Court Opinion

ID: 2675158
Source: CourtListenerOpinion
Date Created: 2014-05-20 22:03:21.716746+00
Date Added: 2024-06-11T12:40:55.590438
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                 March 20, 2014 Session

   SCOTT MCILLWAIN, ET AL. v. MICHAEL SCOTT HOOVER, ET AL.

            Direct Appeal from the Chancery Court for Davidson County
                  No. 11-1171-III   Ellen Hobbs Lyle, Chancellor

                  No. M2013-01277-COA-R3-CV - Filed May 19, 2014

This appeal concerns the nonpayment of commissions to a business broker. The defendants
hired the plaintiff to assist in the sale of all or part of their small business. The parties’
agreement provided that if the defendants entered a transaction with any entity that the
plaintiff solicited on their behalf within a certain time period, they would be obliged to pay
the plaintiff a percentage of the purchase price. During the stated time period, the defendants
sold all of their business’s assets to a third-party company that also hired them as at-will
employees. The plaintiff demanded a commission for the sale, claiming that he met with the
third-party company on the defendants’ behalf prior to the sale. The defendants refused to
pay. The plaintiff filed this lawsuit claiming damages for breach of contract, promissory
estoppel, and unjust enrichment. The trial court granted summary judgment to the
defendants, concluding that there were no genuine disputes of material fact because the
transaction between the defendants and the third-party company was not the type of
transaction the defendants hired the plaintiff to arrange. The plaintiff appealed. We reverse
and remand for further proceedings.

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

D AVID R. F ARMER, J., delivered the opinion of the Court, in which H OLLY M. K IRBY, J., and
J. S TEVEN S TAFFORD, J., joined.

Philip L. Robertson and Andrew L. Power, Franklin, Tennessee, for the appellants, Scott
McIllwain and Alliant Capital Advisors, LLC.

Stanley Allen Kweller, Nashville, Tennessee, for the appellees, Michael Scott Hoover,
Joseph Stanford and Accurate Investment Group, LLC.
                                             OPINION

                                         I. B ACKGROUND

        Scott McIllwain is a business broker–someone who acts as an intermediary between
purchasers and sellers of businesses. In January 2010, Michael Scott Hoover and Joseph
Stanford employed McIllwain to find a purchaser for a mortgage brokerage business they
jointly owned and operated, Accurate Investment Group, LLC (“Accurate Mortgage”). The
parties’ written consulting contract gave McIllwain the exclusive right to “sell, lease, trade,
or otherwise dispose of all or any part of the tangible or intangible assets” of Accurate
Mortgage. If McIllwain successfully arranged a transaction, Hoover and Stanford agreed to
pay him a percentage1 of the total purchase price, which the contract broadly defined as “any
cash, securities, infusion of capital funds, credit arrangements, assets, promissory notes,
employment or consulting agreements which are in excess of an equivalent manager’s
compensation, covenants not to compete, royalty fees, performance payments . . . or any
other such agreements intended to convey value to the Seller.” Though the original term of
the contract only lasted for sixty days, it is undisputed that the parties orally extended it
through November 30, 2010. Notably, the contract also provided that Hoover and Stanford
would be required to pay McIllwain a commission on transactions taking place after that date
in the event that:

        Seller sells, leases, trades, or otherwise disposes of all or any part of the
        Business within twelve (12) months from the termination date of the
        Consulting Period to any person, firm, or entity referred to the Business by
        Broker; or who received information about the Business from Broker, or
        negotiated with Broker during the term of the Consulting Period, or who
        became aware of the Business through the efforts of Broker during the
        Consulting Period.

In August 2010, after a potential sale that McIllwain had arranged fell through, the parties
expanded McIllwain’s scope of performance to include seeking additional funding for
Accurate Mortgage through a credit facility. If McIllwain was successfull, Hoover and
Stanford agreed to pay him one percent of the amount of monthly credit that he obtained on
Accurate Mortgage’s behalf.

      On November 9, 2010, prior to the end of the verbally extended contract term,
McIllwain had a lunch meeting with Stonie O’Briant and George Phillips, the CEO and

       1
         Eight percent (8%) of the first $500,000, plus six percent (6%) of the next $250,000, plus four
percent (4%) of the balance of the total purchase price.

                                                  -2-
general counsel of Acopia, LLC (“Acopia”) respectively. In his deposition, McIllwain stated
that he specifically discussed the possibility of a merger between Accurate Mortgage and
Acopia with O’Briant and Phillips during the meeting. Conversely, O’Briant stated in his
deposition that although McIllwain said that he represented a mortgage company potentially
interested in selling, he never mentioned that he was representing the defendants, nor did he
talk about any specifics relating to his client during the meeting. In any event, no deal was
reached for the sale or other disposition of Accurate Mortgage by the end of the contract term
on November 30, 2010.

