FILED

March 1, 1996

Cecil Crowson, Jr.

Appellate Court Clerk

I N THE COURT OF APPEALS OF TENNESSEE

EASTERN SECTI ON

CANONI E ENERGY, I NC. , a nd ) ANDERSON COUNTY

WGI , INC. ) 03A01- 9506- CH- 00200

)

 Pl a i ntif f s - Appe lle e s )

)

)

 v. ) HON. WI LLI AM E. LANTRI P,

) CHANCELLOR

 )

RODNEY KI NG, MARK HOLBROOK, )

AMERI CAN RESOURCES MANAGEMENT, )

I NC. , AMERI CAN GAS )

TECHNOLOGI ES, I NC. , )

AMERI CAN ENERGY EXPLORATI ON, )

I NC. , BERROD, I NC. , RI CK )

CASTOR, a nd McCROME, LTD. , I NC. ) AFFI RMED I N PART; VACATED

) I N PART; MODI FI ED I N PART;

De f e nda nt s - Appe l l a nt s ) a nd REMANDED

WI LLI AM P. SNYDER a nd ADRI ENNE L. ANDERSON OF KNOXVI LLE FOR

APPELLANTS MARK HOLBROOK, McCROME, LTD. , I NC. , AMERI CAN RESOURCE

MANAGEMENT, I NC. , AMERI CAN ENERGY EXPLORATI ON, I NC. , a nd AMERI CAN

GAS TECHNOLOGI ES, I NC.

H. BRUCE GUYTON OF KNOXVI LLE FOR APPELLEES

O P I N I O N

 Godda r d, P. J .
2

The De f e nda nt s a ppe a l a s umma r y j udgme nt e nt e r e d i n

f a vor of t he Pl a i nt i f f s f or t he enf or ceme nt of a s e t t l e me nt

a gr eeme nt . 

The f act s of t hi s cas e ar e s ome wha t compl e x. Ca noni e

Ene r gy, I nc . ( CEI ) a nd WGI , I nc . ( WGI ) , whi c h s ha l l be

c olle c tive l y r e f e r r e d to a s Pl a i ntif f s , e nt e r e d int o a ve nt ur e

wi t h Ame r i can Re s our ce Ma na ge me nt , I nc . ( ARM) , Ame r i can Ene r gy

Expl or a t i on, I nc . , ( AEX) a nd Coa l Cr e e k Ma nuf a c t ur i ng Compa ny

( Coa l Cr eek) . The ve nt ur e , cal l e d "t he Bl ue Ge m Pr oj ect , " wa s

f or t he e xpl or a t i on of oi l a nd na t ur a l ga s i n Ande r s on a nd Mor ga n

c ount i e s . The ve nt ur e a l s o i nc l ude d t he dr i l l i ng a nd

c ons t r uc t i on of oi l a nd na t ur a l ga s we l l s a nd t he s a l e of oi l a nd

na t ur a l ga s pr oduc e d by t hos e we l l s . 

Unde r t he a gr e e me nt , t he Pl a i nt i f f s we r e t o c ont r i but e

ni ne mi l l i on dol l a r s ove r a s e ve n- ye a r pe r i od. ARM a nd AEX

a gr e e d to c ont r i but e int e r e s t s in c e r t a i n e xi s ting oil a nd

na t ur a l ga s we l l s a nd int e r e s t s in mi ne r a l r i ght s le a s e s , a nd

Coa l Cr e e k a gr e e d t o c ont r i but e a n opt i on t o dr i l l oi l a nd

na t ur a l ga s we l l s on a ppr oxi ma t e l y s e ve nt y t hous a nd a c r e s of

l a nd. The a gr e e me nt pr ovi de d t ha t ARM wa s t o a c t a s t he

ope r a t i ng ma na ge r of t he pr oj e c t a nd wa s t o pr ovi de a l l ope r a t i on

s e r vi c e s . I n c onne c t i on wi t h s uc h dut i e s , ARM hi r e d AGT t o

pe r f or m t he a c t ua l c ons t r uc t i on a nd ope r a t i on of t he pr oj e c t ' s

we l l s . 
3

I n Nove mbe r of 1993, t he Pl a i nt i f f s f i l e d s ui t a l l e gi ng

t ha t t he y we r e f r a udul e nt l y i nduc e d t o pa r t i c i pa t e i n t he Bl ue

Ge m Pr oj ect and al l e gi ng t ha t AGT, as t he al t e r ego of ARM,

wr ongf ul l y c ha r ge d a ma r kup on ma t e r i a l s s uppl i e d f or t he pr oj e c t

a nd wr ongf ul l y c ha r ge d f or t he e qui pme nt a nd s e r vi c e s pur s ua nt t o

t he pr i ce l i s t i n t he expl or a t i on agr eeme nt . Na me d as de f e nda nt s

i n t he s ui t we r e ARM, AGT, AEX, Coa l Cr e e k, Ma r k Hol br ook, Rodne y

Ki ng, Be r r od, I nc . , a nd Ri c ha r d Ca s t or . Hol br ook wa s t he

pr e s i de nt of ARM a nd AEX. Ki ng wa s a f or me r pr e s i de nt of AGT a nd

t he c ur r e nt pr e s i de nt of Be r r od, I nc . , t he s ol e s ha r e hol de r of

AEX. Ca s t or wa s t he pr e s i de nt of AGT.

