# FILED
March 9, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

______________________________________________ ROBERT D. FULCHER, III and wife, ELEANOR FULC HER and ALLEN-FULCHER PARTNERSHIP, Appellants, Davidson Chancery No. 94-1424-I Vs. C.A. No. 01A01-9802-CH-00090 R. CHANCELLOR ALLEN, and H. STANLEY ALLEN, TRUSTEE , and HARWELL-ALLEN PARTNERSHIP, Appellees.

____________________________ _______________________________________________ _ FROM THE DAVIDSON COUNTY CHANCERY CO URT THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

Gail P. Pigg of Nashv

ille For Appellants Alvin L. Harris; W

eed, Hubbard, Be

rry & Doughly of Na

shville For Appellees

AFFIRMED IN PART, REVERSED IN PART AND REMANDED Opinion filed:

W. FRANK CRAWFORD,

PRESIDING JUDGE, W..S

CONCUR: ALAN E. HIGHERS, JUDGE DAVID R. FARMER,

JUDGE
This appeal involves a dispute between partners
. Plaintiffs-Appel lants, Robert D. Fulc her III, Eleanor Fulcher

, and All en-Fulch er Partnership, appeal the trial court’s ruling in favor of Appellees, R. Chancellor Allen, H. Stanley Allen, and Harwell-Allen Partnership.2 Longtime friends, Robert Fulcher (Fulcher) and Chancellor Allen

(Allen), entere

d into two partnerships to de

velop real estat

e during the mid-1980's. These partners hips continued into the mid-1990's when financial difficulties began to cause extreme conflict between Fulcher and Allen. These conflicts subsequently led to the lawsuit upon which this appeal is premised. In his complaint, Fulcher alleged, among other things, that Allen designed and executed
a fraudulent scheme to divest Fulch er of all the partnership property, that Allen converted partnership

money to his own use, that Allen could not be subrogated to the bank’s right of foreclosure, that the partner ships had not been w

ound up in accorda

nce with Tennessee law, and that the settlement agr

eement grantin

g Allen all partnership properti es was fraudulently obtained. After a trial on the merits, the chancellor ruled in favor o f Allen and adopted findings of fact which as pertinent state:

1.
. . . Chan ce Allen’s primary occupation is commercial real estate broker. 2. Defendant

H. Stanley Allen (“Stan Allen”) is the brother of Chance Allen and, at all times material hereto, was a practicing attorney. . . . 3. Plaintiff, Robert

D. Fulcher, III, is primarily employed as a commercial real estate broker. . . . 4. Mr. Fulcher had known Chance Allen and Stan Allen since childhood. 5. In 1986, Chance Allen and Mr. Fulcher pu r chased a parcel o f undeveloped real property located near Old Hickory Boulevard. . . . 6. After

selling off the most valuable portion of the property, and losing a small portion in a condemnation p roceeding, Mr. Fulcher and Ch ance Allen were left with a parcel of approximately 5.2 acres (the “OHB Property”). 7. In 1988, Chance Allen and Mr. Fulcher contracted to purchase improved real property

in Nashville, Tennessee known as the Jackson Busine

ss C enter (th e “JBC”). The purchase was closed in November 1988. The purchase price was $1,250,000. 8. Mr. Fulcher andMr. Allen purchased theJBC as tenants in common, each ow

ning an undivided 50

% interest. 9. To finance their purchase of the JB C, Chance Allen and Mr. Fulcher took out a nonrecour se first mortgage from an affiliate of Metropolitan Sa

vings and Loan (“M

et F ed”) in

the amount o f $1,100,000.00 (t

he “First Meeting”

) and a recours

e second mortgage from First American National Bank (“FANB”) in the amount of $207,500.00 (the “FANB note”).3 * * * 11. Mr. Fulcher and Mr. Allen agreed that their partne

rship in the JBC would be “ 50-50", meaning that they would share equally in the work and financial responsibilities for the building.
* * * 15. Except

for the checkbook, Chance Allen was left with the responsibility

for virtually all

other management responsibilities for the JBC.
* * * 17. Beginning in the mid- to late 19 80's, the real e stat e in Nashville fell upon bad times
. Mr. Fulcher testified that it was a “disaster.”
* * * 23. In addition to manual labor, Chance Allen performed the following JBC manage

ment tasks: a. preparation o

f leases and ame

ndments to leases; b. dealing with ven

dors; c. dealing with lea

sing agents; d. preparation o

f operating state

ments; e. dea ling wit

h FANB and Met Fed (th e mortgage holder

s) including the preparation and supplying of all requested financial information; f. supplying financial information to the accountant for tax purposes; g. preparation of financial analyses of the business operation, the cash flow, projected rents, etc.; h. all business correspondence; and i. all other tasks ne

cessary to manag

e the JBC. 24. In N ovember 1990, Mr. Fulcher decided

to sell a part of his interest in the JBC. Chance Allen gave Mr. Fulcher permission to do so on the condition thatwhoever purchased the interest in the JBC would also agree to join in the per s onal liability under the second mortgage note held by F AN B. Mr. Fulcher agreed to this condition. 25. Mr. Fulcher sold a 25% interes t in the JBC to

the Linda Dale Trust (the “Trust”) for $50,000. The Trust was administered by Third National Ban

k in Nashville (“T

hird Nati onal”) . In selling his 25% interest, Mr . Fulcher did

notrequire the Trus

t to accept a share of the liability under the FANB note. 26. Through December 1992, T homas A llen (no relation to Chance Allen or Stan Allen) was employed in the Third National trust department

and had responsibility for overseeing the Trust’s investment in the JBC.

