# FILED
October 29, 19 97 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTI ON AT JACKS ON

CHARLES S. RIGGAN, ) ) Plaintiff/Appellee, ) Shelby Chancery No. 102307 ) vs. ) ) Appeal No. 02A01-9511-CH-00246 ) WILLIAM TURNER ASKEW, ) ) Defend ant/Appe

llant. )

APPEAL FROM THE CHANCERY COURT OF SHELBY COUNTY

AT MEMPHIS, TENNESSEE

THE HONORABLE NEAL SMALL, CHANCELLOR

For the Plaintiff/Appellee : For the Defendant/Appellant : Stephen G . Beem Tim Edwards William P. Efird James F. Horner Memphis, Tennessee Memphis, Tennessee

AFFIRMED

HOLLY KI

RBY LILLA

RD, J.

CONCUR:

ALAN E. H

IGHERS, J. DAVID R. FARMER, J.OPINION

This case ar

ises out of

the disso lution of a partnership. The plaintiff alleged that he contributed substantially more than the defendant to the partnership’s capitalization, and sought an award of damages for the amount of hi s exc ess contr ibution plu s interes t. The tri al court held in favor of the plaintiff, and we affirm. In 1974, Plaintiff/Appellee Charles S. Riggan (“Riggan”) approached Defendant/Appellant Wi lliam Turne r Askew ( “Askew” ) with a pr oposition to

acquire over 200 acres o f real e state in northern Mississippi for development as industrial property. The parties formed a partner ship, A&R Associates (hereafter “the partnership”) in order to purchase and develop that land. There was no writte n partnership agreement. It was both parties’ under standing that Riggan would serve as the primary financi al contr

ib utor and Askew would pr ovide exp ertise a

nd contacts in the re al estate industry to market the property to potential buyers. In 1976, the parties purchased the prope rty (the “ Mills prope

rty”) fo r $585,50 2.25. The

sale

was owner- finance d. Both Rigga n and Aske

w signed a

promiss ory note (the “Mills note”) in the amount of $446,627.00 to the Mills family. The Mills family took a first mortgage on the propert y

as collateral for the loan. The promissory note pro vided for repayment of the note in ten annual installme nts. The Mi lls prope

rty was th e partne rship’s so le asset. The par ties wer e unable to sell the

Mills prope

rty in toto. Eventua

lly, the pa rtnersh ip sold several small par

cels. The procee ds of thes e sales w ere use d to amortize the debt on the remaining property. In 1979, th

e partne rs borro wed $120, 000 from A skew’s mother in or der to meet the debt payments on the Mills note. She was granted a second mortgage on the Mills property to secure the debt (hereafter the “Hood note”)

. The Mills n ote was finally paid in full in 1985. The record indicates that, over the life of the part nership, both part

ners per iodically provided cash inf usions to service the partnership debt. It is undisputed that Riggan pr ovided ap proximate

ly $638,00 0 while Askew contributed $72,000. The partner s pledged

their interest in the Mills property to secure several personal loans that Riggan received, totaling $1,200,000. The proceeds from the loans were used in some of Riggan’s business ventures outside of the partnership. Askew expressly limited his liability on t hese loa ns to his interest in the partnership property.2

In 1989, Riggan filed for bank ruptcy. C onseque

ntly, in March 19 89, the A& R partner ship

was dissolved. Thereafter, in November 1989, the parties a greed to sell the rema inder of the Mills proper ty for $685,927.17. The proceeds from the sale we re used to pay off the Hood note. I n addition, $402,000 of the proceeds were used to repa y funds contributed by Riggan. Subsequently, partnership tax returns were prepa red and filed. Thedebt

due the partners was closed out

based on their respective contributions, producing a $75,000 capital loss to Riggan and

a $75,000 capital gain to Askew. The tax returns indicated that, in effect, Riggan had advanced the partner ship $150,000 more than Askew. The partnership tax ret u rns also indicated that the partnership’s losses were divided equally each ye ar. The parties unsucce ssfully attempted to resolve their differences. Riggan then filed the present lawsuit in 1992, seeking an accounting. Askew’s answer raised s everal

