*1 con- any law to the issue of cites related Dance, HOGAN, Roger Fred C. P. misrepresen- privity negligent
tractual Service, Inc., City Dust-Tex Music Nor he cite law tation case. does Plaintiffs/Appellants, Fi- of Breach of Contract.” “Inducement in the documents in record nally, v. third-party Mr. Galbreath’s claims where ENTER COYNE INTERNATIONAL mentioned, analyses very there is little are CORPORATION PRISES d/b/a case to particular of the facts this Services, Defendant/Appellee. Textile Rather, party Mr. Galbreath’s third law. Tennessee, unsupported al- primarily Appeals consist claims Court Section, “induced a legations Mr. Lawless at Nashville. Middle “negligent breach of contract” and made Dec. 1998. upon Based this rec- misrepresentations.” Rehearing Denied 1999. Jan. ord, say cannot Mr. we Galbreath’s objectively was reasonable. Appeal conduct Denied Permission 28, 1999. Court June
Supreme V. Conclusion
After a careful review of record us, trial before we find that court’s judgment should be affirmed. As the found, Joyce preserved
court Galbreath right appeal only her the lower court finding involving the breach contract. issue, we find that Regarding granting specif- court below correct Mr. performance plaintiff, ic Finally, McGaugh. we with the low- no merit er court there was to Mr. against Galbreath’s claims third-party Mr. only Bank and Lawless. Not merit, they claims these without did legal a sound factual Con- basis. err in sequently, impos- court did not ing Rule 11 sanctions on Mr. Galbreath for conduct. In of our light findings, wholly
decision of the trial court is af- are appeal firmed and the costs of taxed to Mr. the defendant Galbreath. TODD, Presiding Judge, HENRY F. Jr., KOCH, Judge, C. concur. WILLIAM *3 Nashville, Tennessee, Rogers,
Helen S. plaintiffs/appellants. Walton, Gideon, Jr., C.J. William S. Nashville, Tennessee, defendant/appel- lee.
OPINION CANTRELL, Judge, Presiding
BEN H. M.S. on a series of con-
This action is based sale of an industrial tracts executed in the laundry business. dust control and Chancery Court of County Davidson dis- at closing allocate sales sellers, missed the claims of following held that in the manner. Payable one sellers had breached one Date agreements buyer but that the had failed Due to prove damages, and awarded the Laundry Equipment, Office: corp. July etc. Furniture, 32,500 1,1994 $ buyer attorneys’ fees. We reverse the business; ney, operation. Dust-Tex rented to its custom- Hogan cent (Dust-Tex), the award of dismissal Roger Hogan owned the other of Music owned the P. Fred a Nashville industrial the sellers’ action and attorneys’ City Dance, building owned Dust-Tex I. twenty-five fees. a seventy-five Nashville attor- Service, housed percent. laundry modify per- Inc. the Sales Commission: Building Consulting Merchandise Supplies, 60 months Rent: etc. month x & Inventory: Neg. Covenant: $125,000 $120,000 Hogan $100,000 jointly Fred Dance corp. Hogan Roger Í Apr. 1 and $12,500 Apr. 1,1994 *4 Apr. 1 and starting Apr. starting Oct. 1, monthly Dec. 31, starting Oct. 1, 10 payments Jan. 10 payments 1,1994 1,1994 mats, ers products dust control such as towels, dust mops, mops, wet aprons, bar Within four of purchase, Coyne months the linens, napkins. addition, table and In the cleaning processing moved and opera- Dust-Tex cleaned some of the goods London, tion to Kentucky. Hogan to had (These belonged to its customers. terminate people his sales and pick up the services were referred to the record as of duties a person. salesman and route “N.O.G.”, meaning goods.”) “not change our He viewed this as a demotion from position general manager, and he 1993, In the fall of Mr. and Mr. experienced drop efficiency a because president Dance met with the and vice- problem of getting goods back president Coyne International Enter- 1995, Kentucky. from Spring In the prises Corporation, a national industrial Hogan went on surgery. sick leave for business, laundry to discuss the terms of surgery, After the he did not return to sale of Coyne. Dust-Tex to The negotia- work, and he against Coyne filed suit tions led to a agreements series of on breach of agreement December Coyne agreed 1993 which September of 1995. Dust-Tex, purchase to assets includ- Coyne paid the payment, down ing name, the trade the goodwill, and the 1,1994, July on and the install- separate customer In agree- contracts. payments through April ment of 1995. ments, Coyne general hired as the Coyne also tendered the October 1995 pay- manager operation, of the Nashville and ments on stopped payment the checks leased the building from him. Coyne when sued over employ- his negative Dance executed a agree- covenant Coyne ment to When refused ment in they agreed which to refrain from make the for