Legal Research AI

Brandt v. Bib Enterprises, Ltd.

Court: Court of Appeals of Tennessee
Date filed: 1998-08-05
Citations: 986 S.W.2d 586
Copy Citations
31 Citing Cases

                                                          FILED
R.S. BRANDT, K.M. LUNDIN,              )                     August 5, 1998
M.I. LUNDIN, N.B. LUNDIN,              )
and A .T. WIL TSH IRE, JR .,           )                    Cecil W. Crowson
                                       ) Appeal No.      Appellate Court Clerk
      Plaintiffs-Appellees,            ) 01A01-9708-CH-00431
                                       )
v.                                     ) Lawrence C hancery
                                       ) No. 5965-92
BIB E NTE RPR ISES , LTD ., A          )
Tennessee Limited Partnership,         )
and GR EGOR Y SM ITH , Individually,   )
and VIRGINIA ABERNETHY,                )
                                       )
      Defendants-Appellants.           )




               IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE




APPEALED FROM THE CHANCERY COURT FOR LAWRENCE COUNTY AT
LAWRENCEBURG, TENNESSEE.

THE HONORABLE WILLIAM B. CAIN, CHANCELLOR


WILLIAM S. FLEMING, FLEMING
HOL LOW AY, F LYN N & S AND S, P.C
207 West Eighth Street
Columbia, TN 38401
     For Plaintiffs-Appellees.

HENRY, HENRY, STACK, GARNER & SPEER, P.C.
119 South First Street
Pulaski, TN
      For Defendants-Appellants.




                AFFIRMED AS MODIFIED, AND REMANDED


                                             HERSCHEL P. FRANKS, JUDGE

CON CUR :
GODD ARD, P.J.
McMU RRAY, J.

              This cases involves a d ispute over a limited partnership. B IB

Enterprises, Ltd. (“BIB”) was formed on December 30, 1982 for the stated purpose of

acquiring real estate, equipment and other personal property of a Bonanza Restaurant

in Lawrenceburg, Tennessee. Defendant-appellant Greg Smith was named General

Partner.

              On Dece mber 31, 1982 , BIB entered an ag reement with D inero

Enterprises, Inc. for the lease of B IB’s real and persona l property. In November,

1994, Dinero defaulted on the lease. BIB entered a lease with Southeast Restaurants,

Inc. (“Southeast”) on January 1, 1985. In late 1985, the Bank of Loretto, which had

financed BIB’s purchase of the Bonanza Restaurant, failed and was taken over by the

F.D.I.C. B IB purch ased its note f rom the F .D.I.C. at a disc ount. The money to

purchase the note w as provide d by a bridge lo an from D ominion B ank. Smith

negotiated permane nt financin g through Comm unity Bank a nd Trust.

               In 1991, S outheast file d for ban kruptcy. Afte r securing a new tena nt,

Smith arranged to sell the property at auction. The auction was held on August 18,

1992. S mith pu rchase d the pr operty fo r $242 ,500.00 .

               The Plaintiffs-appellees filed suit against BIB and Greg Smith on

Decem ber 3, 1992 , alleging that th e sale of the partnership property to Sm ith was vo id

and requesting an accounting. The Plaintiffs later amended their complaint to add

additional defendants and further alleged that Smith breached his fiduciary duties and

committed acts of embezzlement and misrepresentation. On November 14, 1994, the

Plaintiffs moved for Partial Summary Judgment on the issues of which law governed

the transactio ns, the sale of the partnersh ip property and Smith’s ren ewal of h is

contract for management services. On February 15, 1995, the trial court filed a


                                              2
Memorandum of Summary Judgement finding that the sale of the assets was null and

void and that the Uniform Limited Partnership Act governed the dispute. The trial

court entered its Order on the Motion for Partial Summary Judgment on March 7,

1995.

               The parties sought an interlocutory appeal, which w as denied. After a

trial on th e rema ining iss ues, the trial cou rt issued an opin ion on O ctober 2 9, 1996 .

