Opinion ID: 1988100
Heading Depth: 1
Heading Rank: 2

Heading: the proceedings in the chancery court

Text: Litigation quickly followed. On November 14, 2005, Wesley Green filed suit in the Chancery Court for Davidson County seeking declaratory and injunctive relief against Edna Green, Mark Green, and Mr. Fourier. Wesley Green also sought temporary restraining orders to prevent the sale or transfer of any of Champs-Elysees's stock. On November 15, 2005, he filed a complaint in the Circuit Court for Davidson County against these same defendants and Champs-Elysees, seeking damages for tortious interference with a business contract. The chancery court conducted a hearing on November 22, 2005 on Wesley Green's request for temporary restraining orders. In its oral findings at the conclusion of the hearing, the court determined that [o]n the face of this I find [the October 27, 2005 bill of sale] to be an unenforceable document. This document could not be presented to any lender as evidence of ownership in this stock. In addition, the chancery court also determined that there is a basis to find that there is an adequate remedy at law and that it was unlikely that Wesley Green would prevail on the merits because I find it to be an unenforceable document. The court also determined that the October 27, 2005 bill of sale was unconscionable and the product of a mutual mistake. Accordingly, the court declined to grant the injunction as to Edna Green. As for a temporary restraining order regarding the sale of treasury stock, the court concluded that this matter was not within the parameters of Wesley Green's declaratory judgment action and thus was not appropriately before the court for purposes of a temporary restraining order. On November 29, 2005, Wesley Green voluntarily nonsuited his claims against Mr. Fourier and Mark Green in the chancery court proceeding. In a written order handed down on December 1, 2005, the chancery court declined to enjoin Edna Green from transferring her Champs-Elysees stock for the following three reasons: (1) the October 27, 2005 bill of sale was invalid on its face; (2) Wesley Green had an adequate remedy at law; and (3) Wesley Green had failed to demonstrate a substantial likelihood of success on the merits. [16] The court also declined to enjoin Edna Green, Mike Green, and Mr. Fourier from issuing or selling any treasury stock because Wesley Green had not requested any relief with regard to this stock in his declaratory judgment complaint. [17] In a second order entered on December 1, 2005, the chancery court directed the parties to participate in mediation which, not surprisingly, proved to be unsuccessful. On February 9, 2006, Champs-Elysees moved to intervene in the pending chancery court proceedings to assert a claim against Wesley Green for $50,000 and punitive damages based on allegations that he had misappropriated corporate funds. On March 9, 2006, over Wesley Green's objections, the court granted Champs-Elysees's motion. On April 10, 2006, Wesley Green filed his answer to Champs-Elysees's complaint. He asserted that the funds alleged to have been misappropriated had actually been paid with the consent and approval of Mark Green, Mr. Fourier, Champs-Elysees's outside counsel, and Mr. Fourier's counsel. He also asserted the affirmative defenses of estoppel, waiver, and license. Wesley Green also filed a counterclaim raising eleven claims against Edna Green, Mark Green, Mr. Fourier, and Champs-Elysees (Champs-Elysees defendants). On May 16, 2006, the chancery court entered an order granting the Champs-Elysees defendants' motion to dismiss Wesley Green's counterclaim. On May 11, 2006, Edna Green and Champs-Elysees moved for a summary judgment on Edna Green's counterclaim for rescission under Tenn.Code Ann. § 48-2-122(b)(1) and Champs-Elysees's claim against Wesley Green for misappropriation of corporate funds. On July 21, 2006, the chancery court filed an order granting these motions. With regard to the summary judgment for Edna Green, the court pointed out that the undisputed facts showed (1) that Edna Green owned the disputed shares of Champs-Elysees stock, (2) that Wesley Green had violated Tenn. Code Ann. § 48-2-121(a)(2) (2002) in the purchase of his mother's Champs-Elysees stock, and (3) that Edna Green was entitled to rescind the bill of sale under Tenn. Code Ann. § 48-2-122(b)(1) (Supp.2008). The chancery court explained that its conclusion that Wesley Green had violated Tenn.Code Ann. § 48-2-121(a)(2) was based on (1) Wesley Green's representation to Edna Green that she was a guarantor of Champs-Elysees's line of credit at AmSouth Bank; (2) the undisputed fact that this representation was not true; (3) the undisputed fact that