                 IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                DECEMBER 2, 2008 Session

 DANIEL E. GREMILLION, M.D. v. NASHVILLE GASTROINTESTINAL
                     SPECIALISTS, INC.

                Direct Appeal from the Chancery Court for Davidson County
                     No. 05-2801-IV Richard H. Dinkins, Chancellor



                     No. M2008-00061-COA-R3-CV - Filed April 20, 2009


This appeal involves a dispute over the interpretation of a buy-out provision. One of the four
physicians in a medical practice retired and requested a repurchase of his stock. The physicians had
previously adopted a formula for the valuation of stock in such situations, but when it came time to
apply the agreement, they could not agree as to the meaning of several phrases within the agreement.
The trial court heard testimony regarding the parties’ intentions as to the agreement and testimony
from two accountants regarding their interpretations of the agreement. After interpreting the various
phrases of the agreement, the trial court valued the physician’s stock and awarded prejudgment
interest at the rate of ten percent since the date of the physician’s retirement. We reverse the trial
court’s ruling as to the meaning of the agreement and affirm the trial court’s judgment as modified.


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

ALAN E. HIGHERS, P.J.,W.S., delivered the opinion of the court, in which DAVID R. FARMER , J., and
HOLLY M. KIRBY , J., joined.

Tim K. Garrett, Justin A. Page, Nashville, TN, for Appellant

Douglas S. Johnston, Jr., Nashville, TN, for Appellee
                                                     OPINION

                                    I. FACTS & PROCEDURAL HISTORY

        On July 31, 2003, Daniel E. Gremillion, M.D., retired from Nashville Gastrointestinal
Specialists, Inc. (“NGS”). Dr. Gremillion was one of four member physicians and shareholders of
NGS. In 1991, the physicians had adopted a buy-out agreement, memorialized in an “Addendum”
to the minutes of their Board of Directors meeting, which provided:

         PHYSICIAN BUY-OUT. When a partner leaves the practice his stock will be
         bought by the Corporation. In lieu of other specific contractural [sic] arrangements,
         when a partners leaves [sic] the practice for death or other reasons and his stock is
         bought back, the following formula will be used;
                The stock value will be the number obtained by taking the total accounts
                receivable; multiplying by 65% and dividing by the total number of
                stockholders; plus the number equal to the book value of the corporate assets
                divided by the total number of stockholders.

NGS made a partial payment to Dr. Gremillion on December 31, 2003, but the parties could not
agree as to the remainder owed.

         On November 10, 2005, Dr. Gremillion filed a complaint against NGS in the Davidson
County Chancery Court, seeking payment for the value of his stock. Both parties agreed that the
Addendum controlled the valuation, but they disagreed as to the meaning of certain phrases within
the Addendum. The first major disagreement involved the valuation of one-fourth of 65% of the
“total accounts receivable.” Dr. Gremillion contended that “total accounts receivable” should
include patient accounts receivable as well as employee accounts receivable, while NGS contended
that the phrase was limited to patient accounts receivable. Next, the parties disagreed as to how to
calculate the value of one-fourth of the “book value of the corporate assets.” Dr. Gremillion asserted
that when computing the “book value of corporate assets,” the value of all of the accounts receivable
should be included as corporate assets. However, NGS contended that the parties did not intend for
patient accounts receivable to be included because they were already specifically valued in the first
part of the formula. In addition, Dr. Gremillion asserted that he was entitled to one-fourth of the
book value of the company’s assets, without consideration of NGS’s liabilities. NGS contended that
the “book value of the corporate assets” should encompass the net value of NGS’s fixed assets and
liabilities.1 Using Dr. Gremillion’s proposed interpretation of the Addendum, his stock value would
be $1,064,737. Using NGS’s proposed interpretation, Dr. Gremillion’s stock would be valued at
$248,838.

1
  On appeal, the parties do not challenge the trial court’s rulings regarding whether employee accounts receivable should
be included in the “total accounts receivable” and whether the accounts receivable should be counted again as part of
the “book value of the corporate assets.” The only one of the three issues challenged on appeal is whether the “book
value of the corporate assets” encompassed the company’s liabilities. Thus, we will not discuss in detail the evidence
presented regarding the other two issues.

                                                          -2-
        NGS also contended that Dr. Gremillion should be judicially estopped from claiming that
NGS’s liabilities could not be included in computing the “book value of the corporate assets”
because, during Dr. Gremillion’s divorce trial, his accountant had computed the value of Dr.
Gremillion’s interest in NGS, as of December 31, 1999, at $230,872 by including NGS’s liabilities
in his valuation.

