                    IN THE COURT OF APPEALS OF TENNESSEE
                                  AT KNOXVILLE
                         Assigned on Briefs on March 26, 2002

T.H. ENGINEERING & MANUFACTURING, INC., and RON TOURTE, v.
      CHRIS A. MUSSARD, individually and doing business as T.H.
           ENGINEERING & MANUFACTURING, L.L.C.

                  Direct Appeal from the Chancery Court for Knox County
                     No. 146015-1 Hon. John F. Weaver, Chancellor

                                       FILED MAY 23, 2002

                                 No. E2001-02406-COA-R3-CV



Plaintiff sued on promissory note. Defendant counterclaimed on grounds of breach of contract,
violation of Tennessee Consumer Protection Act, and fraud. The Trial Court entered Judgment for
plaintiff and defendant has appealed. We affirm.

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

HERSCHEL PICKENS FRANKS, J., delivered the opinion of the court, in which CHARLES D. SUSANO,
JR., J., and D. MICHAEL SWINEY , J., joined.

Arthur F. Knight, III, Knoxville, Tennessee, for Appellants.

John P. Newton, Jr., Knoxville, Tennessee, for Appellees.



                                             OPINION


                Plaintiffs’ action on a promissory note for the sale of plaintiffs’ business and assets
to defendant resulted in a Judgment in favor of the plaintiff for the balance owing on the promissory
note, plus attorney’s fees.

               When sued, the defendants answered and counter-claimed, alleging theories of
misrepresentation and fraud, breach of contract, violation of the Tennessee Consumer Protection Act,
and breach of a non-compete covenant previously executed in connection with the sale of the
business. Summary Judgment was granted to plaintiffs on the issues of the Tennessee Consumer
Protection Act and breach of the covenant not to compete. The remaining issues were tried which
resulted in Judgment for the plaintiffs.

              The Trial Court rendered a detailed Memorandum Opinion and denied defendants’
request pursuant to Tenn. R. Civ. P. 52.01 for findings of fact and conclusions of law.

                Defendant who purchased the business is a CPA and holds an MBA with an extensive
business and financial business and management background. The parties engaged in prolonged
negotiations for the purchase of the business and a deal was struck when defendant offered
$175,000.00 in cash and a note for $125,000.00. The final purchase and sales agreement executed
by the parties allocates the total purchase price as follows:

               $145,000.00 to inventory, equipment, jigs, and supplies
               $105,000.00 to consulting agreement
                $50,000.00 to a non-compete agreement.1

                The evidence showed that plaintiff had sales in 1994 of $194,000.00, in 1995 of
$300,000.00, in 1996 of $380,000.00, and in 1997 $320,000.00. The amount of the 1998 sales was
sharply disputed at trial. Defendant claims that plaintiff represented 1998 sales of $402,000.00.
Defendant testified he was provided with a 1998 sales register which indicated sales of $402,000.00.
However, later in the negotiations, plaintiff told him the business was down 15 to 20%, but indicated
this was due to the loss of a key employee, and not due to a downturn in the market. Defendant
testified he accepted these explanations without any attempt at verification. He conducted what he
called a meticulous evaluation. Plaintiff offered defendant the opportunity to examine any books,
records or other documents or materials, or to meet with his accountant, but defendant did not feel
any of this was necessary. Defendant argues the invoice register for 1998 contains duplicated
invoices, but the Court found that no direct proof was ever introduced that any invoice was invalid
or otherwise not legitimate. Defendant contends the true figure for the actual sales in 1998 was
$122,000.00 less, or closer to $280,000.00 and that had he known the sales were that low he would
have walked away and never bought the company. In 1998, the federal tax return shows
$280,000.00 income. A profit and loss statement for 1998 prepared by the accountant shows gross
sales of $402,000.00. However, defendant’s admission that he never had this document before the
contract was entered and could not have relied upon it as a misrepresentation, was an important fact
in the Court’s Opinion. The proof is also disputed whether defendant ever requested the first quarter
1999 sales figures, which were $40,710.00. The record shows that a business broker did have this
information, and provided it upon request to another interested buyer.


