Dialysis Clinic, Inc. v. Kevin Medley ( 2019 )


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  •                                                                                           05/20/2019
    IN THE COURT OF APPEALS OF TENNESSEE
    AT NASHVILLE
    April 2, 2019 Session
    DIALYSIS CLINIC, INC. ET AL. V. KEVIN MEDLEY ET AL.
    Appeal from the Circuit Court for Davidson County
    No. 14C4843      Joseph P. Binkley, Jr., Judge
    No. M2018-00399-COA-R3-CV
    The owner of four contiguous properties filed unlawful detainer actions against the
    entities that were occupying the properties. The owner did not name as defendants the
    individual who signed the lease or his company. A year and a half after the cases were
    filed, the lessee moved to intervene, claiming that it was entitled to intervene pursuant to
    Tenn. Rs. Civ. P. 24.01 and/or 24.02 and that it was a necessary party pursuant to Tenn.
    R. Civ. P. 19.01. The trial court denied the lessee’s motion on the grounds of prior suit
    pending and timeliness. The lessee appealed. Because the court failed to address the
    lessee’s claim that it was a necessary party, we are unable to address that argument on
    appeal. We vacate the trial court’s judgment and remand the case for further
    proceedings.
    Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated and
    Remanded
    ANDY D. BENNETT, J., delivered the opinion of the Court, in which D. MICHAEL SWINEY,
    C.J., and FRANK G. CLEMENT, JR., P.J., M.S., joined.
    L. Vincent Williams, Nashville, Tennessee, for the appellant, Outloud! Inc.
    L. Vincent Williams, Nashville, Tennessee, for the appellees, Kevin E. Medley, Kevin
    Medley, LLC, 3 Entertainment Group, LLC, and Canvas Lounge, LLC.
    Peter C. Sales and Frankie Neil Spero, Nashville, Tennessee, for the appellee, Dialysis
    Clinic, Inc.
    OPINION
    I. FACTUAL AND PROCEDURAL BACKGROUND
    This case involves four contiguous properties owned by Dialysis Clinic, Inc.
    (“DCI”) located on Church Street in Nashville: 1703, 1705, 1707, and 1709 (together,
    “the Church Street Properties”). DCI purchased these properties from S. Ralph Gordon
    in July 2012. In 2004, Mr. Gordon leased the Church Street Properties to Ted Jensen and
    Outloud! Inc. (“Outloud!”) pursuant to two separate lease agreements. Mr. Jensen was
    the registered agent, corporate secretary, and a member of the board of directors for
    Outloud!, a Tennessee corporation. Kevin Medley was the president, chief executive
    officer, and sole shareholder of Outloud! In 2005 and 2006 Mr. Jensen sublet the Church
    Street Properties to Kevin Medley, who then sub-sublet them to OutCentral, Canvas
    Lounge, LLC, and 3 Entertainment Group, LLC. When DCI purchased the Church Street
    Properties, the leases between Mr. Gordon and Mr. Jensen and Outloud! were assigned to
    DCI.
    DCI filed four unlawful detainer warrants against Mr. Jensen and Outloud! in the
    general sessions court for Davidson County on June 21, 2013, one warrant for each of the
    Church Street Properties (“2013 Action”). DCI asserted claims for rent, damages,
    possession, and attorney’s fees. The court awarded possession and damages to DCI on
    August 13, 2013. Mr. Jensen appealed the judgments to the circuit court for Davidson
    County, but Outloud! did not. DCI and Mr. Jensen subsequently reached an agreement
    whereby Mr. Jensen dismissed his appeals, and DCI entered into amended leases with
    Mr. Jensen, individually and d/b/a Outloud!, with regard to the Church Street Properties.
    As amended, the leases provided that the rental period of all the properties was to
    terminate on August 31, 2014.
    When the termination date of the amended leases passed and the Church Street
    Properties were not vacated, DCI filed three unlawful detainer warrants on October 6,
    2014, against Kevin Medley, Kevin Medley, LLC, Canvas Lounge, LLC, OutCentral,
    Inc., 3 Entertainment Group LLC, and all other occupants of the Church Street
    Properties, seeking possession, damages, and interest (“2014 Action”). The three cases
    were consolidated and removed to the circuit court for Davidson County. Once the cases
    were consolidated and removed to the circuit court, DCI filed a complaint in accordance
    with Tenn. R. Civ. P. 8. DCI’s causes of action included unlawful detainer, declaratory
    relief pursuant to the Tennessee Declaratory Judgments Act, Tenn. Code Ann. §§ 29-14-
    101-113, quantum meruit, and unjust enrichment.
    On April 1, 2016, more than two and a half years after judgments were entered
    against Mr. Jensen and Outloud! in the 2013 Action, Outloud! filed a petition for writ of
    certiorari, seeking review of the general sessions’ judgments dating from August 2013.
    DCI moved to dismiss Outloud!’s petition, and the trial court granted the motion, ruling
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    that the petition was time-barred. Outloud! appealed the trial court’s dismissal, and we
    affirmed the trial court’s judgment. See Outloud! Inc. v. Dialysis Clinic, Inc., No.
    M2016-01528-COA-R3-CV, 
    2017 WL 4004161
    (Tenn. Ct. App. Sept. 11, 2017).
    On April 6, 2016, just a few days after filing its petition for writ of certiorari in the
    2013 Action, Outloud!, which was not a party to the 2014 Action, filed a complaint
    seeking a declaratory judgment and injunctive relief against DCI. DCI moved to strike or
    dismiss the complaint because Outloud! had failed to comply with Tenn. R. Civ. P. 24.03
