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Farmers & Merchants State Bank v. Direct Scaffold Services Co., LLC

United States District Court, M.D. Tennessee, Nashville Division

February 25, 2015

THE FARMERS & MERCHANTS STATE BANK, Plaintiff,
v.
DIRECT SCAFFOLD SERVICES CO., LLC, Defendant.

MEMORANDUM

KEVIN H. SHARP, District Judge.

Contractor's Access Equipment, Inc. ("CAE") filed a Motion to Enforce Judgment (Docket No. 54) arising out this Court's December 14, 2009 Order (Docket No. 27) against the Receiver, Michael Collins, and Plaintiff, The Farmers & Merchants State Bank ("Bank"). Both the Receiver and the Bank oppose the Motion. Oral arguments on this matter were heard on January 20, 2015. For the reasons that follow, the Court concludes that the Order is not enforceable as to the Receiver, but may be enforceable as to Plaintiff.

I. FACTUAL BACKGROUND

The Bank filed an action seeking appointment of a Receiver for Defendant, Direct Scaffold Services, Co., LLC ("DSS") in this Court. The Court appointed Michael E. Collins as the Receiver for DSS. The Receiver held a Court-approved auction sale at which CAE was the successful bidder and purchased the assets of DSS. In the December 14, 2009 Order, the Court approved the sale of DSS's assets to CAE. The Order, which identified CAE as the "Successful Bidder, " decreed that CAE "shall take the Assets free and clear of all liens, claims and interests, with any such liens, claims or interests to attach to the proceeds of the sale in the same order of priority." (Docket No. 27 p. 3).

On November 10, 2010, the Receiver and CAE executed a Settlement and Release Agreement in which CAE released the Receiver, DSS and their agents from any and every claim and liability, past and present, known and unknown, that CAE has or had against them. (Docket No. 56-2). The Settlement and Release Agreement also contained adjustments to the purchase price of DSS's assets which were outlined in a Settlement Statement attached to the agreement.

This Court terminated the receivership and dismissed the case on November 24, 2010 in an Order approving the Final Report of the Receiver. This Order approved, among other things, the final, adjusted purchase price of DSS's assets, and incorporated the Settlement Statement from the Settlement and Release Agreement. It also approved distribution of DSS's liquidated assets to the Bank. (Docket No. 50-51).

CAE alleges, and the Bank and Receiver do not dispute, that two creditors of DSS asserted claims against CAE as successor-in-interest to DSS. First, Rankin County, Mississippi asserted a claim against CAE in early 2010 (while the receivership was still open) for unpaid personal property taxes. Then, in April 2014 (after termination of the receivership) Stone County, Mississippi asserted similar claims. CAE notified and requested assistance from the Receiver and the Bank but did not receive any. CAE alleges it was forced to settle with Rankin County for $107, 184.54, which has been paid, and with Stone County for $56, 656.42 plus interest at a rate of 1% per month in monthly installments of $2, 500 which is being paid monthly.

On July 18, 2014, CAE filed a motion to enforce the Court's December 14, 2009 Order approving the sale of DSS's assets to CAE. Specifically, CAE argues that the Receiver violated that part of the Court's order requiring the Receiver to sell CAE DSS's assets free and clear of all liens, claims and encumbrances. CAE asserts claims against the Bank because it is in possession of the proceeds of the sale, which, according to the Order, must satisfy any liens, claims, or encumbrances asserted against the assets.

The Receiver disputes liability, and argues that any claims against him have been released pursuant to the Settlement and Release Agreement. The Bank contends that CAE does not have standing to bring this action, and, if it does, the Court does not have the power to enforce the Order against it because the Order does not apply to the Bank. Finally, the Bank argues that CAE released claims against it under the Settlement and Release Agreement and/or CAE's claims against the Bank are time-barred.

II. ANALYSIS

A. The Receiver

This Court finds that the Receiver is released from liability pursuant to the Settlement and Release Agreement ("the Agreement"). The Agreement provides that on November 10, 2010, CAE released and forever discharged the Receiver from "[a]ny and every claim, debt, demand, cause of action, obligation, damage and liability of any nature whatsoever (whether or not known, suspected or claimed, and whether sounding in contract or in tort) which [CAE] had or currently ha[s] against the [Receiver]." (Docket No. 57-1). Interpreting the terms in the Agreement to have their usual, natural and ordinary meaning, the Court finds that the Agreement bars CAE's claims against the Receiver for the two instances of alleged tax liability which are the subject of the present motion. See Union Planters Nat'l Bank v. American Home Assurance, Co., 865 S.W.2d 907, 912 (Tenn. Ct. App. 1993) (finding that general principles of contract law require courts to give words in contracts their usual, natural and ordinary meaning and enforce the terms as written).

CAE argues that the Agreement does not release the Receiver from liability because Paragraph 7 makes the Agreement subject to the approval of the Court, and such approval did not occur. However, the Agreement received approval from the Court in its Order approving the Receiver's final report and terminating the receivership. (Docket No. 51). In his Motion to Approve Receiver's Final Report (Docket No. 50), the Receiver asked for approval of the final purchase price of DSS's assets, as modified by the Agreement, and attached the Settlement Statement from the Agreement detailing the purchase price as an exhibit (Docket No. 50-2). The Court, therefore, approved the terms of the Agreement in its Order approving the Receiver's final report, and the condition in Paragraph 7 ...


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