B.C.I. v. City of Memphis

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
______________________________________________
BONHAM GROUP INC.,
Plaintiff-Appellant,
FILED
Shelby Chancery No. 100896-1
Vs. C.A. No. 02A01-9709-CH-00238
April 16, 1999
CITY OF MEMPHIS and
COUNTY OF SHELBY, Cecil Crowson, Jr.
Appellate C ourt Clerk
Defendants-Appellees.
____________________________________________________________________________
FROM THE CHANCERY COURT OF SHELBY COUNTY
THE HONORABLE NEAL SMALL, CHANCELLOR
Tim Edwards; Glassman, Jeter, Edwards and Wade, P.C. of Memphis
For Appellant
Joseph T. Getz, Michael D. Herrin; Less, Getz & Lipman of Memphis
For Appellees
AFFIRMED AND REMANDED
Opinion filed:
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
ALAN E. HIGHERS, JUDGE
DAVID R. FARMER, JUDGE
This appeal involves yet another of the multiple disputes that arose in connection with
the construction of The Pyramid arena in Memphis. Appellant, Bonham Group Inc. (Bonham),1
appeals the order of the trial court dismissing its suit against Appellees, City of Memphis (City)
and County of Shelby (County).
On April 14, 1989, the City and County executed an agreement with Pyramid
Management Authority, Inc. (PMA) whereby PMA was to develop, operate and manage a multi-
use arena (the Pyramid) and a theme park development on Mud Island. PMA was headed by
Sidney Shlenker. In June 1989, PMA orally contracted with Bonham to solicit and negotiate
contracts with sponsors and concessionaires for the project. This agreement was reduced to
writing by letter dated July 23, 1990, which states:
July 23, 1990
Mr. Sidney Shlenker
President and Chief Executive Officer
The Pyramid Companies
245 Wagner Place
Memphis, Tennessee 38103
Dear Sidney:
Although Bonham/Shlenker & Associates and the Pyramid
Companies have been working together for more than a year, we
haven’t yet formalized our contractual agreement. As you and
John and I have discussed, it would be in both companies’ best
interests to commit our heretofore verbal agreement to writing.
In order to ensure that the Pyramid Companies and
Bonham/Shlenker & Associates are in agreement with both the
scope of the work and the method of payment, I ask that you read
this letter carefully to review its contents. In this way, we can
both have a better, more permanent understanding of the
responsibilities each company has to the other. If this letter does
reflect our understanding, please sign both copies and return one
to Bonham/Shlenker & Associates.
Scope
Bonham/Shlenker & Associates has provided (and will continue
to provide) services in the area of sponsorship
development/contract negotiations for The Great American
Pyramid. In this regard, “contract negotiation” also refers to
related areas of economic development; for example, the
concessions and tenant contracts we negotiated with National
Pizza Co. and Memphis State University, respectively. Also,
under the direction of Pyramid management, B/S&A will have
limited responsibility for follow-up and fulfillment on
1
Bonham Group Inc. is a successor corporation to both Bonham/Shlenker and
Associates and Bonham Communications, Inc. Dean Bonham is the president and CEO of
Bonham.
2
sponsorship contracts it negotiates on behalf of the Pyramid
Companies.
B/S&A’s objective will be to create $9.5 million in annualized
sponsorship/concession contracts for the Pyramid Companies.
Our goal will be to negotiate agreements with ten-year terms;
however, in no case will the terms be for less than five years.
Dean A. Bonham, president of Bonham/Shlenker & Associates
will be the account manager for this project. Mr. Bonham will
devote no fewer than 160 hours per month to The Great American
Pyramid. Serving as assistant account manager will be Tom
Lawrence, BS&A’s executive vice president. The Great
American Pyramid will be Mr. Lawrence’s primary client, and
will exercise first priority on his time and efforts.
Terms of Agreement
Bonham/Shlenker & Associates was originally retained by the
Pyramid Companies in June 1989. The arrangement is open-
ended. Termination may occur at the request of one or both
parties, with 30 days prior written notice.
Compensation/Collection
The Pyramid Companies agree to pay Bonham/Shlenker &
Associates as follows:
Retainer: A $15,000 monthly retainer, plus expenses. The
retainer is to be paid within ten days of the receipt of each
monthly invoice.
Commission: Fifteen percent (15%) of gross revenues derived
from sponsorship contracts, minus any retainer amounts paid by
the Pyramid Companies to B/S&A.
7½% of gross revenues derived from concessions contracts not to
exceed $1,200,000.