* * * 29. In March of 1992, Mr. Fulcher, claiming t hat the re was no needfor two people to b e involved with th

e “minutiae” of the4 JBC, and in order to

revive his commercial real estate brokerage business, moved ou t of t he office he wa s occupying at the

JBC.

. . . Prior to moving out, Mr. Fulcher had failed to make hi s agreed upon month

ly rental payment

s for a number of m

onths. 30. After

Mr. Fulcher

moved out, Chance Allen was left with the sole manageme

nt responsibility fo

r the JBC. 31. Each month, Chance Allen sent JBC statem ents of operat ions to both Mr. Fulcher and Thomas Allen a s representative

of the Trust. 32. Mr. Fulcher did

not readthe JBC statements he received from Chance Allen to see what they contained.

* * * 35. Before Mr. Fulcher moved out of the JBC, Chance Allen and the Trust

asked Mr. Fulcher

to enter into a wri

tten partnership agreement. Mr. Fulcher refused. 36. Su bsequently , Chance Allen and Thomas Allen (on be

half of the Trust) agreed that since Chance Allen was doing all of the work at the JB C, Chance Allen should be entitled to a 4% management

fee and to leasing commissions on JBC leases that were signed thro

ugh his efforts. 37. Since Chance Allen owned a 50% interest in the JBC and the Trust owned a 25% interest, the agr eeme nt to p ay Chance Allen management fees and leasing commission s was agreed upon by 75% of the ow

nership interest i

n the JBC.
* * * 39. Chance Allen received his management fee in December 1992. The tota

l fee was $6,842.98. From this amount, Chance Allen deducted r

ent for the suite

he occupied at the JBC leaving a net payment to Chance Allen of $1,892.98. 40. This manag e ment fee reflected in one of the operating statements

Chance Allen sen

t to Mr. Fulcher. Mr. Fulcher did not raise any object ion t o this fee or the leasing commissions taken by Chance Allen un

til after he filed

the instant lawsuit. 41. In December 1992, Chance Allen d iscovered that in excess of $22,000, w hi ch was a portion of an amount that had been held in

escrow pursuant

to the JBC purchase agreement, had been wrongfully

confiscated by th

e Resolution Trust

Corporation (the “RTC”) when the RTC took over Met Fed. 42. Under the terms of the JBC purchase agreement, t hi s escrowed money was to be used for improvements to the building.
* * * 44. Over a four month period, Cha nce Allen wrote 16 separa te letters and made dozens of phone calls mont hs [sic] in an attempt to retrieve the funds confiscated by the RTC.5 45. In December 1992, a $10,000 principal payment on the First Mortgage came due. 46. At the time this pa y ment came due, the re as approximat

ely $13,000 - $15,000 in

the JBC operating ba

nk account. 47. Of this cash ba

lance, $10,700 we

re tenant deposit

s. 48. Thus, unless tenant deposits were used, there was insufficient

funds in the JBC accou nt to make the $10,000 Fir st Mortgage payment in December 1992. 49. Thomas Allen had previously warned Chance Allen that the tenant deposits should be segregated from the operating funds of the JBC. 50. According to both Thomas Allen and Donald Griffi n of FANB, it would have been an improper business practice to use tenant deposits to ma

ke the first mortga

ge payment.
* * *
53. The terms of the FANB second mortgage note (the “FANB Note”) calledfor monthly intere st payments, principal paymen ts of $2,000 per quarter and a

balloon payment of the balance owed in December 1993. 54. The first year after purchasing the JBC (1980), the principal ba lance o wed on the FANB Note was $202,500. In 1989, Mr. Fulcher and Mr. Allen paid $39,0 00 i n principal. This le ft a principal balance of $163,500.

* * * 56. As the years passed, it became increasingly obvious that the revenues of the JBC would not be hi gh eno ugh to pay off the balance of the FANB Note in December 1993. . . . 57. The poor financial c ondition of the JBC an

d its inability to generate enough revenue to pay t he deb t service on the building are consistent wi th Chance Allen’s

testi mony that the JBC was a failing en

terprise which he

did not wish to suppor

t.
* * * 59. When he visitedthe JBC in December 1992, Mr. Griffin knew tha t the JBC revenues would not be sufficient to pay the principal balance owed on the FANB Note ($139 ,000) when it came due the following December.