        At trial, Dr. Gremillion testified that he had no independent recollection of the physicians’
discussions surrounding the adoption of the Addendum in 1991. The minutes from several meetings
of the Board of Directors were introduced, which indicated that the buy-out agreement was first
discussed in August of 1991. After reviewing the minutes, Dr. Gremillion testified that several
options for the buy-out agreement were discussed, although he could not remember what the options
were, and several issues were referred to Bill Alexander, who was NGS’s in-house manager or
adviser at the time. The buy-out agreement was discussed again at a subsequent meeting, and Dr.
Gremillion, along with the other physicians, signed the Addendum on September 30, 1991.

         Dr. Gremillion testified that, during his divorce, he had his personal accountant value several
companies in which he was professionally involved. Dr. Gremillion provided his accountant’s
valuation of NGS to his wife’s attorney and swore under oath that he had no undisclosed interest in
any assets. Dr. Gremillion’s accountant valued his interest in NGS at $230,872. However, Dr.
Gremillion testified that he did not expect his accountant to solely rely upon the Addendum in
valuing his share of NGS. He introduced a letter from his accountant, which detailed the business
valuations. The accountant states in the letter that he received financial statements, leases, buy out
agreements, and other historical data from the various companies, and “[a]ll information was utilized
in formulation of a value for each of the respective businesses.” With regard to NGS, the letter
states, “[NGS] does not have a formal buy-sell agreement but has an agreement we reviewed which
indicates that a terminating shareholder will receive 65 percent of total accounts receivable of all
physicians divided by the number of physicians generating the services, plus the book value of the
remaining assets.” The accountant noted various “shortcomings” in the Addendum formula and
stated that he had made various assumptions regarding each of the formula’s shortcomings. The
accountant never specifically stated that he was applying the Addendum to value Dr. Gremillion’s
share of NGS, but he used the following formula:

               Accounts receivable (65%)       $931,217
               Assets                           396,792
               Total liabilities               (404,520)

               Total for division              $923,489

               Amount per partner              $230,872

On cross-examination, Dr. Gremillion conceded that his accountant did value his interest in NGS
as it was reflected according to the Addendum’s buy-out agreement. He also acknowledged that his


                                                  -3-
accountant used the same method of interpreting and applying the Addendum that NGS was
proposing, in that both the assets and liabilities were included in the calculation.

        Dr. Gremillion testified that he had already received $88,311.73 of what he was owed for his
stock value. Dr. Gremillion said that he received the letter from NGS regarding its proposed
valuation in accordance with the Addendum during the fall of 2005. He said NGS’s valuation was
prepared by Ms. Lucy Carter, who was first employed by NGS around 2002 to address special
accounting issues “above and beyond” what NGS’s other accountant handled “because of her
expertise in health-care accounting.”

         Laroy William Wolff, Jr. testified on behalf of Dr. Gremillion. Mr. Wolff is a certified public
accountant, accredited senior appraiser, certified valuation analyst, and certified management
accountant. Dr. Gremillion had asked Mr. Wolff to determine the buy-out price of his stock by
applying the Addendum formula to NGS’s financial information. Mr. Wolff testified that he
calculated the value of Dr. Gremillion’s stock at $1,064,737 by “adopt[ing] the precise wording out
of the Addendum” and applying it to the financial information. Mr. Wolff testified that, according
to the plain wording of the Addendum, Dr. Gremillion was to receive one-fourth of 65% of the “total
accounts receivable,” which, in his opinion, would include the employee accounts receivable. Mr.
Wolff also stated that determining one-fourth of the “book value of the corporate assets” should be
limited to the book value of the assets of NGS – including all the accounts receivable, but no
liabilities.

        Mr. Wolff emphasized that when determining book value, “you have to know book value of
what.” He explained that there is a book value of fixed assets, a book value of accounts receivable,
a book value of liabilities, a book value of equity, etc. Mr. Wolff described the Addendum formula
as “very clear” and not ambiguous whatsoever. Mr. Wolff was asked whether there was “something
esoteric or exotic about this term ‘book value,’” and he responded, “Not to an accountant, no, sir.”
He testified that the “book value” of something equals its cost, less any depreciation. Mr. Wolff was
asked about the importance of the remainder of the Addendum paragraph and its stated purpose of
determining the value of a shareholder’s stock, and he stated that those considerations were simply
causing confusion in the case at bar. He said that in interpreting the formula, one should look to its
clear terms rather than its purpose. On cross-examination, he was asked the following:

       Q.      So when you – when you’re saying you need context, the only context you
               need is “of the corporate assets”; you don’t need the rest of the paragraph to
               help you?
       A.      Absolutely not. To interpret or to calculate what that element of the formula
               means, absolutely not.

