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Winters v. Southern Heritage Bank

Court of Appeals of Tennessee, Knoxville

January 25, 2018


          Session October 19, 2017

         Appeal from the Circuit Court for Bradley County No. V-12-601 Jerri Bryant, Chancellor[1] No. E2016-01679-COA-R3-CV

         This appeal arises from an alleged breach of contract. Lew Winters ("Winters") sued Southern Heritage Bank ("the Bank") in the Circuit Court for Bradley County ("the Trial Court") for, among other things, breach of contract. Specifically, Winters asserted that the Bank wrongly backed out of a tripartite agreement involving the Internal Revenue Service ("the IRS") which would have allowed Winters to obtain financing for new tractors and therefore be able to continue operating his trucking company. The Bank filed a motion for summary judgment, arguing that no such agreement was reached. Instead, according to the Bank, the parties only engaged in discussions about a possible resolution. The Trial Court granted the Bank's motion for summary judgment. Winters appealed to this Court. We hold, inter alia, that the purported oral agreement violates the Statute of Frauds. We affirm the judgment of the Trial Court.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed; Case Remanded

          Michael E. Richardson, Chattanooga, Tennessee, for the appellant, Lew Winters.

          H. Rowan Leathers and Valerie Diden Moore, Nashville, Tennessee, for the appellee, Southern Heritage Bank.

          D. Michael Swiney, C.J., delivered the opinion of the court, in which John W. McClarty and Thomas R. Frierson, II, JJ., joined.




         Winters started a trucking company, Ocoee River Transport ("Ocoee"), in the 1990s. The Bank financed a terminal and several tractors and trailers bought by Winters' company. Winters' then-wife, Wanda Winters, came to handle the daily financial operations of the company. Cash flow was an ongoing issue for Ocoee. Mrs. Winters entered into a factoring agreement with the Bank whereby the Bank paid Ocoee for its account receivables and the Bank then would collect the receivables. Ocoee pledged all its account receivables to the Bank, and the Bank set up a suspense account whereby the Bank collected all receivables or funds paid to Ocoee.

         Over the course of time, the economy worsened and Ocoee's customers were slow to pay, if they did. In 2006, Mrs. Winters began submitting false invoices to the Bank. In 2007, Winters learned of the problems facing the company and confronted Mrs. Winters. Mrs. Winters acknowledged submitting false invoices. Mrs. Winters' employment with Ocoee ended, and she later pled guilty to a federal charge of bank fraud arising from the matter.

         Winters approached the Bank expressing a desire to rectify the situation and address the $700, 000 deficiency caused by the faulty account receivables. The factoring agreement was terminated while the suspense account remained in place. As part of a restructuring of debt, Ocoee entered into a promissory note in September 2007 in the amount of $2, 089, 282. This promissory note was secured by a personal guarantee signed by Winters.

         This arrangement continued for some years. In 2011, new problems emerged. The Bank advised Winters that a minimum payment was coming due. In addition, problems with the IRS were on the horizon for Ocoee. Winters believed that his business could perform much better if he could obtain new trucking equipment to ease the maintenance expense of his aging fleet. However, in order to obtain financing for the new equipment, Winters and Ocoee had to contend with encumbrances the IRS would place on the trucks.

         On December 6, 2011, a meeting involving representatives of Ocoee, the IRS, and the Bank took place. Attorney Dale Allen attended the meeting on behalf of Winters. What, if any, agreement was reached at this meeting is disputed on appeal. In any event, Winters apparently understood that an agreement had been reached whereby: the Bank would allow Winters to purchase new tractors without asserting a security interest in the tractors; the Bank further would refrain from foreclosing upon Ocoee or Winters if he continued to allow the Bank to collect payments made to Ocoee as before; and, that an Offer and Compromise would be submitted in order to work out problems with the IRS. The purported agreement, if there was one, did not last long. The next day, December 7, 2011, the Bank indicated that it had not agreed to the terms Winters thought were agreed upon. The IRS thereafter pulled out of talks. The Bank foreclosed upon Ocoee's assets and Winters' personal assets, including his home. Ocoee filed for bankruptcy.

         In June 2012, the Bank filed suit in Chancery Court against Winters and his ex-wife to recover on breach of personal guaranty agreements. In August 2012, Winters sued the Bank in the Trial Court, alleging, among other things, breach of contract stemming from the December 6, 2011 meeting. Winters' complaint stated, in part:

8) The Plaintiff would show that he stepped down as the full-time operator and corporate officer in charge of the day to day operations of Ocoee Transport and that his ex-wife took over daily operations. While the Plaintiff's ex-wife was in charge of the day to day operations of Ocoee Transport, the Plaintiff would show that agents of the Defendant bank made coercive demands upon her and demanded that she begin to factor the accounts receivables of the Ocoee Transport with the bank, a business relationship that was not in the best interest of the corporation. Among other things, the bank charged excessive fees.
9) The Plaintiff avers and charges that actions taken by the bank caused a adverse effect upon Plaintiff's business and the Defendant bank eventually undertook to control the day to day financial operations of Ocoee Transport.
10) The Plaintiff undertook to re-take control of his corporation's activities, but met resistance from the Defendant bank. The Defendant bank set up a suspense account to control the financial operations of the corporation and to control all monies coming into and out of the corporation.
11) The Plaintiff would show that he had personal tax obligations and had guaranteed corporate debt obligations and the Plaintiff's personal exposure was substantially increased by wrongful actions taken by the Defendant bank.
12) The Plaintiff would also show that the bank manipulated the corporation's financial operations so as to keep legitimate tax obligations of the Plaintiff and the Plaintiff's corporation, including obligations owed to the Internal Revenue Service, from properly being paid, to the financial benefit of the Defendant bank.
13) The Plaintiff was forced to go to the Defendant bank every business day and obtain the Defendant's approval as to payment of all business expenses, including payroll. The Plaintiff avers and charges that by taking over the control of the Plaintiff's corporation's business operations, the Defendant bank undertook and owed him a duty, in his capacity as a shareholder, to properly manage the business and not take actions that would financially damage his stock ownership interest in Ocoee Transport.
14) Plaintiff would show that the Defendant breached these duties and have caused him substantial financial damage.
15)The Plaintiff would show that the bank's actions in controlling the financial operations of Ocoee Transport also resulted in the Plaintiff's inability to purchase new equipment for his tractor-trailer fleet, which, new equipment was needed in order to continue to operate the corporation as a viable going concern. The Plaintiff obtained approval for equipment loans, but, was unable to secure the loans that were needed to continue the successful operation of his company due to the wrongful actions taken by the Defendant bank.
16) The Plaintiff would show that as a proximate result of the wrongful actions taken by the Defendant bank, he was eventually forced to place his corporation into a bankruptcy. His stock ...

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