Court Opinion

ID: 4372686
Source: CourtListenerOpinion
Date Created: 2019-03-01 15:32:31.458534+00
Date Added: 2024-06-11T14:49:39.550411
License: Public Domain

02/28/2019
               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                              January 16, 2019 Session

                 GARY MILLER v. COLLIN MILLER ET AL.

               Appeal from the Chancery Court for Madison County
                    No. 74990 James F. Butler, Chancellor
                    ___________________________________

                          No. W2018-00482-COA-R3-CV
                      ___________________________________

This case involves the interpretation of a buy-sell provision in a partnership agreement.
The trial court concluded that the buy-sell provision was properly triggered by the
Appellee and ordered that $125,000.00 be paid to the Appellee, representing the value of
Appellee’s interest in the partnership. The trial court also awarded the Appellee
attorney’s fees and held that other claims which had been pursued by the parties were
moot. Having reviewed the terms of the buy-sell provision, we conclude that the
provision was never properly triggered and, therefore, reverse the judgment of the trial
court to the extent that it purported to enforce the parties’ agreement. Because various
other claims were dismissed as moot in light of the trial court’s specific enforcement of
the buy-sell provision that dismissal is hereby vacated, and those additional claims are
remanded for further consideration and proceedings in the trial court.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed
                     in Part, Vacated in Part and Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the court, in which J. STEVEN STAFFORD,
P.J., W.S., and ROBERT E. LEE DAVIES, SR. J., joined.

Michael L. Mansfield, Jackson, Tennessee, for the appellants, Collin Miller, Miller
Contractors, Inc., R. Joel McAlexander, McAlexander Construction, LLC, d/b/a
McAlexander Engineering , McAlexander Engineering, LLC, Miller Family Properties
a/k/a Miller Family Properties Partnership, and Shane McAlexander, individually and
d/b/a McAlexander Engineering.

C. Mark Donahoe, and Lowe Finney, Jackson, Tennessee, for the appellee, Gary Miller.
                                         OPINION

                  BACKGROUND AND PROCEDURAL HISTORY

       VFW Partners (“the Partnership”), whose purpose was and is to develop a parcel
of real property in Jackson, Tennessee, has origins that trace back over a decade. At its
genesis in June 2005, the Partnership was comprised of two members, R. Joel
McAlexander and Shane McAlexander, each of whom owned a 50% interest in the
Partnership. Ownership of the Partnership changed several years after its inception. On
July 21, 2014, Gary Miller and Collin Miller bought Shane McAlexander’s 50% interest,
with each of the Millers individually acquiring a 25% interest. The remaining 50%
ownership interest was retained by R. Joel McAlexander.

        When the Millers bought into the Partnership, it was agreed among all partners
that it was in the best interests of the Partnership to let the Jackson property lay dormant
for an extended and undetermined period prior to development. According to Gary
Miller, however, throughout most of 2015 and 2016, Collin Miller and R. Joel
McAlexander actively concealed a plan to make unauthorized purchases, assume bank
notes on behalf of the Partnership, and engage in self-interested transactions. In response
to these alleged activities, Gary Miller took steps in September 2016 to exercise a buy-
sell provision included in the governing partnership agreement. This provision, which is
of central dispute herein, reads in full as follows:

       The partners agree that if one partner wishes to end the partnership and all
       the parties cannot agree to voluntarily dissolve the partnership as outlined
       above, then the partner wishing to terminate the partnership shall place a
       value on the partnership and offer to buy or sale [sic] his partnership
       interest (adjusted to reflect his percentage ownership in the partnership) to
       the remaining partners at the stated price. This offer must be in writing and
       shall state that the partner is willing to either sale [sic] his partnership
       interest or purchase the remaining partners interest at the same value
       (adjusted to reflect the percentage ownership in the partnership of the other
       partners). This offer must be tendered in writing to each partner and must
       be acted upon by the remaining partners within 15 days of the delivery of
       the buy-sale [sic] offer. The closing of the sale or purchase of the
       partnership interest shall be held within 30 days of the remaining partners
       notice of intent to sale [sic] to, or to buy, from the partner making the initial
       offer. In the event either party fails to honor the terms of this Buy-Sale
       [sic] Agreement, the other party shall have the right to seek specific
       performance of this provision and all applicable damages including but not
       limited to a reasonable attorney’s fee and all reasonable costs for enforcing
       this provision.