Mr. Wolff also testified that he did not consider who wrote the Addendum, although he conceded
that he was not sure a physician would know the meaning of “book value.” Mr. Wolff stated that
the author of the Addendum was not important because the terms used were clear. In addition, Mr.
Wolff stated that he did not consider the practical effect of his interpretation of the Addendum, that


                                                  -4-
the remaining shareholders would be left with all of the company’s liabilities. He again insisted that
there was no need for such considerations because he applied the Addendum “word for word.” Mr.
Wolff stated, “I’ve never seen an agreement written this way, but it is written clearly.”

         Mr. Wolff opined that the valuation performed by NGS’s accountant, Ms. Carter, was not
rendered according to the wording of the Addendum, “book value of the corporate assets,” because
Ms. Carter did not include patient accounts receivable but did include liabilities. Mr. Wolff claimed
that Ms. Carter’s valuation actually calculated “the book value of NGS,” although he acknowledged
that determining the book value of NGS would reflect a shareholder’s equity. He stated that the
book value of a business, meaning shareholder equity, would be calculated as the book value of the
assets minus the book value of the liabilities. Mr. Wolff acknowledged a statement in a treatise
which explained, “Net book value is the book value of the company’s assets less the recorded
liabilities.” The treatise also stated that “net book value” is often called “book value” in the
vernacular, and Mr. Wolff agreed that the terms are synonymous “when referring to the equity.”2

       Mr. Wolff also conceded that Dr. Gremillion’s previous accountant, when valuing Dr.
Gremillion’s interest in NGS during the divorce proceedings, used a method “very similar” to that
used by Ms. Carter in NGS’s valuation. However, he pointed out that the previous accountant did
not specifically state that he was solely relying upon the Addendum formula. Like Ms. Carter,
though, Dr. Gremillion’s accountant had calculated 65% of patient accounts receivable only, then
excluded the patient accounts receivable from the valuation of the company’s “assets,” and included
the company’s liabilities. When asked why Dr. Gremillion’s previous accountant would have
included the liabilities in his valuation, Mr. Wolff responded, “[He] may have had a lot of things
going on.”

        Ms. Lucy Carter, the accountant who prepared the valuation for NGS, also testified at trial.
Ms. Carter has extensive experience representing physicians and physician practices regarding buy-
sell agreements, and Dr. Gremillion, during his testimony, acknowledged that the physicians had
employed her because of “her expertise in health-care accounting.” In computing the value of Dr.
Gremillion’s stock according to the Addendum, Ms. Carter used the following calculation:

           Accounts receivable as of 7/31/03 valued at 65% $1,158,010
           Book value of NGS as of 7/31/03 (excluding A/R)   (162,660)

2
    The treatise reads:

           From a valuation perspective, the terms book value or net book value are merely accounting jargon.
           . . . As an accounting convention, the book value of a company is the historical cost of all of the
           company’s assets – less total accumulated depreciation. Net book value is the book value of the
           company’s assets less the recorded liabilities. Net book value (often called book value, in the
           vernacular) is synonymous with the amount of owners’ equity recorded on the company’s cost-basis
           balance sheet. Therefore, net book value can also be calculated as the sum of the owners’ equity
           investments in the company plus the cumulative amount of the company’s retained earnings.

Shannon Pratt, et al., Valuing a Business – The Analysis & Appraisal of Closely Held Companies (4th ed. 2000).


                                                          -5-
        Total                                                      995,350

        Stock value as of 7/31/03 (25% of total)                $ 248,838

Ms. Carter explained that she did not include employee accounts receivable in the first part of the
formula for “total accounts receivable,” but she did include the employee accounts receivable in
computing the “book value of the corporate assets.” She also explained that she did not include
patient accounts receivable in the corporate assets because they would then be counted twice. Ms.
Carter was questioned about using the “book value of NGS” as follows:

        Q.      . . . And why did you say “book value of NGS” as opposed to “book value of
                the corporate assets”?
        A.      Well, I disagree with Laroy Wolff’s interpretation that the Addendum is
                crystal clear. I think the Addendum has to be taken in whole, not just in
                parts. And the first three words are “the stock value will be computed as . .
                . .” The stock value is the equity in the practice. So my interpretation of this
                language, taken as a whole instead of in parts, is that you would compute the
                book value of the practice versus the book value of just the corporate assets.
        Q.      In your view, Ms. Carter, does the beginning of the paragraph instruct as to
                the entire paragraph’s meaning?
        A.      I believe it does, yes.
        Q.      And so you were trying to interpret the entire paragraph to come up with what
                was intended?
        A.      Correct.

Ms. Carter further explained, “My interpretation of the Addendum, based on the first three words
that we’re computing the stock value, is that we’re looking at the book value of NGS, not just the
book value of – not just the corporate assets without the liabilities attached.” She said that “if you’re
looking at computing the equity, which stock value would be the equity in the practice, then you
would definitely deduct the liabilities.”

