Tennison Brothers, Inc. v. William H. Thomas, Jr. ( 2014 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
June 17, 2014 Session
TENNISON BROTHERS, INC. V. WILLIAM H. THOMAS, JR.
Appeal from the Chancery Court for Shelby County
No. CH081310 Kenny W. Armstrong, Chancellor
No. W2013-01835-COA-R3-CV - Filed August 6, 2014
After a default judgment was entered against Appellee and in favor of Appellants on
claims of intentional interference with business relationships, common law and statutory
inducement to breach a contract and intentional interference with a contract, and breach of
contract, a writ of inquiry hearing was held to determine the appropriate amount of damages
to which the Appellants were entitled. Therein, the trial court went outside the pleadings to
consider the issue of liability. We conclude that the trial court erred in considering the issue
of liability because the well-pled facts contained in the Appellants’ respective complaints
were dispositive on that question upon the grant of default judgment. Our review of the
complaints leads us to conclude that the Appellants have set forth sufficient facts to prove
the prima facie elements of their causes of action. Accordingly, Appellants are entitled to
damages, and the trial court erred in denying them. Therefore, we reverse the trial court’s
order, and remand for a determination of damages. Reversed and remanded.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed
and Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which F RANK G. C LEMENT,
J R., P. J., M. S., and D ONALD E. P ARISH, S P. J., joined.
Kathy Baker Tennison and Stuart B. Breakstone, Memphis, Tennessee, for the appellant,
Tennison Brothers, Inc.
Gary E. Veazey, Memphis, Tennessee, for the appellee, William Thomas, Jr.
Robert L. J. Spence, Jr., Memphis, Tennessee, for the appellee, Clear Channel Outdoor, Inc.
OPINION
This case began in 2004 as a business dispute over competing rights to a state-issued
permit to construct a billboard on two adjacent properties, both of which front Interstate 40
and Interstate 240 in Shelby County. Tennison Brothers, Inc. (“Tennison”) owns one of
those properties. On August 19, 2004, Tennison entered into a lease agreement with Clear
Channel Outdoor (“CCO,” and together with Tennison, “Appellants”). The lease, which
commenced on September 1, 2004 and ran for twenty years, granted CCO the right to
construct an advertising billboard on Tennison’s property. The right to build was predicated
upon CCO’s ability to obtain the proper permits for the billboard.
Southern Millwork and Lumber Company (“Southern Millwork”) owns the property
adjacent to the Tennison property. William H. Thomas ( “Appellee”) had a billboard lease
agreement with Southern Millwork. In late August 2004, Mr. Thomas and CCO each
submitted applications for billboard construction permits, known as “Outdoor Advertising
Device Permits,” to the Beautification Office of the Tennessee Department of Transportation
(“TDOT”).1 TDOT Rule 1680-2-3-.03(1)(a)4(i)(I) provides that, “no two structures shall
be spaced less than 1,000 feet apart on the same side of the highway.” Accordingly, because
Mr. Thomas and CCO’s requested sites were only 50 feet apart, they could not both receive
the TDOT permits. Subpart 5(i) of the foregoing TDOT rule further provides:
Permit applications will be considered on a first come first serve
basis. The applicant must either show proof of ownership of the
property or submit a valid land lease or an affidavit signed by
the property owner stating that permission has been given to
erect this particular outdoor advertising device. The property
owner’s signature must be notarized . . . . Incomplete
applications with accompanying fees will be returned without
action.2
1
The Beautification Office, specifically the Outdoor Advertising Control Program, is responsible
for regulating billboard construction and maintenance along Interstates, National Highways, and Federal-aid
Primary Highway System Routes in Tennessee, to ensure compliance with state and federal law, and to
“Keep Tennessee Beautiful.” The relevant regulations are provided in Tenn. Comp. R & Regs. 1680-2-3-.03,
“Criteria for the Erection and Control of Outdoor Advertising.”
2
This is the 2004 version, in force at the time of Mr. Thomas’s and CCO’s applications. The
(Continued.......)
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Mr. Thomas’s application was rejected because the signatures on the lease agreement
were not notarized. The same day that TDOT rejected Mr. Thomas’s application, TDOT
received CCO’s application for the Tennison site. CCO’s application was accompanied by
all of the necessary paperwork, including the notarized lease agreement between CCO and
Tennison. The application was immediately approved pending the results of a “site
inspection,” during which a TDOT employee visits the proposed location and measures the
distances between other billboards to ensure compliance with the spacing regulations. The
site was approved, and TDOT awarded CCO permit numbers 79-2921 and 79-2922 on
September 8, 2004. In the meantime, Mr. Thomas obtained the proper documentation and
resubmitted his application on August 31, 2004; however, Mr. Thomas’s second application
was also rejected—this time on the ground that his proposed site violated the spacing
requirement as a result of CCO’s recently approved application.
Mr. Thomas proceeded to appeal that decision through the administrative hearing
process, and ultimately to this Court. See Thomas v. Tennessee Dept. of Transportation,
No. M2010-01925-COA-R3-CV, 2011 WL 3433015 (Tenn. Ct. App. Aug. 5, 2011)
(“Thomas”). By the time this Court heard the appeal, Mr. Thomas had sold his lease
agreement, sometime in late 2005, to CBS Outdoor, Inc. (“CBS”). Accordingly, Mr. Thomas
no longer had any leasehold on the disputed property. Upon the filing of a motion to dismiss
for lack of standing, the trial court concluded that Mr. Thomas “lacks standing to maintain
this lawsuit and this cause is moot as a matter of law.” In Thomas, we affirmed that
decision.
By virtue of the state law regulating the spacing of advertising structures, only one of
the billboard owners involved in this case can receive the state-issued permit. That permit,
as discussed above, was issued to CCO. However, there is also a county-issued permit that
addresses the spacing of advertising structures; because of the spacing of the proposed
billboards, as is the case with the state-issued permit, only one of the billboard owners
involved in this case can receive the county-issued permit. The process involved in
procuring the state and county permits is separate and distinct; neither relies upon, nor affects
the other. However, both permits are required in order to legally construct a billboard.