        In a December 2, 2010 email to Hoover and Stanford, McIllwain acknowledged that
his exclusive right to sell Accurate Mortgage had ended. However, because he could still
earn a fee on transactions between Accurate Mortgage and entities that he had already
solicited on its behalf, McIllwain vowed to continue pursuing deals with his existing
contacts. McIllwain stated that he would provide Hoover and Stanford with a list of those
existing contacts, however no such list was ever sent.

        On February 24, 2011, Hoover and Stanford entered into an agreement with Acopia
titled “SALE AND PURCHASE OF CERTAIN ASSETS AGREEMENT.” Pursuant to the
sale agreement, Acopia paid $250 to Hoover and Stanford in exchange for all of Accurate
Mortgage’s tangible property, as well as its office equipment leases, its goodwill and internet
domain name, and its leased office space. The sale agreement also required Hoover and
Stanford to sign separate employment contracts with Acopia to operate a mortgage brokerage
branch of Acopia to be located at the former location of Accurate Mortgage. The
employment contracts provided that Hoover and Stanford would each be paid a yearly salary
of $120,000 and would split 100% of the branch’s profits. Additionally, the sale agreement
provided that in the event that the employment contracts of both Hoover and Stanford were
ever terminated, they would have the option to buy back all of the assets covered in the
agreement for $250.

        On February 28, 2011, Accurate Mortgage ceased doing business as an entity. On
March 1, 2011, Hoover and Stanford became employees of Acopia. After learning of the
sale agreement Hoover and Stanford reached with Acopia, McIllwain contended that he was
entitled to a commission on the transaction. Hoover and Stanford disagreed and refused to
pay McIllwain, contending that he was not entitled to a commission because they had simply
closed Accurate Mortgage and been hired by Acopia.

       On August 25, 2011, McIllwain and Alliant Capital Advisors, LLC 2 (collectively, the

       2
           McIllwain was affiliated with Alliant Capital Advisors, LLC during all times relevant to this case.
                                                                                               (continued...)

                                                      -3-
“plaintiffs”) filed this suit in the Chancery Court of Davidson County against Hoover,
Stanford, and Accurate Mortgage (collectively the “defendants”). The plaintiffs alleged that
the defendants were liable for breach of contract, promissory estoppel, and unjust enrichment
because they failed to pay McIllwain the commission for arranging their transaction with
Acopia. The plaintiffs alleged that the transaction was a merger of Accurate Mortgage and
Acopia, and that it was the result of McIllwain’s efforts to secure a buyer on the defendants’
behalf. The plaintiffs contended that the merger gave Hoover and Stanford access to at least
$10,000,000 credit to fund loans during March 2011, and that McIllwain was entitled to one
percent of that amount, or $100,000. The defendants replied, denying that McIllwain had
done any work for which they owed him a commission or fee under the contract.

        Prior to trial, the defendants filed a motion for summary judgment and a statement of
undisputed facts, which they supported with affidavits of Stanford and O’Briant. The
defendants stated that they were not liable to McIllwain because he never sold or arranged
any agreeable deal between Accurate Mortgage and any other entity. The defendants stated
that they spoke to O’Briant and representatives of Acopia about a potential merger in 2008,
prior to meeting McIllwain. The defendants stated that McIllwain never discussed Accurate
Mortgage with O’Briant or Phillips. The defendants stated that they did sell the tangible
assets of Accurate Mortgage to Acopia for $250. However, the defendants maintained that
the actions of Accurate Mortgage going out of business and Hoover and Stanford
subsequently being hired by Acopia were not actions that entitled McIllwain to a
commission.

       The plaintiffs filed a timely response in which they objected to the defendants’ motion
for summary judgment. The plaintiffs’ reply included a response to the defendants’
statement of undisputed material facts in which the plaintiffs either admitted, admitted for
purposes of the summary judgment motion, or denied each fact asserted by the defendants.
The plaintiffs stated that McIllwain was owed a commission for arranging a transaction that,
in substance, was the sale of Accurate Mortgage as a going concern. The plaintiffs stated
that Hoover and Stanford did not meet O’Briant until 2010. The plaintiffs stated that in
November 2010, McIllwain met with O’Briant and Phillips to discuss a possible deal
between Acopia and the defendants. The plaintiffs stated that the defendants were made
aware of the meeting. The plaintiffs stated that although Acopia only paid $250 for the
tangible assets of Accurate Mortgage, the agreement between the defendants and Acopia
allocated a market value of $19,275 to those assets. The plaintiffs admitted that Hoover and
Stanford were employees of Acopia with no ownership interest in the company, but pointed

        2
         (...continued)
Alliant Capital Advisors, LLC is an intermediary firm that specializes in the purchase and sale of privately
held businesses, and is a plaintiff in this case.

