Package Express Center, Inc. v. Doug Maund

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 21, 2011 Session

PACKAGE EXPRESS CENTER, INC., v. DOUG MAUND, et al.

Appeal from the Chancery Court for Greene County
No. 20050284 Hon. Thomas R. Frierson, II., Chancellor

No. E2010-02187-COA-R3-CV-FILED-JULY 29, 2011

In the initial suit between these parties, plaintiff sued and recovered damages for breach of
contract and attorney's fees as provided in the contract between the parties. Subsequently,
plaintiff brought this action for additional attorney's fees to recover the fees incurred in
collecting the judgment against defendants. The Trial Court awarded attorney's fees and
defendants appealed to this Court. We reverse the Judgment of the Trial Court and hold that
the statute of limitations barred further recovery under the terms of the contract between the
parties.

Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Reversed.

H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which J OHN W.
M CC LARTY, J., joined, and D. M ICHAEL S WINEY, J., joined and filed a separate concurring
opinion.

Kelli L. Thompson and Kyle A. Baisley, Knoxville, Tennessee, for the appellants, Doug
Maund and Emm-Dee Drug Company, Inc.

William S. Nunnally, Greeneville, Tennessee, for the appellee, Package Express Center, Inc.
 OPINION

Background

Plaintiff, Package Express Center, Inc., filed a Complaint for Declaratory Judgment
against Doug Maund and Emm-Dee Drug Company, Inc., d/b/a Athens Pharmacy, alleging
that Maund lived in Alabama, and that Emm-Dee was an Alabama corporation doing
business as Athens Pharmacy in Athens, Alabama. This protracted litigation began with a
breach of contract action filed by plaintiff in 1995, after defendants terminated the parties’
1988 agreement regarding shipment of packages, but continued to ship packages in violation
of an 18-month covenant not to compete contained in the parties’ agreement.

Defendants raised the issue of personal jurisdiction in their Answer, but the case was
tried on the merits, and defendants defended the merits of the action. The Trial Court granted
judgment to plaintiff for $12,502.00, plus a prospective injunction to prohibit defendants
from shipping packages for 18 months from the date of the judgment. This judgment was
rendered in 2000.

Defendants then appealed to this Court. On May 30, 2001, we affirmed the Trial
Court’s decision finding that the covenant not to compete had been breached, but reversed
the Trial Court’s award of damages and injunctive relief, and remanded to the Trial Court to
set reasonable damages for defendants’ breach of the covenant not to compete, and also to
make an award of reasonable attorney’s fees pursuant to the parties’ agreement. We held that
the parties’ agreement did not continue to be operational up through the time of trial, as the
Trial Court had found, but held that the covenant not to compete had been breached after the
contract was terminated. Package Express Center, Inc., v. Doug Maund and Emm-Dee Drug
Co., Inc., d/b/a Athens Pharmacy, (Tenn. Ct. App. Knoxville, May 30, 2001).

After remand, the Trial Court entered a judgment for plaintiff for $16,503.00 plus
interest on September 11, 2003, which included a nominal amount of compensatory damages
plus attorneys fees.

In the present action, plaintiff asserts the judgment became final and defendants failed
to pay to satisfy the judgment, and plaintiff then sought to domesticate the judgment in
Alabama. Plaintiff states that defendants once again raised the jurisdiction issue in Alabama.
The Alabama Trial Court declined to enroll the Tennessee judgment, but on appeal to the
Alabama Court of Appeals, the Alabama Court of Appeals ruled the judgment could be

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domesticated and that any objections to personal jurisdiction were unfounded.1

In the case before us, the Trial Court conducted a hearing on May 24, 2010, and
entered a Judgment, finding that the parties’ agreement provided that attorneys fees could be
recovered, and that the claim for fees in this case was a “new and separate claim for breach
of contract and for attorney’s fees incurred by it after domestication efforts were begun in
the State of Alabama”. The Trial Court awarded plaintiff attorneys fees of $30,809.00, on
the basis that the defendants were "in further breach of the 1988 contract".

The issues presented for review are:

1. Whether PEC is barred by res judicata or estopped from claiming additional
attorneys fees related to the 1995 case by the Satisfaction of Judgment entered
in Alabama?

2. Whether PEC’s claim for additional attorney’s fees under the 1988 agreement
is barred by the six year statute of limitations on actions for breach of contract?

3. Whether the court has personal jurisdiction over defendants?

4. Whether PEC’s request for additional attorney’s fees in the instant litigation
is a procedurally improper attempt to alter or amend the 2003 judgment from
the 1995 case?

DISCUSSION

Appellants have raised several issues with regard to the Trial Court’s judgment
awarding additional attorneys fees to plaintiff. We conclude the Appellants’ second issue
regarding statute of limitations is dispositive of this appeal.

Tennessee has long adhered to the “American Rule” regarding attorneys fees, which
is that litigants should pay their own fees absent a statute or an agreement providing
otherwise. State v. Brown & Williamson Tobacco Corp., 18 S.W.3d 186 (Tenn. 2000). In
this case, plaintiff sought payment of attorneys fees pursuant to a provision in the parties’
agreement, which stated:

If Lessee should fail to pay as herein provided when the same shall be due, or if the
Lessee shall commit a breach of any of its obligations hereunder, then Lessor shall .

