I N THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTI ON FILED
March 1, 1996
Cecil Crowson, Jr.
Appellate C ourt Clerk
CANONI E ENERGY, I NC. , a nd ) ANDERSON COUNTY
W , I NC.
GI ) 03A01- 9506- CH- 00200
)
Pl a i nt i f f s - Appe l l e e s )
)
)
v. ) HON. W LLI AM E. LANTRI P,
I
) CHANCELLOR
)
RODNEY KI NG, M ARK HOLBROOK, )
AM ERI CAN RESOURCES M ANAGEM ENT, )
I NC. , AM ERI CAN GAS )
TECHNOLOGI ES, I NC. , )
AM ERI CAN ENERGY EXPLORATI ON, )
I NC. , BERROD, I NC. , RI CK )
CASTOR, a nd M CROM c E, LTD. , I NC. ) AFFI RMED I N PART; VACATED
) I N PART; M ODI FI ED I N PART;
De f e nda nt s - Appe l l a nt s ) a nd REMANDED
W LLI AM P. SNYDER a nd ADRI ENNE L. ANDERSON OF KNOXVI LLE FOR
I
APPELLANTS M ARK HOLBROOK, M CROM
c E, LTD. , I NC. , AMERI CAN RESOURCE
MANAGEM ENT, I NC. , AMERI CAN ENERGY EXPLORATI ON, I NC. , a nd AMERI CAN
GAS TECHNOLOGI ES, I NC.
H. BRUCE GUYTON OF KNOXVI LLE FOR APPELLEES
O P I N I O N
Godda r d, P. J .
The De f e nda nt s a ppe a l a s umma r y j udgme nt e nt e r e d i n
f a vo r o f t he Pl a i nt i f f s f or t he e nf or c e me nt of a s e t t l e me nt
a gr e e me nt .
The f a c t s o f t hi s c a s e a r e s ome wha t c ompl e x. Ca noni e
En e r g y , I nc . ( CEI ) a nd W , I nc . ( W ) , whi c h s ha l l be
GI GI
c o l l e c t i ve l y r e f e r r e d t o a s Pl a i nt i f f s , e nt e r e d i nt o a ve nt ur e
wi t h Ame r i c a n Re s our c e M na ge me nt , I nc . ( ARM , Ame r i c a n Ene r gy
a )
Ex p l o r a t i on, I nc . , ( AEX) a nd Coa l Cr e e k M nuf a c t ur i ng Compa ny
a
( Co a l Cr e e k) . The ve nt ur e , c a l l e d " t he Bl ue Ge m Pr oj e c t , " wa s
f o r t h e e xpl or a t i on of oi l a nd na t ur a l ga s i n Ande r s on a nd M g a n
or
c ount i e s . The ve nt ur e a l s o i nc l ude d t he dr i l l i ng a nd
c o n s t r u c t i on of oi l a nd na t ur a l ga s we l l s a nd t he s a l e of oi l a n d
n a t u r a l ga s pr oduc e d by t hos e we l l s .
Unde r t he a gr e e me nt , t he Pl a i nt i f f s we r e t o c ont r i but e
n i n e mi l l i on dol l a r s ove r a s e ve n- ye a r pe r i od. ARM a nd AEX
a g r e e d t o c ont r i but e i nt e r e s t s i n c e r t a i n e xi s t i ng oi l a nd
n a t ur a l ga s we l l s a nd i nt e r e s t s i n mi ne r a l r i ght s l e a s e s , a nd
Co a l Cr e e k a gr e e d t o c ont r i but e a n opt i on t o dr i l l oi l a nd
n a t u r a l ga s we l l s on a ppr oxi ma t e l y s e ve nt y t hous a nd a c r e s of
l a nd. The a gr e e me nt pr ovi de d t ha t ARM wa s t o a c t a s t he
o p e r a t i ng ma na ge r of t he pr oj e c t a nd wa s t o pr ovi de a l l ope r a t i o n
s e r vi c e s . I n c onne c t i on wi t h s uc h dut i e s , ARM hi r e d AGT t o
p e r f o r m t he a c t ua l c ons t r u c t i on a nd ope r a t i on of t he pr oj e c t ' s
we l l s .
2
I n Nove mbe r of 1993, t he Pl a i nt i f f s f i l e d s ui t a l l e g i n g
t h a t t h e y we r e f r a udul e nt l y i nduc e d t o pa r t i c i pa t e i n t he Bl ue
Ge m Pr o j e c t a nd a l l e gi ng t ha t AGT, a s t he a l t e r e go of ARM,
wr o n g f u l l y c ha r ge d a ma r kup on ma t e r i a l s s uppl i e d f or t he pr oj e c t
a n d wr o ngf ul l y c ha r ge d f or t he e qui pme nt a nd s e r vi c e s pur s ua nt t o
t h e pr i c e l i s t i n t he e xpl or a t i on a gr e e me nt . Na me d a s de f e nda nt s
i n t h e s ui t we r e ARM AGT, AEX, Coa l Cr e e k, M r k Hol br ook, Rod n e y
, a
Ki n g , Be r r od, I nc . , a nd Ri c ha r d Ca s t or . Hol br ook wa s t he
p r e s i d e nt of ARM a nd AEX. Ki ng wa s a f or me r pr e s i de nt of AGT a n d
t h e c u r r e nt pr e s i de nt of Be r r od, I nc . , t he s ol e s ha r e hol de r of
AEX. Ca s t or wa s t he pr e s i de nt of AGT.
