Tennessee Business Litigation Lawyers Blog

Departing Physician Entitled to Accounts Receivable and Not Liable for Future Rent

Published on: January 31, 2016 | by J. Ross Pepper

In a recent breach of contract case involving a physician’s claim for accounts receivable after he left the partnership in which he was a partner (the ”Partnership”), the physician prevailed on his claims. The physician (the “Plaintiff”) also prevailed as to the counterclaim of his former partners who counter-sued him claiming that he was liable for future rent due under a lease entered into by the Partnership. The case, Pendola M.D., P.C. v. Assoc. Neurologists of Kingsport (Tenn. Ct. App. 2016), involved the following facts:

The Plaintiff joined a Partnership of other neurologists in 1996
The Plaintiff became a partner one year later
At the time Plaintiff became a partner, he signed a Partnership Agreement
In 2008, after Plaintiff became a partner, the Partnership signed a ten year lease for a building with an annual rental rate of $216,000
Plaintiff claimed that he was not informed of the signing of the lease until more than one year after it was signed
In 2011, Plaintiff gave his 180 day notice that he was leaving the Partnership

The Plaintiff filed a breach of contract lawsuit after the Partnership refused to pay him the accounts receivable to which he claimed that he was due. The Partnership counter-sued alleging that the Plaintiff was liable for his pro rata portion of rent due for another eight years after Plaintiff’s departure.

The Partnership Agreement clearly provided that the Plaintiff was entitled to receive his accounts receivable after he left the Partnership. The Partnership based its argument that Plaintiff was liable for future rent on a “hold harmless” provision in the Partnership Agreement.

Undue Influence of Son Results in Will Being Declared Invalid

Published on: January 25, 2016 | by J. Ross Pepper

Tennessee will contest cases, especially will contests where the basis for trying to set aside the will is undue influence, are often all about suspicious circumstances. As Tennessee courts have observed for years, in many cases (I believe most), the only way to prove undue influence is by circumstantial evidence. What Tennessee courts have declared are “suspicious circumstances” are just that — circumstantial evidence of undue influence.

A recent undue influence case exemplifies how a combination of suspicious circumstances can result in the setting aside of a Will even when there was no single piece of evidence of undue influence that was, in and of itself, particularly compelling. This case is important to understand because it is, in my experience, pretty infrequent to have an undue influence case where there is anything close to “smoking gun” evidence of undue influence. Undue influencers are generally cunning, nontransparent and, often, keep the person whom they are influencing so isolated from others that there is little or no direct evidence of their actions.

A combination of suspicious circumstances surrounding the Will of a father (“Father”) who disinherited his daughters and left everything to his son (“Son”) caused a Tennessee trial court to set aside that Will. The ruling of the trial court was affirmed in all respects by the Court of Appeals of Tennessee, so I will focus on what facts where before the trial court to cause it to set aside the Will based on the undue influence of the Son.

Life Insurance Policy Proceeds: How Tennessee Law Protects Those Proceeds for Surviving Children and Spouses

Published on: January 15, 2016 | by J. Ross Pepper

There are Tennessee statutes which protect the proceeds of life insurance policies for surviving spouses and children even when the deceased parent may have owed creditors more money than the policy benefits at the time of his or her death. Not only do the statutes protect the proceeds of life insurance policies, but also, they protect the cash value of life insurance policies and annuities while the parent is alive.

The two statutes which provide protection to surviving spouses and children are T.C.A. §56-7-201 and §56-7-203. Here are some examples of how they work.

Assume that, at Dad’s death, he had a $100,000 life insurance policy in effect, but had named no beneficiary for whatever reason. At Dad’s death, he has lots of debt. Will Dad’s creditors be able to collect from the proceeds of his life insurance policy? After all, he did not designate a beneficiary? The answer is “no.”

If Dad did not name a beneficiary, the life insurance proceeds will be payable to his estate. Under T.C.A. §56-7-201, whether Dad died with a Will (testate) or without a Will (intestate), the proceeds will not be subject to the claims of creditors if Dad died with a surviving spouse and children or either. Under that statute, if Dad died without a Will, the life insurance proceeds must be distributed to his surviving spouse and children according to the statutes that delineate how assets are to be distributed when someone dies without a Will.

Recovering Pre-Judgment Interest in Tennessee Breach of Contract Cases

Published on: January 2, 2016 | by J. Ross Pepper

Pre-judgment interest is the interest which accrues from the date an obligation is due to the plaintiff until the day the judge or jury enters a verdict in favor of the plaintiff.