I n Ma y 1994, Ca s t or a nd Hol br ook be c a me i nt e r e s t e d i n

t he pos s i bility of s e ttling thi s la ws uit. Ca s t or c ont a c t e d the

Pl a i nt i f f s ' r e pr e s e nt a t i ve s to di s c us s thi s pos s i bi l i t y. The

Pl a i nt i f f s a nd Hol br ook a gr e e d t ha t t he di s c us s i ons woul d t a ke

pl a c e i n Pl a i nt i f f s ' of f i c e s i n Sout h Ha ve n, Mi c hi ga n. Pr e s e nt

a t t he me e t i ng we r e : Hol br ook, Ca s t or , Tony Ca noni e , Sr . , a n

i nve s t or i n t he Bl ue Ge m Pr oj e c t , J e r r y Ca noni e , pr e s i de nt of

CEI , Tony Ca noni e , J r . , c ha i r ma n of t he boa r d of di r e c t or s of

CEI , a nd Cl a ude Woods , pr e s i de nt of WGI . Ki ng di d not a t t e nd t he

meet i ng, nor wa s he ma de awa r e t ha t i t wa s t a ki ng pl ace. 

Hol br ook a l l e ge s t ha t dur i ng t he s e t t l e me nt

di s c us s i ons , the Pl a i ntif f s ma de r e f e r e nc e to the pos s i bility

t ha t c r i mi na l c ha r ge s mi ght be br ought a ga i ns t Hol br ook a nd hi s

f a mi l y, who we r e s ha r e hol de r s a nd di r e c t or s of McCr ome , I nc . ,
4

Hol br ook' s f a mi l y c or por a t i on. McCr ome wa s not a n or i gi na l pa r t y

t o the la ws uit, but it di d own a n int e r e s t in the Bl ue Ge m

Pr oj e c t a s of Ma y 1994, a nd t he Pl a i nt i f f s l a t e r a me nde d t he i r

c ompl a i nt t o a dd a c l a i m a ga i ns t McCr ome . Hol br ook f ur t he r

a l l e ge s t ha t t he r e wa s al s o di s c us s i on t ha t s i mi l a r cha r ge s coul d

be br ought a ga i ns t Ki ng a nd hi s f a mi l y me mbe r s . The r e we r e a l s o

a l l e ga t i ons t ha t Ki ng ha d enga ge d i n ext r a ma r i t a l af f a i r s and

t ha t t he s e a f f a i r s woul d be e xpos e d i f t he l i t i ga t i on c ont i nue d.

Hol br ook f ur t he r a l l e ge s t ha t t he Pl a i nt i f f s t hr e a t e ne d t o f or c e

bot h t he Ki ng a nd Hol br ook f a mi l i e s i nt o ba nkr upt c y.

The s e t t l e me nt meet i ng wa s he l d i n t he of f i ces of CEI

a nd at t he end of da y one , a dr a f t of t he agr eeme nt wa s r eache d.

Tha t ni ght , t he Pl a i nt i f f s , Hol br ook a nd Ca s t or s oc i a l i z e d

t oge t he r . Hol br ook a nd Ca s t or r e t ur ne d t o t he i r hot e l r oom l a t e r

t ha t e ve ni ng. Hol br ook c a l l e d hi s wi f e , but he di d not di s c us s

t he s e t t l e me nt ne got i a t i ons wi t h he r . Ne i t he r Hol br ook nor

Ca s t or cont act e d t he i r at t or ne ys .

The ne xt da y ne got i a t i ons r e s ume d. Hol br ook r e que s t e d

t ha t s ome cha nge s be ma de i n t he dr a f t s e t t l e me nt agr eeme nt and

t he c ha nge s we r e ma de . Hol br ook a s s e r t s t ha t t he Pl a i nt i f f s t he n

a gr e e d t ha t Hol br ook a nd Ca s t or ' s s e t t l e me nt of f e r wa s s uf f i c i e nt

t o c ove r Ki ng a s we ll a nd tha t the Pl a i ntif f s woul d r e l e a s e Ki ng

a nd Be r r od, I nc . , Ki ng' s f a mi l y c or por a t i on, f r om a l l c l a i ms i f

Ki ng woul d a gr e e t o be bound by t he t e r ms of t he s e t t l e me nt

a gr eeme nt . Howe ve r , t he s e t t l e me nt agr eeme nt i t s e l f pr ovi de s
5

t ha t t he Pl a i nt i f f s woul d di s mi ss the s ui t onl y a s to ARM, AGT,

Hol br ook, AEX, Ca s t or a nd McCr ome . I t f ur t he r s t a t e d t ha t t he

s e t t l e me nt agr eeme nt di d not af f ect cl a i ms aga i ns t Be r r od, I nc . ,

a nd Ki ng.

