                     I N THE COURT OF APPEALS OF TENNESSEE

                                    EASTERN SECTI ON              FILED
                                                                     March 1, 1996

                                                                  Cecil Crowson, Jr.
                                                                   Appellate C ourt Clerk
CANONI E ENERGY, I NC. , a nd                  )   ANDERSON COUNTY
W , I NC.
 GI                                            )   03A01- 9506- CH- 00200
                                               )
       Pl a i nt i f f s - Appe l l e e s      )
                                               )
                                               )
       v.                                      )   HON. W LLI AM E. LANTRI P,
                                                         I
                                               )   CHANCELLOR
                                               )
RODNEY KI NG, M        ARK HOLBROOK,           )
AM ERI CAN RESOURCES M          ANAGEM    ENT, )
I NC. , AM  ERI CAN GAS                        )
TECHNOLOGI ES, I NC. ,                         )
AM ERI CAN ENERGY EXPLORATI ON,                )
I NC. , BERROD, I NC. , RI CK                  )
CASTOR, a nd M CROM  c       E, LTD. , I NC. )     AFFI RMED I N PART; VACATED
                                               )   I N PART; M ODI FI ED I N PART;
       De f e nda nt s - Appe l l a nt s       )   a nd REMANDED




W LLI AM P. SNYDER a nd ADRI ENNE L. ANDERSON OF KNOXVI LLE FOR
 I
APPELLANTS M ARK HOLBROOK, M CROM
                               c    E, LTD. , I NC. , AMERI CAN RESOURCE
MANAGEM ENT, I NC. , AMERI CAN ENERGY EXPLORATI ON, I NC. , a nd AMERI CAN
GAS TECHNOLOGI ES, I NC.

H. BRUCE GUYTON OF KNOXVI LLE FOR APPELLEES




                                    O P I N I O N




                                                               Godda r d, P. J .
                   The De f e nda nt s a ppe a l a s umma r y j udgme nt e nt e r e d i n

f a vo r o f t he Pl a i nt i f f s f or t he e nf or c e me nt of a s e t t l e me nt

a gr e e me nt .



                   The f a c t s o f t hi s c a s e a r e s ome wha t c ompl e x.        Ca noni e

En e r g y , I nc . ( CEI ) a nd W , I nc . ( W ) , whi c h s ha l l be
                                  GI           GI

c o l l e c t i ve l y r e f e r r e d t o a s Pl a i nt i f f s , e nt e r e d i nt o a ve nt ur e

wi t h Ame r i c a n Re s our c e M na ge me nt , I nc . ( ARM , Ame r i c a n Ene r gy
                                   a                          )

Ex p l o r a t i on, I nc . , ( AEX) a nd Coa l Cr e e k M nuf a c t ur i ng Compa ny
                                                          a

( Co a l Cr e e k) .       The ve nt ur e , c a l l e d " t he Bl ue Ge m Pr oj e c t , " wa s

f o r t h e e xpl or a t i on of oi l a nd na t ur a l ga s i n Ande r s on a nd M g a n
                                                                                  or

c ount i e s .      The ve nt ur e a l s o i nc l ude d t he dr i l l i ng a nd

c o n s t r u c t i on of oi l a nd na t ur a l ga s we l l s a nd t he s a l e of oi l a n d

n a t u r a l ga s pr oduc e d by t hos e we l l s .



                   Unde r t he a gr e e me nt , t he Pl a i nt i f f s we r e t o c ont r i but e

n i n e mi l l i on dol l a r s ove r a s e ve n- ye a r pe r i od.         ARM a nd AEX

a g r e e d t o c ont r i but e i nt e r e s t s i n c e r t a i n e xi s t i ng oi l a nd

n a t ur a l ga s we l l s a nd i nt e r e s t s i n mi ne r a l r i ght s l e a s e s , a nd

Co a l Cr e e k a gr e e d t o c ont r i but e a n opt i on t o dr i l l oi l a nd

n a t u r a l ga s we l l s on a ppr oxi ma t e l y s e ve nt y t hous a nd a c r e s of

l a nd.      The a gr e e me nt pr ovi de d t ha t ARM wa s t o a c t a s t he

o p e r a t i ng ma na ge r of t he pr oj e c t a nd wa s t o pr ovi de a l l ope r a t i o n

s e r vi c e s .    I n c onne c t i on wi t h s uc h dut i e s , ARM hi r e d AGT t o

p e r f o r m t he a c t ua l c ons t r u c t i on a nd ope r a t i on of t he pr oj e c t ' s

we l l s .




                                                   2
                  I n Nove mbe r of 1993, t he Pl a i nt i f f s f i l e d s ui t a l l e g i n g

t h a t t h e y we r e f r a udul e nt l y i nduc e d t o pa r t i c i pa t e i n t he Bl ue

Ge m Pr o j e c t a nd a l l e gi ng t ha t AGT, a s t he a l t e r e go of ARM,

wr o n g f u l l y c ha r ge d a ma r kup on ma t e r i a l s s uppl i e d f or t he pr oj e c t

a n d wr o ngf ul l y c ha r ge d f or t he e qui pme nt a nd s e r vi c e s pur s ua nt t o

t h e pr i c e l i s t i n t he e xpl or a t i on a gr e e me nt .          Na me d a s de f e nda nt s

i n t h e s ui t we r e ARM AGT, AEX, Coa l Cr e e k, M r k Hol br ook, Rod n e y
                           ,                           a

Ki n g , Be r r od, I nc . , a nd Ri c ha r d Ca s t or .           Hol br ook wa s t he

p r e s i d e nt of ARM a nd AEX.            Ki ng wa s a f or me r pr e s i de nt of AGT a n d

t h e c u r r e nt pr e s i de nt of Be r r od, I nc . , t he s ol e s ha r e hol de r of

AEX.       Ca s t or wa s t he pr e s i de nt of AGT.