7.5% of gross revenues derived from the renewal of any
sponsorship contracts. (No renewal fee will be paid on the
concession contract unless mutually agreed upon. Such an
agreement, it is understood, would be based upon the degree and
kind of assistance provided by B/S&A.)
The commission fees will be assessed annually and are due and
payable within ten (10) days of the Pyramid Companies’ receipt
of revenues from its sponsorship/concession contracts.
Bonham/Shlenker & Associates’ receipt of any commissions is
subject to the following proviso:
Prior to the Pyramid Companies’ annual payment to B/S&A of
15% of gross sponsorship fees negotiated on behalf of The
Pyramid by B/S&A, Pyramid management will provide an
accurate accounting of the exact dollar amount of the monthly
retainers that has been paid to B/S&A during the calendar year
July 1 - June 30. Subsequent to this, half of B/S&A’s 15%
commission will be paid to B/S&A. The remaining half will be
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withheld until the entire amount of dollars paid in monthly
retainers to B/S&A has been repaid to the Pyramid Companies.
After the Pyramid Companies have been reimbursed in this
manner, 100% of all commissions due will be paid directly to
B/S&A.
Reimbursement of Expenses
Bonham/Shlenker & Associates will bill you at our costs for
reimbursement of all out-of-pocket expenses incurred on your
behalf. These expenses will include, but are not limited to,
photography, printing, messengers, transportation, duplicating
and postage on mailings.
Protection of the Pyramid Companies
No major out-of-pocket expenses will be undertaken by
Bonham/Shlenker & Associates without the approval of the
Pyramid Companies. We will maintain accurate records of all
expenditures made on your behalf. We will be prepared to supply
reasonable supporting detail of these expenses as requested by the
Pyramid Companies.
In the event the Pyramid Companies question the validity of any
charge by Bonham/Shlenker & Associates, payment for only that
portion under question may be delayed.
All information, facts and figures pertaining to the Pyramid
Companies or the project that come to our attention will be
handled in a confidential manner.
The City and County were not parties to this contract. Bonham’s compensation to be paid by
PMA (referred to in the contract as the Pyramid Companies) was based on a monthly retainer
of $15,000.00 which was offset by a fifteen percent commission of the gross revenues derived
from sponsors and concessionaires brought in by Bonham.
In August of 1988, before PMA or Bonham became involved, the City and County
executed an agreement with Memphis State University (MSU) for the use of the arena for
basketball. The MSU Agreement provided for state funding of seven million dollars for
construction and use of the facility. This contract gave MSU certain concessions on advertising,
parking and luxury suites. These concessions hampered Bonham’s efforts to negotiate contracts
with sponsors and concessionaires. As a result, Bonham renegotiated the MSU contract which
was executed between the Tennessee Board of Regents, MSU and PMA on August 3, 1990.
This resulted in an additional $2.2 million contributed by the state toward the construction and
use of the arena.
Bonham also negotiated a number of sponsor and concessionaire contracts on behalf of
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and for the benefit of PMA. These included Pepsi-Cola Company and its local distributor Delta
Beverage, Inc., National Pizza Company, Acquisition Services Corp. (now known as National
Catering Company and a wholly owned subsidiary of National Pizza Company), Federal Express
Corporation, Phillips Consumer Electronics Company, Sara Lee Corporation, Wang
Laboratories, Inc., VISA USA, Inc., and Dodge Dealers, Inc. Bonham received his monthly
retainer under his contract with PMA but did not receive any commission. On February 13,
1991, PMA terminated its contract with Bonham due to an internal dispute concerning the
schedule of opening the facilities.
Shortly after Bonham had signed on, PMA began having problems performing its
contract with the City and County due to the fact that Shlenker could not arrange the financing
necessary to open the Pyramid and the other facilities. This problem became serious as
basketball season approached because the City and County were required to have the arena ready
for the first MSU basketball game of the season. On June 17, 1991, the City and County
terminated their contract with PMA after it was apparent that PMA was unable to perform its
contract.
Facing the soon approaching basketball season, the City and County took over the
project, and in light of the approaching deadline, were forced to forego all the proposed projects
except the completion of the arena for the basketball season. Under these circumstances, the
City and County were unable to fulfill the contracts previously negotiated by Bonham since
those contracts covered several facilities. Furthermore, two of the concessionaires, National
Pizza Company and National Catering Company, that Bonham had contracted with, were
threatening to force the City and County to honor the contracts with PMA on the basis of a non-
disturbance agreement that the City and County executed for the concessionaires at the request
of Bonham.
The City and County employed Leisure Management of Memphis, Inc. (LMM) to
manage and oversee the completion of the Pyramid. Working under enormous time constraints,
the City and County arranged for LMM to solicit sponsors and concessionaires for the arena.
