# FILED February 5, 1999 Cecil W. Crowson Appellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE

ROBERT S. LIPMAN, ) NO. 01A01-9803-C H-00139 ) Plaintiff/Appell

ant ) DAVIDSON CHANCERY

) v. ) ) HON. ELLEN HOBBS LYLE FIRST NATIONAL BANK OF ) CHANCELLOR BOSTON, ) ) Defendant/Appellee ) ) and ) ) ALEXANDER H. McNEIL, ) J. VIRGINIA McNEIL, ) R & J KNOXVILLE, INC., ) ) AFFIRMED Former Def

endants )

Robert D. Tuke a

nd Stephen K. Rush,

Nashville, for A

ppellant. Paul C. Ney, Jr. and Leesa A. H inson, Nashville, for Appellee.


### O P I N IO N

INMAN, Senio

r Judge The trial court granted the motion of defendant First Nat io nal Bank of Boston(“First Nat

ional”) for sum

mary jud gment, which the plaintiff (“Lipman”] appeals, insisting tha

t there are genuine

issues of mater

ial fact. Lipman filed suit against Alex and Virginia McNeil (husband and wife), First National Bank of Boston, and R & J Knoxville, Inc. , when a real es tate limited partnership involving t

he McNeils as general partners and Lipman as o ne of a number of limited par

tners sold the real p

roperty it owne

d, resulting in the loss of Lipman’s in

vestment becau se the proceeds f rom the sale were ins

ufficient to1 He does not know Lipman personally and, when asked w hether he had “been involved as a def

endant in any

lawsuit other than

this one involving h

is real estate inv

estments since 1985," answered “No.” 2 re imburse

the partners. Lipman asserted that, in entering into a Se ttlemen t Agreement

withFirst National and selling the partne rship property,

the McNeils had conspired with the b ank to dep rive him of his in vestment, and t

hat the bank had induced the McNeils to bre ach their limit

ed partnership agre

ement and/or the fiduc iary du ty the y owed t o him. Prior to the Chancery

Court’s ruling on th

e McNeils’ sum

mary jud gment motion, Lipman reached a settlement with the McNeils. Form er defen dant, R & J Knoxville, Inc.,

no longer exists

and therefore was dismissed as a defendant. The courtthen heard a summ

ary judgm ent motion by First National, the only rem

aining defendant. The trial co urt’s granting of the bank’s mot

ion for summ

ary judgm

ent is the subject of th

is appeal. I W hen these transactions o ccurred, the McN

eils were partne

rs in over one hundred real estate limited partnerships in

various States, which were mortgaged to the extent of at least $60 million, usually through Fi rst Nation al. McNeil testified that all of the venture s involved bank work-outs, in which distressed commercial

property is purchased wit h the aid of bank fin ancing, r efur bished, leased up, and in this case, sold. McNeil had a large staff which investigated potential properties and coop erated with the bank t o determine wh ich pr ojects were suitable for investment. He was not always involved in day-to-day

operations; he rememberssome particulars but testified essentially that at times negotiations were conducted by his and the Bank’s staff. 12 The record shows that limited partners were dissatisfied, the building had been denied

historic certification due to improper rehabilitation of the windows, results of marketing efforts were be

low projected ex

pectations, rent

al income was insuf

ficient to servic

e accounts payable, there were problems in obtaining fire insurance due to low building occupancy, two trade creditors had sued the partnership on overdue accounts, the lender, Dominion Bank, had prepared for a

nd scheduled for

eclosure proce

edings under the c

onstruction loan do

cuments, and the partnership had taken steps to file Chapter 11 Bankruptcy. [T.R., pp. 328-329] 3 Washington

Square I, the building which is the subject of this lawsuit, was owned prior to these trans actions by a par tnership formed in 1983, which included Lipman as a limited pa

rtner, but in whic

h McNeil had no interest. In the midst of financial difficulties, 2 and with Lipman voting in favor, Washington Square I was sold to a new p artnership in 1986. Alex and Virginia McNeil became the new general partners,

Lipman becam

e a limited par

tner, and Dom

inion Bank

held the mortgage. The partnership undertook torehabilitate, ope rate, mainta

in and lease the pro perty. The McNeils also owne d a grou p of commercial buildings known as Washington