Although CCO was adjudicated the correct recipient of the state-issued permit, the county-
issued permit had been issued for the Southern Millwork property before the dispute over the
(.......continued)
current version of the “first come first serve” rule, which has been modified in ways not relevant to this case,
can be found at Tenn. Comp. R & Regs. 1680-2-3-.03(1)(a)7(v). Additionally, the requirements for proof of
ownership or a notarized lease or affidavit from the property owner can be found at -(a)6(iv)(III). The rule
that an application will not be considered unless it is completed and accompanied by all the necessary
documentation can be found at - (a)7(I).
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state-issued permit arose. The county-issued permit is currently held by CBS for its structure
located on the Southern Millwork property. Accordingly, CCO is precluded from building
on its site, despite the fact that it holds the state-issued permit.
On July 16, 2008, Tennison filed a complaint against Mr. Thomas, Southern
Millwork, and CCO, alleging intentional interference with business relationships, common
law and statutory inducement to breach a contract and intentional interference with a
contract, and breach of contract.3 The case was assigned to, and originally heard by,
Chancellor Arnold Goldin. Tennison filed a petition for a temporary restraining order and
injunction on August 22, 2008. An amended complaint was filed on August 27, 2008.4 On
August 29, 2008, Mr. Thomas filed a motion to dismiss, or in the alternative, a motion to
transfer the case to the Circuit Court, in which motion he claimed, inter alia, that the
Chancery Court did not have jurisdiction to consider Tennison’s claims for unliquidated
damages.
On September 8, 2008, CCO filed an answer to the amended complaint and a cross-
complaint against Mr. Thomas, seeking damages against Mr. Thomas for intentional
interference with business relationships and statutory inducement to breach a contract. On
September 10, 2008, Mr. Thomas filed an amended motion to dismiss or, in the alternative,
to transfer the case. On September 16, 2008, the trial court entered an order, extending the
temporary restraining order, and setting the pending motions for hearing. On September 26,
2008, Tennison filed a memorandum in opposition to Mr. Thomas’s amended motion to
dismiss/transfer. CCO filed its response to Mr. Thomas’s motion on October 2, 2008. By
order of October 6, 2008, the trial court denied Mr. Thomas’s motion to dismiss.
On December 5, 2008, Tennison filed a motion for default judgment against Mr.
Thomas for failure to answer. On December 18, 2008, Mr. Thomas filed an answer to
Tennison’s amended complaint and answer to CCO’s cross-complaint, denying any liability
and raising a number of affirmative defenses. On January 7, 2009, the trial court entered an
order, denying Tennison’s motion for default judgment, and allowing Mr. Thomas more time
to answer.
On May 6, 2009, Mr. Thomas filed a motion to dismiss Tennison’s amended
complaint, to dissolve the temporary restraining order, and to dismiss CCO’s cross-
3
On May 24, 2010, Southern Millwork was dismissed from the lawsuit by order of voluntary
non-suit.
4
The amended complaint added the claim of public nuisance, which was later dismissed. All
other claims remained the same.
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complaint. On August 31, 2009, Tennison filed a response in opposition to Mr. Thomas’s
motion. On November 20, 2009, the trial court entered several orders: (1) an order granting
Mr. Thomas’s motion for bifurcation; (2) an order denying Mr. Thomas’s motion to dismiss
the amended complaint and to dissolve the temporary restraining order; and (3) an order
denying Mr. Thomas’s motion to dismiss the CCO cross-complaint. In addition, on
November 20, 2009, the court entered an order striking Mr. Thomas’s answers, as a
discovery sanction pursuant to Tennessee Rule of Civil Procedure 37.02. By this order, the
Chancellor also entered default judgment against Mr. Thomas and in favor of both CCO and
Tennison. Mr. Thomas contends that this was error given the fact that Tennison and CCO’s
respective complaints allegedly contained contradicting allegations as to whether CCO had
breached its contract with Tennison. Specifically, Tennison alleged that the contract had
been breached, whereas CCO allegedly denied this fact. Also on November 20, 2009, the
trial court entered an order, joining CBS as a party-defendant. On December 4, 2009,
Tennison filed a second amended complaint, adding CBS to the lawsuit.5
On April 15, 2010, CCO filed its answer to the second amended complaint. On April
16, 2010, the Chancellor entered an order setting a writ of inquiry to determine the amount
of damages against Mr. Thomas based upon the entry of default judgment against him on
November 20, 2009. On May 18, 2010, Mr. Thomas filed an motion, seeking recusal or
disqualification of Chancellor Goldin. Tennison opposed the motion. The trial court denied
the motion for recusal by order entered on June 4, 2010. Also on June 4, 2010, the
Chancellor entered an order, granting Tennison’s second motion for sanctions against Mr.
Thomas. Therein, the Chancellor held that, “[a]s a sanction for refusing to appear for his
deposition and refusing to produce documents . . . Defendant Thomas shall not be allowed
to present proof related to damages or in defense thereto.” Instead, Mr. Thomas was only
“allowed to cross-examine witnesses presented by other parties related to damages.”
On July 2, 2010, Mr. Thomas filed a motion to dismiss any claims for damages,
claiming, inter alia, that he could not be charged with damages because he had sold whatever
right he had in the billboard. CCO and Tennison each filed a memorandum of law on
damages on July 9, 2010. On December 1, 2010, the trial court entered an order setting the
writ of inquiry. Mr. Thomas renewed his motion to dismiss on January 25, 2011. On
February 4, 2011, Tennison filed a motion to strike Mr. Thomas’s motions to dismiss and to
preclude Mr. Thomas from litigating substantive issues subsequent to the default judgment.
Tennison also filed a motion in opposition to Mr. Thomas’s motions to dismiss on February
17, 2011.
The Thomas opinion was filed on August 31, 2011. On November 2, 2011, the trial
5
On June 8, 2010, CBS was dismissed from the case by agreed order of dismissal with prejudice.
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court entered an order re-setting the writ of inquiry. On December 6, 2011, the court entered
an order, denying Mr. Thomas’s motions to dismiss. On January 10, 2012, Mr. Thomas filed
a motion to set aside the default judgment, which motion was denied by order of July 6,
2012.