        Ms. Carter testified that “book value can be interpreted many different ways.” She also
referenced the aforementioned treatise for the notion that “there may be various ways that valuation
experts will use book value, but in the vernacular, book value means the cost of the asset less
depreciation, amortization and liabilities.” Ms. Carter stated that she considered the vernacular
meaning of the term “book value” to be appropriate here because the Addendum was drafted by a
physician. She said the physicians’ intention to have book value include liabilities was consistent
with published materials. Ms. Carter testified that her manner of interpretation and calculation
regarding the buy-out formula was also consistent with her experience in working with other
physicians and buy-out formulas. She stated that “[t]ypically, when there’s a formula used, there is
some methodology for valuing the receivables . . . . And then added to that would be the book value
of the hard assets, if you will, of the practice, which would be cash, fixed assets less depreciation,


                                                  -6-
less liabilities.” Ms. Carter explained that, based on her experience representing physician practices
and dealing with buy-sell agreements, it would be very unusual and, in fact, unprecedented not to
include liabilities when paying out to a departing shareholder based on book value. Ms. Carter
concluded by stating that the wording of the Addendum, in addition to her knowledge of buy-sell
agreements in medical practices, led her to interpret the Addendum as she did. Ms. Carter testified
that she was not aware of Mr. Gremillion’s previous accountant’s valuation when she prepared her
valuation, but when she reviewed it later, she observed that she and the other accountant had used
“essentially the same” method of interpreting and applying the Addendum.

        Dr. Robert Herring, who had been practicing with NGS for over twenty years, testified as
well. Dr. Herring testified that he wrote down the language of the Addendum at the physicians’
meeting in 1991. According to Dr. Herring, the physicians discussed the Addendum for twenty to
thirty minutes prior to adopting it. He said they intended to create a formula that would simplify
matters when a physician departed and also provide stability for the practice. Dr. Herring testified
that the physicians intended to include the value of the accounts receivable in the formula only one
time, at 65%. Dr. Herring also testified that the physicians did not intend to allow a departing
shareholder to take the value of assets without accounting for the liabilities. Dr. Herring stated, “I
thought when I used the word ‘book value’ that that meant that liabilities would be included.” Dr.
Herring testified that Dr. Gremillion’s proposed interpretation of the Addendum would pressure the
other physicians to leave in order to avoid being “stuck with all the liabilities.” He stated, “the last
one out is a rotten egg, as he has all the liability, certainly. That was not our intent.”

       Another physician, Dr. Ronald Pruitt, who had been practicing with NGS for approximately
eighteen years, testified about the Addendum as follows:

       Q.    Would you have taken pause in deciding whether to join and become a full
             partner had you known Dr. Gremillion took the position that the buy-out
             formula meant that anybody leaving took assets but no liabilities?
       A.    Absolutely.
       Q.    Why?
       A.    Because the company would be insolvent. I mean, if one partner cashed out
             and took essentially 60, 70 percent of the assets of the company, no liabilities
             being assigned, then it would leave 30, 40 percent for the remainder of the
             physicians in the group. So it would essentially bankrupt the company. It
             would be –
       The Court:    Why do you say they would take 60 or 70 percent?
       A.    Because, if you look at the amount, the calculation that we’re looking at here
             that Dr. Gremillion alleges is due to him, it would take so much money out
             of the company, the company likely wouldn’t survive, and certainly no one
             else could retire. Two people would put the company under water, if two
             people took that.
       The Court:    The valuation issue or –
       A.    That’s the practical matter, that if two people retired at the same time, it


                                                  -7-
                 would place the company under water.
        Q.       Did you have any understanding that that was at all the intent at the time the
                 Addendum was adopted?
        A.       No. We had extensive discussions about what the intent of the buy-out was.
                 The intent was to give a physician an exit strategy, realizing that they
                 received considerable income as people buy into the practice. . . . So you
                 make your money on the way in as people come in, you don’t make your
                 money also on the way out. And there were specific discussions regarding
                 this. It’s not to be a windfall to the guy retiring.

        Bill Alexander testified that he was the consultant and practice manager for NGS when the
Addendum was adopted in 1991, but he had since taken a position as administrator of another
practice. Mr. Alexander testified that he provided some guidance to the physicians regarding the
buy-out formula. He stated that the physicians’ intent was to pay a retiring partner one-fourth of the
accounts receivable, discounted due to collection issues, plus “the equity, the book value of the
practice.” Mr. Alexander testified that there was no question in his mind that when the physicians
used the term “book value,” they were referring to the assets and liabilities. He said that to interpret
the phrase “book value” to mean only asset values, without liabilities, would be contrary to the
parties’ intent when they adopted the buy-out agreement, as well as unusual, based on his experience
in dealing with buy-out agreements.