The trial court determined that Smith had no authority to extend his base management

fee beyond the terms of the original agreement. The trial court also determined that

the South east equipm ent deal and the F.D.I.C . discount did not count a s compe nsable

sources of income for Smith.

               The October 29 memorandum adjudicated all issues up to the purported

sale of the restaurant on September 10, 1992. The trial court held an additional

hearing on June 1 7, 1997 in order to adjud icate all remaining issues. The trial court

determined that Smith owed the partnership $53,516.77. The trial court also found

that the Plaintif fs were n ot entitled to a ju dgment a gainst Sm ith’s wife, V irginia

Abernathy. The trial court den ied Plaintiffs’ request for attorney’s fees, discretionary

costs and prejudgment interest and ordered the dissolution of the partnership.

               The trial court properly determined that the Uniform Limited

Partnership Act (“Uniform Act”) governed this case. Appellants contend that the

Revised Un iform Limited Partne rship Act (“Revised Act”) is applicable. The rec ord

does not contain any evide nce, however, that the A ppellants made the ne cessary

election to be governe d by the Rev ised Act.

               This issue w as decided by summa ry judgment. S ummary jud gment is

appropriate only if there are n o genuine issues of m aterial fact and the movin g party is

entitled to judgment as a matter of law. Tenn.R.Civ.P. 56.03. If both the facts and the

conclusions to be drawn from the facts permit a reasonable person to reach only one

                                               3
conclu sion, su mmar y judgem ent sho uld be g ranted. Shadrick v. Coker, 963 S.W.2d

726 (Tenn. 199 8)(citations omitted).

               The partnership in this case was formed in 1982. At that time, the

Uniform Act wa s the gove rning law . T.C.A. § 6 1-2-1204 provides in part:

               (c) Excep t as provide d in subsec tion (e), a limited partnership
               formed prior to January 1, 1988 shall continue to be governed by
               chapter 2 of this title in effect prior to the ado ption of chapter 2
               of this title as hereby repealed, except that such limited
               partnership shall not hav e its term exten ded exce pt under this
               chapte r . . .
               (e) Any limited partnership formed prior to January 1, 1989, and
               any foreign lim ited partnersh ip may elect to b e govern ed by this
               chapter before July 1, 1989 by filing with the register of deeds
               prior to January 1, 1989 and with the secretary of state on or after
               January 1, 1989 a certificate of limited partnership, or an
               application for registration as a foreign limited partnership which
               complies with this chapter or a certificate of amendment which
               would c ause its certifica te of limited p artnership to c omply with
               this chapter and which specifically states that it is electing to be
               so bound and by paying the fee for a certificate of limited
               partnership specified in § 61-2-1207(a)(8). Such certificate may
               be filed by any general partner without the necessity of obtaining
               the approval of any limited pa rtner.

               In this case, there is no evidence tha t the Appellant mad e the necessary

election to be governe d by the Rev ised Act. T he only evide nce of an election is

contained in the affida vit of an ex pert witnes s who state d that the ap propriate

documents were prepared for filing. There is, however, no evidence that the

documents were actually filed or that any fees were paid in compliance with the

statutory requirements. Thus, the trial court properly determined that the Uniform Act

applies in this ca se.

               The trial court determined that “the transfer by general partner Smith of

the partnership asset at bar without the consent of all of the limited partners is null and

void as a matte r of law . . .” This is sue w as also re solved throug h summ ary judgm ent.

The trial court noted that “the sale of the partnership property by the general partner

violated both T.C.A. § 61-2-109 and the fiduciary duty of the general partner . . .”