                  I n M y 1994, Ca s t or a nd Hol br ook be c a me i nt e r e s t e d i n
                       a

t he p o s s i bi l i t y o f s e t t l i ng t hi s l a ws ui t .      Ca s t or c ont a c t e d t he

Pl a i nt i f f s '   r e pr e s e nt a t i ve s t o di s c us s t hi s pos s i bi l i t y.      The

Pl a i n t i f f s a nd Hol br ook a gr e e d t ha t t he di s c us s i ons woul d t a ke

p l a c e i n Pl a i nt i f f s '   of f i c e s i n Sout h Ha ve n, M c hi ga n.
                                                                      i                       Pr e s e n t

a t t h e me e t i ng we r e :       Hol br ook, Ca s t or , Tony Ca noni e , Sr . , a n

i n v e s t o r i n t he Bl ue Ge m Pr oj e c t , J e r r y Ca noni e , pr e s i de nt of

CEI , To ny Ca noni e , J r . , c h a i r ma n of t he boa r d of di r e c t or s of

CEI , a n d Cl a ude Woods , pr e s i de nt of W .
                                                GI                   Ki ng di d not a t t e nd t h e

me e t i n g , n or wa s h e ma de a wa r e t ha t i t wa s t a ki ng pl a c e .



                  Hol br ook a l l e ge s t ha t dur i ng t he s e t t l e me nt

d i s c u s s i ons , t h e Pl a i nt i f f s ma de r e f e r e nc e t o t he pos s i bi l i t y

t h a t c r i mi na l c ha r ge s mi ght be br ought a ga i ns t Hol br ook a nd hi s

f a mi l y , who we r e s ha r e hol de r s a nd di r e c t or s of M Cr ome , I nc . ,
                                                                     c



                                                     3
Ho l b r o o k ' s f a mi l y c or por a t i on.   M Cr ome wa s not a n or i gi na l pa r t y
                                                    c

t o t he l a ws ui t , b ut i t di d own a n i nt e r e s t i n t he Bl ue Ge m

Pr o j e c t a s of M y 1994, a nd t he Pl a i nt i f f s l a t e r a me nde d t he i r
                     a

c o mp l a i nt t o a dd a c l a i m a ga i ns t M Cr ome .
                                                  c                Hol br ook f ur t he r

a l l e ge s t ha t t he r e wa s a l s o di s c us s i on t ha t s i mi l a r c ha r ge s c ou l d

b e b r o u ght a ga i ns t Ki ng a nd hi s f a mi l y me mbe r s .         The r e we r e a l s o

a l l e ga t i ons t ha t Ki ng h a d e nga ge d i n e xt r a ma r i t a l a f f a i r s a nd

t h a t t h e s e a f f a i r s woul d b e e xpos e d i f t he l i t i ga t i on c ont i nue d .

Ho l b r o o k f ur t he r a l l e ge s t ha t t he Pl a i nt i f f s t hr e a t e ne d t o f or c e

b o t h t h e Ki ng a nd Hol br ook f a mi l i e s i nt o ba nkr upt c y.



                   The s e t t l e me nt me e t i ng wa s he l d i n t he of f i c e s of CEI

a nd a t t he e nd o f d a y o ne , a dr a f t of t he a gr e e me nt wa s r e a c he d.

Th a t n i ght , t he Pl a i nt i f f s , Hol br ook a nd Ca s t or s oc i a l i z e d

t oge t he r .      Hol br ook a nd Ca s t or r e t ur ne d t o t he i r hot e l r oom l a t e r

t h a t e v e ni ng.      Hol br ook c a l l e d hi s wi f e , but he di d not di s c us s

t h e s e t t l e me nt ne got i a t i on s wi t h he r .    Ne i t he r Hol br ook nor

Ca s t o r c ont a c t e d t he i r a t t or ne ys .



                   The ne xt da y ne got i a t i ons r e s ume d.       Hol br ook r e que s t e d

t h a t s o me c ha nge s b e ma de i n t he dr a f t s e t t l e me nt a gr e e me nt a nd

t h e c h a nge s we r e ma de .       Hol br ook a s s e r t s t ha t t he Pl a i nt i f f s t h e n

a g r e e d t ha t Hol br ook a nd Ca s t or ' s s e t t l e me nt of f e r wa s s uf f i c i e n t

t o c o v e r Ki ng a s we l l a nd t ha t t he Pl a i nt i f f s woul d r e l e a s e Ki ng

a n d Be r r od, I nc . , Ki ng' s f a mi l y c or por a t i on, f r om a l l c l a i ms i f

Ki n g wo ul d a gr e e t o be bound by t he t e r ms of t he s e t t l e me nt

a gr e e me nt .     Howe ve r , t he s e t t l e me nt a gr e e me nt i t s e l f pr ovi de s



                                                   4
t ha t t h e Pl a i nt i f f s woul d di s mi s s t he s ui t onl y a s t o ARM AGT,
                                                                               ,

Ho l b r o o k, AEX, Ca s t or a nd M Cr ome .
                                     c                     I t f ur t he r s t a t e d t ha t t he

s e t t l e me nt a gr e e me nt d i d not a f f e c t c l a i ms a ga i ns t Be r r od, I nc . ,

a n d Ki n g.



