# FILED

June 17, 1997 Cecil Crowson, Jr. App ellate C ou rt Clerk IN THE COURT

OF APPEA LS OF TEN NESSEE WESTERN SECTION AT J ACKSON

______________________________________________________________________________ GAT ES, DUN CAN AND VA NCA MP Shelby Chancery No. 102071-3 CO., a Part

nership C.A. No. 02A0 1-9605-CH-000

95 Plaintiff, Hon. D. J. Aliss andratos v. RICHARD W. LEVA TINO, Defendant/Cross Plaintiff,

v. GATES, DUNCAN AND V ANCAMP CO., a Tennessee Part nership; Cross De fendant

, and LOUIS “RICK” CHA FFIN and GLEN R. PAGE, Individuall y and as partners o f GDVC Company Third-Party Defend ants. WILLIAMH. HA LT

OM, JR. , T

ho mas on , H end rix, H ar

ve y, Jo hns

on& Mitc hell, Memphis, At

torn ey for

Plaintif f/Cross-Defendan t/Th ird-Part y Defen dants. STANLEY J. KLINE, Memphis, Attorney f or Defendant/Cross Plaintif f AFFIRMED Opinion filed:

______________________________________________________________________________ TOMLIN, Sr. J. Gates, Duncan and V ancamp, a Tennessee partnership ( hereafter “Pl ain tiff” ) fil ed s

uit in the Ch anc ery C ourt o f She lb y Cou nty ag ain st one of its partners, Richard W. Levantino(hereaft er “Levatino” or “Defendant”) , seeking injunct ive relief,an accou nting , compensa tory and punit

ive damage s, termination o f the part nership, att

orney fees and expenses and ot her relief in connection wi th plaintiff’s attempt to protect the assets of the partnership. Subsequent

ly the cha ncellor, at

the r equest of bot h part ies, ent erta ined a motion for a decl aratory judgmen t, which was u ltimatel y resolve d in favor of plaintiff. Thereaft

er the chancellor referred other pending matt ers to a Special Master, whose report to t he chancellor was affirmed by him. In addition, the2

chancell or awarded compensatory and punit ive damages, along with att orney fees to plaintiff

. On ap peal de fenda nt h as ra ised s ome t hirt y-t hree issue s, which we believe are bett

er sta ted by

plaintif f in it s brief. They a re as fo llows: (1) The chancel lor erre d in rende ring decl aratory judgmen t in favor of plaintiff (2) The chancell or erred in overruling defendant’s affirmat ive def ens es to th e par

tnership agre em ent. (3) The chancell or erred in referring certain matters t o the Special Master rather t

han retaining t

hem himsel f. (4) The chancel lor erre d in denyin g defendan t’s motion for additional compensation. (5) The chancell or erred in holding that commissions on renewal insurance produced by him properly belonged to the part nership. (6) The chancel lor erre d in diss olving the partnership based u pon the w rong ful cond uct of the d efen dan t. (7) The chancell or erred in ordering certain f unds to be placed in an escrow account pending determinat ion of the rig htful owner thereof. (8) The cha nce ll or erred in award ing attorne y fee s an d ex pen ses to plaintiff. (9) The chancell or erred in awarding punitive damages t o plaintiff.

For the reasons here after stated, we resol ve each of these issues in favor of plaintiff. Many of the basic fact s are not in disput

e. Plaintiff was a part nership formed fo r the purpose of selling insur ance and i nsurance-related b usiness products in Memphis. In March, 1988, defendant, along with C arl J. Gates, Louis J. “R ick ” Cha ffin , and Gl en R . Pag e en tered into a partn ers hip agre em ent to carry out t

his insurance business under the partnership na me “Gates, Duncan & Vancamp” (“GDV C”). Bot h parties agree t

hat t he partnership agreement was in full force and effect from March 1, 1988 t o October 15,1992, when the partnership was dissolved by order of t he chancellor. Articles I V and V are3

particularly relevant to t his litigation.

