Christopher Deans v. Kathy McColumn , 184 So. 3d 972 ( 2015 )

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2013-CA-01773-COA
CHRISTOPHER DEANS APPELLANT
v.
KATHY REED MCCOLUMN APPELLEE
DATE OF JUDGMENT: 09/19/2013
TRIAL JUDGE: HON. WILLIAM H. SINGLETARY
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: JANE E. TUCKER
SHARON D. HENDERSON
ATTORNEYS FOR APPELLEE: S. MALCOLM O. HARRISON
DAVID NEIL MCCARTY
NATURE OF THE CASE: CIVIL - OTHER
TRIAL COURT DISPOSITION: DISSOLVED PARTNERSHIP AND
DIVIDED ASSETS
DISPOSITION: AFFIRMED - 06/23/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE LEE, C.J., ROBERTS AND JAMES, JJ.
LEE, C.J., FOR THE COURT:
¶1. In this case, we must determine whether the chancellor properly dissolved a
partnership. We find no error by the chancellor and affirm.
PROCEDURAL HISTORY
¶2. In 1998, Christopher Deans and Kathy McColumn, both physical therapists, formed
Therapy First Outpatient Rehabilitation LLC (Therapy First). According to the operating
agreement, Deans and McColumn each had a fifty-percent interest in Therapy First. The
parties, through Therapy First, purchased a commercial building in Jackson, Mississippi, for
their physical-therapy business.
¶3. In December 2011, McColumn filed a petition for dissolution in the Hinds County
Chancery Court. Deans subsequently filed a counterclaim alleging fraud, breach of contract,
breach of fiduciary duties, and conversion. McColumn filed a motion to strike Deans’s
counterclaim. The chancellor granted the motion to strike the counterclaim. A special
master, Oran C. Page, was appointed to review all applicable information to assist the
chancellor in dissolving Therapy First.
¶4. After a trial, the chancellor adopted the findings of the special master and ordered
Therapy First to be dissolved.
¶5. Deans now appeals, arguing several issues, which we have condensed as follows: (1)
the chancellor erred by dismissing his counterclaim, and (2) the chancellor’s findings were
unsupported by the record. McColumn filed a motion to dismiss this appeal, which we will
address as issue three.
FACTS
¶6. Therapy First was formed in 1998. At first Deans and McColumn remained working
for their previous employer, Mid-Delta Home Healthcare. Deans worked at Therapy First
in the morning and Mid-Delta in the afternoon. McColumn worked at Mid-Delta in the
morning and Therapy First in the afternoon. Approximately one year later, Deans and
McColumn were able to leave Mid-Delta and work full-time for Therapy First. While both
Deans and McColumn worked as physical therapists, McColumn also acted as the business
manager.
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¶7. In 2002, Therapy First acquired a yearly contract to service patients at Jefferson
County Nursing Home in Fayette, Mississippi. Deans was primarily responsible for fulfilling
the services under this contract, driving to Fayette five days a week. In 2007, Deans and
McColumn opened another Therapy First in McComb, Mississippi. Deans began to split his
time between the McComb location and the nursing home. Deans and McColumn also
opened a medical supplies company, which ceased operations after a few years. The
McComb location of Therapy First was unsuccessful and closed in 2008.
¶8. McColumn testified that in 2008, she received a phone call from the administrator of
the nursing home in Fayette. McColumn was informed that Deans was no longer providing
services to the residents. The administrator told McColumn that Deans was working for
another nursing home. McColumn testified she had to coax Deans into working at the
nursing home for the remainder of their contract in order to avoid breaching the contract.
Deans testified that he did start working for another nursing home located in Port Gibson,
Mississippi, in June 2008.