        The trial court entered its final order on December 13, 2007. Regarding the issue of judicial
estoppel, the court stated, “[NGS] contends that [Dr. Gremillion] is estopped from asserting that the
value of his interest in the practice is anything other than that used in the valuation he offered . . .
in connection with his previous divorce proceeding, $230,872.”3 The trial court refused to apply
judicial estoppel because it concluded that Dr. Gremillion’s previous accountant performed an
evaluation of the business rather than applying the Addendum.

        Next, the court addressed the parties’ various interpretations of the Addendum. The court
began by noting, “Because the physicians drew up the Addendum themselves and were clearly
involved in its evolution, language and purpose, the Court applies the maxim that equity looks to the
intent rather than the form in its consideration and interpretation of the Addendum and the related
issues in this case.” The trial court then stated, “It is clear to the Court that the term ‘stock value’
as used in the Addendum was not intended to be employed in its traditional sense or in the sense that
the term would be applied to a corporation other than a professional corporation but, rather, was used
by the physicians (who composed the Addendum themselves) as what they characterized as the value
of their investment in the assets of the corporation as well as compensation for their work as
physicians.” The court found that the parties intended to operatively define “stock value” rather than
adopt or incorporate a standard definition. The court concluded that employee accounts receivable

3
  From our review of the record, we find nothing to suggest that NGS argued that Dr. Gremillion was limited to using
that specific figure, $230,872. Rather, NGS took the position that Dr. Gremillion could not interpret the Addendum
formula in a manner that differed from his interpretation during the divorce proceeding.


                                                        -8-
should not be included in the determination of “total accounts receivable” and adopted Ms. Carter’s
calculation with regard to that portion of the formula. Next, the court concluded that accounts
receivable should not be included in the “book value of the corporate assets” because the court found
that the physicians did not agree to include accounts receivable twice. Finally, the trial court found
that liabilities should not be included in computing the “book value of the corporate assets.” The
court stated, “it should be remembered that the Addendum was an effort by the physicians [to]
provide for a buy-out ‘if a physician should retire, die, or leave the practice for other reasons.” The
court then noted that the physicians could have used the terms “valuation of the corporation” or “net
value of the corporate assets” if they intended to include liabilities. The court concluded by stating
that “there is nothing in the record to show that, at the time of the consideration of the Addendum,
the physicians contemplated that liabilities would be included in the determination of the value of
the assets upon which their final payment from the corporation would be based.” Therefore, the
court accepted Mr. Wolff’s valuation of the “book value of the corporate assets,” which did not
include NGS’s liabilities. In sum, the trial court awarded Dr. Gremillion $569,217.75 for the value
of his stock in NGS. NGS received a credit against that award for the $88,311.73 already paid to Dr.
Gremillion. The trial court then awarded Dr. Gremillion interest on the award, at the rate of ten
percent, since the date of his retirement on July 31, 2003. NGS timely filed a notice of appeal.

                                      II. ISSUES PRESENTED

       On appeal, NGS presents the following issues for review, slightly restated:

1.      Did the lower court err in ruling that the phrase “book value of the corporate assets” in the
Addendum did not include corporate liabilities when Plaintiff had agreed that the same valuation
agreement did include liabilities in his prior divorce and when the undisputed evidence at trial was
that the parties to the agreement intended to include liabilities in using the phrase “book value”;
2.      Did the lower court err in ruling that Plaintiff was not judicially estopped and thereby could
espouse before the lower court a method for calculating his “stock value” that was different from the
method he used in a prior divorce proceeding;
3.      Did the lower court err in assessing prejudgment interest at a rate of 10% from July 31, 2003.

For the following reasons, we reverse the trial court’s ruling as to the meaning of the agreement and
affirm the trial court’s judgment as modified.

                                    III.   STANDARD OF REVIEW

        On appeal, a trial court’s factual findings are presumed to be correct, and we will not overturn
those factual findings unless the evidence preponderates against them. Tenn. R. App. P. 13(d)
(2008); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). For the evidence to preponderate
against a trial court’s finding of fact, it must support another finding of fact with greater convincing
effect. Watson v. Watson, 196 S.W.3d 695, 701 (Tenn. Ct. App. 2005) (citing Walker v. Sidney
Gilreath & Assocs., 40 S.W.3d 66, 71 (Tenn. Ct. App. 2000); The Realty Shop, Inc. v. RR
Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn. Ct. App. 1999)). When the resolution of issues


                                                  -9-
depends upon the truthfulness of witnesses, the fact-finder, who has the opportunity to observe the
witnesses in their manner and demeanor while testifying, is in a far better position than this Court
to decide those issues. Mach. Sales Co., Inc. v. Diamondcut Forestry Prods., LLC, 102 S.W.3d
638, 643 (Tenn. Ct. App. 2002); see also Bryant v. Baptist Health Sys. Home Care of E. Tenn., 213
S.W.3d 743, 750 (Tenn. 2006). The weight, faith, and credit to be given to a witness’s testimony
lies, in the first instance, with the trier of fact, and the credibility accorded by the trial judge will be
given great weight by the appellate court. Id. “[A]ppellate courts will not re-evaluate a trial judge’s
assessment of witness credibility absent clear and convincing evidence to the contrary.” Wells v.
Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn. 1999). We review a trial court’s conclusions of
law under a de novo standard upon the record with no presumption of correctness. Union Carbide
Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993) (citing Estate of Adkins v. White Consol.
Indus., Inc., 788 S.W.2d 815, 817 (Tenn. Ct. App. 1989)).