                                              4
              Under th e Unifor m Act:

              A general partner shall have all the rights and powers and be
              subject to all the restrictions and liabilities of a partner in a
              partnership without limited partners, except that without the
              written consent or ratification of the specific act by all the limited
              partners, a general partner or all of the general partners have no
              auth ority:

              (1) To do any action in contravention of the certificate;
              (2) To do any act which would make it impossible to carry on the
              ordinary business of the partnership;
              (3) To confess a judgment against the partnership;
              (4) To possess partnership property, or assign their rights in a
              specific pa rtnership pro perty, for other th an a partne rship
              purpose;
              (5) To admit a perso n as a general partner;
              (6) To ad mit a person as a limited p artner, unless th e right to do s o is
              given in the certificate; or
              (7) To continue the business with partnership property on the
              death, retirement, or insanity of a general partner, unless the right
              to do so is given in the certificate.

T.C.A. § 61-2-1 09 (repealed 1988 ).

               The Lim ited Partnersh ip Agree ment states th at it is intended to comply

with the U niform A ct and that an y provision of the agreem ent that violate s the Act is

invalid. Sectio n 8.3 (l) of the agreeme nt states:

               The Ge neral Partne r, on behalf of the Partn ership and in
               furtherance of the business of the Partnership, shall have the
               authority to perform all acts which the Partnership is authorized
               to perform, including, but not limited to, the following:
               . . . (l) to refinance, sell or otherwise dispose of all or
               substantially all of the assets of the Partnership at any one time,
               subject to the provision of Article XI defining certain rights of
               the Limited Partners.

               As the trial court noted, there is little Tennessee authority on this issue

under the Uniform Act. The trial court therefore analyzed case law from other

jurisdictions. The trial court relied heavily upon Newburger, Loeb and Co., Inc. v.

Gross, 365 F .Supp . 1364 ( S.D.N .Y. 197 3), 563 F.2d 1 057 (2 nd Cir., 1 977), cert.

denied , 434 U.S. 1035 (1978), 611 F.2d 423 (2nd Cir. 1979). In Newburger, two of

the limited partners did not consent to the transfer of partnership assets to a new

                                              5
entity. The Newburger trial cou rt, constr uing a s tatute ide ntical to th e form er T.C .A. §

61-2-109 conc luded that the general partne rs had violated their statutory and fiduciary

duties. The trial court noted:

               It is undispute d that limited p artners Bleic h and D onoghu e did
               not give their written consent to or thereafter ratify the Transfer
               Agreement. Plaintiff contends, however, that execution of the
               Transfer Agreement was not in violation of [the statute]. The
               Court, however, concludes that the execution of the Transfer
               Agreemen t without the written conse nt of the limited partners
               was in violation of the statute. E ven if there were a c ontrary
               provision in the Partnership A rticles, an issue which the Co urt
               need not and does not decide, such a provision would violate [the
               statute] a nd be in valid.

365 F.Supp at 1365.

               The Second Circuit affirmed the portion of the opinion holding the

transfer invalid, but also cited to Mist Properties, Inc. v. Fitzsimmons Realty Co., 228

N.Y.S.2d 406 (N.Y.Sup.Ct. 1962). The Second Circuit noted:

               Mist Properties held that a transfer of the partnership property by
               general pa rtners, witho ut the conse nt of the limite d partners, d id
               not violate [the N.Y. Limited Partnership Act] where the
               partnership agreement ‘specifically contemplated and provided
               for’ the trans fer that took place. Id. at 41 0. [The trial c ourt]
               rejected the argument that the rights of limited partners under
               [the sta tute] cou ld be ab rogated by the pa rtnershi p agree ment . . .
               Howe ver, there is sim ply no langua ge in the Pa rtnership
               agreement that can b e construed as granting th e general partners
               the righ t to cond uct [the transfe r].

563 F.2d 1057, 1075.

               Thus, the Second Circuit distinguished Newburger from Mist. In Mist,

the limited pa rtnership ag reement sta ted that:

               The General Partners in their absolute discretion shall have the power on
               behalf of the Partnership (I) to sell and convey title to, and to grant an
               option for the sale of all or any portion of the Property, including any
               mortgage or leasehold interest or other property which may be acquired
               by the Pa rtnershi p upon a transf er of the Prope rty . . .