LMM sent out request for proposals (RFP) to several prospects including the sponsors and
concessionaires that Bonham had previously contracted with. These RFPs contained
specifications materially different from the provisions of the contracts previously negotiated by
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Bonham. Shortly thereafter, LMM entered into contracts covering sponsorship and concessions
with several companies which included entities that Bonham had previously contracted with -
National Pizza Company, National Catering Company and Pepsi-Cola.
On December 20, 1991, Bonham filed a complaint against the City and County seeking
damages in the amount of five million dollars under the theory of unjust enrichment. The City
and County’s answer denies the material allegations of the complaint and joins issue thereon.
A third party complaint was also filed by the City and County against Dean Bonham and John
Tigrett. On April 24, 1997, Bonham filed an amended complaint seeking relief under the
theories of breach of contract, unjust enrichment, tortious interference with contract and tortious
interference with business relationships. The City and County answered the amended complaint
and filed a motion for summary judgment. By order entered July 30, 1997, the trial court granted
the City and County’s motion for summary judgment as to Bonham’s claims of tortious
interference with contract and tortious interference with business relationships and denied the
motion as to the breach of contract and unjust enrichment claims.
After a non-jury trial, the trial court entered an order dismissing the claims of Bonham
and the claim asserted by the City and County.
Bonham appeals2 and sets forth in its brief three issues for review as follows:
I. After correctly finding that Plaintiff was responsible for
restructuring the key contract for the Pyramid Arena, i.e. the
Memphis State University basketball contract, which resulted in
a contribution of $2.2 million to the Pyramid Arena, the Trial
Court improperly concluded that Plaintiff was not entitled to
compensation for this effort.
II. After correctly finding that sponsor/vendor contracts for
which Plaintiff was responsible yielded over $1,000,000.00 to the
development of the Pyramid project, the Trial Court improperly
concluded that no benefit had been conferred on Defendants and
therefore Plaintiff was not entitled to compensation.
III. After correctly finding that National Pizza Company and its
subsidiary Acquisition Services Corp. (later National Catering
Company) and Pepsi-Cola along with its local distributor Delta
Beverage had been brought to and placed under contract with the
Pyramid project by Plaintiff, the Trial Court improperly
concluded that Plaintiff was not entitled to compensation after
those contracts were re-negotiated by Defendants subsequent to
the improper termination of the developer, Pyramid Management
Authority.
2
The City and County did not appeal the dismissal of its third party complaint.
6
Since this case was tried by the trial court sitting without a jury, we review the case de
novo upon the record with a presumption of correctness of the findings of fact by the trial court.
Unless the evidence preponderates against the findings, we must affirm, absent error of law.
T.R.A.P. 13(d).
The trial court filed written findings of fact and conclusions of law which are
incorporated in the final decree and state in pertinent part as follows:
Defendants could not fulfill the contracts negotiated by
Bonham for PMA because those contracts covered several
facilities and time would make it impossible to complete more
than just one of these facilities, the arena, and even this was not
certain. On the other hand, two of the vendors signed up by
Bonham were threatening to force defendants to honor their
contracts with PMA based on a non-disturbance agreement that
defendants had signed for them at Bonham’s request.
Under the circumstances, the City and County did the best
they could with time running out and possible lawsuits from
MSU and the two vendors hanging over their heads. They
arranged for Leisure Management, Inc. to solicit vendors and
request for proposals (RFP) were sent out to many prospects
including some, or perhaps all, of the vendors which Bonham had
signed up. National Pizza and Pepsi-Cola, the two companies
with non-disturbance agreements, were among the companies re-
signed after first having signed contracts with Bonham for PMA,
however, both agreed to drop any claims they had under the
former contract as a part of their final agreement.
Before PMA was terminated on June 17, 1991 by
defendants, substantial sums of money, perhaps more than one
million dollars, was advanced by various vendors, that Bonham
had signed up, to PMA. However, there is insufficient proof in
the record to indicate that defendants, City and County, ever
received any of this money.
Likewise, it is difficult for this Court to see other specific
benefits from Mr. Bonham’s admitted good efforts. Defendants
may have been incidentally and indirectly benefited by Bonham’s
renegotiation of the MSU contract, but this was done to make his,
Bonham’s, work easier not primarily to benefit defendants. To
set a value, if any, for this service would involve pure
speculation.
The new contracts were entirely different in size, scope,
and amounts and covered only one facility instead of several as
Bonham’s contracts had done. This was not the fault of the
defendants, but the fault of PMA, plaintiff’s employer, who could
not finish the facilities and perform the contracts that Bonham
had secured.