       1
        The allocation of the purchase price for purposes of §1060 of the Internal Revenue Code
signed by the parties, allocates the price as follows: Inventory $22,851.00, Furniture, Fixtures and
Equipment $171,149.00, Covenant Not to Compete $1,000.00, Consulting Agreement with Ronald
W. Tourt $105,000.00.


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               The gravamen of defendants’ appeal2 seems to be either breach of contract in that the
purchaser did not receive an ongoing and profitable business, with damages for loss of goodwill, or
a litany of misrepresentations which together fraudulently induced him to enter into the deal and
purchase a dead or dying business.

               Our review of non-jury cases is de novo with a presumption of correctness of the trial
court’s findings. Absent an error of law, this Court will affirm the lower court unless it finds that
the evidence preponderates against the findings of the trial court. Tenn. R. App. P. 13(d); Grand
Valley Lakes Property Owners Ass’n v. Cary, 897 S.W.2d 262 (Tenn. Ct. App. 1994).

                Defendant argues the Trial Court erred in refusing to consider findings of facts and
conclusions of law in accordance with his Motion, pursuant to Tenn. R. Civ. P. 52.01. In this case,
the Memorandum Opinion provides a clear and detailed summary of a four-day trial, technical
exhibits and respective contentions of the parties. Our review persuades us the Trial Court
adequately fulfilled the requirements of Tenn. R. Civ. P. 52 in its Memorandum Opinion. As we
observed in Hodge v. provident Life and Acc. Ins. Co., 664 S.W.2d 297, 300 (Tenn. Ct. App. 1983):
“It is not necessary for the trial court to treat separately each fact or question at issue so long as the
findings as a whole cover all relevant facts necessary to a determination of the case.”

               Defendant also contends the Trial Court erred in holding that he could not recover
damages for loss of goodwill because none of the purchase price was allocated to goodwill in the
final purchase and sales agreement.

               The Trial Court held that defendant sought damages for a breach of contract for the
loss of goodwill, yet the purchase and sales agreement allocated nothing for the purchase of goodwill
among the list of assets.3 In fact, an earlier draft listed goodwill among the assets, but assigned no
value to it. Goodwill has been defined as:

                the goodwill of a business is a reasonable expectation of its continued profitable
                operation. Many factors are involved; the name of the firm, its reputation for doing
                business, the location, the number and character of its customers, the former success
                of the business, and many other elements which would be advantageous in the
                operation of the business. Goodwill is a property right which may be sold.

Young v. Cooper, 203 S.W.2d 376, 384 (Tenn. Ct. App. 1947).



        2
        The defendants’ brief does not set forth a statement of the issues presented for review in
accordance with Tenn. R. App. P. 27(a)(4).
        3
        The Court opined that defendants’ position would have been stronger if the document had
simply stated the purchase was for “an ongoing business with a solid customer base.”

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                In a case similar to this case, Concord Control, Inv., v. Commissioner, 615 F.2d 1153
  th
(6 Cir. 1980), a sales contract did not list goodwill as an asset in the books or in the contract for the
sale of the business. The Tax Court found that the company could not expect continued patronage
or competitive advantage and therefore possessed no goodwill, but that it did have a substantial
going concern value. It was earning money, had a trained staff of employees, a product line ready
for sale, and equipment ready for use and various tangible assets. The 6th Circuit upheld the Tax
Court’s finding and agreed that these two intangible assets, i.e, “goodwill” and “going concern” are
entirely separate and distinct concepts.

                We find this issue to be without merit.

                Defendant also asks the Court to find that the purchase of the sales agreement is
ambiguous in order to find damages for the purchase of goodwill, absent an express allocation. In
this case the Trial Court correctly observed the merger clause of the Agreement “contains the entire
understanding of the parties, and there are no other oral statements, understandings or representations
relied upon by the parties hereto.” Moreover, defendant’s arguments are proscribed by the parol
evidence rule. See Faithful v. Gardner, 799 S.W.2d 232 (Tenn. Ct. App. 1990).