* * * 61. In late 1992 or early 1993, Mr. Griffin and others within FANB decided to “ex tract the re lationship” concerning the FANB Notewhich meant

that FANB wanted to get the FANB off of its books. 62. It would have been in the borrower s best interest to6 refinancethe FANB Note if possible and hope that, over time, the building revenues would be enough to pay off the FANB Note. 63. In December 1992, Mr. Griffin requested that both Chanc e A llen and Mr. Fulcher supply a personal financial statement t o FANB. 64. Mr. Fulcher’s p

ersonal financial statem

ent showed that his net worth had dropped to zero.

* * * 72. In January 1993, F

ANB classified its

second mortgage loan on the JBC and turned that l oan over to

Samuel Ballesteros in the “Special Assets”

department of FAN

B. 73. Mr. Ballesteros w rote to both Chance Allen and Mr. Fulcher requesting a meeting. 74. Mr. Fulcher and

Mr. Ballesteros met on February 24, 1993, and discussed his personal note and the FANB Note. Mr. Fulcher told Mr. Ballesteros that he could not pay his $25,00 0 per sonal note which was the

n in default. 75. Mr. Ballesteros met with Chance Allen the following day. At that meeting, Mr. Ballesteros began by telling Chance Allen that Mr. Fulcher’s defau

lt on his personal note wa s a “cross-defaul

t” on the FANB Note. This was the first time Chance Allen was aware that Mr. Fulcher ha d a personal note

withFANB or that

it was in default. 76. Mr. Ballesteros discussed with Chance Allen how to pay the FANB note. 77. After his meeting

with Mr. Ballester

os, C hance Allen immediately

contacted Mr. Fulche r and Thomas Allen and requested that they would contribut e to p urchasing the FANB Note. Mr. Fulcher told Chan ce A llen, “I am not a player,” meaning that he did not have the financial ab

ility to pay anything toward the FANB Note. 78. Mr. Fulcher had the sa me opportunity to pur

chase t he FANB Note as did Chance Allen. This is clear from a letter dated March 29, 1993, from an attorney from FANB to attorneys who were representing Chanc e All en and Mr. Fulcher, respectively, which offers the

FANB Note fo r sale at a price o f $100,000.
* * * 80. Not

b e ing liable on the FANB Note, the Trust was unwilling to contribute tow ard repayment or purchase of the FANB Note. 81. Realizing that he was personally liable on the FANB Note, Mr. Allen offered to

purchase it from FANB for $70,0

00. This offer was refused. 82. In a letter from an attorney for FANB dated March 24, 1993,7 FANB had dec lared the Note in default and cited a number of events of default includi ng the material adverse change in the financial condition of the bor rowers. . ., fail

ure to pay property taxes, and failure to make the $10,000 pri ncip a l payment on the first mortgage. 83. Immediately

upon r ece ipt of that letter, Chance Allen began to take steps to remedy the cited defaults. He contacted the first mortgage holder which held the property taxes in escrow and made sure those taxes were paid. He also contacted Mr. Fulcher and t he Trust asking them to send a check for

their pro rata contributi ons f

or the $10,000 first mortgage principal payment pay able to Bank of America. Neither the trust nor Mr. Fulcher responded

to Chance Allen’s

request to contribute toward the first mortgage princip

al payment.
* * * 85. Receiving no physic al or financial h

elp f rom either Mr. Fulcher or the Trust, Chance Allen was left with no choice

but to use his personal funds to purchase the FANB Note. 86. At the time, the principal balance owe d on t he FANB Note was $137,500. 87. On March 31, 1993,

Chance Allen ca

used the FANB Note t

o be purchased for $100,000.

* * * 91. On the legal advice of Stan Allen, the FANB Note was purchased in the name of “Stanley Allen, Trustee.” 92. After

the purchase of the FANB Note, Chance Allen relied upon S tan ley Allen to handle the legal aspects of foreclosing on the JBC, filing law suits and preparation o f documents relating to the recently purchased FANB Note.

* * * 93. As trustee and holder of the FANB Note, Stanley Allen made demand on both makers of the note -- C hance Allen and Mr. Fulcher -- to pay the balance

owed for which they we re both jointly and severally liable. 94. On April 30 , 1993 , when payment was not made, Stanley Allen, in his cap acity a s trustee, foreclosed on the collateral which was the JBC. 95. After

the foreclosure, Chance Al len owned a 100% beneficial inter

est in the JBC.
* * * 99. On May 18, 1993, Stanley Allen filed suit in Circuit Court for Davidson County, Te

nnessee to

collect the balance owed on the FANB Note, naming both Mr. Fulcher and Chan ce A llen as defendants.8 * * * 101. No later than the first week in April 1993, Mr. Fulcher fully understood that Chance Allen had purc hased the FANB Noteand tha t Stanley Allen was trustee for Chanc

e Allen in connection with that purchase. 102. After being serv

ed with the lawsuit f

ile d b y Stanley Allen on the FANB Note, Mr. Fulcher and Stanley Allen reached a n agreement

