Romglobal, Inc. v. Steve Miller ( 2020 )

01/29/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
October 17, 2019 Session
ROMGLOBAL, INC., ET AL. v. STEVE MILLER ET AL.
Appeal from the Chancery Court for Sevier County
No. 16-9-284 Telford E. Forgety, Jr., Chancellor
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No. E2019-00058-COA-R3-CV
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The plaintiff corporation filed an action for breach of contract, claiming that the
defendants had failed to recognize the plaintiff’s ownership in a limited liability company
that was allegedly based on an oral agreement between the plaintiff and defendants. The
trial court dismissed the plaintiff’s claims, determining that the plaintiff had failed to
present clear and convincing evidence establishing the parties’ agreement that the
plaintiff would have an ownership interest in the company. The plaintiff has appealed.
Discerning no reversible error, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded
THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and JOHN W. MCCLARTY, J., joined.
James N.L. Humphreys and Matthew F. Bettis, Kingsport, Tennessee, for the appellant,
Romglobal, Inc.1
Edward H. Hamilton, Sevierville, Tennessee, for the appellees, Steve Miller; Smoky
Mountain Ridge on Cove Creek, LLC; and Steve Miller & Associates, Inc.
1
We note that the appellate brief filed by Romglobal, Inc., indicates that its attorneys also represent
RomCraft Construction Co., LLC, which joined in the filing of the notice of appeal in this action.
However, RomCraft Construction Co., LLC, has raised no issues on appeal.
OPINION
I. Factual and Procedural Background
The plaintiff, Romglobal, Inc. (“Romglobal”), filed a complaint on September 12,
2016, in the Sevier County Chancery Court (“trial court”), naming as defendants Steve
Miller, individually; Steve Miller & Associates, Inc.; and Smoky Mountain Ridge on
Cove Creek, LLC (“the LLC”) (collectively, “Defendants”). In the complaint,
Romglobal alleged that Defendants had entered into a contract to purchase a parcel of
real property in Sevier County (“the Property”) that had already been subdivided and
partially developed, and which was known as Smoky Mountain Ridge. According to
Romglobal’s complaint, Defendants had asked Romglobal to provide funds toward such
purchase in exchange for a minority ownership interest in the LLC, which would
ultimately come to hold the title to the Property. Defendants had allegedly represented
that Romglobal would receive “an equity membership/ownership voting interest in the
Company of 24.5000% and an economic membership/ownership interest in the Company
of 33.3333%.” According to Romglobal, although it advanced funds totaling $40,000.00
to Defendants based on said promise of an ownership interest in the LLC, Defendants
subsequently refused to acknowledge Romglobal’s ownership interest.
Romglobal asserted claims of breach of contract, conversion, and unjust
enrichment, seeking damages of $4,086,662.58, which amount allegedly represented
33.3333% of the net value of the Property owned by the LLC. Romglobal also sought
specific performance of its contract with Defendants, ownership rights in the LLC,
attorney’s fees, and court costs.
Defendants filed an answer on November 4, 2016, denying that Romglobal was
entitled to an ownership interest in the LLC. Defendants averred that Gabriel Vasile of
Romglobal was approached by a previous potential buyer of the Property, Galler Lehman
Law, P.A. (“Galler Lehman”), and asked to provide a $25,000.00 non-refundable earnest
money deposit for Galler Lehman’s purchase of the Property. Defendants alleged that a
subsequent check for $15,000.00 was provided by Romglobal, on behalf of Galler
Lehman, in order to obtain an oral extension of time on the purchase. Defendants averred
that the extension expired on September 5, 2014, and that Galler Lehman failed to obtain
the funding needed to close the sale. Therefore, according to Defendants, the $40,000.00
paid by Romglobal on behalf of Galler Lehman was forfeited to the seller, Steve Miller
and Associates, Inc., as had purportedly been established in a separate lawsuit.
Defendants averred that Mr. Vasile had represented that he could obtain
substantial funds for construction but had failed to do so. They further averred that this
was a condition precedent to Mr. Vasile or Romglobal obtaining any interest in the LLC.
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Defendants asserted that no contract had been formed because there was no meeting of
the minds and because of the failure of a condition precedent. Defendants further stated
that in the alternative, if an agreement was formed between the parties, Romglobal had
materially breached the agreement.
