Gates, Duncan & Vancamp Co. v. Richard Levantino

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
______________________________________________________________________________
GATES, DUNCAN AND VANCAMP Shelby Chancery No. 102071-3
CO., a Partnership C.A. No. 02A01-9605-CH-00095
Plaintiff,
Hon. D. J. Alissandratos
v.
RICHARD W. LEVATINO,
FILED
Defendant/Cross Plaintiff,
June 17, 1997
v.
Cecil Crowson, Jr.
Appellate C ourt Clerk
GATES, DUNCAN AND VANCAMP
CO., a Tennessee Partnership;
Cross Defendant, and
LOUIS “RICK” CHAFFIN and GLEN R.
PAGE, Individually and as partners of
GDVC Company
Third-Party Defendants.
WILLIAM H. HALTOM, JR., Thomason, Hendrix, Harvey, Johnson & Mitchell,
Memphis, Attorney for Plaintiff/Cross-Defendant/Third-Party Defendants.
STANLEY J. KLINE, Memphis, Attorney for Defendant/Cross Plaintiff
AFFIRMED
Opinion filed:
______________________________________________________________________________
TOMLIN, Sr. J.
Gates, Duncan and Vancamp, a Tennessee partnership (hereafter
“Plaintiff”) filed suit in the Chancery Court of Shelby County against one of its
partners, Richard W. Levantino (hereafter “Levatino” or “Defendant”), seeking
injunctive relief, an accounting, compensatory and punitive damages,
termination of the partnership, attorney fees and expenses and other relief in
connection with plaintiff’s attempt to protect the assets of the partnership.
Subsequently the chancellor, at the request of both parties, entertained a
motion for a declaratory judgment, which was ultimately resolved in favor of
plaintiff. Thereafter the chancellor referred other pending matters to a Special
Master, whose report to the chancellor was affirmed by him. In addition, the
chancellor awarded compensatory and punitive damages, along with attorney
fees to plaintiff.
On appeal defendant has raised some thirty-three issues, which we
believe are better stated by plaintiff in its brief. They are as follows:
(1) The chancellor erred in rendering declaratory judgment in favor
of plaintiff
(2) The chancellor erred in overruling defendant’s affirmative
defenses to the partnership agreement.
(3) The chancellor erred in referring certain matters to the Special
Master rather than retaining them himself.
(4) The chancellor erred in denying defendant’s motion for
additional compensation.
(5) The chancellor erred in holding that commissions on renewal
insurance produced by him properly belonged to the partnership.
(6) The chancellor erred in dissolving the partnership based upon
the wrongful conduct of the defendant.
(7) The chancellor erred in ordering certain funds to be placed in an
escrow account pending determination of the rightful owner
thereof.
(8) The chancellor erred in awarding attorney fees and expenses to
plaintiff.
(9) The chancellor erred in awarding punitive damages to plaintiff.
For the reasons hereafter stated, we resolve each of these issues in favor of
plaintiff.
Many of the basic facts are not in dispute. Plaintiff was a partnership
formed for the purpose of selling insurance and insurance-related business
products in Memphis. In March, 1988, defendant, along with Carl J. Gates, Louis
J. “Rick” Chaffin, and Glen R. Page entered into a partnership agreement to
carry out this insurance business under the partnership name “Gates, Duncan &
Vancamp” (“GDVC”). Both parties agree that the partnership agreement was
in full force and effect from March 1, 1988 to October 15, 1992, when the
partnership was dissolved by order of the chancellor. Articles IV and V are
2
particularly relevant to this litigation.
Article IV: It is agreed and understood that the right to sell to, or
deal with, any of the present clientele of the partnership...belongs
to the partnership and that each partner waives any right he may
have claimed as to the ownership or as to the right to sell to or deal
with any of the partnership’s present or future clientele except as
hereinafter provided upon dissolution.
Article V: Each partner shall give to the partnership his entire time
and consideration and shall not engage in any other business that
would in any way work to the disadvantage of the partnership or its
purposes. This shall not prohibit any partner from making outside
investments as long as the time and effort devoted to such
investments does not become so great as to detract from his
effectiveness as a partner of this firm....
