Court Opinion

ID: 1068403
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:29:33.720884+00
Date Added: 2024-06-11T09:54:33.765342
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT KNOXVILLE
                                  November 13, 2002 Session

                    JAMES L. THOMPSON v.
        KNOXVILLE TEACHERS FEDERAL CREDIT UNION, ET AL.

                       Appeal from the Chancery Court for Knox County
                        No. 01-151257-2   Daryl R. Fansler, Chancellor

                                   FILED DECEMBER 10, 2002

                                  No. E2002-00780-COA-R3-CV

James L. Thompson (“Plaintiff”) was the principal stockholder, director, and officer of People
Personnel Industrial Corporation. Plaintiff began kiting checks when the corporation started having
financial difficulties. Plaintiff’s actions resulted in a substantial monetary loss to Knoxville Teachers
Federal Credit Union (“Credit Union”). After both the corporation and Plaintiff filed for bankruptcy,
the parties entered into an agreement whereby the Credit Union agreed not to pursue or assist any
other party in pursuing a cause of action against Plaintiff based on the check kiting. Thereafter,
Plaintiff was prosecuted in federal court. The Credit Union supplied information to the United States
Government pertaining to the amount of its financial losses. After Plaintiff pled guilty in federal
court to defrauding the Credit Union, he was ordered to serve a small amount of time in prison and
pay restitution of $74,417.29 to the Credit Union. Plaintiff brought this lawsuit claiming the Credit
Union pursued the order of restitution in the criminal proceeding and thereby violated the terms of
the settlement agreement. The Trial Court granted summary judgment to Defendants, and Plaintiff
appeals. We affirm.

                    Tenn. R. App. P. 3 Appeal as of Right; Judgment of the
                        Chancery Court Affirmed; Case Remanded.

D. MICHAEL SWINEY, J., delivered the opinion of the court, in which HERSCHEL P. FRANKS , J., and
CHARLES D. SUSANO, JR., J., joined.

C. Mark Troutman, LaFollette, Tennessee, for the Appellant James L. Thompson.

Sam H. Poteet, Jr., Fred C. Statum, III, and Jeffrey S. Price, Nashville, Tennessee, for the Appellees
Knoxville Teachers Federal Credit Union and Cumis Insurance Society, Inc.
                                             OPINION

                                            Background

                Plaintiff sued Defendants in June of 2001 seeking damages for an alleged breach of
a settlement agreement. Plaintiff was the principal shareholder, director, and officer of People
Personnel Industrial Corporation. After the corporation began experiencing financial difficulties,
Plaintiff admittedly began “kiting checks.” Plaintiff’s check kiting resulted in the Credit Union
suffering financial losses which were insured through Defendant Cumis Insurance Society, Inc.
(“Cumis”). To compensate the Credit Union for its losses, Plaintiff executed a Promissory Note on
behalf of Peoples Personnel Inc., and Plaintiff and his wife personally guaranteed the debt. People
Personnel Inc., is a separate corporation from People Personnel Industrial Corporation, although
Plaintiff was the principal shareholder, officer, and director of both corporations. The promissory
note was drafted incorrectly and should have been executed on behalf of People Personnel Industrial
Corporation, not People Personnel, Inc. Plaintiff claims he was unaware of the mistake. After
executing the promissory note, Plaintiff claims he paid approximately $30,000 towards the debt.

                According to the complaint, in March of 1999, Plaintiff realized he could not salvage
People Personnel Industrial Corporation and the corporation filed for bankruptcy. Due to the
mistake in the drafting of the promissory note, the Credit Union’s lien against the corporation’s
assets was lost. Since Plaintiff and his wife had personally guaranteed the debt, he and his wife filed
for bankruptcy. The Credit Union filed an adversary proceeding in Bankruptcy Court seeking to
deny the discharge of the remaining debt it was owed by Plaintiff and his wife. Plaintiff denied there
were any grounds to avoid the discharge of this debt and requested an award of attorney fees. The
parties then entered into a Joint Stipulation of Dismissal of Complaint to Determine Dischargeability
of Debt. In relevant part, this Joint Stipulation provides:

                       5.     The [Credit Union and Cumis] have agreed to dismiss
               the above-styled Complaint with prejudice and to not pursue or to
               allow any party to pursue on their behalf any cause of action they
               have or may have against the Defendants [James or Barbara
               Thompson], either jointly or severally, or any related party for actions
               of the Defendants which are the subject of the Complaint.

                      6.      In exchange for dismissal with prejudice of the above-
               styled Complaint, the Defendants have agreed not to pursue or to
               allow any party to pursue on their behalf, any cause of action they
               have or may have against the Plaintiffs either jointly or severally,
               whether known or unknown, and including but not limited to, any
               claims related to the Plaintiff’s commencement and pursuit of the
               Complaint to Determine Dischargeability of Debt.

                                                 -2-
                After this Joint Stipulation was entered into, Plaintiff was prosecuted for check kiting
in the United States District Court. According to Plaintiff, the Credit Union and Cumis actively
participated in the criminal proceeding “cause of action for restitution” in violation of the terms of
the Joint Stipulation. Plaintiff claims he is entitled to damages of $74,417.29, which is the amount
of restitution he was ordered to make when sentenced in the United States District Court for his
criminal actions.