                Pr i or t o t he s i gni ng of t he s e t t l e me nt a gr e e me nt ,

Ca s t or t ol d t he Pl a i nt i f f s t ha t i n Apr i l of t ha t ye a r he

s u b mi t t e d a l e t t e r of r e s i gna t i on a s pr e s i de nt of AGT a nd t ha t ,

a s a r e s ul t , he ma y not ha ve t he ne c e s s a r y a ut hor i t y t o e xe c ut e

t h e s e t t l e me nt a gr e e me nt on be ha l f of AGT.            Howe ve r , t he r e

a p p e a r s t o be s ome que s t i on ove r whe t he r Ca s t or ' s l e t t e r of

r e s i g n a t i on wa s a c c e pt e d by AGT.        Ca s t or s a i d he wa s t ol d t ha t

t h e r e s i gna t i on woul d not be a c c e pt e d unt i l s ome one c oul d be

f o u n d t o t a ke h i s p l a c e .   Thus , a t t he t i me of t he s e t t l e me nt ,

Ca s t o r t hought hi s r e s i gna t i on ha d not be e n a c c e pt e d a nd t ha t h e

s t i l l h a d a ut hor i t y t o a c t a s pr e s i de nt of AGT.           The a gr e e me nt

wa s t h e n s i gne d by t he pa r t i e s .          Hol br ook s i gne d t he a gr e e me nt o n

b e h a l f of hi ms e l f , ARM AEX, a nd M Cr ome .
                                ,           c                        Ca s t or s i gne d t he

a g r e e me nt of be ha l f of hi ms e l f a nd AGT.



                Upon r e t ur ni ng f r om t he s e t t l e me nt ne got i a t i ons i n

M c h i g a n, Hol br ook me t wi t h Ki ng a nd Ki ng i ni t i a l l y a gr e e d t o t h e
 i

t e r ms o f t he s e t t l e me nt a gr e e me nt .       Hol br ook t he n me t wi t h hi s

f a mi l y , t he s ha r e hol de r s a nd di r e c t or s of M Cr ome , a nd a dvi s e d
                                                               c

t h e m o f t he s e t t l e me nt me e t i ng a nd t he a gr e e me nt i t pr oduc e d.

Th e f a mi l y me mbe r s t he n vot e d t o a c c e pt t he t e r ms of t he

s e t t l e me nt a gr e e me nt .



                                                   5
                    Shor t l y t he r e a f t e r , Hol br ook a l l e ge s t ha t J e r r y Ca no n i e

a d v i s e d hi m t ha t CEI a nd W woul d not a gr e e t o r e l e a s e Ki ng o r
                                    GI

Be r r o d , I nc . , o f a l l c l a i ms unl e s s Ki ng t r a ns f e r r e d c e r t a i n

a s s e t s t o CEI .        At a bout t hi s s a me t i me , t h e s ha r e hol de r s a nd

d i r e c t or s o f Be r r od, I nc . , me t t o di s c us s t he s e t t l e me nt

a gr e e me nt .       Be r r od, I nc . , wa s not a pa r t y t o t he s e t t l e me nt

a g r e e me nt , but i t owne d a l l of AEX' s s ha r e s of s t oc k a nd one -

t h i r d o f ARM s s ha r e s of s t oc k.
                 '                                        The s ha r e hol de r s a nd di r e c t or s

v o t e d n ot t o r a t i f y Hol br ook' s e xe c ut i on of t he a gr e e me nt .

No r ma n Be a uc ha mp, a M c hi ga n a t t or ne y a nd owne r of one - t hi r d o f
                            i

ARM s s ha r e s of s t oc k, a l s o r e f us e d t o vot e hi s s ha r e s of s t oc k
   '

t o r a t i f y Hol br ook' s e xe c u t i on of t he a gr e e me nt .             The

s h a r e h o l de r s a nd di r e c t or s of AGT a l s o me t , a nd t he y vot e d not t o

r a t i f y Ca s t or ' s e xe c ut i on of t he a gr e e me nt .



                    I n t he me a nt i me , t h e Pl a i nt i f f s f i l e d a mot i on t o s t a y

p r o c e e d i ngs i n t he Tr i a l Cour t ba s e d upon t he r e a c he d s e t t l e me n t

a g r e e me nt .      The Pl a i nt i f f s '   mot i on r e que s t e d t ha t a s t a y be

g r a n t e d a s t o a l l De f e nda nt s e xc e pt Ki ng, Be r r od, I nc . , a nd Co a l

Cr e e k .    ARM AEX, a nd Hol br ook t he n oppos e d t he mot i on on t he
                 ,

g r o u n d s t ha t t he s e t t l e me nt a gr e e me nt wa s une nf or c e a bl e .         The

Pl a i n t i f f s s ubs e que nt l y a me nde d t he i r c ompl a i nt t o a dd a n

a l t e r n a t i ve c l a i m f or t he e nf or c e me nt of t he s e t t l e me nt

a gr e e me nt .       The Pl a i nt i f f s a l s o a dde d a c l a i m a ga i ns t M Cr ome f o r
                                                                                      c

t h e a l l e ge d wr ongf ul r e c e i pt of a s s e t s f r om ARM a nd a n

a l t e r n a t i ve c l a i m f or e nf or c e me nt of t he s e t t l e me nt a gr e e me nt .




                                                      6
                      The Pl a i nt i f f s s ubs e que nt l y t ook a vol unt a r y non- s ui t

a s t o t he i r f r a udul e nt i nduc e me nt c l a i ms .                            The Pl a i nt i f f s a l s o

v o l u n t a r i l y di s mi s s e d De f e nda nt Coa l Cr e e k.                         The n i n De c e mbe r o f

1 9 9 4 , a l l De f e nda nt s f i l e d a mot i on f or pa r t i a l s umma r y j udgme n t .