in the pur- called competing Coyne with in the industrial Dance, agreement, chase Hogan, business, assisting any or from Dust-Tex to remaining sued collect the others in such competition. Hogan signed payments. Coyne counterclaimed for a similar negative agreement damages, alleging plaintiffs behalf Dust-Tex. breached agreement they and that $552,- Coyne agreed pay the sellers were guilty of fraudulent misrepresenta- Although quoted 500. a lump sellers Coyne tions. continued make lease per sum based on dollar of through week- payments August $85 when ly business, out, Coyne they rental got alleging building the sellers to moved (1) a Ho- filed a counter-claim based on repaired by had not been unsafe and restrictive covenant in Ho- gan. breach (2) agreement, gan’s employment perform failure to duties under II. (3) fraudulent employment agreement, Agreement The Sales concerning volume misrepresentations The contract sale includes several (4) business, a violation of Dust-Tex’s from letter parts. principal part by Hogan signed covenants 28, 1998 which Coyne dated December Dance. asked for rescission agreement an purchase confirms restitution, damages, and a declaration assets, inventory, customer goodwill, obligations that it had no further under contracts, name. Dust-Tex trade or under agreement Dust-Tex Hogan and Dance warranted that Hogan. In an the lease with Dust-Tex rental volume amounted counterclaim, Coyne al- amendment to its $6,336 per week and the N.O.G. volume had induced leged plaintiffs The two amounted week. $465 breach óf contract with custom- to be in a week figures were verified four ers. *5 1994, if the period January test of and dismissed the fraud The chancellor figures, volume fell below the warranted claims, proof misrep- a lack of of by citing the purchase price would be reduced (The every by Hogan for one volume resentations or Dance. dollar of rental $85 $6,336 every below per week and shows that the warranted figures $30 N.O.G. below dollar week. test $465 the contract checked out in the 1994 Coyne alleged that the period although — Coyne signed purchase two orders. One inflated.) the period billings test On ($100,- inventory supplies covered the covenants, the chancellor found 000) equipment the other the the agree- Dance had not breached that ($32,500). and office furniture Another Hogan but had committed a ment that sheet attached to letter agreement the by being company breach involved in called for payments Hogan for “sales Mop. as As to known Dust-Tex Mat $175,000 commissions” of in ten install- any damages by Coyne, suffered the court ments of April each due on 1 and that were attribut- found losses October final beginning 1 in 1994. The “poor to its service to custom- able own attachment called for payments to rudeness, ers, forgery and short- including jointly “Consulting and Dance ages.” $125,000, Agreement Compete” Not ten on same
payable in installments the to rescind the The chancellor refused payments schedule as the installment could not parties because Hogan. Coyne bargained also for the quo. in status The court dis- placed be right designate purchase claims, Coyne’s damage held missed but rent,” “building as consisting Coyne obligation had no further that (The $2,000 per sixty month for months. pur- make the installment building by Hogan, owned price. chase by Coyne separate and was leased lease.) chan- allege and Dance no holding erred in had cellor on the stopped payment
When on the asset obligation further and Dance for the checks issued installment, agree. we 1, Although 1995 October fact, findings of with the chancellor’s for breach of con- Dance filed an action findings do not a cancellation support did an plead tract. not affirmative action; instead of the balance of contract. defense to the contract 200 may
A contract into a engage several entered covenant not to parts. A breach of one will all part excuse period furniture business for a of three promised performance by the other years. The parties goodwill valued the party per where the is to contract the business and the covenant not to com- only formed Pip as whole. Brockett v. pete at and the purchaser gave the kin, 1, Tenn.App. 25 149 S.W.2d amount, sellers a note for that due one case, (Tenn.App.1940). In such a call we year. The sellers breached the covenant “entire,” complete contract and “the to compete year, within but by fulfillment the contract either side is Supreme Court held sellers could required as a condition precedent to the collect the note. recognized The court fulfillment of of the contract buyers that the did have a claim for the the other.” & Carson v. Mont Bradford they amount had been damaged Co., gomery Furniture 115 Tenn. breach, buyers sellers’ had the (Tenn.1906). S.W. 1104 at 1109 burden the amount proving of their damages. The reasoned Court If, however, “several things are note two things covered different and that contract, to be done under a mon buyers “have far larg- received ey paid apportioned consideration to be note, part of er the consideration of their items, to each of the the contract is ordi good will of the firm Bradford and narily regarded as severable.” 