affirma tive def enses, asserting in part that Riggan did not have standing to bring the lawsuit because of his personal bankruptcy filing in 1989. Askew filed a motionto dismiss on grounds that Riggan’s bankruptcy trustee was t

he only pa rty with legal standing to request an accounting. Thereafter , Riggan purchased

the rights to the cause of action from the bankruptcy trustee for $15,000. Consequently, the parties entere d a Consent Order withdrawing Askew’s motion to dismiss. Askew then filed a counter-complaint alleging that Riggan breached his fiduciary duty to the par tnership. At the bench trial in t

his cause, Riggan contended that the oral partnership contract included an agreement to share

the partnership’s profits a nd losses equally. A skew ar gued that , at the tim

e Askew agreed to become partners with Riggan, he believed that he would not be liable for monetary losses -- his contribut ion would be h is work in selling the property and Riggan would supply the money. Askew cited Riggan’s use of the Mills property as collateral for outside bu siness ventures

as evidenc e that the

partner ship agreement ha d change d to limit Askew ’s liabilit y to his interest

in the partnership property. Askew’s certifi ed public

accoun tant, Jame s Hynds, testified on Askew’s behalf at the trial. Hynds had prepared the partnership’s tax re turn. He testified that he re c tified the partnership account by closing out the debt due the partners based on their respec tive contributions, w ith a $7 5,000 capital loss to Riggan and a $75,000 capital gain to Askew. Hynds ac knowl edged that the tax returns indicated that, in effect, Riggan had advanced the partnership $150,000 more than Askew,3

and that Askew would have to pay Riggan $75,000 to compensate. Hynds admitted further that the tax returns reflected an equal division of the partne rship’s losses, and t hat Askew ha d taken tax deductions of

over $180,000. The partnership tax return was signed by both Riggan and Askew. Following the trial , the trial court awarded Riggan a judgment against Askew. The trial c ourt awarded $ 75,3 66, representing advances made to the partne rship, and interest of $274,380, for a total judgmentof

$349,716. The trial court dismissed Askew’s counterclaim for brea ch of fiduciary duty. Askew now appeals the trial court’s decision in favor of Riggan. On appea l, Askew r

aises seven issue s: 1) Whether the application of the doctrine of judicial estoppel bars Plaintiff’s cause of action; 2) Whether the trial court erred in awa rd i ng Plaintiff interest on the contributions made by plaintiff to the partnership; 3) Whether

the trial court er red in tre ating pla

intiff’s contribu

tions to the

partner ship as loans r ather th an capit

al contr ibutions; 4) Whether the applicable statute of limitations barred plaintiff’s c ause of action; 5) Wheth er plain tiff’s c laim was b arred b y the equi table defense of

laches; 6) Whether the trial court erred in failing to rule t ha t the par

ties merg ed their previous partnership agreement into a new partner ship agreement limiting defendant’s liabi lity to o nly his ca pital con tributionsto the par

tnership in consideration of defe

ndant’s p ledging hi s interes t in th e p artnership property as security for personal loans made to plaintiff; and 7) Whether the trial court erred in holding that the Partnership’ s 1989 fed eral inc ome tax retu rn did not c onstitute a

settled a ccount be tween the partner s. Our review in this case

is de novo on the record of the trial court, with a presumption of the

correctness of its factual findings, unless the evidence preponderates against those findings. Tenn. R. App. P. 13(d). No presumption of correctness attaches to the trial c ourt’s conclusions of law. See Carvell v . Bottoms , 900 S.W.2d 23, 26 (Tenn. 1995). Askew alleges first that the trial court erred in failing to hold that the doctrine o f judicial estoppel preclud

ed Ri ggan fro m a sserting his claim. Askew bases this assertion on Riggan’s bankruptcy petition, filed and signed under oath in March 1989. The bankruptcy petition included Schedule B-2, a sta

tement of all prope rty that th e debtor owns at the

time th e petition is filed. In prepar ing the Sch

edule, Rig gan was r

equeste d to provid

e informa tion on his a ssets, inc luding: P. Other liquidated debts owing debtor Q. Contingent and unliquidated claims of every nature, including counter-claims of the debtor [give estimated value of each] U. Inter ests in pa rtnersh ips4