Pr i or t o t he s i gni ng of t he s e t t l e me nt a gr e e me nt ,

Ca s t or tol d the Pl a i ntif f s tha t in Apr il of tha t ye a r he

s ubmi t t e d a l e t t e r of r e s i gna t i on a s pr e s i de nt of AGT a nd t ha t ,

a s a r e s ul t , he ma y not ha ve t he ne c e s s a r y a ut hor i t y t o e xe c ut e

t he s e t t l e me nt agr eeme nt on be ha l f of AGT. Howe ve r , t he r e

a ppe a r s t o be s ome que s t i on ove r whe t he r Ca s t or ' s l e t t e r of

r e s i gna t i on wa s a c c e pt e d by AGT. Ca s t or s a i d he wa s t ol d t ha t

t he r e s i gna t i on woul d not be a c c e pt e d unt i l s ome one c oul d be

f ound to ta ke hi s pl a c e . Thus , a t the time of the s e ttleme nt ,

Ca s t or t hought hi s r e s i gna t i on ha d not be e n a c c e pt e d a nd t ha t he

s t i l l ha d a ut hor i t y t o a c t a s pr e s i de nt of AGT. The a gr e e me nt

wa s t he n s i gne d by t he pa r t i e s . Hol br ook s i gne d t he a gr e e me nt on

be ha l f of hi ms e l f , ARM, AEX, a nd McCr ome . Ca s t or s i gne d t he

a gr e e me nt of be ha l f of hi ms e l f a nd AGT. 

Upon r e t ur ni ng f r om t he s e t t l e me nt ne got i a t i ons i n

Mi c hi ga n, Hol br ook me t wi t h Ki ng a nd Ki ng i ni t i a l l y a gr e e d t o t he

t e r ms of t he s e t t l e me nt a gr e e me nt . Hol br ook t he n me t wi t h hi s

f a mi l y, t he s ha r e hol de r s a nd di r e c t or s of McCr ome , a nd a dvi s e d

t he m of t he s e t t l e me nt me e t i ng a nd t he a gr e e me nt i t pr oduc e d.

The f a mi l y me mbe r s t he n vot e d t o a c c e pt t he t e r ms of t he

s e t t l e me nt agr eeme nt .
6

Shor t l y t he r e a f t e r , Hol br ook a l l e ge s t ha t J e r r y Ca noni e

a dvi s e d hi m t ha t CEI a nd WGI woul d not a gr e e t o r e l e a s e Ki ng or

Be r r od, I nc . , of al l cl a i ms unl e s s Ki ng t r a ns f e r r e d cer t a i n

a s s e t s to CEI . At a bout thi s s a me time , the s ha r e hol de r s a nd

di r e c t or s of Be r r od, Inc . , me t to di s c us s the s e ttleme nt

a gr eeme nt . Be r r od, I nc . , wa s not a pa r t y t o t he s e t t l e me nt

a gr e e me nt , but i t owne d a l l of AEX' s s ha r e s of s t oc k a nd one -

t hi r d of ARM' s s ha r e s of s t oc k. The s ha r e hol de r s a nd di r e c t or s

vot e d not t o r a t i f y Hol br ook' s e xe c ut i on of t he a gr e e me nt .

Nor ma n Be a uc ha mp, a Mi c hi ga n a t t or ne y a nd owne r of one - t hi r d of

ARM' s s ha r e s of s t oc k, a l s o r e f us e d t o vot e hi s s ha r e s of s t oc k

t o r a t i f y Hol br ook' s e xe c ut i on of t he a gr e e me nt . The

s ha r e hol de r s a nd di r e c t or s of AGT a l s o me t , a nd t he y vot e d not t o

r a t i f y Ca s t or ' s execut i on of t he agr eeme nt .

I n the me a ntime , the Pl a i ntif f s f ile d a motion to s t a y

pr oc e e di ngs i n t he Tr i a l Cour t ba s e d upon t he r e a c he d s e t t l e me nt

a gr e e me nt . The Pl a i nt i f f s ' mot i on r e que s t e d t ha t a s t a y be

gr a nt e d a s t o a l l De f e nda nt s e xc e pt Ki ng, Be r r od, I nc . , a nd Coa l

Cr e e k. ARM, AEX, a nd Hol br ook t he n oppos e d t he mot i on on t he

gr ounds t ha t t he s e t t l e me nt a gr e e me nt wa s une nf or c e a bl e . The

Pl a i nt i f f s s ubs e que nt l y a me nde d t he i r c ompl a i nt t o a dd a n

a l t e r na t i ve cl a i m f or t he enf or ceme nt of t he s e t t l e me nt

a gr eeme nt . The Pl a i nt i f f s al s o adde d a cl a i m aga i ns t Mc Cr ome f or

t he a l l e ge d wr ongf ul r e c e i pt of a s s e t s f r om ARM a nd a n

a l t e r na t i ve cl a i m f or enf or ceme nt of t he s e t t l e me nt agr eeme nt .
1 At or ar ound t h i s s a me t i me , t h e Pl a i n t i f f s appa r e n t l y t ook a

vol unt a r y non- s u i t of t h e i r cl a i ms aga i n s t Rodne y Ki ng and Be r r od, I n c . Th e

r eco r d o n ap p eal d o es no t ap p ear t o i n c l u d e t h e o r d e r o f d i s mi s s a l . Ho we v e r ,

t h e Co u r t r eco g n i zed t h e d i s mi s s a l i n an o r d e r t a x i n g co u r t co s t s dat e d Ma r c h

2 4 , 1 9 9 5 , an d t h u s , we t r eat t h e Co u r t ' s awa r d o f summa r y j u d g me n t as a f i n a l

j udgme n t t h a t i s appe a l a b l e t o t h i s Cour t .