I n M y 1994, Ca s t or a nd Hol br ook be c a me i nt e r e s t e d i n
a
t he p o s s i bi l i t y o f s e t t l i ng t hi s l a ws ui t . Ca s t or c ont a c t e d t he
Pl a i nt i f f s ' r e pr e s e nt a t i ve s t o di s c us s t hi s pos s i bi l i t y. The
Pl a i n t i f f s a nd Hol br ook a gr e e d t ha t t he di s c us s i ons woul d t a ke
p l a c e i n Pl a i nt i f f s ' of f i c e s i n Sout h Ha ve n, M c hi ga n.
i Pr e s e n t
a t t h e me e t i ng we r e : Hol br ook, Ca s t or , Tony Ca noni e , Sr . , a n
i n v e s t o r i n t he Bl ue Ge m Pr oj e c t , J e r r y Ca noni e , pr e s i de nt of
CEI , To ny Ca noni e , J r . , c h a i r ma n of t he boa r d of di r e c t or s of
CEI , a n d Cl a ude Woods , pr e s i de nt of W .
GI Ki ng di d not a t t e nd t h e
me e t i n g , n or wa s h e ma de a wa r e t ha t i t wa s t a ki ng pl a c e .
Hol br ook a l l e ge s t ha t dur i ng t he s e t t l e me nt
d i s c u s s i ons , t h e Pl a i nt i f f s ma de r e f e r e nc e t o t he pos s i bi l i t y
t h a t c r i mi na l c ha r ge s mi ght be br ought a ga i ns t Hol br ook a nd hi s
f a mi l y , who we r e s ha r e hol de r s a nd di r e c t or s of M Cr ome , I nc . ,
c
3
Ho l b r o o k ' s f a mi l y c or por a t i on. M Cr ome wa s not a n or i gi na l pa r t y
c
t o t he l a ws ui t , b ut i t di d own a n i nt e r e s t i n t he Bl ue Ge m
Pr o j e c t a s of M y 1994, a nd t he Pl a i nt i f f s l a t e r a me nde d t he i r
a
c o mp l a i nt t o a dd a c l a i m a ga i ns t M Cr ome .
c Hol br ook f ur t he r
a l l e ge s t ha t t he r e wa s a l s o di s c us s i on t ha t s i mi l a r c ha r ge s c ou l d
b e b r o u ght a ga i ns t Ki ng a nd hi s f a mi l y me mbe r s . The r e we r e a l s o
a l l e ga t i ons t ha t Ki ng h a d e nga ge d i n e xt r a ma r i t a l a f f a i r s a nd
t h a t t h e s e a f f a i r s woul d b e e xpos e d i f t he l i t i ga t i on c ont i nue d .
Ho l b r o o k f ur t he r a l l e ge s t ha t t he Pl a i nt i f f s t hr e a t e ne d t o f or c e
b o t h t h e Ki ng a nd Hol br ook f a mi l i e s i nt o ba nkr upt c y.
The s e t t l e me nt me e t i ng wa s he l d i n t he of f i c e s of CEI
a nd a t t he e nd o f d a y o ne , a dr a f t of t he a gr e e me nt wa s r e a c he d.
Th a t n i ght , t he Pl a i nt i f f s , Hol br ook a nd Ca s t or s oc i a l i z e d
t oge t he r . Hol br ook a nd Ca s t or r e t ur ne d t o t he i r hot e l r oom l a t e r
t h a t e v e ni ng. Hol br ook c a l l e d hi s wi f e , but he di d not di s c us s
t h e s e t t l e me nt ne got i a t i on s wi t h he r . Ne i t he r Hol br ook nor
Ca s t o r c ont a c t e d t he i r a t t or ne ys .
The ne xt da y ne got i a t i ons r e s ume d. Hol br ook r e que s t e d
t h a t s o me c ha nge s b e ma de i n t he dr a f t s e t t l e me nt a gr e e me nt a nd
t h e c h a nge s we r e ma de . Hol br ook a s s e r t s t ha t t he Pl a i nt i f f s t h e n
a g r e e d t ha t Hol br ook a nd Ca s t or ' s s e t t l e me nt of f e r wa s s uf f i c i e n t
t o c o v e r Ki ng a s we l l a nd t ha t t he Pl a i nt i f f s woul d r e l e a s e Ki ng
a n d Be r r od, I nc . , Ki ng' s f a mi l y c or por a t i on, f r om a l l c l a i ms i f
Ki n g wo ul d a gr e e t o be bound by t he t e r ms of t he s e t t l e me nt
a gr e e me nt . Howe ve r , t he s e t t l e me nt a gr e e me nt i t s e l f pr ovi de s
4
t ha t t h e Pl a i nt i f f s woul d di s mi s s t he s ui t onl y a s t o ARM AGT,
,
Ho l b r o o k, AEX, Ca s t or a nd M Cr ome .
c I t f ur t he r s t a t e d t ha t t he
s e t t l e me nt a gr e e me nt d i d not a f f e c t c l a i ms a ga i ns t Be r r od, I nc . ,
a n d Ki n g.
