JACK KELLER, )
JORDAN S. KELLER, )
)
Plaintiffs/Appellants, )
) Appeal No.
) 01-A-01-9505-CV-00212
VS. )
) Davidson Circuit
) No. 94C-2054
COLGEMS - EMI MUSIC, INC., )
SCREEN GEMS - EMI MUSIC, INC.,
EMI MUSIC PUBLISHING, INC.,
)
)
)
FILED
Jan. 5, 1996
Defendants/Appellees. )
Cecil Crowson, Jr.
Appellate Court Clerk
COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
APPEALED FROM THE CIRCUIT COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
THE HONORABLE WALTER C. KURTZ, JUDGE
JACK KELLER
JORDAN S. KELLER
8282 Collins road
Nashville, Tennessee 37221
Pro Se Plaintiffs/Appellants
ROBERT L. SULLIVAN
MANATT, PHELPS & PHILLIPS
1233 17th AvenueSouth
Nashville, Tennessee 37212
Attorney for Defendants/Appellees
AFFIRMED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
LEWIS, J.
OPINION
On June 28, 1994, Plaintiff Jack Keller sued the defendants in the
Davidson County Circuit Court claiming a breach of fiduciary duty by fraudulently
failing to disclose the contents of a contract amendment signed in 1960. Jordan
Keller, to whom a part of the contract rights had been assigned, joined his father as
plaintiff.
The breach of duty allegedly was discovered in 1988 and the question
in this case is whether the three year statute of limitations or the six year statute
applies. We hold that the three year statute applies, and therefore affirm the trial
court's action in dismissing the complaint.
Facts
Plaintiff Jack Keller, a professional songwriter, signed an employment
agreement with Aldon Music, Inc. on November 5, 1959, to perform various services
as a songwriter, producer, and performer. The contract contained a provision, an
"Exhibit B" which obligated Aldon "to counsel [Jack Keller] as to contracts for his
professional work . . . to make the professional career of [Keller] the success
contemplated, both professionally and financially, and in general . . . endeavor to the
best of [Aldon's] ability to forward the interests of [Keller]. The contract also contained
an "Exhibit A" which was crossed out by the parties. Exhibit A would have allowed
Aldon:
"To secure copyright registration and protection of said
works at your own cost and expense and at your election,
including any and all renewals of copyright to which I may
hereafter become entitled, and to have and to hold said
copyrights and all rights of whatsoever nature thereunder
existing, for and during the full terms of all said copyrights
and all renewals and extensions thereof. It is hereby
agreed that one-half of the general advance royalty
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payable to me under paragraph 4(k) of this agreement is
in consideration of the grant by me of said renewals of
copyright and the rights existing thereunder."
In 1960, (the amendment is not dated, and the exact date is nowhere
to be found in the record) Plaintiff Jack Keller signed an amendment to the 1959
agreement effectively reinstating the provisions contained in Exhibit A. Keller claims
that Aldon co-owner Don Kirshner told him the only effect of the amendment would
be to enable Keller to produce other artists for an increased royalty rate. Mr. Keller
also claims he signed the amendment only after relying on the misstatements of his
personal manager Aldon Music.
Mr. Keller allegedly first discovered the amendment's provision
governing copyright renewal rights on July 13, 1988, which he maintains is "when the
first composition copyrighted under the 1959 agreement between himself and Aldon
became subject to renewal." At that time EMI Music Publishing, Inc., ("EMI") which
had subsequently acquired Aldon Music, informed Mr. Keller that he did not have the
right to renew his copyrights.
Issues
The principal issue before this Court is the appropriate statute of
limitations applicable to this action, more specifically whether the three year statute
of limitation for injuries to personal property found in Tenn. Code Ann. § 28-3-105
applies to bar appellants' claims as the appellees insist, or whether the six year statute
found in Tenn. Code Ann. § 28-3-109(c) is more appropriate. Tenn. Code. Ann. § 28-
3-105 states:
Property tort actions - Statutory liabilities. -- The following
actions shall be commenced within three (3) years from
the accruing of the cause of action:
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(1) Actions for injuries to personal or real property;
* * *
Tenn. Code Ann. §28-3-109(c) reads in relevant part:
(a) The following actions shall be -commenced within six (6) years after
covered - Title insurance - Demand notes. -- not otherwise
Rent - Official misconduct Contracts
the cause of action accrued:
(3) Actions on contracts not otherwise expressly provided
for.
