Patton v. Bearden
| Citation | 8 F.3d 343 |
| Decision Date | 21 October 1993 |
| Docket Number | No. 92-6636,92-6636 |
| Parties | Nicholas M. PATTON, Plaintiff-Appellee, v. Richard BEARDEN, Robert Bearden, and J.M. Bearden, Individually, and d/b/a Bearden Fish Farms, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
Charles B. Welch, Jr. (argued and briefed) and Elizabeth G. Fahr, Farris, Hancock, Gilman, Branan & Hellen, Memphis, TN, for plaintiff-appellee.
Michael F. Rafferty (argued and briefed), Harris, Shelton, Dunlap & Cobb, Memphis, TN, for defendants-appellants.
Before: KENNEDY and BATCHELDER, Circuit Judges; and WILHOIT, District Judge. *
In this contract case for royalties allegedly due, defendants Richard Bearden, Robert Bearden, and J.M. Bearden, individually and d/b/a Bearden Fish Farms (collectively referred to as "the Beardens") appeal the grant of summary judgment for Nicolas M. Patton, the plaintiff. The Beardens assert the following errors: (1) the District Court granted a summary judgment finding them liable to Patton when material issues of fact existed regarding their defenses of waiver and laches; (2) the summary judgment is against them individually when they signed the contract in their capacity as partners of Bearden & Sons Fish Farm, a Mississippi partnership; and (3) the judgment against the Beardens violated the automatic bankruptcy stay of claims against the Bearden & Sons Fish Farm partnership. For the reasons stated below, we affirm.
Patton developed a process for a catfish breading mix and in 1982 entered into a licensing agreement with Anthony Pizzolato. 1 This licensing agreement granted Pizzolato the exclusive right to produce Patton's breading mix. Subsequently, Pizzolato granted a sub-license for the breading mix to Richard Bearden, Robert Bearden and J.M. Bearden, individually and d/b/a Bearden Farms.
After production commenced, the Beardens issued several royalty checks directly to Patton as provided by the sub-license agreement. After the payments were sent to Patton, Patton then divided up the royalties between Pizzolato and himself. However, a dispute arose between Patton on the one hand and Pizzolato and the Beardens on the other regarding the production costs of the breading mix. Consequently, the Beardens stopped selling Patton's breading mix and contracted for a similar breading mix made by a different manufacturer and stopped making royalty payments to Patton.
In accord with the licensing agreement, Pizzolato and Patton settled their disagreement, regarding the production costs of the mix, by arbitration. As a result of this arbitration, Pizzolato assigned any rights he had to royalty payments from the Beardens to Patton.
Patton, the assignee, filed this action against the Beardens, individually and d/b/a Bearden Fish Farms, to recover unpaid royalties allegedly due under the sub-license agreement in the United States District Court for the Western Division of Tennessee. Patton then moved for summary judgment. Defendants argued that summary judgment was inappropriate because Patton succeeded to Pizzolato's rights and was therefore subject to any defense the Beardens had against Pizzolato. They argue two defenses exist against Pizzolato: waiver and laches. The District Court found that the waiver and laches defense did not apply and therefore granted Patton summary judgment.
The Beardens moved to reconsider the grant of summary judgment. The Beardens argued that summary judgment was inappropriate on the waiver issue because Anthony Pizzolato had communicated to the Beardens that he would not enforce his rights under the sub-license agreement. The District Court rejected this argument finding that any such communication took place before the parties entered a contract and therefore the contract controlled. The Beardens argued further that Pizzolato waived his contractual rights because the Beardens paid royalties to Patton, not Pizzolato. The District Court also rejected this argument because the sub-license agreement provided that royalties due Pizzolato under the sub-license agreement were to be paid to Patton.
Finally, the Beardens filed a Notice of Bankruptcy indicating that Bearden & Sons Fish Farms d/b/a Bearden Farms, a partnership, had filed for chapter 11 reorganization. The Beardens argued that Richard Bearden, Robert Bearden and J.M. Bearden were partners of Bearden & Sons Fish Farm and that entry of judgment against the individuals, who are the partners of the debtor-partnership, violated the automatic stay of 11 U.S.C. § 362.