Th e Pl a i nt i f f s a l s o f i l e d a mot i on f or pa r t i a l s umma r y j udgme n t

s e e ki n g t o e nf or c e t he s e t t l e me nt a gr e e me nt a ga i ns t ARM AEX,
                                                                                  ,

Ho l b r o o k, M Cr ome , AGT a nd Ca s t or .
                 c



                      On M r c h 10, 1995, t he Tr i a l Cour t e nt e r e d a n or de r
                          a

d e n y i n g t he De f e nda nt s '              mo t i on a nd gr a nt i ng t he Pl a i nt i f f s '

mo t i o n f or s umma r y j udgme nt a s t o Hol br ook a nd M Cr ome , hol di ng
                                                               c

t h e s e t t l e me nt a gr e e me nt va l i d a nd e nf or c e a bl e a s t o t hos e

pa r t i e s .        I n i t s o r de r , t h e Tr i a l Cour t s pe c i f i c a l l y f ound t ha t

t h e r e wa s n o d i s put e d ma t e r i a l f a c t a s t o t he i s s ue of dur e s s a nd

t h a t t h e r e we r e no i mpr ope r pr e s s ur e s or i nf l ue nc e s on Hol br ook

a t t h e t i me he s i gne d t he s e t t l e me nt a gr e e me nt .                               A s e c ond or de r

wa s e n t e r e d on M r c h 24, 1995, gr a nt i ng t he Pl a i nt i f f s '
                       a                                                                                           mot i on

f o r s u mma r y j udgme nt f or e nf or c e me nt of t he s e t t l e me nt a gr e e me n t
                                                                      1
a g a i n s t ARM AEX, AGT a nd Ca s t or .
                 ,                                                        I n doi ng s o, t he Tr i a l Cour t

f o u n d t ha t Hol br ook a nd Ca s t or ha d e i t he r a c t ua l or a ppa r e nt

a u t h o r i t y t o bi nd t he c or por a t i ons t o t he s e t t l e me nt a gr e e me nt

a n d t h a t t he r e we r e no di s put e d f a c t s t o s how t ha t ARM AEX, o r
                                                                            ,

AGT t o o k a ny a c t i on whi c h woul d a dve r s e l y a f f e c t or i nva l i da t e

t h e s e t t l e me nt a gr e e me nt or woul d c ha l l e nge or di s put e t he


          1
                       At o r a r o u n d t h i s s a me t i me , t h e P l a i n t i f f s a p p a r e n t l y t o o k a
vol unt a r y      n o n - s u i t o f t h e i r c l a i ms a g a i n s t Ro d n e y Ki n g a n d Be r r o d , I n c .      Th e
r e c or d on      a p p e a l d o e s n o t a p p e a r t o i n c l u d e t h e o r d e r o f d i s mi s s a l .     Ho we v e r ,
t h e Co u r t     r e c o g n i z e d t h e d i s mi s s a l i n a n o r d e r t a x i n g c o u r t c o s t s d a t e d M r c h
                                                                                                                            a
24, 1995,          a n d t h u s , we t r e a t t h e Co u r t ' s a wa r d o f s u mma r y j u d g me n t a s a f i n a l
j u d g me n t t   h a t i s a p p e a l a b l e t o t h i s Co u r t .

                                                                  7
a u t h o r i t y of Hol br ook or Ca s t or .           Hol br ook, M Cr ome , ARM AEX,
                                                                      c            ,

a nd AGT a ppe a l e d.          The a ppe a l s of t he s e De f e nda nt s ha ve be e n

c o n s o l i da t e d.     De f e nda nt Ca s t or di d not a ppe a l .



                     The De f e nda nt s a s s e r t t ha t t he Tr i a l Cour t e r r e d i n

g r a n t i n g t he Pl a i nt i f f s '   mot i on f or s umma r y j udgme nt be c a us e

t h e r e a r e di s put e d i s s ue s of ma t e r i a l f a c t a s t o t he i s s ue s of

d u r e s s , a ut hor i t y, f a i l ur e of c ons i de r a t i on a nd l a c k of

c o n s i d e r a t i on.



                     The Supr e me Cour t of Te nne s s e e , i n Byr d v. Ha l l , 847

S. W 2 d 208 ( Te nn. 1993) , s e t f or t h t he pr ope r s umma r y j udgme nt
    .

a n a l y s i s t o be a ppl i e d i n Te nne s s e e .       The r e , t he Cour t s a i d i n

e v a l u a t i ng a s umma r y j udgme nt mot i on, t he s e que s t i ons mus t be

r e s o l v e d: " ( 1) whe t he r a f ac t ual di s put e e xi s t s ; ( 2) whe t he r t h e

d i s p u t e d f a c t i s mat e r i al t o t he out c ome of t he c a s e ; a nd ( 3)

wh e t h e r t he di s put e d f a c t c r e a t e s a ge nui ne i s s ue f or t r i a l . "



                     Byr d a l s o ma ke s t he f ol l ow hol di ngs : s umma r y j udgme n t

s h o u l d be e mpl oye d whe r e t he r e i s no di s put e ove r t he e vi de nc e

a n d t h e r e i s no i s s ue f or a j ur y t o de c i de .          Ra t he r , i t i s j us t

f o r t h e c our t t o a ppl y t he l a w.             For a pa r t y t o a voi d s umma r y

j ud g me n t , i t mus t s how t ha t t he f a c t i n di s put e i s ma t e r i a l ;

me a n i n g , t hi s f a c t i s one t ha t " mus t be de c i de d i n or de r t o

r e s o l v e t he s ubs t a nt i ve c l a i m or de f e ns e a t whi c h t he mot i on i s

d i r e c t e d. "     I f s uc h a di s put e d, ma t e r i a l f a c t doe s e xi s t , t he

c ou r t " mus t t he n d e t e r mi ne whe t he r t he di s put e d ma t e r i a l f a c t



                                                    8
c r e a t e s a ge nui ne i s s ue wi t hi n t he me a ni ng of Rul e 56. 03. "               He r e ,