Pr i or t o t he s i gni ng of t he s e t t l e me nt a gr e e me nt ,
Ca s t or t ol d t he Pl a i nt i f f s t ha t i n Apr i l of t ha t ye a r he
s u b mi t t e d a l e t t e r of r e s i gna t i on a s pr e s i de nt of AGT a nd t ha t ,
a s a r e s ul t , he ma y not ha ve t he ne c e s s a r y a ut hor i t y t o e xe c ut e
t h e s e t t l e me nt a gr e e me nt on be ha l f of AGT. Howe ve r , t he r e
a p p e a r s t o be s ome que s t i on ove r whe t he r Ca s t or ' s l e t t e r of
r e s i g n a t i on wa s a c c e pt e d by AGT. Ca s t or s a i d he wa s t ol d t ha t
t h e r e s i gna t i on woul d not be a c c e pt e d unt i l s ome one c oul d be
f o u n d t o t a ke h i s p l a c e . Thus , a t t he t i me of t he s e t t l e me nt ,
Ca s t o r t hought hi s r e s i gna t i on ha d not be e n a c c e pt e d a nd t ha t h e
s t i l l h a d a ut hor i t y t o a c t a s pr e s i de nt of AGT. The a gr e e me nt
wa s t h e n s i gne d by t he pa r t i e s . Hol br ook s i gne d t he a gr e e me nt o n
b e h a l f of hi ms e l f , ARM AEX, a nd M Cr ome .
, c Ca s t or s i gne d t he
a g r e e me nt of be ha l f of hi ms e l f a nd AGT.
Upon r e t ur ni ng f r om t he s e t t l e me nt ne got i a t i ons i n
M c h i g a n, Hol br ook me t wi t h Ki ng a nd Ki ng i ni t i a l l y a gr e e d t o t h e
i
t e r ms o f t he s e t t l e me nt a gr e e me nt . Hol br ook t he n me t wi t h hi s
f a mi l y , t he s ha r e hol de r s a nd di r e c t or s of M Cr ome , a nd a dvi s e d
c
t h e m o f t he s e t t l e me nt me e t i ng a nd t he a gr e e me nt i t pr oduc e d.
Th e f a mi l y me mbe r s t he n vot e d t o a c c e pt t he t e r ms of t he
s e t t l e me nt a gr e e me nt .
5
Shor t l y t he r e a f t e r , Hol br ook a l l e ge s t ha t J e r r y Ca no n i e
a d v i s e d hi m t ha t CEI a nd W woul d not a gr e e t o r e l e a s e Ki ng o r
GI
Be r r o d , I nc . , o f a l l c l a i ms unl e s s Ki ng t r a ns f e r r e d c e r t a i n
a s s e t s t o CEI . At a bout t hi s s a me t i me , t h e s ha r e hol de r s a nd
d i r e c t or s o f Be r r od, I nc . , me t t o di s c us s t he s e t t l e me nt
a gr e e me nt . Be r r od, I nc . , wa s not a pa r t y t o t he s e t t l e me nt
a g r e e me nt , but i t owne d a l l of AEX' s s ha r e s of s t oc k a nd one -
t h i r d o f ARM s s ha r e s of s t oc k.
' The s ha r e hol de r s a nd di r e c t or s
v o t e d n ot t o r a t i f y Hol br ook' s e xe c ut i on of t he a gr e e me nt .
No r ma n Be a uc ha mp, a M c hi ga n a t t or ne y a nd owne r of one - t hi r d o f
i
ARM s s ha r e s of s t oc k, a l s o r e f us e d t o vot e hi s s ha r e s of s t oc k
'
t o r a t i f y Hol br ook' s e xe c u t i on of t he a gr e e me nt . The
s h a r e h o l de r s a nd di r e c t or s of AGT a l s o me t , a nd t he y vot e d not t o
r a t i f y Ca s t or ' s e xe c ut i on of t he a gr e e me nt .
I n t he me a nt i me , t h e Pl a i nt i f f s f i l e d a mot i on t o s t a y
p r o c e e d i ngs i n t he Tr i a l Cour t ba s e d upon t he r e a c he d s e t t l e me n t
a g r e e me nt . The Pl a i nt i f f s ' mot i on r e que s t e d t ha t a s t a y be
g r a n t e d a s t o a l l De f e nda nt s e xc e pt Ki ng, Be r r od, I nc . , a nd Co a l
Cr e e k . ARM AEX, a nd Hol br ook t he n oppos e d t he mot i on on t he
,
g r o u n d s t ha t t he s e t t l e me nt a gr e e me nt wa s une nf or c e a bl e . The
Pl a i n t i f f s s ubs e que nt l y a me nde d t he i r c ompl a i nt t o a dd a n
a l t e r n a t i ve c l a i m f or t he e nf or c e me nt of t he s e t t l e me nt
a gr e e me nt . The Pl a i nt i f f s a l s o a dde d a c l a i m a ga i ns t M Cr ome f o r
c
t h e a l l e ge d wr ongf ul r e c e i pt of a s s e t s f r om ARM a nd a n
a l t e r n a t i ve c l a i m f or e nf or c e me nt of t he s e t t l e me nt a gr e e me nt .
6
The Pl a i nt i f f s s ubs e que nt l y t ook a vol unt a r y non- s ui t
a s t o t he i r f r a udul e nt i nduc e me nt c l a i ms . The Pl a i nt i f f s a l s o
v o l u n t a r i l y di s mi s s e d De f e nda nt Coa l Cr e e k. The n i n De c e mbe r o f
1 9 9 4 , a l l De f e nda nt s f i l e d a mot i on f or pa r t i a l s umma r y j udgme n t .
