Russell v. Zanone

• Decision Date: 04 February 1966
• Citation: 55 Tenn.App. 690,404 S.W.2d 539
• Parties: Rudolph V. RUSSELL, Complainant and Appellee, v. R. A ZANONE and John H. Lee, Defendants and Appellants.
• Court: Tennessee Court of Appeals

Page 539

404 S.W.2d 539

55 Tenn.App. 690

Rudolph V. RUSSELL, Complainant and Appellee, v. R. A ZANONE and John H. Lee, Defendants and Appellants.

Court of Appeals of Tennessee, Western Section At Jackson.

Feb. 4, 1966.

Certiorari Denied by Supreme Court June 6, 1966.

Gerber & Gerber, Memphis, for R. A. Zanone, appellant.

John H. Lee, pro se.

Robert L. Dobbs, Memphis, for appellee.

BEJACH, Judge.

In this cause, Judge C. S. Carney of the Tennessee Court of Appeals, Western Section, was unable to be present at the hearing, and by consent of the parties, Hon. George O. Benton of the Madison County Bar, of Jackson, Tennessee, sat in his place.

This cause involves separate appeals by R. A. Zanone and John H. Lee from a decree rendered against them and in favor of Rudolph V. Russell in the Chancery Court of Shelby County. In this opinion, the parties will be referred to as Russell, Zanone and Lee.

By the terms and provisions of the decree appealed from, a judgment in the sum of $1,500 was entered jointly and severally against said Zanone and Lee. Said decree also made perpetual an injunction which prohibited Zanone from taking any further steps in a suit filed by him in cause No. 204--006 in the General Sessions Court of Shelby County, Tennessee, and from levying execution on a judgment recovered in that cause December 6, 1963 against Lee and Russell in the sum of $1,200, representing $1,000 on a promissory note signed by Russell in favor of Lee, and endorsed by Lee to Zanone, plus $200.00 attorney's fee and costs of that cause. The temporary injunction thus made perpetual, and the recovery of the $1,500 judgment against Zanone and Lee were predicated on an original bill filed December 17, 1963. The final decree was entered October 21, 1964.

In his original bill, Russell alleges that he was fraudulently induced to sign the $1,000 note, and defrauded out of 100 shares of Dobbs Houses stock of the value of $1,500 by said Lee and Zanone. The bill charges that Zanone is not an innocent holder for value of the note. It also avers that Russell was fraudulently induced to invest in 25 per cent of the beneficial interest in the Tennessee Realty Trust, allegedly owned by defendant, John H. Lee, and represented to him as being 5,833 shares, worth $58,333.00. The bill, in specific language, alleges:

'Complainant is advised and believes, and upon information avers that the defendants were acting in active concert with each other in procuring and inducing him to become an investor with them to his great financial detriment. That he believes and therefore avers, that the defendant Lee and the defendant Zanone were partners in the business venture known as Tennessee Realty Trust, and as partners, the defendant, Zanone, is, together with the defendant Lee, jointly obligated to pay the $1,500 which the defendant Lee fraudulently secured from the complainant.'

The record discloses, and the proof is clear that on May 3, 1963 Russell executed in favor of Lee a ninety day note for $1,000 and delivered to him 15 shares of Dobbs Houses stock which Lee sold to J. C. Bradford & Co. for $1,500, and that he negotiated the note to Zanone. There is considerable diversity in the testimony about the circumstances surrounding the transaction and the conditions, if any, attached to the delivery of said note and stock by Russell to Lee. This diversity of testimony will be hereinafter discussed at some length. The proof in this cause was quite voluminous, the Bill of Exceptions preserving same consisting of four volumes containing a total of about 500 pages, in addition to another volume preserving the exhibits. Inasmuch, however, as in all this voluminous mass of evidence there is none sustaining the theory on which Russell predicated his cause of action, namely, that Lee and Zanone were partners in the business venture known as Tennessee Realty Trust and, as such fraudulently induced him to execute his note for $1,000 and to part with 100 shares of Dobbs Houses stock worth $1,500, that circumstance alone would be sufficient to warrant reversal of the decree recovered in this cause. Indeed, the clear preponderance of the evidence negatives the allegations of Russell's bill. So far as the record shows, neither Lee nor Zanone ever owned any stock in the Tennessee Realty Trust.

Chancery practice in Tennessee requires, as a fundamental principle, that the proof must correspond with the allegations in the pleadings, and relief cannot be granted upon proof of a case substantially different from the case made in the pleadings. Gernt v. Cusack, 106 Tenn. 141, 59 S.W. 335; American Lead Pencil Co. v. Nashville, C. & St. L. Ry., 124 Tenn. 57, 134 S.W. 613, 32 L.R.A.,N.S., 323; Gibson's Suits in Chancery, 5th Ed., sec. 149 and sec. 694, note 19.