¶9. Although Deans was still a partner in Therapy First, he did not see patients there after
June 2008. In December 2009, Deans withdrew $9,000 from the Therapy First account for
what he termed “profit sharing.” McColumn became aware of this after the bank informed
her that the account did not have sufficient funds to cover other payments. McColumns
continued to provide services to the patients at Therapy First until 2011, when she started a
new company named Physical Therapy First LLC. McColumn apparently failed to inform
Deans that she had opened a new physical therapy business in the same building as Therapy
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First. At some point McColumn, with Deans’s permission, also formed, Deans and Mac
LLC, as a vehicle to hold title to the real property owned by her and Deans. Her new
company and another tenant renting part of the Therapy First building paid rent to Deans and
Mac LLC.
¶10. McColumn testified that Deans entered the Therapy First building in late 2011 and
removed everything, including equipment, computers, therapy machines, patient files, and
some of her personal items. Shortly thereafter, McColumn filed a temporary restraining
order as well as her request for a judicial dissolution of Therapy First.
¶11. In his report, the special master examined the books and records of Therapy First and
documented the income, expenses, and distributions for 2008 through 2011. In 2008, the
special master noted Deans received a distribution of $7,794 and McColumn received
$9,894. The special master noted McColumn suffered a $7,654 loss to her capital account
in 2009, and Therapy First operated at a net loss, so there was no distribution. That same
year, Deans withdrew $9,000 from the Therapy First account. In 2010, Deans and
McColumn each received a distribution of $20,559. In 2011, McColumn received a $44,577
distribution. The special master recommended the Therapy First building be sold and the
proceeds be used to pay the mortgage indebtedness. Any remaining proceeds were to be
deposited in the court registry to pay off other creditors. The special master also
recommended that the personal property of Therapy First, valued at $25,130, be sold and any
proceeds also be placed in the court registry. The special master determined that McColumn
was a creditor of Therapy First and was entitled to any assets remaining following payments
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to creditors. The special master further determined McColumn formed Physical Therapy
First without using any of the capital or equipment from Therapy First.
¶12. After a trial, the chancellor adopted the special master’s findings and made further
findings as follows:
In consideration of the evidence that Deans contributed nothing to the
partnership businesses . . . after June[] 2008, the Court finds that he was
entitled to not more than approximately one-quarter of the total of $17,688 in
distributions made to partners for that year, or $4,422. Since he received a
distribution of $7,794 in 2008, he is considered and found by the Court to be
a debtor of the partnership businesses for said item in the sum of $3,372. For
calendar year 2009[,] Deans is also found by the Court to be a debtor of the
partnership businesses in the amount of the $9,000 he withdrew from corporate
operating account in that year, as mentioned above, and in the sum of $3,827
representing his fifty percent (50%) portion of the loss from the businesses
reflected in the partners’ capital accounts. Finally, in calendar year 2010[,]
Deans is considered and found by the Court to be a debtor of the partnership
businesses in the sum of $20,559, the amount of the distribution to each of the
partners during a year in which he had no involvement with [or] contribution
to the businesses. Deans is, therefore, found by the Court to be a debtor of the
partnership businesses in a total sum of not less than $36,758.
The chancellor also agreed that McColumn was a creditor because she paid all overhead and
expenses of the business, including mortgage payments of $1,250 per month, for the three
years Deans ceased working at Therapy First. The chancellor noted McColumn had reduced
Therapy First’s indebtedness and renovated and improved the Therapy First building with
no assistance from Deans. The chancellor valued the remaining assets at $77,127.32 and
determined that Deans’s share, or $38,563.66, would be offset by the amount of his debt, or
$36,758.
STANDARD OF REVIEW
¶13. This Court employs a limited standard of review in appeals from chancery court. “We
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will not disturb a chancellor’s factual findings when supported by substantial evidence unless
the chancellor abused his discretion, was manifestly wrong, clearly erroneous[,] or applied
an erroneous legal standard.” Venture Sales LLC v. Perkins, 86 So. 3d 910, 913 (¶11) (Miss.
