JAMES MULLOY ET AL.
EUGENE G. MULLOY, JR. ET AL.
Session July 11, 2018
from the Chancery Court for Davidson County No. 15-992-IV
Russell T. Perkins, Chancellor
brothers formed a limited liability company to own and lease
a commercial property. When the tenant sought to expand, both
brothers sought to find a suitable space for the tenant to
lease. The younger of the two brothers found a property that
would ideally suit the tenant's needs, a fact that was
communicated to his brother. The older brother purchased the
property through a newly created limited liability company
without his younger sibling's involvement. The older
brother's new limited liability company then leased the
new property to the tenant. The younger brother brought a
derivative suit against his brother and the newly formed
limited liability company, claiming usurpation of a corporate
opportunity belonging to the limited liability company that
the brothers had formed together and tortious interference
with business relationships. The younger brother also claimed
unjust enrichment. Following a trial, the chancery court
found in favor of the older brother and his newly formed
limited liability company and dismissed the complaint. After
our review of the record, we affirm.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
P. Funk and D. Gil Schuette, Nashville, Tennessee, for the
appellants, James Mulloy and Chemical Properties, LLC.
K. Grooms, Nashville, Tennessee, for the appellees, Eugene
Mulloy, Jr., and Cockrill Bend Properties, LLC.
Neal McBrayer, J., delivered the opinion of the court, in
which D. Michael Swiney, C.J., and Richard H. Dinkins, J.,
NEAL McBRAYER, JUDGE.
1996, brothers Eugene "Gene" Mulloy, Jr. and James
Mulloy acquired their parents' shares in the family
business, Nashville Chemical & Equipment Company, Inc.
("NCE"), becoming 50/50 owners. As part of that
transaction, the brothers formed Chemical Properties, LLC to
purchase the property where NCE did business, 7001 Westbelt
Drive in Nashville (the "Westbelt Property").
Chemical Properties then leased the Westbelt Property back to
NCE under a triple net lease. The Westbelt Property and the
lease with NCE were Chemical Properties' only assets.
NCE, the brothers owned Chemical Properties equally. But
Gene,  the older of the two brothers, served as
chief manager, while James served as secretary. The brothers
split the profits from Chemical Properties equally. James
described it as "a great investment" because
"essentially you have somebody else pay for your asset
and you receive distributions and they pay for, you know, all
the expenses of taxes, and maintenance and, you know,
anything that occurs."
2011, the brothers sold most of their shares in NCE to
Triwater Holdings LLC. Triwater Holdings brought in its own
chief executive officer, Mike Reardon, to serve as the chief
executive officer of NCE. But both brothers retained
management positions in NCE, reporting to Mr. Reardon. The
brothers also retained minority stock interests in NCE. NCE
continued to operate on the Westbelt Property under its lease
with Chemical Properties, which the brothers still co-owned.
the sale, NCE's business grew, driving the company to
look for additional space to lease. Gene, who was now
president of NCE, led the effort with the assistance of
Anthony "Tony" Allison, the company's
vice-president of operations. The search went on for months,
and even with the assistance of local and national commercial
real estate firms, a suitable property could not be found
until sometime in 2014. During that period, Gene and Mr.
Allison came across manufacturing space in Ashland City that
was soon to be vacant. After touring the property, Gene
approached the owner about leasing the space to NCE. Instead,
the owner wanted to sell the property.
reported the news to Mr. Reardon. The private equity
investors in NCE were not interested in owning real estate,
so Mr. Reardon suggested a third party might buy the Ashland
City property and lease it to NCE. Gene proposed that he fill
the role of buyer. So he signed an option to purchase the
Ashland City property while he carried out further due
learned of Gene's plans to purchase the Ashland City
property around Christmas of 2014. By then, James had been
away from the day-to-day operations of NCE for nearly a year.
He had joined Triwater Holdings, assisting with the
identification of potential acquisition targets. James
thought that the Ashland City facility was
"terrible" and "felt strongly that the owners
[of NCE] would look at that building and not feel like it
would be worthwhile." For those reasons, he did not
initially communicate with Gene about the property.
Cockrill Bend Warehouse
January 7, 2015, during a meeting in Chicago, Mr. Reardon
asked James to assist NCE in finding some space in Nashville.