Defendants concomitantly filed a counter-complaint against Romglobal as well as
a third-party complaint against Mr. Vasile and RomCraft Construction Co., LLC
(“RomCraft”). Defendants alleged that Mr. Vasile had interfered with the Defendants’
sale of various lots by informing the title company that the lots could not be conveyed
due to this lawsuit and the filing of a lien by RomCraft. Defendants further alleged that
Mr. Vasile had slandered the title to certain lots and interfered with Defendants’
contracts. Defendants thus sought damages for slander of title, interference with
contracts, and loss of real estate commissions, as well as payment of attorney’s fees and
treble damages.
RomCraft subsequently filed a counterclaim against Defendants, alleging that
RomCraft had performed maintenance work on the Property at the behest of Mr. Miller
but that RomCraft had not been paid for its work. RomCraft valued the work performed
at $15,000.00. Meanwhile, Romglobal filed a motion seeking to have Defendants’
counter-complaint and third-party complaint dismissed.
Defendants filed a motion for partial judgment on the pleadings on June 29, 2017,
asserting that because Romglobal had claimed to have no more than a 33.3333% interest
in the LLC, Romglobal’s potential ownership interest in the LLC should be limited to this
percentage. Defendants subsequently filed a motion to amend their counterclaim and
third-party claim to add Mr. Vasile and RomCraft as additional defendants. The trial
court conducted a hearing concerning the pending motions on February 3, 2017, and
April 7, 2017, and subsequently entered an order denying the motion to dismiss the
counter-complaint, granting the motion to amend the counter-complaint, and reserving
the remaining motions to dismiss for further hearing.
The trial court entered a subsequent order on July 18, 2017, granting the motion to
dismiss the third-party complaint against Mr. Vasile and RomCraft. The court also
denied Defendants’ motion to amend their counterclaim and third-party claims to add Mr.
Vasile and RomCraft as additional defendants. The court further granted Defendants’
motion for partial judgment on the pleadings, limiting Romglobal’s claim to 24.5000% of
the voting interest and 33.3333% of the economic/ownership interest in the LLC.
On January 22, 2018, the trial court entered an “Order to Add Proper Parties,”
stating that the court had determined from the pleadings and statements of counsel that
Xavier Amberge and the personal representative and heirs of Michael Murray, deceased,
should be added as parties due to their potential interest in the LLC. The court therefore
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ordered Romglobal to file an amended complaint adding these parties as defendants and
to serve proper process upon them. Romglobal filed the respective amended complaint
on January 31, 2018.
Mr. Amberge subsequently filed an answer, stating that he held a 24.5%
ownership interest in the LLC pursuant to a written agreement with Mr. Miller. Four of
Mr. Murray’s children—Shane Murray, Michael Murray, Tracy Mallory, and Ryan
Murray—filed pro se answers asserting ownership claims in the LLC by virtue of their
kinship to Mr. Murray. Linda Murray, Mr. Murray’s widow, subsequently filed a pro se
answer, likewise asserting a claim of ownership in the LLC.
The trial court conducted a hearing on August 29 and 30, 2018. The court
subsequently entered a final order on October 3, 2018, finding as follows:
1. The verbal Motion of the original Defendants to Amend their
Answer to remove any and all allegations and affirmative defenses
requesting offsets, adjustments or credits for expenses incurred by
Steve Miller and/or Steve Miller & Associates, Inc., is granted.
Therefore all such pleadings are removed and not adjudicated in this
cause.
2. All claims of the Plaintiff, Romglobal, Inc., for an ownership interest
and voting rights in SMRCC, LLC, and all claims for monetary
damages against the original Defendants are dismissed with
prejudice.
3. All claims of the Murray Parties for an ownership interest and voting
rights in SMRCC, LLC, and all claims for monetary damages
against the original Defendants are dismissed with prejudice.
4. The monetary claim of RomCraft Construction Co., LLC, for work
performed at SMRCC, LLC, is dismissed with prejudice.
5. This Final Order may be recorded in the Register of Deeds for
Sevier County Tennessee as a full and final Release of the Notice of
Lien of RomCraft Construction Co., LLC, recorded at Book 4441,
page 806.
6. The Counter Complaint against Romglobal, Inc., for slander of title
and interference with contract is dismissed with prejudice.
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7. The claim of Brandonn Xavier Amberge for an ownership interest in
SMRCC, LLC, was not opposed and the Court finds that Brandonn
Xavier Amberge is a Member with a 24.5% ownership interest in
SMRCC, LLC, subject to the terms and conditions of that Operating
Agreement of Smoky Mountain Ridge on Cove Creek, LLC,
between Steve Miller and Brandonn Xavier Amberge dated
September 21, 2015, and filed as Exhibit 19 in the Trial of this
cause.
