IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
ADAMS TV OF MEMPHIS, INC., )
)
Plaintiff/Appellant, ) Shelby Chancery No. 105944-3
)
VS. ) Appeal No. 02A01-9606-CH-00142
COMCORP OF TENNESSEE, INC.,
and THOMAS R. GALLOWAY,
)
)
)
FILED
)
August 19, 1997
Defendants/Appellees. )
Cecil Crowson, Jr.
Appellate C ourt Clerk
APPEAL FROM THE CHANCERY COURT OF SHELBY COUNTY
AT MEMPHIS, TENNESSEE
THE HONORABLE D. J. ALISSANDRATOS, CHANCELLOR
LUCIAN T. PERA
CANNON F. ALLEN
MARY A. McNEIL
ARMSTRONG ALLEN PREWITT GENTRY JOHNSTON & HOLMES
Memphis, Tennessee
Attorneys for Appellant
HENRY L. KLEIN
APPERSON, CRUMP, DUZANE & MAXWELL, PLC
Memphis, Tennessee
Attorney for Appellee
AFFIRMED
ALAN E. HIGHERS, J.
CONCUR:
W. FRANK CRAWFORD, P.J., W.S.
DAVID R. FARMER, J.
In this breach of contract action, Adams TV of Memphis, Inc. (“Plaintiff” or “Adams
TV”) filed suit against ComCorp of Tennessee, Inc. (“ComCorp”) and Thomas R. Galloway
for breaching several provisions of their contract (hereinafter the “Adams TV-ComCorp
contract”), which provided for the sale of WHBQ-TV (hereinafter the “Station”). ComCorp
filed a motion to dismiss asserting that even if ComCorp had breached certain provisions
of the Adams TV-ComCorp contract, such breaches were not material breaches, and
Adams TV incurred no damage as a result. The trial court granted ComCorp’s motion to
dismiss, holding that Adams TV received the entire benefit of its bargain under the Adams
TV-ComCorp contract, that ComCorp did not materially breach any part of the Adams TV-
ComCorp contract, and that the damages sought by Adams TV were merely consequential
and thereby precluded by section 9.2(c) of the Adams TV-ComCorp contract. For the
reasons stated hereafter, we affirm the judgment of the court below.
FACTS
On March 8, 1994, Adams TV and ComCorp executed the Adams TV-ComCorp
contract whereby Adams TV agreed to sell and ComCorp agreed to purchase the Station
for approximately $57,000,000.00. Pursuant to the terms of the Adams TV-ComCorp
contract, Adams TV and ComCorp agreed to keep confidential the information obtained
from each other during the course of completing the transaction. Under paragraph 6.11
of the Adams TV-ComCorp contract, the parties agreed not to divulge the existence of the
contract or the transactions contemplated by it without the prior consent of the other party,
except to the extent required by law or regulation. Paragraph 6.11 of the Adams TV-
ComCorp contract provides as follows:
6.11 Public announcement. Seller shall publish and broadcast
a public notice concerning the filing of the application for
assignment of the Licenses in accordance with the
requirements of Section 73.3580 of the FCC’s Rules. As to
any other announcements, neither party hereto shall issue any
press release or public announcement or otherwise divulge the
existence of this Agreement or the transactions contemplated
hereby without prior approval of the other party hereto (which
shall not be unreasonably withheld), except as and to the
extent that such party shall be obligated by law or regulation,
in which case the other party shall be so advised and the
parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
Similarly, under paragraph 11.9(a) of the Adams TV-ComCorp contract, ComCorp
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agreed not to disclose any information concerning the Station and Adams TV during the
course of completing the transaction. Paragraph 11.9(a) provides, in part, as follows:
11.9 Confidentiality. (a) Buyer agrees that prior to Closing,
Buyer and its respective agents and representatives shall not
use for its or their own benefit (except when required by law
and except for use in connection with Buyer’s financing of the
transaction and Buyer’s investigation of the Station and its
assets in connection with this Agreement), and shall hold in
strict confidence and not disclose: (i) any data or information
relating to Seller and GTH-103, their affiliates, or the Station
obtained from Seller or GTH-103 or any of their directors,
officers, employees, agents or representatives in connection
with this Agreement; or (ii) any data and information relating to
the business, customers, financial statements, conditions or
operations of the Station which is confidential in nature and not
generally known to the public.
Pursuant to paragraph 11.8 of the Adams TV-ComCorp contract, ComCorp agreed
not to assign any rights, obligations or liabilities under the contract without the prior written
consent of Adams TV.