                                                    -4-
out that pursuant to their employment agreements they receive 100% of the profits of the
Accurate Mortgage division of Acopia, and have the right to buy back all of the assets they
sold to Acopia for $250. The plaintiffs stated that because Acopia acquired the tangible
assets of Accurate Mortgage and its goodwill, assumed substantially all of Accurate
Mortgage’s employees, was assigned Accurate Mortgage’s leases, and continues to use the
“Accurate Mortgage” trademark, the transaction between Acopia and Hoover and Stanford
was actually the sale of Accurate Mortgage as a going concern. Each fact that the plaintiffs
contended to be in dispute was accompanied by a citation to the record.

        During a hearing on May 3, 2013, the trial court orally granted the defendants’ motion
for summary judgment on each of the plaintiffs’ causes of action. On May 13, 2013, the trial
court released a written order in which it outlined several reasons for its ruling in its findings
of fact and conclusions of law. First, the court noted that the facts stated by the plaintiffs in
opposition to summary judgment were not designated in a statement of undisputed material
facts. Stated the court:

       The failure of the plaintiffs to specify the particular facts upon which they seek
       for the Court to draw the inference that the defendants’ affiliation with Acopia
       is in substance and reality the sale of defendants’ business as a going concern
       is sufficient to grant the motion for summary judgment in defendants’ favor.

Second, the court concluded that the defendants’ at-will employee relationship with Acopia
did not fall within the types of transactions listed in the parties’ contract that would entitle
McIllwain to a commission. Third, the court stated that the plaintiffs failed to carry their
burden on summary judgment of demonstrating to the court how the inference that Accurate
Mortgage was sold to Acopia as a going concern can co-exist alongside the undisputed fact
that the defendants are at-will employees of Acopia. Finally, the court concluded that the
defendants’ relationship with Acopia was not susceptible to the method of calculating
McIllwain’s commission the parties prescribed in the contract. The court stated that the
impossibility of quantifying the plaintiffs’ damages “(1) further detracts from the plaintiffs’
assertion that it is entitled to recovery and (2) makes trying the case futile.”

       On May 24, 2013, the plaintiffs timely filed a notice of appeal to this Court. The sole
issue raised by the plaintiffs on appeal is whether the trial court erred in granting the
defendants’ motion for summary judgment.

                                        II. D ISCUSSION

       Summary judgment is appropriate in virtually all civil cases that can be resolved on
the basis of legal issues alone. Estate of Brown, 402 S.W.3d 193, 197 (Tenn. 2013).

                                               -5-
However, summary judgment is not appropriate when there is a genuine dispute regarding
material facts. Tenn. R. Civ. P. 56.04. Summary judgment is likewise not appropriate when
more than one conclusion or inference can reasonably be drawn from the facts. CAO
Holdings, Inc. v. Trost, 333 S.W.3d 73, 82 (Tenn. 2010). Accordingly, summary judgment
should only be granted when the undisputed facts, as well as the inferences reasonably drawn
from those facts, support the conclusion that the moving party must be granted a judgment
as a matter of law. Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471 (Tenn. 2012).
Because a trial court’s grant of summary judgment is a matter of law, it is reviewed de novo
by this Court with no presumption of correctness. Id. Thus, appellate courts must make a
fresh determination that the requirements of Tennessee Rule of Civil Procedure 56 (“Rule
56”) have been satisfied. Id. In reviewing an order granting summary judgment, the court
must consider the evidence in the light most favorable to the non-moving party and allow all
reasonable inferences in its favor. Mills v. CSX Transp., Inc., 300 S.W.3d 627, 632 (Tenn.
2009).

       Turning now to the present case, we note initially the position of the trial court and
the defendants that summary judgment is appropriate in this case regardless of McIllwain’s
credibility. Clearly, the parties dispute whether McIllwain proposed a merger between
Accurate Mortgage and Acopia during his November 2010 meeting with O’Briant and
Phillips. McIllwain contends that he did propose the merger, while O’Briant contends that
Accurate Mortgage was never mentioned. Like the trial court, we must construe issues of
witness credibility in favor of the nonmoving party. See Byrd v. Hall, 847 S.W.2d 208, 210
(Tenn. 1993). Going forward, we therefore assume that McIllwain’s version of events is
true–that he did propose the merger of Accurate Mortgage and Acopia to O’Briant and
Phillips during the meeting, and that he subsequently told Hoover and Stanford about the
meeting. The trial court held that even assuming the truthfulness of McIllwain’s version of
events, the plaintiffs did not state a claim for any of the causes of action they asserted. For
several reasons, we must disagree with the trial court’s holding.