8. The Clerk & Master is hereby ordered to hold the sum of Forty
Thousand ($40,000.00) Dollars paid into the Chancery Court until
the Final Order either becomes non-appealable or is affirmed on
appeal.
9. Court costs are assessed against Romglobal, Inc., for which
execution may issue if necessary.
The trial court’s memorandum opinion was attached and incorporated into this order.
Romglobal and RomCraft filed a post-trial motion on October 4, 2018, which the
trial court denied by order dated December 11, 2018. Romglobal and RomCraft timely
appealed.
II. Issues Presented
Romglobal has presented the following issues for our review, which we have
restated slightly:
1. Whether the trial court erred by requiring Romglobal to prove its
claim of breach of contract by clear and convincing evidence.
2. Whether the trial court erred by failing to determine that the
evidence preponderated in favor of Romglobal on its breach of
contract claim.
3. Whether the trial court erred by failing to determine that Romglobal
had proven that an agreement existed between the parties requiring
Defendants to convey an interest in the LLC to Romglobal.
4. Whether the trial court erred by requiring Romglobal to join the
Murray heirs and Mr. Amberge as additional parties.
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5. Whether the trial court erred by prohibiting the cross-examination of
Mr. Miller concerning the code of ethics applicable to realtors.
III. Standard of Review
Our review of the trial court’s judgment following a non-jury trial is de novo upon
the record, with a presumption of correctness as to the trial court’s findings of fact unless
the preponderance of the evidence is otherwise. See Tenn. R. App. P. 13(d); Rogers v.
Louisville Land Co., 367 S.W.3d 196, 204 (Tenn. 2012). “In order for the evidence to
preponderate against the trial court’s findings of fact, the evidence must support another
finding of fact with greater convincing effect.” Wood v. Starko, 197 S.W.3d 255, 257
(Tenn. Ct. App. 2006) (citing Rawlings v. John Hancock Mut. Life Ins. Co., 78 S.W.3d
291, 296 (Tenn. Ct. App. 2001)). The trial court’s determinations regarding witness
credibility are entitled to great weight on appeal and shall not be disturbed absent clear
and convincing evidence to the contrary. See Morrison v. Allen, 338 S.W.3d 417, 426
(Tenn. 2011); Jones v. Garrett, 92 S.W.3d 835, 838 (Tenn. 2002). We review the trial
court’s conclusions of law de novo with no presumption of correctness. Hughes v. Metro.
Gov’t of Nashville & Davidson County, 340 S.W.3d 352, 360 (Tenn. 2011).
IV. Applicable Standard of Proof
Romglobal asserts that the trial court erred by misclassifying Romglobal’s breach
of contract claim as an implied partnership claim and thereby determining that the burden
of proof applicable to Romglobal’s claim would be by a standard of clear and convincing
evidence. The distinction between these types of claims is significant because the
classification of the claim determines the standard of proof required to substantiate that
claim. On the one hand, if the claim was simply for breach of contract, Romglobal would
have to prove the elements of the claim by a preponderance of the evidence. See Next
Generation, Inc. v. Wal-Mart, Inc., 49 S.W.3d 860, 864 (Tenn. Ct. App. 2000) (“[A]
contract can be oral or written or both, and . . . the existence of a contract must be proven
by preponderance of the evidence.”). On the other hand, when a party claims an
ownership interest in a partnership and there is no written partnership agreement, the
party alleging the existence of an implied partnership bears the burden of proving that
fact by clear and convincing evidence. See In re Estate of Threefoot, No. W2005-02942-
COA-R3-CV, 2006 WL 3114147, at *5 (Tenn. Ct. App. Nov. 3, 2006).
In this matter, Romglobal’s complaint alleged that Romglobal and Defendants had
“entered into a verbal contract under which, in exchange for [Romglobal’s] payment of
$40,000, [Romglobal] would become a 24.5000% voting member and 33.3333% equity
member in the Company that was acquiring the Property.” Romglobal further asserted
that Defendants had breached that contract by subsequently failing to acknowledge
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Romglobal’s membership interest after Romglobal paid in the $40,000.00 payment.
Romglobal thus sought to be awarded, inter alia, voting and equity rights in the LLC.
Accordingly, the gravamen of Romglobal’s complaint is an action for enforcement of its
alleged ownership interest in the LLC when the parties have no written agreement.