Square II, which

shared comm

on walls, hallwa

ys, elect rical syste ms andHVAC with Washington Square I. Lipman

knew that McNeil

had interests in Washington

Square II when he

voted for McNeil t

o assume genera

l partnership of Washington

Sq uare I , and he was informed of the overall strategy to mar ket Washington

Square I and

II as a single property for purposes of attracting new tenants. McNeil testified : We all considered that it would be best if both properties were joined togetherlike common own ership . We always considered that. It was rather basic. It was m

uch more effi

cie nt for these properties to be joined together. Lipman testif

ied: Q: Okay. Whenwere you first informed that that was going to occur? That, y

ou know, the two buil

dings would basically be treated as one f

or pur poses o f marketing them to potential

tenants?4 A: Whe n McNeil entered i nto the managem

ent of th e buildings. They describ ed what their overall stra tegy was going to be. Q: Back in ‘86? A: Whenever that da

te was, yes. When the 1986 Washington S quare I partnershi p was formed,

the Washington

Square I building was 70% to 80% leased to tenants, although as noted, it was not pro fitable. The Washington Square II property had very few, if any, tenants. The W ashing ton Square II prope rty, which w

as mortgaged by

First National, also suffered financial di fficulty and, in August, 1 987, in negotiations with that bank, McNeil executed a Promissory Note and Deed of Trust to First

National for $14.5 million (“

the Washington

Square II note”), as well as a personal guarantee of approximately

$8.5 million

and a secur ity interest to First Nat ional in M cNeil’s interest as a gener

al partner in the W

ashington Square I pa

rtnership. On August 28, 1990, af

ter two extensions of

the due date on

the $14 million Washington

Square II note , M cNeil and First N ational entered into

a Settlement Agreement

which conveyed

Washington Square II to a wholly-owned subsidiary of the bank by warranty deed dated August 30,1990, b ut which was not to be recorded until January 2, 1991, t hus all owing t ime for Mc Neil to sell th e prope rty. The Agreem

ent provided specifi

cally, in part : If, prior to the closing date, [McNeil] furnishes proof satisfactory to [First National] that Do minio n Bank has agreed to f orbear from exercising

its rights and remedies with respect to [Washington Square I] for a per iod of six months fr om the date her

eof in order to perm

it A lex, the Company and [the Washin gton Squa re II Partner ship] t o market the [Washington Square II p roperty ] together with t he [Washington

Square I prope rty] (collectively, the “Joint Properties”)

. . . [First National] agrees . . . that the [W ashington Square II conveyance to the bank subsidiary] shall not be recorded at this time, but shall be held in escr

ow by [First National] until January 2, 1991,5 atwhich time the

y shall be automatically

released to [Fir

stNational] and [First National] may at its opt ion record them at any time. The testimony

about the joint

marketing for

sale of Washingto

n Square I and II was provided thr

ough the depositions of a bank officer, L

ipman and McNe

il. Mr. Jeffrey J

. Ingram, com mercial rea

l estate lender (no

w vice-president) who has been employ

ed with First Nat

ional since 1987 and is t

he only person still employed by

the bank who was invo

lved with the McNe

il loans testified: Q: Why

did the Bank require

that the two properties [Washin gton Sq uare I an d II] be mar keted jo intly? A: We didn’t requi

re it. Q: The Bank did

require them t

o be jointly m

arketed, did it not? A: As I rec all it , Mr. Mc Neil a sked us to allow him t o market it jointl y. * * * A: We had collateral in tere sts in a bunch of things, but at no point did we ever te

ll Alex he had to do this, he had to do that

. It was all - - it’s a settlement

agreement.It lays out what -- Q: But it says he’ ll sell all of the October collater

al within five years. Are you aware of that provision in there? A: But

it doesn’t say

- - where does the

controlcome under that? Q: Well, the control, to the extent that [First National] has obtained from McNeil . . . the contractual obligation to sell these propertie s within five ye ars. Do you not recognize that as a

form of contro

l? A: No. I mean,

I don’t. I’m

a lender. I get c

ollateral. On June 14, 1991, McNe il informed the

Washington

Square I limited partners by letter that a

buyer had been f

ound and asked for thei r immedia

te consent in writing to the sal e of the property. Lipman did not consent, but instead6

requested more inform

ation by reply

letter. Howev

er, 52% of

the limited partners did consent, and

therefore, sinc

e terms of the

partnership agree

ment required only the consent of

51%, the sale of W

ashington Square I to

Corim was consummated

on June 24, 1991, for a price which substantially exceeded its appraised value as of March 1991. Proce

eds of the sale paid o ff the Dom

inion B ank note ($3,105,596.34)

and paid closing costs a

nd partnership a

d ministrative e

xpenses. However, after the sale, the Washington Squa re I partnership

was insolvent, wi

th debts that exceeded the value of its asse ts by at least $800 ,000.00. A lso on June 24, 1991, W ashington Square II

was conveyed t

o C orim b y quitclaim deed for consideration which included the release of Alex McNeil’ s $8 million personal guarantee. The following day, Corim sold Washington Square I and Washington Squa re II to SAP (Internationa l) A.G. II Lipman contends that First

