Court Opinion

ID: 4912750
Source: CourtListenerOpinion
Date Created: 2021-09-21 22:13:20.594212+00
Date Added: 2024-06-11T08:13:42.831837
License: Public Domain

09/21/2021
                IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                           Assigned on Briefs January 4, 2021

 CITY OF MEMPHIS, TENNESSEE v. BEALE STREET DEVELOPMENT
                      CORPORATION

                  Appeal from the Chancery Court for Shelby County
                          No. 99-0612 Jim Kyle, Chancellor
                      ___________________________________

                            No. W2020-00523-COA-R3-CV
                        ___________________________________

After counsel announced that the parties had settled their differences, the trial court entered
a consent judgment dismissing all claims with prejudice. One year later, one of the litigants
moved to set aside the judgment arguing lack of consent and fraud. The moving party
claimed that it never approved the settlement or consented to entry of the dismissal order.
The trial court denied the motion. Because the trial court’s decision was not an abuse of
discretion, we affirm.

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

W. NEAL MCBRAYER, J., delivered the opinion of the court, in which KENNY W.
ARMSTRONG and KRISTI M. DAVIS, JJ., joined.

Larry E. Parrish, Memphis, Tennessee, for the appellant, Beale Street Development
Corporation.

Casey Shannon and Brian S. Faughnan, Memphis, Tennessee, for the appellee, City of
Memphis, Tennessee.

                                         OPINION

                                              I.

        Litigation between the City of Memphis and Beale Street Development Corporation
began in 1999. Sixteen years later, the parties, through counsel, announced to the court
that they had “compromised and settled all matters at issue between them . . . , as evidenced
by a written settlement agreement, and that all claims . . . should be dismissed with
prejudice.” On February 17, 2015, the court entered a Consent Order of Dismissal with
Prejudice.

       One year later, on February 16, 2016, under Tennessee Rule of Civil Procedure
60.02, Beale Street moved to set aside the final judgment. The corporation claimed that its
governing board never approved the settlement agreement and that the signature on the
settlement agreement was a forgery.

       The City of Memphis argued that Beale Street was not entitled to Rule 60.02 relief.
The City pointed out that a Beale Street representative participated in the settlement
discussions and Randle Catron, the corporation’s executive director, signed the settlement
agreement on February 3, 2015. And Beale Street had accepted the City’s settlement
payments for five months before abruptly changing course.

       Both sides submitted affidavits and other documentary evidence in support of their
claims. Beale Street submitted sworn statements from the individual members of its
governing board and its current executive director, Lucille Catron. The board members
acknowledged that attorney John Candy had represented the corporation throughout this
protracted legal battle. They also agreed that Randle Catron, the corporation’s long time
executive director, was authorized to speak for the corporation during the settlement
negotiations. But they maintained that the board never approved the final settlement.

       The board named Lucille Catron, the widow of Randle Catron, executive director
shortly before her husband’s passing in July 2015. Mr. Catron’s health had been failing
for some time. According to Mrs. Catron, her late husband’s signature on the settlement
agreement was forged. He was hospitalized on the day he supposedly signed the
agreement. She acknowledged that Mr. Candy visited the hospital on February 3 with
settlement papers in hand. But when he tried to obtain her husband’s signature, Mrs. Catron
ripped the signature page away. A forensic document examiner also opined that the
signature on the settlement agreement did not belong to Randle Catron.

       The City filed affidavits from Jesse Lee, Beale Street’s former accountant, and
Mr. Candy. Mr. Lee explained that Mr. Catron hired him in 2008 to provide financial
services for the corporation. In that role, he often reviewed the financial aspects of various
settlement offers from the City. In 2014, Mr. Catron appointed him to represent the
corporation in the ongoing settlement negotiations. His participation culminated in a
written settlement agreement in early 2015. Throughout the settlement process, he
maintained open communication with both Mr. Catron and individual board members.