" t h e t e s t f or a ' ge nui ne i s s ue '     i s whe t he r a r e a s ona bl e j ur y

c o u l d l e gi t i ma t e l y r e s ol ve t ha t f a c t i n f a vor of one s i de or t h e

ot he r .    I f t he a ns we r i s ye s , s umma r y j udgme nt i s i na ppr opr i a t e ;

i f t h e a ns we r i s no, s umma r y j udgme nt i s pr ope r be c a us e a t r i a l

wo u l d b e poi nt l e s s . . . . "       W n a ppl yi ng t hi s t e s t , " t he c our t
                                             he

i s t o v i e w t he e vi de nc e i n a l i ght f a vor a bl e t o t he nonmovi ng

p a r t y a nd a l l ow a l l r e a s ona bl e i nf e r e nc e s i n hi s f a vor . "      It is

t h e b u r de n of t he nonmovi n g pa r t y t o de mons t r a t e t ha t t he r e a r e

n o d i s p ut e d, ma t e r i a l f a c t s c r e a t i ng a ge nui ne i s s ue f or t r i a l

a n d t h a t s umma r y j udgme nt i s a ppr opr i a t e .



                 I n r e vi e wi ng t he or de r f or s umma r y j udgme nt , we c hoo s e

t o a d d r e s s t he i s s ue o f a ut hor i t y f i r s t .   He r e , t h e Pl a i nt i f f s

h a v e t h e bur de n of pr ovi ng t ha t a n a ge nc y r e l a t i ons hi p e xi s t e d

b e t we e n Hol br ook a nd ARM a nd AEX a nd be t we e n Ca s t or a nd AEX.

Sl o a n v . Ha l l , 673 S. W 2d 548 ( Te nn. App. 1984) .
                              .                                           Sl oa n a l s o hol d s

t h e f o l l owi ng:      " The s c ope a nd e xt e nt of a n a ge nt ' s r e a l a nd

a p p a r e n t a ut hor i t y a r e que s t i ons t o be de t e r mi ne d by t he t r i e r o f

f a c t f r om a l l t he f a c t s a nd c i r c ums t a nc e s i n e vi de nc e . "

Fu r t h e r mor e , a n a ge nt ' s a ut hor i t y mus t be t r a c e a bl e t o t he

p r i n c i p a l a nd c a nnot be s h own by t he a ge nt ' s s t a t e me nt s or

a c t i o n s a l one .    And whe n a t hi r d pe r s on " a c t ua l l y knows , or

s h o u l d know, t he l i mi t a t i ons of a n a ge nt ' s a ut hor i t y, t he

p r i n c i p a l i s not bound by a n a c t t ha t i s be yond s uc h

l i mi t a t i ons . "    Rul e v. Br ot he r hood' s Re l i e f & Compe ns a t i on Fun d,

3 6 Te n n . App. 20, 251 S. W 2d 309 ( 1952) .
                              .


                                                  9
                 Looki ng f i r s t t o Ca s t or ' s a ut hor i t y, a di s put e e xi s t s

a s t o t he e f f e c t of hi s r e s i gna t i on f r om t he pos i t i on of

p r e s i de nt of AGT.         Ca s t or ma i nt a i ns t ha t de s pi t e hi s r e s i gna t i on

h e c o n t i nue d t o f unc t i on a s pr e s i de nt of AGT a nd t hought he ha d

a u t h o r i t y t o s i gn t he s e t t l e me nt a gr e e me nt .   Howe ve r , unde r t h e

r u l e o f Sl oa n , Ca s t or ' s s t a t e me nt s a l one c a nnot be de t e r mi na t i v e

o f h i s a ut hor i t y.       Ki ng, t he f or me r pr e s i de nt of AGT who r e c e i v e d

Ca s t or ' s l e t t e r o f r e s i gna t i on, ma i nt a i ns t ha t t he r e s i gna t i on

wa s a c c e pt e d a t t he t i me i t wa s t e nde r e d a nd t ha t a s s uc h, Ca s t o r

h a d n o a ut hor i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be h a l f

o f AGT.       Thus , Ca s t or ' s r e s i gna t i on c r e a t e s a di s put e d i s s ue a s

t o wh e t he r he ha d a ny a c t ua l a ut hor i t y a t t he t i me he s i gne d t h e

s e t t l e me nt a gr e e me nt .    W t he r t he Pl a i nt i f f s t hought Ca s t or h a d
                                       he

a u t h o r i t y i s a l s o di s put e d.    Re vi e wi ng t he e vi de nc e i n t he l i gh t

mo s t f a vor a bl e t o t he De f e nda nt s , i t a ppe a r s t ha t Ca s t or i nf or me d

t he Pl a i nt i f f s o f h i s r e s i gna t i on a nd t he pos s i bi l i t y t ha t he

l a c k e d t he r e qui s i t e a ut hor i t y t o e nt e r i nt o t he a gr e e me nt .

Th u s , s i nc e t he Pl a i nt i f f s we r e ma de a wa r e t ha t Ca s t or ' s

a u t h o r i t y t o bi nd AGT wa s i n que s t i on, t he Pl a i nt i f f s c a nnot no w

a r g u e t ha t t he y a s s ume d Ca s t or ha d a ppa r e nt a ut hor i t y t o a c t f o r

AGT.      The Pl a i nt i f f s we r e wa r ne d of t he pos s i bi l i t y t ha t Ca s t or

h a d n o a ut hor i t y s i nc e he ha d t e nde r e d a l e t t e r of r e s i gna t i on .

