GORDON MCGEE, ) ) Plaintiff/Appellee, ) ) Rutherford Chancery VS. ) No. 89CV000083 ) CARL PIPPIN and wife, HELEN PIPPIN, ) DAVID ATKINS, HARDAWAY ) Appeal No. CONSTRUCTION COMP ANY, and ) 01-A-01-9706-CH-00289 C & G WHOLESALE LUMBER & ) SUPPLY, INC., ) ) Defendants/Appellant

s, )

IN THE COURT OF AP PEALS OF TENNESSEE MIDDLE SECTION AT NASH VILLE
APPEAL FROM RUTHERFORD CHANCERY COURT AT MURFREESBORO, TE NNESSEE
HONORABLE ROBERT E. CORL EW III, CHANCELLOR

W. H. Steph enson , II 346 21st Avenue No

rth Nashville, TN 37203 ATTORNEY FOR PLAINTIF F/APPELLEE Quentin Scott Horton 201 West Main Street McMinnville, TN 37110 ATTORNEY FOR DEFENDANTS/APPELLANTS



### MODIFIED AND AFFIRMED IN PART, REVERSED AND VACATED IN PART, REMANDED

.

HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION

CONCUR: BEN H. CANTRELL, JUDGE-2- 

# FILED January 30, 1998 Cecil W. Crowson Appellate Cou rt Clerk WILLIA M C. KOCH, JR., JUDGE GORDON MCGEE, ) ) Plaintiff/Appellee, ) ) Rutherford Chancery VS. ) No. 89CV000083 ) CARL PIPPIN and wife, HELEN PIPPIN, ) DAVID ATKINS, HARDAWAY ) Appeal No. CONSTRUCTION COMP ANY, and ) 01-A-01-9706-CH-00289 C & G WHOLESALE LUMBER & ) SUPPLY, INC., ) ) Defendants/Appellant

s, ) 

## O P I N I O N
This is a suit by a stockholder

of an insolvent corporation, against another stockholder, his wife and an employee, seeking judgment ag ainst them for dissipation of assets of the corporation, recovery of money due f rom deb tors of the corporation and liquidation of the corporation for the benefit of creditors. Although not designated suc

h in the complaint, the

suit appe ars to be a suit for a r eceivership. Ma

tter of Liquida

tion of United Amer

ican Bank in Knoxville. Tenn. 1987, 743 S.W.2d 911.
Defendants,

Carl Pippin and his wi fe, Helen Pippin, have appealed from a non jury judgment of the Trial Court awarding the corporation $179,474.78, plus pre-judgment interest from September 12, 1995.
Appellants’ present the following issues for review:

I. The Order iscontrary to the law and evidence. II. The Courterred in finding as a “badge of fraud” the disappearance of more than $100,000.00 worth of lumber from the premises of Henderson ville Bu ilding Supply as the evidence presented

explained the disappearance and it was not controverted. III. The Court erred

in finding Mr. Pippi

n failed to pursue the issue of theft. On the contrary, the proo f was-3- uncontradicted

that this investigation failed to demonstrate the existence of fra

ud or crimes. IV. The Court err ed in finding a “badge of fraud” to the Smoot’s Flowers incident. This matter involved a figure of substantially

less th an t he award, and to infer that this transaction would infer frau d as it rela

t es to the case in its totality is unwarranted. V. The Court erred in rendering a judgment agains t Mrs. Pippin th

r ough con cept s of all eged vic ari ous lia bil ity. The proof demonstrat

ed that M

rs . Pippin was in no way connected

either a ctively or passively with the transaction involving the Hendersonville Lum be r incident. To infer knowledge on her part is unwarranted as the record is void of such knowledge or implication. VI. The Court erred in rendering a judgment agains t Mrs. Pippin

through concepts of alle

ged vicarious li

ability in any other r

espects. VII. The Court erred in finding that Mr. Pi ppin mismanaged

the corporation as this is not a ground for lia bil ity. VIII. The Court, as the trier of fact, erred in

rendering a judgment b a sed upon the evidentiary summaries of respective coun

sel. IX. Appellants’ defenses were un duly prejudiced and were thereby denied due process by

the lengthy, protracted and interrupted progression of the trial and ultimate Order. X. The Court erred in setting aside the judgment by default that was e

ntered agains

t the Appellees. XI. The Court erred in its assessment of prejudgment intere

st. XII. The Court erred in awarding pre-judgment interest as of September 12, 1995. XIII. The Court erred in all of its inferences of fraud attribut able to Defendants with regard to the enormous judgment when in f

ac t the small transactions that were admitted as mistakes through inadvertence were insignificant in comparison. XIV. The Courterred in it’s finding that Mrs. Pippin, “hadto know the misdeal ing of Mr. Pippin” as the record is void of any evidence to justify such a de termination. XV. The Court erred in that the amount of the award was excessive.-4- The first issue is too general for consideration by this Court. State v. Nolan , 161 Tenn. 293, 30 S.W.2d 601 (1930); State v. Tenn. Coal, Iro n & R. Co ., 94 Tenn. 295, 29 S.W. 116 (1895); Leach v. Leach , 52 Tenn. App. 606, 376 S.W.2d 739 (1964).