        First, it appears the trial court concluded in its order that the plaintiffs’ response to the
defendants’ motion for summary judgment failed to comply in form with Rule 56. The court
stated that it was not clear the precise facts upon which the plaintiffs were relying regarding
the defendants’ affiliation with Acopia. Thus, the court stated that the plaintiffs failed to
meet their burden of demonstrating how the court could reasonably draw the inference that
Accurate Mortgage was sold to Acopia as a going concern. We do not agree with the trial
court’s conclusion.

        In litigating a motion for summary judgment, the party moving for summary judgment
has the initial burden of demonstrating that no genuine issue of material fact exist and that
it is entitled to judgment as a matter of law. Green v. Green, 293 S.W.3d 493, 513 (Tenn.

                                                 -6-
2009). In order to assist the court in determining the necessity of a trial on the merits, Rule
56.03 requires that any motion for summary judgment be accompanied by a separate and
concise statement of undisputed material facts. Tenn. R. Civ. P. 56.03. Once the moving
party makes a properly supported motion, the burden of production shifts to the nonmoving
party to produce evidence of specific facts establishing that genuine issues of material fact
exist. Byrd, 847 S.W.2d at 215. The nonmoving party must respond to each fact set forth
by the moving party and either admit that it is undisputed, admit that it is undisputed for
purposes of the summary judgment motion, or demonstrate that it is disputed with support
for specific citations in the record. Tenn. R. Civ. P. 56.03. The nonmoving party can
demonstrate that a fact is disputed by:

       (1) pointing to evidence overlooked or ignored by the moving party that
       establishes a material factual dispute, (2) by rehabilitating the evidence
       attacked by the moving party’s papers, (3) by producing additional evidence
       showing the existence of a genuine issue for trial, or (4) submitting an
       affidavit explaining why further discovery is necessary as provided for in
       [Tenn. R. Civ. P., Rule 56.06].

Byrd, 847 S.W.2d at 215 n.6 (citation omitted). If the nonmoving party fails to comply with
Rule 56.03 in its response, the trial court may, at its discretion, refuse to consider the
nonmoving party’s factual contentions even where such facts are ascertainable from the
record. Holland v. City of Memphis, 125 S.W.3d 425, 428 (Tenn. Ct. App. 2003).

        Here, the trial court found that the defendants satisfied their initial burden by
submitting a statement of undisputed material facts indicating that the plaintiffs could not
establish essential elements of any of their claims because McIllwain never arranged any
transaction between Accurate Mortgage and any other entity. Additionally, the defendants
stated that Accurate Mortgage was never involved in any transaction contemplated by the
parties’ original contract as one for which they would owe McIllwain a commission.

         The plaintiffs then submitted a response to the defendants’ statement of undisputed
facts in which they demonstrated that the material facts alleged by the defendants were, in
fact, disputed. First, the plaintiffs stated that McIllwain met with O’Briant and Phillips in
November 2010 for the purpose of exploring a deal between Accurate Mortgage and Acopia.
Thus, the plaintiffs demonstrated a dispute regarding whether McIllwain arranged the
transaction between the two companies. Second, the plaintiffs stated that because Acopia
purchased all of Accurate Mortgage’s tangible assets, acquired its goodwill, was assigned
all of its leases, ultimately assumed substantially all of its employees, and continued to use
the “Accurate Mortgage” trademark, Acopia essentially purchased Accurate Mortgage as a
going concern. Thus, the plaintiffs demonstrated a dispute regarding whether the transaction

                                              -7-
itself was the type for which McIllwain would be owed a commission for his efforts. Each
of the plaintiffs’ assertions is supported by a citation to the record. Based on the foregoing,
we find that the plaintiffs’ response complied in form with Rule 56. To the extent that the
trial court disregarded the plaintiffs’ factual contentions, it did so in error.