Th e r e f o r e , i t a ppe a r s t o t hi s Cour t t ha t a ge nui ne i s s ue of

ma t e r i a l f a c t e xi s t s :   W t he r Ca s t or di d i n f a c t ha ve t he
                                       he

a u t h o r i t y t o e nt e r i nt o t he s e t t l e me nt a gr e e me nt on be ha l f of

AGT.      Be c a us e t hi s i s a n i s s ue of f a c t t ha t mus t be r e s ol ve d,

s u mma r y j udgme nt i s va c a t e d a s t o De f e nda nt AGT.            The De f e nda n t



                                                  10
Ca s t o r di d not a ppe a l f r om t he Tr i a l Cour t ' s or de r e nf or c i ng t h e

s e t t l e me nt a gr e e me nt .



                     W now t ur n t o t he i s s ue of Hol br ook' s a ut hor i t y t o
                      e

b i n d ARM a nd AEX.           At t he t i me he s i gne d t he a gr e e me nt , Hol br o o k

wa s t h e pr e s i de nt of t he s e t wo c or por a t i ons .         As s uc h, Hol br oo k

h a s t h e a ut hor i t y t o e nt e r i nt o a gr e e me nt s on be ha l f of t he

c o r p o r a t i ons .    " Al l c or por a t e or ga ni z a t i ons a c t by a nd t hr ough

b o a r d s , c ommi s s i ons , of f i c e r s a nd e mpl oye e s , a nd i f t he y a c t

wi t h i n t he a ppa r e nt s c ope of t he i r a ut hor i t y, t he n t he i r a c t i on s

a r e t h o s e of t he c or por a t i on a nd, t he r e f or e , bi ndi ng on t he

s t o c k h o l de r s or me mbe r s of s uc h c or por a t i ons . "     W t e ha ve n Ut i l .
                                                                           hi

Di s t . o f She l by Count y v. Ra ms a y, 215 Te nn. 435, 387 S. W 2d 35 1
                                                                    .

( 1964) .        He r e , t he Cour t he l d t ha t t he a c t i ons of t he boa r d' s

c o mmi s s i one r s we r e unque s t i ona bl y bi ndi ng on t he me mbe r s ,

r e s i de n t s a nd b ondhol de r s of t he ut i l i t y di s t r i c t .    Si mi l a r l y, i n

Bl a s i n g a me v. Ame r i c a n M t e r i a l s , I nc . , 654 S. W 2d 659
                                    a                                 .

( Te n n . 1 983) , t he Supr e me Cour t he l d t ha t t he pr e s i de nt of a

c o r p o r a t i on c oul d bi nd t he c or por a t i on t o a c ont r a c t wi t hout t h e

a p p r o v a l of t he Boa r d of Di r e c t or s .     I t i s c l e a r t he n t ha t

Ho l b r o o k, a s pr e s i de nt of AEX a nd ARM ha d a ut hor i t y t o bi nd t h e
                                                  ,

c o r p o r a t i ons s o l ong a s he di d not e xc e e d t he s c ope of t ha t

a u t h o r i t y.     I t i s not c l e a r a s t o wha t t he s c ope of hi s a ut hor i t y

ma y h a v e b e e n.       W t hout t hi s de t e r mi na t i on, i t i s i mpos s i bl e t o
                             i

k n o w wh e t he r Hol br ook e xc e e de d hi s a ut hor i t y.        M ki ng t hi s
                                                                          a

d e t e r mi na t i on i s f or t he t r i e r of f a c t .    Se e Sl oa n, s upr a .

Ad d i t i o na l l y, t he boa r d of di r e c t or s of bot h AEX a nd ARM vot e d


                                                  11
n o t t o r a t i f y Hol br ook' s s i gni ng of t he s e t t l e me nt a gr e e me nt .

Co n t r a r y t o t he Tr i a l Cour t ' s f i ndi ng, t he s e vot e s a ppe a r t o b e

a c t i o n s t ha t ma y a dve r s e l y a f f e c t or i nva l i da t e t he s e t t l e me nt

a gr e e me nt .     At t he l e a s t , t he s e vot e s c e r t a i nl y a ppe a r t o

c h a l l e n ge or di s put e t he a ut hor i t y of Hol br ook.               Si nc e a

d e t e r mi na t i on wa s not ma de a s t o whe t he r Hol br ook e xc e e de d hi s

a u t h o r i t y whe n he s i gne d t he s e t t l e me nt a gr e e me nt wi t hout t he

k n o wl e d ge of t he s ha r e hol de r s , s umma r y j udgme nt i s va c a t e d a s t o

De f e n d a nt s AEX a nd ARM.



                   Ha vi ng di s c ove r e d one r e a s on why s umma r y j udgme nt

s h o u l d not ha ve be e n gr a nt e d a s t o De f e nda nt s AGT, AEX, a nd ARM,

we g o n o f ur t he r a s t o t he s e De f e nda nt s .            Si nc e i t i s not

n e c e s s a r y t o r e a c h t he ot he r i s s ue s r a i s e d by t he s e De f e nda nt s ,

we c h o o s e not t o do s o.



                   Howe ve r , t he r e now r e ma i ns t he que s t i on of Hol br ook a n d

M Cr o me , Hol br ook' s f a mi l y c or por a t i on.
 c                                                                  The r e i s no i s s ue of

a u t h o r i t y he r e be c a us e t he s ha r e hol de r s of M Cr ome , Hol br ook' s
                                                                  c

f a mi l y , di d not que s t i on Hol br ook' s a ut hor i t y.             I n f a c t , t he y

v o t e d t o r a t i f y t he s e t t l e me nt a gr e e me nt .     De f e nda nt Hol br ook

a r g u e s i ns t e a d t ha t t he s e t t l e me nt a gr e e me nt s houl d not be

e nf o r c e d b e c a us e t he a gr e e me nt wa s e xe c ut e d unde r dur e s s a nd

b e c a u s e no c ons i de r a t i on wa s gi ve n t o M Cr ome i n e xc ha nge f or
                                                         c

a gr e e i n g t o t he s e t t l e me nt .




