Wardley Homes, LLC. v. Michael C. Johnson ( 2018 )

09/17/2018
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
July 19, 2018 Session
WARDLEY HOMES, LLC, ET AL. v. MICHAEL C. JOHNSON, ET AL.
Appeal from the Chancery Court for Loudon County
No. 12131 Frank V. Williams, III, Chancellor
No. E2017-01831-COA-R3-CV
This appeal arises from a lawsuit over the construction of a house. Wardley Homes, LLC
(“Wardley Homes”), owned by James A. Wardley, II, and Teresa Smith Wardley (“the
Wardleys”), contracted with Michael C. Johnson and Deborah A. Johnson (“the
Johnsons”) to build the Johnsons’ house. A dispute arose over payment, and Wardley
Homes sued the Johnsons in the Chancery Court for Loudon County (“the Trial Court”).
The Johnsons, in turn, filed a counterclaim against Wardley Homes. The Johnsons later
attempted to bring the Wardleys into the case individually under a theory of piercing the
corporate veil. The record contains no order relating to whether the Wardleys were
brought into this suit. Despite there being no order in the record bringing them into this
suit, the Wardleys filed a motion for partial summary judgment relating to their
individual liability. The Trial Court at a hearing apparently orally granted the Wardleys’
motion, although the record contains no order to that effect either. The Johnsons later
filed a Tenn. R. Civ. P. 60.02 motion for relief, which the Trial Court denied. Wardley
Homes and the Johnsons settled their dispute. The Johnsons appeal to this Court with
respect to their effort to bring the Wardleys into the case individually. The absence of
key orders precludes our review. We, therefore, vacate the Trial Court’s judgment, to the
extent it exists, as it relates to partial summary judgment and remand for the Trial Court
to (1) enter an order on the Johnsons’ motion to bring in the Wardleys, and if granted, (2)
enter an order on the Wardleys’ motion for partial summary judgment that states the legal
grounds and complies with Tenn. R. Civ. P. 56.04. We otherwise affirm the Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed, in Part, and Vacated, in Part; Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.
Stephen H. Byrd, Knoxville, Tennessee, for the appellants, Michael C. Johnson and
Deborah A. Johnson.
W. Tyler Chastain and Margo J. Maxwell, Knoxville, Tennessee, for the appellees,
Wardley Homes, LLC, James A. Wardley, II, and Teresa Smith Wardley.
OPINION
Background
Wardley Homes, a construction company, contracted with the Johnsons to build
the Johnson’s house. While the underlying facts of the dispute are not relevant to the
dispositive issue in this appeal, suffice it to say the arrangement took a turn for the worse.
The Johnsons fired Wardley Homes during the course of its work. Wardley Homes
believed it had been shorted as to what it was owed on the project.
In May 2013, Wardley Homes sued the Johnsons for breach of contract among
other claims. In March 2014, the Johnsons filed a counterclaim including claims such as
violation of the Tennessee Consumer Protection Act.1 In January 2015, the Johnsons
filed a motion to bring the Wardleys in individually pursuant to Tenn. R. Civ. P. 14 and
19. The Trial Court apparently orally granted the motion, but the record contains no
order reflecting this.2
Despite there being no order in the record bringing the Wardleys into the suit, in
February 2016, the Wardleys filed a motion for partial summary judgment relating to
their personal liability. The Trial Court apparently orally granted this motion. We say
apparently because, again, the record lacks an order to that effect. Both sides agree the
Trial Court orally granted partial summary judgment. In October 2016, the Johnsons
filed a motion pursuant to Tenn. R. Civ. P. 60.02 alleging fraud and seeking relief from
partial summary judgment. It was, and is, the Johnsons’ theory that the Wardleys used
Wardley Homes as a personal “piggy bank” and that they should therefore face individual
liability. In March 2017, the Trial Court denied the Johnsons’ motion for relief. This
time an order at least was entered, although the issue was disposed of in one line: “The
Court denied the Defendant’s Motion for Relief of Order for Partial Summary Judgment
Pursuant to T.R.C.P. 60.02 based upon Fraud.”
1
Certain other parties were sued in this case and later dismissed, but none of them are relevant for
purposes of this appeal.