to settle the disput e. This agreement was memorializedin an agreeme nt date d June 17, 1993 (the “Settlement Agreement”). 103. Under

the terms of the Settlement Ag reement, Mr. Fulch er had 3 0 d ays (or such additional time as agreed upon by the parties) to find a purchaser for the OHB Property for a minimum of $250,000. . . . If he failed to do so, he agreed, in exchange for dismissal of the claims against him in the Circuit Court lawsuit, to c onve y all his right, title and interest in the JBC and OHB Property to Stanley Allen, Trustee. 104. The 30-day sale condition was suggested by Mr. Fulcher. 105. Mr. Fulcher did

not sell the OHB property within the 30-day period set forth in

the Settlement Agr

eement. 106. The only effort Mr. Fulcher m a de to sell the OHB Property durin g that time was to make 2- 3 telephone calls to potential buyers who declined to purchase the property. 107. After failing to sell the OHB property, on August 12, 1993, Mr. Fulcher and his wife executed quitclaim deeds in favor of Stanley Allen, Trustee for all of his right, title

and interest in the OHB Property and the JBC (the “Quitclaim Deeds”). 108. Paragraph

5 of the Settlement Agreement required Stan Allen to dismiss his lawsuit against Mr. Fulcher following the execution of Quitclaim Deeds. Stan Allen co mpli ed with this provision of the Settlement Agreement after Mr. Fulcher filed

the instant lawsuit. During the interim, Stan Allen made no effort to prosecute the Circuit Court lawsuit against Mr. Fulcher andthis Court finds credible Sta n Alle n’ s testimony that he did not dismiss it earlier due to simple inadvertence.

* * * 112. Subsequentl

y, with t he help of Chance Allen, Mr. James Harwell negotiated for a nd purchased the First Mortgage for $700,000. Mr. Harwell and Chance Allen reached an agreement that each would ow

n a 50% interest in

JBC.
* * * 114. As of August

12, 1993, according to expert testimony of Michael P. Ishie, the value of the JBC was $850,000. 115. As of August 12, 1993 , according to expert testimony of Michael P. Ishie, the value of the OHB was $100,000.9 * * * 117. On May 10, 1994, Mr. Fulc her filed this lawsuit alleging inter alia that Chance Allen defrauded him out of his intere

sts in the OHB Property and the J BC. The tr ial court a

lso adopted Allen’s proposed conclusions of law, and entered a Memorandum and Or

der which stated

in pertinent part: On consideration of the entire record, the Court adopts the proposed findings of

fact and conclusions of law proposed by the defendants. Accordingly, the Court finds that the Agreement entered into by the parties on June 17, 1993, is valid and binding on the parties, the plaintiffs having failed to carry their burden of proof to the contrary. The Court finds that sinc e there are no assets or liabilities of the partnership, t h e appointment of a receiver is unnecessary. The Plaintiffs’ compla int is hereby dismissed. Fulcher timely appealed th

e trial court’s r

uling and cites in

his brief the following issues: I. Whether the trial judge was in error in failing to find that Allen could not take and

receive partne

rship monies for his

benefit. II. Whether the foreclosure by Allen against the partnership was void. III. Whether Allen eng a ged in fraudulen t misconduct again

st Fulcher for the purpose of ousting him from the partnership. IV. Whether the circuit cou rt law suit filed by Stanley Allen, Plaintiff, as trustee for Chancellor Allen, against Cha ncellor Allen and Robert Fulcher as Defendants, was fraudulent and v oidfrom its inception. V. Whether the partnerships have ever been woun d u p in accordance with the Uniform Partnership Act of Tennessee. VI. Whether Fulcher is entitled to punitive damages aga ins t Allen. VII. The action of the lower court in aw arding discretio

nary costs against Fulcher w

as erroneous. Since this case was tried by the trial court sitting without a jury, we review the case de
novo upon the record with a presumption of correctness of the

findings of fact b

y the trial court. Unl ess the evidence preponderates against the findings, we must affirm, absent error of law
. T.R.A.P. 13(d). W e b e g i n fir st w ith A l l en’ s asse r t ion tha t t h e so-c all e d S ett lem e n t A gre e m e n t , da ted Ju n e 17 , 19 9 3 , is a
com p l e t e defense t o any cl a i m s m ade by Fu l cher agai nst A l l en. T he decree of t

he t r i a l cour t is p r e m ise d o n th e v a lid ity of t h i s agr eem ent .A s di scuss ed i n other part s of t h i s opi n ion, t h i s agr eem ent res u l t e d fr o m a la w s u it file d b y S t a n l e y10