                                                  12
                    W d i s c us s t he dur e s s i s s ue f i r s t .
                     e                                                    Te nne s s e e ha s

g e n e r a l l y de f i ne d dur e s s a s t he c ondi t i on of mi nd pr oduc e d by t h e

i mp r o p e r e xt e r na l pr e s s ur e or i nf l ue nc e t ha t pr a c t i c a l l y de s t r o y s

t h e f r e e a ge nc y of a pa r t y , a nd c a us e s hi m t o do a nd a c t or ma k e

a c o n t r a c t not of hi s own vol i t i on, but unde r s uc h wr ongf ul

e xt e r n a l p r e s s ur e .   Ra i ne y v. Ra i ne y, 795 S. W 2d 139 ( Te nn.
                                                                  .

Ap p . 1 9 9 0) .     Se e a l s o Gi l l e y v. Gi l l e y , 778 S. W 2d 862 ( Te nn. Ap p .
                                                                      .

1 9 8 9 ) ( i nt e r na l pr e s s ur e s t ha t a r e of a pa r t y' s own ma ki ng a r e

not dur e s s ) .        To de t e r mi ne whe t he r t he r e i s dur e s s , t he que s t i o n

i n e a c h c a s e i s , wa s t he pe r s on s i gni ng t he c ont r a c t s o a f f e c t e d

b y t h r e a t s of t he ot he r pa r t y a s t o be be r e f t of t he qua l i t y of

mi n d e s s e nt i a l t o t he ma ki ng of a c ont r a c t .           I n ot he r wor ds , wa s

t h e p e r s on be r e f t of t he f r e e e xe r c i s e of hi s wi l l powe r .              Exum

v . W s h i ngt on Fi r e a nd M r i ne I ns . Co. , 41 Te nn. App. 610, 297
     a                          a

S. W 2 d 805 ( 1955) .
    .                             W t he r dur e s s e xi s t s i s de t e r mi ne d by
                                   he

e xa mi n i ng a l l t he c i r c ums t a nc e s .        Si mps on v. Ha r pe r , 21 Te nn.

Ap p . 4 3 1, 111 S. W 2d 882 ( 1937) .
                      .



                    I n t hi s c a s e , t h e Tr i a l Cour t de t e r mi ne d t ha t t he r e

we r e no di s put e d ma t e r i a l f a c t s wi t h r e s pe c t t o t he i s s ue of

d u r e s s a nd f ur t he r t ha t Hol br ook wa s not unde r i mpr ope r e xt e r n a l

f o r c e s whe n h e s i gne d t he a gr e e me nt .          W a gr e e .
                                                                e             The Pl a i nt i f f s

d o n o t di s put e t he f a c t t ha t s ome s or t of t hr e a t s a s t o t he

p o s s i b i l i t y of c r i mi na l pr os e c ut i on a nd ba nkr upt c y we r e

c o mmu n i c a t e d t o Hol br ook.        Howe ve r , t he s e t hr e a t s do not

c o n s t i t ut e s uc h i mpr ope r t hr e a t s a s t o i nva l i da t e Hol br ook' s

s i g n i n g of t he a gr e e me nt .       Hol br ook wa s not f or c e d i nt o t he



                                                     13
s e t t l e me nt pr oc e s s ; i t wa s he who i ni t i a t e d s e t t l e me nt by

c o n t a c t i ng t he Pl a i nt i f f s a nd t he n a gr e e i ng t o me e t i n t he i r

o f f i c e s i n M c hi ga n.
                   i                Hol br ook s t a t e d i n hi s de pos i t i on t ha t h e

wa s n o t f or c e d t o s i gn t he a gr e e me nt a nd t ha t he wa s f r e e t o

l e a ve t he s e t t l e me nt d i s c us s i ons a t a ny t i me .        He c oul d ha ve a l s o

c o n t a c t e d hi s l a wye r or hi s f a mi l y a t a ny t i me .          He c hos e not t o

do s o.      Hol br ook wa s not de pr i ve d of t he f r e e e xe r c i s e of hi s

wi l l po we r .     W a gr e e wi t h t he Tr i a l Cour t t ha t a ny pr e s s ur e s
                      e

Ho l b r o o k ma y ha ve be e n unde r a t t he t i me of t he a gr e e me nt we r e

n o t s u c h i mpr ope r one s a s t o c ons t i t ut e dur e s s a nd t o i nva l i da t e

t h e a gr e e me nt .



                As f or t he c ons i de r a t i on i s s ue , i n or de r f or a

s e t t l e me nt a gr e e me nt t o b e e nf or c e a bl e , l i ke a ny c ont r a c t ,

c o n s i d e r a t i on mus t be gi ve n a nd r e c e i ve d.        M l we e v. Pe a c ht r e e
                                                                       i

Cy p r e s s I nve s t me nt Co. , 510 F. Supp. 279 ( E. D. Te nn. 1977) .                  It is

we l l s e t t l e d i n Te nne s s e e t ha t t he c our t wi l l not " i nqui r e i nt o

t h e a d e qua c y or i na de qua c y of t he c ons i de r a t i on f or a c ompr omi s e

f a i r l y a nd d e l i be r a t e l y ma de . "   Thur mond v. W t t a ke r , 1
                                                                  hi

Te n n . Ap p. 111 ( 1925) .         Re l e a s i ng c l a i ms a ga i ns t a pa r t y, whe t h e r

t h e c l a i ms a r e a c t ua l l y pe ndi ng or not , i s s uf f i c i e nt

c on s i d e r a t i on f or a s e t t l e me nt a gr e e me nt .     Se r vi c e St a mp Co. v .

Ke t c he n, 10 Te nn. App. 59 ( 1929) .                 Fur t he r mor e , whe r e t he f a c t s

a r e un d i s put e d, whe t he r a r e l e a s e c ons t i t ut e s a de qua t e

c o n s i d e r a t i on i s a que s t i on of l a w.        Appl e whi t e v. Al l e n , 2 7

Te n n . ( 1 Hum. ) 696 ( 1848) .