Following the execution of the partnership agreement, all the partners
executed assignments, by which all commissions and fees from their former
clients were assigned to the new partnership. Subsequently, one of the partners
discovered some evidence that indicated that Levatino was conducting an
outside insurance business in violation of the partnership agreement. However,
when confronted, Levatino denied such conduct. Upon further investigation,
some of the partners uncovered more evidence and again confronted
Levatino, who this time admitted engaging in insurance-related business outside
the scope of the partnership. This suit followed.
In addition to the relief sought by plaintiff, Levatino in a cross-complaint
sought to have himself restored as an active partner and also sought a
temporary restraining order that would prevent the other partners from
interfering with his participation in the partnership.
Following a hearing the chancellor entered an order dissolving the
partnership as of October 15, 1992. In addition he entered a temporary
restraining order against Levatino, requiring him to conduct all insurance-related
business through the partnership. The order did permit him to pursue any
insurance clients with whom he had not dealt while a partner in GDVC. The
chancellor referred several issues to the Master, for a full accounting of all
3
claims raised by the parties in the pleadings, as well as an accounting of any
misappropriated insurance and insurance-related commissions by Levatino
during the period the partnership agreement was in effect.
Thereafter, at the request of both parties, the chancellor held a hearing
for declaratory judgment to ascertain the intent and meaning of the partnership
agreement. At the conclusion of that hearing the chancellor entered an order
in favor of plaintiff, specifically finding that under the clear and unambiguous
language of the partnership agreement, Levatino was prohibited from
conducting any insurance or insurance-related business outside the partnership
agency during the period from March 1, 1988 through October 15, 1992. The
court further ruled that any and all commissions and funds received by Levatino
during the time the partnership was in effect should be paid over to plaintiff. The
chancellor referred this issue to the Special Master for an accounting to
ascertain the extent of insurance and/or insurance-related business Levatino
had conducted outside the partnership during the partnership period, as well as
an accounting by Levatino of what disposition had been made of those funds.
In a subsequent hearing the chancellor held that renewal commissions received
during the life of the partnership agreement on insurance previously written by
Levatino were the sole property of GDVC.
Levatino thereafter filed a motion seeking compensation on the ground
that the court had forced him to perform work for the partnership without being
paid, stating that he was entitled to an award of $40,000.00. This issue was also
referred to the Special Master.
As a result of several hearings the Special Master submitted his report to
the chancellor for his consideration. The Master made the following findings:
(1) Levatino was indebted to plaintiff in the amount of $88,612.72 for
insurance business conducted outside the partnership agency.
After deducting the value of Levatino’s partnership interest from this
amount, Levatino was indebted to plaintiff in the amount of
$83,948.72.
4
(2) Levatino’s cross-complaint against Chaffin and Page, two of the
partners, asserting that they had engaged in wrongful conduct and
thus breached the agreement, was without foundation.
(3) Levatino’s conduct caused the dissolution of the partnership,
pursuant to the provisions of T.C.A. § 61-1-137(6)(3)(B).
(4) Levatino was not entitled to any compensation from plaintiff
based upon the allegation that he had been forced to work for the
partnership.
The chancellor ratified and affirmed the report of the Special Master. In
addition the chancellor held that the evidence was clear and convincing that
Levatino acted willfully, intentionally and deliberately in misappropriating funds
that belonged to the plaintiff, thereby constituting intentional misconduct. The
chancellor awarded plaintiff punitive damages against Levatino in the amount
of $20,000.00. The chancellor also granted plaintiff’s motion for attorney fees
incurred by it for action taken in the defense of partnership assets, and ordered
Levatino to pay attorney fees in the amount of $43,355.00, along with related
expenses of $765.17. This appeal followed.
I. Declaratory Judgment Issue.
In entering a declaratory judgment in favor of plaintiff, the chancellor
held that Levatino was precluded from conducting any insurance-related
business outside the partnership agency during the life of the partnership.
It is Levatino’s contention that the logical construction of the language of
the partnership agreement did not require him to conduct all insurance or
insurance-related business solely and exclusively through the partnership. He
also contended that the chancellor was in error in denying the affirmative
defenses raised by him.
