Court Opinion

ID: 4355469
Source: CourtListenerOpinion
Date Created: 2019-01-02 16:00:35.556087+00
Date Added: 2024-06-11T14:46:17.471734
License: Public Domain

12/28/2018
                  IN THE COURT OF APPEALS OF TENNESSEE
                              AT NASHVILLE
                                   November 7, 2018 Session

                 LARRY E. PARRISH, P.C. v. NANCY J. STRONG

                   Appeal from the Chancery Court for Lincoln County
                            No. 13039 J. B. Cox, Chancellor
                        ___________________________________

                              No. M2017-02451-COA-R3-CV
                          ___________________________________

W. NEAL MCBRAYER, J., concurring in part and dissenting in part.

        I concur in all aspects of the opinion, save one. The majority concludes that the
Chancery Court of Lincoln County erred in denying the motion of Nancy J. Strong to
hold Larry E. Parrish personally liable for the obligations of Larry E. Parrish, P.C.1 The
majority vacates the trial court’s decision and “remands for a hearing” on that issue.
Because I would affirm the denial of the motion, I respectfully dissent from that part of
the opinion.

       Ms. Strong asserted her breach of contract claim against a professional
corporation, Larry E. Parrish, P.C. After the trial of her claim against the professional
corporation and the award of compensatory damages, Ms. Strong asserted that
Mr. Parrish should be found personally liable. As grounds, Ms. Strong stated that
Mr. Parrish had filed articles of dissolution for the corporation with the Tennessee
Secretary of State during the pendency of the case. Ms. Strong further alleged, without
citing any specific instances, that Mr. Parrish had “dissipated the assets [of the
corporation] such that the corporation [wa]s without funds to pay its debts (most
specifically an adverse judgment in favor of Nancy J. Strong) which [wa]s due to the
misconduct on the part of Larry E. Parrish as sole stockholder and President of the
corporation.”

       Although, like the majority, I take issue with some of the trial court’s rationale, I
conclude that there were adequate reasons for denying Ms. Strong’s request. Ms. Strong
seems to incorrectly equate dissolution of a corporation with the end of its corporate
existence. Under the Tennessee Business Corporation Act, “[a] dissolved corporation
        1
         The majority concludes, and I agree, that Ms. Strong does not challenge on appeal the denial of
her motion to substitute under Tennessee Rule of Civil Procedure 25.03.
continues its corporate existence,” and dissolution does not “[a]bate or suspend a
proceeding . . . against the corporation on the effective date of the dissolution.” Tenn.
Code Ann. § 48-24-105(a), (b)(6) (2012). This is no less true for professional
corporations. Id. § 48-101-602 (2012).

        Additionally, Ms. Strong offers little or no evidence of the claim of dissipation of
assets by Mr. Parrish. In the memorandum accompanying her motion to hold Mr. Parrish
personally liable, Ms. Strong states that, following the jury verdict for compensatory
damages, her counsel subpoenaed relevant financial records of Larry E. Parrish, P.C.
Ms. Strong then claims that the subpoenaed documents showed that Larry E. Parrish, P.C.
had “systematically taken steps to shut down the P.C., ha[d] dissipated assets, ha[d] a
variety of records that require further scrutiny, and most particularly, ha[d] dissolved the
P.C.” I am left to wonder, if these financial records were so damning, why not detail at
least one or two instances of dissipation by Mr. Parrish. If anything, Ms. Strong seems to
be requesting more time to evaluate possible avenues to hold Mr. Parrish personally
liable.

       Finally, like the trial court, I find the timing of the motion weighed in favor of its
denial. When the motion was filed, the liability and damages phase of the case had
seemingly concluded. The introduction of the question of personal liability ultimately
served to delay matters and created a host of other issues. See Larry E. Parrish, P.C. v.
Strong, No. M2015-02495-COA-R9-CV, 2016 WL 5888935 (Tenn. Ct. App. Oct. 7,
2016). Given that the question of whether “a corporation is a mere instrumentality of an
individual . . . is ordinarily a question of fact for the jury,” Elec. Power Bd. of
Chattanooga v. St. Joseph Valley Structural Steel Corp., 691 S.W.2d 522, 526 (Tenn.
1985), in my view, the trial court took the best course, namely attempting to proceed to
the punitive damages phase of the case.

       If anything, this case illustrates the complications that come when the procedure to
follow is not entirely clear. This is not uncommon with claims to pierce the corporate
veil. As at least one commentator has noted, “[n]either state nor federal procedure is
uniform in how veil-piercing cases are adjudicated.” Sam F. Halabi, Veil-Piercing’s
Procedure, 67 RUTGERS U. L. REV. 1001, 1006 (2015). “[V]eil-piercing claims run the
gamut from free-standing causes of action (which under the law of waiver in some
jurisdictions must be pleaded early in litigation) to affirmative defenses to . . . equitable
remedies enforced at the end of litigation.” Id. at 1016. In Tennessee, we treat such
claims as an equitable remedy, but one that can be pursued by a separate suit after
judgment has been obtained against the corporation.2 See Oceanics Sch., Inc. v. Barbour,

        2
         Corporate identity can be disregarded in other contexts. See, e.g., CAO Holdings, Inc. v. Trost,
333 S.W.3d 73, 88-89 (Tenn. 2010) (recognizing that separate legal status of corporations can be
disregarded in order to collect taxes); Waste Conversion Sys., Inc. v. Greenstone Indus., Inc., 33 S.W.3d
779, 780 (Tenn. 2000) (holding parent corporation may interfere with the contractual relations of wholly-
                                                   2
112 S.W.3d 135, 145 (Tenn. Ct. App. 2003).

       In light of Oceanics Schools, Inc. v. Barbour and given the timing of Ms. Strong’s
motion, I conclude that the trial court did not err in denying the motion to hold
Mr. Parrish personally liable for the obligations of Larry E. Parrish, P.C. Given that the
financial records of the corporation, in the words of Ms. Strong, “require further
scrutiny,” the better course is for Ms. Strong to file a separate suit against Mr. Parrish
seeking to pierce the corporate veil rather than to remand this matter for a hearing, which
is potentially a remand for yet another jury trial.

        For these reasons, I respectfully dissent from part (E) of the opinion.

                                                          _________________________________
                                                          W. NEAL MCBRAYER, JUDGE

owned subsidiary without liability for tortious interference with contract).

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