Session October 19, 2017
from the Circuit Court for Bradley County No. V-12-601 Jerri
Bryant, Chancellor No. E2016-01679-COA-R3-CV
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
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.
Rowan Leathers and Valerie Diden Moore, Nashville, Tennessee,
for the appellee, Southern Heritage Bank.
Michael Swiney, C.J., delivered the opinion of the court, in
which John W. McClarty and Thomas R. Frierson, II, JJ.,
MICHAEL SWINEY, CHIEF JUDGE
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.
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.
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.
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.
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
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
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 ...