       Mr. Candy confirmed Mr. Lee’s description of events. He also explained the
circumstances surrounding the execution of the settlement agreement. On February 3,
2015, Mr. Candy took the agreement to the hospital for Mr. Catron to review. Mr. Catron,
although in pain, appeared to be competent. After reviewing the agreement, Mr. Catron
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signaled that he was ready to sign it. But when Mr. Candy gave him the agreement,
Mrs. Catron physically assaulted him and tore the agreement. Mr. Catron admonished his
wife. And Mr. Candy gave Mr. Catron another copy of the settlement agreement, which
he signed.

       The City also submitted other documentary evidence including a newspaper article,
the executed settlement agreement, and copies of seven cancelled checks. In January 2015,
the Memphis Commercial Appeal ran a front-page article featuring the impending
settlement. And, in compliance with the settlement terms, the City paid Beale Street
$65,000 between February and June of 2015.

       According to Mrs. Catron, Mr. Candy never informed her of the settlement. She
heard rumors. But she did not know that a settlement agreement had been executed until
June or July of 2015. She was equally unaware of the City’s settlement payments. As she
explained, Mr. Lee deposited the funds in Beale Street’s corporate account without the
corporation’s knowledge. She noted that Mr. Lee paid Mr. Candy’s fee with the deposited
funds. And he transferred some of the funds to Randle Catron’s personal account.

        After reviewing the evidence in the record, the court found that Beale Street failed
to prove that it was entitled to Rule 60 relief. Proof that the board did not expressly approve
the settlement agreement did not warrant setting aside the final judgment. And the record
did not support Beale Street’s fraud claims.

                                                    II.

                                                    A.

        Beale Street argues that the Consent Order must be set aside because the board never
expressly approved the settlement agreement. In Tennessee, an attorney cannot agree to
dismiss litigation with prejudice “without the express authority of the client.” Absar v.
Jones, 833 S.W.2d 86, 89 (Tenn. Ct. App. 1992). Even so, once “a consent decree becomes
final[,] it can only be attacked either by a suit against counsel who consented to it, or by a
bill of review or some original action.” Kelly v. Walker, 346 S.W.2d 253, 256 (Tenn.
1961).1 Rule 60.02 has replaced former remedies for setting aside a final judgment. TENN.
R. CIV. P. 60.02. Now, a “party who waits more than thirty days after entry of an order to

        1
          Beale Street’s reliance on Kelly v. Walker, 346 S.W.2d 253 (Tenn. 1961), as authority for setting
aside the Consent Order is misplaced. Kelly was decided before adoption of the Tennessee Rules of Civil
Procedure. See Thomas v. Oldfield, 279 S.W.3d 259, 262 (Tenn. 2009) (“The Tennessee Rules of Civil
Procedure were adopted in 1970.”). And it concerned a litigant’s efforts to set aside a consent order before
it became final. Kelly, 346 S.W.2d at 256; see also Jerkins v. McKinney, 533 S.W.2d 275, 280 (Tenn. 1976)
(“Courts have always had the authority to modify, alter, amend or revoke judgments and decrees before
they become final.”).

                                                     3
seek relief must do so under Rule 60.02.” Hussey v. Woods, 538 S.W.3d 476, 482 (Tenn.
2017); see Silliman v. City of Memphis, 449 S.W.3d 440, 451 (Tenn. Ct. App. 2014) (noting
that Rule 60.02 applies with equal force to consent orders).

       We review a trial court’s ruling on a Rule 60.02 motion under the abuse of discretion
standard. Discover Bank v. Morgan, 363 S.W.3d 479, 487 (Tenn. 2012). We consider
whether “the trial court applied incorrect legal standards, reached an illogical conclusion,
based its decision on a clearly erroneous assessment of the evidence, or employed
reasoning that cause[d] an injustice to the complaining party.” Id. (quoting State v. Jordan,
325 S.W.3d 1, 39 (Tenn. 2010)). This is not an opportunity for the appellate court to
substitute its judgment for that of the trial court. Eldridge v. Eldridge, 42 S.W.3d 82, 85
(Tenn. 2001). The “trial court’s ruling ‘will be upheld as long as reasonable minds can
disagree as to [the] propriety of the decision made.’” Id. (quoting State v. Scott, 33 S.W.3d
746, 752 (Tenn. 2000)).