17A Am. Carson, and performance their con- case, § Jur.2d Contracts 418. In that nearly tract to close business for one-third “neither party can claim more than an agreed upon.” time 92 S.W. at equivalent for the actual consideration on performance 1110. The of the contract not part.” and Carson v. Mont Bradford *6 Co., to the gomery re-enter furniture business Furniture 115 Tenn. 92 was (Tenn.1906). therefore not a to precedent 1104 at 1109 condition col- S.W. lecting the note. case, Coyne In this specifically as signed money to separate parts value the This court reached a similar result in of the agreement. We think it is clear Jones, Young v. Tenn.App. 36 255 severable, that the contract was and a 703 (Tenn.App.1952), S.W.2d where the part breach of one not would excuse the plaintiff veterinary sold his business for promised performance for the other parts. agreed practice not to veteri It should be obvious therefore that Mr. nary long medicine “for as as the contract Hogan’s breach of the (by buyer, was not breached” the we as separate his breach of his employment sume). The purchase price paid was to be right would not defeat Dance’s monthly in installments of When $166.67. to promised recover what was to him. veterinary practice, the seller resumed a performance received full from of buyer the asked for a cancellation the Dance and should deliver what was prom Relying upaid purchase price. on Brad in ised return. v. Montgomery, and Carson this ford court held that the contract was severable Hogan?
What about There an performance by party either was severability other level of that has been subject performance by not to the other as our applied by courts. That is severability precedent. condition To demonstrate specific part within a of a contract.1 The the point by independence is best covenant and illustrated Bradford to Montgomery, supra, promise pay purchase price Carson v. where sellers sold their furniture business and court said: Although 1. in courts have talked terms of ises or conditions. See Am.Jur.2d Contracts cases, severability precise in these the more § 473. dependent independent prom- terms vs. are
201 due on lease only except for the balance difference in those facts part with that not to will deal payments. case is the covenant the instant opinion. to run the rest case in Part IV of compete was paid to price life and was be Jones’ to be said remains thing One other a five over approximately installments controversy. The of the about this that, year It is if Jones period. obvious into its several of the contract breakdown longer years, than five lived tax own invention—for Coyne’s was parts applied before he could would been The reference purposes, apparently. died, say and if Jones had fully perform, payments “commissions” year, purchaser first was “consulting” fully perform years for five bound labels, merely Coyne’s and not were Dance note; paying perfor- immediate specific services an indication was was expected, mance neither nor from and Dance. Ho- due per- one performance dependent upon due commissions under gan was not parts formance the other of these separate He sales had the contract. agreement under which he at S.W.2d 706. company if could earn a bonus level, but there is a certain sales achieved prom The order of time in which he was to proof no in the record how may performed ises are be control pay was to him earn they independent depen whether are true of the years. five The same is over dent. the acts are to to be done “[W]here for Dance. There is “consulting” services stipulations be at done different times the had no duties are as independent to be construed of each conclude regard. We therefore § 474. other.” Am.Jur.2d Contracts just for separate categories were obligated pay In this case accounting for the convenience in purchase price balance of the over five price. years. The negative signed covenants year and Dance included a five to recover The sellers should allowed (not