228 N.Y.S.2d at 409.

               Interpreting th is language , the court de termined th at “[t]here cle arly

                                               6
appears to have been no violation of the statute since the conveyance was not without

the written consent of the limited partners but was specifically contemplated and

provided for by the agreement.” Id. at 410. The M assachusetts Appe als Court

considered a similar issue in Wasserman v. Wasserman, 386 N.E.2d 783

(Mass.App.Ct. 1979). The court noted that “cases from other jurisdictions which have

considered the question have either held or assumed that the required consent can be

found in the express provisions of a partnership agreement.” Id. at 787 (citations

omitted). Similarly, the Arizona Court of Appeals held that “[t]he consent required by

the statu te can b e foun d in the e xpress provisio ns of th e partne rship ag reeme nt.”

Jerman v. O’Leary, 701 P.2d 120 5, 1209 (Ariz.Ct.Ap p. 1985)(citations omitted).

               In this case, the Limited Partnership Agreement states that the general

partner has authority “to refin ance, sell or o therwise d ispose of a ll or substantially all

of the assets of the Partnership at any one time . . .” Under the rationale of Mist, this

language could reasonably be interpreted as providing consent for the sale of the

assets. Thus, this case is distinguishable from Newb urger, where no such language

existed in the partnership agreement. Although the Appellant could properly sell the

assets, that does not necessarily mean that he could also purchase them. His purchase

must als o be an alyzed in t erms o f his statu tory and f iduciary d uties.

               The A ppellan t was n ot autho rized to p urchas e the pro perty at au ction.

Under the Uniform Act, a general partner may not possess partnership property for

other than a partnership purpose without the consent or ratification of the limited

partners. T.C.A. § 61-2-109 (repealed 1988). The Uniform Act requires “written

consent or ratification of the specific act.” Id. The Lim ited Partnersh ip Agree ment in

this case do es not spec ifically permit the g eneral partn er to posses s partnership

property for a non-partnership purpose. Although the Agreement grants very broad

powers to the gen eral partner, it is to be construed in accorda nce with the Un iform

                                                7
Act. Since there is no sp ecific grant o f permissio n to purch ase the partn ership

proper ty, the Ap pellant w as not a uthoriz ed to do so. Cf. Jerman v. O’Leary, 701 P.2d

1205 (Ariz.Ct.App. 1985)(defendant did not possess partnership property without

consent when partnership agreement stated that general partner could “acquire”

partnership property).    Wh en review ing docum ents that purp ortedly allow se lf

dealing by a g eneral partn er “courts w ill not imply such a powe r, and even when it is

expressly give n they constru e it so narrow ly that it is seldom, if e ver, found to exist in

the matter under consideration.” 59A Am.Jur.2d Partnersh ip § 1291 (1987). The

App ellan t was not auth orized to purc hase the p rope rty.

               The trial court determined that the Appellant had no authority to extend

his base management fee beyond its original expiration date. The Contract for

Management Services, executed between the limited partnership and the general

partner on D ecembe r 31, 1982 , provides in p art:

               2 .Compensation. As full com pensation f or services re ndered to
               the Partners hip in wh atever cap acity rendered, th e Partnersh ip
               shall pay to Sm ith the sum o f $545.07 per mon th payable w ithin
               ten (10) days following the conclusion of the month. These
               payments shall be made for five (5) years, and such compensation
               shall not be paid for employment beyond that term. As additional
               compen sation for the services ren dered to the Partnership in
               whateve r capacity rende red, the Partn ership shall als o pay to
               Smith, as an incentive for the effective management of the
               Partnership , fifty per cent (50 %) of all c ash incom e realized in
               excess of Forty-two Thousand Dollars ($42,000.00) per year
               generate d fro m the ren tal an d lea sing of th e Partnership prop erty.
               This compensation shall be paid to Smith for any employment
               during an y extension as provided in paragrap h 3 of this
               Agreem ent.
               3. Term. The term of employment shall be five (5) years from
               the date hereof unless further extended by agreement of all the
               parties . . .