                                             -2-
        In his attempt to exercise his rights under the above provision, Gary Miller sent a
letter to Collin Miller and R. Joel McAlexander on September 12, 2016, wherein Gary
valued the Partnership at $500,000.00 and offered to purchase Collin Miller’s 25%
interest for $125,000.00 or sell his own 25% interest in the Partnership for the same price.
Notably, the offer did not state that Gary Miller was willing to purchase the interest of the
remaining partners as was required under the buy-sell provision. Although an email
requesting some clarification about the offer was thereafter sent to counsel for Gary
Miller, no response was forthcoming.

       On September 27, 2016, counsel for R. Joel McAlexander and Collin Miller sent a
specific response to the September 12 offer. The response stated that R. Joel
McAlexander and Collin Miller agreed with the $500,000.00 valuation Gary Miller had
put on the Partnership and further stated that they would purchase Gary Miller’s 25%
interest “following the equalization of the partners’ accounts.” The upshot of the
response was that Gary Miller would be required to pay nearly $3,000.00 to sell his
interest in the Partnership.

       This suggested “equalization” soon became a heated point of contention. On
October 4, 2016, counsel for Gary Miller sent a letter to counsel for R. Joel McAlexander
and Collin Miller, arguing that the buy-sell provision did not provide for what was
proposed in the September 27 response. According to counsel for Gary Miller, pursuant
to the buy-sell provision, “the buying party simply buys another individual out of the
agreement subject to whatever liabilities have attached to the partnership otherwise.” In a
subsequent letter dated October 7, 2016, counsel for R. Joel McAlexander and Collin
Miller informed counsel for Gary Miller that his clients would accept a purported offer
from Gary to purchase their interests in the Partnership.

        Shortly thereafter, on November 15, 2016, Gary Miller commenced the present
litigation by filing a complaint in the Madison County Chancery Court. As is relevant to
this appeal, Gary Miller averred that R. Joel McAlexander and Collin Miller had
breached the buy-sell provision when they responded that they would purchase his share
in the Partnership after his share was equalized. Gary Miller contended that the court
should grant him specific performance and require Collin Miller and R. Joel
McAlexander to purchase his 25% interest outright for $125,000.00 and pay for his
reasonable attorney’s fees incurred in enforcing the buy-sell provision.

       In addition to raising this issue, Gary Miller’s complaint asserted a number of
other claims, such as a count for breach of duty of loyalty, and alleged that Collin Miller
and R. Joel McAlexander had engaged in a number of self-interested transactions by
having services rendered to the Partnership through their own businesses, Miller
Contractors, Inc., McAlexander Construction, LLC, and McAlexander Engineering, LLC.
These businesses were also named as defendants, and Gary Miller prayed that the
chancery court would “issue a temporary injunction pending the outcome of a trial on the
                                           -3-
merits in this cause preventing Defendants from engaging in any additional transactions
on behalf of the [Partnership.]” In addition to this prayer in the complaint, a formal
motion for temporary injunction was contemporaneously filed. Specifically, the motion
requested an injunction “preventing Defendants, R. Joel McAlexander and Collin Miller,
and/or their agents, servants, employees, representatives, and/or any other individuals or
entities in active participation and/or concert with Defendants from taking any further
action in their capacities as partners and interest holders in the . . . Partnership . . . with
regard to selling or encumbering assets of the Partnership at issue in this cause without
first obtaining an order from [the court.]”

       The Defendants thereafter filed a response to the motion for temporary injunction
and a motion to dismiss/answer to the complaint. A counter-complaint was also filed and
was specifically brought in the name of Collin Miller, Miller Contractors, Inc., R. Joel
McAlexander, Miller Family Properties a/k/a Miller Family Properties Partnership, and
Shane McAlexander, individually and d/b/a McAlexander Engineering. The counter-
complaint set forth various causes of action and, among other things, asserted that Gary
Miller had not fully paid his share of the consideration owed to Shane McAlexander for
the prior sale of Shane’s interest in the Partnership in 2014.