Article IV: It is agreed and under stood that the right t

o sell to, or deal with, any of the present clientele of the part nership...belongs to t he partnership and t

hat each part

ner waives any right he may have claimed as to the ownership or as t o the right

to sell to or deal with any of t

he partnership’s present or future clientele except as hereinafter prov ided upon dissolution. Article V: Eac h pa rt

ner sha ll give t

o t he p art ner shi p his en ti re t

ime and consideration and shall not engage in any o ther business that wou ld in an y wa y work to the d isa dva ntage of the partn ers hip or its purposes

. This shall not pr

ohibit any pa rtner

from making outs

ide invest ments as

long as t

he time a nd effor

t devo ted t

o such investments does not become so great as t o detract from his effectiveness as

a partner of this firm.... Following the execution of t he partnership agreement , all the partners executed assignments, by which all commissions and fees from their former clients were assigned to the new part nership. Subsequently, one of t he partners discovered some evidence that indicat ed that L

evatino was conducting an outside insurance business in violation of the part nership agreement. However, when confronted, Levat ino denied such conduct. Upon furt her investigat

ion, some of the part

ners uncovered more evidence and again confronted Levat ino, whothis t

ime admitt

ed engaging in insu rance-re lated busi ness out side the sco pe of t

he part nership. This suit

followed. In addition to t

he relief sought by plaintiff,Levatino in a cross-complaint

sou ght to ha ve hi ms

el f res tored as an activ e par tner a nd a ls

o sou ght a temporary restrainin g order that woul d prevent the other partners from interfering wi th his participation in the partnershi p. Following a hearing the chancellor entered an order dissolving the partnership as of October 15, 1992. In addition he ent ered a temporary restraining order against Levatino,requiring him to conduct all insurance-related business through t

he partnership. T

he order did permit him to pursue any insurance clients with whom he had not dealt while a partner in GDV C. The cha nce llor

re fe rr ed s evera l iss

ues toth e Ma st

er,fo r a fu ll ac co unt

ing of all4

claims raised by the parties in t he pleadings, as well as an accounting of any misappropriated insurance and insurance-related commissions by Levatino during the pe riod the pa rtner shi p agr eem ent was i n eff

ect. Thereafter, at t

he request of bot

h parties, t

he chancellor hel d a hearing for declaratory judgment t o ascertain t

he intent and meaning of the part nership agreement. At

the conclusion of that hearing the chancellor entered an order in favo r of plaint

iff, sp ecifically findi ng th at un der th e clear and una mbiguous langua ge of the partnership agree ment, Levatino was pr ohibited from conducting any insurance or insurance-related business out side the partner

ship agency during the period fro m March 1, 1988 through Oct ober 15, 1992. The court further rul ed that any and all commi ssions and funds rec eived by Levatino during the time t

he partnership was in effect should be paid over to plaintiff. The cha nce ll or re ferr

ed th is i ssu e to the Spe cia l M aster for a n ac cou nting to ascertain t

he extent of insurance and/or insurance-related business Levatino had conducted outside t he partnership during t he partnership period, as well as an accounting by Leva tino of what disposition had been mad e of those funds. In a subsequent hearing the chancellor held that renewal commissions received during the life of the pa rtnership agreement o n insurance previously written by Levatino were the sol e property of GDVC. Levatino t

hereafter filed a motion seeking co mpensation on t he ground that the court had forced him to perform work for t he partnership witho ut being paid, st atin g tha t he wa s entitled toan award o f $40, 000.0 0. This issue was a lso referred to t

he Special Master. As a res ul t of se vera l h eari ngs the Sp eci al Mas

ter su bmi tted hi s re port to the ch ancellor for his considera tion . The Mas ter made the f

ollowing finding s: (1) Levatino was indebted to pl aintiff in the amount of $88,612.72 for insuranc e busines

s conduc ted outside the partnership ag ency. After deducting t

he value of Levatino’s part nership interest from this amount, Levatino was i ndebted to plain tiff in the amount of $83,948.72.5 (2) Leva tino’s cross-complaint against Chaffin and Page, t

wo of the partners, assert

ing that they had engaged in wrongful conduct and thus breached the ag reement, was without foundation. (3) Leva tino’s conduct caused t he dissolution of the part nership, pursuant to the provisions of T.C.A. § 61-1-137(6)(3)(B). (4) Leva tino was not

entitled to any compensation from plaintiff based upon the allegation t hat he had been forced t o work for the partnership.

