RICHARD MALONE, ET AL.
MATHEW LASATER, ET AL.
Assigned on Briefs January 27, 2015.
Appeal from the Chancery Court for Montgomery County No. MCCHCVMG125 Laurence M. McMillan, Jr., Chancellor.
Jacob P. Mathis, Clarksville, Tennessee, for the appellant, Mathew Lasater, Annie Lasater, and Lasaters Corp., Inc.
Richard J. Malone, Pro se, appellee.
Arnold B. Goldin, J., delivered the opinion of the Court, in which Brandon O. Gibson, J., and Kenny Armstrong, J., joined.
ARNOLD B. GOLDIN, JUDGE.
Plaintiffs Malone Enterprise, LLC ("Malone Enterprise"), Richard Malone ("Mr. Malone") and Allison Malone ("Ms. Malone"; collectively, "the Malones") seek damages arising from a 2009 franchise agreement and 2010 equipment lease agreement. The background facts relevant to our disposition of this matter on appeal are largely undisputed. In December 2009, Defendant Lasaters Corporation, Inc. ("Lasaters Corporation") and the Malones entered into a franchise agreement governing the Malones' operation of a Lasaters Coffee and Tea franchise. The franchise agreement identified the parties as "Lasaters Corporation" and "Malone Enterprises, LLC (Rick & Allison Malone) dba Lasaters Coffee & Tea." It was executed by "Mat Lasater, CEO" for Lasaters Corporation, and by "Richard J. Malone" and "Allison D. Malone." The franchise agreement recited an initial term of ten years, set-forth the rights and obligations of the parties, and contained an arbitration provision that was separately initialed by Mr. Malone, Ms. Malone, and Mathew Lasater ("Mr. Lasater"). Paragraph twenty-three of the franchise agreement provided that the agreement "contain[ed] the entire agreement between Franchisee and Franchisor."
Disputes subsequently arose between the parties, who eventually agreed to submit the matter to binding arbitration. Although the parties' franchise agreement contained an arbitration clause that provided that "Any controversy arising out of this Agreement will be settled solely and totally by Arbitration … in accordance with the rules of the American Arbitration Association, " the parties entered into a new arbitration agreement that provided that the arbitration panel would consist of three "Christian persons" selected by the signatories' respective pastors. The new arbitration agreement provided that all disputed issues, including procedural issues, would be submitted to the arbitrators, the arbitrators' decision would be binding, that no appeal would be permitted, and that no legal counsel would be present during the proceedings. The agreement was signed by "Rick Malone, " "Allison Malone, " "Mat Lasater, " and "Annie Lasater."
In March 2011, the arbitrators communicated their "Unanimous Agreement of Christian Arbitration Panel" to the parties' respective pastors. The arbitrators' decision permitted "Lasaters [to] take over [the] store" and assume current inventories and required them to pay $55, 000.00 to the Malones at the time of possession or before the end of March 2011. It required the Malones to pay all equipment, royalties, and rent through February 28, 2011. It also required that "Lasaters and Malones mutually apologize to each other and agree to never disparage each other in [the] future." This lawsuit ensued.
The Malones filed a complaint for damages and a writ of attachment against Defendants' real and personal property in the Chancery Court for Montgomery County in March 2012. In their complaint, the Malones named Mathew T. Lasater ("Mr. Lasater") and Annie R. Lasater ("Ms. Lasater"; collectively, "the Lasaters") as Defendants. They alleged, in relevant part, that they had entered into a franchise relationship with the Lasaters, that "many disputes" had subsequently arisen between the parties, and that the parties had entered into binding arbitration to resolve their disputes. They asserted that the parties had executed an agreement to arbitrate in February 2011; that they had selected arbitrators in accordance with the terms of the arbitration agreement; that, although "[t]here was no face to face arbitration session . . . the parties did submit substantial documentation and information to the arbitrators"; and that, in March 2011, the arbitrators awarded the Malones $55, 000.00. They further asserted that the Lasaters had refused to pay the amounts awarded despite good faith efforts by the Malones to perform the duties specified by the arbitrators. They also alleged that the Lasaters had been selling real property and submitted that they were "fearful that the attempts to sell the property [were] done with the intent to defraud creditors." They prayed for a writ of attachment to certain real property owned by the Lasaters, for a judgment in the amount of $55, 000.00, and for costs and other relief as the trial court found just. On March 9, 2012, the trial court granted their prayer for a writ of attachment against the Lasaters.
On March 20, 2012, the Lasaters filed a motion to dismiss. In their motion, as subsequently twice amended, the Lasaters asserted that the arbitrators had failed to conduct a hearing; that the 2011 arbitration agreement contained no provision waiving a hearing; and that a hearing was required under Tennessee Code Annotated § 29-5-306. The Lasaters further asserted that the franchise agreement and equipment lease that were the source of the parties' dispute were executed by the Lasaters Corporation and that the Lasaters, in their individual capacities, had no contractual relationship with the Malones.
On May 4, 2012, the Malones amended their complaint by agreement of the parties and added Malone Enterprise, LLC as a Plaintiff and Lasaters Corporation (hereinafter, collectively with the Lasaters, "Defendants") as a Defendant. Following a hearing on May 4, 2012, the trial court denied the Lasaters' motion to dismiss. The Lasaters answered the amended complaint on May 18 and denied that they had entered into an agreement with the Malones in their individual capacities. In their answer, the Lasaters admitted to the Malones' allegation that "the Plaintiffs and the Defendants executed [the] agreement to arbitrate the dispute" described in the complaint and admitted to the arbitration agreement attached to the complaint. They denied that the arbitrators had awarded the Malones $55, 000.00, that the Malones had made a good faith effort to perform the terms and conditions set-forth in the arbitration award, and that they had refused to pay the amounts awarded to the Malones. The Lasaters also denied the Malones' contention that they had sold real property with an intent to defraud creditors and denied that the Malones were entitled to a judgment pursuant to Tennessee Code Annotated § 29-6-101, et seq. The Lasaters further denied that the Malones were entitled to any of the relief sought in their complaint and prayed for dismissal of the matter.
The Malones filed a motion for a judgment on the pleadings in June 2012. Defendants opposed the motion, asserting, in part, that a March 2011 email from the arbitrators clarified the award and required the Malones to reimburse Defendants certain expenses incurred through March 31, 2011. They asserted that the Malones owed Defendants payment for outstanding invoices in the amount of $6, 250.87, and that, prior to the commencement of this lawsuit, Defendants had paid the Malones $6, 000.00 as payment ...