Perceiving that he was not being treated fairly, Mr. Thomas made several motions
throughout these proceedings (some of which are mentioned above) seeking Chancellor
Goldin’s recusal or transfer of the case to a different court. Prior to the hearing on the writ
of inquiry, the matter was transferred to Part III of the Shelby County Chancery Court, where
the writ of inquiry was heard by Chancellor Kenny W. Armstrong on January 7, 2013. On
July 10, 2013, Chancellor Armstrong entered a memorandum opinion, which provides, in
relevant part:
Although [based on the grant of default judgment] this Court
must consider as true the well-pled allegations contained in the
Complaint, the Court does not find that all of the allegations in
the Complaint are consistent with the proof in the record. Upon
review of the record and more specifically the Clear Channel
Outdoor Lease Agreement (“Lease Agreement”) between
Tennison and Clear Channel, the Court does not find that a
breach had occurred. Section 3 of the Lease Agreement
required Clear Channel, upon the execution of the lease, to pay
Tennison $1,000.00 for the period of time prior to completion of
construction of the billboard. This section further provided that
rental payments commence on the date construction is
completed. Because construction on the billboard was never
completed, these yearly rental payments were never due, making
it impossible for Clear Channel to have breached its Lease
Agreement with Tennison. Furthermore, Section 7 of the Lease
Agreement gives Clear Channel the sole option to cancel the
Lease Agreement if Clear Channel is unable to obtain or
maintain the necessary permits for the erection, use and/or
maintenance of the billboard or if the billboard’s use is
prevented or restricted by law. Here, Clear Channel was unable
to obtain all the necessary permits to erect the billboard at the
Tennison site. The claim for common law and statutory
inducement to breach a contract expressly requires a breach to
occur. Having found no breach, the Court finds that Tennison’s
claim on this ground fails. Furthermore, for the same reason,
Tennison’s claim of breach of contract against Clear Channel
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also fails.
Concerning Tennison’s claim for intentional interference with business relationships, the
memorandum opinion goes on to state that:
[The intentional interference with business relationships claim]
does not require an actual breach, just the intention on the part
of the defendant to cause a breach employing improper motives.
To establish damages for intentional interference with business
relationships, Tennison must show that the predominant intent
of Thomas’[s] actions were to cause the breach or termination
of Tennison’s business relationship with Clear Channel. The
proof presented did not demonstrate this to be Thomas’[s]
primary motive. The primary motive here on the part of Thomas
appears to be in pursuit of his own business interest. Thomas
zealously pursued his legal rights and remedies in seeking to
uphold the initial administrative law judge’s order which voided
Clear Channel’s permit and ordered approval of his permit
application. The pursuit of such rights on his part cannot be
deemed improper. As such, the Court finds that Tennison is not
entitled to any damages for intentional interference with
business relationships. Having denied damages based on the
intentional interference with business relationships claim, the
Court further finds that Tennison is not entitled to treble or
punitive damages.
Concerning CCO’s cross-claim against Mr. Thomas, the memorandum opinion states:
The Court finds, however, that Clear Channel did not
sufficiently plead or prove enough facts to support the claims of
unjust enrichment, implied indemnification or public nuisance
and therefore dismisses those claims. As to the claim of
intentional interference with business relationships, the Court
reaches the same conclusions as expressed previously.
On August 2, 2013, the trial court entered an order on its memorandum opinion. CCO
and Tennison appeal. Tennison raises the following issues, as stated in its brief:
I. Whether the trial court erred in failing to award damages . .
. on a default judgment when it did not accept the properly
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pleaded allegations as true but rather considered the issue of
liability.
II. Even if the issue of liability was properly considered,
whether the trial court erred in failing to award damages when
sufficient evidence was submitted to demonstrate that Mr.
Thomas used unlawful and improper means to induce Clear
Channel to breach or fail to perform the lease agreement . . . .
III. Whether an award of compensatory damages, treble
damages, punitive damages, and pre-judgment interest is
warranted.
CCO raises the following issues as stated in its brief:
I. The trial court erred at the final hearing when it required
Clear Channel to prove the elements of its causes of action
against Thomas where Clear Channel was previously awarded
a default judgment against Thomas.
II. The trial court’s ruling that Clear Channel had not proven its
causes of action is contrary to the evidence.
III. The trial court erred in denying Clear Channel an award of
damages against Thomas.
In the posture of Appellee, Mr. Thomas raises the additional issue:
Whether Chancellor Goldin erred when he failed to dismiss the
case—or transfer it to the Circuit Court for lack of subject
matter jurisdiction.
We begin our analysis with Thomas’s jurisdiction question.
Jurisdiction
Tennessee Code Annotated Section 16-11-102 provides, in relevant part, as follows:
(a) The chancery court has concurrent jurisdiction, with the
circuit court, of all civil causes of action, triable in the circuit
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court, except for unliquidated damages for injuries to person or
character, and except for unliquidated damages for injuries to
property not resulting from a breach of oral or written contract;
and no demurrer for want of jurisdiction of the cause of action
shall be sustained in the chancery court, except in the cases
excepted.
Unliquidated damages” are those damages “that have not been previously specified or
contractually provided for.” Bryan A. Garner, A Dictionary of Modern Legal Usage 902 (2d.
ed.1995). As explained in 22 Am. Jur. 2d Damages § 465 (2012):
Whether the amount involved qualifies as “liquidated” is not
always clear, but in general, “liquidated” means “made certain
or fixed by agreement of the parties or by operation of law.” On
the other hand, “unliquidated damages” are damages that have
not been determined or calculated, or not yet reduced to a
certainty in respect to amount.
* * *
A liquidated claim exists if the plaintiff has made a demand for
a specific sum that the defendant allegedly unlawfully retained,
because such a claim is certain and known to the defendant
before the suit is filed. A claim that was for a fixed amount that
had become due and payable on a set date is also liquidated,
even though the verdict for the plaintiff turns out to be less than
the figure demanded, as this fact does not necessarily convert a
claim for an otherwise liquidated amount into a claim for an
uncertain and therefore unliquidated amount.