* * *
In Tennessee the applicable statute of limitations is determined
according to the gravamen of the complaint rather than its designation as an action
for tort or contract. Pera v. Kroger, 674 S.W.2d 715, 719 (Tenn. 1984). In
determining the gravamen, or real purpose of an action, the court must look to the
basis for which damages are sought. Bland v. Smith, 197 Tenn. 683, 277 S.W.2d 377
(1955). Another way of stating this principle is "[t]he limitation is not determined by
the form of the action but by its object." Bodne v. Austin, 156 Tenn. 156, 2 S.W.2d
100 (1928), quoting Birmingham v. Chesapeake & Ohio Railway Co., 37 S.E. 17 (Va.
1900).
Thus, regardless of whether a complaint sounds in contract, if the suit
seeks to recover damages for injuries to the plaintiff's property, the applicable
limitations period is three years as found in Tenn. Code Ann. § 28-3-105. Alexander
v. Third National Bank, 1994 W.L. 424287, *3 (Tenn. App. 1994). An "injury to
property" need not be physical however, just as an injury to the person is not limited
to bodily injury. Id. Also, actions for damages resulting from the breach of contract
to a builder of real property are considered actions for damages to property even
where they have sued in contract. Id.
The Second Amended Complaint alleges fraud, and breach of fiduciary
duty with regard to the 1960 amendment. The appellants insist that they have been
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deprived of the right to recapture 100% of their copyrights after the first 28 year
copyright period. They contend that they, and not Aldon Music, would have been the
owners of the renewal rights in the copyrights before the amendment was signed.
Whether the loss of these renewal rights is actionable as an injury to "personal
property" under the tort statute of limitations, or more appropriately as economic
damage to one's "pocketbook" is the foremost issue in this appeal.
In Vance v. Schulder the owner of 10% of the stock of a corporation filed
suit alleging that one of the defendant directors had fraudulently represented that
there had been an offer to purchase the corporation for $360,000, but that the offer
had been for $708,000 and that the plaintiff had been induced to sell his interest for
$36,000 and suffered damage in the amount of $34,800 because of this fiduciary
breach. 547 S.W.2d 927 (Tenn. 1977). In applying the three year statute of
limitations, the Supreme Court stated that it was "important to distinguish this
transaction from the more typical situation where corporate directors or officers with
inside information purchase or sell stock detrimentally to stockholders at large." Id.
at 931. Those more typical fiduciary breaches the Court reasoned, are "quasi-
contractual in nature" and thus the six year statute would be applicable. Id.
As in this case, the plaintiff in Vance alleged damages resulting from
breach of a fiduciary duty caused by a face to face misrepresentation which induced
a financial loss. In Vance the property rights were in shares of stock, in this instant
case, copyright renewals. The Court in Vance determined that the gravamen of the
action was tortious, specifically fraud in the inducement of a contract. Id. As the
appellants do in this case, the plaintiff in Vance argued that the monetary, non-
physical loss suffered cannot be an " 'injury to property' in the classic tort sense of the
word." Id. at 932. As the Court stated however, "[t]his argument is predicated upon
a narrow definition of the word 'injury' as used in the property actions three year
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statute, and the notion that torts, in the classic sense, result only in physical damage."
Id.
The Court concluded that the economic loss sustained by the plaintiff
from the fraud was an " 'injury to personal property' " as stated in Tenn. Code Ann. §
28-305, the predecessor to today's Tenn Code Ann. § 28-3-105. Although the Court
conceded the question was a close one, it applied the three year statute.