    by filing a motion to intervene, and this prompted Outloud! to file a motion to intervene
    on April 25, 2016. Outloud! filed an amended complaint on April 29, followed by a
    revised motion to intervene and a second amended complaint on July 12, 2016. In its
    initial and revised motion and memorandum of law, Outloud! argued, inter alia, that it
    was a necessary party to the action pursuant to Tenn. R. Civ. P. 19.01.
    DCI opposed Outloud!’s motion to intervene on the grounds of prior suit pending
    and Outloud!’s failure to satisfy the requirements of Tenn. R. Civ. P. 24. Following a
    hearing on September 9, 2016, the trial court entered an order denying Outloud!’s motion
    to intervene. The court based its decision on both the prior suit pending doctrine and
    Tenn. R. Civ. P. 24. With regard to the prior suit pending doctrine, the court wrote, in
    pertinent part:
    2. The prior-suit-pending doctrine requires a defending party to show (1)
    the two cases involve identical subject matter; (2) the two cases are
    between the same parties; (3) the former case remains pending in a court
    having subject matter jurisdiction over the dispute; and (4) the former case
    remains pending in a court having personal jurisdiction over the parties.
    West v. Vought Aircraft Indus., Inc., 
    256 S.W.3d 618
    , 623 (Tenn. 2008).
    3. With regard to the identical subject matter element, this Court finds that
    the action involving Outloud!’s Petition for Writ of Certiorari and
    subsequent appeal relating to General Sessions Case. Nos. 13GT5292,
    13GT5302, 13GT5303, and 13GT5304 (the “First Action”) and the present
    action involve identical subject matter.
    4. The relevant analysis of whether two actions have “identical subject
    matter” is the transactional test adopted by the Tennessee Supreme Court in
    Creech v. Addington, 
    281 S.W.3d 363
    (Tenn. 2009), for the purpose of
    analyzing whether a second action is the “same cause of action” as the first
    action for res judicata purposes. As such, like the res judicata doctrine, the
    prior-suit-pending doctrine “applies not only to issues actually raised in the
    first suit, but also to issues that could have been raised regarding the same
    subject matter.” Fidelity & Guar. Life Ins. Co. v. Corley, 
    2003 WL 23099685
    , at * 3 (Tenn. Ct. App. 2003).
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    5. From a review of Outloud!’s Petition for Writ of Certiorari in the First
    Action and Outloud!’s Proposed Intervening Complaint in this action, it is
    clear that the two pleadings raise identical issues. Accordingly, for purposes
    of the prior suit pending doctrine analysis, the First Action and this action
    involve the same subject matter.
    6. With regard to the second element of the prior suit pending doctrine
    analysis, this Court finds that this action and the First Action involve the
    same parties.
    7. Under Tennessee law, the prior suit pending doctrine still applies where
    the parties in the two cases are “sufficiently similar so as to make no
    practical difference.” Fid. & Guar. Life Ins. Co. v. Corley, 
    2003 WL 23099685
    , at *5 (Tenn. Ct. App. 2003). Because this action and the First
    Action involve parties that are sufficiently similar as to make no practical
    difference, Dialysis Clinic, Inc. (“DCI”) has satisfied the second element.
    8. This Court further finds that the final two elements have been satisfied
    because the First Action remains pending in the Tennessee Court of
    Appeals, which has both subject matter jurisdiction and personal
    jurisdiction over the parties.
    The trial court then addressed DCI’s alternative basis for opposing Outloud!’s
    motion to intervene into the case: that Outloud! had not satisfied the requirements of
    Tenn. R. Civ. P. 24.01, to intervene as a matter of right, or Tenn. R. Civ. P. 24.02, to
    intervene on a permissive basis. The court wrote:
    11. Both Rule 24.01 and 24.02 require that a motion to intervene be timely.
    See Tenn. R. Civ. P. 24.01, 24.02. A determination regarding “[W]hether a
    motion to intervene has been timely filed is determined by the facts and
    circumstances of the case, and equitable principals govern the trial court’s
    determination.” Am. Materials Techs., LLC v. City of Chattanooga, 
    42 S.W.3d 914
    , 916 (Tenn. Ct. App. 2000).
    12. Tennessee courts consider the following factors in deciding whether a
    motion to intervene is timely: (1) the point to which the suit has progressed;
    (2) the purpose for which intervention is sought; (3) the length of time
    preceding the application during which the proposed intervener knew or
    reasonably should have known of his interest in the case; (4) the prejudice
    to the original parties due to the proposed intervener’s failure after he knew
    or reasonably should have known of his interest in the case to apply
    promptly for intervention; and (5) the existence of unusual circumstances
    militating against or in favor of intervention. Lee v. City of Memphis, No.
    -4-
    W2011-01643-COA-R3-CV, 
    2012 WL 1245665
    , at *3 (Tenn. Ct. App.
    Apr. 11, 2012).
    13. With regard to the first factor, the Court finds that the filing of this
    Motion to Intervene is untimely, as it was filed two years after this action
    commenced.
    14. With regard to the second factor, this Court finds that the relief sought