               The Ap pellant con tinued to pa y either himself o r his designe e Virginia

Abernathy (his wife) the $547.07 monthly fee after December 31, 1987. The

Appellant memorialized his authority to extend the agreement in a document dated


                                              8
March 7, 1990. This document provides:

                      The contract for management services between BIB En terprises,
               Ltd., and Gregory Smith expired December 31, 1987. This extension
               agreement, per paragraph 3 of the Contract for Management Services,
               extends the Contract Term from the date of expiration, January 1, 1988
               through a period ending five years from today’s date, or until March 7,
               1995.

               This docume nt is signed by Greg Sm ith as general partner of B IB

Ente rpris es, L td., and by Gre gory S mith individu ally.

               The trial court correctly noted that “[t]he meaning of the contractual

provisions relative to compensation of the general partner must be considered in light

of the fiduciary duty of the general partner and the extraordinary powers of

management given to him, both by the Uniform Limited Partnership Act and by the

Limited Partnership Agreement in issue.” The trial court found that the 1982 Contract

for Management Services is not ambiguous. The interpretation of unambiguous

contrac ts is a que stion of law fo r the cou rt. Hardeman County Bank v. Stallings, 917

S.W.2 d 695 ( Tenn .App. 1 995), appeal denied, (Jan. 29, 1996).

               The Contract for Management Services clearly states that the $547.07

per month “shall be paid for five (5) years and such compensation shall not be paid for

employme nt beyond tha t term.” The contract also states that the 5 0% ov erride “shall

be paid to Smith for any employment during any extension as provided in paragraph 3

of this Agreement.” Thus, as the trial court properly found, “[i]t is clear that

paragraph 3 can only extend the percentage override term. Otherwise, the five-year

limitation on the Five Hundred Forty-five Dollars and Seven Cents ($545.07) per

month paymen t would make no sen se.”

               The Appellant contends that the Limited Partnership Agreement

authorizes h im to mak e contracts o n behalf o f the partne rship and th us permits h im to

extend the compen sation. As n oted previo usly, courts narro wly construe docume nts


                                               9
that purportedly allow self dealing by a general partner 59A Am.Jur.2d Partnersh ip §

1291 (1987). The trial court did not err on this issue.

               The Ap pellant con tends that the trial court erred in holding th at certain

payments made by Southeast to BIB under an equipment lease-purchase agreement

were not rental or leasing income and therefore not subject to the provision allowing

the Appellant 50% of all annual rentals over $4 2,000.00. Accord ing to the trial court

“all parties construed the equipment disposition to Southeast as being the sale of an

asset rather than a lease thereof, and the Court agrees that such construction by the

parties is a correct interpretation of the contract.”

               Tennessee decisions have addressed the distinction between a true lease

and a conditional sale. In United States Fidelity and Guar. Co. v. Thompson & Green

Mach . Co., Inc ., 568 S.W.2d 8 21, 825 (Tenn. 19 78), the Tennessee S upreme Co urt

stated:

               Perhaps th e most rev ealing test is w hether the so -called lessee is
               obligated to accept and pay for the pro perty or is obligate d only
               to return or account for the property according to the terms of the
               lease from which h e may be ex cused on ly if he exercises his
               privilege of purchasing it. If the latter is the case the transaction
               is a true lease but if the contract, whatever its form, imposes an
               absolute obligation to pay for and accept the property and the
               transferor may require its return only upon default of the
               transferee, the transaction is a conditional sale.

(citations omitted).

The court also noted that “the intent of the parties is always controlling and is to be

ascertained from the whole transaction, not merely from the language employed.” Id.

               In this case, the restaurant equipment transaction between BIB and

Southeast is titled “Lease Agreement” and is separate from the lease of the restaurant

itself. Th e origin al transa ction be tween BIB a nd Din ero ma de no s uch dis tinction .

