Ingram v. Earthman

• Citation: 993 S.W.2d 611
• Parties: Frederic B. INGRAM, Plaintiff/Appellee, v. William F. EARTHMAN, Defendant/Appellant.
• Decision Date: 21 October 1998
• Court: Court of Appeals of Tennessee

Page 611

993 S.W.2d 611

Frederic B. INGRAM, Plaintiff/Appellee, v. William F. EARTHMAN, Defendant/Appellant.

Court of Appeals of Tennessee,

Middle Section, at Nashville.

Oct. 21, 1998.

Permission to Appeal Denied by Supreme Court March 22, 1999.

Rehearing Denied by Supreme Court June 7, 1999.

Maclin P. Davis, Jr. H. Buckley Cole, Jonathan Cole Baker, Donelson Bearman & Caldwell, Nashville, Tennessee, for the Defendant/Appellant.

James V. Doramus Gregory Mitchell Doramus & Trauger Nashville, Tennessee for the Plaintiff/Appellee

OPINION

WILLIAM C. KOCH, Judge.

This appeal involves a dispute between two former friends and business associates over a sizeable personal debt. After one of the friends failed to repay a $1,700,000 loan, the friend who had loaned the money filed suit in the Chancery Court for Davidson County seeking to recover the loan and interest. The borrower asserted that the lender had delayed too long in filing suit and counterclaimed for allegedly unpaid compensation and retirement benefits. A jury awarded the lender $5,667,122.84 on the debt, and the trial court, with the parties' consent, awarded the lender an additional $400,000 for his legal expenses. On this appeal, the borrower raises numerous issues relating to the denial of his motions for directed verdict, the adequacy of the jury instructions, the instructions limiting the use of the evidence of the lender's prior criminal conviction, and the excessiveness of the verdict. We have determined that the judgment should be affirmed.

I.

Frederic B. Ingram and William F. Earthman became acquaintances in the early 1960's. Mr. Ingram was the scion of a prominent, wealthy Nashville family. Mr. Earthman was the young, fast-rising president of Nashville's Commerce Union Bank, ¹ one of a group of banks extending credit to the Ingram Corporation. Mr. Earthman had been the bank officer assigned to the Ingram Corporation accounts for several years and had developed a cordial business relationship with Mr. Ingram's father. The business dealings between the two men ripened into a close personal relationship between the two men and their families.

In 1970 Mr. Earthman was elected chief operating officer of Tennessee Valley Bancorp the holding company that owned Commerce Union Bank. He retained his position as president of Commerce Union Bank. Despite the outward appearance of financial success and security, Mr. Earthman's personal finances were burdened by large medical expenses associated with a chronic mental illness of one of his children. Mr. Earthman was struggling to keep up with these expenses, and in September 1972, he turned to Mr. Ingram for help. Mr. Ingram agreed to loan Mr. Earthman $600,000 for six months, and Mr. Earthman executed a note made payable to Mr. Ingram bearing an interest rate of 5 1/2%. Mr. Earthman was unable to pay the note when it came due, but Mr. Ingram did not insist on being repaid as long as Mr. Earthman continued to pay the interest accruing on the note.

In the early 1970's, the Ingram Corporation decided to pursue a lucrative sludge-hauling contract with the sanitary district serving Chicago and surrounding communities. Sometime before the fall of 1974, a federal grand jury in Chicago began looking into how the Ingram Corporation had secured the contract and how it had obtained favorable modifications to the contract. The grand jury eventually indicted Mr. Ingram and other business associates for paying more than $900,000 in bribes to an Illinois legislator and other city officials. In November 1977, following a nine-week trial, Mr. Ingram was convicted of authorizing political payoffs and was sentenced to imprisonment for four years. Mr. Earthman attended portions of the trial to support Mr. Ingram.

Mr. Ingram remained free on bond pending the appeal of his conviction. In 1978, he and his brother decided to divide the family business. Mr. Ingram formed a new entity and invited several members of the board of the former Ingram Corporation to serve on the board of his new corporation. His brother invited the remaining board members to serve on the board of his corporation. After the United States Court of Appeals for the Sixth Circuit affirmed his conviction in March 1979, ² Mr. Ingram recruited several new board members, one of whom was Mr. Earthman. According to Mr. Ingram, he sought out Mr. Earthman because he was "an astute and honest businessman." Mr. Earthman, for his part, later stated that Mr. Ingram invited him to join the board to be "his eyes and ears" while he was in prison.