       Following a hearing in August 2017, the chancery court ultimately determined that
Gary Miller had properly triggered the buy-sell provision and that $125,000.00 should be
paid to him for his interest in the Partnership. In explaining its position in a letter ruling,
which was later incorporated by reference in an order entered on February 14, 2018, the
court found as follows:

               Paragraph 11 of the Partnership Agreement provides a method
       whereby a partner may either compel the other partner, or partners, to buy
       his interest at a stated price which he sets, or in the alternative, he must buy
       the other partners out at the same price. It is not a dissolution of the
       partnership business, nor a liquidation thereof and winding up. It is a
       transfer of the partnership interest from one partner to the other or others.

              By letter dated September 12, 2016, Gary activated the buy/sell
       provision in paragraph 11 of the Partnership Agreement. The letter was
       addressed to Collin and Joel. The leter was simple and straightforward, and
       referenced paragraph 11. The letter valued the partnership at $500,000.00
       and offered to purchase Collin’s 25% for $125,000.00. In the alternative,
       according to the terms of the partnership agreement, Gary offered to sell his
       interest for the same amount.

              On Septemer 27, 2016, Mr. Mansfield, attorney for Collin and/or
       Joel, sent a letter agreeing with the $500,000.00 value and stating that the
       offer was accepted to buy Gary’s interest, but that acceptance was
                                            -4-
      conditioned upon “equalizing of the partner’s accounts”. Equalizing the
      accounts, per the Mansfield letter, involved revaluing the partnership by
      deducting partnership obligations. This procedure, however, is provided
      for in Section 10 of the Partnership Agreement when the partnership is
      being dissolved and the business liquidated. The procedure is not provided
      for in Section 11 of the Partnership Agreement which contemplates the
      partnership will continue to operate and not be liquidated or wound up.
      Paragraph 11 is a classic buy/sell provision as opposed to a termination of
      the partnership and dissolution.

               On October 7, 2016, Joel and Collin accepted Gary’s offer to
      purchase “their interest” with a $500,000.00 valuation (adjusted for their
      respective interest) and the assumption of the partnership debts and
      liabilities. The Court notes that Gary has not offered to buy Joel’s interest,
      only Collin’s interest.

      ****

             The Court finds that Gary properly triggered the buy/sell clause in
      the Partnership Agreement and that Collin had the option of either
      accepting the offer or buying Gary out at the same price. Collin accepted
      the offer by opting to buy Gary’s partnership interest. The additional
      qualifications put on the acceptance are of no consequence to the
      acceptance and Collin could not enforce these conditions. There may be
      some future settlements of accounts between the parties, and even third
      parties, but they are not a condition that has to be met prior to the
      conclusion of the purchase of Gary’s interest by Collin.

       Indicident to the entry of its February 14, 2018 order, the chancery court
specifically certified its order as final pursuant to Rule 54.02 of the Tennessee Rules of
Civil Procedure, and a notice of appeal was subsequently filed in this Court. However,
on July 23, 2018, we entered an order indicating that the February 14, 2018 order was not
a final judgment. We determined that several claims had not been ruled on and noted
that, notwithstanding the chancery court’s certification under Rule 54.02, an entire claim
or party had not been fully adjudicated. Specifically, we noted that the chancery court’s
order did not address Gary Miller’s claim for attorney’s fees. Rather than dismiss the
appeal, we allowed an opportunity for the parties to obtain a final judgment, and on
September 20, 2018, the chancery court entered an amended order addressing our
concerns about finality. In pertinent part, the chancery court’s amended order stated as
follows:

      [T]he Court’s previous order dated February 14, 2018 shall remain in full
      force and effect according to its terms and that all other claims in Plaintiff’s
                                           -5-
       complaint and Defendants’/Counter-Plaintiffs’ counter-complaint are
       hereby dismissed as moot in light of the Court’s granting Plaintiff Gary
       Miller’s demand for specific performance of the parties’ agreement.
       Plaintiff Gary Miller is further hereby awarded attorney’s fees in the
       amount of $15,430.00 incurred to-date in his prosecution and defense of
       this matter pursuant to the parties’ agreement.

A supplemental record was transmitted to this Court following the entry of the chancery
court’s amended order, and the appeal thereafter proceeded with the filing of briefs and
scheduling of oral argument.

                                   STANDARD OF REVIEW

       Primarily at issue on appeal is the trial court’s interpretation and enforcement of
the buy-sell provision included in the underlying partnership agreement. “The
interpretation of a written agreement is a matter of law and not of fact. Therefore, our
review is de novo on the record with no presumption of the correctness of the trial court’s
conclusions of law.” Wills & Wills, L.P. v. Gill, 54 S.W.3d 283, 285 (Tenn. Ct. App.
2001) (citation omitted).