this representation was made in connection with the sale of stock; and (4) that, viewed objectively, this representation was material to the transaction. The court also stated that Wesley Green's lack of intent to defraud Edna Green and the dispute over whether Edna Green relied on Wesley Green's representation were not material with regard to Edna Green's rescission claim. The chancery court also granted summary judgment to Champs-Elysees on its claim that Wesley Green had misappropriated $46,600 in corporate funds. The court reasoned (1) that it was undisputed that Wesley Green had written $46,600 in checks to himself, (2) that the unpaid salary belonged to Dianne Green not him, and (3) that Wesley Green was without any authority to appropriate Company funds to himself to satisfy an obligation which the Company is alleged to have had to Mrs. Dianne Green. On August 21, 2006, Wesley Green filed a motion to alter or amend the July 21, 2006 summary judgment and a motion for leave to file a thirteen-claim amended complaint against the Champs-Elysees defendants. The chancery court heard the motions on September 15, 2006, and entered an order on September 22, 2006 denying both motions. Wesley Green appealed to the Court of Appeals. The Court of Appeals filed its opinion on March 5, 2008. Green v. Green, No. M2006-02119-COA-R3-CV, 2008 WL 624860 (Tenn.Ct.App. Mar.5, 2008). The court affirmed the chancery court's decision to permit Champs-Elysees to intervene in the proceeding and to assert a claim for misappropriation of corporate funds against Wesley Green. The court also affirmed the chancery court's orders denying Wesley Green's motions for recusal and temporary injunctive relief and granting Edna Green's motion for protective limitations on her depositions. However, the Court of Appeals also determined that the chancery court had erred by granting the summary judgments in favor of Edna Green's claim for rescission under Tenn.Code Ann. § 48-2-122(b)(1) and in favor of Champs-Elysees's misappropriation claim. The court also concluded that the trial court had erred by dismissing Wesley Green's counter-complaint and by denying his later motion to file an amended complaint. The Court of Appeals based its decision regarding Edna Green's rescission claim chiefly on its conclusion that rescission claims under Tenn. Code Ann. § 48-2-122(b)(1) required the claimant to prove reliance on the defendant's representations. The court based its decision regarding Champs-Elysees's misappropriation claim on its conclusion that genuine disputes of material fact prevented the granting of a summary judgment. On May 5, 2008, Champs-Elysees and Edna Green filed a Tenn. R.App. P. 11 application for permission to appeal, asserting that the Court of Appeals erred (1) by reversing the summary judgment for Edna Green on her claim for rescission under Tenn.Code Ann. § 48-2-122(b)(1) disposing of Wesley Green's claim against Edna Green, (2) by reversing the summary judgment for Champs-Elysees on its claim against Wesley Green for misappropriation of funds, and (3) by concluding that the chancery court erred by denying Wesley Green's motion to amend his complaint. Wesley Green has not taken issue with any of the issues decided adversely to him by the Court of Appeals. Although on grounds partially different from those relied on by the Court of Appeals, we affirm the conclusion of the Court of Appeals that the chancery court erred by awarding summary judgments to Edna Green. We also affirm the Court of Appeals' conclusion that the chancery court erred by awarding summary judgment to Champs-Elysees and by denying Wesley Green permission to file an amended complaint. The principal focus of this appeal is on Edna Green's claim for rescission of the October 27, 2005 bill of sale in which she agreed to sell her Champs-Elysees stock to Wesley Green. Edna Green insists that the Court of Appeals erred by construing Tenn.Code Ann. § 48-2-122(b)(1) to require sellers seeking rescission of a contract to sell securities to prove that they had relied on the purchaser's misrepresentations regarding the sale. For his part, Wesley Green asserts that reliance is an essential element of a rescission claim under Tenn.Code Ann. § 48-2-122(b)(1). He also asserts (1) that his representations regarding his mother's liability for the Am-South Bank line of credit were true; (2) that, if these representations were not true, his mother knew that they were not true; (3) that his statements regarding the AmSouth Bank line of credit were not material to the transaction; and (4) that Tenn.Code Ann. § 48-2-122(b)(1) does not apply to the transaction because it involves the sale of a partnership interest rather than a security.