7

The Pl a i nt i f f s s ubs e que nt l y t ook a vol unt a r y non- s ui t

a s to the i r f r a udul e nt induc e me nt c l a i ms . The Pl a i ntif f s a l s o

vol unt a r i l y di s mi s s e d De f e nda nt Coa l Cr e e k. The n i n De c e mbe r of

1994, a l l De f e nda nt s f i l e d a mot i on f or pa r t i a l s umma r y j udgme nt .

The Pl a i nt i f f s a l s o f i l e d a mot i on f or pa r t i a l s umma r y j udgme nt

s eeki ng t o enf or ce t he s e t t l e me nt agr eeme nt aga i ns t ARM, AEX,

Hol br ook, McCr ome , AGT a nd Ca s t or . 

On Ma r c h 10, 1995, t he Tr i a l Cour t e nt e r e d a n or de r

de nyi ng t he De f e nda nt s ' mot i on a nd gr a nt i ng t he Pl a i nt i f f s '

mot i on f or s umma r y j udgme nt a s t o Hol br ook a nd McCr ome , hol di ng

t he s e t t l e me nt agr eeme nt va l i d and enf or ceabl e as t o t hos e

pa r tie s . In its or de r , the Tr i a l Cour t s pe c i f i c a lly f ound tha t

t he r e wa s no di s put e d ma t e r i a l f act as t o t he i s s ue of dur e s s and

t ha t t he r e we r e no i mpr ope r pr e s s ur e s or i nf l ue nc e s on Hol br ook

a t t he t i me he s i gne d t he s e t t l e me nt agr eeme nt . A s econd or de r

wa s e nt e r e d on Ma r c h 24, 1995, gr a nt i ng t he Pl a i nt i f f s ' mot i on

f or s umma r y j udgme nt f or e nf or c e me nt of t he s e t t l e me nt a gr e e me nt

a ga i ns t ARM, AEX, AGT a nd Ca s t or .

1

 I n doi ng s o, t he Tr i a l Cour t

f ound t ha t Hol br ook a nd Ca s t or ha d e i t he r a c t ua l or a ppa r e nt

a ut hor i t y t o bi nd t he c or por a t i ons t o t he s e t t l e me nt a gr e e me nt

a nd t ha t t he r e we r e no di s put e d f a c t s t o s how t ha t ARM, AEX, or

AGT t ook a ny a c t i on whi c h woul d a dve r s e l y a f f e c t or i nva l i da t e

t he s e t t l e me nt a gr e e me nt or woul d c ha l l e nge or di s put e t he
8

a ut hor i t y of Hol br ook or Ca s t or . Hol br ook, McCr ome , ARM, AEX,

a nd AGT appeal e d. The appeal s of t he s e De f e nda nt s ha ve been

c ons ol i da t e d. De f e nda nt Ca s t or di d not a ppe a l .

The De f e nda nt s as s e r t t ha t t he Tr i a l Cour t er r e d i n

gr a nt i ng t he Pl a i nt i f f s ' mot i on f or s umma r y j udgme nt be c a us e

t he r e ar e di s put e d i s s ue s of ma t e r i a l f act as t o t he i s s ue s of

dur e s s , a ut hor i t y, f a i l ur e of c ons i de r a t i on a nd l a c k of

c ons i de r a t i on. 

The Supr e me Cour t of Te nne s s e e , i n Byr d v. Ha l l , 847

S. W. 2d 208 ( Te nn. 1993) , s e t f or t h t he pr ope r s umma r y j udgme nt

a na l ys i s t o be a ppl i e d i n Te nne s s e e . The r e , t he Cour t s a i d i n

e va l ua t i ng a s umma r y j udgme nt mot i on, t he s e que s t i ons mus t be

r e s ol ve d: " ( 1) whe t he r a f ac t ual di s put e e xi s t s ; ( 2) whe t he r t he

di s put e d f a c t i s mat e r i al t o t he out c ome of t he c a s e ; a nd ( 3)

whe t he r t he di s put e d f act cr eat e s a ge nui ne iss ue f or tr i a l."

Byr d a l s o ma ke s t he f ol l ow hol di ngs : s umma r y j udgme nt

s houl d be e mpl oye d whe r e t he r e i s no di s put e ove r t he e vi de nc e

a nd t he r e i s no i s s ue f or a j ur y t o de c i de . Ra t he r , i t i s j us t

f or t he c our t t o a ppl y t he l a w. For a pa r t y t o a voi d s umma r y

j udgme nt, it mus t s how tha t the f a c t in di s put e is ma t e r i a l ;

me a ni ng, t hi s f a c t i s one t ha t " mus t be de c i de d i n or de r t o

r e s ol ve t he s ubs t a nt i ve c l a i m or de f e ns e a t whi c h t he mot i on i s

di r ect e d. " I f s uc h a di s put e d, ma t e r i a l f act doe s exi s t , t he

c our t "mus t t he n de t e r mi ne whe t he r t he di s put e d ma t e r i a l f act
9

c r e a t e s a ge nui ne i s s ue wi t hi n t he me a ni ng of Rul e 56. 03. " He r e ,