        The trial court stated that the plaintiffs did not meet their burden as the nonmoving
party because they failed to demonstrate how the inference that Accurate Mortgage was sold
to Acopia as a going concern could coexist with the undisputed fact that Hoover and Stanford
were hired as at-will employees of Acopia. The trial court stated that in the absence of such
an inference, the plaintiffs had no basis to prove a claim of breach of contract, promissory
estoppel, or unjust enrichment. In spite of that assertion, we are not aware of any authority,
nor have the parties’ cited any, supporting the assertion that the sale of a company as a going
concern is mutually exclusive with employment by the purchaser. Black’s Law Dictionary
defines a business that is a “going concern” as “[a] commercial enterprise actively engaging
in business with the expectation of indefinite continuance.” B LACK’S L AW D ICTIONARY 712
(8th ed. 2004). In their response, the plaintiffs pointed out that Hoover and Stanford sold
essentially all of the tangible and intangible assets of Accurate Mortgage to Acopia. In the
past, we have recognized that such a transaction is one way to sell a business as a going
concern. See Schoen v. J.C. Bradford & Co., 642 S.W.2d 420, 426 (Tenn. Ct. App. 1982)
(“The business may be sold as a complete unit, name assets, management and personnel, so
that its operation would continue without perceptable [sic] change.”). The plaintiffs cited
portions of Stanford’s deposition in which he stated that, apart from who was funding the
loans, Accurate Mortgage’s business remained essentially the same after becoming a division
of Acopia. Stanford admitted that a person who did not investigate the company’s source of
funding might not perceive any difference in its operations after the transaction with Acopia.
Considering the evidence presented in the light most favorable to the plaintiffs, it is clear that
the plaintiffs demonstrated the existence of a disputed material fact as to whether Acopia
purchased Accurate Mortgage as a going concern. We therefore reject the trial court’s
contrary holding as a basis for granting summary judgment.

       Moreover, the sale of Accurate Mortgage as a going concern was not the only method
by which McIllwain could earn a commission pursuant to the parties’ contract. The contract
provided that McIllwain would earn a commission on the sale of all or any part of the
business. By the defendants’ own admission at oral argument, the sale of Accurate
Mortgage’s assets to Acopia for $250 was a sale of part of the business. At the very least,
assuming the truthfulness of the facts as they were asserted by the plaintiffs, summary
judgment is clearly not appropriate in this case because McIllwain is entitled to a commission
on the $250 sale.

       The defendants contend that they cannot be liable to McIllwain for any transaction

                                               -8-
with Acopia because McIllwain failed to send a list of his existing contacts as he stated he
would in his December 2, 2010 email. They argue that in doing so, McIllwain violated his
own contractual terms. We must disagree. Though McIllwain stated he would send the list,
his statement was never part of the parties’ contract, nor can it be construed as a modification
of the contract. The modification of a previously existing agreement that imposes new
obligations on one of the parties is unenforceable for lack of consideration unless it also
imposes a new obligation on the other party. Givens v. Mullikin ex rel. Estate of McElwaney,
75 S.W.3d 383, 406 (Tenn. 2002). Based on the facts before us, we find that McIllwain’s
representation that he would send a list of existing prospects was clearly a gratuitous
promise, not an enforceable provision of the contract.

       Finally, we address the issue of damages. In its order, the trial court stated that the
impossibility of quantifying the plaintiffs’ claim for damages made trying the case futile.
However, as we have noted in the past, courts will allow recovery for the breach of a contract
even when the exact amount of damages is impossible to prove. Cummins v. Brodie, 667
S.W.2d 759, 765 (Tenn. Ct. App. 1983). Uncertain and speculative damages are only
prohibited when the existence of damages is uncertain, not when the amount is uncertain.
Id. The plaintiff must present enough evidence to allow the fact-finder to fairly and
reasonably assess damages. Poole v. Union Planters Bank, N.A., 337 S.W.3d 771, 789
(Tenn. Ct. App. 2010). Here, there is ample evidence with which to reasonably assess
damages. The parties’ original contract provided that if McIllwain arranged an agreeable
transaction, the defendants would pay him a commission calculated as a specific percentage
of the total purchase price for the transaction. The contract defined total purchase price
broadly, essentially encompassing anything intended to convey value to the defendants. It
is not disputed that the defendants received $250 in cash from Acopia in exchange for
Accurate Mortgage’s assets. Additionally, if other assets were exchanged or agreements
were made with the intent of conveying value to the defendants, their worth must also be
considered in calculating McIllwain’s commission. We therefore must reverse the trial
court’s holding that trying this case would be futile because the transaction between the
defendants and Acopia was not susceptible to the fee method prescribed in the agreement.

                                        III. H OLDING

      Based on the foregoing, we conclude that genuine issues of material fact make
summary judgment improper in this case. We therefore reverse the trial court’s grant of
summary judgment to the defendants, and remand this action for further proceedings in
accordance with this opinion. The costs of this appeal are taxed to the appellees.

                                                    _________________________________
                                                    DAVID R. FARMER, JUDGE

                                              -9-