It is understandable that some of the vendors originally
signed by Bonham were re-signed by Leisure Management which
the defendants had hired to replace PMA. There are only two
beverage companies in the entire country capable of handling a
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facility as large as the Mud Island complex, Coca-Cola and Pepsi.
Leisure Management, Inc. sent RFPs to both and it is nor
surprising that Pepsi was again signed up in the second round
even without considering the need for defendants to try to protect
themselves from a lawsuit over the non-disturbance agreement.
Another vendor, Ticketmaster, was the only company in the
nation capable of servicing this kind of facility.
Not only does this Court find that the defendants did not
profit from Bonham’s effort, but it seems more likely that they
suffered a detriment from the over-all performance of PMA of
which Bonham was a part. Of all the facilities promised by PMA,
only one, the arena, is even partially in place and usable today.
To whatever extent these unfinished facilities would have
benefited defendants, in gate receipts, sales tax, and publicity, that
benefit has been lost.
Mr. Bonham appeared to be very effective in his efforts to
secure business for PMA, but his contract was with PMA and it
is to PMA that he must look for satisfaction. Once Bonham was
terminated by PMA, he was of no further help to either PMA or
defendants and the contracts he had secured were of no value to
defendants, especially after PMA breached its contract with
Memphis and Shelby County and was terminated.
The trial court concluded:
This Court finds that in this case, any benefits to, or
enrichment of, defendants was incidental and inconsequential.
Defendants were not third-party beneficiaries of the contract
between PMA and Bonham, were not enriched and certainly not
unjustly enriched, therefore plaintiff’s case must fail.
Bonham’s complaint presents two theories of recovery for matters encompassed in the
issues.3 The complaint first alleges that the defendants are third party beneficiaries of the
contract between Bonham and PMA and, thus, as third party beneficiaries are liable to Bonham
under the contract. Alternatively, the complaint avers that the City and County are liable to
Bonham on the theories of unjust enrichment, quasi contract, contract implied in law, and
quantum meruit.
Third Party Beneficiary
Tennessee recognizes two categories of third party beneficiaries - intended and incidental.
First Tennessee Bank Nat’l Ass’n v. Thoroughbred Motor Cars, Inc., 932 S.W.2d 928, 930
(Tenn. App. 1996). Only if the third party is an intended beneficiary may it maintain an action
on the contract. Moore Constr. Co. v. Clarksville Dep’t of Electricity, 707 S.W.2d 1, 9 (Tenn.
3
Bonham presents no issue pertaining to tortious interference with contract or tortious
interference with business relationships.
8
Ohio App. 1985). The requisites necessary to establish a third party beneficiary relationship are: (1)
a valid contract made upon sufficient consideration between the promisor and promisee; and (2)
the clear intent to have the contract operate for the benefit of a third party. United Am. Bank
of Memphis v. Gardner, 706 S.W.2d 639, 641 (Tenn. App. 1985). This intent to benefit may
be shown if “there is either an expression in the contract that the contracting parties intended to
benefit the third party (the ‘intent to benefit’ test) or proof that the promisor’s performance will
otherwise discharge a duty owed to a third party beneficiary by the promisee (the ‘duty owed’
test).” Moore Constr., 707 S.W.2d at 9. Whether a party is a third party beneficiary must be
decided on a case-by-case basis in light of the specific contractual agreements and the
circumstances under which they were made. Id. at 10.
Bonham asserts that the City and County are third party beneficiaries to the contract
between PMA and Bonham, and, therefore, are liable under the contract for the commissions
earned due to Bonham’s efforts in renegotiating the MSU contract and in negotiating the various
sponsor and concessionaire contracts.
We do not find it necessary to determine if the City and County are third party
beneficiaries, and, if so, what type, since they are not seeking any relief under the contract.
Bonham’s assertion of liability against the City and County on the contract is unknown to the
law. Bonham has not, and probably cannot, cite any authorities in support of this position. The
very description of the status “third party beneficiary” belies an assertion of liability as an
obligor. A beneficiary gets a benefit, not an obligation. To attempt to hold someone liable on
a contract to which it is not a party is contrary to common reason. Accordingly, Bonham has no
cause of action against the City and County for breach of contract.
Unjust Enrichment
The theories of unjust enrichment, quasi contract, contracts implied in law, and quantum
meruit are essentially the same. Paschall’s, Inc. v. Dozier, 219 Tenn. 45, 53, 407 S.W.2d 150,
154 (1966). Unjust enrichment is a quasi-contractual theory or is a contract implied-in-law in
which a court may impose a contractual obligation where one does not exist. Whitehaven
Community Baptist Church v. Holloway, 973 S.W.2d 592, 596 (Tenn. 1998) (citing Paschall’s,
219 Tenn. at 53-54, 407 S.W.2d at 154-55). Such contracts are not based upon the intention of
the parties but are obligations created by law and are “founded on the principle that a party
9
receiving a benefit desired by him, under the circumstances rendering it inequitable to retain it
without making compensation, must do so.” Paschall’s, 219 Tenn. at 54, 407 S.W.2d at 154.