The District Court rejected this argument because the automatic stay does not protect a partner of a partnership. The District Court therefore denied the defendants' motion to reconsider and this timely appeal followed.
This Court reviews a District Court's summary judgment order de novo, "making all reasonable inferences in favor of the non-moving party to determine if a genuine issue of material fact" exists. EEOC v. University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). Summary judgment is appropriate only where there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). Viewing the evidence in the light most favorable to the non-moving party, this Court must determine whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986).
In the Beardens' first challenge to the District Court's decision, they contend that Pizzolato waived any rights he had under the agreement and Patton, as assignee, is bound by this waiver.
Because this case is based on diversity jurisdiction, we look to the substantive law of Tennessee where appropriate. Under Tennessee law, "waiver is the voluntary relinquishment of a known right and is established by express declarations or acts manifesting an intent not to claim the right." Dallas Glass of Hendersonville, Inc. v. Bituminous Fire & Marine Ins. Co., 544 S.W.2d 351, 354 (Tenn.1976); Tennessee Asphalt Co. v. Purcell Enterprises, Inc., 631 S.W.2d 439 (Tenn.Ct.App.1982). Both express and implied waivers must be intentional. Hill v. Goodwin, 722 S.W.2d 668, 671 (Tenn.Ct.App.1986). Additionally, a waiver of a contractual right must be clear and unequivocal. Springfield Tobacco Redryers Corp. v. Springfield, 41 Tenn.App. 254, 293 S.W.2d 189, 198 (1956). Finally, Tennessee law requires either consideration or an element of estoppel for a contractual waiver. Bokor v. Holder, 722 S.W.2d 676, 680 (Tenn.Ct.App.1986). "The party seeking to invoke the equitable estoppel must have acted to his detriment in reliance upon the statements or conduct of the party against whom it is to be enforced." Id.
To support their argument, defendants rely on Pizzolato's statements and conduct.
Initially, the Beardens argue Pizzolato expressly waived his contractual rights when Pizzolato told Robert Bearden that he would not charge them royalties. 2 However, Pizzolato's statements were made prior to the execution of the sub-license agreement. Therefore, the contract controlled the parties' agreement and the Beardens could not have detrimentally relied on these statements to support their waiver defense.
The defendants next argue that Pizzolato expressly waived his contractual rights because he told Patton that he was not interested in suing the Beardens. 3 While this statement illustrates a reluctance to pursue legal remedies, the Beardens have not produced any evidence that they knew of these statements, let alone that they detrimentally relied on them.
The Beardens also claim that Pizzolato waived his contractual rights by his conduct and that they detrimentally relied on this conduct. First, the Beardens assert that when they made payments under the sub-license agreement, they made them to Patton, not Pizzolato. They therefore argue that Pizzolato waived his portion of the royalty payments due. This argument is not persuasive because the sub-license agreement expressly provided that the Beardens were to forward all royalties to Patton. Pizzolato and Patton entered a separate agreement for the division of royalty payments for payments received from the Beardens under the sub-license agreement. Thus, the mere fact that the Beardens made payments solely to Patton does not constitute a waiver.
Finally, the Beardens argue that Pizzolato never demanded strict enforcement of the contract after they stopped making royalty payments. We agree with the District Court that the mere failure to strictly enforce an agreement does not constitute waiver of contractual rights.
The Beardens have not produced any evidence that Pizzolato clearly and unequivocally waived his contractual rights. Furthermore, the Beardens must produce evidence of consideration or detrimental reliance to support their waiver defense. The Beardens have failed to bring forth such evidence. Thus, we affirm the District Court's conclusion that no genuine issues of fact existed with regard to the waiver defense and Patton was entitled to summary judgment as a matter of law.
The defendants next argue that summary judgment was inappropriately granted because material issues of fact exist regarding their defense of laches. We disagree.
The defense of laches requires an inexcusably long delay in commencing the action which causes prejudice to the other party. Home Guaranty Ins. Corp. v. Third Financial Services, Inc., 694 F.Supp. 438, 439 (M.D.Tenn.1988); W.F. Holt Co. v. A & E Electric Co., 665 S.W.2d 722, 736 (Tenn.Ct.App.1983). However, mere delay is insufficient to establish the laches defense. Clark v. American Nat. Bank...
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