Th e c ha nc ello r r

at if ie d a nd af

fi rme d t he re po rt

of the Sp ec ia l Ma st

er . In addition the chancellor held that t he evidence was clear and convincing that Levat ino act ed willfully, intent

ionally and delibera tely in misa ppropr iati ng funds that belonged to the plaintif f, thereby constitut

ing intent

ional misconduct. The chancell or awarded plaintiff punitive damages against Levatino in t

he amount of $20,000

.00. The chancellor also granted plaintiff’s motion for att orney fees incurred by it for act

ion taken in t

he defense of partnership a ssets, and ordered Levatino t

o pay at

torney fees in t

he amount of $43, 355.00, along with r elated expenses o f $765.17. This ap peal followed. I. Declaratory Judgment Issue. In en tering a decl aratory judgmen t in favor of plaintiff, the chanc ell or held that Levat

ino was precluded from conducting any insurance-related business outside the part nership agency during the life of t he partnership. It is Levatino’s c ontention that t he logic al cons

truction of the language of the partnership agreem ent did not require h im to conduc t all in surance or insurance-related business solel y and exclusively through the part nership. He also contended that

the chancellor was in error in denying the affirmat ive def ens es r ais ed b y hi m. The court’s interpretation of the partnership ag reement is not entitled to a presum ption of correctness un der T.R.A.P. 13(d), inasm uch as the interpretation of a contract involves a legal rather than a factual inqu iry. Hillsboro Pl aza Enter. v. Moon , 860 S.W. 2d 45, 47 ( Tenn. A pp. 19

93). Our scope of rev iew is de novo

. T.R.A.P. 13(d).6 It has long been established in this stat e that a contract

must be interpreted and enf

orced acc ording to its cle ar, plain and unam biguous terms

. Bob Pea rsall Motors,Inc. v. Reg al Chrysler-Plymout h, Inc. , 521 S.W.2d 578, 580 (Tenn. 19

75). When the language of t he contract

is unambiguous and there is no claim or fraud or mistake, the court must give effect to t

he intentio n of the parties as expres

sed in the l anguage use d in the contract. Jennings v. Hayes , 787 S.W.2d 1, 2 (Tenn. App. 1990). Moreover, the part

ies to a cont

ract cannot

create an ambiguit

y where none exists. Edward s v. Travele rs In demni ty Co. , 300 S.W.2d 615, 617-618 (Tenn. 1957). Par

ole evidence is inadmissabl e to cont radict or vary t

he terms of a written cont

ract, when the parties’ int entions are readily ascertained fro m the contract as reduce d in writing. McQuiddy Printing Co. v. H irsig , 134 S.W.2d 197, 204 ( Tenn. 1 939). The law conclusively presumes t hat t he part ies toa cont

ract understood its o bligations, and evidence is not admissible to show that t heir understandi ng was in fac t otherwise. Id. at 204. After reviewing t

he terms of the partnership agreement this court is

co nv inc ed t

ha t t he clea r a nd u na mbiguo us la ng uag e t her einin dic at

ed t ha t a ll partners were todevote t heir entire t

ime and resources to the pro motion of t he partn ers hip and wer

e not to e ngag e in any o ther b usi nes s that woul d work to the disadvantag e of the part nership. The record is also clear that Leva tino’s actions were in direct cont radiction with t