A lle n , Trus t ee, agai nst bot h Ful cher and Chance A

l l en f o r an al l eged de f i c i ency on a par t ner shi p i n d ebt edness af t e r forec losure of the sec urit y. T h e ag reem e n t st ates: AGREEMENT T h i s agr eem ent i s m ade a nd ent e r ed i n t o t h i s 17t h day of June , 1993 i n M e tro p o lita n N a s hvi l l e and D avi dson Count y , Tenness ee by a nd bet w een H
. Stanl e y A l l en, t r ust ee, her e i naf t e r r e f e r r ed t o as “ p l a i n tiff,” R . C h a n c e llo r A lle n , herei naft er a s [ s i c ] ref err ed t o as “D efe ndan t A l l en” and R obert D
.Fu l cher, II I , herei naft er r efe r r ed t o as “D efe ndan t Fu l cher. ” W H E R E A S , l i t i gat i on am ong t he par t i e s i s pe ndi ng i n t he Cir cui t C our t f o r D avi dson C oun t y , T ennessee, und er docket num ber 93C
- 1 4 47 w herei n P l a i n t i f f i s s u i ng bot h D e f endant s f o r def i c i ency on a Prom i s s o r y N o t e , and, W H E R E A S , t he par t i e s des i r e t o s ettle s a i d litig a tio n in o r d e r to t erm i nat e t hei r di sput e . N O W T H E R E F O R E , the p arti es a gre e a s foll o w s : 1 .The par t i e s agr ee t hat pr ose cut i on of sa i d l a w sui t w i l l be del ayed f o r a per i o d o f t h i r t y ( 30) days f r o m dat e , unt i l t he 17t h day of Jul y , 1993. 2 . D u r i ng sa i d t h i r t y ( 30) days , D efen d a nt F ulch er sh all m ark et for sale 5.5 ac res, m o r e o r less , i n D avi dson C oun t y , T ennessee, ow ned b y bo t h D efe ndan t s , equall y , a s t enant s i n com m on .. . . T h e net consi derat i on o f t he sal e of s a i d real est a t e sha l l not be l e s s t han $250, 000. 00 cas h . The cl osi ng of t he s a l e s hal l t ake pl ace e i t her w ith i n sa i d t h i r t y ( 30) day per i od, or w i t h i n a r eas onabl e per i o d fo llo w i n g s a i d th irty (3 0 ) d a y s, u p o n th e w ritte n a p p r o v a l o f a ll p a rtie s h e r e t o . 3 .Sh ould t he propert y se l l , t he D e f endant s s hal l di v i de equa l l y t he net pr ocee d s t her eof , and i n addi t i on, D e f endant F u l cher sha l l pay t o t he Pl a i n t i f f , or hi s assign s , t he cash sum of $60, 000
. 00 fr

o m D efe ndan t Fu l cher’ s s hare o f th e n e t p r ocee ds. I n addi t i on, D e f endant F u l c h e r sha l l pay ei t her t r ust ee, D avi dson C ount y or D e f endant A l l en on e-hal f 1992 p roper t y t axes pai d , pl us pe nal t y and inte res t t her eon, w h i ch s hal l be deduc t ed f r o m Fu l cher’ s s hare of t he proceeds at c l osi ng. 4 .Shoul d t he pr opert y fai l t o sel l and the cl osi ng n o t t ake place as provi ded abov e , D efe ndan t Fu l cher s hal l deed to Plai

n t i f f , or hi s as s i gns, Fu l c h er’ s und i v i ded o n e - h a lf r i g h t, titl e , an d interest (w

hich F ulch er w arran ts i n unencum ber ed) i n and t o sai d propert y of r ecord [ O H B ] .
. . and F u l cher’ s onef o u rth u n d i v i d e d rig h t, titl e , a n d in t e r e s t in [th e J B C ]. . . . 5 .Fol l o w i ng t he cl osi ng of t h e sal e and d i sposi t i on o f t he proceeds of s

a m e pur sua n t to th is A g ree m e n t , o r if s a i d s a l e does not t ake pl ace , f o l l o w i ng t h e exec u t i o n o f th e tw o D eeds herei n by D efe ndan t Fu l cher, Plai n t i f f shal l cause t o b e di s m i s s ed, w i t h pr e j udi ce, as t o D e f endant Ful cher , sa i d l a w sui t 93C
- 1447 pres ent l y pen d i ng in t he C i rcui t C ourt of D avi dson C oun t y , T ennessee. / s / H
.STA N L E Y A L L E N , PLA I N T I F F / s / R. CH A N CELLO R A LLEN, DEFEN D A N T / s / RO BERT D
.FULCH ER, I I I , DEFEN D A N T A l t hough as sum i ng t hat t he agr eem ent i s va l i d , t he l anguage of t he agr eem ent does not pur por t to release any1 In fact Fulcher refused to sign a release proposed by Stan Allen dated July 1993 which included the following language:

Upon fu ll compliance with said agreement of June 17,1993, including but not limited to execution of two deeds by Robert D. Fulcher, III. [sic] as de scribed therein, and the dismissal of the litigation described th

erein, at the costs of the Plaintiff, each of the aforesaid parties do hereby forever release the other from any and all claims hereto

fore arising or h

ereafter to ac

crue as a result of any and all busine

ss dealings a

nd tr ansactions among the parties existing pr

ior to the date of th

is agreement. 11 c l a i m Fu l cher has or m ay hav e agai nst A l l en. T o t he con t rar y , t he agreem ent m ere l y rel eases the trus tee ’s c laim fo r a defi c i ency as a resu l t of the forec losure by ex c h a n ging qu i t claim de e d s of p a r t ner shi p pr oper t y f o r di s m i s s a l of t h e l a w s u it; i t does not , how ever , pr event Ful cher f r o m br i ngi ng an ac t i on agai nst A l l en f o r al l eged m i s c onduct conce r n i n g t he par t ner shi p . 1 A l l e n ’s asserti o n is w i t h o ut m erit
.W e w i l l now co nside r Fu lche r’s i ssue s . I. Whether the tr ial court erred in failing to find that Allen could not take and rec

eive partnership f

unds for his benefit
. F u l cher as s e rts t hat C hance A l l en conve r t ed par t ner shi p f unds t o hi s own use. Sp eci f i cal l y , Fu l cher chal l enges f o rty -tw o ( 42) chec ks dr a w n on par t ner shi p acc ount s by All en bet w een A p r i l 1992 and D

ece m ber 1993 t o t a l i n g $81, 095. 94. The vast

m a jo r i t y of t hes e che cks l i s t ed Chance A

l l en as t he paye e and m any w e r e ei t her not expl a i ned or the e x p lana t i o n s give n w ere d u b ious. F u l cher al so cl a i m s t hat port i ons of t hese m onies w ere for unau t hori zed m anage m ent f ees and com m i s s i ons and ass ert s t hat A l l en fai l ed t o pay rent t o t he part ners h i p for hi s occupan cy of part of t he JB C
.A l l e n co u n ters t h a t t h e s e l eas i n g com m i s s i ons and m anagem ent fee s w ere properl y paid i n acc o r dance w i t h an or a l agr eem ent rea ched b e t w een A lle n and t he Li nda D a l e T rus t w h ich com pri sed 75% of t he part ners h i p . It i s cl ear fr o m t he t est i m ony of Th o m as A l l en, f o r m e r vice- pres i dent of T h i rd N a t i onal/ S u n t rus t B ank, t hat A l l en and t h e T hird N ati o n al, as trustee for the T

rust, ent ere d i n t o an o ral agreem ent w hereby A l l en w ould r ecei ve a 4% com m i s s i on o n l eases as a m anagem ent fee
. W h ile it is true , as Ful cher poi n t s out , t hat t he T ennessee U n i for m Part ners h i p A c t st a t es t he “[n] o part

ner i s
e n title d t o r e m uner a t i on f o r act i ng i n t h e par t ner shi p busi nes s . .., ” t h i s r u l e i s “ subj ect t o any agr eem ent bet w een” t h e part ners . T. C
. A
.§ 61- 1 - 117( 6 )

( 1998 Supp. )
.The ora

l agr eem ent bet w een A l l en and t he Trus t al l o w i n g a 4% f ee f o r l eas i n g and m anagem ent w a s agr eed t o by a m a j o r i t y of t he par t ner shi p and t hus va l i d under t he U n i f o r m Par t ner shi p A c t . H o w ever, sev eral qu esti o n s st i l l exi s t conce r n i ng t he appr opr i a t enes s of som e of t he paym ent s m ade t o A l l en. A lle n se e k s to o b v iate th e s e q u e s t i o n s b y cla i m ing tha t all pa y m e n ts afte r the A p ril 30, 1993 f o r ecl osur e w ere ent i rel y
w ith i n hi s l egal di s c r e t i o n beca use he w a s t he s o l e ow ner of t he J B C , and t h e t r i a l cour t agr eed w i t h A l l en’ s a r gum ent .12

H o w ever, w e m ust di sagr ee w i t h t h i s as ser t i on. The p art ners h i ps i n t h i s i nst ance w ere f o r t he ow ner shi p and
m a i n t enance o f t he real est a t e i nvo l ved. T. C
. A
.§ 61 -1- 130 (1989) provi

des i n pert i nent par t : 61-1-130. Causes o

f dissolution.

- D i s s o l u t i on is caused: (1) W i t h o ut violati o n of the ag reem e n t betw e e n the pa r t n e rs: ( A ) by t h e t e r m i nat i on of t he def i n i t e t e r m or par t i cul a r under t aki n g spe c i f i ed i n t he agr eem ent ; ( B ) by the express

w i l l of any part

ner w hen n o defi n i t e t erm or par t i cul a r under t aki ng i s s peci f i ed;
* * * T h e f o r ecl osur e of A p r i l 1993, ef f ect i vel y t e r m i nat ed t he J B C par t ner shi p by r e m ovi ng t h e par t ner shi p ’ s m a jo r
ass e t and t he r eas on f o r i t s exi s t ence. This cons t i t u t ed a di s s o l u t i on.The uncont