Id. (footnotes omitted).
As set out above, Tennessee Code Annotated Section 16-11-102 gives chancery courts
concurrent jurisdiction with circuit courts for most claims. As is relevant to this case, the
statute excepts, from the chancery courts’ jurisdiction, claims for unliquidated damages “not
resulting from a breach of oral or written contract.” Inferentially, then, concurrent
jurisdiction between the chancery and circuit courts remains intact for claims for unliquidated
damages that do result from a breach of oral or written contract. The question, then, is
whether CCO and Tennison’s causes of action sound in contract.
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In its complaint, Tennison sued CCO for breach of contract, and sued Mr. Thomas for
tortious interference with a contract and inducement to breach a contract. Tennison also
sought injunctive relief in its amended complaint “[f]or the unpermitted and illegally
constructed billboard to be removed at the expense of Defendants.” Similarly, in its cross-
complaint against Mr. Thomas, CCO sought relief under causes of action for tortious
interference with a contract and statutory inducement to breach a contract. In addition, CCO
sought injunctive relief to have the allegedly unlawful billboard removed. CCO also sought
disgorgement of any ill-gotten profits that Mr. Thomas may have received from the billboard.
See Zirkle v. Kingston, 396 S.W.2d 356 (Tenn. 1965) (“Quasi contract (or unjust
enrichment) is one of those remedies properly called equitable and cognizable in chancery
under its inherent jurisdiction.”). The gravamen of CCO and Tennison’s respective causes
of action is the alleged breach of Tennison’s lease agreement with CCO. Thus, the chancery
court would have concurrent jurisdiction with the circuit court to adjudicate these claims.
However, even if we assume, arguendo, that not all of the damages sought by CCO
and/or Tennison are within the chancery court’s jurisdiction, it is well settled that “where the
chancery court has obtained jurisdiction over some portion of or feature of a controversy it
may grant full relief in the same manner as could a court of law.” PNC Multifamily Capital
Institutional Fund XXVI Ltd. P’ship v. Bluff City Cmty Dev. Corp., 387 S.W.3d 525, 558
(Tenn. Ct. App. 2012) (quoting Pruitt v. Talentino, 464 S.W.2d 294, 296 (Tenn. Ct. App.
1970)); accord, Industrial Dev. Bd. v. Hancock, 901 S.W.2d 382, 384 (Tenn. Ct. App.1995)
(“When a court of chancery takes jurisdiction of a case under its inherent jurisdiction it may
decide all issues involved in the matter in order to prevent a multiplicity of actions.”).
Consequently, to the extent that the damages sought may be unliquidated, having taken
jurisdiction over the portion of the damages arising in contract, the chancery court may fully
adjudicate the matter.
In his brief, Mr. Thomas relies upon the case of Varno v. Tindall, 51 S.W.2d 502
(Tenn. 1932), in which our Supreme Court ruled that the chancery court lacked subject matter
jurisdiction over the plaintiffs’ claims for interference with an oral contract. Id. In Varno,
the disputed contract for the sale of real property was entered by and between the plaintiffs
and a non-party, and the damages sought arose from a wrongful mortgage default. Id. The
Varno case is distinguishable from the instant appeal. Unlike the case at bar, in Varno, the
plaintiff’s claims did not include a breach of contract cause of action. This fact is important
because, as noted by the Varno Court, pursuant to Tennessee Code Annotated Section 16-11-
102, “when the suit is (1) for an injury, (2) to property and (3) for unliquidated damages, not
arising out of a contract between the parties, it cannot be brought in the chancery court.”
Id. at 503 (emphasis added). Here, the damages sought by Tennison and CCO arise out of
a contract between the parties. Accordingly, we conclude that the chancery court had subject
matter jurisdiction to adjudicate the case.
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Default Judgment
As discussed in detail above, the trial court entered default judgment against Mr.
Thomas under its authority, as specifically set out in Tennessee Rules of Civil Procedure
37.02 and 37.04, to impose various sanctions for repeated and contumacious conduct during
discovery. Here, the issue of whether the default judgment was proper is not specifically
before this Court. Accordingly, our review is initially limited to whether the trial court erred
in its ruling on the writ of inquiry for damages.
It is well settled that “[a] judgment by default is a final order disposing of the case on
its merits, like any other judgment.” See, e.g., H.G. Hill Realty Co, L.L.C. v. Re/Max
Carriage House, Inc., 428 S.W.3d 23, 30 (Tenn. Ct. App. 2013). A judgment by default is
generally considered an admission of all the properly pled material allegations of fact in the
complaint, except the amount of unliquidated damages. Id. In the case of Clark v. Sputniks,
L.L.C., 368 S.W.3d 431 (Tenn. 2012), our Supreme Court discussed the effect of a default
judgment as follows:
By allowing default judgments to be entered against them, the
defendants impliedly admitted as true all the material factual
allegations contained in the complaints, except the amount of
the plaintiffs’ unliquidated damages. Patterson v. Rockwell
Int’l, 665 S.W.2d 96, 101 (Tenn.1984); Adkisson v. Huffman,
225 Tenn. 362, 469 S.W.2d 368, 375 (1971); Warren v.
Kennedy, 48 Tenn. (1 Heisk.) 437, 439 (1870). Because the
factual allegations of the complaints were conclusively
established by the trial court’s default judgments, Insurer cannot
attack or challenge the facts in a later action. See Home Ins. Co.
v. Leinart, 698 S.W.2d 335, 336 (Tenn.1985); Kelly v.
Cherokee Ins. Co., 574 S.W.2d 735, 737–38 (Tenn.1978);
Adkisson, 469 S.W.2d at 375.