The petition does notmention any claim against Askew under items P and Q. On cross examination at trial, Riggan admitted that by 1986 he had determined that Askew owed him money: Q: [Y]ou say your agreement was for 50- 50; is that correct, sir? A: That’scorrect. Q: And you say that you considered that [Askew] owed you some money. A: I figured that at any time that you have a partnership and it is 50-50, every dollar that’s put in it, whether

I put it in or Mr. Askew put it in, the ot

her par tner is lia ble and obligated for the other part plus any interest that may be ac crued. Q: So you considered that Mr. Askew owed you money? A: At what

point? Q: Did you in 1989? A: Yes. ****** Q: Did Mr. Askew owe you money in 1986? A: Mr. Askew owed money almost from the inception of this project -- until now. Q: Did he owe you money in 1986? A: Yes. Riggan ex

plained h is failur e to list Ask

ew’s de bt as follo ws: A: I gave all the information to the attorney a nd they fi lled all th is out. He t

old me to spellout ever

ything, la y it out on the tabl e. I had nobody question anything about this statement [the bankruptcy petition]. I had people that were trying to collect, and I spent a lot of money and a lot of time in court, but to no avail to them because we were up front wit

h him and - - to start with . So as far as all the detailed reports on this thing, sir, I don’t want to say that I put it all in there. Q: Did you tell him [the bankruptcy attorney] that Turner Askew owe d yo u over a half millio n dollars or whate ver your contenti on is? A: We got i

t listed rig

ht there 700 some od

d thousand

dollars. Riggan then ref

erred t o an entr y in the ba nkruptcy petition li sted as “ Intere sts inpartner ships” which refer enced a $550,000 i nterest in AR & Assoc iates: Q: The next

page you’re referring to shows AR & Associates, $550,000, statement of all property of debtor, right? Does that mean -- wha t does that mean? A: Well, I imagine wh at that me ans, sir, is that $55 0,000 is what Mr. Askew owes me. Under the doctrine of judicia

l estoppel, a part

y is bound by sworn statements made in former judicial proceedings. Allen v. Neal , 396 S.W.2 d 344 (Te nn. 1965) ; see also Sartain v. Dixie Coal & Iron Co. , 150 Tenn. 633, 266 S.W. 313 (Tenn. 1924). In Melton v. Anderson , 222 S.W.2d 666, 669 (Tenn. App. 1948), this Court discussed the reasoning behind the doctrine: A general statement of the doctrine of judicial estoppel is that where one states on oath in former l

itigation, either in

a pleading or in a deposition or on oral testimony, a given fa ct as true , he will no t be perm itted to deny that fact in subsequent litigation, although the parties may not be the same. *** The doctrine

in no sense

depends upon pre

judice to the part y invoking i

t. Upon the contr

ary it re sts solely o n public po licy which exalt s the sanct ity of the oath. The object is to safeguard the administration of justice by placinga restraint5

upon the tendency to reckless and false swea ring and th ereby pr

eserve the public confidence in the purity

and efficiency of judicial proceedings. (Citations omitted). In D. M. Rose & Co. v. Snyder , 206 S.W.2d 897, 906 (Tenn. 1947), the Tenness ee Supre

me Court discussed the requisite state of mind for application of the doctrine: While jud icial est

oppel app lies wher

e there is no expla

nation of the previo u s cont radictory sworn statement, it does not apply where there is an explana tio n showing such statement

was inadvertent, inconsiderate, mistaken, or anything short of a “willfully false” statement of fact. (citations omitted). Therefore, the doctrine

of judicia l estoppel applies o nly if Rigga n realiz ed that he

had a cla im against Askew at the time his bankruptcy petition was filed, and nevertheless willfully omitted i t. At the trial, Riggan testified that, during the course of thepartnership, he repeatedly informed Askew that cash deposits placed into the partner ship were loans tothe partnership, for which Askew would be held liable. In addition, at the time the bankruptcy petition was filed in March 1989, the partner ship had neither liquidated the Mills property nor rendered a final accoun

