FILED

March 9, 1999

Cecil Crowson, Jr.

Appellate Court Clerk

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

 ______________________________________________

ROBERT D. FULCHER, III and

wife, ELEANOR FULCHER 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 COURT

THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

Gail P. Pigg of Nashville

For Appellants

Alvin L. Harris; Weed, Hubbard, Berry & Doughly of Nashville

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-Appellants,RobertD.Fulcher

III, Eleanor Fulcher, and Allen-Fulcher 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), entered into

two partnerships to develop real estate during the mid-1980's. These partnerships 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 Fulcher 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 partnerships had not been wound up in accordance with Tennessee law, and

that the settlement agreement grantingAllen all partnershipproperties was fraudulently obtained.

After a trial on the merits, the chancellor ruled in favor of Allen and adopted findings of fact

which as pertinent state:

1. . . . Chance 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 purchased a parcel

of 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 proceeding, Mr.

Fulcher and Chance 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 Business Center (the “JBC”). The purchase was

closed in November 1988. The purchase price was $1,250,000.

8. Mr. Fulcher and Mr. Allen purchased the JBC as tenants

in common, each owning an undivided 50% interest.

9. To finance their purchase of the JBC, Chance Allen and

Mr. Fulcher took out a nonrecourse first mortgage from an

affiliate of Metropolitan Savings and Loan (“Met Fed”) in the

amount of $1,100,000.00 (the “First Meeting”) and a recourse

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 partnership 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 1980's, the real estate 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 management tasks:

a. preparation of leases and amendments to leases;

b. dealing with vendors;

c. dealing with leasing agents;

d. preparation of operating statements;

e. dealing with FANB and Met Fed (the mortgage holders)

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 necessary to manage the JBC.

24. In November 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 that whoever purchased the

interest in the JBC would also agree to join in the personal

liability under the second mortgage note held by FANB. Mr.

Fulcher agreed to this condition.

25. Mr. Fulcher sold a 25% interest in the JBC to the Linda

Dale Trust (the “Trust”) for $50,000. The Trust was administered

by Third National Bank in Nashville (“Third National”). In

selling his 25% interest, Mr. Fulcher did not require the Trust to

accept a share of the liability under the FANB note.

26. Through December 1992, Thomas Allen (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 that there was no

need for two people to be involved with the “minutiae” of the
4

JBC, and in order to revive his commercial real estate brokerage

business, moved out of the office he was occupying at the JBC.

. . . Prior to moving out, Mr. Fulcher had failed to make his

agreed upon monthly rental payments for a number of months.

30. After Mr. Fulcher moved out, Chance Allen was left with

the sole management responsibility for the JBC.

31. Each month, Chance Allen sent JBC statements of

operations to both Mr. Fulcher and Thomas Allen as

representative of the Trust.

32. Mr. Fulcher did not read the 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 written partnership

agreement. Mr. Fulcher refused.

36. Subsequently, Chance Allen and Thomas Allen (on behalf

of the Trust) agreed that since Chance Allen was doing all of the

work at the JBC, Chance Allen should be entitled to a 4%

management fee and to leasing commissions on JBC leases that

were signed through his efforts.

37. Since Chance Allen owned a 50% interest in the JBC and

the Trust owned a 25% interest, the agreement to pay Chance

Allen management fees and leasing commissions was agreed

upon by 75% of the ownership interest in the JBC.

* * *

39. Chance Allen received his management fee in December

1992. The total fee was $6,842.98. From this amount, Chance

Allen deducted rent for the suite he occupied at the JBC leaving

a net payment to Chance Allen of $1,892.98.

40. This management fee reflected in one of the operating

statements Chance Allen sent to Mr. Fulcher. Mr. Fulcher did not

raise any objection to this fee or the leasing commissions taken

by Chance Allen until after he filed the instant lawsuit.

41. In December 1992, Chance Allen discovered that in

excess of $22,000, which was a portion of an amount that had

been held in escrow pursuant to the JBC purchase agreement, had

been wrongfully confiscated by the Resolution Trust Corporation

(the “RTC”) when the RTC took over Met Fed.

42. Under the terms of the JBC purchase agreement, this

escrowed money was to be used for improvements to the

building. 

* * *

44. Over a four month period, Chance Allen wrote 16 separate

letters and made dozens of phone calls months [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 payment came due, there as approximately

$13,000 - $15,000 in the JBC operating bank account.

47. Of this cash balance, $10,700 were tenant deposits.

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

insufficient funds in the JBC account to make the $10,000 First

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 Griffin of

FANB, it would have been an improper business practice to use

tenant deposits to make the first mortgage payment.

* * *

53. The terms of the FANB second mortgage note (the “FANB

Note”) called for monthly interest payments, principal payments

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

balance owed on the FANB Note was $202,500. In 1989, Mr.

Fulcher and Mr. Allen paid $39,000 in principal. This left a

principal balance of $163,500.

* * *

56. As the years passed, it became increasingly obvious that the

revenues of the JBC would not be high enough to pay off the

balance of the FANB Note in December 1993. . . .

57. The poor financial condition of the JBC and its inability

to generate enough revenue to pay the debt service on the

building are consistent with Chance Allen’s testimony that the

JBC was a failing enterprise which he did not wish to support.

* * *

59. When he visited the JBC in December 1992, Mr. Griffin

knew that 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 “extractthe relationship” concerning the FANB

Note which meant that FANB wanted to get the FANB off of its

books.

62. It would have been in the borrowers best interest to
6

refinance the 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 Chance

Allen and Mr. Fulcher supply a personal financial statement to

FANB.

64. Mr. Fulcher’s personal financial statement showed that his

net worth had dropped to zero.

