K-Testing Lab, Inc. v. Estate of Larry Kennon, Brenda L. Kennon

• Court: Court of Appeals of Tennessee
• Decided: June 20, 2001
• Docket: 02A01-9703-CH-00064
• Status: Published

Opinion

IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON

K-TESTING LAB, INC., ) ) Plaintiff/Appellee, ) Shelby Equity No. 107837 ) vs. ) ) ESTATE OF LARRY L. KENNON, ) Appeal No. 02A01-9703-CH-00064 BRENDA L. KENNON, EXECUTRIX, ) ) Defendant/Appellant. )

APPEAL FROM THE CHANCERY COURT OF SHELBY COUNTY AT MEMPHIS, TENNESSEE

THE HONORABLE D. J. ALISSANDRATOS, CHANCELLOR

For the Plaintiff/Appellee: For the Defendant/Appellant:

Louis R. Lucas Warner Hodges, III Russell X. Thompson Germantown, Tennessee Memphis, Tennessee

AFFIRMED IN PART AND REVERSED IN PART

HOLLY KIRBY LILLARD, J.

CONCUR:

W. FRANK CRAWFORD, P.J., W.S.

ALAN E. HIGHERS, J. OPINION

At issue in this case is a stock redemption agreement executed by the owners of a closely-

held corporation. The Chancellor issued a mandatory injunction instructing the holder of the stock

certificates to abide by the stock redemption agreement and turn over the shares to the corporation,

and the holder appealed. We affirm in part and reverse in part.

Plaintiff/Appellee K-Testing Laboratory, Inc. (“K-Testing”), is a closely-held Tennessee

corporation with offices in Memphis, Tennessee. K-Testing is currently owned by two shareholders,

Bernie Lee Keating and the estate of Larry L. Kennon, Brenda L. Kennon, Executrix. Each

shareholder holds fifty percent of the capital stock. Before the death of Larry Kennon, he and

Keating entered into a “Stock Restriction and Redemption Agreement” (“SRRA”) which established

a procedure by which, upon the death of either stockholder, the Corporation would purchase the

decedent’s stock for a previously ascertained value. This value could be modified by mutual

agreement, and was modified in 1992 when the parties increased the value of each shareholder’s

interest to $ 315,000.00.

Larry Kennon died on April 9, 1996, leaving a will which was admitted to Probate in Shelby

County. Brenda Kennon was named as Executrix. Pursuant to the SRRA, K-Testing made a tender

offer to Brenda Kennon for the shares of stock held by the estate of Larry Kennon soon after his

death. At this time, Brenda Kennon asked to see the books of the corporation. Keating refused. The

negotiations broke down, and on July 11, 1996, K-Testing filed a lawsuit to enforce the SRRA

against Kennon’s estate.

On the same date the Complaint in this action was filed, the Chancellor issued an Order to

Show Cause and for Permission to Commence Discovery Prior to Answer. This Order scheduled

a final hearing for July 26, 1996 and also granted K-Testing permission to take the deposition of

Brenda Kennon upon five days’ notice. Brenda Kennon filed a motion to quash her deposition on

July 15, 1996. This motion was denied and Brenda Kennon’s deposition took place on July 22,

1996. A hearing was held on July 26, 1996. On that date, the Chancellor entered an order granting

a mandatory injunction which required Brenda Kennon to immediately transfer the decedent’s stock

to K-Testing in exchange for the sum of $ 307,500. K-Testing then filed a motion for attorneys’

fees and costs in this matter. The Chancellor granted K-Testing’s request, over Brenda Kennon’s

objection, on August 23, 1996. Brenda Kennon filed a motion for new trial and a motion to allow

filing of counter-complaint. The Chancellor denied both motions, and Brenda Kennon appealed to this Court.

We review the Chancellor’s findings de novo, with a presumption of correctness of the

findings of fact. Tenn. R. Civ. P. 13(d).