    in Outloud!’s Intervening Complaint is the same relief it seeks in the First
    Action and, therefore, there is no purpose for the intervention.
    15. With regard to the third factor, this Court finds that Outloud! knew or
    reasonably should have known of its interest on or around December 17,
    2014. Emails dated December 17, 2014, between Outloud!’s counsel and
    Kevin Medley clearly show that Outloud!’s counsel was discussing the
    First Action and as it pertains to Outloud!. Accordingly, Outloud! knew or
    should have known facts sufficient for it to seek to intervene in this action.
    16. Finally, with regard to the fourth and fifth factors, allowing Outloud! to
    intervene at this late stage in the litigation would prejudice DCI. Further,
    the only unusual circumstance in this case is that Outloud!’s intervention is
    barred by the prior suit pending doctrine.
    17. This Court finds that Outloud!’s Motion to Intervene is untimely under
    both Rule 24.01 and Rule 24.02.
    Outloud! appeals the trial court’s denial of its motion to intervene. It argues the
    trial court erred in (1) denying its intervention as a matter of right; (2) denying its
    intervention on a permissive basis; and (3) dismissing its motion based on the prior suit
    pending doctrine. Outloud! also contends the trial court erred in failing to rule that it is a
    necessary party because the validity of its leases is vital to the determination of the
    validity of the leases belonging to Mr. Medley, Canvas Lounge, LLC, and 3
    Entertainment, LLC.
    II. ANALYSIS
    The trial court’s order denying Outloud!’s motion to intervene did not address
    Outloud!’s contention that it was a necessary party pursuant to Tenn. R. Civ. P. 19.01.
    That rule provides:
    A person who is subject to service of process shall be joined as a party if
    (1) in the person’s absence complete relief cannot be accorded among those
    already parties, or (2) the person claims an interest relating to the subject of
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    the action and is so situated that the disposition of the action in the person’s
    absence may (i) as a practical matter impair or impede the person’s ability
    to protect that interest, or (ii) leave any of the persons already parties
    subject to a substantial risk of incurring double, multiple, or otherwise
    inconsistent obligations by reasons of the claimed interest. If the person has
    not been so joined, the court shall order that the person be made a party. If
    the person properly should join as a plaintiff but refuses to do so, he or she
    may be made a defendant, or in a proper case, an involuntary plaintiff.
    TENN. R. CIV. P. 19.01.
    Outloud! relies on the case Adler v. Double Eagle Properties Holdings, Inc., No.
    W2010-01412-COA-R3-CV, 
    2011 WL 862948
    (Tenn. Ct. App. Mar. 14, 2011), to
    support its claim that it is a necessary party to this litigation. That case involved the lease
    of the rooftop portion of a building to a site management company in exchange for
    $135,000. Adler, 
    2011 WL 862948
    , at *1. The site management company assigned its
    interest in the agreement to its wholly-owned subsidiary. 
    Id. When the
    owner of the
    building (“the seller”) entered into an agreement to sell the building to a holdings
    company (“the buyer”), a dispute arose prior to the closing regarding whether the seller
    or the buyer was entitled to a portion of the $135,000 lease payment by the site
    management company for the use of the rooftop portion of the building. 
    Id. The seller
    sued the buyer and failed to include either the site management company or its assignee
    as parties to the action. 
    Id. at *2.
    The trial court granted the buyer’s motion for summary
    judgment, and the seller appealed. 
    Id. at *2.
    Before addressing the issues the parties raised, this Court asked, sua sponte,
    whether all necessary parties were included in the lawsuit. 
    Id. at *3.
    Citing the
    Declaratory Judgment Act, the Adler court determined that Tenn. Code Ann. § 29-14-
    107(a)1 ‘“imposes stricter requirements than those imposed generally by Tennessee Rules
    of Civil Procedure 19.01 and 19.02.’” 
    Id. at *3
    (quoting Huntsville Util. Dist. of Scott
    Cnty., 
    839 S.W.2d 397
    , 403 (Tenn. Ct. App. 1992)). The Adler court wrote that “[a]
    party to an agreement may be a necessary party to a declaratory judgment action
    construing that agreement,” and referenced another case initiated by a landowner to
    interpret a lease in which our Supreme Court held that “the original lessee and the
    assignee of the entire lease were necessary parties.” 
    Id. at *4
    (citing David v. Coal Creek
    Mining & Mfg. Co., 
    461 S.W.2d 29
    , 32 (Tenn. 1970)). Noting that “identifying the
    1
    Tennessee Code Annotated section 29-14-107(a) states:
    When declaratory relief is sought, all persons shall be made parties who have or claim
    any interest which would be affected by the declaration, and no declaration shall
    prejudice the rights of persons not parties to the proceedings.
    -6-
    necessary parties in a declaratory judgment action is fact intensive and depends on the
    type of case and issues involved,” the Adler court concluded that the trial court had erred
    by failing to include “the holder of current contractual rights under the Rooftop
    Agreement in this declaratory judgment action” and vacated the trial court’s judgment.
    