A similar claim was made in Estate of Threefoot, wherein the plaintiff sought to
enforce an oral agreement to establish a partnership. See 2006 WL 3114147, at *1. The
trial court analyzed the plaintiff’s claim as one for establishment of an implied
partnership and applied the clear and convincing standard as the plaintiff’s burden of
proof. Id. at *3. On appeal, the plaintiff argued that the trial court erred by “requiring the
Estate to prove the existence of an enforceable partnership contract by clear and
convincing evidence, and assert[ed] that the less stringent preponderance of the evidence
standard is applicable to the question of whether an oral contract to fund the Partnership
exists.” Id.
The Threefoot Court determined that the clear and convincing evidence standard
was the appropriate level of proof to be applied to the plaintiff’s claim that there existed
an oral contract to establish a partnership. Id. at *6. As this Court specifically stated,
“the record here must establish, ‘by clear and convincing proof, the existence of an oral
contract of partnership evidenced by mutual assent to sufficiently definite terms that is
supported by valid consideration.’” Id. (quoting In re Taylor & Assoc., L.P., 249 B.R.
448, 469, 1998 WL 1572942 (Bankr. E.D. Tenn. 1998)). The Threefoot Court further
explained that although a contract to form a partnership may be “express or implied,
written or oral,” in order to be enforceable, it must “result from a meeting of the minds in
mutual assent to terms, must be based upon sufficient consideration, and must be
sufficiently definite.’” Id. at *5 (quoting Wheeler v. Haley, No. 91-267-1, 1993 WL
398489, at *5 (Tenn. Ct. App. Oct. 1, 1993)).
Similarly, here, Romglobal seeks to enforce its alleged oral contract with
Defendants to establish Romglobal as an owner and member of the LLC. Although we
recognize that under Tennessee law, an LLC is a business entity that is legally distinct
from a partnership, see, e.g., ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1,
27 (Tenn. Ct. App. 2005), we discern no reason that a claim based on an oral contract to
establish an interest in an LLC should be subject to less scrutiny than a claim based on an
oral contract to establish an interest in a partnership. We further note that although the
Tennessee Limited Liability Company Act, codified at Tennessee Code Annotated § 48-
201-101, et seq. (2019), contains stringent requirements concerning the necessary
documentation for establishment and operation of a limited liability company in
Tennessee, this Court has previously recognized that a claim of ownership in a limited
liability company could potentially be based on an oral agreement if the proper proof of
such an agreement were presented. See, e.g., Bridgeforth v. Jones, No. M2013-01500-
COA-R3CV, 2015 WL 336376, at *19 (Tenn. Ct. App. Jan. 26, 2015) (reversing the trial
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court’s grant of summary judgment because there were disputes of material fact regarding
the plaintiff’s claim that an oral contract existed concerning her ownership in a limited
liability company); Schott v. Animagic Studios, LLC, No. E2003-02287-COA-R3CV,
2004 WL 1813280, at *5 (Tenn. Ct. App. Aug. 16, 2004) (determining that no agreement
had been reached concerning the plaintiff’s alleged ownership interest in the subject
limited liability company without specifically addressing the appropriate standard of
proof to be applied).
Having determined that the trial court applied the appropriate standard of proof in
this matter, we will proceed in the following section to analyze the evidence to determine
whether Romglobal proved its claim that it acquired an interest in the LLC via an oral
agreement by clear and convincing evidence.
V. Evidence of Oral Agreement
We again note that although a contract to form a business entity may be “express
or implied, written or oral,” in order to be enforceable, it must “‘result from a meeting of
the minds in mutual assent to terms, must be based upon sufficient consideration, and
must be sufficiently definite.’” In re Estate of Threefoot, 2006 WL 3114147, at *5
(quoting Wheeler v. Haley, No. 91-267-1, 1993 WL 398489, at *5 (Tenn. Ct. App. Oct. 1,
1993)). In the case at bar, we agree with the trial court’s conclusion that the evidence
was simply insufficient to establish that Mr. Vasile, on behalf of Romglobal, and Mr.
Miller, on behalf of the LLC, reached a “meeting of the minds in mutual assent to terms”
that were “sufficiently definite.” See id.
During trial, Mr. Vasile testified that he became involved with the purchase of the
Property after he was asked by a representative of Galler Lehman to travel to Tennessee
and look at the Property. Mr. Vasile explained that after viewing the Property, he was
asked to provide the earnest money for its purchase by Galler Lehman. Accordingly, Mr.
Vasile initially provided the $25,000.00 down payment on the Property on behalf of
Galler Lehman, and in return Mr. Vasile was supposed to receive repayment of the
$25,000.00, five lots within the subdivision, and a $50,000.00 fee.
