Court Opinion

ID: 1054523
Source: CourtListenerOpinion
Date Created: 2013-10-08 20:50:16.788895+00
Date Added: 2024-06-11T12:50:17.303646
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                            AT KNOXVILLE
                                 December 6, 2004 Session

               RICHARD E. MILLER v. BERNARD STONE, ET AL.

                     Appeal from the Circuit Court for Hamilton County
                         No. 02C2214     Samuel H. Payne, Judge

                  No. E2004-00421-COA-R3-CV FILED MARCH 29, 2005

Richard E. Miller, in his capacity as an officer and director of Duncan Electric Company, Inc.
(“Duncan Electric”), brought this action against the company’s other directors, Bernard Stone and
Greta B. Lindsay (collectively “the defendants”), alleging that they had breached certain fiduciary
duties owed to him. Stone and Lindsay each moved for summary judgment on the basis that a
settlement agreement and release entered into by the parties in a prior and separate lawsuit barred
the plaintiff’s present action. The trial court granted the defendants’ motions and ordered the
plaintiff to pay their attorney’s fees. The plaintiff appeals, arguing that the trial court erred in
granting summary judgment to the defendants. We affirm.

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

CHARLES D. SUSANO , JR., J., delivered the opinion of the court, in which D. MICHAEL SWINEY and
SHARON G. LEE, JJ., joined.

Michael E. Richardson, Chattanooga, Tennessee, for the appellant, Richard E. Miller.

Donald J. Aho and Alison Bales Martin, Chattanooga, Tennessee, for the appellee, Bernard Stone,
Individually, and in his capacity as Co-Trustee of the Estate of W. Terry Lindsay and as Co-Trustee
of the Irrevocable Trust of W.S. Lindsay.

Michael R. Campbell, Chattanooga, Tennessee, for the appellee, Greta B. Lindsay, Individually, and
in her capacity as Co-Executor of the Estate of W. Terry Lindsay and as Co-Trustee of the
Irrevocable Trust of W.S. Lindsay.

                                            OPINION
                                                  I.

        W. Terry Lindsay (“the decedent”) was president and majority shareholder of Duncan
Electric, holding 64.44% of the company’s stock. The other shareholders were the Irrevocable Trust
of William S. Lindsay (“the Lindsay Trust”) with a 24.44% interest, and the plaintiff with a 11.11%
stake. On March 15, 2000, the decedent passed away. Stone, who served as Duncan Electric’s
accountant, and Lindsay, the decedent’s widow, were the co-executors of the decedent’s estate (“the
Lindsay Estate”). In addition, the two served as co-trustees of the Lindsay Trust.

        Under the terms of Duncan Electric’s stock purchase agreement (“the SPA”), the company,
upon the decedent’s death, was obligated to redeem the stock held by the Lindsay Estate and the
Lindsay Trust. On March 27, 2000, Duncan Electric’s attorney, C. George Caudle, met with Stone,
Lindsay, and the plaintiff to discuss the stock redemption. At the meeting, Stone, Lindsay, and the
plaintiff were elected directors of the corporation, and the plaintiff was elected president.

        On March 31, 2000, Caudle advised Stone and the plaintiff that White Electrical
Construction Company (“White Electrical”) in Atlanta was interested in purchasing Duncan Electric.
On that same date, Caudle prepared an Agreement and Amendment (“the Amendment”) to the SPA,
which would eliminate Duncan Electric’s right and obligation to purchase the stock held by the
Lindsay Estate and the Lindsay Trust. A few days later, the plaintiff, Stone, and Lindsay met with
Caudle and Preston Bond, the president of White Electrical, to discuss the potential purchase of
Duncan Electric. One week later, the plaintiff, Stone, Lindsay, and Caudle again met to discuss
White Electrical’s proposal, and at that meeting, the plaintiff, Stone, and Lindsay signed the
Amendment to the SPA, thus eliminating Duncan Electric’s right and obligation to purchase the
stock.

        On May 2, 2000, Caudle received a letter from an accountant retained by the plaintiff,
advising that the plaintiff contended that he had been induced into signing the Amendment based
upon representations made to him that Duncan Electric was not in an economic position to purchase
the shares of stock owned by the Lindsay Estate and the Lindsay Trust, and that the plaintiff had been
told that it would be in his best interest to sign the Amendment. The plaintiff, through his
accountant, contended that these representations might be inaccurate and that the Amendment should
be considered null and void.

        Three weeks later, Duncan Electric’s board of directors voted to accept White Electrical’s
proposal to purchase substantially all of Duncan Electric’s assets. On June 23, 2000, Lindsay and
Stone, in their roles with respect to the Lindsay Estate and the Lindsay Trust, voted to approve the
sale of Duncan Electric’s assets. The plaintiff voted against the sale. The sale was approved and
the company’s name was changed to Lindsay, Inc.