The term s of the So utheast transa ction state that it is a thirty month, no n-cancela ble

lease requiring payments of $1698.30 per month plus sales tax. It appears that the

                                              1 0
only way BIB could repossess the equipment during this period was if Southeast

defaulted. Paragraph four of the agreement provides “[a]t the expiration of the lease

term, the Lessee shall have the option of purchasing the said equipment by paying the

sum of T welve T housand Five Hu ndred D ollars ($12,5 00.00) to the Lessor. U ntil

such price s hall have b een paid in full, the said eq uipment sh all remain in th e property

of the L essor.”

               In United States Fidelity, the court noted:

               In close cases the courts consider whether the payments required
               of the transferee are in such amounts, spread over such a period
               of time, and are to be so made that compared with the original
               value of the property, its depreciation and likely value at the end
               of the term, that they may be reasonably considered as
               compensation for the use of the prop erty or, instead, as p ayments
               on an absolute obligation for the purchase price, as in a
               conditional sale.

568 S .W.2d at 825.

Southeas t’s total paymen ts, including sa les tax, over th irty months am ounted to

approximately $54,705.30. Southeast could then exercise its option to purchase the

equipment for $12, 500.00. This low purchase price, compared to the amount of the

month ly paymen ts indica tes that S outhea st was m aking p ayments toward s a purc hase.

               The trial cou rt applied the r ule of prac tical construc tion. Unde r this

approach, “the interpretation placed upon a contract by the parties thereto, as shown

by their acts, will be adopted by the court . . .” Hamblen County v. City of Morristown,

656 S.W.2d 331, 335 (Tenn. 1983)(citations omitted). When applying this rule, “not

only the acts but the declarations of the parties may be considered.” Id. Add ition ally:

               In applying the appropriate standard of interpretation even to an
               agreeme nt that on its fa ce is free fro m ambig uity it is permissible
               to consider the situation of the parties and the accompanying
               circumstances at the time it was entered into — not for the
               purpose o f modifying or enlarging or curtailing its ter ms, but to
               aid in determ ining the m eaning to b e given to th e agreem ent.
               Appling v . Ellendale 1 22 Prop erty, 718 S.W.2d 261 (Tenn.App.
               1986)(ap plying rules of c onstruction to a limited pa rtnership

                                              1 1
               agreem ent).

               In this case, the record contains no direct evidence of how Southeast

viewed the transaction. T he trial court was correct, how ever in finding that the BIB

partners viewed the transaction as a sale. In a memorandum written in preparation for

litigation against Martin-Dinero for defaulting on the original lease and dated

Decem ber 11, 198 5, one of th e BIB lim ited partners d escribed the deal with

Southeas t:

               As I recall, for tax purposes we valued the equipment at
               $125,000 at the time of the original lease on December 31,
               1982.
               The lease was breached and we threw Dinero off the
               property on D ecembe r 31, 1984 . We we re forced to get a
               new tena nt and the n ew tenan t is Southeas t Restauran ts
               which is re ally a man nam ed McK inney. McK inney wou ld
               not lease the property from us unless h e was pe rmitted to
               buy the equip ment from us. We w ere forced in order to
               quickly re-lease the property to sell him the equipment as
               of January 1, 1985 for $60,000 payable at the rate of
               $1,698.30 a month with an option to purchase at the end of
               the 30-month period of $12,500. I believe we calculated
               this as a total of $60,000 payable over the 30-month period
               with an extremely low interest rate--something like 5%.

               Similar ly, the Ap pellant te stified b y depositio n in the s ame litig ation.

When asked about the equipment transaction he stated that Southeast was “purchasing

the equipment under a lease purchase agreement . . .” Additionally, in a report to the

limited partners dated January 9, 1985, the Appellant noted that the Dinero lease “had

no separate provision for equipment, while the new agreement treats the equipment

separately.” He noted that under the new lease “the equipment is being sold, resulting

in prese nt cash flow f or the p artnersh ip.”