Mr. Vasile further testified that after the Galler Lehman purchase failed to close on
August 25, 2014, he and Mr. Miller began discussing a new transaction the following
day. Mr. Vasile stated that Mr. Miller told him they could be partners in the purchase of
the Property if Mr. Vasile could provide another $15,000.00 toward the down payment.
Mr. Vasile tendered another $15,000.00 to the title company on September 3, 2014,
which was the same day that Mr. Miller filed the necessary documents to establish the
LLC as a single-member entity. The Property was ultimately purchased by the LLC on
September 30, 2014, with a down payment of $110,000 and the remaining balance
financed by the seller. Mr. Vasile stated that he provided $40,000.00 of the down
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payment from the payments he had already made to the title company, and Mr. Miller’s
wife paid the remaining $70,000.00 of the down payment.
Mr. Vasile related that he then began to search for investors to provide funds for
the development of the Property and construction of cabins. Mr. Vasile testified that
although he brought several investors forward, Mr. Miller did not want to work with any
of them. Mr. Vasile explained that he also brought in four men from his construction
company in Atlanta to clean up the Property. In addition, Mr. Vasile stated that his
attorney in Atlanta, Louis Bridges, was working on an operating agreement for the LLC.
According to Mr. Vasile, during the time period while he was looking for
investors, he worked from Mr. Miller’s office when he was in Tennessee. Mr. Vasile
related that Mr. Miller told others that Mr. Vasile was his partner, including the Smoky
Mountain Ridge homeowners during an October 2014 homeowners meeting. Mr. Vasile
further stated that Mike Murray was also working from Mr. Miller’s office for a short
period of time prior to Mr. Murray’s unexpected death. Mr. Vasile related that on one
occasion, Mr. Miller shook hands with Mr. Vasile and Mr. Murray and said that they
were all “partners,” with each having a one-third interest. Mr. Vasile further stated that
Mr. Murray was also working on an operating agreement for the LLC.
Mr. Murray became ill and passed away suddenly in mid-October of 2014.
According to Mr. Vasile, Mr. Miller told Mr. Murray’s wife and sons that Mr. Murray
was a “good partner” and that he would see to it that Mr. Murray’s heirs received his fair
share of the company. Mr. Vasile stated that he then traveled to Europe for ten days to
meet with potential investors. When he returned, Mr. Miller told him that “this is not
going to work out” and offered to credit his $40,000.00 investment toward another
property that Mr. Miller was brokering, which contained an apartment complex. Mr.
Vasile refused Mr. Miller’s offer and left.
In December 2014, Mr. Vasile and his attorney, Mr. Bridges, sent demand letters
to Mr. Miller seeking recognition of Mr. Vasile’s ownership interest in the LLC. Mr.
Vasile additionally invoiced Mr. Miller for the work performed on the Property by
RomCraft’s construction crew in the amount of $14,354.95. Mr. Vasile stated that
because Mr. Miller had refused to pay RomCraft for the work done on the Property, Mr.
Vasile filed a mechanic’s lien thereon. Mr. Vasile testified that he was ultimately seeking
a one-third interest in the LLC based on an oral partnership agreement. When questioned
about the specifics of their oral agreement, Mr. Vasile explained that Mr. Murray, Mr.
Miller, and he were each to have a one-third interest in the LLC. He further explained
that Mr. Murray would manage operations and handle finances, Mr. Miller would be
director of marketing and sales, and Mr. Vasile was to select builders and suppliers and
perform maintenance.
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Mr. Bridges, Mr. Vasile’s Atlanta attorney, testified that he and Mr. Vasile
participated in a conference call in the summer of 2014 with Mr. Miller. Mr. Bridges
noted that Mr. Miller and Mr. Vasile discussed being partners in the development of
Smoky Mountain Ridge, and Mr. Bridges reportedly told them they should establish a
limited liability company for such purpose. Mr. Bridges related that Mr. Miller was to
own two-thirds of the company and Mr. Vasile was to own the remaining one-third.
According to Mr. Bridges, Mr. Miller was to manage the LLC, but no details were
worked out otherwise. He explained that he had not heard of Mr. Murray, although he
did relate that they discussed another gentleman who was helping and had died. Mr.
Bridges further stated that he was never asked to draft an operating agreement.
Mr. Miller testified that he was a realtor and had originally arranged to purchase
the Property for $500,000.00 and immediately “flip it” by selling it to Galler Lehman for
$650,000.00. Mr. Miller explained that if this transaction had closed, he would have had
no involvement with the Property after closing. Mr. Miller stated that Galler Lehman
paid $25,000.00 in earnest money, which he later learned was paid by Romglobal, and
the transaction was originally set to close on August 8, 2014. According to Mr. Miller,
the closing date was extended initially to August 25, 2014, and was extended further to
September 5, 2014, upon an additional payment of $15,000.00 by Galler Lehman, which
payment was actually made by Romglobal.