        On December 1, 2000, the plaintiff filed a suit in chancery court, on behalf of himself and
all other shareholders of Lindsay, Inc., against White Electrical, Stone, and Lindsay. In essence, the

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complaint alleged that the cause of action arose from the sale of Duncan Electric to White Electrical.
Count III of the complaint, which is pertinent to the instant case, avers as follows:

               [The plaintiff] brings this action against [Stone] and [Lindsay] as
               members of the Board of Directors of Duncan for their failure to carry
               out their common law and statutory fiduciary duties and
               responsibilities to act in good faith for the benefit of all of the
               stockholders of Duncan, to treat all of the stockholders of Duncan
               fairly by making distributions pro rata to them as required by [Tenn.
               Code Ann.] § 48-16-101, for assigning to White the asserted claim for
               indebtedness against [the plaintiff] arising out of his employment
               with Duncan after Duncan had settled all such matters with [the
               plaintiff], and for failing to take appropriate action to protect all the
               stockholders of Duncan against the improper actions of White. More
               specifically [the plaintiff] avers that the directors of Duncan violated
               the duty imposed upon them under [Tenn. Code Ann.] § 48-18-301.
               [The plaintiff] seeks compensatory damages, punitive damages and
               all costs and attorney fees expended by him as a result of such
               violations.

(Paragraph numbering in original omitted). This action was settled in May, 2001. On May 4, 2001,
the plaintiff signed a settlement agreement containing releases and covenants not to sue. The
plaintiff’s attorneys participated in drafting the settlement agreement. The agreement contains the
following pertinent language:

               WHEREAS, all parties to this Agreement now desire to fully and
               finally compromise, settle, and resolve all claims and disputes among
               and between them, including without limitation, all claims sought to
               be enforced in the above-described civil action.

                                                ***

               Upon payment of the sums described in Paragraph 1, supra, . . . Stone
               (including Stone in his capacities as director, agent, and
               representative of Lindsay, Inc., and as trustee or representative of the
               Plan); [and] Lindsay . . . shall, without further action, stand fully and
               finally released, absolved, and discharged by [the plaintiff] from all
               claims, debts, dues, demands, and causes of action of every name and
               nature, however or whenever arising, whether cognizable in law or in
               equity, for or by reason of any manner or act, omission, event or
               occurrence, including all claims through and including the date of this
               Agreement which were or could have been asserted through and

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                including the date of this Agreement by [the plaintiff] and sought to
                be enforced in the above-described civil action.

                                                   ***

                [The plaintiff] hereby covenants and agrees never to commence or
                prosecute any legal action or administrative proceeding based on any
                matter released above, and shall indemnify and hold . . . Stone
                (including Stone in his capacities as director, agent, and
                representative of Lindsay, Inc., and as trustee or representative of the
                Plan); [and] Lindsay . . . harmless from and against any and all
                claims, losses or damages (including attorneys’ fees and costs)
                resulting from any such legal action or administrative proceeding
                commenced or prosecuted and from any breach or failure to comply
                with the terms of this Settlement Agreement Containing Releases and
                Covenants Not to Sue.

(Paragraph numbering in original omitted) (underlining in original). On August 29, 2001, the
chancery court entered an order dismissing the plaintiff’s action with prejudice.

         In early August, 2002, Caudle learned that the plaintiff was considering the filing of a lawsuit
related to a claim arising out of his execution of the Amendment. On August 13, 2002, Caudle sent
a letter to the plaintiff’s attorney in an attempt to dissuade the plaintiff from filing the action. In that
letter, Caudle alluded to the terms of the settlement agreement.

        On December 20, 2002, the plaintiff filed suit in the trial court against Stone and Lindsay,
individually and in their capacities as co-executors of the Lindsay Estate and as co-trustees of the
Lindsay Trust. The plaintiff alleged that Stone made negligent or false misrepresentations of fact
to him, causing him to enter into the Amendment, whereby Duncan Electric waived its right to
purchase the stock owned by the Lindsay Trust and the Lindsay Estate. In addition, the plaintiff
alleged that Lindsay was guilty of non-disclosure of the discussions and negotiations with White
Electrical and that she was guilty of fraudulent and material misrepresentations of fact.

        Lindsay filed an answer and counterclaim on February 17, 2003, relying upon the settlement
agreement entered into by the plaintiff on May 4, 2001, and the doctrine of res judicata. She also
pled the one-year statute of limitations governing actions against directors and officers. See Tenn.
Code Ann. § 48-18-601 (2002). She asserted a counterclaim against the plaintiff for breach of the
hold harmless provisions of the settlement agreement, requesting a judgment for her attorney’s fees
and costs. Stone filed his answer and counterclaim on February 24, 2003, alleging breach of the
settlement agreement and the contractual duties of good faith and fair dealing, seeking
indemnification for damages, attorney’s fees and costs.