The court’s interpretation of the partnership agreement is not entitled to a
presumption of correctness under T.R.A.P. 13(d), inasmuch as the interpretation
of a contract involves a legal rather than a factual inquiry. Hillsboro Plaza Enter.
v. Moon, 860 S.W.2d 45, 47 (Tenn. App. 1993). Our scope of review is de novo.
T.R.A.P. 13(d).
5
It has long been established in this state that a contract must be
interpreted and enforced according to its clear, plain and unambiguous terms.
Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580
(Tenn. 1975). When the language of the contract is unambiguous and there is
no claim or fraud or mistake, the court must give effect to the intention of the
parties as expressed in the language used in the contract. Jennings v. Hayes,
787 S.W.2d 1, 2 (Tenn. App. 1990).
Moreover, the parties to a contract cannot create an ambiguity where
none exists. Edwards v. Travelers Indemnity Co., 300 S.W.2d 615, 617-618 (Tenn.
1957). Parole evidence is inadmissable to contradict or vary the terms of a
written contract, when the parties’ intentions are readily ascertained from the
contract as reduced in writing. McQuiddy Printing Co. v. Hirsig, 134 S.W.2d 197,
204 (Tenn. 1939). The law conclusively presumes that the parties to a contract
understood its obligations, and evidence is not admissible to show that their
understanding was in fact otherwise. Id. at 204.
After reviewing the terms of the partnership agreement this court is
convinced that the clear and unambiguous language therein indicated that all
partners were to devote their entire time and resources to the promotion of the
partnership and were not to engage in any other business that would work to
the disadvantage of the partnership. The record is also clear that Levatino’s
actions were in direct contradiction with this agreement. In no way does the
agreement allow Levatino the freedom to establish his separate insurance
business outside the partnership which in effect would compete with the
partnership. In so doing Levatino was attempting to serve two masters, and by
so doing he was totally wrong.
II. Defendant’s “Affirmative Defenses.”
The contention by Levatino that the chancellor erred in denying the
various affirmative defenses raised by him is without merit. The law is well
established in this state that mutual assent is gathered by the language of the
6
contract rather than the unexpressed or undisclosed intentions of the parties.
See Sutton v. First National Bank of Crossville, 620 S.W.2d 526, 530 (Tenn. App.
1981).
As for the affirmative defenses of estoppel, laches, waiver and failure to
act with due diligence, the chancellor heard testimony from the various partners
who testified that when they first suspected Levatino of being involved in
inappropriate partnership behavior and confronted him, he denied any
involvement in such affairs. Almost a year later, when confronted again, he
admitted engaging in insurance-related business outside the partnership.
Plaintiff’s suit was filed two months later. This issue is without merit.
III. The References to the Special Master.
Levatino contends that the chancellor abdicated his role as trier of the
lawsuit by ordering that the majority of the issues now before this court were to
be determined by the Special Master. This issue is without merit as well. In
Archer v. Archer, 907 S.W.2d 412, 415-16 (Tenn. App. 1995) this court stated that
the main issues of a controversy and the principles on which these issues were to
be adjudicated should be determined by the court, and that subordinate and
incidental issues and the determination of ancillary facts are matters properly to
be referred to a Special Master.
The reference to the Master was done only after the chancellor had
decided the main issue in this case, which was the interpretation of the written
partnership agreement.
IV. Compensation for Work Allegedly Performed.
By this issue Levatino contends that the chancellor was in error in failing to
award him compensation for “forced labor and services”, which he contended
was worth nearly $40,000.00 and that he was required to perform for the plaintiff
by order of court. At the hearing before the Master, Levatino failed to present
any proof of the time worked on behalf of plaintiff, but rather contended that he
was automatically entitled to certain commissions from insurance-related
7
business that he had brought to the partnership. This claim was dismissed by the
Special Master following motion of plaintiff and was affirmed by the chancellor.
Not only did Levatino fail to carry his burden of proof, he failed to present any
proof at all. This issue is without merit.