In Gernt v. Cusack, complainants sought to recover of the defendant, Cusack, a part of the proceeds of certain oil leases to which they averred they were entitled, received by Cusack as a partner of complainants, upon a sale under an option obtained by one of the complainants, and fraudulently transferred by Cusack to his wife. The answer denied the entire case stated in the bill, and Mrs. Cusack joined in a cross-bill setting up an independent title in herself. The proof sustained the answer and cross-bill. The Court of Chancery Appeals decided in favor of complainants, but the Supreme Court reversed and dismissed on the ground that complainants made no attack upon or claim under Mrs. Cusack's option. From the Supreme Court's opinion, written by Beard, J., we quote as follows:

'But it is said by counsel of the complainants that, without regard to pleading, the whole case was opened up in the evidence, and the court of chancery appeals, yielding to this insistence, adopted the theory that Mrs. Cusack had colluded with her husband to obtain the fruit of the Gernt option, and was therefore bound in equity to account to complainants.

This leads us to the other of the rules referred to, to wit:

2. 'Allegations without proof, or proof without allegations, can never be the foundation of a decree.' King v. Rowan, 10 Heis. 675; Furman v. North, 4 Baxt. 296; Robertson v. Wilburn, 1 Lea 633; Randolph v. Merchants' Nat. Bank, 9 Lea 63; McKelden v. Gouldy, 91 Tenn. 677, 20 S.W. 231; Bradshaw v. Van Valkenburg, 97 Tenn. 316, 37 S.W. 88; Bank v. Carpenter, 97 Tenn. 437, 37 S.W. 278.

The principle insisted upon by counsel of complainants that, 'if a stranger collusively join with a partner in a rival undertaking, the profits of the collusive or rival undertaking become partnership assets,' is sound and well supported by authority. 1 White & Tu. Lead. Cas. Eq., 62; 2 Lind. Partn. 495; Story, Partn., §§ 174--175. But this principle cannot be successfully invoked here, because there is no averment in the original or amended bill nor admission in the answer of the Cusacks to warrant its application.' Gernt v. Cusack, 106 Tenn. 150--151, 59 S.W. 337.

In American Lead Pencil Co. v. Nashville, C. & St. L. Ry., the pencil company sued the railway for loss of a carload of pencils, claiming that breach of a contract between the railway and the pencil company caused the loss. The proof failed to establish any such contract, but did establish a usage between the parties, the terms of which were substantially like those alleged by the pencil company as being set out in a contract. Recovery was denied on the ground that complainants could not recover in a case where the bill alleged a contract, but the proof established a mere usage. From the Supreme Court's opinion, written by Mr. Justice Buchanan, we quote as follows:

'We cannot bring ourselves to the conclusion that a bill, which bases the complainant's right to recover upon the breach of a contract, can be sustained by proof of a usage and no proof of a contract, or by proof of a custom and no proof of a contract. A contract is created by act of the parties. It may be either expressed or implied. It may be either written or oral. It must result from a meeting of the minds of the parties in mutual assent to its terms. It must be founded on a sufficient consideration. It must be mutual, free from fraud or undue influence, not against public policy, and sufficiently definite. See Cyc., vol. 9, 241, 242, and note 1, p. 141.

Usage and custom, on the other hand, in legal contemplation, differ radically in many respects from a contract. Usage is a repetition of acts, and is distinguished from custom in that usage is a fact, while custom is a law. There may be usage without custom, but there can be no custom without usage to accompany or precede it. Usage consists in the repetition of acts, and custom arises out of this repetition. Esriche Dist. Jurisprudence, quoted in Cutter v. Waddingham, 22 Mo. 206--248, and cited in Cyc. vol. 12, p. 1030, note. 1.

It follows from the foregoing that to permit the complainant to maintain its bill based upon the breach of a contract by proof of the breach of a usage is to permit complainant to profit by a variance between its bill and its proof. The proof does not connect the defendant with the loss, if the contract was in fact nonexistent, and if there was no contract there was no breach, and so, on the proof, the defendant would stand wholly disconnected from the loss of the property.

It is a fundamental principle that the proof must correspond with the allegations in the pleadings. East Tenn., etc., R. Co. v. Collins, 85 Tenn. 227, 1 S.W. 883; East Tenn. Coal Co. v. Daniel, 100 Tenn. 65, 42 S.W. 1062; East Tenn., etc., R. Co. v. Lindamood, 111 Tenn. 457, 78 S.W. 99; Foster v. Jackson, 8 Baxt. 433, 434.' American Lead Pencil Co. v. Nashville C. & St. L. Railroad, 124 Tenn. 63--65, 134 S.W. 614--615.

From Gibson's Suits in Chancery (5th Ed.) sec. 149, we quote as follows:

'Every fact essential to the complainant's title to maintain the bill, and obtain the relief, must be stated in the bill, otherwise the defect will be fatal. For no...