               The Appellant’s expert witness characterized the equipment transaction

as a lease “[a]t least for tax and financial reporting purposes.” The trial court found

that “[t]he critical question to be answered is not under tax and accounting law, but

under prin ciples of co ntract constru ction applica ble to the limite d partnersh ip

                                                 1 2
agreement in question.” In United Sta tes Fidelity, the court stated that “[t]he

accounting methods employed by each of the parties with respect to the rental

payments . . . ma y be considere d to be mo re indicative o f the hope of the parties to

minimize federal income taxes than of the true nature of the transactions between

them.” 568 S.W.2d at 826. Based on all the available evidence, the trial court did not

err in characterizing the Southeast equipment transaction as a sale not subject to the

50% override.

              The Appellant argues that the trial court erred in determining that

payments made to BIB by the guarantors of the original Dinero lease were not subject

to the 50% override provision. The trial court held that the payments were not “rent or

lease” payments and were therefore “simply not subject to the 50% override.” The

trial court noted that “such payments were not considered by the managing partner

himself to be subject to the override until after ill will developed among the parties.”

              The entire $ 25,000.00 settlement w as distributed in accorda nce with

paragraph 7.2 of the Partnership Agreement, which addresses cash distributions to the

limited partne rs. The trial cou rt found tha t the Appe llant never as serted any right to

the 50% override at th at time. Wh ile some pe rcentage o f the total settlem ent could

arguably comprise compensation for lost rent, the evidence does not show that it was

treated that way by the parties. Thus, the trial court did not err on this issue.

               The trial court also determined that an F.D.I.C. discount of the mortgage

on the pro perty was no t income f rom leasing and rental. A fter the Ba nk of Lo retto

failed, the F.D.I.C. took it over and thus obtained the Dinero loan on which BIB was

making m onthly paymen ts. The Ap pellant neg otiated with the F.D.I.C . and was able

to obtain a $45,0 00.00 d iscoun t on the n ote, wh ich BIB purcha sed fo r $235 ,000.00 .

BIB obtained financing for the purchase through a bridge loan at Dominion Bank.

               The Appellant contends that the $45,000.00 discount was subject to the

                                             1 3
50% override provision. The trial court held that the discount “produces a reduction

in debt for the partnership and is not ‘lease or rental’ income . . .” The trial court was

correct in this determination. The Partnership Agreement provides for the 50%

override fo r cash incom e “genera ted from th e rental and leasing of th e Partnersh ip

property.” Th e F.D.I.C. d iscount do es not fall un der the term s of this prov ision and is

therefo re not su bject to th e 50% overrid e.

               The Ap pellant argu es that the trial co urt erred in ref using to red uce his

debt to the partnership by $27,054.65. This amount represents payments the

Appellant made when he purchased the partnership property. The Appellant made a

$24,250.00 dow n payment and paid $ 2,804.50 in closing costs. Th e trial court

determine d that he w as not entitled to the offse t since “the p urported sa le of the on ly

asset of the limite d partn ership w as null a nd void and in b reach o f his fid uciary du ty.”

As noted previously, the Appellant was authorized to sell the partnership property. He

could not, however, purchase it for himself.

               The tria l court p roperly vo ided the Appe llant’s pu rchase of the p roperty.

The Appellant should receive a credit, however, for the money that BIB received after

the sale. Otherwise, the Appellees would receive a windfall because they would not

only hav e the pro perty, but w ould als o retain t he mo ney paid by the A ppellan t.

Exhib it 202 6 -17-97 , affixe d to Vo l. 18 of th e Tran script, is a n analysis of the o ffset.

This analysis computes the total cash the Appellant paid and then deducts any

settlement ch arges paid b y either the buyer o r seller as a resu lt of the sale. T his

computation yields an offset of $27,054.65, which would reduce the Appellant’s debt

to the partne rship to $26 ,462.12. T he trial court err ed in failing to make this o ffset.

               The Appellant contends that the trial court erred in ordering the

dissolution of the partnership and appointing a receiver. The Appellant argues that the

Appellees wa ived the right to seek such relief in the Partnership Agreem ent. A court

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has no authority to order dissolution absent an application by one of the parties.