Mr. Miller testified that when Galler Lehman failed to close by the August 25
date, he began negotiating with the seller in the event he had to complete the purchase of
the Property without a subsequent buyer in place. He related that he formed a single-
member LLC in early September in order to be able to purchase the Property and have
title held by the LLC in case Galler Lehman again failed to close the deal. Mr. Miller
ultimately purchased the Property in the name of the LLC and paid $110,000.00 down,
with $70,000.00 supplied by his wife and the remaining $40,000.00 coming from the
nonrefundable funds held in escrow by the title company from the defunct Galler Lehman
deal.
Mr. Miller also testified that he never had an agreement with Mr. Vasile to convey
Mr. Vasile an ownership interest in the LLC unless Mr. Vasile was able to raise
additional money for development of the Property. According to Mr. Miller, the monies
paid by Romglobal on behalf of Galler Lehman constituted nonrefundable earnest money
that was forfeited when the transaction failed to close. Mr. Miller denied telling Mr.
Bridges that he and Mr. Vasile were partners. Mr. Miller explained that Mr. Vasile
brought workers up from Atlanta to clean the Property without asking Mr. Miller. Mr.
Miller further explained that any other work performed by Mr. Vasile was to raise money
for development because that was how Mr. Vasile would obtain an interest. Mr. Miller
stated that he told Mr. Vasile, “you bring the money and we will sit down and talk.”
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Mr. Miller described the investors that Mr. Vasile sought to bring in as “crooks,”
stating that the sole potential investor who actually offered money would only provide a
$5,000,000.00 loan. Mr. Miller stated that he was always skeptical of Mr. Vasile’s ability
to provide capital because Mr. Vasile had failed to do so for Galler Lehman. Mr. Miller
admitted that he wanted Mr. Murray’s help because Mr. Murray was the original
developer of the subdivision and had a wealth of knowledge concerning it. Mr. Miller
stated that he told Mr. Murray he would bring him into the company after he “got the
money to flowing.” Mr. Murray, unfortunately, passed away after being in Tennessee for
approximately one week. Mr. Miller also utilized assistance from Mr. Amberge, to
whom he later conveyed a 24.5% ownership interest in the LLC.
The remaining witnesses at trial were Ryan Murray, one of Mr. Murray’s sons,
and Linda Murray, Mr. Murray’s widow. They both testified that Mr. Miller assured
them in the days following Mr. Murray’s death that he would make sure Mr. Murray’s
family received his share of the company or what they were “due.” Deposition testimony
from additional witnesses demonstrated that Mr. Miller had referred to Mr. Vasile as his
“partner” in front of others.
In its findings and conclusions rendered from the bench and transcribed in its
memorandum opinion, the trial court found that Mr. Vasile tendered $25,000.00 in
nonrefundable earnest money on behalf of Galler Lehman toward Galler Lehman’s
purchase of the Property. The court also found that Mr. Vasile subsequently paid an
additional $15,000.00 to the title company but that the circumstances of this payment
were in dispute. The court noted that Galler Lehman never completed its purchase of the
Property.
The trial court determined that Mr. Miller formed the LLC in order to purchase the
Property when he saw that Galler Lehman was not going to close the deal. The court also
found that the LLC purchased the Property at the end of September, after Galler Lehman
failed to do so, and that $25,000.00 in nonrefundable earnest money in the title
company’s escrow account was applied because it had been forfeited to the seller. As the
court further noted, the LLC established by Mr. Miller on September 3, 2014, was a
single-member LLC rather than an LLC that included Mr. Murray and Mr. Vasile. The
court reasoned that if there had been a definite agreement among the three, Mr. Miller
would have named them as members of the LLC so that they could share liability for
costs and expenses, such as the mortgage encumbering the Property.
The trial court further determined that Mr. Vasile and the heirs of Mr. Murray had
failed to present clear and convincing evidence establishing an agreement among Mr.
Miller, Mr. Murray, and Mr. Vasile concerning their co-ownership in a business entity.
The court found that there was no meeting of the minds concerning the terms of the
alleged contract regarding the LLC. Although testimony indicated that Mr. Murray was
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working on an operating agreement when he died, neither a draft agreement nor
testimony concerning its alleged terms was presented. As the court noted, assuming,
arguendo, that a partnership agreement existed among Mr. Miller, Mr. Murray, and Mr.