Clark, 368 S.W.3d at 435. The Clark case arose when several customers were injured and
one customer was killed in an altercation in a bar. The injured patrons and the survivor of
the decedent patron brought action against the bar’s liability insurer for declaratory judgment,
seeking to recover damages awards obtained against the insured under the insured’s liability
and liquor license policies. Default judgments were entered against the bar. In Clark, the
Supreme Court noted relevant allegations from the complaint, “which are taken as true,”
including that the Defendant “breached the duty to take reasonable measures to protect
customer from foreseeable criminal attacks,” and “that as a proximate result of the
negligence of defendant . . . the plaintiff’s husband was killed.” Id. at 345–36. The Court
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cited Tennessee Rule of Civil Procedure 54.03, which provides that:
A judgment by default shall not be different in kind from or
exceed in amount that prayed for in the demand for judgment.
Except as to a party against whom a judgment is entered by
default, every final judgment shall grant the relief to which the
party in whose favor it is rendered is entitled, even if the party
has not demanded such relief in the party’s pleadings; but the
court shall not give the successful party relief, though such party
may be entitled to it, where the propriety of such relief was not
litigated and the opposing party had no opportunity to assert
defenses to such relief.
Although the Clark Court applied the foregoing rule, stating that, “accepting the allegations
[in the complaint] to be true, as we must because of the default judgment,” the Court
concluded that the plaintiffs could not extend default judgment to matters outside the issues
raised in the pleadings. Clark, 368 S.W.3d at 438–39. The Court specifically stated that
“because the complaints contained no allegation that the defendants sold, served or furnished
alcohol . . . the default judgment did not impose liability on the defendants for furnishing or
providing alcoholic beverages.” Id. at 440.
Thus, appellate courts may review default judgments for fundamental error, i.e., error
“apparent on the face of the record and going to the very foundation of the action.” 5 C.J.S.
Appeal & Error § 718 (1993). Consequently, on appeal from a default judgment or decree,
an appellate court may consider the issue of subject matter jurisdiction, as well as “the
sufficiency of the . . . complaint to sustain the decree of judgment.” 5 C.J.S. Appeal & Error
§ 718 (1993); accord Edington v. Michigan Mut. Life Ins. Co., 183 S.W. 728, 729
(Tenn.1915) (stating that, on appeal from default judgment, appellate court reviews
sufficiency of complaint by same standard by which court considers motion to dismiss).
“The purpose of a Rule 12.02(6) motion to dismiss is to test the legal sufficiency of the
complaint, not the strength of the complainant’s proof.” Webb v. Nashville Area Habitat for
Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011). “We must liberally construe the
pleadings, presuming all factual allegations are true and drawing all reasonable inferences
in favor of the complainant.” Id. at 426. A complaint “need not contain detailed allegations
of all the facts giving rise to the claim,” but it “must contain sufficient factual allegations to
articulate a claim for relief.” Id. at 427 (citation omitted).
Applying the foregoing principles, so long as matters are sufficiently raised in the
pleadings and sufficiently pled in the complaint, a default judgment requires that the
allegations be taken as true and determinative of liability. While the sufficiency of the
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complaint may be examined, so long as the causes of action have been adequately pled,
default judgment is determinative on the question of liability. In reviewing this question, we
apply the standard for Tennessee Rule of Civil Procedure 12.02 motions to dismiss, and give
all reasonable inferences in favor of sustaining the causes of action.
The question, then, is whether Tennison’s complaint demonstrates the elements of
each of the causes of action for which it seeks damages: (1) intentional interference with
business relationships; (2) intentional interference with contract; (3) statutory and common
law inducement to breach a contract; and (4) breach of contract. Concerning CCO, their
cross-complaint must demonstrate the elements for: (1) intentional interference with a
business relationships; and (2) statutory inducement to breach a contract pursuant to
Tennessee Code Annotated Section 47-50-109. Because the trial court’s ruling rests, in part,
upon its determination that there had been no breach of contract in this case, we first address
the question of whether the finding of no breach of contract was correct.
A. Breach of Contract
In the interest of full adjudication, we briefly discuss the trial court’s finding that
there had been no breach of the contract between CCO and Tennison so as to support
Appellants’ claims against Mr. Thomas, supra. In its order, the trial court specifically found
that no breach of contract had occurred because construction on CCO’s billboard (on
Tennison’s property) was never completed. In addition, the court determined that no breach
had occurred on the basis that CCO had the option to cancel the agreement, but did not
exercise that option. The contract between Tennison and CCO provides, in relevant part, that
payments from CCO to Tennison were not due until the billboard was built. As Tennison
notes, the effective date of the lease was September 1, 2004, and the writ of inquiry was not
heard until January 7, 2013. Therefore, more than eight years had passed from the time
Tennison and CCO entered their contract, and still the precipitating event for payment, i.e.,
building the billboard, had not occurred–this allegedly due to Mr. Thomas’s illegal activity
in erecting a competing billboard.
It is well settled that “[w]here no provision is made in the contract for performance,
a reasonable time is applied to all contracts.” Minor v. Minor, 863 S.W.2d 51, 55 (Tenn.
Ct. App. 1993). Furthermore, we have held that the reasonable time standard also applies
in the context of a conditional contract, i.e., a contract, such as the one at issue here, where
the obligation to perform is dependent upon the happening of some condition that is
expressly stated in the contract. Birkholz v. Hardy, No. W2003-01539-COA-R3-CV, 2004
WL 1801736, at *5 (Tenn. Ct. App. Aug. 11, 2004) (citing Stovall v. Dattel, 619 S.W.2d 125
(Tenn. Ct. App. 1981). Moreover, the reasonable time standard applies “regardless of
whether the performance contingency is wholly or partially within the control of the obligor.”
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Id. at *7.
In its second amended complaint, concerning its breach of contract claim, Tennison
avers, in relevant part:
34. That a breach of the implied reasonable time of performance
has occurred and the Plaintiff has suffered harm as a result
thereof.
35. The Plaintiff has suffered harm as a result of the Defendants
actions and will continue to suffer harm so long as the conduct
continues.
