Huggins v. McKee
| Decision Date | 31 May 2016 |
| Docket Number | No. E2015–01942–COA–R3–CV,E2015–01942–COA–R3–CV |
| Citation | 500 S.W.3d 360 |
| Parties | Delwin L. Huggins, et al. v. R. Ellsworth McKee, et al. |
| Court | Tennessee Court of Appeals |
John P. Konvalinka and Cody M. Roebuck, Chattanooga, Tennessee, for the appellant, John P. Konvalinka.
Anthony A. Jackson and Bruce C. Bailey, Chattanooga, Tennessee, for the appellee, Alternative Fuels, LLC.
J. STEVEN STAFFORD
, P.J.,W.S., delivered the opinion of the Court, in which CHARLES D. SUSANO, JR., and THOMAS R. FRIERSON, II, JJ., joined.
Appellant appeals the trial court's grant of summary judgment dismissing his claims against a limited liability corporation surrounding the sale of the corporation and the distribution of the proceeds to one member. Although we reverse the trial court's ruling with regard to the application of Tennessee Code Annotated Section 48–237–101(d)
, we otherwise affirm the trial court's ruling granting summary judgment to the corporation on all claims asserted by Appellant.
This is the third appeal arising from this case. In June 1995, Delwin Huggins formed Alternative Fuels, LLC (“AF” or “Alternative Fuels”) to develop an alternative fuel source. From that time until 2003, Mr. Huggins was the Chief Manager of AF and allegedly had control of its books and records.
In June 1996, Ellsworth McKee made a $1,500,000.00 capital contribution in exchange for a 50% membership interest in AF. Subsequently, Mr. McKee acquired an additional 20% membership interest in AF. In 2002 and throughout the events at issue in this case, Mr. McKee had a membership interest of 70% of AF, and Mr. Huggins had a membership interest of 30%.
By April 2002, Mr. Huggins was attempting to liquidate AF. In late 2003, Mr. McKee assumed control of AF because of his belief that AF “was not operating and had no income.” In that same year, Mr. McKee sold AF's assets to Cogeneration Technologies, Inc. (“Cogeneration”), for $60,000.00 and an equity interest in Cogeneration. Cogeneration never made a profit, and Mr. McKee contended that he did not receive any monies other than the $60,000.00 that Cogeneration paid for the AF assets. Mr. McKee retained all of the proceeds from the sale of AF's assets to Cogeneration. Cogeneration dissolved in 2009 with no assets and allegedly no further distributions to Mr. McKee.
On December 14, 2007, Mr. Huggins filed a complaint for damages and equitable relief against AF and Mr. McKee (together, “Defendants”). In his complaint, Mr. Huggins alleged that Mr. McKee effectively shut him out of AF resulting in his claimed damages. In February 2008, the Defendants filed an answer and McKee filed a counterclaim seeking at least $1,500,000.00 alleging that Mr. Huggins was incompetent and drove AF into the ground.
In 2009, Mr. Huggins filed for Chapter 7 bankruptcy protection. During the bankruptcy proceedings, John P. Konvalinka, as Trustee for an undisclosed principal, bought Mr. Huggins's interest in this lawsuit. Mr. Konvalinka (“Appellant”) was joined as a plaintiff in this matter on August 5, 2010. On May 6, 2011, Mr. McKee filed a motion to amend his answer and counterclaim to assert a new and distinct claim for “setoff” against Appellant. On May 27, 2011, the trial court granted the motion.
On November 17, 2011, the bankruptcy court entered an order granting Mr. McKee's previously filed motion seeking approval of certain claims asserted by Mr. McKee against Mr. Huggins's bankruptcy estate. Then, on December 5, 2011, Appellees filed a motion for judgment on the pleadings, asserting that, based on Mr. McKee's setoff claim and the November 2011 bankruptcy court order, Appellant's claims should be dismissed as a matter of law. Appellant responded on December 12, 2011. The trial court, on January 6, 2012, entered an order granting Appellees' motion and dismissing all of Appellant's claims. Appellant appealed.