       Relief under Rule 60.02 is “an exceptional remedy.” Nails v. Aetna Ins. Co., 834
S.W.2d 289, 294 (Tenn. 1992). The rule “was designed to strike a proper balance between
the competing principles of finality and justice.” Jerkins, 533 S.W.2d 275, 280 (Tenn.
1976). It “acts as an escape valve from possible inequity that might otherwise arise from
the unrelenting imposition of the principal of finality imbedded in our procedural rules.”
Thompson v. Firemen’s Fund Ins. Co., 798 S.W.2d 235, 238 (Tenn. 1990). “This escape
valve ‘should not be easily opened.’” Hussey, 538 S.W.3d at 483 (quoting Furlough v.
Spherion Atl. Workforce, LLC, 397 S.W.3d 114, 127 (Tenn. 2013)). So the moving party
must prove “that it is entitled to relief by clear and convincing evidence.” Henderson v.
SAIA, Inc., 318 S.W.3d 328, 336 (Tenn. 2010).

        Rule 60.02 permits a trial court to set aside a final judgment for four specified
reasons plus a catch-all provision. TENN. R. CIV. P. 60.02. Beale Street asked the trial
court to set aside the Consent Order based on fraud and its contention that the judgment
was void. See TENN. R. CIV. P. 60.02(2), (3). We conclude that the trial court’s refusal to
set aside the final judgment for these reasons was not an abuse of discretion.

        Beale Street’s fraud argument focuses exclusively on the alleged fraudulent conduct
of its former attorney. Under Rule 60.02(2), a court may set aside a final judgment for
“fraud . . . , misrepresentation, or other misconduct of an adverse party.” TENN. R. CIV.
P. 60.02(2) (emphasis added). To obtain relief based on Rule 60.02(2), the moving party
must come forward with proof connecting an adverse party to the fraud. See Everett v.
Morgan, No. E2007-01491-COA-R3-CV, 2009 WL 113262, at *7-8 (Tenn. Ct. App. Jan.
16, 2009) (affirming the trial court’s decision to set aside a final order for fraud perpetrated
by a friend of the adverse party when there was evidence connecting the adverse party to
the fraud). Federal courts have reached the same conclusion when applying the identical
federal rule. See Latshaw v. Trainer Wortham & Co., 452 F.3d 1097, 1102 (9th Cir. 2006)
(holding that moving party was not entitled to set aside a final judgment based on her own
                                               4
attorney’s fraudulent conduct); 11 CHARLES ALAN WRIGHT & ARTHUR R. MILLER,
FEDERAL PRACTICE AND PROCEDURE § 2860 (3d ed. 1998) (explaining that fraud meriting
relief under federal Rule 60(b)(3) “must be chargeable to an adverse party”).

       Beale Street failed to prove that it was entitled to set aside the Consent Order based
on fraud. This record contains no evidence that the City of Memphis or its counsel engaged
in any fraudulent activity. The express requirements of Rule 60.02(2) have not been met.
See Henderson, 318 S.W.3d at 336 (noting that Rule 60 relief “is appropriate only in those
relatively few instances that meet the criteria of the rule”).