                Defendant further asserts that the Trial Court erred in ruling that defendant failed to
establish an element of damage in its fraud and breach of contract counter-claim.

                 False statements alone will not affect the validity of a transaction. The injured party
must have relied upon false statements and the reliance must have been reasonable under the
circumstances. Security Federal Savings and Loan Ass’n v. Riviera Ltd., 856 S.W.2d 709 (Tenn.
Ct. App. 1992). The evidence establishes that the true state of the business was never concealed
from defendant, and that his reliance upon any alleged misrepresentations was not reasonable in the
light of all the information. According to defendant’s testimony, he only evaluated one factor as
important, i.e., sales. He was offered an opportunity to examine all books and records, but deemed
them inconsequential. He declined to investigate credit history, customer base, accounting records,
market competitions or labor problems. He never ran an annual total for the 1998 invoice register,
despite his meticulous spread sheet analysis. Significantly, on cross examination, he admitted that
he had the mid-year financial reports of January-July, 1998, which evidenced sales of only
$181,000.00, which extrapolated to much less than $402,000.00 for the year. He admitted he had
concerns about the company but did no investigation into the decline of the market, loss of
customers, or presence of competitors.

                 Plaintiff’s statements about the 1998 sales and the reasons for the decline in sales due
to the loss of a key employee, were in the nature of estimations and opinions of present and future
1999 sales, which do not establish a basis for fraudulent representation on this record. Reliance upon
statements of opinion or estimates of future sales, and where the means of information have been
furnished and available, will not substantiate a subsequent claim based upon fraud. Pakul v. Barnes,
631 S.W.2d 436 (Tenn. Ct. App. 1981). Statements of opinion, puffing, sales talk, conjecture, or
representations concerning future events are not actionable, even though they may later turn out to

                                                  -4-
be inaccurate. McElroy v. Boise Cascade Corp., 632 S.W.2d 127 (Tenn. Ct. App. 1982).

               The record reveals that defendant became aware of what he alleges were fraudulent
misrepresentations within a short time after the closing of the sale. However, he decided to continue
on in the business and change the product line and develop a new customer base. By doing this, he
waived any right to rescission and made it implausible to establish damages as he substantially
changed the business from what he had purchased for a new endeavor. The evidence supports the
Trial Court’s findings that defendant did not prove by a preponderance of the evidence either a
breach of contract or material fraudulent misrepresentations.

               Finally, defendant argues that the Trial Court should have applied the missing witness
rule for the plaintiff’s failure to call Marcus Lee, the company’s accountant who prepared the
corporate tax returns and financial statements. The Trial Court’s response was that assuming
arguendo the rule was applicable, it did not change the Court’s opinion upon consideration of all the
evidence.

               The missing witness rule provides that failure of a party to call an available witness
               possessing peculiar knowledge concerning the facts essential to a party’s case, direct
               or rebutting, or to examine such witness as to the facts covered by his special
               knowledge, especially if the witness would naturally be favorable to the party’s
               contention, relying instead upon the evidence of witnesses less familiar with the
               matter, gives rise to an inference that the testimony of such uninterrogated witness
               would not sustain the contention of the party. No such inference arises where the
               only object of calling such witness would be to produce corroborative, cumulative,
               or possibly unnecessary evidence; or when an adverse inference would be improper
               for any other reason. . . .”

               The Trial Court based its findings of fact upon a plethora of evidence and, at best, any
testimony by the so-called “missing witness” would have been in the nature of corroborative and
cumulative testimony, as there was considerable evidence before the Court on the pertinent issues
to be determined. We find this issue to be without merit.

               The Judgment of the Trial Court is affirmed and the cause remanded, with the cost
of the appeal assessed to Chris A. Mussard.



                                                       _________________________
                                                       HERSCHEL PICKENS FRANKS, J.




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