The Appellant raises two issues on appeal. First, she argues that the Chancellor erred in

granting “what was in effect a summary judgment only eleven days after the complaint was filed,”

and without adequate opportunity to allow her to properly investigate and develop her defenses and

counter-complaint. While Appellant raises legitimate questions, this argument was not raised before

the Chancellor until thirty days after the hearing of July 26, in a motion for new trial filed by Brenda

Kennon. Because Kennon never requested an extension of time or a resetting of the hearing date,

she cannot now argue that the expedited hearing was error. “[T]his Court can only consider such

matters as were brought to the attention of the trial court and acted upon or [pretermitted] by the trial

court.” Stewart Title Guar. Co. v. F.D.I.C., 936 S.W.2d 266, 270-71 (Tenn. App. 1996) (quoting

Irvin v. Binkley, 577 S.W.2d 677, 679 (Tenn. App. 1978)); see also Thomas v. Noe, 301 S.W.2d

391, 394 (Tenn. App. 1956); Foley v. Dayton Bank & Trust, 696 S.W.2d 356, 359 (Tenn. App.

1985)).

Appellant argues that the trial court abused its discretion in denying Kennon’s motion for a

new trial. In Tennessee, “the granting or denying of a new trial lies largely in the discretion of the

trial judge.” Mize v. Skeen, 468 S.W.2d 733, 736 (Tenn. App. 1971) (citing Gardner v. Burke, 28

Tenn. App. 119, 187 S.W.2d 25 (1944)). A trial court is given “wide latitude” in its disposition of

a motion for new trial. The appellate court will not overturn such a decision unless there has been

an abuse of discretion. Loeffler v. Kjellgren, 884 S.W.2d 463, 468 (Tenn. App. 1994) (citing Mize

v. Skeen, 468 S.W.2d 733, 736 (1971); Tennessee Asphalt Co. v. Purcell Enter, Inc., 631 S.W.2d

439, 442 (Tenn. App. 1982)). In this case, Appellant has not demonstrated that the trial court abused

its discretion in denying Kennon’s motion for a new trial. The evidence in the record supports the

proposition that the SRRA is valid. While Kennon may disagree with the valuation of the stock

contained in the agreement, the SRRA is enforceable. The decision of the trial court is affirmed on

this issue.

2 The Appellant next argues that the Chancellor erred in awarding attorney’s fees to K-Testing

because no statutory provision or a contractual agreement allowing such an award applied in this

case.

K-Testing maintains that an award of attorney’s fees in this situation was proper because the

“fees and expenses incurred in this action were occasioned by the actions of the Defendant which

were without any basis in fact or law, and the defenses asserted were baseless and frivolous.” After

reviewing the record, we find that K-Testing’s request for attorney’s fees was not based upon any

statute or provision in the SRRA. K-Testing relied instead upon assertions that Kennon had acted

wrongfully in refusing to turn over the stock according to the agreement. On appeal, K-Testing

argues that Kennon is guilty of conduct that would justify an award of fees under either Rule 11 of

the Tennessee Rules of Civil Procedure or under “recognized grounds of equity.” However, K-

Testing based its original request on neither Rule 11 nor equitable grounds.

Tennessee recognizes the American rule of legal fees, which requires litigants to pay their

own fees, with few exceptions. Morrow v. Bobbitt, 943 S.W.2d 384, 392 (Tenn. App. 1996) (citing

Howard G. Lewis Const. Co., Inc. v. Lee, 830 S.W.2d 60, 64 (Tenn. App. 1991)). One exception

is that “attorney's fees may be recovered by a prevailing party when attorney's fees are provided for

by statute or by contract between the parties, . . .” Cookville Gynecology & Obstetrics, P.C. v.

Southeastern Data Sys., Inc., 884 S.W.2d 458, 463 (Tenn. App. 1994) (citing Goings v. Aetna Cas.

& Sur. Co., 491 S.W.2d 847 (Tenn. App. 1972). Where there are sufficient grounds for such

awards, a trial court has wide discretion in its decision to award attorneys fees. Garfinkel v.

Garfinkel, 945 S.W.2d 744, 748 (Tenn. App. 1996). Generally, however, “[i]n the absence of a

statutory provision or a contractual agreement between the parties, attorney fees, incurred by a

litigant, are not a proper element of damages.” Morrow, at 392 (citing John J. Heirigs Const. Co.,

Inc. v. Exide, 709 S.W.2d 604, 609 (Tenn. App. 1986); Goings v. Aetna Cas. & Sur. Co., 491

S.W.2d 847, 848 (Tenn. App. 1972)). The record in this case contains no basis for an award of

attorney’s fees. The award of attorney’s fees is reversed.

3 The decision of the trial court is affirmed in part and reversed in part, consistent with this

Opinion. Costs are taxed equally against the parties, for which execution may issue, if necessary.

W. FRANK CRAWFORD, P. J., W.S.

ALAN E. HIGHERS, J.