Th e Pl a i nt i f f s a l s o f i l e d a mot i on f or pa r t i a l s umma r y j udgme n t
s e e ki n g t o e nf or c e t he s e t t l e me nt a gr e e me nt a ga i ns t ARM AEX,
,
Ho l b r o o k, M Cr ome , AGT a nd Ca s t or .
c
On M r c h 10, 1995, t he Tr i a l Cour t e nt e r e d a n or de r
a
d e n y i n g t he De f e nda nt s ' mo t i on a nd gr a nt i ng t he Pl a i nt i f f s '
mo t i o n f or s umma r y j udgme nt a s t o Hol br ook a nd M Cr ome , hol di ng
c
t h e s e t t l e me nt a gr e e me nt va l i d a nd e nf or c e a bl e a s t o t hos e
pa r t i e s . I n i t s o r de r , t h e Tr i a l Cour t s pe c i f i c a l l y f ound t ha t
t h e r e wa s n o d i s put e d ma t e r i a l f a c t a s t o t he i s s ue of dur e s s a nd
t h a t t h e r e we r e no i mpr ope r pr e s s ur e s or i nf l ue nc e s on Hol br ook
a t t h e t i me he s i gne d t he s e t t l e me nt a gr e e me nt . A s e c ond or de r
wa s e n t e r e d on M r c h 24, 1995, gr a nt i ng t he Pl a i nt i f f s '
a mot i on
f o r s u mma r y j udgme nt f or e nf or c e me nt of t he s e t t l e me nt a gr e e me n t
1
a g a i n s t ARM AEX, AGT a nd Ca s t or .
, I n doi ng s o, t he Tr i a l Cour t
f o u n d t ha t Hol br ook a nd Ca s t or ha d e i t he r a c t ua l or a ppa r e nt
a u t h o r i t y t o bi nd t he c or por a t i ons t o t he s e t t l e me nt a gr e e me nt
a n d t h a t t he r e we r e no di s put e d f a c t s t o s how t ha t ARM AEX, o r
,
AGT t o o k a ny a c t i on whi c h woul d a dve r s e l y a f f e c t or i nva l i da t e
t h e s e t t l e me nt a gr e e me nt or woul d c ha l l e nge or di s put e t he
1
At o r a r o u n d t h i s s a me t i me , t h e P l a i n t i f f s a p p a r e n t l y t o o k a
vol unt a r y n o n - s u i t o f t h e i r c l a i ms a g a i n s t Ro d n e y Ki n g a n d Be r r o d , I n c . Th e
r e c or d on a p p e a l d o e s n o t a p p e a r t o i n c l u d e t h e o r d e r o f d i s mi s s a l . Ho we v e r ,
t h e Co u r t r e c o g n i z e d t h e d i s mi s s a l i n a n o r d e r t a x i n g c o u r t c o s t s d a t e d M r c h
a
24, 1995, a n d t h u s , we t r e a t t h e Co u r t ' s a wa r d o f s u mma r y j u d g me n t a s a f i n a l
j u d g me n t t h a t i s a p p e a l a b l e t o t h i s Co u r t .
7
a u t h o r i t y of Hol br ook or Ca s t or . Hol br ook, M Cr ome , ARM AEX,
c ,
a nd AGT a ppe a l e d. The a ppe a l s of t he s e De f e nda nt s ha ve be e n
c o n s o l i da t e d. De f e nda nt Ca s t or di d not a ppe a l .
The De f e nda nt s a s s e r t t ha t t he Tr i a l Cour t e r r e d i n
g r a n t i n g t he Pl a i nt i f f s ' mot i on f or s umma r y j udgme nt be c a us e
t h e r e a r e di s put e d i s s ue s of ma t e r i a l f a c t a s t o t he i s s ue s of
d u r e s s , a ut hor i t y, f a i l ur e of c ons i de r a t i on a nd l a c k of
c o n s i d e r a t i on.
The Supr e me Cour t of Te nne s s e e , i n Byr d v. Ha l l , 847
S. W 2 d 208 ( Te nn. 1993) , s e t f or t h t he pr ope r s umma r y j udgme nt
.
a n a l y s i s t o be a ppl i e d i n Te nne s s e e . The r e , t he Cour t s a i d i n
e v a l u a t i ng a s umma r y j udgme nt mot i on, t he s e que s t i ons mus t be
r e s o l v e d: " ( 1) whe t he r a f ac t ual di s put e e xi s t s ; ( 2) whe t he r t h e
d i s p u t e d f a c t i s mat e r i al t o t he out c ome of t he c a s e ; a nd ( 3)
wh e t h e r t he di s put e d f a c t c r e a t e s a ge nui ne i s s ue f or t r i a l . "
Byr d a l s o ma ke s t he f ol l ow hol di ngs : s umma r y j udgme n t
s h o u l d be e mpl oye d whe r e t he r e i s no di s put e ove r t he e vi de nc e
a n d t h e r e i s no i s s ue f or a j ur y t o de c i de . Ra t he r , i t i s j us t
f o r t h e c our t t o a ppl y t he l a w. For a pa r t y t o a voi d s umma r y
j ud g me n t , i t mus t s how t ha t t he f a c t i n di s put e i s ma t e r i a l ;
me a n i n g , t hi s f a c t i s one t ha t " mus t be de c i de d i n or de r t o
r e s o l v e t he s ubs t a nt i ve c l a i m or de f e ns e a t whi c h t he mot i on i s
d i r e c t e d. " I f s uc h a di s put e d, ma t e r i a l f a c t doe s e xi s t , t he
c ou r t " mus t t he n d e t e r mi ne whe t he r t he di s put e d ma t e r i a l f a c t
8
c r e a t e s a ge nui ne i s s ue wi t hi n t he me a ni ng of Rul e 56. 03. " He r e ,
" t h e t e s t f or a ' ge nui ne i s s ue ' i s whe t he r a r e a s ona bl e j ur y
c o u l d l e gi t i ma t e l y r e s ol ve t ha t f a c t i n f a vor of one s i de or t h e
ot he r . I f t he a ns we r i s ye s , s umma r y j udgme nt i s i na ppr opr i a t e ;
i f t h e a ns we r i s no, s umma r y j udgme nt i s pr ope r be c a us e a t r i a l
wo u l d b e poi nt l e s s . . . . " W n a ppl yi ng t hi s t e s t , " t he c our t
he
i s t o v i e w t he e vi de nc e i n a l i ght f a vor a bl e t o t he nonmovi ng
p a r t y a nd a l l ow a l l r e a s ona bl e i nf e r e nc e s i n hi s f a vor . " It is
t h e b u r de n of t he nonmovi n g pa r t y t o de mons t r a t e t ha t t he r e a r e
n o d i s p ut e d, ma t e r i a l f a c t s c r e a t i ng a ge nui ne i s s ue f or t r i a l
a n d t h a t s umma r y j udgme nt i s a ppr opr i a t e .