ting quant

ifying the partner s’ respective financial status. The sale o f the Mills property occurred in November 1989, and the partnership’s tax returns were prepared and signed by both parties in April 1990. Whether Askew remained liable to Riggan primarily depended upon the sales price of the partne rship’s main asset -- the Mills property. This sale had not occurred when the bankruptcy petition was filed. Moreover, Riggan’s failure to directly list a claim against Askew on t he ba nkruptcy petition is mitigated by mention on the same document of an interest in the partnership, valued at $550,000. Consequently, the evidence does not preponderate aga inst the trial court’s determination that Askew failed

to prove that Riggan’s omission of a claim against Askew onthe bankrup tcy petiti on constit uted a “willfully false” statement designed to mislead the court. The trial court is aff irmed on this issue. Askew asserts next that the trial court er red in aw arding Rig gan inter est on his adva

nces to the partnership, citing Tennessee Code Annotated § 61-1-117. Although A skew alle ges in his reply brief that this is sue was s ufficie ntly raise d before

the trial court, his quote to the record consists of

one sentenc e in which

his attorne

y question s what interest rate should apply to the debt , not whether

or not interest should be awarded. We are un able to f

ind in the r

ecord a challen ge by Aske

w to Riggan’s entitleme

nt to interest

on the deb t. Rule

6 of the Rules of the Court of Appeals requires that the a ppellant ’s brief

contain a written c itation to t

he part o f the re cord con

taining a ppellant ’s6

challen ge of the

alleged error b efore t

he trial c ourt: Rule 6. Briefs -- (a) Wr itte n argumen

t in rega rd to eac h issue on a

ppeal sha ll contain: 2. A statement showing how such allege d err or was seasonably called to the attention of the trial judge with citation to that part of the record where appellant’s challenge of the alleged error is recorded. (b) No complaint of or reliance upon action by the trial court will be considered on appe alunless the argument thereon contains a specific reference to the page or pages of the recor

d wh ere such action is recorded. No assertion of fact will be considered on appeal unless the argument upon such asser tion contains a reference to the page or

pages of the record where e vidence of such f

act is re corded (

Emphasis added). In the case at bar, Askew’s brief on a ppeal does not contain any reference to the portion of the record in wh ich Aske w raised

to the tria

l court hisopposition

to an awa

rd of inte rest to Rig gan on his contributions to the partner ship. Since Askew po ints to no pla

ce in the rec ord whic h refle cts that th is argumen t was made

to the tria

l court, it shall not b e conside

red on ap peal. Askew also contends that the trial court erred in treating the advanc es made by Riggan to the partner ship as loans r

ather th an capital contributions. Askew contends that the determination of whether the advanc es we re loans or capital contributions affects the interest aw arded upon dissolution. As noted above, Askew pointed to no place in the record in which he opposed an aw ard of interest on Riggan’s contributions to the partnership; therefore, this issue will not be considered

on appeal. To the extent that the trial court’s treatment of these monies as loans rather than capital contributions affects any o the r issue, the evidence in the record does not preponde rate against the trial court’s decision. Neither Askew nor Riggan introduced evidenc e, other than partnership tax returns , to support their respective claims concerning Riggan’s advanc es. The proof consisted of Riggan’s testimony that Askew promised to repay the contributions and Askew’s denial of suc h statemen ts, a credi

bility dete

rmination for th e t rial court to determine. The trial court’s determin atio n regarding credibility is accorded great we ight by the appellate court. See Doe v. Coffee Co. Bd. of Ed. , 925 S.W.2d 534 (Tenn. App. 1996 ). The dec ision of the trial cou rt is affirmed on this issue. Askew further asserts that Riggan’s cause of action for reimbursement of “advances” to the partner ship plus interest is barred by the six year statute of limitations governing actions based on contracts, Tennessee Code Annotated § 28-3-109(a)(3) , or, alternatively, by the ten year statute of limitations governin g actions on demand notes as set for th at Tennessee Code Annotated § 28-3- 109(c). He points to Riggan’s claims that the amounts advanced were debts of the partnership, and7

states that if tha

t were tr ue, then t he amount s became immedi ately due and payable. Because the

cause of action accrued

when each advance was made , Askew argues that the statute of limitations foractions b ased on a