ComCorp further promised under section 5.8 of the Adams TV-ComCorp contract
that all written statements furnished by it to Adams TV were true and accurate and that it
had not omitted to state any material facts to Adams TV which would make its other
statements misleading. Paragraph 5.8 of the Adams TV-ComCorp contract provides as
follows:
5.8 Disclosure. To the knowledge of Buyer, no statement of
material fact by Buyer contained in this Agreement and no
written statement of material fact furnished by Buyer to Seller
pursuant to this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not
misleading.
ComCorp, likewise, warranted that all representations made by it to Adams TV were
true and correct in all material respects as of the parties’ closing date under the contract.
Paragraph 8.3 of the Adams TV-ComCorp contract provides as follows:
8.3 Representations and Warranties. The representations and
warranties made by Buyer shall be true and correct in all
material respects as of the Closing Date with the same force
and effect as though such representations and warranties had
been made on the Closing Date, except for changes permitted
or contemplated by this Agreement.
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Moreover, paragraph 9.2 of the parties’ Adams TV-ComCorp contract, which
provides for indemnification to Adams TV for various breaches of the contract by
ComCorp, states that Adams TV’s “recovery under Section 9.2(a) shall in no event include
any special, indirect, incidental or consequential damages.”
On August 11, 1994, ComCorp executed a second contract, the “ComCorp-Fox
contract” whereby ComCorp agreed to sell, and FTS Investments, Inc. (hereinafter, “Fox”)
agreed to purchase the Station for approximately $80,000,000.00. This agreement was
executed on behalf of ComCorp by Thomas Galloway, who was the chief executive officer,
chairman of the board of directors and sole stockholder of ComCorp. Adams TV alleged
that prior to the execution of the ComCorp-Fox contract that ComCorp disclosed significant
amounts of confidential information concerning the Station to Fox for the purpose of
negotiating a sale of the Station to Fox. ComCorp allegedly disclosed more information
to Fox than was necessary for financing the transaction under the Adams TV-ComCorp
contract.
On August 18, 1994, Adams TV and ComCorp closed the Adams TV-ComCorp
contract whereby Adams TV received the $57,000,000.00 purchase price from ComCorp,
and ComCorp received title to the Station from Adams TV. ComCorp also furnished
Adams TV with a document entitled “Buyer’s Performance Certificate” which was executed
by Thomas Galloway for ComCorp. That document stated that ComCorp had “performed
and complied with all of its obligations under the [Adams TV-ComCorp contract] which are
to be performed or complied with by it prior to or on the date hereof.”
Although Adams TV was aware that Fox had agreed to finance the purchase of the
Station under the Adams TV-ComCorp contract, Adams TV did not know that ComCorp
had agreed to sell the Station to Fox pursuant to the ComCorp-Fox contract until after the
August 18, 1994, closing. Ultimately, ComCorp and Fox closed on their contract
concerning the Station on July 5, 1995, and Fox now owns the Station.
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Sometime before the August 18, 1994, closing of the Adams TV-ComCorp contract,
Adams TV negotiated a contingent contract to sell the Station to another entity in the event
that Adams TV and ComCorp failed to close the Adams TV-ComCorp contract. Pursuant
to the terms of the contingent contract, the other purchaser agreed to pay Adams TV
approximately $63,444,000.00 for the Station.
Adams TV brought this action asserting that ComCorp and Galloway breached the
Adams TV-ComCorp contract in four material ways:
1) by breaching the nondisclosure and confidentiality provisions contained
in paragraphs 6.11 and 11.9(a) by disclosing information protected under
those provisions to Fox;
2) by breaching the representations and warranties that ComCorp had
complied with the contract’s nondisclosure and confidentiality provisions;
3) by violating the prohibition on assignment of any rights, obligations or
liabilities under the contract contained in paragraph 11.8 by assigning
Defendants’ interest under the contract to Fox without Adams TV’s
knowledge or consent; and
4) by breaching the representations and warranties that ComCorp had
complied with the agreement’s nonassignment provision.
ComCorp and Thomas Galloway each filed motions to dismiss the complaint, and
Adams TV filed a motion for partial summary judgment. Following a hearing on December
12, 1995, the trial court entered an order on January 10, 1996, in which it granted Adams
TV’s motion to amend the complaint, denied Adams TV’s motion for partial summary
judgment and granted Defendants’ motions to dismiss the cause. Adams TV timely filed
a notice of appeal on February 8, 1996, and the appeal has been perfected to this Court.
ISSUES
The issues before this Court are as follows:
1) Whether the trial court erred in granting ComCorp’s motion to dismiss
Adams TV’s cause of action;
2) Whether the trial court erred in dismissing as moot Adams TV’s motion for
partial summary judgment;
3) Whether Adams TV was obligated to consummate the Adams TV-
ComCorp contract, regardless of the extent of its knowledge of the
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impending sale by Defendants to Fox;
4) Whether Adams TV’s damage claims are barred because of its failure to
satisfy the conditions precedent under the Adams TV-ComCorp contract in
bringing an action for indemnification; and
5) Whether the ComCorp-Fox transaction was an assignment or sale.