" t he t e s t f or a ' ge nui ne i s s ue ' i s whe t he r a r eas ona bl e j ur y

c oul d l e gi t i ma t e l y r e s ol ve t ha t f a c t i n f a vor of one s i de or t he

ot he r . I f t he a ns we r i s ye s , s umma r y j udgme nt i s i na ppr opr i a t e ;

i f t he a ns we r i s no, s umma r y j udgme nt i s pr ope r be c a us e a t r i a l

woul d be poi nt l e s s . . . . " Whe n a ppl yi ng t hi s t e s t , " t he c our t

i s t o vi e w t he e vi de nc e i n a l i ght f a vor a bl e t o t he nonmovi ng

pa r t y a nd a l l ow a l l r e a s ona bl e i nf e r e nc e s i n hi s f a vor . " I t i s

t he bur de n of t he nonmovi ng pa r t y t o de mons t r a t e t ha t t he r e a r e

no di s put e d, ma t e r i a l f a c t s c r e a t i ng a ge nui ne i s s ue f or t r i a l

a nd t ha t s umma r y j udgme nt i s a ppr opr i a t e .

I n r e vi e wi ng t he or de r f or s umma r y j udgme nt , we c hoos e

t o a ddr e s s the is s ue of a ut hor ity f i r s t. He r e , the Pl a i ntif f s

ha ve t he bur de n of pr ovi ng t ha t a n a ge nc y r e l a t i ons hi p e xi s t e d

be t we e n Hol br ook a nd ARM a nd AEX a nd be t we e n Ca s t or a nd AEX.

Sl oa n v. Ha l l , 673 S. W. 2d 548 ( Te nn. App. 1984) . Sl oa n a l s o hol ds

t he f ol l owi ng: " The s c ope a nd e xt e nt of a n a ge nt ' s r e a l a nd

a ppa r e nt a ut hor i t y a r e que s t i ons t o be de t e r mi ne d by t he t r i e r of

f a c t f r om al l t he fac t s and ci r c ums t a nc e s i n evi de nc e . " 

Fur t he r mor e , a n a ge nt ' s a ut hor i t y mus t be t r a c e a bl e t o t he

pr i nc i pa l a nd c a nnot be s hown by t he a ge nt ' s s t a t e me nt s or

a c t i ons a l one . And whe n a t hi r d pe r s on " a c t ua l l y knows , or

s houl d know, t he l i mi t a t i ons of a n a ge nt ' s a ut hor i t y, t he

pr i nc i pa l i s not bound by a n a c t t ha t i s be yond s uc h

l i mi t a t i ons . " Rul e v. Br ot he r hood' s Re l i e f & Compe ns a t i on Fund,

36 Te nn. App. 20, 251 S. W. 2d 309 ( 1952) . 
10

Looki ng f i r s t t o Ca s t or ' s a ut hor i t y, a di s put e e xi s t s

a s t o t he e f f e c t of hi s r e s i gna t i on f r om t he pos i t i on of

pr e s i de nt of AGT. Ca s t or ma i nt a i ns tha t de s pite hi s r e s i gna tion

he c ont i nue d t o f unc t i on a s pr e s i de nt of AGT a nd t hought he ha d

a ut hor i t y t o s i gn t he s e t t l e me nt a gr e e me nt . Howe ve r , unde r t he

r ul e of Sl oa n, Ca s t or ' s s t a t e me nt s al one cannot be de t e r mi na t i ve

of hi s a ut hor i t y. Ki ng, t he f or me r pr e s i de nt of AGT who r e c e i ve d

Ca s t or ' s le tte r of r e s i gna tion, ma i nt a i ns tha t the r e s i gna tion

wa s accept e d at t he t i me i t wa s t e nde r e d and t ha t as s uc h, Ca s t or

ha d no a ut hor i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be ha l f

of AGT. Thus , Ca s t or ' s r e s i gna t i on c r e a t e s a di s put e d i s s ue a s

t o whe t he r he ha d a ny a c t ua l a ut hor i t y a t t he t i me he s i gne d t he

s e ttleme nt a gr e e me nt. Whe t he r the Pl a i ntif f s thought Ca s t or ha d

a ut hor i t y i s a l s o di s put e d. Re vi e wi ng t he e vi de nc e i n t he l i ght

mos t f a vor a bl e t o t he De f e nda nt s , i t a ppe a r s t ha t Ca s t or i nf or me d

t he Pl a i ntif f s of hi s r e s i gna tion a nd the pos s i bility tha t he

l a c ke d t he r e qui s i t e a ut hor i t y t o e nt e r i nt o t he a gr e e me nt .

Thus , s i nce t he Pl a i nt i f f s we r e ma de awa r e t ha t Ca s t or ' s

a ut hor i t y t o bi nd AGT wa s i n que s t i on, t he Pl a i nt i f f s c a nnot now

a r gue t ha t t he y a s s ume d Ca s t or ha d a ppa r e nt a ut hor i t y t o a c t f or

AGT. The Pl a i ntif f s we r e wa r ne d of the pos s i bility tha t Ca s t or

ha d no a ut hor i t y s i nc e he ha d t e nde r e d a l e t t e r of r e s i gna t i on.