James understood from that request that he should "go
home and put [his] Chemical Properties hat on because
that's the entity that leases property for [NCE] and
supplies that need." But James acknowledged that neither
he nor Mr. Reardon mentioned Chemical Properties at the
Nashville the following day, James called a friend in the
commercial real estate business, Mike Gorney, about NCE's
space needs. Mr. Gorney responded with a list of buildings in
close proximity to the Westbelt Property. But he highlighted
one prospect in particular, office/warehouse space at 7344
Cockrill Bend Boulevard (the "Cockrill Bend
Warehouse"). Mr. Gorney emailed that he "would not
be surprised if your brother [wa]s looking at this
[property]." The leasing agent for the Cockrill Bend
Warehouse advised Mr. Gorney that the owner of the property
was interested in selling as well as leasing. So Mr. Gorney
told the leasing agent "to put me in the mix to
reply to Mr. Gorney, James emailed that the Cockrill Bend
Warehouse "looks like a perfect opportunity." He
inquired about a potential purchase price and, alternatively,
about lease rates. James also emailed Tony Allison at NCE,
asking if he had looked at the Cockrill Bend Warehouse.
point, however, the opportunity to purchase appeared to be
over. The same day as the email exchanges between James and
Mr. Gorney and James and Mr. Allison, the owner of the
Cockrill Bend Warehouse, JCH Development Company, Inc.,
signed a contract to sell the property to a California buyer
for $1.8 million.
of the purchase contract, on January 9, Mr. Gorney emailed
the leasing agent to express his interest "in signing a
contract immediately to acquire the [Cockrill Bend Warehouse]
. . . for a total purchase of $2, 356, 100." Mr. Gorney
made the offer on behalf of his company, Gorney Realty
Partners, LLC. James did not authorize the offer, but Mr.
Gorney later explained that, had the offer been accepted, he
and James would have "work[ed] out some kind of
agreement to get everyone treated fairly."
having received the information from James on the Cockrill
Bend Warehouse, Mr. Allison made his own call to the leasing
agent. The leasing agent told him that the property was
already under contract. This prompted Mr. Allison to call
James. Mr. Allison recalled that he was told by James that
"Mike Gorney knows who has the option on that property
and [Mr. Gorney] believes that he has an opportunity to get
it." James recalled only suggesting that Mr. Gorney may
have had some sort of "in" based on Mr.
Gorney's email reporting that he asked to be put "in
the mix to purchase."
was said, it was enough for Gene and Mr. Allison to give the
Cockrill Bend Warehouse a look or, rather, another look.
Given its close proximity to the Westbelt Property, both Gene
and Mr. Allison were familiar with the Cockrill Bend
Warehouse and that space was advertised for lease there. But
both men had ruled the property out because it was already
partially leased. The nature of NCE's business made it
important to them to lease the entire building.
Gorney scheduled a site visit for the following Monday,
January 12. That afternoon, Gene, Mr. Allison, and another
NCE employee met Mr. Gorney and the leasing agent at the
Cockrill Bend Warehouse. James could not attend. Gene and Mr.
Allison thought the property would suit NCE's needs, and
Gene remembered discussing NCE possibly leasing the property
from either "Mike Gorney or some entity that he
created." Then the group met John Coleman Hayes, the
president of the owner of the Cockrill Bend Warehouse, JCH
Gorney recalled Mr. Hayes remarking that he wished that they
had shown up earlier because the warehouse was already tied
up with another purchaser. Mr. Gorney believed that this
interaction with Mr. Hayes may have been when he first
learned that the property was under contract.
and Mr. Hayes knew of each other from their county club but
had not met. Gene thought Mr. Hayes seemed surprised by the
site visit and acted as if the visit was an interruption.
Gene recounted Mr. Hayes saying something to the effect of
"I don't know why you all are here" and
"[y]ou all are wasting your time." It would later
be revealed that Mr. Hayes may not have seen the emails from
the leasing agent forwarding Mr. Gorney's purchase offer
and advising of the building tour.
site visit ended shortly after the group's encounter with
Mr. Hayes. Afterward, Gene wanted to know what was going on,
so he and the other NCE representatives met with Mr. Gorney
back at NCE. Mr. Gorney remembered explaining that he was
"in a backup position to purchase the property."
Both Gene and Mr. Allison had a different recollection. They
recalled Mr. Gorney representing that he had an option to
purchase the property. They also recalled Mr. Gorney stating
that his ...