Tennison argues that, after the final order was entered by the Commissioner of TDOT on July
31, 2007, CCO could have erected its billboard on the Tennison property, and that the
construction could have been completed within thirty-to-sixty days, depending on the
procurement of local permits. As noted above, however, even after eight years, CCO was
unable to build its billboard in satisfaction of the contract due to its inability to obtain the
county permit. In this appeal, Tennison does not take issue with the fact that the trial court
found no liability on CCO’s part for breach of contract; rather, Tennison argues that the trial
court’s finding that there was no breach of contract, which finding (according to the trial
court) precluded damages for Mr. Thomas’s alleged interference with the CCO and Tennison
contract, was error. We agree. Following entry of the default judgment against Mr. Thomas,
we must give Tennison all reasonable inferences and take the averments in the complaint
as true. Here, Tennison’s complaint states that “a breach of the implied reasonable time of
performance has occurred.” Taking that allegation as true, we must conclude that a breach
of the CCO and Tennison contract occurred based upon the passing of the reasonable time
for performance.
The trial court also found that no breach of contract had occurred on the ground that
CCO had the option to cancel the contract if it was unable to obtain the necessary permits.
While this may be a reasonable interpretation of the contract, the fact remains that CCO did
not exercise this option. Rather, CCO alleged that Mr. Thomas interfered with the
construction of the billboard and sought damages against him. CCO’s decision was
reasonable under the circumstances as it, like Mr. Thomas, has every right to “pursu[e] [its]
own business interest.” Accordingly, the mere fact that CCO did not exercise its right to
terminate the contract does not, ipso facto, mean that the contract was not breached.
B. Intentional Interference with Business Relationships
Our Supreme Court has defined the elements of the tort of intentional interference
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with business relationships as follows: (1) an existing or prospective business relationship
with specific or identifiable third persons; (2) that the alleged interfering party knew of the
existing or prospective business relationship; (3) that this party intended to cause a breach
or termination of the business relationship or business prospect; (4) that the interfering party
used improper motive or means; and (5) the party seeking relief suffered damages. Trau-Med
of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002). Concerning the
prima facie element of “improper motive or means,” the Trau-Med Court explained:
It is clear that a determination of whether a defendant acted
“improperly” or possessed an “improper” motive is dependent
on the particular facts and circumstances of a given case, and as
a result, a precise, all-encompassing definition of the term
“improper” is neither possible nor helpful. However, with regard
to improper motive, we require that the plaintiff demonstrate
that the defendant’s predominant purpose was to injure the
plaintiff. See Leigh Furniture & Carpet Co., 657 P.2d at
307–08.
Moreover, in the attempt to provide further guidance, we
cite the following methods as some examples of improper
interference: those means that are illegal or independently
tortious, such as violations of statutes, regulations, or
recognized common-law rules, see id. at 308; violence, threats
or intimidation, bribery, unfounded litigation, fraud,
misrepresentation or deceit, defamation, duress, undue
influence, misuse of inside or confidential information, or
breach of a fiduciary relationship, see Duggin, 360 S.E.2d at
836 (citing Top Serv. Body Shop, Inc., 582 P.2d at 1371 n.11);
and those methods that violate an established standard of a trade
or profession, or otherwise involve unethical conduct, such as
sharp dealing, overreaching, or unfair competition, see id. at
837.
Trau-Med, 71 S.W.3d at 701, fn. 5 (emphasis added).
In Watson’s Carpet & Floor Coverings, Inc. v. McCormick, 247 S.W.3d 169 (Tenn.
Ct. App. 2007), perm. app. denied (Tenn. May 14, 2007), the improper motive element of
intentional interference with business relationships tort was at issue. In Watson’s, Carpet
Den was a competitor of Watson’s, and Watson’s claimed that Carpet Den was interfering
with Watson’s acquired business relationships in order to improve its own business. In
Watson’s, we stated that “[w]hen two competitors are competing over the same business,
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separating the interest in improving one’s own business and taking business away from the
competitor would seem problematic.” Id. at 183. However, in Watson’s, we did not have
to consider the motive or predominant purpose because of the existence of improper means:
That is because either improper motive or improper means
may support liability for tortious interference. Thus, even if
a competitor enjoys a privilege that negates the improper motive
requirement, it is not insulated from liability if the other
requirement is present, i.e., improper means. The Restatement
recognized this distinction in § 768(1), quoted above, by
providing no protection to a competitor under subsection (b)
who uses “wrongful means.” Rephrased, a competitor may be
liable for damages under § 768(1) of the Restatement if it
uses “improper means,” regardless of the motive.
Id. at 176 (emphases added). Based upon the foregoing in Watson’s, we affirmed the award
of damages of over $1.6 million against Carpet Den and Rick McCormick for tortious
interference with business relationships after concluding that the defendants used improper
means, including making defamatory statements, which resulted in a loss of the business
relationship. Id. at 174, 184, 186. In so ruling, we stated that “the competitor’s privilege
does not apply to prevent liability based on wrongful means, methods, or conduct.” Id. at
185.
With the foregoing principles in mind, we turn to examine Tennison’s second
amended complaint, and CCO’s cross-complaint. Concerning the allegation of intentional
interference with business relationships, Tennison averred the following, relevant facts:
17. That the Plaintiff has a business relationship with Clear
Channel in that the Plaintiff entered into a lease agreement
effective August 19, 2004 commencing on September 1, 2004
wherein Clear Channel leased certain space from the Plaintiff
for an outdoor advertising structure ("billboard"). That the rent
was to commence “on the date construction is completed.”
18. That Defendant[] Thomas . . . had knowledge of the
existence of the lease, the terms of the lease, and the business
relationship between Clear Channel and the Plaintiff,
19. That Defendant[] Thomas . . . improperly intended to
interfere with and intended to cause the termination of the
Plaintiff’s business relationship.
20. That Defendant[] Thomas . . . improperly interfered with the
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Plaintiff’s business relations by illegally and improperly
constructing a billboard without a permit that interfered with the
construction of the billboard on the Plaintiff’s property.
21. That Defendant[] Thomas . . . improperly interfered with the
Plaintiff’s business relations by failing and refusing to remove
the illegally constructed and unpermitted billboard even after the
Tennessee Department of Transportation ordered the billboard
to be IMMEDIATELY REMOVED on March 5, 2007 and on
July 31, 2007. That the Defendants have refused to remove the
billboard to date and continue to profit from the illegal and
unpermitted billboard.