        Beale Street also argues that the lack of express client consent rendered the Consent
Order void ab initio. See TENN. R. CIV. P. 60.02(3) (permitting a court to set aside a void
judgment). We disagree. “A judgment is not void . . . because it is or may have been
erroneous.” Hussey, 538 S.W.3d at 485 (alteration in original) (quoting United Student Aid
Funds, Inc. v. Espinosa, 559 U.S. 260, 270 (2010)). Lack of client consent may void a
settlement agreement, but it will not void a judgment. See United States v. Krilich, 152 F.
Supp. 2d 983, 991 (N.D. Ill. 2001), aff’d, 303 F.3d 784 (7th Cir. 2002). A judgment is void
only if the court lacked jurisdiction over the subject matter or the parties or if it concerned
an issue wholly outside of the pleadings. Turner v. Turner, 473 S.W.3d 257, 270 (Tenn.
2015). That is not the case here.

        We recognize that under different circumstances the conduct of a moving party’s
attorney may provide grounds for relief under section (1) of Rule 60.02. See Terminix Int’l
Co., L.P. v. Tapley, No. 02A01-9701-CH-00028, 1997 WL 437222 at *4 (Tenn. Ct. App.
Aug. 4, 1997) (fraudulent conduct of moving party’s attorney met criteria for excusable
neglect); see also Krilich, 152 F. Supp. 2d at 991-92 (“Modern cases denominate a motion
to vacate based on an attorney lacking authority to enter into a settlement agreement as a
Rule 60(b)(1) motion based on mistake or inadvertence.”). But here, Beale Street failed to
come forward with facts justifying its failure to avoid the mistake. See Travis v. City of
Murfreesboro, 686 S.W.2d 68, 69-70 (Tenn. 1985). The Beale Street board was aware of
the ongoing settlement discussions. The impending settlement was announced on the front
page of the local newspaper. Seven settlement payments were deposited in Beale Street’s
corporate account. We find no evidence that Mr. Candy lied to his client about the status
of the case. This record is silent as to Beale Street’s efforts, if any, to remain abreast of the
progress of the litigation or the settlement discussions.

       And Beale Street failed to file its motion within a reasonable time. Rule 60 motions
seeking relief from a judgment on the basis of excusable neglect or fraud must be brought
within a reasonable time, no more than one year after entry of the judgment. Tenn. R. Civ.
P. 60.02. “[O]ne year is the ‘outer limit on the time allowed for filing the motion.’”
Furlough, 397 S.W.3d at 128 (quoting Rogers v. Estate of Russell, 50 S.W.3d 441, 445
(Tenn. Ct. App. 2001)). Although Beale Street filed its initial Rule 60 motion within the
one-year limit, on these facts, the motion was untimely. See Rogers, 50 S.W.3d at 445.
                                               5
Beale Street was admittedly aware of the settlement by late June or early July of 2015.
And yet the corporation inexplicably waited another six months or more to file its Rule 60
motion. “Rule 60.02 does not ‘permit a litigant to slumber on [its] claims and then
belatedly attempt to relitigate issues long since laid to rest.’” Furlough, 397 S.W.3d at 128
(quoting Thompson, 798 S.W.2d at 238).

                                             B.

       The City asserts that this appeal is frivolous, entitling it to damages, including
attorney’s fees and expenses incurred on appeal. Under Tennessee Code Annotated § 27-
1-122 (2017), an appellate court may award damages for a frivolous appeal. This statute
“must be interpreted and applied strictly so as not to discourage legitimate appeals.” See
Davis v. Gulf Ins. Grp., 546 S.W.2d 583, 586 (Tenn. 1977) (citing the predecessor to
Tennessee Code Annotated § 27-1-122). A frivolous appeal is one “utterly devoid of
merit,” Combustion Eng’g, Inc. v. Kennedy, 562 S.W.2d 202, 205 (Tenn. 1978), or “taken
solely for delay,” Chiozza v. Chiozza, 315 S.W.3d 482, 493 (Tenn. Ct. App. 2009). This
was not a frivolous appeal.

                                            III.

       The trial court did not abuse its discretion in declining to set aside the Consent
Order. Beale Street failed to prove that this is one of the exceptional cases meriting relief
from a final judgment. So we affirm.

                                                      s/ W. Neal McBrayer
                                                   W. NEAL MCBRAYER, JUDGE

                                             6