                                           IV. DISCUSSION

                                   A.    Interpreting the Addendum

        “The central tenet of contract construction is that the intent of the contracting parties at the
time of executing the agreement should govern.” Planters Gin Co. v. Fed. Compress & Warehouse
Co., Inc., 78 S.W.3d 885, 889-90 (Tenn. 2002) (citing Empress Health & Beauty Spa, Inc. v. Turner,
503 S.W.2d 188, 190 (Tenn. 1973)). When resolving disputes concerning contract interpretation,
our task is to ascertain the intention of the parties based upon the usual, natural, and ordinary
meaning of the contractual language. Id. (citing Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.
1999)). We determine the parties’ intent “by examining the four corners of the contract and the
circumstances at the time of contracting.” BVT Lebanon Shopping Ctr., Ltd. v. Wal-Mart Stores,
Inc., 48 S.W.3d 132, 135 (Tenn. 2001) (citing Realty Shop, Inc., 7 S.W.3d at 597; Gredig v. Tenn.
Farmers Mut. Ins. Co., 891 S.W.2d 909, 912 (Tenn. Ct. App. 1994)). “This determination of the
intention of the parties is generally treated as a question of law because the words of the contract are
definite and undisputed, and in deciding the legal effect of the words, there is no genuine factual
issue left for a jury to decide.” Planters Gin Co., 78 S.W.3d at 890 (citing Doe v. HCA Health
Servs. of Tenn., Inc., 46 S.W.3d 191, 196 (Tenn. 2001); 5 Joseph M. Perillo, Corbin on Contracts,
§ 24.30 (rev. ed. 1998)). Parol evidence is inadmissible to contradict or vary the terms of a written
contract when the parties’ intentions are readily ascertainable from the contract as reduced to writing.
Gates, Duncan & Vancamp Co. v. Levatino, 962 S.W.2d 21, 25 (Tenn. Ct. App. 1997) (citing
McQuiddy Printing Co. v. Hirsig, 134 S.W.2d 197, 204 (Tenn. Ct. App. 1939)). However, the
language of a contract, when “taken together with extrinsic facts,” may lend itself to more than one
reasonable inference of the intent of the parties. See Blue Diamond Coal Co. v. Holland-America
Ins. Co., 671 S.W.2d 829, 833-34 (Tenn. 1984) (finding the term “employer” ambiguous when
considering the circumstances to which the word referred). Therefore, our initial task in construing
a contract is to determine whether the language of the contract is ambiguous. Planters Gin Co., 78
S.W.3d at 890. “Contractual language ‘is ambiguous only when it is of uncertain meaning and may
fairly be understood in more ways than one.’” Allstate Ins. Co. v. Watson, 195 S.W.3d 609,
611 (Tenn. 2006) (quoting Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn. 1975)).


                                                   -10-
When the words in a contract are susceptible to more than one reasonable interpretation, the parties’
intent cannot be determined by a literal interpretation of the language. Id. If ambiguity remains after
the court applies the pertinent rules of construction, the legal meaning of the contract becomes a
question of fact. Planters Gin Co., 78 S.W.3d at 890 (citing Smith v. Seaboard Coast Line R.R. Co.,
639 F.2d 1235, 1239 (5th Cir. 1981)). “[W]hen a contractual provision is ambiguous, a court is
permitted to use parol evidence, including the contracting parties’ conduct and statements regarding
the disputed provision, to guide the court in construing and enforcing the contract.” Allstate Ins.
Co., 195 S.W.3d at 612.

         Although the trial court did not specifically find that the Addendum was ambiguous, it stated
that it was looking to the parties’ intent, rather than the form of the Addendum, in interpreting it.
The trial court then concluded that the parties did not intend the term “stock value” to be given its
ordinary meaning, and the court also concluded that the parties did not intend the “book value of the
corporate assets” to include patient accounts receivable. However, the court found “nothing in the
record to show that, at the time of the consideration of the Addendum, the physicians contemplated
that liabilities would be included in the determination of the value of the assets[.]”