National is liable t

o him for conspir

ing with the McNeils and/or inducing the Mc Neils to breach the

ir partnership agree

ment with him and /or th e fidu ciary d uty th e McNe ils o wed to him. The trial court, relying specif ically on the Se

ttlement Agre

ement between th e Bank and the McNeil inte

rests, the deposition of Alex Mc

Neil, and the deposition of Jeffrey Ingr

am, held that t

he record does not rai se any genuine issues of material fact so as to warrant a tria

l. The court held t

hat the plaintiff’ s contention “tha t the Bank controlled

the McNeils is not su

pported by the tex

t of the Settlem

ent Agreement

even to the

extent of raising a

genuine issue of m

aterial fact” [

emphasis in original]. The

court also found tha

t there was insuffi

cient proof in the deposition

of Alex McNeil th

at n egotiati ons between the bank and McNeil amountedto conspiracy or inducement to br

each against

plaintiff. Finally, and as7

to whether the bank induced McNeil to violate his fiducia

ry duty to pla

intiff in marketing

Washington

Square I as part of a package with Washington Square II, the court held that “

as a matter of

law, the term

s of theSettlement

Agreement di

d not obligate marketing of th e limited partn

ership property

and the McNeil’s other property to gether” [emph asis in ori ginal].

III Summary judgment is proper

when the movant demonstrates that there are

no genuine issues of m

aterial fact and that the moving pa rty is entitled t

o judgment

as a matter of la

w. Tenn. R. C

iv. P. 56.03 . T he party moving for summary judgment bears the burden of demonstrating that no genuine issue of material fact exists. Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn . 1993). On a motion for summary ju dgm ent, the courts must t ake the strongest leg

itimate view of the evidence in favor of the n onmovin g party, allow all reasona ble inferen ces in f avor of that pa rty, anddiscard all countervailing ev idence. Id. at 210-11. In Byrd, the Court stated: Once it is shown by the m oving party that th

er e is no genuine issue of material fa

ct, the nonmovin

g party must then dem

onstrate, by affidavitsor discovery materials, that there is a genuine, mate rial fact disputeto warrant a trial. In this regard, Rule 56.05 provides that the nonmoving

party cannot sim

ply rely upon

his pleadings but must set forthspecific facts sho

wing that there is a

genui n e issue of material fact for trial. “If he does not so respond, summary judgment . .. shall be entered against h im.” Id. at 211 (citation s omitted) . Summa ry judgme

nt is only appropri

ate when the

case can be decided on the legal issues alone. Id. at 210. Because only questions of law are involved,

there is nopresumption of c orrectnessregarding a trial cou rt’s grant o summary judgment. Johnson v. EMPE, Inc., 837 S.W.2d 62, 6 8 (Tenn.8

App. 1992). Therefore, our review of a trial court’s order granting summ ary judgment is de novo on the record befor e this Court. See Carvell

v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995). IV On appeal , Lipma n argues that the tri al court erred in f

inding that the affidavits, depositions and docum ents inthe record fail to show a genuine issue of materialfact as to

whether First N

ational Bank of Bosto

n conspired with, induced

or aided the McNeils in bre

aching their

Limited Par

tnership Agreem

ent with him and/or th e fiduciary dut

y they owed

to him. He a

sserts that the bank contro lle d the McNei ls’ de aling s with him su ch tha t his claim o f brea ch of d uty ag ainst them, now settled, raises a se parate claim against the b ank. V CIVIL CONSPIRACY A civil consp irac y is a “com bination between tw

o or more perso

ns to accomplish

an unlawful purpose, or to accomplis h a purpose

not in itself unlawf

ul by unlawful means.” Dale v. Thomas H . Temple Co., 208 S.W.2d 344,

347 (Tenn. 1948). The essence of a civil conspiracy is a concert or combination to

defraud or

causeother injury to person or property, which re sults i n damage to per son or property of the p laintiff.” Kirksey v. Overton Pub., Inc., 739 S.W.2d 230, 236 (Tenn. App. 1987). The elements of ci vil conspiracy a

re “comm on design, concert of action, and

an overt act.” Id. In addition, the primary purpose of the agree

ment must be t o cause injury to anothe r; incidental injur

ies resulting from

a pursuit of the p arties’ own fair interest a re not actionable. National Med. Care, In c. v . Gardiner, No. 85-154-II, 1 986 Tenn. App . LEXIS 35 59; WL 3157 (Marc h 12, 1986) (citing 16 Am. Jur. 2d Conspiracy § 49).9 The record i n this case contains no facts indicating an agreement between the McNeils and the ban k with for

the pu rpose of causing inj ury to Lipm an. Indeed, there are no fac

ts, save for

bare speculation, at most, that Lipman actually suffered injuryby this transact ion. While it

is true that he lost his

investment by the sale of Washington Square I, the property was in dire financial condition when purchased by the McNeil

interests. Althou

gh it was 70

to 80% leased, the

tenants’ payments were insuff

icient to service accounts payable, two trade creditors had sued on overdue accounts and Dominion Bank had scheduled fo reclosu re p roceedings

