Chenault v Bursey

• Decision Date: 09 February 2000
• Docket Number: 98-00769
• Parties: DAVID CHENAULT, Plaintiff-Appellee, Vs. JEFF L. WALKER, JO BURSEY, JACK L. MOORE, OCEAN INN, INC., and DIMENSION III FINANCIAL, INC., Defendants-Appellants C.A.IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON Opinion Filed:
• Court: Tennessee Court of Appeals

DAVID CHENAULT, Plaintiff-Appellee,

Vs.

JEFF L. WALKER, JO BURSEY, JACK L. MOORE, OCEAN INN, INC., and DIMENSION III FINANCIAL, INC., Defendants-Appellants

C.A. No. W1998-00769-COA-RM-CV

IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON

Opinion Filed: February 9, 2000

FROM THE SHELBY COUNTY CIRCUIT COURT

Shelby Circuit No. 94214 T.D

THE HONORABLE JOHN R. McCARROLL, JUDGE

This case deals with in personam jurisdiction under the Tennessee Long Arm Statute and comes to this Court as a T.R.A.P. interlocutory appeal.¹ Defendants, Jo Bursey (Bursey), Jack L. Moore (Moore), Ocean Inn, Inc. (Ocean Inn), and Dimension III Financial, Inc. (Dimension III)², appeal the order of the trial court denying their motions to dismiss for lack of jurisdiction.

For Appellee:

Les Jones; Scott J. Crosby; Burch, Porter & Johnson of Memphis

Allan B. Thorp; Thorp and Jones, PLC of Memphis

For Appellants:

Bursey, Ocean Inn, Inc., and Dimension III Financial, Inc.

For Jack L. Moore:

Rex L. Brasher, Jr.; Brown, Brasher & Smith of Memphis

AFFIRMED AND REMANDED

W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.

CONCUR:

ALAN E. HIGHERS, JUDGE, DAVID R. FARMER, JUDGE

PLEADINGS

Plaintiff, David Chenault (Chenault), filed his circuit court complaint April 22, 1998, seeking compensatory, punitive, and treble damages. The complaint avers that both Chenault and defendant Walker are residents of Shelby County, Tennessee, and that the remaining defendants are nonresidents of the State of Tennessee, but all have sufficient minimal contacts with Tennessee to be subject to the jurisdiction of the court. The complaint alleges that in April 1997, Walker approached Chenault with an investment opportunity in a Quality Inn in Ormand Beach, Florida. Walker told Chenault that he and his partner, Moore, needed additional funds in the amount of $125,000.00 to close on the acquisition of the Quality Inn and that if plaintiff invested this amount he would receive eight percent in the corporation, Ocean Inn, the owner of the hotel. The complaint avers that Walker continued to represent himself as the principal investor in and vice president of Ocean Inn, as well as a partner with Moore. Walker also represented that defendant Bursey, president of Dimension, was the mortgage broker for their closing and their financial consultant in the investment. Walker continually promised Chenault that copies of all closing documents would be provided concerning the acquisition of the Quality Inn. In May of 1997, before Chenault had paid any money to invest, he and Walker called defendant Bursey from Chenault's office to discuss issues related to the investment, and during this telephone conversation Bursey told Chenault that the investment was a "super opportunity" and that the hotel was producing approximately $800,000.00 per year in profit. The complaint avers that based upon this conversation, Chenault invested his initial $25,000.00 by paying this sum to Black Acre Ridge Capital LLC, the mortgage company, financing the acquisition. The complaint avers that thereafter Bursey, acting individually and for defendant, Dimension, sent by facsimile a two-page document to evidence the receipt of the initial $25,000.00 and setting out that Chenault would have an eight percent interest in Ocean Inn upon payment of the total of $125,00.00. This document was signed by Walker as vice president. Chenault made his payments for a total of $125,000.00, with the final payment made on July 10, 1997, to Walker. The complaint further avers that Chenault was provided with a stock certificate showing stock ownership and also was furnished the stock distribution agreement attached as Exhibit B between Ocean Inn and Chenault, signed for Ocean Inn by Walker. The complaint alleges that contrary to representations made by Walker, Moore, and Bursey, Chenault was never an actual shareholder in Ocean Inn. Walker was never a shareholder and an officer in Ocean Inn and that the stock certificate and stock distribution agreement were fraudulent. The complaint alleges that in July 1997, Walker advised Chenault that renovations were needed on the Ocean Inn facility in excess of one million dollars and that Walker and Moore were going to sell their investments "in order to avoid being assessed for the renovations." The complaint avers that Walker represented to Chenault that two other hotels were better investments than Ocean Inn and that he should sell his investment in Ocean Inn and invest in those hotels and receive a larger return on his investment. Chenault alleges after this representation by Walker, he again contacted Bursey for her advice, and she confirmed Walker's statement that this was a better opportunity.