provision engage in or assist anoth due to the balance *7 er in the engaging industrial due to and Dance business) (not ten year provision a jointly. Coyne’s any solicit or Dust-Tex customers employees by Coyne). Although hired III. year provision chancellor held that the ten (and was unreasonable therefore unen Hogan’s Employment Agreement beyond years) forceable five the contract Coyne for a breach of Hogan sued payment demonstrates that was not condi separate employment He performance by tioned on the sellers. general as a alleged employed that was Coyne against purchase could set off manager plant, but that he of Nashville it damages suffered from a position to the of route was reduced breach, Coyne had the sellers’ burden on long He was not consulted salesman. Coyne The proof. chancellor found that or range planning corporate policy deci Coyne that carry had failed to burden and sions, special he did not receive has not taken issue with that determina on proprietary or information instructions examined the appeal. tion on We have relations, adjusting or customer pricing, that is no record and we are satisfied there complaints. judgment which to proof on base that aban- cove The chancellor found for a breach damages therefore, Coyne with and breached Coyne, obligated job doned his nant. remains acting con- by price, employment agreement pay purchase the balance trary interests and engaging to do July refused so. On employment. other building. vacated the We with the findings chancellor’s The chancellor found that “the premises First, respect. conclusion not good order and upon condition agreement did define the duties of receipt by Coyne and that the problems general manager, but it did provide that which required prem- to vacate the “carry would out and such perform ises were pre-existing.” may assigned duties as by employer’s president, its chairman of the board or its Hogan maintains that vice president.” Coyne was free to make showing the pre-exist defective roof was a the business decision to move most of the ing condition violated the parol evidence London, operations to Kentucky and to rule; it provision contradicted lease redirect activities in light that the premises were in good received decision. But to pay continued Ho- noted, order and condition. It should be Therefore, gan salary. his full Coyne did however, provisions two lease not breach employment agreement together. should be read provision The constructively discharge Hogan. imposing duty the tenant to make In the spring 1995 Hogan went on conditions, repairs “except for pre-existing sick for surgery. leave He did not return and structural repairs” indicates that the to work for Coyne, and he filed an action parties things knew such might exist. the breach of his in Septem- Therefore, parol evidence that the roof ber of 1995. Since we concur in the chan- was defective on the date of the lease cellor’s findings and regarding conclusions vary would not or contradict the contract. alleged Coyne, breach we also think findings the chancellor’s are agree with her conclusion that Hogan vol- Therefore, supported proof. untarily abandoned his con- building condition amounted ato construc- tract. tive eviction.
IV. respect With the lease $2,000 per month Lease mentioned in the sales agreement, Hogan argues that the true Coyne acquired When Dust-Tex in rent was per month and that the December it also entered into $2,000 payment year space five lease owned effect, In price. Hogan argues Hogan, formerly served as the base of to rent in the sales reference operations. Dust-Tex’s The lease stipu *8 agreement just another of lated that the premises were received in practices. accounting slick good order It and condition. also included provision that would maintain the note, however, that the lease actual- premises good order and make all nec $6,500 ly that per recites month will be essary repairs except pre-existing for paid forty-eight for months and that structural conditions. month be paid will for an additional The showed that in 1996 the roof twelve months. If Mr. it Hogan is correct leaked to such an extent that Coyne em- year Coyne means that the fifth would ployed roofing expert to prob- assess the occupying be rent-free. The building lem. The expert concluded that doubt, the leaks issue is not free from so we will made the building unsafe and that accept Coyne’s argument that the respect deficiencies that existed prior monthly in the sales December Therefore, of 1993. called on Ho- represented rent. gan necessary to make the repairs, finding chancellor’s that breached or entities or other any ships, corporations claim lease is a defense further any partnership, person, agencies, payments. lease for the entity. or other corporation 3) apply will also covenants These V. Employee to which any new location Negative The Covenants Employee’s during may transferred that the restrictive Hogan asserts employment. employment agreement in his covenant 4) for peri- agrees also Employee covenant he and Dance negative (3) from termi- years od of three they are used to are void because signed regardless employment, of his nation ordinary competition.
