Burks v. Elevation Outdoor Advertising, LLC

• Decision Date: 24 July 2006
• Docket Number: No. W2005-01449-COA-R3-CV.,W2005-01449-COA-R3-CV.
• Citation: 220 S.W.3d 478
• Parties: Marshall BURKS, et al. v. ELEVATION OUTDOOR ADVERTISING, LLC f/k/a Delta Outdoor Advertising, LLC.
• Court: Tennessee Court of Appeals

220 S.W.3d 478

Marshall BURKS, et al. v. ELEVATION OUTDOOR ADVERTISING, LLC f/k/a Delta Outdoor Advertising, LLC.

No. W2005-01449-COA-R3-CV.

Court of Appeals of Tennessee, Western Section, at Jackson.

April 17, 2006 Session.

July 24, 2006.

Order on Petition to Rehear August 21, 2006.

Application for Permission to Appeal Denied by Supreme Court December 18, 2006.

Keith M. Alexander, Southaven, MS, for Appellants.

Irma Merrill Stratton, Memphis, TN, for Appellee.

OPINION

ALAN E. HIGHERS, J., delivered the opinion of the court, in which DAVID R. FARMER, J., and HOLLY M. KIRBY, J., joined.

The Appellee is a billboard advertising business engaged in selling advertising space on the billboards it maintains. The Appellants contracted with the principal owner of the business to sell the business in exchange for a commission. One of the Appellants had partial ownership interest in three of the billboards serviced by the business. After closing the sale, the Appellee paid the Appellants a significantly smaller commission than the parties had agreed upon. The Appellants brought suit for breach of contract seeking to recover the remainder of the commission allegedly owed. The Appellee subsequently filed a motion for summary judgment asserting that, pursuant to the Tennessee Real Estate Broker License Act of 1973 codified at section 62-13-101 et seq. of the Tennessee Code, the Appellants could not recover a commission as a matter of law. The Appellee also sought to invoke the Act's provisions to recover the commission already paid to the Appellants. Finding it undisputed that the Appellants did not have a real estate broker's license when negotiating the sale of the business and that real estate comprised a significant portion of the Appellee's assets, the trial court granted the Appellee's motion for summary judgment. Further, the trial court ordered the Appellants to return the commission already paid by the Appellee. The Appellants have appealed the trial court's decision to this Court. We affirm.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY¹

Martin Daniel ("Daniel") is a licensed Tennessee attorney. At the time of the events giving rise to the present case, Daniel was the principal owner² of Elevation Outdoor Advertising, LLC, formerly known as Delta Outdoor Advertising, LLC (hereinafter "Delta" or "Appellee"). Delta engaged in the business of leasing advertising space on the billboards it maintained.

Garrott Massie ("Massie") worked as an insurance agent, and Daniel previously had purchased insurance from Massie. After Massie expressed an interest in getting involved in the outdoor advertising business, Daniel undertook an effort to educate Massie about various aspects of the business. Around 1999, Massie began working for Delta as an independent contractor selling advertising space and checking tax maps to determine the ownership of various parcels of property. Massie worked on commission and received a per diem amount to cover the expenses he incurred in performing these tasks. At some point, Massie acquired a 10% ownership interest in three of the billboards serviced by Delta.

In 2001, Daniel decided that he wanted to sell Delta. Massie approached Daniel and asked if he could sell the business for Daniel in exchange for a commission. In April of 2001, Daniel orally agreed that, if Massie could find a buyer for the business, he would pay Massie a commission of 7% of the net proceeds received from the sale, which amount represented the gross amount received minus any debt, taxes, and/or outstanding expenses owed by Delta. According to Daniel, their deal was contingent upon Delta receiving a minimum price of $2.8 million and Massie's promise not to offer the business to Lamar Advertising Company ("Lamar"). Daniel and Massie never memorialized their oral agreement in a written contract.

Massie subsequently contacted Marshall Burks ("Burks" or, collectively with Massie, the "Appellants") asking if he could assist Massie with finding a buyer for the business. Massie also introduced Burks to Daniel and told him that Burks had business connections and could assist him with finding a buyer for Delta. According to Burks, Massie felt that Burks, who worked for a paint company, could use his business relationship with Lamar to help them negotiate a sale of Delta to Lamar. In exchange for his assistance, Massie agreed to split the commission with Burks. Burks also called Daniel at a later date to reiterate that he planned to assist Massie with selling the business and would split the commission with Massie. Burks stated that, during their conversation, he informed Daniel that he and Massie were going to attempt to sell Delta to Lamar and that Daniel did not voice any concerns about the arrangement.