The r e f or e , i t a ppe a r s t o t hi s Cour t t ha t a ge nui ne i s s ue of

ma t e r i a l f act exi s t s : Whe t he r Ca s t or di d i n f act ha ve t he

a ut hor i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be ha l f of

AGT. Becaus e t hi s i s an i s s ue of f act t ha t mus t be r e s ol ve d,

s umma r y j udgme nt i s va c a t e d a s t o De f e nda nt AGT. The De f e nda nt
11

Ca s t or di d not a ppe a l f r om t he Tr i a l Cour t ' s or de r e nf or c i ng t he

s e t t l e me nt agr eeme nt . 

We now t ur n t o t he i s s ue of Hol br ook' s a ut hor i t y t o

bi nd ARM a nd AEX. At t he t i me he s i gne d t he a gr e e me nt , Hol br ook

wa s t he pr e s i de nt of t he s e t wo c or por a t i ons . As s uc h, Hol br ook

ha s t he a ut hor i t y t o e nt e r i nt o a gr e e me nt s on be ha l f of t he

c or por a t i ons . " Al l c or por a t e or ga ni z a t i ons a c t by a nd t hr ough

boa r ds , c ommi s s i ons , of f i c e r s a nd e mpl oye e s , a nd i f t he y a c t

wi t hi n t he a ppa r e nt s c ope of t he i r a ut hor i t y, t he n t he i r a c t i ons

a r e t hos e of t he c or por a t i on a nd, t he r e f or e , bi ndi ng on t he

s t oc khol de r s or me mbe r s of s uc h c or por a t i ons . " White ha ve n Util.

Di s t . of She l by Count y v. Ra ms a y, 215 Te nn. 435, 387 S. W. 2d 351

( 1964) . He r e , t he Cour t he l d t ha t t he a c t i ons of t he boa r d' s

c ommi s s i one r s we r e unque s t i ona bl y bi ndi ng on t he me mbe r s ,

r e s i de nt s a nd bondhol de r s of the utility di s t r i c t. Si mila r l y, in

Bl a s i nga me v. Ame r i can Ma t e r i a l s , I nc . , 654 S. W. 2d 659

( Te nn. 1983) , t he Supr e me Cour t he l d t ha t t he pr e s i de nt of a

c or por a t i on c oul d bi nd t he c or por a t i on t o a c ont r a c t wi t hout t he

a ppr ova l of t he Boa r d of Di r e c t or s . I t i s c l e a r t he n t ha t

Hol br ook, a s pr e s i de nt of AEX a nd ARM, ha d a ut hor i t y t o bi nd t he

c or por a t i ons s o l ong a s he di d not e xc e e d t he s c ope of t ha t

a ut hor i t y. I t i s not c l e a r a s t o wha t t he s c ope of hi s a ut hor i t y

ma y ha ve be e n. Without thi s de t e r mi na tion, it is impos s i bl e to

know whe t he r Hol br ook e xc e e de d hi s a ut hor i t y. Ma ki ng t hi s

de t e r mi na t i on is f or the tr i e r of f a c t. Se e Sl oa n, s upr a .

Addi t i ona l l y, t he boa r d of di r e c t or s of bot h AEX a nd ARM vot e d
12

not t o r a t i f y Hol br ook' s s i gni ng of t he s e t t l e me nt a gr e e me nt .

Cont r a r y t o t he Tr i a l Cour t ' s f i ndi ng, t he s e vot e s a ppe a r t o be

act i ons t ha t ma y adve r s e l y af f ect or i nva l i da t e t he s e t t l e me nt

a gr eeme nt . At t he l eas t , t he s e vot e s cer t a i nl y appear t o

c ha l l e nge or di s put e t he a ut hor i t y of Hol br ook. Si nc e a

de t e r mi na t i on wa s not ma de a s t o whe t he r Hol br ook e xc e e de d hi s

a ut hor i t y whe n he s i gne d t he s e t t l e me nt a gr e e me nt wi t hout t he

knowl e dge of t he s ha r e hol de r s , s umma r y j udgme nt i s va c a t e d a s t o

De f e nda nt s AEX a nd ARM.

Ha vi ng di s c ove r e d one r e a s on why s umma r y j udgme nt

s houl d not ha ve be e n gr a nt e d a s t o De f e nda nt s AGT, AEX, a nd ARM,

we go no f ur t he r a s t o t he s e De f e nda nt s . Si nc e i t i s not

necess a r y t o r each t he ot he r i s s ue s r a i s e d by t he s e De f e nda nt s ,

we c hoos e not t o do s o.