As to all of the above issues dealing with findings of the Master, a
concurrent finding of a Master in a trial court is conclusive on appeal on this
court, except where it is upon an issue not properly to be referred, where it is
based upon an error of law or mixed question of fact and law, or where it is not
supported by any material evidence. Coates v. Thompson, 713 S.W.2d 83, 84
(Tenn. App. 1986). None of these exceptions apply to the issues so presented to
this court. Hence we hold that these concurrent findings are binding upon us.
V. Automatic Renewal Premiums.
Levatino contends that the automatic renewal premiums should have
been paid directly to him rather than being considered property of the
partnership. Automatic renewal premiums were revenues generated off the
sales of insurance policies that took place before the formation of the
partnership in March, 1988. The language of the partnership agreement clearly
states that upon the formation of the partnership, the clients of the partners
became clients of the partnership. The contention of Levatino violates both the
spirit and language of the partnership agreement. We resolve this issue in favor
of plaintiff.
VI. Dissolution of the Partnership.
Next, Levatino contends that the trial court erred in finding that his
wrongful conduct violated the partnership agreement, thereby causing the
dissolution of the partnership. Levatino also contests the method employed by
the court in valuing the partnership and in ascertaining the partnership
damages. Following our scope of review pursuant to T.R.A.P. 13(d), we are of
the opinion that the evidence does not preponderate against the finding of the
chancellor that the misconduct of Levatino caused the dissolution of the
8
partnership.
As for the valuation of Levatino’s interest in the partnership and the
determination of compensatory damages due the partnership by Levatino,
once again we point out that these results were reached by the Master and
concurred in by the chancellor. There was no error in law and there was
material evidence to support these findings. Accordingly, these issues are
resolved in favor of plaintiff.
VII. Temporary Injunction.
By this issue Levatino contends that the trial court was in error in issuing a
temporary injunction that required that all funds connected with the
commissions generated by Levatino during the existence of the partnership be
placed in an escrow account until a proper determination could be made of
who rightfully owned such funds. It appears without contradiction that the
purpose of this injunction was to create a separate account for the funds in
dispute. At the time this was done, the court had not issued its declaratory
judgment ruling. It is readily apparent that the court was trying to protect the
interests of both parties by properly separating and identifying the disputed
funds. This issue is without merit.
VIII. Attorney Fees and Expenses.
Levatino here asserts that the trial court was in error in awarding plaintiff
attorney fees and expenses in this litigation. The law is well established in this
state that surviving partners are entitled to attorney fees for defending
partnership assets. Bird v. Collette, 168 S.W.2d 797, 800 (Tenn. App. 1942); Evans
v. Boggs, 245 S.W.2d 641, 656-657 (Tenn. App. 1951).
Plaintiff, the partnership in this case, brought this suit in an attempt to
preserve the assets of the partnership and to prevent any further diversion of
funds from the partnership to the personal use of Levatino. There was more than
adequate proof presented that the amount of the fees being requested were
fair and reasonable. We resolve this issue in favor of plaintiff.
9
IX. Punitive Damages.
Lastly, Levatino challenges the award of punitive damages to plaintiff in
the amount of $20,000.00. It has been established in this state that a court may
award punitive damages if it finds by clear and convincing evidence that the
opposing party has engaged in intentional and fraudulent misconduct. Hodges
v. S.C. Toof & Co., 833 S.W.2d 896, 900 (Tenn. 1992).
The record in this case is replete with evidence presented by plaintiff that
Levatino engaged in a deliberate, willful and intentional course of conduct in
misappropriating over $80,000.00. Examples of this evidence include Levatino’s
directing the payment of certain insurance premiums to his home rather than to
plaintiff’s business address and lying to the partners about the sequestering of
assets of the partnership in an attempt to avoid being caught. Only after
Levatino was presented with overwhelming evidence did he admit to some of
the things of which he was accused. It is apparent that the chancellor found
Levatino’s story unbelievable. This issue is also without merit.
Accordingly, the decree of the chancellor is affirmed in all respects. Costs
in this cause on appeal are taxed to Levatino, for which execution may issue if
necessary.
________________________________________
TOMLIN, Sr. J.
________________________________________
CRAWFORD, P.J. S.W. (CONCURS)
________________________________________
LILLARD, J. (CONCURS)
10