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        Both Lindsay and Stone moved for summary judgment in April, 2003, relying upon the
language in the release contained in the settlement agreement. In addition, Stone relied on the one-
year statute of limitations for filing accounting malpractice actions.

        The trial court filed its memorandum opinions on August 4, 2003. In them, the court
determined that the language of the settlement agreement established that the plaintiff had executed
a general release, expressly discharging Stone and Lindsay from all claims and causes of action
existing at the time of execution of the agreement. The trial court then granted Stone and Lindsay’s
respective motions for summary judgment and ruled that they were both entitled to their attorney’s
fees. As to Stone, the trial court held that the plaintiff’s cause of action for accounting malpractice
had accrued in May or June, 2000, and was therefore barred by the one-year statute of limitations.
The trial court entered its judgment for Stone on October 16, 2003, and judgment for Lindsay was
entered on February 5, 2004.

       The plaintiff filed a motion to alter or amend on November 14, 2003, which motion was
denied on January 13, 2004. From this order, the plaintiff appeals.

                                                   II.

         In deciding whether a grant of summary judgment is appropriate, courts are to determine “if
the pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” Tenn. R. Civ. P. 56.04. Courts “must take the strongest
legitimate view of the evidence in favor of the nonmoving party, allow all reasonable inferences in
favor of that party, and discard all countervailing evidence.” Byrd v. Hall, 847 S.W.2d 208, 210-11
(Tenn. 1993).

        A party seeking summary judgment has the initial burden of demonstrating that there is no
genuine issue of material fact and that it is entitled to a judgment as a matter of law. Id. at 215.
Once the moving party satisfies its burden, the burden shifts to the nonmoving party to show that
there is a genuine issue of material fact requiring submission of the case to a trier of fact. Id.

      Since summary judgment presents a pure question of law, our review is de novo with no
presumption of correctness as to the trial court’s judgment. Gonzales v. Alman Constr. Co., 857
S.W.2d 42, 44-45 (Tenn. Ct. App. 1993).

                                                  III.

        The plaintiff’s sole issue on appeal is whether the trial court erred in granting summary
judgment to Stone and Lindsay based upon the release entered into between the parties in settlement
of the chancery court lawsuit. The plaintiff contends that the release was limited to the claims and
causes of action that the plaintiff had sought to enforce in the chancery court action, and was not
intended to and did not release Stone and Lindsay from additional causes of action that were not

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raised in the chancery court action. In support of this contention, the plaintiff points to the language
of the release which states that all claims “through and including the date of this Agreement [are
released] which were or could have been asserted through and including the date of this Agreement
by [the plaintiff] and sought to be enforced in the above-described civil action.” (Emphasis added).
It is the plaintiff’s position that the final clause of that sentence expressed a clear intent to limit the
release to any claims which were or could have been actually raised in the chancery court action.
Because, so the argument goes, the plaintiff brought the chancery court case against Stone and
Lindsay for their alleged failure to make proper pro rata distributions to the plaintiff, while the
allegations against Stone and Lindsay in the instant action involved alleged breaches of fiduciary
duties, the claims involved in the two cases are entirely different and the plaintiff could not have
released claims that he never sought to enforce in chancery court.

      The scope and extent of a release was addressed in the Supreme Court case of Cross v. Earls,
517 S.W.2d 751, 752 (Tenn. 1974):

                Generally speaking, the scope and extent of a release depends on the
                intent of the parties as expressed in the instrument. A general release
                covers all claims between the parties which are in existence and
                within their contemplation; a release confined to particular matters or
                causes operates to release only such claims as fairly come within the
                terms of the release.

See also Jackson v. Miller, 776 S.W.2d 115, 118 (Tenn. Ct. App.1989); Richland Country Club,
Inc. v. CRC Equities, Inc., 832 S.W.2d 554, 557 (Tenn. Ct. App.1991); Louis Dreyfus Corp. v.
Austin Co., 868 S.W.2d 649, 654 (Tenn. Ct. App.1993). “Because the release is a contract, rules
of construction for interpreting a contract are used in construing a release.” Jackson, 776 S.W.2d
at 117. The cardinal rule of construction provides that a court is to determine the intention of the
parties. Richland Country Club, Inc., 832 S.W.2d at 557. The words of a release, like any other
contract, are to be “given their usual, natural and ordinary meaning.” Rainey v. Stansell, 836
S.W.2d 117, 119 (Tenn. Ct. App.1992). In determining the intention of the parties, we consider the
language of the release in the context of “what was within the contemplation of the parties when the
release was executed.” Jackson, 776 S.W.2d at 118 (citing 66 Am. Jur. 2d Release § 30 (1973)).