I n r e vi e wi ng t he or de r f or s umma r y j udgme nt , we c hoo s e
t o a d d r e s s t he i s s ue o f a ut hor i t y f i r s t . He r e , t h e Pl a i nt i f f s
h a v e t h e bur de n of pr ovi ng t ha t a n a ge nc y r e l a t i ons hi p e xi s t e d
b e t we e n Hol br ook a nd ARM a nd AEX a nd be t we e n Ca s t or a nd AEX.
Sl o a n v . Ha l l , 673 S. W 2d 548 ( Te nn. App. 1984) .
. Sl oa n a l s o hol d s
t h e f o l l owi ng: " The s c ope a nd e xt e nt of a n a ge nt ' s r e a l a nd
a p p a r e n t a ut hor i t y a r e que s t i ons t o be de t e r mi ne d by t he t r i e r o f
f a c t f r om a l l t he f a c t s a nd c i r c ums t a nc e s i n e vi de nc e . "
Fu r t h e r mor e , a n a ge nt ' s a ut hor i t y mus t be t r a c e a bl e t o t he
p r i n c i p a l a nd c a nnot be s h own by t he a ge nt ' s s t a t e me nt s or
a c t i o n s a l one . And whe n a t hi r d pe r s on " a c t ua l l y knows , or
s h o u l d know, t he l i mi t a t i ons of a n a ge nt ' s a ut hor i t y, t he
p r i n c i p a l i s not bound by a n a c t t ha t i s be yond s uc h
l i mi t a t i ons . " Rul e v. Br ot he r hood' s Re l i e f & Compe ns a t i on Fun d,
3 6 Te n n . App. 20, 251 S. W 2d 309 ( 1952) .
.
9
Looki ng f i r s t t o Ca s t or ' s a ut hor i t y, a di s put e e xi s t s
a s t o t he e f f e c t of hi s r e s i gna t i on f r om t he pos i t i on of
p r e s i de nt of AGT. Ca s t or ma i nt a i ns t ha t de s pi t e hi s r e s i gna t i on
h e c o n t i nue d t o f unc t i on a s pr e s i de nt of AGT a nd t hought he ha d
a u t h o r i t y t o s i gn t he s e t t l e me nt a gr e e me nt . Howe ve r , unde r t h e
r u l e o f Sl oa n , Ca s t or ' s s t a t e me nt s a l one c a nnot be de t e r mi na t i v e
o f h i s a ut hor i t y. Ki ng, t he f or me r pr e s i de nt of AGT who r e c e i v e d
Ca s t or ' s l e t t e r o f r e s i gna t i on, ma i nt a i ns t ha t t he r e s i gna t i on
wa s a c c e pt e d a t t he t i me i t wa s t e nde r e d a nd t ha t a s s uc h, Ca s t o r
h a d n o a ut hor i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be h a l f
o f AGT. Thus , Ca s t or ' s r e s i gna t i on c r e a t e s a di s put e d i s s ue a s
t o wh e t he r he ha d a ny a c t ua l a ut hor i t y a t t he t i me he s i gne d t h e
s e t t l e me nt a gr e e me nt . W t he r t he Pl a i nt i f f s t hought Ca s t or h a d
he
a u t h o r i t y i s a l s o di s put e d. Re vi e wi ng t he e vi de nc e i n t he l i gh t
mo s t f a vor a bl e t o t he De f e nda nt s , i t a ppe a r s t ha t Ca s t or i nf or me d
t he Pl a i nt i f f s o f h i s r e s i gna t i on a nd t he pos s i bi l i t y t ha t he
l a c k e d t he r e qui s i t e a ut hor i t y t o e nt e r i nt o t he a gr e e me nt .
Th u s , s i nc e t he Pl a i nt i f f s we r e ma de a wa r e t ha t Ca s t or ' s
a u t h o r i t y t o bi nd AGT wa s i n que s t i on, t he Pl a i nt i f f s c a nnot no w
a r g u e t ha t t he y a s s ume d Ca s t or ha d a ppa r e nt a ut hor i t y t o a c t f o r
AGT. The Pl a i nt i f f s we r e wa r ne d of t he pos s i bi l i t y t ha t Ca s t or
h a d n o a ut hor i t y s i nc e he ha d t e nde r e d a l e t t e r of r e s i gna t i on .