r over t ed pr oof i s t hat A l l en’ s 1993 i ncom e t ax r e t u r n , Schedul e D and E , show s t hat t he part ners h i p w as di s s o l ved in 1993 and w as s o report ed t o t he feder a l gover n m ent . Since A l l en t ook contr o l of al l of t he asset s of t he part ners h i p at t h i s t i m e , he as sum ed t he pos i t i on of a w i ndi n g u p part ner, an d F ulch er h as the ri g h t t o a n a c c o u nti n g of h is i nterest as agai nst t he w i ndi ng up par t ner .T. C
. A
. § 61- 1 - 142 ( 1989)
. W hen such a m i sappropri a t i on is m ade by one o f t he part ners i n charge of t he bu s i ness, and then dis covered b y t he ot her par t ner af t e r he s o l d hi s i n t e r e s t i n t h e busi ness , t he s e l l i ng par t ner has t he r i ght t o an ac count i ng. See Calls v. Ca lls ,

40 T enn. A pp. 681, 292

S.W
. 2d 4 83 (1955). T here appears

t o be p roof i n t he recor d t hat A lle n pers onall y ac q u ired p artn ers h ips fu n d s fo r h is o w n u s e w i t h o u t F u lch er’s k n o w led g e. T h ere f o re, the c ase m ust be
r e m anded t o t he t r i a l cour t f o r f u r t her pr ocee d i ngs f o r an ac count i ng pur sua n t t o T. C
. A
.§ 61- 1 - 142 ( 1989)
. II. Whether the fore

closure by Allen aga

inst the partnership was void
. S t a n A l l en, as t r ust ee f o r C hance A l l en, sue d Ful cher and Chance A

l l en f o r a def i c i ency r e s u l t i ng f r o m t h e for ecl osure. In r esponse, Fu l cher qu i t claim e d his i nterest i n t he pr oper t y t o t he t r ust ee i n r e t u r n f o r a di s m i s s a l of t h e sui t . T he evidence i

n t he r ecor d r evea l s a nd t he cha ncel l o r f ound t hat beca use of t he exi s t i n g i ndebt ednes s on J B C ’ s propert y t her e w a s no equi t y avai l abl e t o t he par t ner s a t t he t i m e of f o r ecl osur e . Ful cher t ook no act i on t o se t as i d e th e f o r ecl osur e nor di d he q uest i on the val i d i t y t hereof i n t he defi c i ency case. “T

he pri nci pal of w a i ver as r ecogni zed i n t h e st a t e i s def i ned as t he vo l untar y rel i nqu i shm ent or ab ando n m ent of a know n ri ght or pri v i l ege. ” Felts v. Tennessee Consol. Retirement Sys. , 650 S. W
. 2d 371, 375 ( Tenn. 1983)
.Ful cher

vol unt a r i l y r e l i nqui she d hi s
r i ght t o cont e s t t he val i d i t y of t he f o r ecl osur e and t her e f o r e w a i ved hi s r i ght
. III. Whether Allen engaged in fra ud ulent misconduct aga inst Fulcher for the purpose

of ousting him from the

partnership
. T h e tr i a l c our t f ound t hat A l l en di d not engage i n f r aud f o r t he pur pose of oust i ng Ful cher f r o m t h e13

par t ner shi ps. A f t e r a ca r e f u l exam i nat i on of t he r ecor d i n t h i s c a s e , w e do not bel i eve t hat Ful cher has car r i ed hi s burden o f pr oof i n es t abl i shi ng f r aud. Speci f i cal l y , t he t e s t i m ony at t r i a l i ndi c a t ed t hat A l l en d i d no t sabot age F u l cher’ s
r eput a t i on w i t h banks or e nter into sec ret neg oti ati o n s w i t h m o r t gage c o m pani e s .Ful cher ’ s ot her cl a i m s a dvance d i n h i s br i e f conce r n i n g t h i s i s s ue dea l w i t h t he pur por t ed “s ham ” l a w sui t and t he t aki n g of par t ners h i p funds. T hese cl a i m s
a r e dea l t w i t h el s e w her e i n t h i s opi n i on. IV. Whether the

circuit court lawsuit file

d by Stanley Allen, Plaintiff, as trustee for

Chancellor Allen,

against Chancellor Allen and Robert Fulcher as Defendants, was f

raudulent and void from its inception
. F u l cher charact eri zes Stan A l l en’s defi c i ency suit agai nst Fu l cher and C hance A l l en as “a cl ass i c exam p l e of t h e w r ongf u l use of t h e C our t s as a vehi c l e t o def r aud a de f endant
. ” H o w ever , Ful cher di d not chal l enge t he s u i t , and i nst ead, ent e r ed i n t o an agr eem ent w h i ch t r ans f e r r ed pr oper t y f o r se t t l e m ent of the su i t
.T h e pro p e r co urse i n deal i n g
w ith a law suit ba sed up o n fraud or q u e sti o nable l egal pri nci p l es i s t o defend it i n cou r t and seek a d