contract runs fro m that point in time, and theref

ore bar s the suit

fo r reimbursement. Because there wa s no explic it a greem ent concerning repayment of the funds, the rules se t forth in the Uniform Partnership Act govern. See Young v. Cooper , 30 Tenn. App. 55, 203 S.W.2d 376 (1947). Partners who made payments and incurred reasonable personal liabilities on behalf of the partner ship are entitled to indemnification by the partnership. Tenn. Code Ann. § 61-1-117(2) (1989 and Supp. 1996). A partner who seeks to recov er advancemen ts must first request an accounting in equity. See Mandrell v. McBee , 892 S.W.2d 842, 847 (Ten n. App. 19 94); Snow v. Adamson , 385 S.W.2d 759, 761 (Tenn. 1965); Davis v. Fisher , 27 Tenn. App. 663, 184 S.W.2d 400 (1944). In an action for accounting under the Un iform Partnership Act, the statute of limitations begins to run at the time the partnership is dissolved. Tenn. Code Ann. § 61-1-142 (1989). Under Tennessee statutes, the p artner sh ip between Askew and Riggan dissolved when Riggan filed bankruptcy in March, 1989. See Tenn. Code Ann. § 61-1-130(5) (1989 and Supp. 1996). Although the advancements made byRiggan we re immedi ately due

and paya ble and subject to

interest , see Tennessee Code Annotated § 61-1-117(3) (1989 an d Supp. 1996 ), the cl aim did not a ccrue u ntil the dissolution of the partnership. See Manley v. Belew , 190 Tenn. 698, 231 S.W.2d 353 (1950). Riggan filed this lawsuit seeking a n acc ounting in December 1992, within the applicable six year limitation period. Accordingly, the decision of the trial court is affirmed on this issue. Askew also asserts on appeal that Riggan’s cause of action is barred by the equitable doc trine of laches. Laches is a defense pec uliar to the courts of equity and wi ll ge nerally be applied when

no statute of

limitations governs. Consumer Credit Unio n v. Hite , 801 S.W.2d 822, 825 (Tenn. App. 1990). On

occasio n the doct

rine is applied prior to expiration of the statutory period where the plaintiff has been guilty of gross laches in the pro secution of a cla im. Id

. A summary of the doctrine of laches is in 11 Tenn. Jurisprudence, Equity , §39 : The two essen

tial elem ents of la ches ar e neglig ence and unexcused delay of the complainant

in asserting his alleged claim and injury to rights of third persons intervening during and therefore on account of the delay. Thus, the determinative test as to l aches, w

hich may b e availa

ble as a s uccessf

ul defen se in an e quitable a ction, is not the length of time that has elapsed, but whether the party relying o n laches as a defense has been pr ejudiced by the delay.8

Askew contendsthat Rigga n’s dela y in filing suit resulted in over $250,000 in interest accruing on

a $75,000 outstanding loan balance over an 18 year per iod. Askew also note s that Rigga n lost many of the part nership’ s tax and f

inancia l recor ds. Askew , howeve

r, fails t o explain how the loss of the records prejudiced his defense. Riggan’s expert witness, Robert Hester C.P.A., testified that the partner ship document s contained all the informat ion nece ssary to

provide an accurate acc ounting of the part nership’ s financ es. Askew also contends t hat Riggan lost documents which described how the proceeds from the personal loans that Riggan received were used. However, Askew fails to explain how Riggan’s

use of the loan proceeds is relevant to the case at ba r. These loan documents were unnecessa ry to pe rform the partner ship acc ounting. T herefo re, othe r than the accrua l of inter est on the indebted ness, Askew failed to present evidence demonstratingthat he was prejudiced by Riggan’s delay in filing suit. The evid

ence do es not pre

pondera te against the trial court’s finding that the doctrine of laches is not applicable in this case. The trial court is affirmed on this issue. Askew next co ntends tha t the trial court erred in failing to hold that the parties’ original partner ship agreement had evolved into a new agreement

in which A skew’s li ability wa s limited to his interest in the partnership property. Askew contends that his limited liability resulted from pledging his interest in the partnership’ s property as security for personal loans made to Riggan. However, Askew’s testimony on this issue does not establish a specific “new” part ner ship agreem ent: Q: What agreement was reached with Mr. Riggan at the time that you limited your liability to the investment that you had in the realty? A: You know, I can’t

