Adams TV of Memphis, Inc. v. ComCorp of Tennessee, Inc.

• Decision Date: 19 August 1997
• Citation: Adams TV of Memphis, Inc. v. ComCorp of Tennessee, Inc., 969 S.W.2d 917 (Tenn. App. 1997)
• Parties: ADAMS TV OF MEMPHIS, INC., Plaintiff/Appellant, v. COMCORP OF TENNESSEE, INC., and Thomas R. Galloway, Defendants/Appellees.
• Court: Tennessee Court of Appeals

Page 917

969 S.W.2d 917

ADAMS TV OF MEMPHIS, INC., Plaintiff/Appellant, v. COMCORP OF TENNESSEE, INC., and Thomas R. Galloway Defendants/Appellees.

Court of Appeals of Tennessee Western Section, at Jackson.

Aug. 19, 1997.

Application for Permission to Appeal

Denied by Supreme Court

March 16, 1998.

Lucian T. Pera, Cannon F. Allen, Mary A. McNeil, Armstrong Allen Prewitt Gentry Johnston & Holmes, Memphis, for Appellant.

Henry L. Klein, Apperson, Crump, Duzane & Maxwell, PLC, Memphis, for Appellee.

HIGHERS, Judge.

In this breach of contract action, Adams TV of Memphis, Inc. ("Plaintiff" or "Adams TV") filed suit against ComCorp of Tennessee, Inc. ("ComCorp") and Thomas R. Galloway for breaching several provisions of their contract (hereinafter the "Adams TV-ComCorp contract"), which provided for the sale of WHBQ-TV (hereinafter the "Station"). ComCorp filed a motion to dismiss asserting that even if ComCorp had breached certain provisions of the Adams TV-ComCorp contract, such breaches were not material breaches, and Adams TV incurred no damage as a result. The trial court granted ComCorp's motion to dismiss, holding that Adams TV received the entire benefit of its bargain under the Adams TV-ComCorp contract, that ComCorp did not materially breach any part of the Adams TV-ComCorp contract, and that the damages sought by Adams TV were merely consequential and thereby precluded by section 9.2(c) of the Adams TV-ComCorp contract. For the reasons stated hereafter, we affirm the judgment of the court below.

FACTS

On March 8, 1994, Adams TV and ComCorp executed the Adams TV-ComCorp contract whereby Adams TV agreed to sell and ComCorp agreed to purchase the Station for approximately $57,000,000.00. Pursuant to the terms of the Adams TV-ComCorp contract, Adams TV and ComCorp agreed to keep confidential the information obtained from each other during the course of completing the transaction. Under paragraph 6.11 of the Adams TV-ComCorp contract, the parties agreed not to divulge the existence of the contract or the transactions contemplated by it without the prior consent of the other party, except to the extent required by law or regulation. Paragraph 6.11 of the Adams TV-ComCorp contract provides as follows:

6.11 Public announcement. Seller shall publish and broadcast a public notice concerning the filing of the application for assignment of the Licenses in accordance with the requirements of Section 73.3580 of the FCC's Rules. As to any other announcements, neither party hereto shall issue any press release or public announcement or otherwise divulge the existence of this Agreement or the transactions contemplated hereby without prior approval of the other party hereto (which shall not be unreasonably withheld), except as and to the extent that such party shall be obligated by law or regulation, in which case the other party shall be so advised and the parties shall use their best efforts to cause a mutually agreeable release or announcement to be issued.

Similarly, under paragraph 11.9(a) of the Adams TV-ComCorp contract, ComCorp agreed not to disclose any information concerning the Station and Adams TV during the course of completing the transaction. Paragraph 11.9(a) provides, in part, as follows:

11.9 Confidentiality. (a) Buyer agrees that prior to Closing, Buyer and its respective agents and representatives shall not use for its or their own benefit (except when required by law and except for use in connection with Buyer's financing of the transaction and Buyer's investigation of the Station and its assets in connection with this Agreement), and shall hold in strict confidence and not disclose: (i) any data or information relating to Seller and GTH-103, their affiliates, or the Station obtained from Seller or GTH-103 or any of their directors, officers, employees, agents or representatives in connection with this Agreement; or (ii) any data and information relating to the business, customers, financial statements, conditions or operations of the Station which is confidential in nature and not generally known to the public.

Pursuant to paragraph 11.8 of the Adams TV-ComCorp contract, ComCorp agreed not to assign any rights, obligations or liabilities under the contract without the prior written consent of Adams TV.