In 1980 the Court of Appeals decided a case which dealt with the
interplay between the three and six year statutes of limitations in Tennessee. In
Harvest Corporation v. Ernst & Whinney, the plaintiff claimed that the defendant
partnership failed to audit the inventory of a company professionally, causing the
plaintiff to pay an excessive price for the corporate stock of such company. 610
S.W.2d 727 (Tenn. App. 1980). The Court held that such action was for ordinary
money damages resulting from breach of contract, and thus, the applicable statute of
limitations was the six year statute for contract cases rather than the three-year
statute for actions involving injury to real or personal property. The Court noted that
although the gravamen of the complaint was that the defendants overstated the value
of the corporation in question, the "general tenor" of the complaint was that the
defendants attempted to perform the contract in an unprofessional manner and more
importantly, the property being audited was not the plaintiffs at the time of breach.
610 S.W.2d at 731.
The Court in Harvest Corporation, quoted the following from Bland v.
Smith, a 1955 Tennessee Supreme Court case:
"It will be found that the weight of authority to be (sic) in
Tennessee and elsewhere that regardless of whether the
suit is based on tort or on contract the Court must look to
the plaintiff's declaration to see whether or not he is suing
for damages arising out of a contract or for damages
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arising out of tort. . . . " 277 S.W.2d 377, 380 (Tenn.
1955). Id. at 729.
From this precedent the Harvest Corporation Court then observed that the
major criterion in determining the gravamen of the action is the kind of damage
alleged. Id. at 729. The inquiry into the kind of damage alleged "is utilized regardless
of whether the cause of action sounds in tort or contract." Prescott v. Adams, 627
S.W.2d 134, 137 (Tenn. App. 1981). The Harvest Corporation Court then examined
two different types of lawsuits to demonstrate the principle enunciated in Bland v.
Smith. First, the Court viewed medical malpractice cases and noted that "although
the claim may arise in contract by virtue of the doctor-patient relationship, the
damages sustained are to the person . . . and are governed by the one year statute
of limitations and not the general contract statute of limitations." Harvest Corp. at 729.
Second, the Court examined legal malpractice cases which it concluded are "neither
to the person nor property of the claimant but are to the client's "pocketbook." Id. The
Court based this statement of law on a 1966 Supreme Court legal malpractice action,
where an attorney failed to file suit before the running of the statute of limitations. The
Supreme Court characterized the suit as one based on the "failure to carry out
contractual duties and not against one for doing some wrong to the person."
Hillhouse v. McDowell, 219 Tenn. 362, 410 S.W.2d 162, 163 (1966). The Kellers
argue that their damages are analogous to purely economic or "pocketbook" damages
found in legal malpractice cases.
Later in its opinion the Harvest Corporation Court stated:
". . . suits for fraud, deceit, or conspiracy, whether they
arise incident to a contract or not are actions in tort and
must be governed by the applicable tort statute of
limitations. At bar, neither fraud, deceit nor conspiracy
are charged and no facts which could possibly constitute
such have been pled.
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With the foregoing general principles in mind, we
examine the pleadings in this case in order to determine
the nature of plaintiff's cause of action look to the
damages alleged." Id. at 730, 731.
The Court eventually determined that the damages sought by the
plaintiff were the "ordinary money damages that result from a breach of contract." Id.
at 730. The Court stated that the complaint essentially stated that the defendants did
not advise the plaintiffs of the inventory's true value as required by the contract, and
that result led directly to the damages alleged.
Conclusion
In Tennessee we determine the gravamen of the complaint by looking
to the basis for which damages are sought. Bland v. Smith, 197 Tenn. 683, 277
S.W.2d 377 (1955). The basis of the appellants' damages are tortious in nature,
specifically breach of fiduciary duty, and fraudulent misrepresentation. The Harvest
Corporation Court instructs us to look at the act which created the damages to
determine the statute of limitation regardless of whether a contract existed between
the parties. In Vance v. Schulder, the Supreme Court concluded that the phrase
"injury to property" in the three year statute of limitations was not to be narrowly
confined to tangible property damaged in a physical manner only. Taking the view of
personal property suggested by the Vance decision we believe the renewal rights
must be considered "property." Therefore, the three year statute of limitations
governs this suit.
We conclude that an economic loss, as in the case before us, which is
a consequence of property damage is within the three year statute found in Tenn.
Code Ann. § 28-3-105. Thus the decision of the trial court is affirmed. Costs on
appeal are taxed to the appellants and the case is remanded for any proceedings
consistent with this opinion.
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_________________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
SAMUEL L. LEWIS, JUDGE
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