Hawkins v. Superior Motors Inc., 01-9811

• Decision Date: 28 June 1999
• Docket Number: 01-9811
• Parties: DWAYNE HAWKINS AND AL GOSSETT, PLAINTIFFS/APPELLEES, v. SUPERIOR MOTORS, INC. AND PATRICK A. HART, DEFENDANTS/APPELLANTS, NELSON BOWERS II AND BOWERS TRANSPORTATION GROUP, LLC, DEFENDANTS.Tennessee Supreme Court
• Court: Tennessee Supreme Court

DWAYNE HAWKINS AND AL GOSSETT, PLAINTIFFS/APPELLEES v SUPERIOR MOTORS, INC. AND PATRICK A. HART, DEFENDANTS/APPELLANTS, NELSON BOWERS II AND BOWERS TRANSPORTATION GROUP, LLC, DEFENDANTS

No. 01S01-9811-CV-00199

Tennessee Supreme Court

June 28, 1999

Davidson Circuit No. 96-C-2528 Hon. Barbara N. Haynes, Judge

For Defendants/appellants: John Branham Kathryn Barnett Nashville

For Plaintiffs/appellees: Steven A. Riley Katharine R. Cloud Nashville

FOR PUBLICATION

COURT OF APPEALS AFFIRMED IN PART AND REVERSED IN PART; CASE REMANDED TO TRIAL COURT

OPINION

The opinion of the court was delivered by: Holder, J.

We granted this appeal to address: (1) whether the Court of Appeals erred in effectively granting summary judgment to the plaintiffs on the issue of individual liability; and (2) whether a party is required to produce privilege logs for documents or materials withheld pursuant to a claim of privilege or work product protection. We hold that there exist genuine issues of material fact on the issue of individual liability and that any creation of a requirement for privilege logs similar to that found in the Federal Rules of Civil Procedure should be in the form of an amendment to the Tennessee Rules of Civil Procedure. The decision of the Court of Appeals on both these issues is reversed.

FACTS

The following facts appear not to be in dispute. Patrick Hart met Mark Chmelar at a yacht show in Miami. Chmelar owned Superior Motors, Inc., an automobile dealership located in Nashville, Tennessee. Chmelar suggested that Hart acquire an interest in the Nashville dealership. Hart subsequently invested $500,000.00 and acquired a fifty percent interest in Superior Motors, Inc. The parties agreed that Chmelar would manage the day-to-day operations of the dealership. In addition, Hart and his wife personally guaranteed a $4,000,000 capitalization loan and a $6,000,000 floor plan loan and provided First Tennessee with a $1,000,000 letter of credit.

Less than a year and one-half after entering the business arrangement with Chmelar, Hart was notified by First Tennessee Bank that Superior Motors was $1,000,000 out of trust on its floor plan. Chmelar assured Hart that there were no problems. Approximately three months later, however, Hart was informed that Superior Motors was now $1,600,000 out of trust. Once again, Chmelar assured Hart that everything was all right.

During the next several months, Hart learned that: (1) Chmelar had used Superior Motors' credit to purchase an airplane; (2) Chmelar had used Superior Motors' assets to purchase a yacht; (3) Chmelar was paying himself a salary of $351,357 rather than the agreed-upon salary of $144,000; and (4) Superior Motors had sustained an operating loss of $714,000. First Tennessee contacted Hart and informed him that the bank intended to call his letter of credit and was going to require him to honor his personal guaranty unless Superior Motors' financial problems were quickly resolved. Hart, now facing serious potential personal liability, retained an attorney to investigate the problems at Superior Motors.

Al Gossett and Dwayne Hawkins had been partners in the automotive business since the late 1980s. Gossett contacted Hart in Seattle and informed him that he and Hawkins were interested in acquiring the Nashville dealership. Hart met with Gossett and Hawkins in Memphis. Gossett and Hawkins agreed to make an offer for Superior Motors, Inc. The following day, the parties executed two documents, an "Agreement for the Purchase and Sale of Assets" and an "Agreement for Interim Management Agreement."

Hart and Gossett met later in the day with Hart's lawyer. Hart informed his lawyer that "I got this thing solved. Here are the two agreements. They're all signed, put to bed, and I can go home." Later, Hart was apparently advised by his attorney that the contracts were not financially advantageous to him and that he could probably have made more money from the sale.

The next day, Hart's attorney sought Gossett's assistance in convincing Chmelar to relinquish his stock in the Nashville dealership. Since Hart and Chmelar each owned fifty percent of Superior Motors, Hart could not out-vote Chmelar. Following a meeting between Gossett and Chmelar, Chmelar relinquished his stock and was subsequently terminated as president. ¹ Gossett's testimony indicates that he learned of Hart's intention not to perform under the agreement the day after Chmelar was terminated as president. Hart later contracted to sell the Nashville dealership for more money to Nelson Bowers.

Gossett and Hawkins filed suit against Hart and Superior Motors, Inc., seeking to enforce the contract for the sale of Superior Motors, Inc. Bowers was provided notice of this action. Bowers later purchased Superior Motors and assigned his interest to European Motors, Inc. Gossett and Hawkins amended their complaint to include Bowers and Bowers Transportation Group as defendants.

Superior Motors, Inc. and Patrick A. Hart moved for summary judgment. They alleged that the "Agreement for the Purchase and Sale of Assets" was too uncertain to be enforced. Hart also argued that he could not be held personally liable on the contract. Bowers and Bowers Transportation Group also moved for summary judgment on the constructive trust claim. The trial court found that the agreement for sale was too indefinite to be enforced and that impressing a constructive trust on the assets of Superior Motors was not an appropriate equitable remedy. The trial court granted summary judgment to Superior Motors and Hart. The Court of Appeals held that portions of the agreement were enforceable, that Hart could be held individually liable, ² and that Hart should provide an index containing a description of the materials being withheld pursuant to an assertion of privilege or work product protection. We granted review only on the issues of individual liability and privilege logs.

INDIVIDUAL LIABILITY

The Court of Appeals held that the agreement between the parties "imposes individual liability upon Hart as guarantor to the extent of the liability of Superior Motors, Inc." The court, however did not explain its reasoning behind this holding.

A party seeking summary judgment must demonstrate the absence of any genuine and material factual issues. Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn. 1993). Mere "conclusory assertion[s] that the non-moving party has no evidence [are] clearly insufficient." Id. at 215. The movant must either affirmatively negate an essential element of the non-movant's claim or conclusively establish an affirmative defense. Id. 215 n.5. If the movant does not negate a claimed basis for the suit, the non-movant's burden to produce either supporting affidavits or discovery materials is not triggered and the motion for summary judgment fails. Id. Summary judgment shall be denied if there is "any doubt whether or not a genuine issue exists." Id. at 211.

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