Th e r e f o r e , i t a ppe a r s t o t hi s Cour t t ha t a ge nui ne i s s ue of
ma t e r i a l f a c t e xi s t s : W t he r Ca s t or di d i n f a c t ha ve t he
he
a u t h o r i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be ha l f of
AGT. Be c a us e t hi s i s a n i s s ue of f a c t t ha t mus t be r e s ol ve d,
s u mma r y j udgme nt i s va c a t e d a s t o De f e nda nt AGT. The De f e nda n t
10
Ca s t o r di d not a ppe a l f r om t he Tr i a l Cour t ' s or de r e nf or c i ng t h e
s e t t l e me nt a gr e e me nt .
W now t ur n t o t he i s s ue of Hol br ook' s a ut hor i t y t o
e
b i n d ARM a nd AEX. At t he t i me he s i gne d t he a gr e e me nt , Hol br o o k
wa s t h e pr e s i de nt of t he s e t wo c or por a t i ons . As s uc h, Hol br oo k
h a s t h e a ut hor i t y t o e nt e r i nt o a gr e e me nt s on be ha l f of t he
c o r p o r a t i ons . " Al l c or por a t e or ga ni z a t i ons a c t by a nd t hr ough
b o a r d s , c ommi s s i ons , of f i c e r s a nd e mpl oye e s , a nd i f t he y a c t
wi t h i n t he a ppa r e nt s c ope of t he i r a ut hor i t y, t he n t he i r a c t i on s
a r e t h o s e of t he c or por a t i on a nd, t he r e f or e , bi ndi ng on t he
s t o c k h o l de r s or me mbe r s of s uc h c or por a t i ons . " W t e ha ve n Ut i l .
hi
Di s t . o f She l by Count y v. Ra ms a y, 215 Te nn. 435, 387 S. W 2d 35 1
.
( 1964) . He r e , t he Cour t he l d t ha t t he a c t i ons of t he boa r d' s
c o mmi s s i one r s we r e unque s t i ona bl y bi ndi ng on t he me mbe r s ,
r e s i de n t s a nd b ondhol de r s of t he ut i l i t y di s t r i c t . Si mi l a r l y, i n
Bl a s i n g a me v. Ame r i c a n M t e r i a l s , I nc . , 654 S. W 2d 659
a .
( Te n n . 1 983) , t he Supr e me Cour t he l d t ha t t he pr e s i de nt of a
c o r p o r a t i on c oul d bi nd t he c or por a t i on t o a c ont r a c t wi t hout t h e
a p p r o v a l of t he Boa r d of Di r e c t or s . I t i s c l e a r t he n t ha t
Ho l b r o o k, a s pr e s i de nt of AEX a nd ARM ha d a ut hor i t y t o bi nd t h e
,
c o r p o r a t i ons s o l ong a s he di d not e xc e e d t he s c ope of t ha t
a u t h o r i t y. I t i s not c l e a r a s t o wha t t he s c ope of hi s a ut hor i t y
ma y h a v e b e e n. W t hout t hi s de t e r mi na t i on, i t i s i mpos s i bl e t o
i
k n o w wh e t he r Hol br ook e xc e e de d hi s a ut hor i t y. M ki ng t hi s
a
d e t e r mi na t i on i s f or t he t r i e r of f a c t . Se e Sl oa n, s upr a .
Ad d i t i o na l l y, t he boa r d of di r e c t or s of bot h AEX a nd ARM vot e d
11
n o t t o r a t i f y Hol br ook' s s i gni ng of t he s e t t l e me nt a gr e e me nt .
Co n t r a r y t o t he Tr i a l Cour t ' s f i ndi ng, t he s e vot e s a ppe a r t o b e
a c t i o n s t ha t ma y a dve r s e l y a f f e c t or i nva l i da t e t he s e t t l e me nt
a gr e e me nt . At t he l e a s t , t he s e vot e s c e r t a i nl y a ppe a r t o
c h a l l e n ge or di s put e t he a ut hor i t y of Hol br ook. Si nc e a
d e t e r mi na t i on wa s not ma de a s t o whe t he r Hol br ook e xc e e de d hi s
a u t h o r i t y whe n he s i gne d t he s e t t l e me nt a gr e e me nt wi t hout t he
k n o wl e d ge of t he s ha r e hol de r s , s umma r y j udgme nt i s va c a t e d a s t o
De f e n d a nt s AEX a nd ARM.
Ha vi ng di s c ove r e d one r e a s on why s umma r y j udgme nt
s h o u l d not ha ve be e n gr a nt e d a s t o De f e nda nt s AGT, AEX, a nd ARM,
we g o n o f ur t he r a s t o t he s e De f e nda nt s . Si nc e i t i s not
n e c e s s a r y t o r e a c h t he ot he r i s s ue s r a i s e d by t he s e De f e nda nt s ,
we c h o o s e not t o do s o.
Howe ve r , t he r e now r e ma i ns t he que s t i on of Hol br ook a n d
M Cr o me , Hol br ook' s f a mi l y c or por a t i on.
c The r e i s no i s s ue of
a u t h o r i t y he r e be c a us e t he s ha r e hol de r s of M Cr ome , Hol br ook' s
c
f a mi l y , di d not que s t i on Hol br ook' s a ut hor i t y. I n f a c t , t he y
v o t e d t o r a t i f y t he s e t t l e me nt a gr e e me nt . De f e nda nt Hol br ook
a r g u e s i ns t e a d t ha t t he s e t t l e me nt a gr e e me nt s houl d not be
e nf o r c e d b e c a us e t he a gr e e me nt wa s e xe c ut e d unde r dur e s s a nd
b e c a u s e no c ons i de r a t i on wa s gi ve n t o M Cr ome i n e xc ha nge f or
c
a gr e e i n g t o t he s e t t l e me nt .