        We agree with the trial court’s implicit finding that the Addendum is ambiguous. The
Addendum begins by stating that it is computing “stock value.” According to Ms. Carter’s
testimony, in order to compute “stock value,” or shareholder equity, you must deduct liabilities. Mr.
Wolff also testified that in order to calculate the shareholder equity, one would subtract the book
value of the liabilities. However, the Addendum required a valuation of one-fourth of the “book
value of the corporate assets,” without specifically mentioning liabilities. Ms. Carter testified that
“book value can be interpreted many different ways,” and she explained that, “in the vernacular,
book value means the cost of the asset less depreciation, amortization and liabilities.” This Court
has previously stated, “As to the accountant’s definition of book value, we note that the term has
different meanings depending on the context in which it is used.” Corbin v. Pendergrast, Shelby
Equity No. 13, 1990 WL 51308, at *2-3 (Tenn. Ct. App. W.S. Apr. 26, 1990) (citing 51 A.L.R.2d
606 (1957) (“The term ‘book value’ has no generally accepted meaning; its significance varies
according to the particular definitions or stipulations under which it is to be determined.”)).

         As stated above, “when a contractual provision is ambiguous, a court is permitted to use parol
evidence, including the contracting parties’ conduct and statements regarding the disputed provision,
to guide the court in construing and enforcing the contract.” Allstate Ins. Co., 195 S.W.3d at 612.
The parties do not challenge the trial court’s conclusion that the physicians did not intend the term
“book value of the corporate assets” to include the value of the patient accounts receivable, so we
will not address the issue. However, they do challenge the trial court’s conclusion that there was
“nothing in the record to show that” they intended the liabilities to be included. Dr. Gremillion
testified that he could not recall the physicians’ discussions regarding the Addendum, but he knew
that several options were discussed. Dr. Herring, on the other hand, did recall discussing the
Addendum, and he testified that the physicians did not intend to allow a departing shareholder to
take the value of assets without accounting for the liabilities. Dr. Herring, who wrote the
Addendum, stated, “I thought when I used the word ‘book value’ that that meant that liabilities


                                                 -11-
would be included.” Dr. Pruitt also testified that the physicians had extensive discussions “about
what the intent of the buy-out was,” and he said they did not intend to leave the remaining
shareholders with 100% of the liabilities. NGS’s former practice manager, Mr. Alexander, who was
a disinterested witness, testified that there was no question in his mind that when the physicians used
the term “book value,” they were referring to the assets and liabilities.

         We also have the valuation performed by Dr. Gremillion’s own accountant during his divorce
proceedings, which valued his interest in the company as of December 31, 1999, at $230,872.
Although the accountant did not specifically state that he was calculating Dr. Gremillion’s interest
in sole reliance on the Addendum, he discussed the Addendum at length and applied, in our opinion,
the same basic formula in valuing Dr. Gremillion’s interest. The accountant calculated one-fourth
of 65% of the accounts receivable, in addition to one-fourth of the value of the company’s remaining
assets minus its liabilities.

        Both Ms. Carter and Mr. Wolff agreed that when computing shareholder equity, meaning,
stock value, liabilities are typically included. We find no evidence in the record to support the trial
court’s conclusion that the physicians did not intend the term “stock value” to be employed in its
traditional sense.

        Considering the undisputed testimony of Dr. Herring, Dr. Pruitt, and Mr. Alexander, we find
that the evidence does not support the trial court’s conclusion that “there is nothing in the record to
show that” the physicians intended for liabilities to be included in calculating book value. In
addition to this testimony, we find it appropriate to consider the Addendum’s stated purpose of
calculating stock value, and the fact that the Addendum was drafted by physicians rather than
accountants. Based on our review of the record, we conclude that the physicians intended that
NGS’s liabilities would be included in computing the value of a departing shareholder’s stock.
Therefore, we reverse the trial court’s ruling to the contrary and modify the judgment in accordance
with NGS’s proposed valuation. Dr. Gremillion’s stock should be valued at $248,838, and NGS
should be credited for its prior payment of $88,311.73.

       In light of our resolution of this issue, we need not consider the issue NGS presented
regarding judicial estoppel.

                                     B.   Prejudgment interest

        Next, NGS challenges the trial court’s decision to award Dr. Gremillion prejudgment interest
on the award, at the rate of ten percent, since the date of his retirement.

       Tennessee Code Annotated section 47-14-123 provides, in relevant part:
       Prejudgment interest, i.e., interest as an element of, or in the nature of, damages, as
       permitted by the statutory and common laws of the state as of April 1, 1979, may be
       awarded by courts or juries in accordance with the principles of equity at any rate not
       in excess of a maximum effective rate of ten percent (10%) per annum . . . .