his agreement. In no way does the agreement

allow Levati no th e freedo m to est ablish his sep arat

e insuran ce business outside the part nership which in effect would compete with the partnership. In so doing Levat ino was att

empting to serve two masters, and by so doing he was totally w rong. II. Defendant’s “Affirmative Defenses.” The content

ion by Levat

ino that the chancellor erred in denying the

va rio us a ff

irm at ive de fe nse s ra ise d by hi m is wit ho ut mer it . T he law is we ll established in this stat e that mutual assent is gathered by the language of t he7

contract rather than the unexpresse d or undis close d intentions of the parties. See Sut to n v . Firs

t N at io na l Ba nk

of Cr os sv ille , 620 S.W.2d 526, 530 (Tenn. App. 1981). As fo r the a ffirmati ve d efen ses of es toppe l, la che s, waive r and fail ure to act with due diligence, the chancellor heard testimony fro m the various part ners who testified t

hat when they

first suspected Leva tino of being involved in inappropriate p artnership behavior and confronted him, he denied any involvement in such affairs. Almost a year later,when confronted again, he admitted engagin g in insuran ce-rel ated business outside the partnership. Pl ain tiff’ s su it wa s fil ed two mo nths la ter. Th is i ssu e is

with out m eri t. III. The References to the Special Master. Levatino cont

ends that t

he chancellor abdicated his role as trier of the la wsu it by or

dering that the m ajority of th e is sue s nowbefo re thi s co urt were to be de t er min ed by

the Sp ec ia l Ma st

er . T his iss ue is wi tho ut mer it as we ll. In Archer v. Archer

, 907 S.W.2d 412, 415-16 (Tenn. App. 1995) this court st ated that the m ain iss

ues of a c ontro vers

y and the princ ipl es on whi ch th ese iss ues wer e to be adjudicated should be determined by the court , and that

subordinate and inc ide ntal iss

ues and the d eterm ina tion o f anc il la ry fa cts ar e ma tters p rope rl y to be referred to a Special Master. The reference to t

he Master was done only after t he chancellor had decided the main issue in this case, which was the int erpretat ion of the writ

ten partnership agree ment.

IV. Compensation for Work Allegedly Performed. By thi s is sue Leva tino c onten ds th at the c han cel lo r wa s in erro r in fail ing to award him compensation for “forced labor and services”, which he contended was worth nearly $40,000. 00 and that he was required to perform for t he plaintiff by order of court

. At t he hearing before t

he Master, Levat

ino failed to present any proof of t

he time worked on behalf of plaintiff, but rather cont

ended that he was automatically entitled to cert ain commissions from insurance-related8

business that he ha d brought t o the part

nership. This claim was dismissed by the Special Master fol lowi ng motion of pl aintiff and was af firmed by the chancel lor. Not only did Levatinofail to carry his burden of pro of, he failed to present any proo f at al l. This

iss ue i s wi thout m eri t. As to all of the above issues d ealin g with findings of the Master, a concurrent finding of a Mast er in a trial court is conclusive on appeal on t his court, except

where it is upon an issue not properly to be referred, where it is based upon an error of lawor mixed question of fact and l aw, or wher e it is not supported by any m aterial evid ence. Coates v. Thompson , 713 S.W.2d 83, 84 (Tenn . App . 1986

). Non e of th ese exc eptio ns a ppl y to the i ssu es s o pre sen ted to this co urt. Hence we ho ld that these concurren t fin dings are binding u pon us. V. Automatic Renewal Premiums. Levatino cont

ends that t

he automatic renewal premiums should have been paid directly to him rat her than being considered propert y of the partnership. Aut

omatic renewal premiums were revenues generated off the sales of insurance policies that to ok place before the format ion of the pa rt ner shi p i n Ma rch , 1 98