In June of 2001, Massie and Burks began negotiating the sale of Delta with Lamar's vice president and regional manager, Thomas Sirmon ("Sirmon"). Sirmon began evaluating Delta's records, which Burks supplied to him, in order to value the business. Lamar initially offered to purchase Delta for $2,032,850, which Daniel rejected. Lamar responded with an offer of $2,242,700. (Exhibit 1, pp. 2000-03). After receiving the second offer, Daniel told Massie and Burks that they were to have no further contact with representatives of Lamar and that he would negotiate with Lamar directly in an attempt to obtain a higher price. Daniel ultimately accepted Lamar's second offer. According to the terms of the agreement, Lamar would receive the billboard structures, all permits from state and local governmental entities, all advertising contracts, all materials and inventory, and all real estate leases held by Delta.

Burks and Massie were led to believe, apparently from discussions with Daniel, that Lamar would be assuming $800,000 in debt owed by Delta. Accordingly, they anticipated receiving a commission on the net proceeds of $1,442,700, which represented the $2,242,700 sales price minus the $800,000 debt. After concluding the sale, Delta presented Massie with a check for $29,408, which represented $26,640 in commission and $2,768 for his ownership interest in the billboards sold to Lamar. Burks received a check for $26,640 for his share of the commission. The total commission of $53,280 was significantly less than Massie and Burks had hoped to receive.

On January 14, 2004, Massie and Burks filed suit against Delta seeking damages for breach of contract. Specifically, they sought to recover the remaining $47,709 they claimed Delta owed them pursuant to their agreement. Delta filed an answer raising numerous defenses and also filed a counter-complaint asserting that it was entitled to recover the amount already paid to Massie and Burks. In its initial counter-complaint, Delta asserted that the amount previously paid to Massie and Burks represented a settlement of any claims they had arising out of the transaction. Since they brought suit, he argued that he was entitled to recoup that amount. The trial court subsequently allowed the parties to amend their complaints and answers to assert additional theories of recovery and defenses. In their amended complaint, Massie and Burks asserted that, through discovery, they learned that Lamar only assumed $377,557.50 in debt owed by Delta, therefore, Delta received $1,865,142.50 in net proceeds from the sale. Accordingly, they sought the remaining commission owed in the amount of $77,279.97, which represented the total commission owed on this new amount ($130,559.97) minus the amount already paid ($53,280).

After completing discovery, Delta filed a motion for summary judgment on the breach of contract claim filed by Massie and Burks. Delta argued that, as a matter of law, Massie and Burks could not recover a commission on the sale of the business under the Tennessee Real Estate Broker License Act of 1973 since they were not licensed real estate brokers. In support of its motion, Delta supplied the affidavit of Sharon Peebles, Administrative Director of the Tennessee Real Estate Commission, confirming that Massie and Burks are not licensed real estate brokers. Massie and Burks filed a response arguing that the Act did not apply to this case because, among other reasons, Massie held an ownership interest in some of the assets sold and that Daniel should be estopped from invoking the Act to thwart their recovery of the remainder of the commission. In support of their response, Massie and Burks supplied their own affidavits stating that Daniel never asked to see a real estate broker's license or indicated that they needed one to sell the business.

The trial court ultimately granted Delta's motion for summary judgment, stating:

The Court finds that real estate was not "merely incidental" to the business whose sale is at issue herein; in fact, the Court finds that real estate was integral to that business. Plaintiffs were not licensed real estate brokers at the time the business was sold. In accordance with the provisions of the Tennessee Real Estate Broker License Act of 1973, T.C.A. §§ 62-13-101 et seq., the Court finds that Tennessee law bars Plaintiffs from maintaining an action to collect compensation. The Court further finds each Plaintiff/Counterdefendant is liable for the amount each person individually received from Defendant/Counterplaintiff.

The Plaintiffs' claims are dismissed with prejudice. [Delta] is awarded a judgment against [Burks] in the amount of $26,640.00 [Delta] is also awarded a judgment against [Massie] in the amount of $26,640.00.³

Massie and Burks timely filed a notice of appeal to this Court to contest the trial court's ruling.

II. ISSUE PRESENTED

Whether the trial court properly granted summary judgment to the defendant on the plaintiffs' claim to recover a commission on the sale of a business when the plaintiffs were not licensed real estate brokers?

III. STANDARD OF REVIEW

"[T]he summary judgment process is designed to provide a quick, inexpensive means of...