               In their Answer, the Credit Union and Cumis admitted Plaintiff had been kiting
checks and Plaintiff signed the promissory note. Defendants averred the remaining balance owed
by Plaintiff was $74,417.29.1 Defendants also admitted entering into the Joint Stipulation in the
Bankruptcy Court and that Plaintiff was ordered by the United States District Court to pay restitution
in the amount of $74,417.29 as part of Plaintiff’s sentence for his criminal actions. Defendants
denied, however, that they had breached the terms of the Joint Stipulation or were otherwise liable
to Plaintiff.

                Defendants moved for summary judgment, claiming Plaintiff had no evidence to
support his “allegation that the Defendants breached the Settlement Agreement between the parties.
In addition, the Plaintiff has not incurred any damages as a result of the alleged breach.” In support
of the motion, Defendants filed the affidavit of Myra Melton (“Melton”), a probation officer with
the United States Probation Office. Melton was assigned to Plaintiff’s criminal action and prepared
the sentencing report and recommendations to the District Court. According to Melton, Plaintiff
pled guilty to devising a scheme to defraud a credit union and was sentenced to five months in
prison, followed by five years of probation. Plaintiff also was ordered to pay restitution in the
amount of $74,417.29. Pursuant to the sentencing guidelines, Plaintiff’s conduct warranted ten to
sixteen months of imprisonment, three to five years of supervised release, and a fine of $3,000 to
$1,000,000. Melton went on to state as follows:

                        8.     I prepared and presented the information to the court
                 which the court used in determining the proper punishment for Mr.
                 Thompson.

                         9.     Neither Knoxville Teachers Federal Credit Union nor
                 Cumis Insurance Society pursued a criminal judgment or Order of
                 Restitution and neither Knoxville Teachers Federal Credit Union nor
                 Cumis Insurance Society advocated to the court the entry of the
                 criminal Order of Restitution.

        1
            Cumis paid the Credit Union $73,417.29 through its insurance policy. The Credit Union was owed the
rema ining $1 ,000 .

                                                     -3-
                           10.     Based upon my experience, the court will not waive or
                   excuse a criminal defendant from his obligation to pay restitution to
                   the victim of the crime.2

                            11.   Neither Knoxville Teachers Federal Credit Union nor
                   Cumis Insurance Society had or has the authority or ability to prevent
                   the entry of the Order of Restitution or to release the Order of
                   Restitution. The Order of Restitution is part of Mr. Thompson’s
                   criminal sentence and cannot be modified by an agreement of private
                   parties.

                Plaintiff responded to the motion for summary judgment. Plaintiff asserted
Defendants actively pursued restitution claims against Plaintiff instead of advising the United States
Government that any claims between the parties had been resolved. Plaintiff “viewed the settlement
agreement as a compromise of any claims for restitution and so advised the government.” Plaintiff
also stated he reviewed, during the course of the criminal proceedings, information provided by
Defendants to the United States Government relating to the check kiting scheme, the amount of the
checks involved, and the attorney fees incurred by Defendants. Plaintiff also stated counsel for the
Credit Union was present at the sentencing hearing and “appeared to be prepared to file the
documents in connection with the pursuit of restitution,” but these documents never were filed.
(emphasis added).

               The Trial Court granted Defendants’ motion for summary judgment, although the
exact reasons for doing so are not stated in the Order. Plaintiff appeals the grant of summary
judgment to Defendants. On appeal, the issue as stated by Defendants is: “Whether the Chancellor
properly held that, as a matter of law, the separate and independent action of the United States
District Court in sentencing Plaintiff to make restitution as part of Plaintiff’s punishment upon
criminal conviction for defrauding a federal credit union did not constitute a breach of a civil
settlement agreement between Plaintiff and Defendants.”3

                                                         Discussion

             The standard for review of a motion for summary judgment is set forth in Staples v.
CBL & Associates, Inc., 15 S.W.3d 83 (Tenn. 2000):

                          The standards governing an appellate court’s review of a
                   motion for summary judgment are well settled. Since our inquiry
                   involves purely a question of law, no presumption of correctness

         2
           In the Presentence Investigation Report filed in the criminal proceeding, Melton pointed out that while the
app licable statute allows an o rder of restitution, in accordance with § 5E 1.1 o f the USSG , “restitution sh all be o rdered.”

         3
           Plaintiff’s brief does not contain a statement of the issues presented for review as required by Tenn. R. App.
P. 27(a)(4).