In August 1987, the plaintiff, Gordon R. McGee and the defendant, Carl P ippin, organized the defendant, C & G Wholesale Lumber and Supply, Inc. Each

owned one-half of the corporate stock. Defendant Pippin became the active super viso r of the operations of the corporation and his wife, Helen Pippin became the bookkeeper of the corporation.

On February

10, 1989, Mr. McGe

e file d this suit against Mr. and Mr s. Pippin, David Atki n s, Hardaway Construction Company and C & G Wholesale Lumber & Supply, I nc. The complaint alleged: 1. C & G Wholesale Lumber and Supply, Inc.

was insolvent and should be liquidated and dissolved. 2. Carl Pippin had committed fraud upo n plaintiff and the cred ito rs o f C & G by:
a. Payi n g personal debts wi th corporate fund

s. b. Removing corpor ate assets. c. Converting funds of the corporation. d. Preferring ce

rtain creditors. e. Failing to protect c o rporate assets in the possession of the defendant, Dav

id Atkins. 3. Plaintiff had loaned the corporation $20,000.00. 4. Defendant,

Mrs. Pippin negligent ly kept the corporate boo ks an d conspired with Mr. Pippin and David Atkins. 5. Defendant,

Hardaway Construction Company owed C & G approximately $55,000.00. The complaint sought the following relief:

2. T ha tupon a hearing on the merits, this Court appoint an accountant-

receiver or som

e other individ

ua l to-5- begin dissolution of C &

G Wholesale

Lumber & Supply, Inc
. and that a full and complete accounting be made a s to the status of accounts pay

able and receivable and

the other assets of C & G Wholesale Lumber & Supply, I nc. 3. That

due to the fraudu

lent actsof

Carl Pippin as alleged in the Complaint, and as to Hel en Pippin also, that a restraining order sh ou ld issue against them restraining them from representing t

o any oth er p arties that they are agents of said corporation and

that th ey sh ould be restrained from incurring any oth er obligations in behalf of said corporation and that they should cease any and a ll activities of conducting any further business for and in behalf of said C & G Wholesale Lumber & Su ppl y, Inc. Further, that Carl A. Pippin should be restrained from collecting any other accounts rece ivable of sai d corporation or taking any othe r action which might harm or hinder the creditors of said corporation. 4. That

a restraining or der should issue to Hardaway

Construction Compan

y restrain

ing th em from paying any sums of money owed by them to C & G Wholesa

le Lumber & Supply and

anyone othe

r than the Cl

e rk & Master of the Chancery Court of Rutherford County, TN
. 5. That after an acco unting is conducted, the Cou r t determine the rights of the various creditor s of C & G Who les ale Lumb er & S upp ly. 6. That

upon a hearing on the merits, thi s Court award a judgment in beh

alf of the Plaintiff against Carl Pippin, Helen Pippin, and David At kins in such sums as th

is C ourt may determine by

virtue of the conduct of the

se Defendants in harming Gordon McGee. Hardaway

answered, ad mitting a debt to C & G for lumber, but asserti ng that C & G should release its materialman’s lien as a condition of payment.

On April 3, 1989, the Trial Court entered an a greed order that, after resolution of lien issue, Hardaway pay to the Cler k and M aste r any funds due C & G, that the Clerk and Master
was appointed receiver for C & G, that all records of C & G be delivered to the Clerk and Master and that Mr. McGee, Mr. Pippin and Mrs. Pippin be restrained from conducting any business of C & G.

On May 8, 1989, Mr. & Mrs. Pippin answered admitting that C & G was insolvent and should be di ss olved, admitting that lumber and other assets were stored under the control of-6-

David Atkins who misappropriated said lumber and assets, but denying any misconduct of Mr. or Mrs. Pippin.

On May 23, 1990, an

agreed order was entered authorizing the sale of remaining asse

ts of C & G to plaintiff for $1,500.00.

On August

14, 1990, a fter a hearin g, the Trial Court entered an order requiring Hardaway to pay $39,5 64.24 to the Clerk a nd Master and auth

orizing the Clerk a

nd Master to satisf

y a judgment of the Ch

ancery Cou

rt of Gibson County

out of said funds.

On September

21, 1990, the defendant, David Atkins answered denying any conve

rsion of assets of C & G, or

conspiracy

to defraud plaintiff, and claiming the benefit of a disc

harge in ban kru ptc y.