ComCorp further promised under section 5.8 of the Adams TV-ComCorp contract that all written statements furnished by it to Adams TV were true and accurate and that it had not omitted to state any material facts to Adams TV which would make its other statements misleading. Paragraph 5.8 of the Adams TV-ComCorp contract provides as follows:

5.8 Disclosure. To the knowledge of Buyer, no statement of material fact by Buyer contained in this Agreement and no written statement of material fact furnished by Buyer to Seller pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein contained not misleading.

ComCorp, likewise, warranted that all representations made by it to Adams TV were true and correct in all material respects as of the parties' closing date under the contract. Paragraph 8.3 of the Adams TV-ComCorp contract provides as follows:

8.3 Representations and Warranties. The representations and warranties made by Buyer shall be true and correct in all material respects as of the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date, except for changes permitted or contemplated by this Agreement.

Moreover, paragraph 9.2 of the parties' Adams TV-ComCorp contract, which provides for indemnification to Adams TV for various breaches of the contract by ComCorp, states that Adams TV's "recovery under Section 9.2(a) shall in no event include any special, indirect, incidental or consequential damages."

On August 11, 1994, ComCorp executed a second contract, the "ComCorp-Fox contract" whereby ComCorp agreed to sell, and FTS Investments, Inc. (hereinafter, "Fox") agreed to purchase the Station for approximately $80,000,000.00. This agreement was executed on behalf of ComCorp by Thomas Galloway, who was the chief executive officer, chairman of the board of directors and sole stockholder of ComCorp. Adams TV alleged that prior to the execution of the ComCorp-Fox contract that ComCorp disclosed significant amounts of confidential information concerning the Station to Fox for the purpose of negotiating a sale of the Station to Fox. ComCorp allegedly disclosed more information to Fox than was necessary for financing the transaction under the Adams TV-ComCorp contract.

On August 18, 1994, Adams TV and ComCorp closed the Adams TV-ComCorp contract whereby Adams TV received the $57,000,000.00 purchase price from ComCorp, and ComCorp received title to the Station from Adams TV. ComCorp also furnished Adams TV with a document entitled "Buyer's Performance Certificate" which was executed by Thomas Galloway for ComCorp. That document stated that ComCorp had "performed and complied with all of its obligations under the [Adams TV-ComCorp contract] which are to be performed or complied with by it prior to or on the date hereof."

Although Adams TV was aware that Fox had agreed to finance the purchase of the Station under the Adams TV-ComCorp contract, Adams TV did not know that ComCorp had agreed to sell the Station to Fox pursuant to the ComCorp-Fox contract until after the August 18, 1994, closing. Ultimately, ComCorp and Fox closed on their contract concerning the Station on July 5, 1995, and Fox now owns the Station.

Sometime before the August 18, 1994, closing of the Adams TV-ComCorp contract, Adams TV negotiated a contingent contract to sell the Station to another entity in the event that Adams TV and ComCorp failed to close the Adams TV-ComCorp contract. Pursuant to the terms of the contingent contract, the other purchaser agreed to pay Adams TV approximately $63,444,000.00 for the Station.

Adams TV brought this action asserting that ComCorp and Galloway breached the Adams TV-ComCorp contract in four material ways:

1) by breaching the nondisclosure and confidentiality provisions contained in paragraphs 6.11 and 11.9(a) by disclosing information protected under those provisions to Fox;

2) by breaching the representations and warranties that ComCorp had complied with the contract's nondisclosure and confidentiality provisions;

3) by violating the prohibition on assignment of any rights, obligations or liabilities under the contract contained in paragraph 11.8 by assigning Defendants' interest under the contract to Fox without Adams TV's knowledge or consent; and

4) by breaching the representations and warranties that ComCorp had complied with the agreement's nonassignment provision.

ComCorp and Thomas Galloway each filed motions to dismiss the complaint, and Adams TV filed a motion for partial summary judgment. Following a hearing on December 12, 1995, the trial court entered an order on January 10, 1996, in which it granted Adams TV's motion to amend the complaint, denied Adams TV's motion for partial summary judgment and granted Defendants' motions to dismiss the cause. Adams TV timely filed a notice of appeal on February 8, 1996, and the appeal has been perfected to this Court.

ISSUES

The issues before this Court are as follows:

1) Whether the trial court erred in granting ComCorp's motion to dismiss Adams TV's cause of action;

2) Whether the trial court erred in dismissing as moot Adams TV's motion for partial summary judgment;

3) Whether Adams TV was obligated to consummate the Adams TVComCorp contract, regardless of the extent of its knowledge of the impending sale by Defendants to Fox;

4) Whether Adams TV's damage claims are barred because of its failure to satisfy the conditions precedent under the Adams TV-ComCorp contract in bringing an action for indemnification; and

5) Whether the ComCorp-Fox transaction...