Owens v. Bricks, Inc., 703 S.W.2d 147 (Tenn.App. 1985). In this case, the request

was set fo rth in the Am ended C omplaint. “T he terms o f a partnersh ip contract w ill

not deprive a court of its e quity jurisdiction to decree the dissolution o f a partnersh ip

on pro per gro unds.” 59A Am.Jur.2d Partnersh ip §849 (19 87); See also Barclay v.

Barrie, 102 N.E. 602 (N.Y. 1913)(partnership agreement stating that there was no

right to relief un til a set period o f time after n otice of bre ach did no t defeat right to

seek judicial dissolution). The trial court properly ordered dissolution.

               The Appellees argue that the trial court erred in refusing to find the

Appellant’s wife, Virginia Abernathy, liable for conversion. Conversion is “the

appropriation of [property] to the party’s own use and benefit, by the exercise of

domin ion ove r it, in def iance o f plaintif f’s righ t.” Mammoth Cave Prod. Credit Ass’n.

v. Oldham, 569 S.W.2d 833, 836 (Tenn.App. 1977) (citations omitted). The

Appellee s claim that V irginia Abe rnathy received funds thro ugh an ag reement w ith

the Appellant to receive part of his management fee. The trial court found that the

Appellees were not entitled to a judgment against Virginia Abernathy and that the

amount of money sought from her was included within the amount already adjudged

against the Appellant. The trial court determined that the proof did not establish any

basis for holding Abernathy liable. Based on the record, the trial court did not err on

this issue .

               The Appe llees also argue that the trial court erred in refusing to award

them attor ney’s fees , disc retio nary c osts and prejudgmen t inte rest. Gen erall y,

attorney’s fees a re not recov erable “in the absence o f a statute or c ontract spec ifically

providing for such recovery, or a recognized ground of equity . . .” Pullman Standard,

Inc. v. Abex Corp., 693 S.W.2d 33 6, 338 (Tenn. 198 5). The Revised U niform

Limited Partnership Act provides for recovery of attorney’s fees in derivative actions.

                                               1 5
See T.C.A. § 61-2-1004. There is no provision under the Uniform Limited

Partnership Act that seems applicable to this case. Tennessee cases have allowed

attorney’s fee aw ards fo r breach es of a tr ustee’s f iduciary d uty. Brown v. Conroy,

1990 W L 1057 4 (Tenn.A pp.); See also Marshall v. First Nat. Bank of Lewisburg, 622

S.W.2 d 558 ( Tenn .App. 1 981)(re cogniz ing app ropriate ness of such an award ).

Regardless, the trial court properly noted that under the facts of this particular case

attorney’s fees should not be awarded. The trial court did not err on this issue.

               An award of prejudgment interest is within the sound discretion of the

trial cou rt and w ill not be disturbe d on ap peal ab sent an abuse o f that dis cretion. Otis

v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439 (Tenn. 1992). In Mitchell v.

Mitchell, 876 S.W.2d 830, 832, (Tenn. 1994) the Supreme Court noted that

prejudgment interest would be allowed when “the amount of the obligation is certain,

or can be ascertained by a proper accounting, and the obligation is not disputed on

reasonable grounds. . .” In this case, there was considerable controversy over the

amount due. The trial court did not abuse its discretion. The same standard of review

governs the awarding of discretionary costs. Tenn.R.Civ.P. 54.04(2). Based on the

record, the trial court also did not abuse its discretion on this issue.

               We affirm the judgment of the Trial Court, as modified herein. The

cause is remanded for entry of judgment in conformity with this Opinion. The cost of

the cau se is adju dged o ne-half to the ap pellants and on e-half to the app ellees.




                                              __________________________
                                              Herschel P. Franks, J.


CONCUR:



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___________________________
Houston M. Godd ard, P.J.




___________________________
Don T. McM urray, J.




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