Given that a breach of contact case or other commercial litigation case may take a year or more to get to the point where a verdict is rendered once the case is filed, pre-judgment interest can be substantial in many cases. Consider also that, for various reasons, many cases are not filed until months, even years, after the debt was due to the plaintiff.

Where the parties in litigation do not have a contract about the amount of any interest due, as is often the case, T.C.A. §47-14-123 allows a judge or jury to award pre-judgment interest at any rate not in excess of ten percent (10%). Under Tennessee case law, if you are relying on the statute for pre-judgment interest, you can never receive anything more than simple interest. You cannot compound statutorily awarded pre-judgment interest.

Partition Lawsuits in Tennessee: Practical Considerations

Published on: December 20, 2015 | by J. Ross Pepper

Where parties own real property jointly, and one party has announced his or her intention to sell, the most sensible approach for the other owner or owners to take is to cooperate with the owner who wants to sell. If co-owners can cooperate, they can save themselves attorneys’ fees and a substantial amount of hassle. The key agreements which co-owners must reach are the agreement on the terms of the sale and the agreement on how the net sales proceeds will be divided.

Many times, it is not possible for co-owners to agree on how to go about selling the property. The reasons are many.

Once I take on a partition case, I will first try to determine whether any type of agreement can be reached regarding the sale of the property before I file a partition lawsuit. In most cases, by the time I am hired, there is no hope of agreement between the co-owners, at least until a partition action is underway and the other co-owners are forced to accept the reality of the situation.

Iron Stakes Win Boundary Line Dispute Over Deed Descriptions

Published on: December 5, 2015 | by J. Ross Pepper

Any Tennessee boundary line case will most likely turn into a classic “battle of the experts” where both parties use a surveyor as their expert witness. In cases where both parties have reputable surveyors, how does the court pick the winner?

A boundary line case which recently reached the Court of Appeals of Tennessee provides some solid insight into how a Tennessee court will approach and decide a boundary line dispute where two surveyors come to different conclusions. The case, Haddad Family Partnership v. Pouncey, involved the following facts:

The Pouncey property, about 430 acres of farmland, lay directly to the north of the Haddad property, about 208 acres of farmland
A field road was located on the north part of the Haddad property, and the Haddad family always considered the field road and everything south of it to be their property
According to Pouncey, the field road, over the years, had been moved north and was located on his property
A dispute arose and both parties hired surveyors
The Haddad family used a surveyor named Erwin
Pouncey used a surveyor named Van Boals
Erwin concluded that the field road was on the Haddad property
Van Boals determined that the field road was on the Pouncey property
The discrepancy between the surveys of Erwin and Van Boals was significant – – – almost 50 feet

To determine the correct boundary line, Erwin did the following:

He examined the deeds of the Haddad property and adjoining properties and created a computer generated title map based on the legal descriptions of the properties in the deeds
He discovered that the latest Haddad deed was incomplete because it included a specific bearing and distance for only three sides of the Haddad property
He determined that, because of that, the Haddad deed contained an error of closure of 622 feet
Even though there was an error of closure, Erwin determined that each of the deeds from 1910 forward called for the north line of the Haddad property to be common with the south line of the Dunlap Estate which was the predecessor to the Pouncey property
Erwin went to the Haddad property to find any markers, and he found several iron stakes
Erwin found two iron stakes which marked the northwest corner of the Haddad property and the southwest corner of the Pouncey property
Erwin decided to survey the Pouncey property (in addition to the Haddad property) because the latest Haddad deed was incomplete
The Pouncey deed called for an iron stake in a lake, and Erwin located it with a metal detector in three feet of water

Joint Accounts with Rights of Survivorship and Payable on Death Designations

Published on: November 21, 2015 | by J. Ross Pepper

In Tennessee, a bank account, certificate of deposit, money market account, or other type of financial account may be maintained as a joint account with a right of survivorship. Such accounts may also be maintained as single owner accounts, but be made payable on death to a named beneficiary. Payable on death designations are abbreviated as “POD.”

The difference between a single owner account, with no payable on death designation, and a joint account, with a right of survivorship, can have a major effect on relatives and beneficiaries under Wills. The difference between a single owner account and a single owner account with a payable on death designation can also have a major effect on relatives and beneficiaries under Wills.