8. Th e la ng uag e o f t

he pa rt ner shi p a gr eem ent clea rly states t hat upon t

he formation of t

he partnership, t

he clients of the part

ners became clients of the part nership. The content ion of Levat

ino violates bot

h the spirit and l anguage of the partnershi p agreemen t. We resolve this issue in favor of plaintiff. VI. Dissolution of the Partnership. Next, Levat

ino contends t

hat t he trial court erred in finding t hat his wrongful conduct violated the part nership agreement, t hereby causing the dissolution of the part nership. Levatinoalso contests t he method employed by the court in valuing the partnership a nd in ascertaining t he partnership damages. Foll owing our sc ope of review pu rsuant to T.R.A.P. 13(d), we are of the opinion t

hat t he evidence does not preponderat e against t

he finding of the chancell or that

the misconduct of Leva tino caused the dissolution o f the9

partnership. As for the valuatio n of Levatino ’s interest in the part nership and the determination of com pensatory damag es due the partnersh ip by Levatino, once again we point out that these results were reached by the Mast er and concurred in by the chancellor. There was no error in law and there was material evidence to support these findings. Accordingly, t hese issues are resolved in favor of plaintiff.VII. Temporary Injunction. By this issue Levat

ino contends t

hat t he trial court was in error in issuing a temporary injunct

ion that required that

all funds connected with the commissions generated by Levatinoduring the existence o f the part nership be place d in an escr

ow accoun t until a proper de termination coul d be mad e of who rightfully owned such funds. It appears without cont radiction tha t the purpose of this injunct ion was to creat

e a separate account for the funds in dispute. At

the t ime this was done, the court had not issued its declarator y judgment ruling. It is readily apparent that the court

was trying t

o protect

the interests o f both part

ies by properly separating a nd identifying t he disputed fun ds. This

iss ue i s wi thout m eri t.

VIII. Attorney Fees and Expenses. Levatino here assert

s that the tria l court was in error in awarding plaintiff atto rney fees and expenses in this litigat ion. The law is well established in this state t hat surviving part

ners are entit

led to att

orney fees for defending partnership ass

ets. Bird v. Col le tte , 168 S.W.2d 797, 800 (Tenn. App. 1942); Evans v. Boggs

, 245 S.W.2d 641, 656-657 (Tenn. App. 1951). Pl ain tiff, th e par

tnership in thi s ca se, b roug ht this sui t in an attem pt to preserve the ass

ets of the partnership and to prevent any further d iversion of funds from the part

nership to t

he personal use of Levatino. There was more than adequate proof p resented that the amount o f the fees being request ed were fair and reasonable. We resolve t his issue in favor of plaintiff.10 IX. Punitive Damages. Lastly, Levat

ino challenges the award of punitive damages to p laintiff in the amount of

$20,000.0

0. It has been established in this st ate t hat a court

may award punitive damages if it f inds by clear and convincing evidence that t he opposing party has engag ed in intentional and fraudu lent mis conduct. Hodges v. S.C. Toof & Co. , 833 S.W.2d 896, 900 (Tenn. 1992). The record in this case is replete wit h evidence presented by plaintiff t hat Levatino engag ed in a deliberate, willful and intentio nal course of conduct in misappropriating over $80,000.00 . Examples of this evidence include Levatino’s dir ecti ng the paym ent of cer tain i nsu ranc e pre mi um s to hi s hom e rath er tha n to plaintiff’s

business

address

and lyi ng to the partners about the sequestering of assets of t

he partnership in an at tempt t o avoid being caught . Only after Levatino was pres

ented with overwh elm ing evidenc e did he ad mit to some of the thing s of which he was accused. It is apparent t hat t he chancellor found Leva tino’ s stor

y unb el ieva bl e. Th is i ssu e is al so w ithou t merit. Acc ord ing ly , the d ecr ee of the ch anc el lo r is

affi rme d in al l r

esp ects. Cos

ts in this cause on appeal are t axed to Levat

ino, for which execution may issue if

necessar

y.

________________________________________ TOMLIN, Sr. J.

________________________________________ CRA WFOR D, P .J. S.W. (CONC URS)

________________________________________ LILLARD, J. (CONC URS)