Mr. Ingram began serving his sentence in January 1980. Mr. Earthman visited him for the first time in April 1980. After the federal Parole Commission set his release date for September 1982 even though he was eligible for parole in May 1981, Mr. Ingram requested Mr. Earthman and others to assist him in seeking an earlier release from prison. Mr. Earthman enlisted the aid of a local politician, John Jay Hooker, who assisted in obtaining the services of a lawyer and a political consultant with governmental connections and who also contacted President Carter's chief of staff on Mr. Ingram's behalf.

Mr. Earthman visited Mr. Ingram in prison in September or October 1980 to discuss his personal financial problems caused by his child's continuing illness. He continued to be unable to repay Mr. Ingram the $600,000 he had borrowed eight years earlier, and he had accumulated large secured and unsecured debts at other banks. ³ Mr. Earthman again asked Mr. Ingram for financial assistance. Mr. Ingram desired to help his friend but made it clear that he would not incur any personal expense in doing so. Accordingly, he proposed to guaranty a $1,700,000 loan to Mr. Earthman from another Nashville bank which held a sizeable amount of Mr. Ingram's collateral. Mr. Earthman informed Mr. Ingram that he planned to use the stock options he was receiving from Commerce Union Bank to repay his personal debts.

Instead of following Mr. Ingram's suggestion, Mr. Earthman returned to Nashville and arranged for a $1,700,000 loan from United American Bank in Knoxville directly to Mr. Ingram. On October 14, 1980, he also prepared and executed a personal $1,700,000 note to Mr. Ingram, using a standard Commerce Union Bank note form. Mr. Earthman wrote "Frederic B. Ingram" in the space for identifying the lending bank and also filled in another blank stating that the note would be due "Eighteen Months after Date." With regard to the interest, Mr. Earthman checked a box signifying that the interest would be "At the Bank's 'Prime Rate' plus _____ % per year." ⁴

Thereafter, Mr. Earthman mailed the note to Mr. Ingram's assistant in New Orleans. United American Bank wired the loan proceeds to Mr. Ingram's personal account at a New Orleans bank. On October 24, 1980, the $1,700,000 was transferred to Mr. Earthman's account at a New York bank. Three days later, Mr. Earthman used $600,000 of the proceeds to repay Mr. Ingram's 1972 loan.

Mr. Ingram received word in late December 1980 that he had been granted a presidential commutation enabling him to be released from prison in May 1981. Following his release, Mr. Ingram pursued discussions with Mr. Earthman about Mr. Earthman's leaving Commerce Union Bank and working full-time for the Ingram Corporation. The two men also discussed in general terms the possibility that Mr. Ingram might forgive Mr. Earthman's $1,700,000 loan out of gratitude for his efforts in helping secure Mr. Ingram's early release from prison.

With regard to the offer of employment with the Ingram Corporation, Mr. Earthman told Mr. Ingram that leaving Commerce Union Bank would depend on obtaining the bank board's approval of his early retirement and that it could take several years to work this out. In the meantime, Messrs. Ingram and Earthman agreed that Mr. Earthman would become the "managing director" of Ingram Worldwide Investments, Ltd. On September 23, 1981, Mr. Ingram provided Mr. Earthman with a letter agreeing to pay Mr. Ingram supplemental retirement benefits in return for his services to the Ingram Corporation and other related corporations. The purpose of this agreement was to compensate Mr. Earthman for the difference between the amount of his early retirement benefit from the bank and the amount of his regular retirement benefit if he retired at the age of sixty-five. In the letter, Mr. Ingram agreed to pay the supplemental retirement benefits himself if the Ingram Corporation did not make them because of "the Board's not having authorized and approved this agreement."

In mid-December 1981, Mr. Ingram renounced his United States citizenship and became a citizen of Ireland. He explained later that he took this step for tax reasons, but Mr. Earthman added that Mr. Ingram was also angry about his treatment by the federal government. In late 1981 or early 1982, Mr. Ingram established several trusts in Liechtenstein and placed his personal assets, valued at between $100,000,000 and $150,000,000, in the hands of the professional trustees retained to manage the trusts. On January 26, 1982, Mr. Ingram executed an assignment in blank of Mr. Earthman's note and forwarded the original note and the incomplete assignment document to a Swiss lawyer who was serving as a trustee of the Liechtenstein trusts.

Following their discussion in mid-1981, Mr. Earthman continued to find ways to induce Mr. Ingram to forgive his $1,700,000 debt. During a telephone conversation in early January 1982, Mr. Ingram's New Orleans lawyer and Mr. Earthman's New York lawyer discussed various possible forms for the gift including a testamentary gift to Mr. Earthman's children and an outright inter vivos gift. They reached no conclusion because of the unresolved question about the tax consequences of this gift to Mr. Ingram.

In April 1982, Mr. Ingram received word that the $1,700,000 note in his name at United American Bank was about to come due. Mr. Earthman...