i s m i s s a l
. A s d i scuss e d in Issue 2 of t h i s opi n i on, Ful cher vol unt a r i l y r e l i nqui she d hi s r i ght t o chal l enge t he def i c i ency s u i t by ent e r i n g i n t o t he J une 17, 1993 agr eem ent . See Felts v. Tennes

see Consol. Retirement Sys. , 650 S. W
. 2d 371 ( Tenn. 1983)
. V. Whether the partn erships have ever b

een wound up in accordance with the Uniform Partnership Act of Tennessee
. A s di s c uss ed i n I s s ue 1 of t h i s opi n i on, t he J B C par t ner shi p w a s di s s o l ved at t he t i m e of f o r ecl osur e and a
w i ndi n g up i s a ppr opr i a t e at t h i s t i m e .T he O H B part ners h i p w as di s s o l ved by the q uit claim de e d by F ulch er in A u g ust 1993. A s w i t h t he JB C part ners h i p , A l l en t ook contr o l of t he asset s of t he O H B part ners h i p at t he t i m e of di s s o l u t i on, and he assum ed t he po s i t i on o f a w i nding up p art ner. Ful cher

has t he r i ght t o an ac count i ng of hi s int erest as ag ainst t h e w i nding up p art ner. T
. C
. A
.§ 6 1-1 -14 2 (1 9 8 9). T h e refore, on rem a n d the tr ial co urt m ust conduct an ac count i n g on bot h par t ner shi ps a nd se t t l e m ent i n com p l i ance w i t h T. C
. A
.§ 61- 1 - 139 ( 1989)
. VI. Whether Fulcher is

entitled to punitive

damages against Allen
. F u l cher ass ert s t hat t he evid ence i n t h i s cas e over w hel m i ngl y shows t hat A l l en ac t ed m a l i c i ousl y and i n t ent i onall y t o excl ude Fu l cher f rom t he part ners h i ps, and ther efor e , pun i t i ve dam ages ar e appropri a t e .T he T ennessee Sup rem e C our t cl a r i f i ed t he l a w conce r n i ng puni t i ve dam ages i n t h i s s t a t e i n Hodges v. S.C. Toof & Co. , 833 S . W
. 2d 896 ( Tenn. 1992)
.The C

our t st a t ed: I n T ennessee, t heref ore, a cour t m ay henc e f o r t h aw a r d puni t i v e dam ages onl y i f i t fi nds a defendant has act

ed ei t her ( 1) i n t ent i onal l y , (2 ) f r audul ent l y , ( 3 ) m a l i c i ousl y , or ( 4 ) r eckl e s s l y .14 * * * [ B ] eca use puni t i ve dam ages ar e t o be aw a r ded onl y i n t he m ost egr egi ous of c a ses, a p lain t i f f m ust prove t he defendan t ’ s i n t ent i onal, f r audul ent , m a l i c i ous, or rec k l ess cond uct by clear and co nvinci

ng ev i dence. Id. a t 901. T h e e v i den ce pr e s ent ed at t r i a l does not pr eponder a t e aga i nst t he t r i a l cour t ’ s f i ndi ng t hat Ful cher f a i l ed t o p r ove f r aud on t he par t of A l l en. VII. The action of the lower court in awarding discretionary costs against Fulche

r was erroneous . T h e l o w e r cour t aw a r ded over $12, 000 t o A l l en as di scr e t i onary cost s i ncurr e d in de fen ding the c ase . T h e co sts
w e r e i ncur r ed bec aus e A l l en di d not pr ocee d t o have a pr oper acc ount i ng i n t he w i ndi ng up of t he par t ner shi p . A t t h e tim e of f orecl osure, t he JB C part ners h i p w a s di s s o l ved, and A l l en becam e t he w i nding up p art ner. Fu l cher w as ent i t l e d t o an ac count i ng at t hat t i m e , and by f a i l i ng t o w i nd u p t he par t ner shi p i n t he cor r ect m anner , A l l en per pet uat ed t h i s l engt h y confl i c t .It w ould not be appropri

a t e t o aw ard A l l en dis cre t i onary cost s i n t h i s cas e based up o n hi s a c t i ons. W e
rever se t he t r i a l court ’ s aw ard of di scr e t i onary cost s t o A l l en. Conclusion T h e fi ndings of t he chan cel l or concerni ng forecl osure, f r aud, t he ci r cui t cour t l a w sui t , and p unit i ve dam ages
are aff i r m ed. In al l ot her r espect s t he decree of t

he t r i a l court i s r evers ed, and thi s cas e i s r e m anded t o t he t r i a l cour t f o r an ac c o u n t i n g o f b o th th e O H B an d JB C p artn ers h ips an d a w ind ing u p o f the p artn ers h ips . C o sts o f ap p e a l are
ass ess ed against t he A ppell ee.

_________________________________ W. FRANK CRAWFORD, PRESIDING JUDGE, W.S. CONCUR:

____________________________________ ALAN E. HIGHERS, JUDGE

____________________________________ DAVID R. FARMER,

JUDGE