On September 26, 1990, plaintiff filed a supplemental complaint naming three creditors of C & G which should participate in the proceeds of the liquidation of C & G.

On Jan uary 22, 199 1, Pippin and wife a mended their answ

er to plead the sta

tute o f limitations, T.C.A. § 48-18-601.
On March 28, 1991,

plaintiff nonsuite

d his action aga

inst David Atkins.

On July 7, 1993, the Trial Court dismissed Carl and Helen Pippin for failure of plaintiff to appear for tr

ial.
On August 13, 1995, the July 7, 1993 order was set aside.-7- On October 12, 1995, the Pippins filednotice of appeal from the letter of the Trial Judge and resulting order.

On May 16, 1996,

the Trial C o urt entered judgment against Mr. & Mrs. Pippin as follows: The Court f inds that t he Plainti ff, Gordon M cGee, is ent itled to re cover the fo llowing:

1. $100, 000.00 -- The minimum amount which Defendan t Car l Pippin, reported to Hendersonville Police was missing from the corporation. 2. $92.28 -- Pers ona l expenses paid by the corporation for Defendants, Carl and H elen Pippin, illustrated by Trial Exhibit 16. 3. $347.00 -- Payment t o ta x pre parer for the corporation for preparation of t he per sonal taxes of Defendants, Carl and Helen Pippin. 4. $ 129.36 -- Per Trial Exhibit 4, inclu din g personal expenses paid by the corporation. 5. $79. 26 -- Representing funds overchar

ged to the corporation for

a meal, and related gasoline expenses, not adequately explained. 6. $2 0.81 - - Purchase of beer shown by Trial Exhibit 38. 7. $1,300.00 -- Checks No. 299, 350, 389, and 444 all made payable to Defendant, Helen Pippin, and signed by either Defendants, Car

l and Helen Pippin, p

osted either to fr eigh t, outside labor, or inventory, and explained by Defendants’ salary, and explained b y D efendant, Helen Pippin, as reimbursement of expenses. (Sic) 8. $2,839.26 -- Defendant’s Carl Pippin, transaction with Hendersonville Building Supply, which appears to the Court to have been a transaction with the corporation. 9. $952.46 -- The Smoot’s Flowers tr ansactions. 10. $500.00 -- Representing the sum which the Courtfinds to be the depr eciated value of the cellular telephone which Defend ant, Carl Pippin, kept for the corporation, the whereabouts of he (sic) was u

nab le adequately to explain. In recognition of the testimony co nc erning the substantial debt of the corporation, it appears appropriate for-8- the Court to recogni

ze that the entire s

um of $106,260.43 should be awarde d to the corporation. The Court finds that thes e sums were fraudulently taken from the corporation by Defendant,

Carl Pippin, or Defendant, Helen Pippin, and with the knowledge o

f both parties. Th e Court further fin

ds that pre-judg

ment interest should enter with

regard to the $100,000, due to the unusual circumstances surrounding the disappearance of the lumber, and also for the $952. 46, i nvolved in the Smoot’s Flowers in cident. The offense re port was filed with

police in Hendersonville

on June 7, 1988. Pre-judgment interest from that date, then, is $72, 500. Pr e-judgment interest on the Smoot’s Flowers money

is $ 714.3 5, calculating pre-judgment interest from March 8, 1988. All interest

calculations are made through September 12, 1995, the date of the Chancellor’s opinion. Included in this Order by Reference and marked as Exhibit “A” and attache

d is the letter written by Judge Robert E. Corlew, III, dated September 12, 1995 to B. G. Marks, Quinton F. Horton, and

W. H. Stephenson, I

I, RE: Gordon R. McGee v. Carl and Helen Pippin, Ruther for d Chancery No. 89CV000083. IT IS THEREFORE

ORDERED, ADJUDGED AND DECREED by th

e Court as follows: The corporation is hereby awarded judgment agai

nst th e De fendants, Carl and Helen Pippin, in the sum of $179,474.78, plus pre-judgment interest from September 12, 1995 to date, along with costs.
On November 12, 1996, the Trial Court overruled the motion of the Pippins for a new trial.

On February

6, 1997, the Pippins’ moved the Trial Court to extend the time for fi ling a transcript.

On April 7, 1997, the Trial Court entered an ord er extending the time for filing the transcript to May 1, 1997.

On May 1, 1997, the Trial Cour t en tered an order extending the time for filing the transcript to May 8, 1997.-9- On May 9, 1997, the Trial Court extended the time for filing the transcript to May 15.
The transcript was filed May 15, 1997.

TRAP Rule 4(d) provides that a premature notice of appeal will be treated as filed on the date of filing of the final order. In the present case, the order overruling appellant’s motion for
new trial was entere

d on November 12, 1 996. TRAP Rule 24(b) requires the transcript to be filed within 90 days after notice of appeal is filed. Thus, the last day for filing the transcript was February 10, 1997, which wa

s a Saturday

whic h would extend the time to February 12, 1997. The transcript was not filed until May 8, 1997.