The complaint avers that at this time, unknown to him, Bursey was the majority shareholder in Ocean Inn. The complaint further avers that based upon Walker and Bursey's advice, Chenault made the exchange by voiding his stock certificate with Ocean Inn and accepting the stock certificates in the two other companies. In June 1997, it was discovered that the two other hotels - Holiday Inn and a Comfort Inn - in which Chenault was now part owner, were in financial trouble, and this information had been conveyed to defendant, Moore and defendant, Bursey, but they did not disclose this information to Chenault. The complaint also avers that defendants, Moore and Walker, conspired to convince the plaintiff in September to execute a shareholder agreement to allow the hotel properties to be foreclosed. The complaint alleges that because of the combined illegal efforts of Bursey, Walker, and Moore, Chenault lost his total investment and later learned that some of the initial investment was never used for the initial acquisition.

Counts I and II of the complaint allege fraud and misrepresentation respectively and aver that Walker, Moore, and Bursey, individually and through Dimension, made false and fraudulent misrepresentation upon which plaintiff relied to his detriment. Count III of the complaint alleges civil conspiracy and avers:

39. Walker, Moore and Bursey, individually, and through Dimension, each had the common design to defraud Plaintiff of his investment in Ocean Inn and subsequently to swap his stock in two corporations which were on the verge of bankruptcy. By engaging in these overt acts of convincing Plaintiff to make the investment of $125,000.00, each conspirator was acting in concert, all to the detriment of Plaintiff.

Count IV alleges fraud and avers that Walker, Moore, and Bursey, individually and through Dimension, fraudulently induced Chenault to make the investment.

Count V alleges tortious interference with a business relationship and avers that Walker, Moore, and Bursey, individually and through Dimension, intentionally interfered with Chenault's valid relationship with Ocean Inn.

Count VI alleges that Bursey, as a majority shareholder and member of the Board of Directors of Ocean Inn, breached his fiduciary duty to Chenault.

Count VII alleges breach of contract on the part of Walker, Moore, and Bursey, individually and through Dimension, and Ocean Inn.

Count VIII alleges a violation of the Consumer Protection Act on the part of Walker, Moore, and Bursey, individually and through Dimension.

In Count IX, Chenault prays for an accounting of Ocean Inn, based upon his eight percent interest as a shareholder.

The defendant filed motions to dismiss for lack of jurisdiction, and the trial court denied all motions. The trial court's order denying the motions to dismiss stated:

Except for the allegations of conspiracy among the defendants, there were insufficient contacts with the State of Tennessee for there to be jurisdiction over the defendants, Bursey, Moore, Ocean Inn, and Dimension, III, but that because of the allegations of a conspiracy among the defendants, the court finds that this court has jurisdiction over these defendants.

Defendants appeal and present three issues for review by this Court as stated in their brief:

1. When there are insufficient contacts with the state of Tennessee for jurisdiction, can allegations of a civil conspiracy occurring out of state create a basis for jurisdiction in Tennessee?

2. Can a civil conspiracy, even if proved, which occurs outside of Tennessee, but which is alleged to have a financial impact on a Tennessee resident, constitute an independent basis for jurisdiction in Tennessee?

3. Did the Plaintiff prove an out of state conspiracy to defraud?

Plaintiff-appellee presents three issues for review as stated in their brief:

1. Upon the showing of a prima facie case of conspiracy effecting [sic] a Tennessee resident, does a finding of in personam jurisdiction of each co-conspirator, whether he or she be a Tennessee resident, offend due process, fair play, and justice?

2. Did the trial court err in finding that, except for the allegations of a conspiracy among all the defendants, insufficient contacts exist with the State of Tennessee for there to be in personam jurisdiction over the appellants/defendants?

3. May the appellants/defendants raise with this Court an issue on appeal not raised in their Application to the Supreme Court for Interlocutory Appeal.

PROOF

In support of the motions to dismiss, defendants Bursey and Moore filed affidavits. Jo Bursey's affidavit states that she is a resident of Orlando, Florida, and at all pertinent times was a resident of Orlando, Florida. She was president of Dimension, III Financial, Inc., a Florida corporation, engaged in the business of real estate broker and mortgage financing with a principal place of business in Orlando, Florida. Bursey has never acted as a real estate broker for any property in Tennessee and has never financed a mortgage for any property in Tennessee. Dimension was the real estate broker for the seller of the Holiday Inn hotel in Ormand Beach, Florida, and she had discussions with Moore about the possibility of Moore purchasing the Quality Inn. All of...