restrain termination, he will the cause of or otherwise attempt or to solicit solicit The contract contained Coyne employees to cause attempt following provision: employment. leave their 1) that, Employee for a agrees period by Hogan signed (3) years termi- three from the date of provided: Dance regardless his employment, nation of a) termination, with Except any employment will not the cause of will, in, CTS, directly indirectly, within the terri- engage or re-en- Covenantors C, immediately conduct, in Exhibit in, any tory or set forth operate, assist gage all their activities in the industrial oth- cease partnership, corporation or person, will withdraw their officer, laundry business and director, entity partner, er as an ev- consultant, otherwise, business connections services employee, or way ery any kind and nature in connect- laundry nor will industrial business laundry business ed with the industrial laundry he do industrial for sale or rent- includes, but any phases, which by anyone al else. The covenant con- to, items the rental of such is not limited paragraph tained in this to all of applies towels, clothes, wiping (70) shop work as geographic seventy area within coveralls, cloths, coats, jackets, Nashville, pants, miles of Tennessee. frocks, smocks, cov- gloves, fender work 2) that, for a Employee agrees further ers, sup- equipment dust control (10) period years of ten from the termi- towels, towels, dust plies, glass caps, roll regardless employment, nation of his ab- reusable bags, protective garments, termination, the cause he will not other similar items sorbents and upon upon, call or cause be called or or by Dust-Tex any other items rented assist in the solicitation of industrial apply CTS. This restriction shall from person, part- business (3) period years from the date three nership, corporation entity or other hereof. served from location dur- b) period that for a Covenantors
ing Employee’s employment or with (5) not, years, they five will within acquainted whom the became Employee A, reen- territory forth in Exhibit set Employer’s employ while in the or in, conduct, or an- operate assist gage whose name addresses were fur- and/or shareholder, money, other as a lender of by Employer procured nished to him *9 consultant, or other- agent, employee, in by employ while said Employee business, laundry in the industrial wise writing will not furnish in or he they will do industrial nor any or conversa- otherwise disclose by anyone sale or rental else. tion, directly indirectly, any of said or c) period that for a any agree or other Covenantors names addresses and/or (10) they not years will cause persons, these of ten concerning information in the solicita- upon or assist or other enti- be called partnerships, corporations . from, pur- customer any any person, partner- or tion business agencies, ties 204 (the “Customers”). by
chased
CTS
Cov- with the sale. He posed more than an
any
enantors shall not at
time disclose in ordinary
competition
Coyne.
threat of
any
any manner
Proprietary Informa- On appeal, Hogan argues
length
at
relating
tion
to the
including,
Customers
the proof shows he did not personally
to,
but not limited
any
the names
any
cause
customers to take
addresses of these Customers or
and/or
Therefore,
their business elsewhere.
any other information
concerning
argues,
closely
he was not
associated with
names
addresses of these Cus-
and/or
business
the customer’s minds. The
any
person,
tomers to
other
partnership,
restriction, however,
reasonableness
firm, corporation
agency.
or
Covenan- must be
measured as
the time of the
they
tors further
will not at
Parks,
agreement. Allright Auto
Inc. v.
or
any way
time
interfere with or
Berry, 219 Tenn.