22. That Defendant[] Thomas . . . maliciously and intentionally
interfered with the business relationship between the Plaintiff
and Clear Channel and continue to maliciously interfere with the
business relationship to date by failing and refusing to remove
the illegally constructed and unpermitted billboard.
23. Defendant[] Thomas . . . employed improper means and
improper motives to interfere with Plaintiff’s business
relationship with Clear Channel.
24. The Plaintiff has suffered harm as a result of the actions of
Defendant[] Thomas . . . . All of the foregoing acts will
substantially harm and impair the business relationship of the
Plaintiff as long as the conduct continues.
In its cross-complaint, CCO avers the following, relevant facts concerning
interference with business relationships:
30. Cross-Plaintiff had an existing business relationship with
Tennison Brothers.
31. Defendant[] Thomas . . . knew that Cross-Plaintiff and
Tennison Brothers had an existing business relationship
pertaining to the construction of a billboard upon Tennison
Brothers’ property.
32. Defendant[] Thomas . . .intended to cause the breach or
termination of the business relationship Cross-Plaintiff
maintains with Tennison Brothers.
33. Defendant[] Thomas . . . had an improper motive for causing
a breach or termination of the business relationship between
Cross- Plaintiff and Tennison Brothers.
34. The conduct of Defendant[] Thomas . . . of illegally
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constructing a billboard on Southern’s property was tortuous and
designed to cause harm to the business relationship between the
Cross-Plaintiff and Tennison Brothers.
35. Cross-Plaintiff was damaged by the tortuous interference by
Defendant[] Thomas . . . which has resulted in a long delay in
the construction and erection of the billboard on Tennison
Brothers’ property.
36. Such tortuous interference with a business relationship by
Defendant[] Thomas . . . procured a breach or violation
Cross-Plaintiffs contract with Tennison Brothers thus entitling
Cross-Plaintiff to treble damages.
As set out in its order, supra, the trial court stated that “Tennison must show that the
predominant intent of Thomas’s actions were to cause the breach or termination of
Tennison’s business relationship with Clear Channel.” This is correct. However, the trial
court’s order goes on to state that “[t]he proof presented did not demonstrate this to be
Thomas’s primary motive. The primary motive here on the part of Thomas appears to be in
pursuit of his own business interest.” As discussed above, it is not the proof that drives the
inquiry in a review of a default judgment; it is the averments made in the complaint. From
its order, supra, it appears that the trial court erroneously focused on the fact that Mr.
Thomas’s pursuit of his own business interests was not improper. Although that finding may
be true, we cannot overlook the specific facts pled in the Appellants’ respective complaints.
Therein, both Tennison and CCO aver that Mr. Thomas illegally constructed a billboard
without a permit to prevent the construction of a billboard by CCO on Tennison’s property.
Under the definitions outlined in Trau-Med and Watson’s, the allegation that Mr. Thomas
illegally constructed a billboard is sufficient to satisfy the fourth criterion for this tort, i.e.,
that the interfering party use improper motive or means. Here, the improper means was Mr.
Thomas’s construction of a billboard without a permit, which prevented CCO from building
its billboard on Tennison’s property. Taking the facts averred above as true and giving all
reasonable inference in favor of Tennison and CCO, we conclude that both Tennison and
CCO have pled facts sufficient to satisfy the prima facie requirements for the intentional
interference with business relationships tort.
C. Inducement to Breach a Contract and Intentional Interference with Contract
Tennessee recognizes both a statutory and common law action for inducement to
breach a contract or intentional interference with contract, and both forms of the tort protect
“contracts implied in fact, as well as formal, expressed contracts.” Givens v. Mullikin, 75
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S.W.3d 383 (Tenn. 2002); Tenn. Code Ann. §47-50-109.6 Both statutory and common law
inducement to breach a contract require the plaintiff to prove seven elements: (1) that a legal
contract existed; (2) that the defendant was aware of the contract; (3) that the defendant
intended to induce a breach of that contract; (4) that the defendant acted with malice; (5) that
the breach of the contract occurred; (6) that the breach was a proximate result of the
defendant’s conduct; and (7) that the breach injured the plaintiff. Givens, 75 S.W.3d at 405.
Turning to the complaints. Concerning this tort, Tennison’s second amended
complaint avers, in pertinent part, that:
26. That the Plaintiff has a contract with Clear Channel in that
the Plaintiff entered into a lease agreement effective August 19,
2004 commencing on September 1, 2004 wherein Clear Channel
leased certain space from the Plaintiff for an outdoor advertising
structure (“billboard”). That the rent was to commence “on the
date construction is completed.”
27. That Defendant[] Thomas . . . have full knowledge of the
existence of the lease, the terms of the lease, and the business
relationship between Clear Channel and the Plaintiff.
28. That Defendant[] Thomas . . . intended to induce a breach of
the contract between the Plaintiff and Clear Channel by illegally
and improperly constructing a billboard without a permit that
interfered with the construction of the billboard on the
Plaintiff’s property and by failing and refusing to remove said
billboard to date.
29. Defendant[] Thomas . . . maliciously and intentionally
interfered with the business relationship between the Plaintiff
and Clear Channel and continue to maliciously and intentionally
interfere with the contract to date by failing and refusing to
remove the illegally constructed and unpermitted billboard.
30. That a breach has occurred as a direct result of Defendant[]
6
The statute provides:
It is unlawful for any person, by inducement, persuasion, misrepresentation,
or other means, to induce or procure the breach or violation, refusal or
failure to perform any lawful contract by any party thereto; and, in every
case where a breach or violation of such contract is so procured, the person
so procuring or inducing the same shall be liable in treble the amount of
damages resulting from or incident to the breach of the contract. The party
injured by such breach may bring suit for the breach and for such damages.
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Thomas[’s] . . . conduct.
31. The Plaintiff has suffered harm as a result of
Defendant[]Thomas . . . action[] and will continue to suffer
harm so long as the conduct continues.