* * *

72. In January 1993, FANB classified its second mortgage loan

on the JBC and turned that loan over to Samuel Ballesteros in the

“Special Assets” department of FANB.

73. Mr. Ballesteros wrote 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 $25,000 personal

note which was then 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 default on his personal note was a “cross-default”

on the FANB Note. This was the first time Chance Allen was

aware that Mr. Fulcher had a personal note with FANB 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. Ballesteros, Chance Allen

immediately contacted Mr. Fulcher and Thomas Allen and

requested that they would contribute to purchasing the FANB

Note. Mr. Fulcher told Chance Allen, “I am not a player,”

meaning that he did not have the financial ability to pay anything

toward the FANB Note.

78. Mr. Fulcher had the same opportunity to purchase the

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 Chance Allen and Mr. Fulcher, respectively,

which offers the FANB Note for sale at a price of

$100,000.

* * *

80. Not being liable on the FANB Note, the Trust was

unwilling to contribute toward 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 $70,000. This

offer was refused.

82. In a letter from an attorney for FANB dated March 24, 1993,
7

FANB had declared the Note in default and cited a number of

events of default including the material adverse change in the

financial condition of the borrowers. . ., failure to pay property

taxes, and failure to make the $10,000 principal

payment on the first mortgage.

83. Immediately upon receipt 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 the Trust asking them to send a check for their pro rata

contributions for the $10,000 first mortgage principal payment

payable to Bank of America. Neither the trust nor Mr. Fulcher

responded to Chance Allen’s request to contribute toward the first

mortgage principal payment.

* * *

85. Receiving no physical or financial help from 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 owed on the FANB

Note was $137,500.

87. On March 31, 1993, Chance Allen caused the FANB Note to

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 Stanley Allen to handle the legal aspects of

foreclosing on the JBC, filing lawsuits and preparation of

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 -- Chance Allen and Mr.

Fulcher -- to pay the balance owed for which they were both

jointly and severally liable.

94. On April 30, 1993, when payment was not made, Stanley

Allen, in his capacity as trustee, foreclosed on the collateral

which was the JBC.

95. After the foreclosure, Chance Allen owned a 100%

beneficial interest in the JBC.

* * *

99. On May 18, 1993, Stanley Allen filed suit in Circuit Court

for Davidson County, Tennessee to collect the balance owed on

the FANB Note, naming both Mr. Fulcher and Chance Allen as

defendants.
8

* * *

101. No later than the first week in April 1993, Mr. Fulcher

fully understood that Chance Allen had purchased the FANB

Note and that Stanley Allen was trustee for Chance Allen in

connection with that purchase.

102. After being served with the lawsuit filed by Stanley Allen

on the FANB Note, Mr. Fulcher and Stanley Allen reached an

agreement to settle the dispute. This agreement was

memorialized in an agreement dated June 17, 1993 (the

“Settlement Agreement”).

103. Under the terms of the Settlement Agreement,Mr.Fulcher

had 30 days (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 convey 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 Agreement.

106. The only effort Mr. Fulcher made to sell the OHB

Property during 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 complied 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 and this

Court finds credible Stan Allen’s testimony that he did not

dismiss it earlier due to simple inadvertence.

* * *

112. Subsequently, with the help of Chance Allen, Mr. James

Harwell negotiated for and purchased the First Mortgage for

$700,000. Mr. Harwell and Chance Allen reached an agreement

that each would own 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. Fulcher filed this lawsuit alleging

inter alia that Chance Allen defrauded him out of his interests in

the OHB Property and the JBC.

The trial court also adopted Allen’s proposed conclusions of law, and entered a

Memorandum and Order 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 since there are no

assets or liabilities of the partnership, the appointment of a

receiver is unnecessary. The Plaintiffs’ complaint is hereby

dismissed.

Fulcher timely appealed the trial court’s ruling 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 partnership monies for his benefit.

II. Whether the foreclosure by Allen against the partnership was

void.

III. Whether Allen engaged in fraudulent misconduct against

Fulcher for the purpose of ousting him from the partnership.

IV. Whether the circuit court lawsuit filed by Stanley Allen,

Plaintiff, as trustee for Chancellor Allen, againstChancellor Allen

and Robert Fulcher as Defendants, was fraudulent and void from

its inception.

V. Whether the partnerships have ever been wound up in

accordance with the Uniform Partnership Act of Tennessee.

VI. Whether Fulcher is entitled to punitive damages against

Allen.

VII. The action of the lower court in awarding discretionary costs

against Fulcher was 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 by the trial court.

Unless 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 i on, 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 y
10

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 e ttle 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 any
1

In fact Fulcher refused to sign a release proposed by Stan Allen dated July 1993 which

included the following language:

Upon full compliance with said agreement of June 17,1993,

including but not limited to execution of two deeds by Robert D.

Fulcher, III. [sic] as described therein, and the dismissal of the

litigation described therein, at the costs of the Plaintiff, each of

the aforesaid parties do hereby forever release the other from any

and all claims heretofore arising or hereafter to accrue as a result

of any and all business dealings and transactions among the

parties existing prior to the date of this 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 trial court erred in failing to find that Allen

could not take and receive partnership funds 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 j o 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 i ch 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 vi ce- 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 of 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 j o 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. Calls, 40 T enn. A pp. 681, 292 S.W . 2d 4 83 (195 5). 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 foreclosure by Allen against 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 fraudulent misconduct against

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 e
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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 filed by Stanley Allen,

Plaintiff, as trustee for Chancellor Allen, against Chancellor

Allen and Robert Fulcher as Defendants, was fraudulent 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. Tennessee Consol. Retirement Sys., 650 S. W . 2d 371 ( Tenn.

1983) .

V. Whether the partnerships have ever been 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 .
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* * *

[ 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 Fulcher 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