We think Coyne legitimate had a the party enforcing the Agree- protect by business interest to putting Ho ment shall be entitled to reasonable at- gan under a non-compete agreement. torneys’ Ho fees and reasonable costs and *10 gan area, was the business in this and expenses associated with enforce- the agreed to the restrictions in connection ment thereof. claims, are satisfied that hearing the all of we a on in the
The trial court held only proof on of the total fees attorneys’ allocating fees The almost one-half issue. the in the was contained in records to items alone results expenses amount and in lawyers, firm kept by Coyne’s one or fee for enforcement an unreasonable in York. The Nashville and another New as the trial handicapped, are defense. We expenses detailed the time and was, Coyne’s records attor- by the refusal court the consolidated spent on series cases their on own. neys to make allocation trial, but the do not break for records fact, in delete the record In the summaries defending down the costs incurred in activities for specific to the all references total the covenant. The enforcing negative spe- If the charges were made. which the came expenses fees for the two firms and secret, some other kept cifics to be are $129,388.52. dispute is over to There no employed give have been method could hourly rates the reasonableness the of the time devoted a better approximation the charged spent or the total hours in Negative to the Covenant.
litigation. record, our of the we Based on review here, then, question The is how sole expense the should think one-fourth of fee be appor- much of the overall should Nega- to the enforcement allocated controversy tioned over We, therefore, modify tive Covenant. breach There Negative Covenant. Hogan attorneys’ for judgment against three consolidated actions $82,347.13. fees to for trial. The first was action Ho- an the court below is re- judgment The gan employment a alleging breach as part, modified part, versed in and agreement. Coyne filed a counterclaim it is Dust-Tex, respects In all other al- indicated herein. against Hogan, Dance and is remanded affirmed. The cause leging a violation of the Dance, Chancery County of Davidson Court a breach of contract, in accordance with entry judgment of a fraud on the opinion. Pre-judgment interest on part of all of the counter-defendants. Dance, and Dance for breach award by Hogan, second action was filed in the of the asset a of the asset Dust-Tex for breach per annum shall run from amount of 10% purchase agreement. Coyne filed a coun- came the installment terclaim, is- dates essentially raising the same Coyne’s' on Post-judgment interest sues action. due. prior that were raised $32,347.13 against Hogan shall addition, judgment alleged In the counter- 17, 1997, the date of run from November obligated claim it no on longer that was judgment below. Tax costs the final joined issue on that lease. Coyne. equally to appeal allegation. appeal The third action was an Ho- of a General Sessions action in which
gan sought repossess and Dance CAIN, JJ., KOCH and concur. equipment transferred to sale. REHEAR ON PETITION TO OPINION indicated, only As we have filed to re- petitions Both have parties attorneys’ provision recovery for the respect to the petition hear. With major Negative fees in the Covenant. A sellers, petition we reviewed oth controversy of the whole involved part ground find that it does not state claims, allega fraud er matters —the original opinion. modification of the Cov Negative tion Dance violated the enant, we do lease, respect petition, Hogan’s employment With result, requires change not think it acknowledge While we response. specific it does merit Hogan’s Negative played Covenant *11 206
a.
picture by establishing that
tire/severable
for the breach of a severable contract the
The chief complaint in the
is
petition
plaintiff has the burden of proving how
with this court’s conclusion that the sales
damage
much
resulted from the breach.
contract was severable. We have exam
That
the simple consequence of this
ined
cases cited in the petition, James
whole exercise. Coyne was
entitled
re
Partners,
Jamestown,
Cable
City
L.P. v.
duce its payment by every penny caused
818 S.W.2d
(Tenn.App.1991),
388
Penske
by Hogan’s
By failing
breach.
prove
Co.,
Huddleston,
Truck Leasing
L.P. v.
it
any damages
had suffered
from
(Tenn.1990),
1918), do b. not find any authority con trary original opinion. our In fact the Coyne’s petition to rehear also takes definition a divisible contract adopted issue with this court’s reduction in the by the court in to specifically James seems of attorneys award fees. think our We describe the contract in this ease: “one in original discussion in the opinion properly performance which the is divided into dif disposed of this issue. groups, ferent each set embracing perfor therefore, opinion, We are of the
mances
agreed
which are the
exchange for
denied,
both petitions to rehear should be
each other.”
S.W. 1104
and Young v.
(Tenn.
36 Tenn.App.