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Nesmith v. Clemmons

Court of Appeals of Tennessee, Nashville

November 7, 2019

JOHNNY NESMITH
v.
SAMUEL C. CLEMMONS, ET AL.

          Session May 7, 2019

          Appeal from the Chancery Court for Williamson County No. 43480 Michael W. Binkley, Judge

         Defendants appeal the judgment entered in favor of Plaintiff in this breach of contract action arising out of a failure to pay a promissory note. Defendants argue that the trial court erred in several pretrial rulings, in concluding that the contract was ambiguous and considering parol evidence, in holding that the attorney that drafted the agreement represented Defendants and construing the ambiguous term against them, and in denying their motion to supplement the appellate record. Upon our review, we discern no reversible error and affirm the judgment of the trial court.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

          Robert Dalton and L. Jeffrey Payne, Lewisburg, Tennessee, for the appellants, Samuel C. Clemmons and Shannon N. Clemmons.

          Virginia L. Story and Kathryn L. Yarbrough, Franklin, Tennessee, for the appellee, Johnny Nesmith.

          Richard H. Dinkins, J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Carma Dennis McGee, J., joined.

          OPINION

          RICHARD H. DINKINS, JUDGE

         I. FACTUAL AND PROCEDURAL HISTORY

         This appeal stems from a breach of contract action to recover on a promissory note executed between family members who were also business partners. Dr. Samuel Clemmons and his wife, Shannon, founded Elite Emergency Services ("Elite")[1], an emergency room physician staffing business. Mrs. Clemmons' parents, Johnny and Brenda Nesmith, bought into the company, with each person owning 25 percent of the company. In July 2010, after a disagreement between Dr. Clemmons and Mr. Nesmith, Dr. and Mrs. Clemmons gave notice of their offer to sell their membership interest in Elite via a document styled "Notice of Exercise of Business Agreement's Put/Call Provision." Pursuant to that notice, Mr. Nesmith was also permitted the option of requiring Dr. and Mrs. Clemmons to purchase his membership interest, which he elected to exercise. A Membership Transfer Agreement ("MTA") was entered into by Dr. Clemmons, Mrs. Clemmons, and Mr. Nesmith on August 27, 2010, and the Clemmons executed a promissory note to Mr. Nesmith in the amount of $600, 000, payable in monthly installments of $10, 000 beginning September 1, 2010; they stopped making payments in October 2013.

         On August 27, 2014, Mr. Nesmith ("Plaintiff") filed suit in the Chancery Court for Williamson County, alleging that Dr. and Mrs. Clemmons ("Defendants") failed to make payments according to the schedule in the Note and were therefore in default; he sought $118, 000 for the arrearages and late fees, plus interest and attorneys' fees.

         Defendants moved to dismiss the action or, in the alternative, transfer it to the circuit court for Williamson County, where they had previously initiated a suit against Mr. Nesmith and six others who worked for, advised, or provided services to Elite; the motion was denied. Defendants then answered the complaint, asserting a counterclaim for breach of contract and pleading the affirmative defenses of estoppel, laches, unclean hands, and waiver; in an amended answer, Defendants asserted that the promissory note was not valid due to a material mistake of fact and sought a judgment in their favor as to the damages caused by the breach of contract. Plaintiff answered the countercomplaint, asserting the defense of failure to state a claim and the doctrines of unclean hands, unjust enrichment, and consent and acquiescence.

         A bench trial was held on April 25, 26 and May 12 and 20, 2016, and on April 5, 2017.[2] The following witnesses testified: Mr. Nesmith; Russell Morrow, who prepared Elite's corporate tax returns from 2000 until 2009; Dr. Clemmons; Randy Stockton, who worked for Frost-Arnett Company, a collections agency used by Elite; Michael Bowen, who works in the Medical Specialty Group of SunTrust Bank, where Elite's bank account was held; Brenda Nesmith; Dan Huffstutter; Kelly Pendergrass; and Wanda Jones.

         By order entered August 17, 2017, the trial court held that Defendants had breached the promissory note and proceeded to consider whether Plaintiff had first breached the MTA by bringing "harm" to Defendants or Elite. The court held that the term "harm" as used in the MTA was ambiguous, calling for the court to consider parol evidence to consider the parties' intent. The court concluded that Defendants failed to show by a preponderance of the evidence that Plaintiff breached the MTA or the promissory note, failed to establish the affirmative defenses they raised, and failed to prove the elements of their counterclaim for breach of contract and material mistake of fact. The court awarded judgment in the amount of $240, 000 and held that Plaintiff was entitled to reasonable attorney's fees and costs, to be determined in a subsequent order; the court also awarded prejudgment interest to Plaintiff at the rate of ten percent per annum from the date of the filing of the complaint until entry of the order as well as post judgment interest. By order entered November 27, the court entered judgment in the amount of $202, 780.47 for Plaintiff's attorneys' fees and costs.

         Defendants filed their notice of appeal on December 22, 2017. They moved in this court to supplement the record with additional documents which they asserted were not included in the technical record and were "essential for a fair and accurate consideration of all of the issues on appeal." By order entered May 31, 2018, this Court remanded the matter to the trial court for consideration, which denied the motion to supplement. On July 31, Defendants filed another motion to supplement the record in this court, arguing that "the trial court has refused to grant Defendants any relief whatsoever, even when it is facially apparent that the current Technical Record is entirely insufficient and not in conformity with the truth." This Court denied the motion without prejudice to the trial court taking further action relative to the record. The Tennessee Supreme Court denied Defendants' Rule 10 application for extraordinary appeal.