2
In their motion for partial summary judgment, the Wardleys represent what transpired as follows: “On
February 9, 2015, the Johnsons’ motion was heard by the Court. After oral argument, Court ruled that the
Wardleys could be brought in as individual defendants but noted that it would entertain a motion for
partial summary [judgment] at a later date depending on the information collected through additional
discovery.”
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In August 2017, the Trial Court entered an order disposing of the case between
Wardley Homes and the Johnsons, stating therein:
The parties, Wardley Homes, LLC, Michael C. Johnson, and Deborah A.
Johnson, by and through counsel, announce to the Court that all matters and
controversies between them have been compromised and settled.
Therefore it is ORDERED, ADJUDGED and DECREED as follows:
1. Plaintiff Wardley Homes, LLC’s Verified Complaint against Defendants
Michael C. Johnson and Deborah A. Johnson is dismissed.
2. Plaintiff Wardley Homes, LLC lien on Defendants Michael C. Johnson
and Deborah A. Johnson home at . . . is hereby released. Proof of release
from Loudon County will be provided within 10 days of the entry of this
order to Michael C. Johnson and Deborah A. Johnson.
3. Judgment in favor of Defendants Michael C. Johnson and Deborah A.
Johnson for all causes of action in the Counter Claim against Plaintiff
Wardley Homes, LLC.
The Johnsons timely appealed.3
Discussion
Although not stated exactly as such, the Johnsons raise the following issues on
appeal: 1) whether the Trial Court erred in granting partial summary judgment to the
Wardleys related to piercing the corporate veil; and, 2) whether the Trial Court erred in
denying the Johnsons’ Tenn. R. Civ. P. 60.02 motion for relief from partial summary
judgment based upon fraud. The Wardleys raise what we believe to be the dispositive
issue on appeal: whether the record is sufficient for our appellate review.
The Johnsons contend that their effort to hold the Wardleys individually liable
should have survived summary judgment and proceeded to trial. It is, however, not even
clear from this record that the Wardleys ever were brought into this suit. The Johnsons’
attorney stated at oral argument that the order granting partial summary judgment to the
Wardleys is contained in the record, but our careful review of the entire record furnished
to us has revealed no such order. There is no citation in any brief to the technical record
of the location of any such order. This is a problem, as Tenn. R. Civ. P. 56.04 provides
that “[t]he trial court shall state the legal grounds upon which the court denies or grants
3
The Wardleys contend that the Johnsons incorrectly named them as appellees when the correct appellee
is Wardley Homes, the entity. We disagree with the Wardleys. First, the question of the Wardleys’
individual involvement and potential liability is the very matter being appealed, so it begs the question to
state they were incorrectly named as appellees. Second, the Wardleys filed the motion for partial
summary judgment, which suggests they at least believed at one stage they were parties to the case.
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the motion, which shall be included in the order reflecting the court’s ruling.” Here, we
have no order at all, let alone any stated legal grounds. We further find no order
reflecting that the Wardleys ever were brought in such as to necessitate partial summary
judgment to bring them out.4 This record contains no transcripts. In short, this is a
woeful record.5
Regarding responsibility for preparing the appellate record, our Supreme Court
has discussed as follows:
An appellant is responsible for preparing the record and providing to
the appellate court a “fair, accurate and complete account” of what
transpired at the trial level. State v. Ballard, 855 S.W.2d 557, 560 (Tenn.
1993) (citing State v. Bunch, 646 S.W.2d 158, 160 (Tenn. 1983)). The
appellee, however, shares the responsibility for ensuring the appellate court
has a complete record. See Tenn. R. App. P. 24(a), (b), (d) (providing that
after the appellant has designated portions of the record or transcript for
appeal, the appellee may designate any other part of the record it deems
necessary or may prepare a transcript or a statement of the evidence.)
In Svacha v. Waldens Creek Saddle Club, 60 S.W.3d 851 (Tenn. Ct.