                                      DISCUSSION

       In their brief on appeal, the Defendants/Counter-Plaintiffs (“the Appellants”)
present a number of issues for our review. In general, they challenge the chancery
court’s order of specific performance relative to the buy-sell provision and its
concomitant award of attorney’s fees. They further submit that, based on the chancery
court’s erroneous grant of specific performance, it was also error to dismiss their
remaining claims as moot.

        As in the chancery court, one of the principal points of contention on appeal is
whether the buy-sell provision requires an equalization of accounts incident to the
performance of its terms. Although the Appellants invoke a number of alternative
arguments in appealing the chancery court’s conclusion that no such equalization is
mandated, we, like the chancery court, are of the opinion that the framework of the buy-
sell provision is not ambiguous. Under the buy-sell provision, a partner places a value on
the partnership and then, when making an offer, must “state that the partner is willing to
either sale [sic] his partnership interest or purchase the remaining partners interest at the
same value (adjusted to reflect the percentage ownership in the partnership of the other
partners).” The remaining partners/offerrees are free to act on the offer in one way or the
other, but an offer made under the buy-sell provision “must be acted upon by the
remaining partners within 15 days of the delivery of the buy-sale [sic] offer.” The
transaction is governed simply by (1) the valuation made in the offer, (2) the partners’
respective ownership interests, and (3) the choice made by the remaining partners.
                                              -6-
        As the chancery court observed, however, when R. Joel McAlexander and Collin
Miller responded to Gary Miller’s offer pursuant to the buy-sell provision, they stated
that they would purchase Gary Miller’s interest following an equalization of the accounts,
thereby purporting to obligate Gary Miller to pay them for selling his own interest. We
agree with the chancery court that such a proposed equalization is not a proper response
to an offer made under the buy-sell provision. As the chancery court remarked, “[t]he
only possible response to a buy/sell offer . . . is basically ‘I will sell my interest for the
stated price’ or ‘I will buy your interest for the stated price’.”

       With that said, we are actually in agreement with the Appellants that the chancery
court’s order of specific performance was in error. Just as the conditional acceptance of
the offer premised on an equalization went outside the parameters of the buy-sell
provision, so too did the initial offer. As noted above, an offer made under the buy-sell
provision must state that the partner is willing to sell his interest or purchase the interest
of the remaining partners. There is no dispute that this did not occur in this case; Gary
Miller only offered to buy Collin Miller’s interest. Because the offer did not comply with
the mandatory requirements of the buy-sell provision, we must respectfully disagree with
the chancery court that the buy-sell provision was ever properly triggered.1 Accordingly,
we are compelled to conclude that it was error for the chancery court to order specific
performance of that provision and to award Gary Miller attorney’s fees for enforcement
of the agreement. The chancery court’s decision to award specific performance and
attorney’s fees is hereby reversed. The trial court is instructed to enter an order
dismissing the claim for specific performance.

       Given our conclusion on this matter, we are also compelled to vacate that portion
of the chancery court’s September 20, 2018 order which held that “all other claims in
Plaintiff’s complaint and Defendants’/Counter-Plaintiffs’ counter-complaint are hereby
dismissed as moot.” Indeed, the chancery court’s order reflects that it found these other
claims moot “in light of the Court’s granting Plaintiff Gary Miller’s demand for specific
performance of the parties’ agreement.” Inasmuch as the chancery court’s cited basis for
its mootness determination is now reversed, the additional claims dismissed as moot are
remanded for further consideration and proceedings in the trial court. In remanding for
reconsideration of these claims, we express no opinion as to whether they have merit or
whether they may ultimately be subject to dismissal.

        1
         As the buy-sell provision was never properly triggered, we find it to be of no moment that
Collin Miller and R. Joel McAlexander attempted to insert conditions on acceptance that were not, in fact,
in conformity with the provision.
                                                  -7-
                                   CONCLUSION

       For the foregoing reasons, the chancery court’s order is hereby reversed in part,
vacated in part, and remanded for further proceedings as may be necessary and are
consistent with this opinion.

                                               _________________________________
                                               ARNOLD B. GOLDIN, JUDGE

                                         -8-