    Id. at *5,
    *7; see also Little v. City of Chattanooga, No. E2018-00870-COA-R3-CV,
    
    2019 WL 1308264
    , at *8 (Tenn. Ct. App. Mar. 21, 2019).
    The parties to the lease agreements that DCI relies upon in this case are DCI and
    Ted Jensen, individually and d/b/a Outloud!. Although the trial court denied Outloud!’s
    motion on the basis of prior suit pending and Rule 24, it did not address Outloud!’s
    argument that it is a necessary party pursuant to Tenn. R. Civ. P. 19.01. Until the trial
    court rules on Outloud!’s argument, that issue is not ripe for review by this Court. As the
    Adler opinion makes clear, the trial court should also consider whether Outloud! and Ted
    Jensen are necessary parties pursuant to the Declaratory Judgments Act.
    III. CONCLUSION
    The trial court’s judgment is vacated and the case is remanded with instructions
    that the trial court address Outloud!’s assertion that it is a necessary party. The court
    should also determine whether the Declaratory Judgments Act requires that Outloud! and
    Ted Jensen be made parties to the case. Costs of this appeal shall be split evenly between
    Outloud!, Inc. and Dialysis Clinic, Inc.
    ________________________________
    ANDY D. BENNETT, JUDGE
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Document Info

Docket Number: M2018-00399-COA-R3-CV

Judges: Judge Andy D. Bennett

Filed Date: 5/20/2019

Precedential Status: Precedential

Modified Date: 5/20/2019