        Applying this law to the release in the instant case, we find that the release entered into by
the parties was a general release. It states that Stone and Lindsay shall

                stand fully and finally released, absolved, and discharged by [the
                plaintiff] from all claims, debts, dues, demands, and causes of action
                of every name and nature, however or whenever arising, whether
                cognizable in law or in equity, for or by reason of any manner or act,
                omission, event or occurrence, including all claims through and
                including the date of this Agreement which were or could have been

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                asserted through and including the date of this Agreement by [the
                plaintiff] and sought to be enforced in the above-described civil
                action.

(Emphasis added). The only reasonable interpretation of this language is that the plaintiff was
releasing Stone and Lindsay from any and all claims that had arisen through the date of the
settlement agreement – which was May 4, 2001 – including any claims that were or could have been
asserted in the chancery court action. The word “including” does not limit the claims to those
asserted in the chancery court case; rather, those claims are included along with any other claims of
any nature the plaintiff could have asserted against Stone and Lindsay as of May 4, 2001.

        In the complaint filed in the instant case, the plaintiff alleged that Stone and Lindsay had
breached certain fiduciary duties owed to him, and these alleged breaches all concerned conduct that
occurred at the time of the sale of Duncan Electric to White Electrical, which occurred – at the latest
– in June, 2000. Caudle received a letter from the plaintiff’s accountant on May 2, 2000, in which
these alleged breaches of fiduciary duties were raised. Accordingly, the plaintiff was well aware of
these causes of action in May, 2001, when he signed the settlement agreement releasing Stone and
Lindsay from any claims he might have against them at that time.

        We hold that the language of the release clearly makes it a general release. It in no way
purports to confine the release to specific matters. Indeed, the only restrictive language in the release
concerns time – the release only applies to claims that were known to the plaintiff at the time the
agreement was signed on May 4, 2001. As we have previously held that the conduct complained of
by the plaintiff all occurred well before May 4, 2001, the language of the release bars the plaintiff
from bringing the instant action against Stone and Lindsay, and the trial court was correct in granting
summary judgment to Stone and Lindsay on this basis.

        In addition, because the plaintiff breached the settlement agreement by bringing this action
against Stone and Lindsay, we affirm the trial court’s award of attorney’s fees to both of these
defendants.

                                                  IV.

        As an additional basis for granting summary judgment to Stone, the trial court relied on the
one-year statute of limitations for accounting malpractice, codified at Tenn. Code Ann. § 28-3-
104(a)(2) (2000). In his complaint in the instant case, the plaintiff alleged that Stone breached his
professional duties as an accountant by failing to render proper financial advice to the plaintiff with
respect to the potential sale of Duncan Electric to White Electrical. Based upon the letter from
plaintiff’s accountant to Caudle, in which this alleged unsound financial advice was referenced, the

                                                  -7-
plaintiff was aware of this potential malpractice claim in early May of 2000. However, the plaintiff
did not file his complaint in the instant case until December 20, 2002, more than two and one-half
years later. Accordingly, we hold that the plaintiff’s claims against Stone are barred by the one-year
statute of limitations and we affirm the trial court’s grant of summary judgment to Stone on this
ground.

        While not addressed in Lindsay’s motion for summary judgment or the trial court’s
subsequent grant of same, Lindsay, in her answer and counterclaim, relied upon the one-year statute
of limitations for actions against officers and directors for breach of fiduciary duty, codified at Tenn.
Code Ann. § 48-18-601. This statute provides, in pertinent part, that “[a]ny action alleging breach
of fiduciary duties by directors or officers . . . must be brought within one (1) year from the date of
such breach or violation.” As we have previously held, the plaintiff was aware of the potential
claims he had against Lindsay in May, 2000, and he did not file suit based upon breach of fiduciary
duties until December 20, 2002. We find that the plaintiff’s action against Lindsay is barred by this
one-year statute of limitations, and we hold that it serves as an additional ground for affirming the
trial court’s grant of summary judgment to her.

                                                   V.

         Both Stone and Lindsay seek an award for the attorney’s fees and expenses incurred in
defending this appeal. We find that such an award is appropriate. As such, we remand this case to
the trial court for a determination of the amount of fees to award for this appeal. See Folk v. Folk,
357 S.W.2d 828, 829 (Tenn. 1962) (discussing the factors to be considered in awarding such fees).

                                                  VI.

        The judgment of the trial court is affirmed. This case is remanded to the trial court for
enforcement of the trial court’s judgment and for the collection of costs assessed below, all pursuant
to applicable law. Costs on appeal are taxed to the appellant, Richard E. Miller.

                                                        _______________________________
                                                        CHARLES D. SUSANO, JR., JUDGE

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