DISCUSSION
Defendants filed their motions to dismiss the complaint on July 28, 1995. These
motions to dismiss were supported by an affidavit and by the record on appeal which
contained responses to interrogatories and requests for admissions and responses to a
request for production of documents. The Chancellor recited in the order dismissing this
cause that he had considered the entire record filed in this cause. Therefore, we conclude
that because the trial court considered items outside the pleadings, the Defendants’
motions to dismiss were converted to motions for summary judgment, and we shall treat
them accordingly. Rule 12.02 Tenn. R. Civ. P.; Pacific E. Corp. v. Gulf Life Holding Co.,
902 S.W.2d 946 (Tenn. App. 1995).
No presumption of correctness attaches to decisions granting summary judgment
because such motions involve only questions of law. Thus, on appeal, the Court must
make a fresh determination concerning whether the requirements of Rule 56 Tenn. R. Civ.
P. have been met. Cowden v. Sovran Bank/Central South, 816 S.W.2d 741, 744 (Tenn.
1991). We begin our analysis of the issue of summary judgment by noting that a trial court
should grant a motion for summary judgment only if the movant demonstrates that there
are no genuine issues of material fact and that the moving party is entitled to judgment as
a matter of law. Rule 56.03 Tenn. R. Civ. P.; Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn.
1993). The party moving for summary judgment bears the burden of demonstrating that
no genuine issues of material fact exist. Byrd, 847 S.W.2d at 211. In Byrd, the Tennessee
Supreme Court stated:
Once it is shown by the moving party that there is no genuine
issue of material fact, the nonmoving party must then
demonstrate, by affidavits or discovery materials, that there is
a genuine, material fact dispute to warrant a trial. (Citations
omitted). In this regard, Rule 56.05 provides that the
nonmoving party cannot simply rely upon his pleadings but
must set forth specific facts showing that there is a genuine
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issue of material fact for trial.
Id. at 211. (Emphasis in original).
Considering the evidence in the light most favorable to Adams TV, we are left to determine
whether Defendants were entitled to summary judgment as a matter of law.
In addressing the motion for summary judgment, the court must consider the
evidence in the same manner as a motion for directed verdict made at the close of
plaintiff’s proof. Therefore, the “court must take the strongest legitimate view of the
evidence in favor of the nonmoving party, allow all reasonable inferences in favor of that
party, and discard all countervailing evidence.” Byrd at 210-11. After exhaustive
examination of the record in this cause, we find that the trial court’s decision granting
summary judgment should be affirmed.
Adams TV’s argument is founded on its assertion that it would have refused to
perform the contract had it known of the existence of the ComCorp-Fox contract.
Underlying this argument is Adams TV’s assertion that ComCorp disclosed information
about Adams TV and the Station to Fox in violation of the Adams TV-ComCorp contract.
Adams TV further avers that ComCorp breached its agreement with Adams TV and did not
disclose to Adams TV the existence of the ComCorp-Fox contract. Therefore, Adams
argues that it is entitled to damages equal to the difference between its contract price of
$57,000,000 and the $80,000,000 contract price of the ComCorp-Fox contract.
Upon consideration of the motions to dismiss, the trial court found, and we agree,
that any breach of the terms of the Adams TV-ComCorp contract was not a material
breach so as to warrant non-performance of the contract by Adams TV. In determining
whether a breach of contract is material such that the non-breaching party could avoid
performance, Tennessee courts have adopted the criteria established in the Restatement
(Second) of Contracts, § 241 (1981), which enumerates the following factors to consider:
(1) The extent to which the injured party will be deprived of the
expected benefit of his contract;
(2) The extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be
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deprived;
(3) The extent to which the party failing to perform or to offer
to perform will suffer forfeiture;
(4) The likelihood that the party failing to perform or to offer to
perform will cure his failure, taking account of all the
circumstances including any reasonable assurances; and
(5) The extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of good
faith and fair dealing.
See, McClain v. Kimbrough Constr. Co., Inc., 806 S.W.2d 194, 199 (Tenn. App. 1990).
The consideration applicable to this case is whether the non-breaching party
obtained the benefit expected under the terms of the contract. In the instant case, Adams
TV was not deprived of the expected benefit of its bargain. In fact, Adams TV received the
full contract price of $57,000,000. It appears to the Court that the breach, if any, was not
material. The objectives of the agreement were effectuated in that Adams TV received
from ComCorp the contract price in exchange for which ComCorp received from Adams
TV its interest in the Station.