Vasile following the purchase of the Property, that partnership would have been
dissolved when Mr. Murray died. The court determined that although there had been
discussions among the parties about Mr. Murray’s and Mr. Vasile’s obtaining an interest
in the LLC when they raised some capital, they had never done so; thus, they never
acquired any interest in the existing, single-member LLC. In dismissing the claims of
Mr. Vasile and Mr. Murray’s heirs, the court reiterated that “the evidence of [a]
partnership or a three-member [limited] liability company has not been proven to the
standard of clear, cogent and convincing.”
Upon our thorough review, we agree with the trial court’s conclusion that
Romglobal failed to present sufficient evidence of an implied partnership or its claimed
membership in the LLC. As this Court previously explained in Estate of Threefoot,
although a contract to form a partnership may be “express or implied, written or oral,” in
order to be enforceable, it must “‘result from a meeting of the minds in mutual assent to
terms, must be based upon sufficient consideration, and must be sufficiently definite.’”
In re Estate of Threefoot, 2006 WL 3114147, at *5 (quoting Wheeler v. Haley, No. 91-
267-1, 1993 WL 398489, at *5 (Tenn. Ct. App. Oct. 1, 1993)). Furthermore, the
evidence must be clear and convincing, which has been defined as “eliminat[ing] any
serious or substantial doubt about the correctness of the conclusions to be drawn from the
evidence” and rendering the truth of the facts as alleged to be “‘highly probable’” as
opposed to “‘more probable’ than not.” Id. at *6 (quoting Lettner v. Plummer, 559
S.W.2d 785, 787 (Tenn. 1977)).
Mr. Vasile’s testimony and the other evidence presented in support of
Romglobal’s claims failed to prove sufficiently definite terms of any alleged agreement.
Moreover, Mr. Miller’s testimony demonstrated that there was, ultimately, no meeting of
the minds and no mutual assent. We therefore affirm the trial court’s determination that
Romglobal failed to prove its claim of an implied agreement affording Romglobal an
ownership interest in the LLC.
VI. Joinder of Other Parties
Romglobal contends that the trial court also erred by requiring Romglobal to join
Mr. Murray’s heirs and Mr. Amberge as additional parties. Regarding the joinder of
indispensable parties, Tennessee Rule of Civil Procedure 19.01 states:
A person who is subject to service of process shall be joined as a party if
(1) in the person’s absence complete relief cannot be accorded among those
already parties, or (2) the person claims an interest relating to the subject of
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the action and is so situated that the disposition of the action in the person’s
absence may (i) as a practical matter impair or impede the person’s ability
to protect that interest, or (ii) leave any of the persons already parties
subject to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reasons of the claimed interest. If the person
has not been so joined, the court shall order that the person be made a party.
If the person properly should join as a plaintiff but refuses to do so, he or
she may be made a defendant, or in a proper case, an involuntary plaintiff.
Concerning joinder of a party, this Court has previously stated: “[Tennessee Rule of
Civil Procedure 19.01] is designed to protect the interests of absent persons as well as
those before the court from multiple litigation and inconsistent judicial determinations.”
Citizens Real Estate & Loan Co., Inc. v. Mountain States Dev. Corp., 633 S.W.2d 763,
766 (Tenn. Ct. App. 1981).
With regard to the distinction between a proper party and an indispensable one,
this Court has further elucidated:
A “proper party” to a lawsuit is one who has legal or equitable rights in the
subject of the litigation. A proper party is so connected with the dispute as
to be under an enforceable obligation to the plaintiff, or to have a right or
position with regard to the subject of the litigation that entitles him to
defend against the court’s judgment. However, a proper party is not
necessarily an indispensable party for the purposes of Tenn. R. Civ. P.
19.01. “Only a party who will be directly affected by a decree and whose
interest is not represented by any other party to the litigation is an
indispensable or necessary party, that is, one without which no valid decree
may be entered settling the rights between the parties that are before the
[c]ourt.” Brewer [v. Lawson], 569 S.W.2d [856,] 858 [(Tenn. Ct. App.
1978)](emphasis added).
Moore v. Teddleton, No. W2005-02746-COA-R3-CV, 2006 WL 3199273, at *6 (Tenn.
Ct. App. Nov. 7, 2006) (other internal citations omitted).