. The part nershi p had ta ken ste ps to fi le Chap ter 11 B ankrup tcy. While Lipman testif

ied th a t he expect ed an improve ment in the p artnershi p’s financial condition and did not wa nt the pr operty sold, nothing in the record supports that exp ectation, and 52% of th e limited partners voted to sell. Assumi ng, a rguendo, that the loss of Lipman’s investment was caused directly and even solely by

the sale of the Washington Square I property, there are still no facts which indicate that the McNeils and Fi

rst National Bank

conspired for the purpose of injur

y to him. M

cNeiltestified that he

did not know Lipman. He recalled the sale of Washington Square I because it was on a list of properties given to him by his staff b efore he was de posed. He was inde

bted for over $60 million in mortgages on commercial property in various states . Lipman ’s investment

of less than $200,000. 00 amounted to a fraction of

McNeil’s exposure

on this one project alone, whichexceeded $8 million. McNeil testified that he tried to please the bank, w

hich could call in his

notes and place him

in bankruptcy, but thatit was all a mat

ter of negotiation. The commercial lender from First National Bank te stified that he did not tell McNeil what to do: “I’m a lender. I get collateral.”10 VI INDUCING OR AIDING BREACH OF PARTNERSHIP AGREEMENT

OR FIDUCIARY DUTY Lip man’s allegations that Fi rst National induce d or aided the McNe ils t o breach the Washington Squa re I partnership a

greement or their fiduciary

duty is grounded upon the McNeils’ failure to disclose to him their Settlem

ent Agreeme

nt withFirst National on Washi ngton Square II. However, there is no evidence whatsoever

as to what the 52% of

limited partne

rs who approved the s ale knew or didn’ tknow, an d wheth er any su ch know ledge w ould h ave cha nged an y o f thei r votes. Simply stated, Lipman’s vote did not carry enough weight, regar dles s of what he knew or did

not know, to prevent

the sale of Washington Square I. Since he failed to submit t

he affidavit of any

other limited pa

rtners to show that a

ny partner would have, or might

have, voted “no

” under any condi

tions, his argum

ents thatthe McNeils violated their partnership agreement or fiduciary duty by faili

ng to obtain “inform

ed” consent and by

selling Washington Square I raise no genuine issue of material fact. VII

CONTROL OVER GENERAL PARTNERS Finally, Lipman alleges that an issue of mate

rial fact exists

as to whether

the bank “took control of the Partnership’ s assets and re quired the McNeils

to sale [sic] those assets at a t ime when such a sale was not ne cessary.” When asked why the Bank re quired theMcNeils to be mark eted joi ntly, JeffreyIngram of First National Bank answered, “W e didn’t require i t . . . as I recall it, Mr. McNeil

asked us to allow him

to market it

jointly . . .

at no point did we ever tell Alex he had to do this, he had to do that . . .”11 Although Lipman earnestly insists that th e Bank controlled Alex McNeil ’s business decisions, we find no evidence in the record to that effect. In order to defeat summary judgment, L

ipm an mu st present specific admissible facts which

r eali stically

challenge the McN

eils’ stated rea

sons for their busines s decisions. Wilk i ns v. Eaton Corp., 790 F.2d 515, 521 (6th C ir. 1986); Silpacharin v. Metropolitan

Go v’t., 797 S.W.2d 625, 629 (Tenn. App. 1990

). However, if the facts and conclusions to

be drawn from the fac

ts are such that a r

easonable person would only reach one c

onclusion, summ

ary judgm ent should

be granted. McClung v. Delta Square Limited Partnership, 937 S.W.2d 891, 894 (Tenn. 1996). We findthe record in this ca se does not raise any

genuine issues of material fact so as to warrant a trial and, accordingly, the judgment of the trial court granting the motion of defendant Fi rst Nat ional Bank of Boston for summary judgment is af

firmed at the costs of the appellan t.

_ ___ ________________________ _ William H.

Inman, Senio

r Judge CONCUR:

_______________________________ Houston M. Goddard, Presiding Judge

_______________________________ Herschel P. Fr

anks, Judge