Howe ve r , t he r e now r e ma i ns t he que s t i on of Hol br ook a nd

McCr ome , Hol br ook' s f a mi l y c or por a t i on. The r e i s no i s s ue of

a ut hor i t y he r e be c a us e t he s ha r e hol de r s of McCr ome , Hol br ook' s

f a mi l y, di d not que s t i on Hol br ook' s a ut hor i t y. I n f a c t , t he y

vot e d t o r a t i f y t he s e t t l e me nt a gr e e me nt . De f e nda nt Hol br ook

a r gue s i ns t e a d t ha t t he s e t t l e me nt a gr e e me nt s houl d not be

e nf or ced becaus e t he agr eeme nt wa s execut e d unde r dur e s s and

be c a us e no c ons i de r a t i on wa s gi ve n t o McCr ome i n e xc ha nge f or

a gr eei ng t o t he s e t t l e me nt .
13

We di s c uss t he dur e ss i ssue f i r s t . Te nne sse e ha s

ge ne r a l l y de f i ne d dur e s s a s t he c ondi t i on of mi nd pr oduc e d by t he

i mpr ope r e xt e r na l pr e s s ur e or i nf l ue nc e t ha t pr a c t i c a l l y de s t r oys

t he f r e e a ge nc y of a pa r t y, a nd c a us e s hi m t o do a nd a c t or ma ke

a c ont r a c t not of hi s own vol i t i on, but unde r s uc h wr ongf ul

e xt e r na l pr e s s ur e . Ra i ne y v. Ra i ne y, 795 S. W. 2d 139 ( Te nn.

App. 1990) . Se e a l s o Gille y v. Gille y, 778 S. W. 2d 862 ( Te nn. App.

1989) ( i nt e r na l pr e s s ur e s t ha t a r e of a pa r t y' s own ma ki ng a r e

not dur e s s ) . To de t e r mi ne whe t he r t he r e i s dur e s s , t he que s t i on

i n each cas e i s , wa s t he pe r s on s i gni ng t he cont r act s o af f ect e d

by t hr e a t s of t he ot he r pa r t y a s t o be be r e f t of t he qua l i t y of

mi nd e s s e nt i a l t o t he ma ki ng of a c ont r a c t . I n ot he r wor ds , wa s

t he pe r s on be r e f t of t he f r e e e xe r c i s e of hi s wi l l powe r . Exum

v. Wa s hi ngt on Fi r e a nd Ma r i ne I ns . Co. , 41 Te nn. App. 610, 297

S. W. 2d 805 ( 1955) . Whe t he r dur e s s e xi s t s i s de t e r mi ne d by

e xa mi ni ng al l t he ci r c ums t a nces . Si mps on v. Ha r pe r , 21 Te nn.

App. 431, 111 S. W. 2d 882 ( 1937) .

I n thi s c a s e , the Tr i a l Cour t de t e r mi ne d tha t the r e

we r e no di s put e d ma t e r i a l f act s wi t h r e s pect t o t he i s s ue of

dur e s s a nd f ur t he r t ha t Hol br ook wa s not unde r i mpr ope r e xt e r na l

f or ces whe n he s i gne d t he agr eeme nt . We agr ee. The Pl a i nt i f f s

do not di s put e t he f a c t t ha t s ome s or t of t hr e a t s a s t o t he

pos s i bi l i t y of c r i mi na l pr os e c ut i on a nd ba nkr upt c y we r e

c ommuni c a t e d t o Hol br ook. Howe ve r , t he s e t hr e a t s do not

c ons t i t ut e s uc h i mpr ope r t hr e a t s a s t o i nva l i da t e Hol br ook' s

s i gni ng of t he a gr e e me nt . Hol br ook wa s not f or c e d i nt o t he
14

s e ttleme nt pr oc e s s ; it wa s he who initia t e d s e ttleme nt by

c ont a c t i ng t he Pl a i nt i f f s a nd t he n a gr e e i ng t o me e t i n t he i r

of f i c e s i n Mi c hi ga n. Hol br ook s t a t e d i n hi s de pos i t i on t ha t he

wa s not f or c e d t o s i gn t he a gr e e me nt a nd t ha t he wa s f r e e t o

l eave t he s e t t l e me nt di s c us s i ons at any t i me . He coul d ha ve al s o

c ont a c t e d hi s l a wye r or hi s f a mi l y a t a ny t i me . He c hos e not t o

do s o. Hol br ook wa s not de pr i ve d of t he f r e e e xe r c i s e of hi s

will powe r . We a gr e e with the Tr i a l Cour t tha t a ny pr e s s ur e s

Hol br ook ma y ha ve be e n unde r a t t he t i me of t he a gr e e me nt we r e

not s uc h i mpr ope r one s a s t o c ons t i t ut e dur e s s a nd t o i nva l i da t e

t he agr eeme nt .

As f or t he c ons i de r a t i on i s s ue , i n or de r f or a

s e t t l e me nt agr eeme nt t o be enf or ceabl e , l i ke any cont r act ,

c ons i de r a t i on mus t be gi ve n a nd r e c e i ve d. Mi l wee v. Peacht r e e

Cypr e s s I nve s t me nt Co. , 510 F. Supp. 279 ( E. D. Te nn. 1977) . I t i s

we ll s e ttle d in Te nne s s e e tha t the c our t will not " i nqui r e int o

t he a de qua c y or i na de qua c y of t he c ons i de r a t i on f or a c ompr omi s e

f a i r l y and de l i berat e l y ma de . " Thur mond v. Whi t t a ke r , 1

Te nn. App. 111 ( 1925) . Re l e a s i ng c l a i ms a ga i ns t a pa r t y, whe t he r

t he c l a i ms a r e a c t ua l l y pe ndi ng or not , i s s uf f i c i e nt

c ons i de r a t i on f or a s e t t l e me nt agr eeme nt . Se r vi ce St a mp Co. v.