As set out in full context above, CCO, in its cross-complaint, avers that “Thomas . . .
procured a breach or violation Cross-Plaintiffs contract with Tennison Brothers thus entitling
Cross-Plaintiff to treble damages.” CCO relies upon the facts averred in connection with the
intentional interference with business relationships to also support its claim for damages
based upon Mr. Thomas’s alleged interference with contract.
In its order, the trial court determined that Mr. Thomas had no liability for interference
with contract, or inducement to breach a contract because of its finding that no breach of
contract had occurred. Tennison, however, asserts that a breach of contract did occur
because the reasonable time for performance had passed. Regardless, even if we assume,
arguendo, that there was no breach of contract, Tennessee Code Annotated Section47-50-109
imposes liability where there has been interference or inducement of breach. “Tenn. Code
Ann. §47-50-109 is designed to prevent third parties from interfering with the contractual
rights of others by way of inducing one of the parties to breach its obligation to another
party.” Dowlen v. Weathers, No. E2004-00857-COA-R3-CV, 2005 WL 1160627, at *18-19
(Tenn. Ct. App. May 16, 2005). In Dowlen, this Court affirmed an award of treble damages,
i.e., three times the amount of the commission due to the Plaintiff, after the defendants
“effectively removed the owners’ obligation to pay the commission owed under the Listing
Agreement.” Id. at *19. By agreeing to the terms of the release, the Dowlen plaintiffs
argued, and the trial court found, that the defendants had “equipped the owners with a legal
basis for not doing that which they were otherwise contractually obligated to do.” Id. at *7.
The crux of Tennison’s argument on this tort is that Mr. Thomas’s action in erecting an
illegal billboard was to preclude CCO from constructing its billboard under its lease
agreement with Tennison. Because Mr. Thomas’s billboard was built, CCO could not
accomplish the purpose of its contract with Tennison, and thus breached that agreement as
a direct result of Mr. Thomas’s malicious act. Likewise, CCO asserts that, on August 19,
2004, it entered into a lease agreement for the purpose of erecting a billboard on Tennison
property. Mr. Thomas knew that CCO had an agreement with Tennison for the construction
of a billboard as early as 2004 and intended to induce a breach of the agreement. Mr.
Thomas acted maliciously and with an improper motive in rendering CCO unable to perform
under its lease and, as a result, CCO sustained damages. Based upon the averments in
Tennison’s second amended complaint, and in CCO’s cross-complaint, we conclude that
there are sufficient facts pled in both documents to satisfy the prima facie elements for
inducement to breach a contract and intentional interference with contract claims.
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In sum, the trial court had before it only the writ of inquiry on damages, but, from its
order, appears to have considered evidence outside the pleadings on the subject of liability.
Having determined, under the applicable standard for default judgments, that CCO and
Tennison have succeeded in pleading each of their respective causes of action, and for the
foregoing reasons, we conclude that Tennison and CCO are entitled to damages against Mr.
Thomas for the foregoing causes of action. Accordingly, we remand for a determination of
the appropriate damages. To that end, we now turn to address the types of damages allowed
in this case.
Damages
In Dorsett Carpet v. Whitt Title & Marble Distr. Co., 734 S.W.2d 322 (Tenn. 1987),
our Supreme Court adopted the Restatement Second of Torts §774A to determine damages
arising from the interference with business relationships. Specifically, the Dorsett Court
stated that: “One who is liable to another for interference with a contract or prospective
contractual relation is liable for damages for (a) the pecuniary loss of the benefits of the
contract or the prospective relation. . . .” Id. at 324. Here, Tennison alleges that it has
suffered the loss of value of the lease agreement with CCO. Tennison submitted a damages
calculation, including the annual increase in rents, indicating a loss over the twenty-year
lease term of $419,177.84.
Furthermore, in Dorsett, the Tennessee Supreme Court stated that Tennessee Code
Annotated Section 47-50-109 “mandates the trebling of the amount of damages resulting
from or incident to the breach of contract.” Id. At 324. Indeed, the statute provides that “in
every case where a breach or violation of such contract is so procured, the person so
procuring shall be liable in treble the amount of damages resulting from or incident to
the breach of contract.” (Emphasis added). Thus:
In the event that a plaintiff successfully asserts a cause of action
under Tennessee Code Annotated section 47-50-109 as well as
a punitive damages claim in the common law action for tortious
interference with contract, plaintiff is required to elect between
remedies. Only after the amount of punitive damages and
multiple damages have been assessed is plaintiff required to
make an election between the two types of remedies.
Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901 (Tenn. 1999). “Punitive damages are not
awarded to compensate the injured party, but instead serve to punish the wrongdoer and to
deter the wrongful conduct.” MLGW v. Starkey, 244 S.W.3d 344, 355 (Tenn. Ct. App.
2007). A defendant must act intentionally, fraudulently, maliciously or recklessly in addition
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to proving the elements of tortious interference with contract, for an award of punitive
damages. Cambio Health Solutions v. Reardon, 213 S.W.3d 785, 793 (Tenn. 2006). Here,
and as discussed above, Tennison and CCO have averred facts sufficient to show that Mr.
Thomas engaged in intentional or malicious acts that kept CCO from accomplishing its
objective under its contract with Tennison. Accordingly, Tennison and CCO are entitled to
elect between treble damages and punitive damages.
Finally, Tennessee Code Annotated Section 47-14-123 authorizes the award of pre-
judgment interest. The award of pre-judgment interest is discretionary with the court. The
purpose of awarding the interest is to fully compensate a plaintiff for the loss of used funds
to which he or she was legally entitled, but it is not to penalize the defendant for wrongdoing.
Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn. 1994). Although CCO and Tennison may
be entitled to pre-judgment interest, we will defer to the trial court’s discretion on remand
as to whether to award the interest and, if so, in what amount.
For the foregoing reasons, we reverse the order of the trial court. The case is
remanded for such further proceedings as may be necessary and are consistent with this
Opinion, including, but not limited to, calculation of damages. Costs of the appeal are
assessed against the Appellee, William H. Thomas, Jr., for which execution may issue if
necessary.
_________________________________
J. STEVEN STAFFORD, JUDGE
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