12
W d i s c us s t he dur e s s i s s ue f i r s t .
e Te nne s s e e ha s
g e n e r a l l y de f i ne d dur e s s a s t he c ondi t i on of mi nd pr oduc e d by t h e
i mp r o p e r e xt e r na l pr e s s ur e or i nf l ue nc e t ha t pr a c t i c a l l y de s t r o y s
t h e f r e e a ge nc y of a pa r t y , a nd c a us e s hi m t o do a nd a c t or ma k e
a c o n t r a c t not of hi s own vol i t i on, but unde r s uc h wr ongf ul
e xt e r n a l p r e s s ur e . Ra i ne y v. Ra i ne y, 795 S. W 2d 139 ( Te nn.
.
Ap p . 1 9 9 0) . Se e a l s o Gi l l e y v. Gi l l e y , 778 S. W 2d 862 ( Te nn. Ap p .
.
1 9 8 9 ) ( i nt e r na l pr e s s ur e s t ha t a r e of a pa r t y' s own ma ki ng a r e
not dur e s s ) . To de t e r mi ne whe t he r t he r e i s dur e s s , t he que s t i o n
i n e a c h c a s e i s , wa s t he pe r s on s i gni ng t he c ont r a c t s o a f f e c t e d
b y t h r e a t s of t he ot he r pa r t y a s t o be be r e f t of t he qua l i t y of
mi n d e s s e nt i a l t o t he ma ki ng of a c ont r a c t . I n ot he r wor ds , wa s
t h e p e r s on be r e f t of t he f r e e e xe r c i s e of hi s wi l l powe r . Exum
v . W s h i ngt on Fi r e a nd M r i ne I ns . Co. , 41 Te nn. App. 610, 297
a a
S. W 2 d 805 ( 1955) .
. W t he r dur e s s e xi s t s i s de t e r mi ne d by
he
e xa mi n i ng a l l t he c i r c ums t a nc e s . Si mps on v. Ha r pe r , 21 Te nn.
Ap p . 4 3 1, 111 S. W 2d 882 ( 1937) .
.
I n t hi s c a s e , t h e Tr i a l Cour t de t e r mi ne d t ha t t he r e
we r e no di s put e d ma t e r i a l f a c t s wi t h r e s pe c t t o t he i s s ue of
d u r e s s a nd f ur t he r t ha t Hol br ook wa s not unde r i mpr ope r e xt e r n a l
f o r c e s whe n h e s i gne d t he a gr e e me nt . W a gr e e .
e The Pl a i nt i f f s
d o n o t di s put e t he f a c t t ha t s ome s or t of t hr e a t s a s t o t he
p o s s i b i l i t y of c r i mi na l pr os e c ut i on a nd ba nkr upt c y we r e
c o mmu n i c a t e d t o Hol br ook. Howe ve r , t he s e t hr e a t s do not
c o n s t i t ut e s uc h i mpr ope r t hr e a t s a s t o i nva l i da t e Hol br ook' s
s i g n i n g of t he a gr e e me nt . Hol br ook wa s not f or c e d i nt o t he
13
s e t t l e me nt pr oc e s s ; i t wa s he who i ni t i a t e d s e t t l e me nt by
c o n t a c t i ng t he Pl a i nt i f f s a nd t he n a gr e e i ng t o me e t i n t he i r
o f f i c e s i n M c hi ga n.
i Hol br ook s t a t e d i n hi s de pos i t i on t ha t h e
wa s n o t f or c e d t o s i gn t he a gr e e me nt a nd t ha t he wa s f r e e t o
l e a ve t he s e t t l e me nt d i s c us s i ons a t a ny t i me . He c oul d ha ve a l s o
c o n t a c t e d hi s l a wye r or hi s f a mi l y a t a ny t i me . He c hos e not t o
do s o. Hol br ook wa s not de pr i ve d of t he f r e e e xe r c i s e of hi s
wi l l po we r . W a gr e e wi t h t he Tr i a l Cour t t ha t a ny pr e s s ur e s
e
Ho l b r o o k ma y ha ve be e n unde r a t t he t i me of t he a gr e e me nt we r e
n o t s u c h i mpr ope r one s a s t o c ons t i t ut e dur e s s a nd t o i nva l i da t e
t h e a gr e e me nt .
As f or t he c ons i de r a t i on i s s ue , i n or de r f or a
s e t t l e me nt a gr e e me nt t o b e e nf or c e a bl e , l i ke a ny c ont r a c t ,
c o n s i d e r a t i on mus t be gi ve n a nd r e c e i ve d. M l we e v. Pe a c ht r e e
i
Cy p r e s s I nve s t me nt Co. , 510 F. Supp. 279 ( E. D. Te nn. 1977) . It is
we l l s e t t l e d i n Te nne s s e e t ha t t he c our t wi l l not " i nqui r e i nt o
t h e a d e qua c y or i na de qua c y of t he c ons i de r a t i on f or a c ompr omi s e
f a i r l y a nd d e l i be r a t e l y ma de . " Thur mond v. W t t a ke r , 1
hi
Te n n . Ap p. 111 ( 1925) . Re l e a s i ng c l a i ms a ga i ns t a pa r t y, whe t h e r
t h e c l a i ms a r e a c t ua l l y pe ndi ng or not , i s s uf f i c i e nt
c on s i d e r a t i on f or a s e t t l e me nt a gr e e me nt . Se r vi c e St a mp Co. v .
