# FILED May 6, 1998 Cecil W. Crowson Appellate Cou rt Clerk ELI MIKE, an individual, JAMES A. ) SCHRAMPFER, a

n individual, and ) JANE B. FORBES, as Tr ustee in ) bankruptcy for the es

tate of DAVID L. ) OSBORN, ) ) Davidson Chancery Plaintiffs/Appellants

, ) No. 89-1713-II (II I)(I) ) VS. ) ) PO GROUP, INC., a Tennessee ) Appeal No. corporation; JAMES W. (BILL) ) 01A01-9707-CH-00321 ANDERSON, III, an indivi dual; and ) HAROLD L. JENKINS, a n individual, )

) Defendants/Appellee

s. )
IN THE COURT OF AP PEALS OF TENNESSEE AT NASHVILLE APPEAL FROM

THE CHANCERY COURT OF DAVIDSON COUNTY AT NASHVILLE, TENNESSEE HONORABLE IRVIN H. K ILCREASE, JR., CHANC ELLOR
John C. Tishler, #13441 TUKE, YOPP & SWEENEY 17th Floor , Third Nat ional Bank Bl dg. 201 Fourth Avenue

North Nashville, Tennessee 37219-2040 ATTORNEY FOR PLAINTIF FS/APPELLANTS William L. Harbison, #7012 Andrew J. Pulliam, #16863 SHERRARD & ROE 424 Church Street, Suite 2000 Nashville, Tennessee 37219 D. Denty Cheatham CHEATHAM & PAL

ERMO 43 Music Square Wes

t P.O. Box 121857 Nashville, Tennessee 37212-1857 ATTORNEYS FOR DEFENDANTS/APPELLEES AFFIRMED. HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION CONCURS: BEN H. CANTRELL, JUDGE CONCURS IN RESULT: WILLIA M C. KOCH, JR., JUDGE-2-

ELI MIKE, an individual, JAMES A. ) SCHRAMPFER, a

n individual, and ) JANE B. FORBES, as Tr ustee in ) bankruptcy for the es

tate of DAVID L. ) OSBORN, ) ) Davidson Chancery Plaintiffs/Appellants

, ) No. 89-1713-II (II I)(I) ) VS. ) ) PO GROUP, INC., a Tennessee ) Appeal No. corporation; JAMES W. (BILL) ) 01A01-9707-CH-00321 ANDERSON, III, an indivi dual; and ) HAROLD L. JENKINS, a n individual, )

) Defendants/Appellee

s. ) 

## O P I N I O N
The captioned plaintiffs’ haveappealed from a summary judgment dismissing plaintif

fs’ actions against the cor

porate defenda

nt for the value of

their stock as disse

nting minority shareholders and their action against the individual defendants for breach of fi duc iary duty as corporate dire

ctors.
On appeal, plaint

iffs present the f

ollowing issues: 1. Whether

summ a ry judgmen

t is appropriate dismissing a claim based upon the stat ut e of limitations when the undisputedfacts indicate that the cause of action accru

ed within the perio

d of the statute of limitations rather than o u tside the period as determined by

the Trial Court? 2. Alt erna tiv ely, whether summary judgment i s appropriate

dismissi ng a claim basedupon the statute of limitations when different inferences regarding the accrualof plaintiffs cause of action may be draw n from the facts? 3. I n the event the summa ry judgmen

t i s reversed, whether the discretionary costs judgment should be vacated?-3- Defendants pre

sent the following

issues: A. Whe ther

the Trial Court properly held that appellants’ claims are time-b arred by th

e th ree-year statute of limitations in

Tenn. Code Ann. § 28-3-105 due to those claims accruing more t han three years beforeappellants filed t

his suit when appellants knew of their claims and their counsel threatened suit on their behalf in letters making the same allegations that appellants make i

n this suit. B. Whether

the Trial Cour t’s award of discretion ary

c osts to Mr. Anderson was within the court’s authority under Tenn. R. C iv.P. 54.04 to award discretionary

costs?
In a former appeal in this same case, the Supreme Court held that the appli

cable statute of limitations was thre

e years. T

his suit was filed on June 30, 1989. Three years prior to June 30, 1989, was June 30, 1986. The primary inquiry on appeal is whether plaintiff’s right of action or any part thereof arose after June 30, 1986.

The individual de fendants were the sole stockholders, officers and directors of the corporate defendant which

owned majority

interests in a numbe

r of lesser corp

orations in

which plaintiffs held minority interests. Specifically, stock of the corpora te defendant, Po Group, Inc.,
was owned in equal sha

res by the

defendants, Anderson and Jenkins, who were also equal
owners of all of the stock of Pro Combination, Inc., a non-party. Po Group, Inc., owned 80% of the stock of Po Louisville, Inc., 72.57% of the stock of Po Jackson, Inc., and 73% of the stock of Po Memphis, Inc.

The plaintiff, Eli Mike, was a minority stockholder of Po Louisville,Inc. The plaintiffs, James A. Schrampfer

and David Osborne, were minority stockholders of Po Jackson, Inc., and Po Memphis, Inc.. David Osborne is in bankruptcy, and his interests are represented by

Jane A. Forbes, Trustee.

After an unsuccessful

effort t o sell the corporate st

ock of Po Group, I

nc., and Po Combination, Inc., to DineLite Corporation , Po Group , Inc. agr eed to sell and Din

eLite-4-

Corporation agreed to buy substantially

all of the assets of

Po Group, Inc.

and Po Combination, Inc.. T.C.A. § 48-1-907( c) requires that stockholders dissenting from such a sale be paid the fair value of their stock. A part of the consideration of the sale was thepayment by DineL ite of certain bank debts

of Po Group, Inc., and

Po Combination, Inc., which were guaranteed by the individual defendants, Jenkin s and Anderson. Th

is provision of the s

ale is th e basis o f the plaintiffs’ suit against the defendants, Jenkins and Anderson.