2012). When considering a motion to dismiss, this Court applies a de novo standard of
review. Storey v. Williamson, 101 So. 3d 662, 665 (¶10) (Miss. Ct. App. 2012). “When
considering a motion to dismiss, the allegations in the complaint must be taken as true and
the motion should not be granted unless it appears beyond doubt that the plaintiff will be
unable to prove any set of facts in support of his claim.” Lang v. Bay St. Louis/Waveland
Sch. Dist., 764 So. 2d 1234, 1236 (¶7) (Miss. 1999) (citation omitted).
DISCUSSION
I. COUNTERCLAIM
¶14. The hearing on McColumn’s motion to strike Deans’s counterclaim occurred on
February 24, 2012. After listening to arguments from both Deans and McColumn, the
chancellor stated the following:
[McColumn’s] motion to dismiss the counterclaim is granted. And I will not
strike the answer because I think that it might in some way be helpful to the
special master, I suppose. But the counterclaim, for purposes of the relief that
it directly requests of the Court as a separate matter to the winding up of the
business is granted. So you need to make these positions known to the special
master, who is in a position to investigate all these things . . . and to address
the relative equities between the parties and to make a recommendation to the
Court about how to wind up and dissolve this business equitably to both
parties, and all this - - all this will be considered by him if you make it known
to him.
Deans’s attorney was confused by this statement, so the chancellor responded that the parties
were to provide “the special master with all the information that he needs relevant to the
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parties’ business dealings together so that he can formulate his opinions and
recommendations to the Court.” In a written order dated March 19, 2012, the chancellor
granted McColumn’s motion to dismiss Deans’s counterclaim. On March 5, 2013, Deans
filed a separate lawsuit in the Hinds County Circuit Court against McColumn, raising the
same allegations as his counterclaim.
¶15. Although the chancellor technically granted McColumn’s motion to dismiss Deans’s
counterclaim, he did state that any issues relating to the “parties’ business dealings together”
would be allowed. Additionally, the chancellor stated Deans would be allowed to address
any concerns to the special master. The chancellor also heard evidence regarding Deans’s
claims against McColumn of conversion and breach of fiduciary duty. Since the chancellor
was presented with testimony relating to Deans’s counterclaim, we cannot find that Deans
was unduly harmed by the chancellor’s ruling.
¶16. We note that McColumn contends Deans’s counterclaim was based in tort, and thus
the chancery court lacked jurisdiction. However, caselaw states that a chancery court has
pendent jurisdiction over similar ancillary claims. See In re Hardin, 158 So. 3d 341, 347-48
(¶21) (Miss. Ct. App. 2014) (citing Cuevas v. Kellum, 12 So. 3d 1154, 1157-58 (¶15) (Miss.
Ct. App. 2009)).
II. INSUFFICIENT EVIDENCE
¶17. Deans contends the chancellor’s findings were not based upon credible evidence.
Deans claims the special master and the chancellor disregarded evidence that showed
McColumn committed malfeasance. The special master testified that he reviewed hundreds
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of pages of business records and affidavits from the parties. These records included tax
records, detailed receipts, inventory lists, and bank statements. The special master noted that
most of the records he examined were produced by Deans, including “four or five notebooks
which were about sixteen to twenty inches thick.” The chancellor heard testimony from the
special master, Deans, and McColumn. After reviewing the comprehensive findings by the
special master and the chancellor as previously noted in the facts section, we find the
chancellor’s findings were based upon credible evidence. This issue is without merit.
III. MOTION TO DISMISS APPEAL
¶18. McColumn filed a motion to dismiss this appeal, arguing that Deans’s appeal is barred
because he filed his counterclaim in the circuit court. However, since we are affirming the
chancellor’s ruling regarding the counterclaim, we find it unnecessary to address the merits
of this motion. Therefore, McColumn’s motion to dismiss the appeal is denied.
¶19. THE JUDGMENT OF THE HINDS COUNTY CHANCERY COURT IS
AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE
APPELLANT.
IRVING AND GRIFFIS, P.JJ., ISHEE, ROBERTS, CARLTON, MAXWELL
AND FAIR, JJ., CONCUR. BARNES, J., CONCURS IN PART AND IN THE
RESULT. JAMES, J., CONCURS IN PART.
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