Ke t c he n, 10 Te nn. App. 59 ( 1929) . Fur t he r mor e , whe r e t he f a c t s

a r e undi s put e d, whe t he r a r e l eas e cons t i t ut e s ade qua t e

c ons i de r a t i on i s a que s t i on of l a w. Appl e white v. Alle n, 27

Te nn. ( 1 Hum. ) 696 ( 1848) .
2

Sp e c i f i c a l l y , Ho l b r ook and Mc Cr o me agr e e d t o gi v e t h e Pl a i n t i f f s a

4 . 45% wo r k i ng i n t e r e s t i n t h e Bl u e Ge m Pr o j e c t as we l l as 93 s h a r e s of

Te nne s s e e En e r gy Pi p e l i n e ( TEPSCO) or t h e mone y r e c e i v e d f r o m a s a l e of t hos e

s h a r e s . I n r e t u r n , t h e Pl a i n t i f f s agr e e d t o r e l e a s e Ho l b r ook and Mc Cr o me f r o m

a n y cl a i m ar i s i n g o u t o f t h e l a wsui t , f r o m al l mo n e t a r y o b l i g a t i o n s and cl a i ms

a l l e g e d l y o we d t h e Pl a i n t i f f s and an y o t h e r cl a i m ar i s i n g o u t o f t h e Bl u e Ge m

Pr o j e c t .

3 Th e Tr i a l Co u r t g r a n t e d t h e Pl a i n t i f f s ' mo t i o n t o ame n d t h e i r

c o mp l a i n t o n Oc t o b e r 3 1 , 1 9 9 4 , an d t h e Pl a i n t i f f s s u b sequ e n t l y ad d e d a cl a i m

a g a i n s t Mc Cr o me f o r t h e al l e g e d wr ongf u l r e c e i p t of as s e t s f r o m ARM and i n t h e

a l t e r n a t i v e , a c l a i m f o r t h e enf o r c e me n t of t h e s e t t l e me n t agr e e me n t .

15

I n t he c a s e a t t he ba r , De f e nda nt Hol br ook a gr e e d on

be ha l f of McCr ome t o gi ve up s ome a s s e t s of t he c ompa ny2

 i n or de r

t o be r e l eas e d f r om any cl a i ms t he Pl a i nt i f f s mi ght ha ve aga i ns t

Mc Cr ome . Tha t no cl a i ms ha d been act ua l l y f i l e d aga i ns t Mc Cr ome

a t the time of s e ttleme nt is not di s pos itive .

3

 I t appear s t he n

t ha t t he Pl a i nt i f f s a nd McCr ome ga ve s uf f i c i e nt c ons i de r a t i on f or

t he s e t t l e me nt a gr e e me nt , a nd t he r e i s no ne e d f or di s c us s i on a s

t o t he va l i di t y of a ny c l a i ms a l l e ge dl y he l d by t he Pl a i nt i f f s or

t he a de qua c y of t he Pl a i nt i f f s ' c ons i de r a t i on i n e xc ha nge f or

Mc Cr ome ' s as s e t s .

 

Thus , f i ndi ng no di s put e d ma t e r i a l f a c t s a s t o t he

i s s ue s of dur e s s or c ons i de r a t i on, we a f f i r m t he Tr i a l Cour t ' s

e nt r y of s umma r y j udgme nt a s t o McCr ome a nd Hol br ook.

I n a ddi t i on t o t he i r a ppe a l of s umma r y j udgme nt , t he

De f e nda nt s l a t e r appeal e d t he Tr i a l Cour t ' s or de r awa r di ng

di s c r e tiona r y c os t s to the Pl a i ntif f s . The y ins i s t the Cour t

a bus e d i t s di s c r e t i on by i nc l udi ng c os t s i nc ur r e d i nc i de nt t o t he

or i gi na l s ui t f or br e a c h of c ont r a c t. Whi l e thi s is tr ue , we

ha ve no doubt t ha t t he i nf or ma t i on de ve l ope d i n pr e pa r i ng t he
16

or i gi na l c l a i m pr ompt e d the s e ttleme nt a gr e e me nt whi c h is the

pr i nc i pa l s ubj e c t of t hi s a ppe a l . I n l i ght of t hi s , we f i nd no

a bus e of di s c r e t i on i n a l l owi ng s uc h f e e s .
17

We a c c or di ngl y a f f i r m t he j udgme nt i ns of a r a s t he

De f e nda nt s Hol br ook a nd McCr ome a r e c onc e r ne d, but modi f y t he

di s c r e t i ona r y c os t s a wa r d by r e qui r i ng t he m t o pa y one - f i f t h e a c h

of t he a mount a wa r de d by t he Cha nc e l l or , va c a t e t he j udgme nt a s

t o t he r e ma i ni ng De f e nda nt s , a nd r e ma nd t he c a s e f or f ur t he r

pr oc e e di ngs not i nc ons i s t e nt wi t h t hi s opi ni on. One - ha l f of t he

c os t s of a ppe a l a r e a dj udge d a ga i ns t Hol br ook a nd McCr ome a nd

one - ha l f a ga i ns t Ca noni e Ene r gy a nd WGI .

_______________________________

Hous t on M. Godda r d, P. J .

CONCUR:

________________________________

He r s c he l P. Fr a nks , J .

________________________________

Cha r l e s D. Sus a no, J r ., J .