                                                    14
                    I n t he c a s e a t t he ba r , De f e nda nt Hol br ook a gr e e d on

b e h a l f of M Cr ome t o gi ve up s ome a s s e t s of t he c ompa ny 2 i n or d e r
                c

t o b e r e l e a s e d f r om a ny c l a i ms t he Pl a i nt i f f s mi ght ha ve a ga i n s t

M Cr o me .
 c                  Tha t n o c l a i ms ha d be e n a c t ua l l y f i l e d a ga i ns t M Cr ome
                                                                                           c
                                                                                          3
a t t he t i me o f s e t t l e me nt i s not di s pos i t i ve .                              I t a ppe a r s t he n

t h a t t h e Pl a i nt i f f s a nd M Cr ome ga ve s uf f i c i e nt c ons i de r a t i on f o r
                                      c

t h e s e t t l e me nt a gr e e me nt , a nd t he r e i s no ne e d f or di s c us s i on a s

t o t h e va l i di t y of a ny c l a i ms a l l e ge dl y he l d by t he Pl a i nt i f f s o r

t h e a d e qua c y of t he Pl a i nt i f f s '                 c ons i de r a t i on i n e xc ha nge f or

M Cr o me ' s a s s e t s .
 c



                    Thus , f i ndi ng no di s put e d ma t e r i a l f a c t s a s t o t he

i s s u e s of dur e s s or c ons i de r a t i on, we a f f i r m t he Tr i a l Cour t ' s

e n t r y o f s umma r y j udgme nt a s t o M Cr ome a nd Hol br ook.
                                             c



                    I n a ddi t i on t o t he i r a ppe a l of s umma r y j udgme nt , t he

De f e nd a nt s l a t e r a ppe a l e d t he Tr i a l Cour t ' s or de r a wa r di ng

d i s c r e t i ona r y c os t s t o t he Pl a i nt i f f s .                   The y i ns i s t t he Cour t

a b u s e d i t s di s c r e t i on by i nc l udi ng c os t s i nc ur r e d i nc i de nt t o t h e

o r i gi na l s ui t f or b r e a c h of c ont r a c t .                      W l e t hi s i s t r ue , we
                                                                               hi

h a v e n o doubt t ha t t he i nf or ma t i on de ve l ope d i n pr e pa r i ng t he



          2
                     S p e c i f i c a l l y , Ho l b r o o k a n d Mc Cr o me a g r e e d t o g i v e t h e P l a i n t i f f s a
4 . 4 5 % wo r k i n g i n t e r e s t i n t h e Bl u e Ge m P r o j e c t a s we l l a s 9 3 s h a r e s o f
Te n n e s s e e En e r g y P i p e l i n e ( TEP S CO) o r t h e mo n e y r e c e i v e d f r o m a s a l e o f t h o s e
s h a r e s . I n r e t u r n , t h e P l a i n t i f f s a g r e e d t o r e l e a s e Ho l b r o o k a n d Mc Cr o me f r o m
a n y c l a i m a r i s i n g o u t o f t h e l a ws u i t , f r o m a l l mo n e t a r y o b l i g a t i o n s a n d c l a i ms
a l l e g e d l y o we d t h e P l a i n t i f f s a n d a n y o t h e r c l a i m a r i s i n g o u t o f t h e Bl u e Ge m
Pr o j e c t .

          3
                       Th e Tr i a l Co u r t g r a n t e d t h e P l a i n t i f f s ' mo t i o n t o a me n d t h e i r
c o mp l a i n t o n Oc t o b e r 3 1 , 1 9 9 4 , a n d t h e P l a i n t i f f s s u b s e q u e n t l y a d d e d a c l a i m
a g a i n s t M Cr o me f o r t h e a l l e g e d wr o n g f u l r e c e i p t o f a s s e t s f r o m ARM a n d i n t h e
                  c
a l t e r n a t i v e , a c l a i m f o r t h e e n f o r c e me n t o f t h e s e t t l e me n t a g r e e me n t .

                                                               15
o r i gi na l c l a i m p r ompt e d t he s e t t l e me nt a gr e e me nt whi c h i s t he

p r i n c i p a l s ubj e c t of t hi s a ppe a l .   I n l i ght of t hi s , we f i nd no

a b u s e o f di s c r e t i on i n a l l owi ng s uc h f e e s .




                                                 16
               W a c c or di ngl y a f f i r m t he j udgme nt i ns of a r a s t he
                e

De f e n d a nt s Hol br ook a nd M Cr ome a r e c onc e r ne d, but modi f y t he
                                   c

d i s c r e t i ona r y c os t s a wa r d by r e qui r i ng t he m t o pa y one - f i f t h e a c h

o f t h e a mount a wa r de d by t he Cha nc e l l or , va c a t e t he j udgme nt a s

t o t h e r e ma i ni ng De f e nda nt s , a nd r e ma nd t he c a s e f or f ur t he r

p r o c e e d i ngs not i nc ons i s t e nt wi t h t hi s opi ni on.      One - ha l f of t h e

c o s t s o f a ppe a l a r e a dj udge d a ga i ns t Hol br ook a nd M Cr ome a nd
                                                                       c

o n e - h a l f a ga i ns t Ca noni e Ene r gy a nd W .
                                                     GI



                                             _______________________________
                                             Hous t on M Godda r d, P. J .
                                                        .


CONCUR:



_ _ _ _ _ _ _ _________________________
He r s c he l P. Fr a nks , J .



_ _ _ _ _ _ _ _________________________
Ch a r l e s D. Sus a no, J r . , J .




                                                17
