Court Opinion

ID: 1079480
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:32:52.549924+00
Date Added: 2024-06-11T12:05:18.771962
License: Public Domain

ELI MIKE, an individual, JAMES A.       )
SCHRAMPFER, an individual, and          )
JANE B. FORBES, as Trustee in           )
bankruptcy for the estate of DAVID L.   )
OSBORN,                                 )
                                        )    Davidson Chancery
       Plaintiffs/Appellants,           )    No. 89-1713-II (III)(I)
                                        )
VS.                                     )
                                        )
PO GROUP, INC., a Tennessee             )    Appeal No.
corporation; JAMES W. (BILL)            )    01A01-9707-CH-00321
ANDERSON, III, an individual; and       )
HAROLD L. JENKINS, an individual,

       Defendants/Appellees.
                                        )
                                        )
                                        )
                                                                  FILED
                                                                       May 6, 1998
                   IN THE COURT OF APPEALS OF TENNESSEE Cecil W. Crowson
                              AT NASHVILLE            Appellate Court Clerk
       APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
                     AT NASHVILLE, TENNESSEE

            HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

John C. Tishler, #13441
TUKE, YOPP & SWEENEY
17th Floor, Third National Bank Bldg.
201 Fourth Avenue North
Nashville, Tennessee 37219-2040
ATTORNEY FOR PLAINTIFFS/APPELLANTS

William L. Harbison, #7012
Andrew J. Pulliam, #16863
SHERRARD & ROE
424 Church Street, Suite 2000
Nashville, Tennessee 37219

D. Denty Cheatham
CHEATHAM & PALERMO
43 Music Square West
P.O. Box 121857
Nashville, Tennessee 37212-1857
ATTORNEYS FOR DEFENDANTS/APPELLEES

                                   AFFIRMED.

                                        HENRY F. TODD
                                        PRESIDING JUDGE, MIDDLE SECTION
CONCURS:
BEN H. CANTRELL, JUDGE

CONCURS IN RESULT:
WILLIAM C. KOCH, JR., JUDGE
ELI MIKE, an individual, JAMES A.             )
SCHRAMPFER, an individual, and                )
JANE B. FORBES, as Trustee in                 )
bankruptcy for the estate of DAVID L.         )
OSBORN,                                       )
                                              )       Davidson Chancery
       Plaintiffs/Appellants,                 )       No. 89-1713-II (III)(I)
                                              )
VS.                                           )
                                              )
PO GROUP, INC., a Tennessee                   )       Appeal No.
corporation; JAMES W. (BILL)                  )       01A01-9707-CH-00321
ANDERSON, III, an individual; and             )
HAROLD L. JENKINS, an individual,             )
                                              )
       Defendants/Appellees.                  )

                                     OPINION

       The captioned plaintiffs’ have appealed from a summary judgment dismissing plaintiffs’

actions against the corporate defendant for the value of their stock as dissenting minority

shareholders and their action against the individual defendants for breach of fiduciary duty as

corporate directors.

       On appeal, plaintiffs present the following issues:

               1.      Whether summary judgment is appropriate
               dismissing a claim based upon the statute of
               limitations when the undisputed facts indicate that the
               cause of action accrued within the period of the statute
               of limitations rather than outside the period as
               determined by the Trial Court?

               2.      Alternatively, whether summary judgment is
               appropriate dismissing a claim based upon the statute
               of limitations when different inferences regarding the
               accrual of plaintiffs cause of action may be drawn
               from the facts?

               3.     In the event the summary judgment is
               reversed, whether the discretionary costs judgment
               should be vacated?

                                               -2-
       Defendants present the following issues:

               A.      Whether the Trial Court properly held that
               appellants’ claims are time-barred by the three-year
               statute of limitations in Tenn. Code Ann. § 28-3-105
               due to those claims accruing more than three years
               before appellants filed this suit when appellants knew
               of their claims and their counsel threatened suit on
               their behalf in letters making the same allegations that
               appellants make in this suit.

               B.      Whether the Trial Court’s award of
               discretionary costs to Mr. Anderson was within the
               court’s authority under Tenn. R. Civ.P. 54.04 to award
               discretionary costs?

       In a former appeal in this same case, the Supreme Court held that the applicable statute

of limitations was three years. This suit was filed on June 30, 1989. Three years prior to June

30, 1989, was June 30, 1986. The primary inquiry on appeal is whether plaintiff’s right of action

or any part thereof arose after June 30, 1986.

       The individual defendants were the sole stockholders, officers and directors of the

corporate defendant which owned majority interests in a number of lesser corporations in which

plaintiffs held minority interests. Specifically, stock of the corporate defendant, Po Group, Inc.,

was owned in equal shares by the defendants, Anderson and Jenkins, who were also equal

owners of all of the stock of Pro Combination, Inc., a non-party. Po Group, Inc., owned 80% of

the stock of Po Louisville, Inc., 72.57% of the stock of Po Jackson, Inc., and 73% of the stock

of Po Memphis, Inc.

       The plaintiff, Eli Mike, was a minority stockholder of Po Louisville, Inc. The plaintiffs,

James A. Schrampfer and David Osborne, were minority stockholders of Po Jackson, Inc., and

Po Memphis, Inc.. David Osborne is in bankruptcy, and his interests are represented by Jane A.

Forbes, Trustee.

       After an unsuccessful effort to sell the corporate stock of Po Group, Inc., and Po

Combination, Inc., to DineLite Corporation, Po Group, Inc. agreed to sell and DineLite

                                                 -3-
Corporation agreed to buy substantially all of the assets of Po Group, Inc. and Po Combination,

Inc.. T.C.A. § 48-1-907( c) requires that stockholders dissenting from such a sale be paid the

fair value of their stock. A part of the consideration of the sale was the payment by DineLite of

certain bank debts of Po Group, Inc., and Po Combination, Inc., which were guaranteed by the

individual defendants, Jenkins and Anderson. This provision of the sale is the basis of the

plaintiffs’ suit against the defendants, Jenkins and Anderson.