1
The Judgment was ultimately satisfied by defendants.

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 . . recover reasonable attorney’s fees, court costs, and interest (10% A.P.R.) should
it be necessary for the Lessor to commence legal action to collect sums due under this
lease.

This provision was the only basis for plaintiff’s claim for attorneys fees.

In the appeal of the first action for breach of contract, this Court specifically rejected
the idea that this contract had not been properly terminated and continued to be operational
through the time of the first trial, as the Trial Court had found. We held that defendants had
terminated the contract and breached the same by continuing to ship packages after the
termination, and that the correct measure of damages would be the lost profits for the 18
months following the termination of the contract, as that was the length of the non-compete
covenant, plus an additional 60 days because defendants failed to give the requisite 60 days
notice for termination. We then remanded the case to the Trial Court for a determination of
those damages, plus a reasonable attorneys fee in accordance with the contractual provision.

This contract terminated in early 1995, and the breach of the covenant not to compete
was committed within the 18 months thereafter, and pursuant to the Tennessee six-year
statute of limitations on actions on contract, the plaintiff’s 2005 claim for additional attorneys
fees is untimely. Tenn. Code Ann. §28-3-109(a)(3). The only basis for plaintiff to receive
an award of attorney’s fees is under the contractual provision, but it specifically states that
it is triggered by defendants’ failure to pay sums due under the original contract, or when the
contract is breached and plaintiff has to file a legal action. This is the history of this case,
defendants breached the covenant not to compete and plaintiff filed a legal action, and
received an award of attorneys fees in that action, and those were included in the judgment
which plaintiff ultimately domesticated in Alabama.

As we have previously stated, “a cause of action for breach of contract accrues on the
date of the breach or when one party demonstrates a clear intention not to be bound by the
contract.” Coleman Management, Inc. v. Meyer, 304 S.W.3d 340 (Tenn. Ct. App. 2009).
“Thus, the statute of limitations begins to run when a contracting party first knows or should
know that the contract will not be performed.” Id., quoting Wilkins v. Third Nat'l Bank in
Nashville, 884 S.W.2d 758, 762 (Tenn. Ct. App. 1994).

It is clear that the only breach of the terms of this contract occurred when defendants
continued to ship packages after termination, in violation of the non-compete covenant, as
we have already held. There was no “further breach” of the contract’s terms, simply because
litigation continued in the courts. After the non-compete expired, the parties’ obligations
under the contract were concluded, and there could be no further breach of the contract
terms. As such, any lawsuit for breach of contract would have to have been filed within six

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years of that time, but instead, this lawsuit was not instituted for more than ten years, and was
untimely.

Defendants cite numerous cases which they claim supports their position that a lawsuit
for fees can be filed after the contract action is over, but these cases do not address the statute
of limitations. Moreover, these cases deal with fee-shifting provisions which require a
“prevailing party” in the litigation, which was not the case with this provision. PEC argues
that its claim for attorney’s fees did not accrue until the first judgment became final in 2003,
but cites no controlling authority for this proposition. PEC ignores the fact that it received
the fees it sought up to that point in the 2003 judgment.

We conclude that the action before us is barred by the Statute of Limitations, and all
other issues are pretermitted as moot.

The Judgement of the Trial Court is reversed and the cost of the appeal is assessed to
Package Express Center, Inc., and the cause remanded.

_________________________________
HERSCHEL PICKENS FRANKS, P.J.

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 IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 21, 2011 Session

PACKAGE EXPRESS CENTER, INC., v. DOUG MAUND, et al.

Appeal from the Chancery Court for Greene County
No. 20050284 Hon. Thomas R. Frierson, II., Chancellor

No. E2010-02187-COA-R3-CV-FILED-JULY 29, 2011

D. MICHAEL SWINEY , J., concurring.

I concur in the decision to reverse the judgment of the Trial Court. I write
separately to express my opinion that the “American Rule” regarding attorney fees, as discussed
in the majority’s Opinion, by itself requires this decision by this Court.

As stated by Plaintiff in its brief before this Court, this current lawsuit was filed
by Plaintiff to collect additional attorney fees incurred by Plaintiff in its attempt to enforce its
original judgment. These additional attorney fees were not incurred to enforce the terms of the
contract which, as discussed by the majority, “terminated in early 1995...” but were incurred, as
stated by Plaintiff, to enforce its judgment.

As stated by the majority, “Tennessee has longed adhered to the ‘American Rule’
regarding attorney fees, which is that litigants should pay their own fees absent a statute or an
agreement providing otherwise. State v. Brown & Williamson Tobacco Corp., 18 S.W.3d 186
(Tenn. 2000).” I believe Plaintiff’s “additional attorney fees” were not incurred to enforce its
contract as that contract had been terminated long before those fees were incurred. The
additional attorney fees Plaintiff is attempting to recover are nothing more than attorney fees
incurred by Plaintiff to enforce its judgment. As there is no statute or agreement providing for
the award of attorney fees incurred in enforcing its judgment, I believe the “American Rule”
prohibits Plaintiff’s recovering its additional attorney fees incurred to enforce its judgment. As
such, I concur in the majority’s Opinion to reverse the judgment of the Trial Court.

___________________________________
D. MICHAEL SWINEY, J.

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