No authority is cited or found which authorizes a Trial Court to waive or grant extensions of the time for fili

ng transcripts.

TRAP Rule 2 authorizes thi s Court to waive, TRAP Rules (except for notice of appeal), butth ere i s no record of any application to this Court for extension of time for filing the transcript.

In this state of

affairs, the tra

nscript is not a comp

etent part of the

record on appea

l.

This Court has reluctantly determined that TRAP Rule 2 4 (b) should be waived in the interests of justice. This action is by no means an indication that such indulgence will ever occur again.

The j u dgment of the Trial Court is ambiguous in that it first awards damages to the plaintiff, Gordon McGee, but thereafter states that the recovery was awarde d to the defendant corporation, C & G Wholesale Sup ply, Inc . This Court interprets the judgment to award damages to the estate of the insolvent corporation, rather than to the individual stockholder-10-

plaintiff, Mr. McGee, as prayed for in the complaint. It does not appear that this deviation from the complaint was called to the attention of the Trial Court, and it may therefore be assumed that the i ssues of the right of the corporation was tried by consent of the par ties, or was a prope r incident to the liquidation of the corporation..

The first four

issues of the appellants’ challenge the holding that they are liable to the corporation for fraud.

The word, fraud, is usually emp loye d to indicate misre presentation whic

h induces anoth

e r to justifiably

rely th ereon to his hurt. Speaker v. Cates C o ., Tenn. 1994, 879 S.W.2d 811; Harrogate

Corp. v. Systems Sal es Corp. , Te nn. App. 1995, 915 S.W.2d 812. Fraud is never presumed. Where it is alleged it must be clearly made out. Hiller v. Hailey , Tenn. App. 1995, 915 S.W.2d 800. No evidence is found in this record to justify a recovery on this ground.
The complaint app

arently is grounded upon a conspiracy to convert certain property of the corporation t

o the private use o

f one or more of th

e alleged cons

pirators.

It is uncontroverte

d that a substantia

l quantity of

lumber belonging

to the corporatio

n did disappear. However, it did not disappear from the premises of the corporation, but from another premises not under the control of the corporation. There is no evidence of ho w th e lumber disappeared

or who realized

a benefit from its disappearance. At the insistence of plaintiff, Mr. Atkins was arrested; and, at the request of Mr. Pippin, he was released. This is not evidence of fraud or conspiracy

because neither Mr. McGee nor Mr. Pippin had admissible information of the guilt of Mr. Atkins. Moreover, the action of Mr. McGee in nonsuiting his suit against Mr. Atkins detracts f

rom any infe

rence of guilt o

f Mr. Atkins.

This Court finds thatthere is insufficient evidence to support a judgment against anyone for the loss of the lumber.-11- Other lesser ite

ms have sufficie

nt support.

The evidence shows that Mr. Pippin received $952.46 from Smoot’s Flowers in payment of a debt to the corporation, and the corporation did not receive this payment.

There is evidence that M

r. Pippin received $2,839.27 from Hendersonville Lumber Co. in payment of

a debt due the cor

poration which ne

ver received th

e benefit of the p

ayment.

There is evidence that funds of the corporation were used to pay $92.28 for pet supplies for Mr. and Mrs. Pippin.

There is evidence that c

orporate funds p

aid a $347 personal debt

of the Pippins to a tax specialist.

There is evidence that Mr. Pippin gave to an unknown person a cellular telephone which cost t he corporation $1,108.75 in 1988. (The Trial Court valued it at $500.00 without other evidence of value.)

From the melange of i

ndefinite and con

fusing evidenc

e, this Court has be

en able to identify substantial evide

nce to support a lia

bility of Mr. Pippin to

the corporation for a total of $3,937.95.
Insufficient evidence is found to support other claims against Mr. Pippin.

There is some evidence o f errors in the bookkeeping of Mrs. Pippin, but not so specific in nature or amount as to warrant a judgment against her a nd in favorof the estate of the corporation.-12- The judgment in favor of

the corporation a

nd against Carl Pi

ppinis modified by reducing it to $3,937.95. As modified, this judgment is affirmed.
The judgment ag

ainst Helen Pippin is rev

ersed and vaca

ted. Appellate

costs are taxed against Carl Pippin. The cause is remanded to the Trial Court for entry of the modified judgment and further proceedings in the liquidation of C & G Wholesale Supply, I nc.


### MODIFIED AND AFFIRMED IN PART, REVERSED AND VACATED IN PART, REMANDED.

___________________________________ HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION

CONCUR:
BEN H. CANTRELL, JUDGE

WILLIA M C. KOCH, JR., JUDGE