The sale was appro ved by a majo rity of the st

ockholders of ea

ch of the corpor

ations, including those in which plaintiffs’ were interested, at a meeting held on December 15, 1985.

As stated above, the

Supreme Court conc

luded the former

appeal by h

oldin g that th e three-year statute of limitations barred the action of plaintiffs against the co rpo rate defendan

t. The opinion of the Su

preme Court also st

ates:

. . .any right the plaintiffs may have had to recove r from Andersonand Jenkins for bre ach of their

fiduci ary duties as officers or directors of a ny o f the three subsidiary corporations or Po Gro up, Inc., expired on January 1, 1989, prior to the date on whichthe present suit was filed, June 30, 1989. The plaintiffs acknowledge that Section 4 8- 18-601 ba rs recovery from Anderson or Jenkins for any breach o f fiduciary duties as officers or directors. 937 S.W.2d at 794.

- - - - The complaint allege s t hat the majority shareholder, Po Group, Inc., breache d a fiduciary duty owed to them as minority shareholders . . . . [T]he plai n tiffs allege that the proceeds from the sale of corporat e assets were unf

airly distributed by the defendant, Pro Group, Inc., to th e defendants

Anderson and Jenkin

s. The complain

t do es not otherwise define the duty or the wrong. The allegations do notindi cateclearly the “gravamen of the action.” T he legal wrong of which the plaintiffs complain is un cert ain. The complaint does n ot charg e fraud; howeve r, there is found i

n the complaint

the statement that the breach of fiduc iary duty by the defenda nts

included “the diversion and/or mi sappropriation” of assets. Even then, the legal duty that was violated is not entirely clear. The plaintiffs seek no

judgment of liabi

li tyfor wrongdoingagainst Anderson and Jenkins. The complaint against Anderson and Jenkin

s is that their rela

tio nsh ip with the majority sha

re holder, Po Group, Inc., was such that the plaintiffs should be allowe d to pierce the corporate veil and-5- collect from the individua

l defendants the v

alue of their shares of stock.

- - - - Thus, the action of Po Group, as the majority shareholder

in the three subsidiary corporations, was essential to the consummation of the sale. Id . at 794.
The cause was remanded by the Supreme Court to

afford opportun

ity to the plaintiffs to show that some

wrongful act of

the individual defendants occurred after June 30, 1966. No such act is shown by this record.
Appellants

insist that the three-year statut e di d not begin to run against them until the final transfer of assets which occurred after

June 30, 1986. This Court does not agree. By the binding contract to sell a

nd buy the as sets, the corporations were bound to complete the transfer anddelivery of

such assets, and th

e statute of limitat

ions began to run

at that time, reg

ardlessof any delay in carry

ing out the details of transfer.

The plaintiffs assert

that the individual defendants committed a breach of fiduciary

duty by relieving themselves of

their liability as guarantors. The guaranteed liability was secondary to the primary liability of the corporations which was a legitimate subject of inclusion in the sales agreement.

The incidental benefit to the individual defendants without detriment to the
corporations is not legitimate ground for liability of the individual defendants. Moreover, t h e provision of the sales agreement for satisfaction of ba

nk debts was disclosed to plaintiffs in the notice of stoc kholde rs meeting received by plaintiffs. Furthermore, on January 3, 1986, plaintiffs’ attorney wrote a letter to the president of Po Louisville, Po Memphis and Po Jackson demanding p ayment of fair v alue of plai ntiffs’ st ock and stat ing:

The value, of

course, should include monies that have beenm isappropriate [sic] from the Company by the controlling shareholder, the value o f the franchise rights for the Company’s market

that were represented by

the majority shareholders to b e in the Com pan y and th e proportionate value being realized by the majority shar eholder’s being relieved of certain liabilities by DineLite Corporation. “[f]ailure to arrive at a fair value for” the shares of Mr. Brown’s client,-6- ...will leave us no alternative but to institute litigation, which would include, but not necessarily be limited to claims for:

(1) v iolations of notice procedures unde r the Te nnessee General Corporation Ac t (2) violati ons of state and federal securitie s law (3) misappropriation o f assets (4) violations o f the racketeering [sic] influences and corrupt organizations act. We await further action by you on this matter.
Plaintiffs assert that there was an inequitabl

e distribution of be

nefits to the subordinate corporations by payment of the various bank loans which a dversely affected

the value of their stock and thereby unfairly re duced the amount to be paid to them for their stock.

No evidence is cited or found as to t he specific or a mount of the alleg

ed inequitable allocation of bank loan relief among the sev eral corpora tions inv olved. Even though the action of plaintiffs were not barred, no relief could be granted to

plaintiffs for the alleged inequity of relief from bank

loans because of

the lack of evide

nce of the amount o

f damages.

Fin all y, plaintiffs argue that, in event of reversal of the judgment of

the Trial Court, the award of discretionar

y costs should

be dismissed. Ther

e is no complaint tha

t the award of discretionary costs was otherwise in error.

No grounds are fo

und for reversa

l of the judgment of dismissal, hence the award of discretionary costs will not be reversed.-7- The judgment of t

he Trial Court is

affirmed. Costs

of this appeal are taxed against the appellants

andtheir surety . The cause is remanded to the Trial Court for necessary f urther proceedings.

AFFIRMED & RE MANDED
.

_________________________________ HENRY F. TODD PRESIDING JUDGE, MIDDL E SECT IO N

CONCUR:

_____________________________ BEN H. CANTRELL, JUDGE

CONCURS IN RESULT:

_____________________________ WILLIA M C. KOCH, JR., JUDGE