A contractual obligation under an unjust enrichment theory will be imposed when: (1) no
contract exists between the parties or, if one exist, it has become unenforceable or invalid; and
(2) the defendant will be unjustly enriched absent a quasi-contractual obligation. Holloway, 973
S.W.2d at 596. In Paschall’s, supra, the Court stated:
Each case must be decided according to the essential elements of
quasi contract, to-wit: A benefit conferred upon the defendant by
the plaintiff, appreciation by the defendant of such benefit, and
acceptance of such benefit under such circumstances that it would
be inequitable for him to retain the benefit without payment of the
value thereof.
219 Tenn. at 57, 407 S.W.2d at 155.
The most significant requirement for a recovery under this theory is that the enrichment
must be unjust. Id. Consequently, if the defendant has given any consideration to anyone for
the benefit, it would not be unjust for the defendant to retain the benefit without paying the
provider of such. Furthermore, before recovery can be had against the defendant on the theory
of unjust enrichment, the provider of the benefit must have exhausted his remedies against the
person with whom he had contracted, and still has not received the reasonable value of his
services. Id.
In the record, testimony was introduced that while Bonham negotiated some contracts
between PMA and various sponsors and concessionaires, the substance of these contracts
covered a project that was different in size and scope from the contracts which were
subsequently negotiated and actually used. The record reveals extensive efforts on the part of
the City and County, necessitated by the change in the size and scope of the project, in sending
out RFPs to numerous sponsors and concessionaires and the procurement of new contracts with
such. Moreover, the proof showed that no one ever operated under the contracts negotiated by
Bonham. The record also reflects that payments made by any of the contractees were received
by PMA. Testimony was introduced that the City and County never received any of the funds,
and there is no proof that the payments made to PMA benefited the City and County.
Bonham also seeks recovery by virtue of the renegotiation of the MSU Agreement. The
testimony in the record indicates that the MSU Agreement did not provide exclusive control to
10
MSU for all of the parking, all of the advertising and all of the luxury suites. Admittedly, the
new MSU Agreement allowed PMA more flexibility in its solicitation with sponsors and
concessionaires, but the renegotiation of the contract was procured for the benefit of PMA to
allow this flexibility. Bonham also claims that he is entitled to a commission on the procurement
of $2.2 million from the renegotiated MSU/PMA contract. Proof is lacking that Bonham’s
efforts secured the $2.2 million from MSU or that it directly benefited the City and County.
During the hearing, extensive testimony was introduced that the City and County did not
derive any benefit from Bonham’s actions in connection with his work with PMA. Admittedly,
this testimony conflicts with some of the other evidence introduced on behalf of Bonham. The
trial court made detailed findings of fact, and obviously the findings on the disputed issues were
largely dependent on the credibility of the witnesses. Any conflict in the testimony requiring a
determination of the weight, faith, and credit of any witness’s testimony rests in the first instance
with the trial court and will be given great weight by the appellate court unless other real
evidence compels a contrary conclusion. Haverlah v. Memphis Aviation, Inc., 674 S.W.2d 297,
302 (Tenn. App. 1984).
Whether a benefit has been conferred and the value of such benefit is a fact question.
Therefore, the finding by the trial court comes to us with a presumption of correctness. From
the record before us, we do not find that the evidence preponderates against the findings of the
trial court.
Bonham has also presented in this Court an issue concerning agency on the part of
Bonham acting for the City and the County. However, the record reflects that he failed to
present this as a theory in his complaint and did not present the issue in the trial court, and this
is raised for the first time on appeal. As a general rule, questions or issues not raised in the trial
court will not be entertained on appeal. Lawrence v. Stanford, 655 S.W.2d 927, 929 (Tenn.
1983); City of Lavergne v. Southern Silver, Inc., 872 S.W.2d 687, 691 (Tenn. App. 1993).
Therefore, we will
not consider Bonham’s arguments concerning this issue.
Accordingly, the order of the trial court is affirmed, and the case is remanded to the trial
court for such further proceedings as may be necessary. Costs of appeal are assessed against the
11
appellant.
_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
____________________________________
ALAN E. HIGHERS, JUDGE
____________________________________
DAVID R. FARMER, JUDGE
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