                                                 -12-
An award of prejudgment interest is within a trial court’s sound discretion. Hunter v. Ura, 163
S.W.3d 686, 706 (Tenn. 2005); In re Estate of Ladd, 247 S.W.3d 628, 645 (Tenn. Ct. App. 2007).
The purpose of prejudgment interest is not to penalize a defendant for wrongdoing, but to fully
compensate a plaintiff for the loss of the use of funds to which he or she was legally entitled.
Hunter, 163 S.W.3d at 706 (citing Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998)).
“The trial court must consider whether the amount of the obligation was certain or ascertainable and
whether the existence of the obligation was disputed on reasonable grounds.” Id. However, these
are only two of the factors to be considered when deciding whether prejudgment interest is, as a
matter of law, equitable under the circumstances. Id. “The uncertainty of either the existence or
amount of an obligation does not mandate a denial of prejudgment interest, and a trial court’s grant
of such interest is not automatically an abuse of discretion, provided the decision was otherwise
equitable.” Id. (quoting Myint, 970 S.W.2d at 928). “The principle of equity is the foremost guiding
consideration for a trial court when exercising its discretion to award or deny prejudgment interest.”
In re Estate of Ladd, 247 S.W.3d at 645 (citing Myint, 970 S.W.2d at 927; Tenn. Code Ann. § 47-
14-123). Basically, the trial court must decide whether awarding prejudgment interest is fair, given
the circumstances of a case. Id. The recent trend is to favor prejudgment interest whenever
awarding it “will more fully compensate plaintiffs for the loss of use of their funds.” Id. (citing
Scholz v. S.B. Intern. Inc., 40 S.W.3d 78, 83 (Tenn. Ct. App. 2000)).

       Fairness will, in almost all cases, require that a successful plaintiff be fully
       compensated by the defendant for all losses caused by the defendant, including the
       loss of use of money the plaintiff should have received. That is not to say that trial
       courts must grant prejudgment interest in absolutely every case. Prejudgment interest
       may at times be inappropriate such as (1) when the party seeking prejudgment
       interest has been so inexcusably dilatory in pursuing a claim that consideration of a
       claim based on loss of use of the money would have little weight; (2) when the party
       seeking prejudgment interest has unreasonably delayed the proceedings after suit was
       filed; or (3) when the party seeking prejudgment interest has already been otherwise
       compensated for the lost time value of its money.

Id. (quoting Scholz, 40 S.W.3d at 83).

        Again, awards of prejudgment interest are within the trial court’s sound discretion. Hunter,
163 S.W.3d at 706; In re Estate of Ladd, 247 S.W.3d at 645. “Generally stated, the abuse of
discretion standard does not authorize an appellate court to merely substitute its judgment for that
of the trial court.” In re Estate of Ladd, 247 S.W.3d at 645 (citing Myint, 970 S.W.2d at 927).
“However, appellate deference is not synonymous with rubber stamping a trial court’s decision.”
Id. A trial court’s discretionary decision remains subject to appellate scrutiny, albeit less strict, in
that we will determine whether the trial court based its decision on applicable legal principles and
whether the decision is consistent with the evidence. Id.




                                                 -13-
         The final order grants prejudgment interest at the rate of ten percent without elaboration.
NGS contends that interest was not appropriate in this case because of the dispute as to the amount
of its obligation. NGS claims that it repeatedly offered to pay Dr. Gremillion his share value as set
forth in the Addendum, but Dr. Gremillion refused to accept such payment. In addition, NGS claims
that Dr. Gremillion delayed the proceedings below because he initially disputed the effectiveness of
the Addendum and did not concede that it controlled the valuation of his stock until he filed his pre-
trial brief in the trial court. Dr. Gremillion admits that he initially disputed the effect of the
Addendum. However, he claims that NGS delayed the proceedings by constantly changing its
calculations and refusing to supply the necessary financial records until 2006, three years after Dr.
Gremillion retired.

         There is nothing in the record to support many of these assertions. However, Dr. Gremillion
testified that he did not receive NGS’s final valuation of his stock, prepared by Ms. Carter, until the
fall of 2005. Ms. Carter’s valuation letter is included in the record before us, but it is not dated. Dr.
Pruitt acknowledged during his testimony that there were “a number of issues” that arose prior to
trial and that “all of these things contributed to my perceived delay in the process.” We cannot
substitute our judgment for that of the trial court on this issue, and the record does not demonstrate
that the trial court abused its discretion. Therefore, we affirm the award of prejudgment interest.

                                          V. CONCLUSION

        For the aforementioned reasons, we reverse the trial court’s ruling as to the meaning of the
agreement and affirm the trial court’s judgment as modified. Costs of this appeal are taxed equally
to the appellant, Nashville Gastrointestinal Specialists, Inc., and its surety, and to the appellee,
Daniel E. Gremillion, M.D., for which execution may issue if necessary.




                                                         ___________________________________
                                                         ALAN E. HIGHERS, P.J., W.S.




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