App. 2001), the Court of Appeals addressed a summary judgment in which
the trial court relied upon the plaintiff’s testimony in granting the
defendant’s motion. The transcript of that testimony was not filed in the
trial court or included in the record on appeal. The Court of Appeals
vacated the summary judgment, concluding that it could not determine
whether the summary judgment was proper because the potentially crucial
evidence was not in the record. Id. at 856. The intermediate appellate court
acknowledged that the burden is on the appellant to prepare a complete
record. Id. The Court of Appeals concluded, however, that the appellee
shares some of the burden to ensure that the record contains all of the proof
considered by the trial court, particularly when the trial court grants the
appellee’s summary judgment motion. Id. at 855-56 (citing Tenn. R. Civ.
P. 56.04; Tenn. R. App. P 24(a)).
4
We note that the record does contain an earlier motion by the Johnsons “To Bring in City of Lenoir
City, Tennessee Pursuant to Third-Party Practice Rule 14.” The record does contain an order granting
this motion to add Lenoir City as a third-party defendant. Despite this, the record does not contain any
such order as to the Wardleys.
5
The Johnsons did file a barebones Statement of the Evidence, but it only recites some of the procedural
history of the case and is no substitute for actual orders.
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We agree with the reasoning in Svacha and conclude that Sewell-
Allen has a responsibility to ensure the appellate record is sufficient to
determine if the trial court’s summary judgment in its favor was proper. In
this case, the record is incomplete, and we are unable to determine the basis
for the judgment entered by the trial court. We refuse to “perform the
equivalent of an archeological dig and endeavor to reconstruct the probable
basis for the [trial] court’s decision.” Church v. Perales, 39 S.W.3d 149,
157 (Tenn. Ct. App. 2000) (citation omitted).
Jennings v. Sewell-Allen Piggly Wiggly, 173 S.W.3d 710, 713 (Tenn. 2005).
The Wardleys argue in their brief that the inadequacies of this record “preclud[e]
effective appellate review of the issues on appeal” and that the Johnsons are responsible
for the deficiency. We agree with the Wardleys that effective appellate review is
precluded, but disagree that the Johnsons bear sole responsibility. As our Supreme Court
discussed in Jennings, appellees also have some responsibility to ensure the appellate
record is complete, particularly when, as here, summary judgment apparently was
granted, orally, in appellees’ favor. The solution is not, as the Wardleys would have it,
simply to affirm the Trial Court in the absence of key orders. That would, in
contravention of Jennings, absolve the Wardleys for their failure to ensure that an order
for partial summary judgment in their favor and upon which they now rely was entered
into the record.
In Range v. Baese, this Court was confronted with a deficient record in a summary
judgment case. We stated:
The record in this case prevents the court from evaluating the
propriety of the trial court’s decision to grant summary judgment. We
cannot determine whether there were issues of material fact or whether the
defendants were entitled to judgment as a matter of law. Normally, we
would remand this matter for supplementation of the record; however, as
previously noted, we have determined that the trial judge erred by failing to
state the legal basis for the grant of summary judgment. We, therefore,
vacate the trial court’s orders granting summary judgment and remand for
the trial court to state the legal grounds for the ruling and for the
preparation of a fair, accurate and complete record on appeal.
Range v. Baese, No. M2006-00120-COA-R3-CV, 2008 WL 186645, at *5 (Tenn. Ct.
App. Jan. 22, 2008), no appl. perm. appeal filed.
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We adopt the same course in the present case. We, therefore, vacate the Trial
Court’s judgment as it relates to partial summary judgment, to the extent it exists, and
remand for the Trial Court to (1) enter an order on the Johnsons’ motion to bring in the
Wardleys, and if granted, (2) enter an order on the Wardleys’ motion for partial summary
judgment that states the legal grounds and otherwise complies with Tenn. R. Civ. P.
56.04. We further vacate the Trial Court’s order denying the Johnsons’ Tenn. R. Civ. P.
60.02 motion for relief from partial summary judgment because the record contains no
such order granting partial summary judgment. Otherwise, we affirm the Trial Court’s
judgment, including its August 2017 order settling the dispute between Wardley Homes
and the Johnsons, an order neither side appeals.
Conclusion
The judgment of the Trial Court is affirmed, in part, and vacated, in part, and this
cause is remanded to the Trial Court for collection of the costs below and for further
proceedings consistent with this Opinion. The costs on appeal are assessed against the
Appellees, Wardley Homes, LLC, James A. Wardley, II, and Teresa Smith Wardley.
____________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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