An injured party is only entitled to be placed in the same position it would have been
had the contract been performed and should not profit from a defendant’s breach.
Hennessee v. Wood Group Enterprises, Inc., 816 S.W.2d 35, 37 (Tenn. Ct. App. 1991).
Although Adams TV argues that it is entitled to damages based upon the contract/market
price differential of the Station at the time of the parties’ August 18, 1994, closing under
the Adams TV-ComCorp contract because of the Defendants’ alleged breach of contract,
it is well settled in Tennessee that an injured party may not profit from a defendant’s
breach. Action Ads, Inc. v. William B. Tanner Co., 592 S.W.2d 572, 575 (Tenn. App.
1975). Adams TV received the contract price it bargained for; thus, Adams TV would not
be entitled to an award of damages. Furthermore, it does not appear that the alleged
breach of contract was material under the McClain criteria.
In Fleet National Bank v. Anchor Media Television, Inc., et al., 831 F. Supp. 16
(D.R.I. 1993), aff’d., 45 F.3d 546 (1st Cir 1995), a federal court addressed an alleged
breach of contract arising from the purchase of a television station. Fleet National Bank,
the plaintiff, moved for a directed verdict following a jury verdict in favor of the defendants
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and asserted, inter alia, that the motion be granted because Anchor Media, a defendant,
had failed to comply with the exact dispute resolution procedures provided by the contract.
However, the trial court looked to the total obligations imposed by the parties’ contract and
found that Anchor Media’s failure to follow the precise contours of the agreement were
“slight or unimportant omissions” and not a material breach of the contract when viewed
in the context of its total obligations. Id. at 33-34.
In reviewing the award of summary judgment, it is incumbent upon this Court to take
the strongest legitimate view of the evidence in favor of Adams TV, to allow all reasonable
inferences in favor of Adams TV, and to discard all countervailing evidence. In the instant
case, the non-disclosure and confidentiality provisions of the Adams TV-ComCorp contract
permitted ComCorp to make certain disclosures of “Seller’s Information” in order to obtain
financing for the purchase of the Station. Specifically, § 11.9(a) provides:
11.9 Confidentiality. (a). Buyer agrees that prior to Closing,
Buyer and its respective agents and representatives shall not
use for its or their own benefit (except when required by law
and except for use in connection with Buyer’s financing of the
transaction and Buyer’s investigation of the Station and its
assets in connection with this Agreement), and shall hold in
strict confidence and not disclose: (i) any data or information
relating to Seller and GTH-103, their affiliates, or the Station
obtained from Seller or GTH-103 or any of their directors,
officers, employees, agents or representatives in connection
with this Agreement; or (ii) any data and information relating to
the business, customers, financial statements, conditions or
operations of the Station which is confidential in nature and not
generally known to the public. (Emphasis added).
Adams TV concedes that it knew prior to the August 18, 1994, closing that Fox had agreed
to finance ComCorp’s purchase of the Station. Pursuant to the terms of the contract,
ComCorp had the right to make disclosures about Adams TV so long as those disclosures
related to financing. What is not contemplated by the contract is the situation that arose
in the instant case wherein the lender ultimately became the purchaser. The fact that prior
to the closure of the Adams TV-ComCorp sale, ComCorp entered into a separate sales
agreement with Fox for the Station does not change the fact that Fox was the lender that
provided the financing for ComCorp to purchase the Station from Adams TV. Examination
of the Adams TV-ComCorp contract reveals nothing that prohibits resale of the Station in
the manner so accomplished in this case. Further, we find no contract provision requiring
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ComCorp to disclose either the existence of a resale agreement or the provisions thereof
to Adams TV, just as we find no provision requiring Adams TV to have disclosed either the
existence or provisions of the contingent sales agreement it had entered into with another
purchaser.
In the present case, Adams TV and ComCorp entered into a contract whereby
Adams TV agreed to sell and ComCorp agreed to buy the assets of WHBQ-TV for
approximately $57,000,000. On August 18, 1994, the parties performed their respective
obligations under the contract; Adams TV received the $57,000,000 purchase price from
ComCorp, and ComCorp received title to the Station from Adams TV. In examining the
evidence in the light most favorable to Adams TV, as we must in summary judgment cases,
we do not find that ComCorp’s disclosure of information to Fox was inconsistent with the
preservation of confidentiality. As a result, we find that such disclosure was not a material
breach of the Adams TV-ComCorp contract.
The judgment of the trial court is hereby affirmed. Costs on appeal are taxed to
Appellant for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
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FARMER, J.
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