honestly answer that. I never took personal liability after that other than the agreement with my mother, and that was a pre-existing agreement but my -- I think that was the extent of my liability. I mean -- ****** Q: Did you ever

have a specific agreement with Mr. Riggan that your liability was only the land? A: We never had a

specific agreem ent peri od. That’ s the prob lem. ***** Q: Is your testimony, then, that you really had no specific agreement on a nything? Is that really where you are? Is that your testimony? A: Unfortunately, that is my testimony, and that is my honest belief. I mean, we hoped to make a profit, and that’s not much of an agree ment.9

In addition, James Hynds, Askew’s personal accountant and the partnership’s accountant, testified that all of the pa

rtnersh ip’s tax ret urns reflected an agreement unde r which profits and liabilities

were equally split between the partners. The evidence does not preponderate against the trial court’s holding, and the decision of the trial court is affirmed on this issue. Finally, Askew ma

intains on

appeal t hat the pa

rtn ership’ s signed tax return for 1989 constituted a settled account between the parties, thereby precluding Riggan from br inging suit. In Tennessee, a settled account is an account which is adm ittedly c orrect . So long as the acc ount is disputed, it cannot be a liquida ted or se ttled acc ount. Mack v. Hugger Bros. Constr. Co. , 10 Tenn. App. 402 (1929). In this case , it

is undisputed that Riggan signed the part nership’ s finaliz ed tax doc uments in April1990. Both parties agreed that the 1989 tax form indicated the fina l tax position of the partners at the dissolution of the partnership. Neither party disputes that the $75,000 figure is correct. Rather, the parties d

is pute A skew’s liability to Riggan for payment of Riggan’s $75,000 loss. Riggan testified that after the dissolution of the partnership and

the sale of the Mills property, Askew assured him that he would repay the outstanding debt when he obtained sufficient funds. Askew denied

ever agreeing to repay Riggan any outstanding loan balance. The 1989 tax form does not

clearly absolve Askew from liability to Riggan; rather, it is a formal accounting, necessary for dissolution o f the partnership. Determination of whether Askew agree d to pay Riggan the outstanding debt required the trial cou

rt to assess Rig gan’s and Askew’ s credib ility. The weight, faith and credit to be given to any witness’ testimony lies in the first instance with the trier of fact, and the credibi lity determination of the trial court is accorded great we ight by the appella

te court. See Doe v. Coffee Co. Bd. of Ed. , 925 S.W.2d 534 (Tenn. App. 1996); Koch v. Koch , 874 S.W.2d 571 (Tenn. App. 1993). We find that the trial court did not err in declining to hold that the 1989 tax form constituted a settled account between the parties as to the pa yment or repudiation of the debt. In sum, we a

ffirm the trial cou rt’s holdin g that Riggan is not judicially estopped from asserting his claim agai nst Askew because the proof does not c learly show that Rig gan willf ully omitted his claim against Askew from his bankruptcy petition. We also affirm the trial court’s award of interest , because Askew cites no place in the re cord in which this issue was raised to the tria l court. The trial court’s treatment of Riggan’s advances to the partnership as loans rather than capital contributions is affirmed based on thecredibility determination of the trial court. We affirm the trial10

court’s holding that Rigga n’s claim is not bar

red by the

statute of

limitationsbecause

the statut e began to run whe

n the par tnership was dissolved. The doctrine of lache s is not app licable b ecause Askew failed to show he was prejudiced by the delay, beyond the a ccrual of interest. We affirm the trial court’s holding that Askew’s liabi lity was no t limited to h is intere st in the pa

rtnersh ip proper ty because Askew failed to present sufficient proof to e stablish such an ag reemen t. The trial court’s holding that this was not a settled account is affirmed based on the trial court’s de term in ation of Riggan’s and Askew’s rela tive cre dibili ty. Therefore, the decision of the trial court a warding damages plus interest to Riggan is affirmed. Costs on appeal are taxed to the Appellant, for which execution may issue if necessary.

HOLLY KIRBY LILLARD, J.

CONCUR:

ALAN E. HIGHERS, J.

DAVID R. FARMER, J.