Ke t c he n, 10 Te nn. App. 59 ( 1929) . Fur t he r mor e , whe r e t he f a c t s
a r e un d i s put e d, whe t he r a r e l e a s e c ons t i t ut e s a de qua t e
c o n s i d e r a t i on i s a que s t i on of l a w. Appl e whi t e v. Al l e n , 2 7
Te n n . ( 1 Hum. ) 696 ( 1848) .
14
I n t he c a s e a t t he ba r , De f e nda nt Hol br ook a gr e e d on
b e h a l f of M Cr ome t o gi ve up s ome a s s e t s of t he c ompa ny 2 i n or d e r
c
t o b e r e l e a s e d f r om a ny c l a i ms t he Pl a i nt i f f s mi ght ha ve a ga i n s t
M Cr o me .
c Tha t n o c l a i ms ha d be e n a c t ua l l y f i l e d a ga i ns t M Cr ome
c
3
a t t he t i me o f s e t t l e me nt i s not di s pos i t i ve . I t a ppe a r s t he n
t h a t t h e Pl a i nt i f f s a nd M Cr ome ga ve s uf f i c i e nt c ons i de r a t i on f o r
c
t h e s e t t l e me nt a gr e e me nt , a nd t he r e i s no ne e d f or di s c us s i on a s
t o t h e va l i di t y of a ny c l a i ms a l l e ge dl y he l d by t he Pl a i nt i f f s o r
t h e a d e qua c y of t he Pl a i nt i f f s ' c ons i de r a t i on i n e xc ha nge f or
M Cr o me ' s a s s e t s .
c
Thus , f i ndi ng no di s put e d ma t e r i a l f a c t s a s t o t he
i s s u e s of dur e s s or c ons i de r a t i on, we a f f i r m t he Tr i a l Cour t ' s
e n t r y o f s umma r y j udgme nt a s t o M Cr ome a nd Hol br ook.
c
I n a ddi t i on t o t he i r a ppe a l of s umma r y j udgme nt , t he
De f e nd a nt s l a t e r a ppe a l e d t he Tr i a l Cour t ' s or de r a wa r di ng
d i s c r e t i ona r y c os t s t o t he Pl a i nt i f f s . The y i ns i s t t he Cour t
a b u s e d i t s di s c r e t i on by i nc l udi ng c os t s i nc ur r e d i nc i de nt t o t h e
o r i gi na l s ui t f or b r e a c h of c ont r a c t . W l e t hi s i s t r ue , we
hi
h a v e n o doubt t ha t t he i nf or ma t i on de ve l ope d i n pr e pa r i ng t he
2
S p e c i f i c a l l y , Ho l b r o o k a n d Mc Cr o me a g r e e d t o g i v e t h e P l a i n t i f f s a
4 . 4 5 % wo r k i n g i n t e r e s t i n t h e Bl u e Ge m P r o j e c t a s we l l a s 9 3 s h a r e s o f
Te n n e s s e e En e r g y P i p e l i n e ( TEP S CO) o r t h e mo n e y r e c e i v e d f r o m a s a l e o f t h o s e
s h a r e s . I n r e t u r n , t h e P l a i n t i f f s a g r e e d t o r e l e a s e Ho l b r o o k a n d Mc Cr o me f r o m
a n y c l a i m a r i s i n g o u t o f t h e l a ws u i t , f r o m a l l mo n e t a r y o b l i g a t i o n s a n d c l a i ms
a l l e g e d l y o we d t h e P l a i n t i f f s a n d a n y o t h e r c l a i m a r i s i n g o u t o f t h e Bl u e Ge m
Pr o j e c t .
3
Th e Tr i a l Co u r t g r a n t e d t h e P l a i n t i f f s ' mo t i o n t o a me n d t h e i r
c o mp l a i n t o n Oc t o b e r 3 1 , 1 9 9 4 , a n d t h e P l a i n t i f f s s u b s e q u e n t l y a d d e d a c l a i m
a g a i n s t M Cr o me f o r t h e a l l e g e d wr o n g f u l r e c e i p t o f a s s e t s f r o m ARM a n d i n t h e
c
a l t e r n a t i v e , a c l a i m f o r t h e e n f o r c e me n t o f t h e s e t t l e me n t a g r e e me n t .
15
o r i gi na l c l a i m p r ompt e d t he s e t t l e me nt a gr e e me nt whi c h i s t he
p r i n c i p a l s ubj e c t of t hi s a ppe a l . I n l i ght of t hi s , we f i nd no
a b u s e o f di s c r e t i on i n a l l owi ng s uc h f e e s .
16
W a c c or di ngl y a f f i r m t he j udgme nt i ns of a r a s t he
e
De f e n d a nt s Hol br ook a nd M Cr ome a r e c onc e r ne d, but modi f y t he
c
d i s c r e t i ona r y c os t s a wa r d by r e qui r i ng t he m t o pa y one - f i f t h e a c h
o f t h e a mount a wa r de d by t he Cha nc e l l or , va c a t e t he j udgme nt a s
t o t h e r e ma i ni ng De f e nda nt s , a nd r e ma nd t he c a s e f or f ur t he r
p r o c e e d i ngs not i nc ons i s t e nt wi t h t hi s opi ni on. One - ha l f of t h e
c o s t s o f a ppe a l a r e a dj udge d a ga i ns t Hol br ook a nd M Cr ome a nd
c
o n e - h a l f a ga i ns t Ca noni e Ene r gy a nd W .
GI
_______________________________
Hous t on M Godda r d, P. J .
.
CONCUR:
_ _ _ _ _ _ _ _________________________
He r s c he l P. Fr a nks , J .
_ _ _ _ _ _ _ _________________________
Ch a r l e s D. Sus a no, J r . , J .
17