In its Opinion filed November 28, 2012, this Court affirmed the trial court's order dismissing all of the claims against Mr. McKee based upon doctrine of set-off, but reversed the dismissal of Appellant's claims against AF. Huggins v. McKee , 403 S.W.3d 781, 788 (Tenn. Ct. App. 2012)
(“Huggins I ”), perm. app. denied .2 As such, the only remaining count of the complaint in this matter was Count V, which provides:
33. As a result of [Mr.] McKee's misconduct described in this Complaint, [Mr.] Huggins seeks appropriate equitable relief from the Court pursuant to T.C.A. § 48–230–105
to rectify the wrongs committed by [Mr.] McKee and to compensate [Mr.] Huggins and AF for all losses suffered at the hands of [Mr.] McKee.
On remand, on February 28, 2014, AF filed a motion to dismiss Appellant's claims, arguing that they were moot. The trial court granted the motion on April 2, 2014, dismissing Appellant's claims in their entirety. Appellant appealed, and this Court reversed based upon the trial court's failure to explain the basis for the dismissal. Huggins v. McKee , No. E2014–00726–COA–R3–CV, 2015 WL 866437 (Tenn. Ct. App. Feb. 27, 2015)
(“Huggins II ”).
On the second remand, AF filed a motion for summary judgment, accompanied by a memorandum of law, a statement of undisputed material facts, and over twenty exhibits. AF asked the trial court to rule that Appellant's claims for an accounting and a receivership against AF were moot, that the $60,000.00 distribution to Mr. McKee was lawful, and that any claims against Mr. McKee were time-barred.
The trial court heard arguments on the motion for summary judgment on August 26, 2015. The trial court entered its written order on September 29, 2015, granting the motion for three reasons. First, the trial court ruled that the case against AF was moot because the trial court could not afford any practical relief and ordering an accounting or appointing a receiver would be futile because Mr. Huggins had access to all of AF's books and records. Second, the trial court found that AF's actions in selling its remaining assets and distributing the $60,000.00 in proceeds from the sale to Mr. McKee were lawful. Last, the trial court found that any action to recover the distribution was time-barred. Appellant appealed. The sole appellee is AF.
Appellant raises four issues, which are taken from his brief, and reordered by this Court:
4. Whether the trial court erred in ruling that certain claims made by Appellant against AF were moot?
This case was determined on the basis of summary judgment. Summary judgment is appropriate where: (1) there is no genuine issue with regard to the material facts relevant to the claim or defense contained in the motion and (2) the moving party is entitled to judgment as a matter of law on the undisputed facts. Tenn. R. Civ. P. 56.04
. Our Supreme Court in Rye v. Women's Care Center of Memphis, MPLLC recently explained the burden-shifting analysis to be employed by courts tasked with deciding a motion for summary judgment:
[I]n Tennessee, as in the federal system, when the moving party does not bear the burden of proof at trial, the moving party may satisfy its burden of production either (1) by affirmatively negating an essential element of the nonmoving party's claim or (2) by demonstrating that the nonmoving party's evidence at the summary judgment stage is insufficient to establish the nonmoving party's claim or defense. We reiterate that a moving party seeking summary judgment by attacking the nonmoving party's evidence must do more than make a conclusory assertion that summary judgment is appropriate on this basis. Rather, Tennessee Rule 56.03 requires the moving party to support its motion with “a separate concise statement of material facts as to which the moving party contends there is no genuine issue for trial.” Tenn. R. Civ. P. 56.03
. “Each fact is to be set forth in a separate, numbered paragraph and supported by a specific citation to the record.” Id. When such a motion is made, any party opposing summary judgment must file a response to each fact set forth by the movant in the manner provided in Tennessee Rule 56.03. “[W]hen a motion for summary judgment is made [and] ... supported as provided in [Tennessee Rule 56],” to survive summary judgment, the nonmoving party “may not rest upon the mere allegations or denials of [its] pleading,” but must respond, and by affidavits or one of the other means provided in Tennessee Rule 56, “set forth specific facts” at the summary judgment stage “showing that there is a genuine issue for trial.” Tenn. R. Civ. P. 56.06.
Rye v. Women's Care Ctr. of Memphis, MPLLC , 477 S.W.3d 235, 264–65 (Tenn. 2015)
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