       The sale was approved by a majority of the stockholders of each of the corporations,

including those in which plaintiffs’ were interested, at a meeting held on December 15, 1985.

       As stated above, the Supreme Court concluded the former appeal by holding that the

three-year statute of limitations barred the action of plaintiffs against the corporate defendant.

The opinion of the Supreme Court also states:

               . . .any right the plaintiffs may have had to recover from
               Anderson and Jenkins for breach of their fiduciary duties as
               officers or directors of any of the three subsidiary
               corporations or Po Group, Inc., expired on January 1, 1989,
               prior to the date on which the present suit was filed, June 30,
               1989. The plaintiffs acknowledge that Section 48-18-601
               bars recovery from Anderson or Jenkins for any breach of
               fiduciary duties as officers or directors. 937 S.W.2d at 794.
                                            ----
                       The complaint alleges that the majority shareholder,
               Po Group, Inc., breached a fiduciary duty owed to them as
               minority shareholders . . . . [T]he plaintiffs allege that the
               proceeds from the sale of corporate assets were unfairly
               distributed by the defendant, Pro Group, Inc., to the
               defendants Anderson and Jenkins. The complaint does not
               otherwise define the duty or the wrong. The allegations do
               not indicate clearly the “gravamen of the action.” The legal
               wrong of which the plaintiffs complain is uncertain. The
               complaint does not charge fraud; however, there is found in
               the complaint the statement that the breach of fiduciary duty
               by the defendants included “the diversion and/or
               misappropriation” of assets. Even then, the legal duty that
               was violated is not entirely clear.

                       The plaintiffs seek no judgment of liability for
               wrongdoing against Anderson and Jenkins. The complaint
               against Anderson and Jenkins is that their relationship with
               the majority shareholder, Po Group, Inc., was such that the
               plaintiffs should be allowed to pierce the corporate veil and

                                             -4-
                collect from the individual defendants the value of their
                shares of stock.
                                             ----
                        Thus, the action of Po Group, as the majority
                shareholder in the three subsidiary corporations, was essential
                to the consummation of the sale. Id. at 794.

        The cause was remanded by the Supreme Court to afford opportunity to the plaintiffs to

show that some wrongful act of the individual defendants occurred after June 30, 1966. No such

act is shown by this record.

        Appellants insist that the three-year statute did not begin to run against them until the

final transfer of assets which occurred after June 30, 1986. This Court does not agree. By the

binding contract to sell and buy the assets, the corporations were bound to complete the transfer

and delivery of such assets, and the statute of limitations began to run at that time, regardless of

any delay in carrying out the details of transfer.

        The plaintiffs assert that the individual defendants committed a breach of fiduciary duty

by relieving themselves of their liability as guarantors. The guaranteed liability was secondary

to the primary liability of the corporations which was a legitimate subject of inclusion in the sales

agreement. The incidental benefit to the individual defendants without detriment to the

corporations is not legitimate ground for liability of the individual defendants. Moreover, the

provision of the sales agreement for satisfaction of bank debts was disclosed to plaintiffs in the

notice of stockholders meeting received by plaintiffs. Furthermore, on January 3, 1986,

plaintiffs’ attorney wrote a letter to the president of Po Louisville, Po Memphis and Po Jackson

demanding payment of fair value of plaintiffs’ stock and stating:

                        The value, of course, should include monies that have
                been misappropriate [sic] from the Company by the
                controlling shareholder, the value of the franchise rights for
                the Company’s market that were represented by the majority
                shareholders to be in the Company and the proportionate
                value being realized by the majority shareholder’s being
                relieved of certain liabilities by DineLite Corporation.

                      “[f]ailure to arrive at a fair value for” the shares of Mr.
                Brown’s client,

                                              -5-
               ...will leave us no alternative but to institute litigation, which
               would include, but not necessarily be limited to claims for:

                               (1)     violations of notice procedures under
                                       the Tennessee General Corporation Act

                               (2)     violations of state and federal securities
                                       law

                               (3)     misappropriation of assets

                               (4)     violations of the racketeering [sic]
                                       influences and corrupt organizations
                                       act.

                       We await further action by you on this matter.

       Plaintiffs assert that there was an inequitable distribution of benefits to the subordinate

corporations by payment of the various bank loans which adversely affected the value of their

stock and thereby unfairly reduced the amount to be paid to them for their stock.

       No evidence is cited or found as to the specific or amount of the alleged inequitable

allocation of bank loan relief among the several corporations involved. Even though the action

of plaintiffs were not barred, no relief could be granted to plaintiffs for the alleged inequity of

relief from bank loans because of the lack of evidence of the amount of damages.

       Finally, plaintiffs argue that, in event of reversal of the judgment of the Trial Court, the

award of discretionary costs should be dismissed. There is no complaint that the award of

discretionary costs was otherwise in error.

       No grounds are found for reversal of the judgment of dismissal, hence the award of

discretionary costs will not be reversed.

                                                -6-
       The judgment of the Trial Court is affirmed. Costs of this appeal are taxed against the

appellants and their surety. The cause is remanded to the Trial Court for necessary further

proceedings.

                              AFFIRMED & REMANDED.

                                                    _________________________________
                                                    HENRY F. TODD
                                                    PRESIDING JUDGE, MIDDLE SECTION

CONCUR:

_____________________________
BEN H. CANTRELL, JUDGE

CONCURS IN RESULT:

_____________________________
WILLIAM C. KOCH, JR., JUDGE

                                             -7-