In the case at bar, Mr. Amberge and Mr. Murray’s heirs claimed an interest in the
LLC in addition to the interests claimed by Mr. Vasile and Mr. Miller. The respective
claims for ownership among the parties to the litigation were as follows: Mr. Miller
claimed an ownership interest of 75.5%; Mr. Amberge claimed an ownership interest of
24.5%; Romglobal claimed an ownership interest of 33.3%; and the Murrays claimed an
ownership interest of 33.3%. These combined claims would amount to the impossible
sum of 166.6% in ownership interests in the LLC. Therefore, without joinder of the
Murrays and Mr. Amberge, Mr. Miller could have been left subject to “double, multiple,
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or otherwise inconsistent obligations by reasons of the claimed interest” by way of
subsequent lawsuits brought by Mr. Amberge or the Murrays. See Tenn. R. Civ. P.
19.01. Furthermore, these parties would be directly affected by the court’s decree, and
their interests were not represented by any other party to the litigation. See Brewer v.
Lawson, 569 S.W.2d 856, 858 (Tenn. Ct. App. 1978). Accordingly, the trial court was
correct to require joinder of the Murrays and Mr. Amberge in order to determine the
proper allocation of interests in the LLC with all involved parties present. Romglobal’s
issue raised concerning improper joinder is without merit.
VII. Limitation on Cross-Examination
Finally, Romglobal argues that the trial court erred by failing to allow Mr. Miller
to be cross-examined concerning whether his conduct violated the code of ethics
applicable to realtors. With regard to Mr. Miller’s claim that the $15,000.00 payment by
Romglobal was in exchange for an oral extension of the closing date, Romglobal
specifically asserts that such an oral extension given by a realtor is unethical and thus
affects Mr. Miller’s credibility. When Romglobal’s attorney attempted to question Mr.
Miller concerning the code of ethics applicable to realtors in reference to this extension,
the trial court sustained the objection of Mr. Miller’s attorney, finding such testimony to
be irrelevant because the court could not adjudicate and had not been presented with an
ethical claim.
As our Supreme Court has previously explained concerning relevancy rulings:
Relevant evidence is admissible, and irrelevant evidence is not,
unless excepted by the state and federal constitutions, the Tennessee Rules
of Evidence, or other rules or laws generally applicable to the courts. Tenn.
R. Evid. 402. Relevant evidence is defined as “evidence having any
tendency to make the existence of any fact that is of consequence to the
determination of the action more probable or less probable than it would be
without the evidence.” Tenn. R. Evid. 401. The admission of evidence is
left to “the sound discretion of the trial judge,” Otis v. Cambridge Mut. Fire
Ins. Co., 850 S.W.2d 439, 442 (Tenn. 1992), and “[r]elevancy is always a
judicial question to be determined according to the issue which is to be
tried.” Randolph v. State, 570 S.W.2d 869, 872 (Tenn. Crim. App. 1978)
(quoting Ellison v. State, 549 S.W.2d 691, 696 (Tenn. Crim. App. 1976)).
We review a trial court’s admission of evidence under an abuse of
discretion standard and will reverse the decision to admit evidence only if
“the court applied an incorrect legal standard, or reached a decision which
is against logic or reasoning” and admission of the evidence “caused an
injustice to the party complaining.” State v. Gilliland, 22 S.W.3d 266, 270
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(Tenn. 2000) (quoting State v. Shirley, 6 S.W.3d 243, 247 (Tenn. 1999))
(internal quotation marks omitted).
In re Estate of Smallman, 398 S.W.3d 134, 149 (Tenn. 2013).
The testimony sought in this matter—whether Mr. Miller’s conduct in granting an
oral extension of the closing date violated the code of ethics applicable to realtors—did
not have a “tendency to make the existence of any fact that is of consequence to the
determination of the action more probable or less probable than it would be without the
evidence.” Id. (quoting Tenn. R. Evid. 401) (emphasis added). Ultimately, whether Mr.
Miller’s conduct in granting an oral extension violated the applicable code of ethics for
realtors had no bearing on whether the parties had a sufficiently definite and enforceable
agreement granting Romglobal an ownership interest in the LLC. We therefore
determine that the trial court did not abuse its discretion in excluding the testimony
sought in cross-examination.2
VIII. Conclusion
For the foregoing reasons, we affirm the trial court’s dismissal of the claims filed
by Romglobal. Costs on appeal are taxed to the appellant, Romglobal, Inc. This case is
remanded to the trial court for collection of costs assessed below.
_________________________________
THOMAS R. FRIERSON, II, JUDGE
2
Moreover, although the trial court made no credibility findings, to the extent that this testimony could
have been considered by the trial court in its analysis of Mr. Miller’s credibility as a witness, we
determine the trial court’s exclusion of the evidence to be harmless error.
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