Let’s assume that I die with $200,000 in undisputed debt, and with $200,000 in a bank account which I own, but which has no payable on death beneficiary. In that case, even if I bequeathed all of my assets to my wife in my Will, and even if I specifically stated in my Will that I wanted her to have all of the money in my bank account, nevertheless, the $200,000 in my bank account at the time of my death would never become my surviving wife’s. Why? The answer is because, at my death, it would become part of my probate estate. Once it became part of my probate estate, it would be subject to the claims of creditors.

Enforcing a Judgment from a State other than Tennessee in Tennessee

Published on: November 15, 2015 | by J. Ross Pepper

I receive calls frequently from companies and individuals who have obtained a judgment from a court in a state other than Tennessee against someone who lives in Tennessee or someone or some business which owns property in Tennessee or has operations in Tennessee. If you are one of those companies or individuals who have a judgment from another state against someone who lives in Tennessee or some company which has assets or real estate in Tennessee, here is the good news: In all likelihood, that judgment can be enforced in Tennessee.

Tennessee has adopted the Uniform Enforcement of Foreign Judgments Act. That Act essentially codifies the full faith and credit clause of the United States Constitution which requires the states to give full faith and credit to the judgments and decrees of sister states.

The Act requires Tennessee courts to presume that a judgment issued by a state other than Tennessee is valid. Even better, once a foreign judgment is “enrolled” by a Tennessee court, you can use all of the procedures to collect it that you could if it was a judgment which originally came from a Tennessee court. Continue reading

Lessons from Daniel Kahneman’s Thinking Fast and Slow

Published on: November 8, 2015 | by J. Ross Pepper

Daniel Kahneman’s bestseller, Thinking Fast and Slow, is not only a fascinating read, but also, it contains insights that can be an immense help to clients in making decisions about their cases, choosing lawyers, negotiating settlements, and evaluating the advice of their lawyers. Here is what clients (and trial lawyers) can learn from the book:

Lesson One: Intuitions are not as Reliable as We Think

With objective evidence and data, Mr. Kahneman proves the point that many people are overconfident and place too much faith in their intuitions. I know from experience that lawyers are just as susceptible to this way of analysis as any other group. On many occasions, I have heard misguided advice from lawyers that was the result of their relying on some kind of intuitive impulse rather than spending time and effort evaluating a case from many angles (which takes time), bouncing the facts of the case off of several other people, including lawyers and non-lawyers (especially important where a jury trial is involved), and seeking and studying objective data (like published case law).

Lesson Two: Jury Outcomes are Unpredictable

When I first became a trial lawyer 25 years ago, I participated in the National Institute of Trial Advocacy and read extensively about the decision making process of juries. What I learned, and was taught, by seasoned trial lawyers and psychologists, is that most juries will ignore the law, the jury instructions, to get to the result which they think is fair. In my trial practice, I have found that to be true.

After reading Kahneman’s book, I realized that there is a whole other layer in the jury decision making process of which we have to be aware. You can’t help but be persuaded by Kahneman that, even the people who make decisions, like jurors, do not understand fully why they decided something the way they did. The point Kahneman makes, and makes well, is that we can all be primed to make decisions in a certain way without even knowing that we have been primed or what has primed us.

Using the Tennessee Trust Fund Statute in Construction Cases to Recover Attorneys’ Fees

Published on: November 1, 2015 | by J. Ross Pepper

In breach of contract cases involving construction contracts, the Tennessee Trust Fund Statute, T.C.A. §66-11-138, may provide a subcontractor with a way to recover the attorneys’ fees and expenses incurred in collecting amounts owed to it, but not paid. To recover attorneys’ fees and expenses using that Statute, it is not enough to prove just a breach of the contract by the contractor or subcontractor with whom you contracted. You have to prove that you were not paid because the contractor or subcontractor who owed you money violated the Statute and did so with the intent to defraud.

The Statute also provides protection to project owners by allowing them to recover any attorneys’ fees and expenses, as well as any other damages, incurred as the result of the contractor using funds of the owner for improper purposes (purposes prohibited by the Statute).

Under the Tennessee Trust Fund Statute, any contractor or subcontractor who, with intent to defraud, uses monies paid to it for any purpose other than to pay for labor, materials, services, equipment, machinery or for related overhead or profit, while any subcontractor remains unpaid, has violated the Statute (subject to the exceptions discussed below). A violation of the Statute, besides amounting to a Class E felony, entitles the injured party to recover any damages caused to it as the result of the misuse of the funds, including attorneys’ fees and expenses.