         Defendants raise six issues for our review. Two concern the court's rulings on a discovery motion and a motion to continue the trial; three concern holdings relative to the MTA; lastly, Defendants appeal the denial of their motion to supplement the record. Plaintiff seeks his attorney's fees incurred in this appeal.

         II. ANALYSIS

         A. The Record on Appeal

         We first consider Defendants' contention that the trial court erred in denying their Motion to Correct and Supplement the Record. After Defendants filed their notice of appeal on December 22, 2017, they filed a Designation of the Record on January 8, 2018, identifying 33 items. When the trial court clerk certified the record on appeal, she included an affidavit in which she stated that four of the items identified in the Designation were already included in the record, one could not be found "nor was it identified with particularity," and that "[a]ll remaining requests were for documents that were not filed in the trial court . . . during the pendency of the proceedings." Defendants filed a motion with this Court to correct and supplement the record, and we remanded the case for the trial court's consideration; the trial court held a hearing and denied the motion by order entered July 6, 2018. Defendants moved this court for relief from the trial court's decision, and we denied the motion, "find[ing] no extraordinary circumstances which would warrant this court disregarding the trial court's decision." Defendants filed an application for an extraordinary appeal from our decision in the Tennessee Supreme Court, pursuant to Rule 10 of the Rules of Appellate Procedure; the Supreme Court denied the application. Defendants have included this issue in their appeal as of right.

         Defendants assert in their brief on appeal that the court's decision was error for three reasons, which we quote below:

[1] First, regarding the Designation, the vast majority of the documents enumerated in the Designation are not included in the Technical Record . . . [2] Second, regarding motions and orders relating to discovery, Appellants concede that such materials were not included in the Designation. . . . As trial counsel pointed out in Paragraph 4 of the Declaration, the lack of meaningful discovery and unreasonable restrictions placed thereon by the trial court are critical issues in the appeal of the trial court's final ruling. . . . Based on this reasoning, Appellants argued in their Motion that the Technical Record should be supplemented to include each and every motion and order relating to discovery. . . . [3] Finally, … the Appendix to the Brief of Appellant is replete with documents that otherwise should have been included in the Technical Record pursuant to Tenn. R. App. P. 24(a) but, inexplicably, were not. . . . In sum, Appellants have been denied procedural due process by the deficiencies in the record and the trial court's refusal to correct them. As evidenced by the lengthy Appendix to this brief and the numerous citations thereto contained herein, the documents that have been excluded from the record are essential to Appellants' arguments on appeal.

         This issue addresses the application of Rule 24 of the Tennessee Rules of Appellate Procedure. We accord great deference to decisions of this nature made by the trial court:

The procedure for correction or modification of the record reflects the policy of avoiding technicality and expediting a just resolution on the merits by according deference to the trial court's decision on which matters are properly includable in the record, thereby avoiding additional litigation on that subject alone. The specific purpose of Rule 24 is accommodated as well, since the trial judge is in the best position to determine which matters are necessary to "convey a fair, accurate and complete account of what transpired with respect to those issues that are the bases of appeal." See also Artrip v. Crilley, 688 S.W.2d 451, 453 (Tenn. [Ct.] App. 1985).

Bradshaw v. Daniel, 854 S.W.2d 865, 868-69 (Tenn. 1993). Rule 24 provides in pertinent part:

(a) . . . The following papers filed in the trial court are excluded from the record: (1) subpoenas or summonses for any witness or for any defendant when there is an appearance for such defendant; (2) all papers relating to discovery, including depositions, interrogatories and answers thereto, reports of physical or mental examinations, requests to admit, and all notices, motions or orders relating thereto; (3) any list from which jurors are selected; (4) trial briefs; and (5) minutes of opening and closing of court. Any paper relating to discovery and offered in evidence for any purpose shall be clearly identified and treated as an exhibit. No paper need be included in the record more than once. . . . If the appellee deems any other parts of the record to be necessary, the appellee shall, within 15 days after service of the description and declaration, file with the clerk of the trial court and serve on the appellant a designation of additional parts to be included. All parts of the record described or designated by the parties shall be included by the clerk of the trial court as the record on appeal. The declaration and description of the parts of the record to be included on appeal provided in this subdivision may be filed and served with the declaration and description of the parts of the transcript to be included in the record provided in subdivision (b) of this rule. If a party wishes to include any papers specifically excluded in this subdivision, but fails to timely designate such items, the trial court clerk may supplement the record as provided for in subdivision (e) without modifying the previously prepared record.
(e) Correction or Modification of the Record. If any matter properly includable is omitted from the record, is improperly included, or is misstated therein, the record may be corrected or modified to conform to the truth. Any differences regarding whether the record accurately discloses what occurred in the trial court shall be submitted to and settled by the trial court regardless of whether the record has been transmitted to the appellate court. Absent extraordinary circumstances, the determination of the trial court is conclusive. If necessary, the appellate or trial court may direct that a supplemental record be certified and transmitted.
***
(g) Limit on Authority to Add or Subtract From the Record. Nothing in this rule shall be construed as empowering the parties or any court to add to or subtract from the record except insofar as may be necessary to convey a fair, accurate and complete account of what transpired in the ...

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