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06/24/96 RESOLUTION TRUST CORPORATION v. ADOLPH J.

June 24, 1996

RESOLUTION TRUST CORPORATION, PLAINTIFF,
v.
ADOLPH J. BLOCK, ET AL., DEFENDANT.



Certified Question of Law from the United States District Court for the Eastern District. Hon. Joe A. Tilson, United States Magistrate Judge.

Penny J. White, Justice, Concur: Birch, C.j., Drowota, Anderson, Reid, J.j.

The opinion of the court was delivered by: White

WHITE, J.

I. Introduction

The United States District Court for the Eastern District of Tennessee has certified to this Court, pursuant to Rule 23, Tennessee Supreme Court Rules, the following question:

Whether under Tennessee law the directors and officers of a Tennessee corporation would be jointly and severally liable for the collective actions of the board or proportionately liable under the doctrine of comparative fault.

As written, the question is broadly stated. We understand it, however, to focus on the application of principles of comparative fault to circumstances in which corporate officers and directors are found to be liable for damages. The issue is narrowed and clarified by the pleadings and facts.

II. Facts

Resolution Trust Corporation, which was first conservator, and then receiver, for Lincoln Federal Savings and Loan Association, sued the corporation's former officers and directors alleging, as causes of action, breach of fiduciary duty, negligence, gross negligence, negligence per se, and breach of contract. The causes of action arise out of certain loans approved by the officers and directors and made by the corporation. In an amended complaint, Resolution Trust requested judgment "against the defendants, jointly and severally in the amount of $4.2 million . . . ."

Defendants filed a motion to strike alleging that Resolution Trust could not obtain a joint and several judgment, but was limited to a judgment based on each defendant's comparative fault. After initially denying the motion, the federal court reconsidered and granted defendants' petition for certification of a question of law which we accepted.

In addressing the certified question, we make the following assumptions. First, we assume that the basis of defendants' liability is not at issue. The question implies that the officers and directors are liable to the corporation for losses caused by their "collective" breaches. It further assumes that the receiver is entitled to maintain the suit on behalf of the insolvent corporation. Finally, the question as written implies, and we assume for purposes of our response, that no affirmative defenses or claims for contribution or indemnity are presented.

Our answer, then, to the question before us is as follows: In an action for damages on behalf of a corporation against its officers and directors who are found to be liable for their collective breach of fiduciary duty and contract and for negligence, the liability of the officers and directors to the corporation is joint and several, not proportional to fault.

III. Analysis

Our analysis begins with the recognition that the adoption of comparative fault principles in McIntyre v. Balentine, 833 S.W.2d 52 (Tenn. 1992), has prompted reconsideration of numerous tort principles. While we noted in McIntyre the inconsistencies in the premises of comparative fault and those of joint and several liability, we did so in the context of that case involving a sole tortfeasor sued for damages proximately caused by his negligence. In our more recent decision, Owens v. Truckstops of America, 915 S.W.2d 420 (Tenn. 1996), in which Justice Drowota Dissented, we addressed head on defendants' contention that McIntyre abolished all joint and several liability. After an exhaustive review of all our comparative fault decisions, we concluded that "where the separate, independent negligent acts of more than one tortfeasor combine to cause a single, indivisible injury, each tortfeasor will be liable only for that ...


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