                                                              -4-
attaches to the lower court’s judgment, and our task is confined to
reviewing the record to determine whether the requirements of Tenn.
R. Civ. P. 56 have been met. See Hunter v. Brown, 955 S.W.2d 49,
50-51 (Tenn. 1997); Cowden v. Sovran Bank/Central South, 816
S.W.2d 741, 744 (Tenn. 1991). Tennessee Rule of Civil Procedure
56.04 provides that summary judgment is appropriate where: (1) there
is no genuine issue with regard to the material facts relevant to the
claim or defense contained in the motion, see Byrd v. Hall, 847
S.W.2d 208, 210 (Tenn. 1993); and (2) the moving party is entitled
to a judgment as a matter of law on the undisputed facts. See
Anderson v. Standard Register Co., 857 S.W.2d 555, 559 (Tenn.
1993). The moving party has the burden of proving that its motion
satisfies these requirements. See Downen v. Allstate Ins. Co., 811
S.W.2d 523, 524 (Tenn. 1991). When the party seeking summary
judgment makes a properly supported motion, the burden shifts to the
nonmoving party to set forth specific facts establishing the existence
of disputed, material facts which must be resolved by the trier of fact.
See Byrd v. Hall, 847 S.W.2d at 215.

        To properly support its motion, the moving party must either
affirmatively negate an essential element of the non-moving party’s
claim or conclusively establish an affirmative defense. See McCarley
v. West Quality Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998);
Robinson v. Omer, 952 S.W.2d 423, 426 (Tenn. 1997). If the moving
party fails to negate a claimed basis for the suit, the non-moving
party’s burden to produce evidence establishing the existence of a
genuine issue for trial is not triggered and the motion for summary
judgment must fail. See McCarley v. West Quality Food Serv., 960
S.W.2d at 588; Robinson v. Omer, 952 S.W.2d at 426. If the moving
party successfully negates a claimed basis for the action, the non-
moving party may not simply rest upon the pleadings, but must offer
proof to establish the existence of the essential elements of the claim.

        The standards governing the assessment of evidence in the
summary judgment context are also well established. Courts must
view the evidence in the light most favorable to the nonmoving party
and must also draw all reasonable inferences in the nonmoving
party’s favor. See Robinson v. Omer, 952 S.W.2d at 426; Byrd v.
Hall, 847 S.W.2d at 210-11. Courts should grant a summary
judgment only when both the facts and the inferences to be drawn
from the facts permit a reasonable person to reach only one
conclusion. See McCall v. Wilder, 913 S.W.2d 150, 153 (Tenn.
1995); Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995).

                                  -5-
Staples, 15 S.W.3d at 88-89. A fact is “material” for summary judgment purposes, if it “must be
decided in order to resolve the substantive claim or defense at which the motion is directed.” Luther
v. Compton, 5 S.W.3d 635, 639 (Tenn. 1999)(quoting Byrd v. Hall, 847 S.W.2d at 211).

                Defendants argue the criminal action in which restitution was ordered is not a “cause
of action” that a private party can pursue and, therefore, the undisputed material facts show they
neither pursued any cause of action nor allowed the United States Government to do so on their
behalf. Thus, Defendants argue there was no breach of the Joint Stipulation which prohibited their
pursuing or allowing any party to pursue a cause of action against Plaintiff. Defendants rely on K.B.
v. State Farm Fire and Casualty Co., 189 Ariz. 263, 267, 941 P.2d 1288, 1292 (Ariz. App. 1997)(“A
victim is not a party to the criminal trial and he has no opportunity to litigate the issues.”) and State
v. Stirba, 972 P.2d 918, 921 (Utah App. 1998)(“The State’s right to pursue criminal restitution
cannot be equated with the victim’s right to pursue civil damages.”). Plaintiff essentially argues
Defendants breached the Joint Stipulation by providing the United States Government information
regarding the amount of its losses which were incurred as a result of Plaintiff’s criminal activity and
“appearing” to be ready to file documents.

                According to Melton’s affidavit, Defendants neither pursued a criminal judgment or
order of restitution, nor advocated for same. Melton further stated the federal court, in her
experience, will not excuse a criminal defendant from his or her obligation to pay restitution. More
importantly, however, is Melton’s testimony that Defendants neither have the authority to prevent
an order of restitution from being entered, nor can they release Plaintiff from this obligation which
he has to the federal court. Plaintiff did not rebut any of these material facts established by Melton.
While Defendants may have provided information to the federal court with regard to the amount of
its losses, the undisputed material facts show that whether or not Plaintiff was ordered to pay
restitution clearly was out of Defendants’ hands, and they could not impact that result. As such,
Defendants did not “pursue” a cause of action against Plaintiff for restitution, even assuming there
is a cause of action for restitution. Likewise, Defendants did not “allow” the United States
Government to pursue a cause of action against Plaintiff since Defendants neither could allow nor
disallow the restitution aspect of the federal court’s sentence imposed upon Plaintiff.

               We conclude the undisputed material facts show neither Defendant violated the terms
of the Joint Stipulation. Accordingly, the Trial Court properly granted Defendants summary
judgment. Because we conclude there was no breach of the Joint Stipulation, we pretermit any
remaining issues.

                                                  -6-
                                           Conclusion

               The judgment of the Trial Court is affirmed, and this cause is remanded to the Trial
Court for such further proceedings as may be required, if any, consistent with this Opinion. The
costs on appeal are assessed against the Appellant James L. Thompson, and his surety.

                                                     ___________________________________
                                                     D. MICHAEL SWINEY, JUDGE

                                               -7-