City of Memphis v. Beale St. Dev. Corp.

CITY OF MEMPHIS, TENNESSEE v. BEALE STREET DEVELOPMENT CORPORATION

No. W2020-00523-COA-R3-CV

Court of Appeals of Tennessee, Jackson

September 21, 2021

Assigned on Briefs January 4, 2021

Appeal from the Chancery Court for Shelby County No. 99-0612 Jim Kyle, Chancellor

After counsel announced that the parties had settled their differences, the trial court entered a consent judgment dismissing all claims with prejudice. One year later, one of the litigants moved to set aside the judgment arguing lack of consent and fraud. The moving party claimed that it never approved the settlement or consented to entry of the dismissal order. The trial court denied the motion. Because the trial court's decision was not an abuse of discretion, we affirm.

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

Larry E. Parrish, Memphis, Tennessee, for the appellant, Beale Street Development Corporation.

Casey Shannon and Brian S. Faughnan, Memphis, Tennessee, for the appellee, City of Memphis, Tennessee.

W Neal McBrayer, J., delivered the opinion of the court, in which Kenny W. Armstrong and Kristi M. Davis, JJ., joined.

OPINION

W. NEAL McBRAYER, JUDGE

I.

Litigation between the City of Memphis and Beale Street Development Corporation began in 1999. Sixteen years later, the parties, through counsel, announced to the court that they had "compromised and settled all matters at issue between them . . ., as evidenced by a written settlement agreement, and that all claims . . . should be dismissed with prejudice." On February 17, 2015, the court entered a Consent Order of Dismissal with Prejudice.

One year later, on February 16, 2016, under Tennessee Rule of Civil Procedure 60.02, Beale Street moved to set aside the final judgment. The corporation claimed that its governing board never approved the settlement agreement and that the signature on the settlement agreement was a forgery.

The City of Memphis argued that Beale Street was not entitled to Rule 60.02 relief. The City pointed out that a Beale Street representative participated in the settlement discussions and Randle Catron, the corporation's executive director, signed the settlement agreement on February 3, 2015. And Beale Street had accepted the City's settlement payments for five months before abruptly changing course.

Both sides submitted affidavits and other documentary evidence in support of their claims. Beale Street submitted sworn statements from the individual members of its governing board and its current executive director, Lucille Catron. The board members acknowledged that attorney John Candy had represented the corporation throughout this protracted legal battle. They also agreed that Randle Catron, the corporation's long time executive director, was authorized to speak for the corporation during the settlement negotiations. But they maintained that the board never approved the final settlement.

The board named Lucille Catron, the widow of Randle Catron, executive director shortly before her husband's passing in July 2015. Mr. Catron's health had been failing for some time. According to Mrs. Catron, her late husband's signature on the settlement agreement was forged. He was hospitalized on the day he supposedly signed the agreement. She acknowledged that Mr. Candy visited the hospital on February 3 with settlement papers in hand. But when he tried to obtain her husband's signature, Mrs. Catron ripped the signature page away. A forensic document examiner also opined that the signature on the settlement agreement did not belong to Randle Catron.

The City filed affidavits from Jesse Lee, Beale Street's former accountant, and Mr. Candy. Mr. Lee explained that Mr. Catron hired him in 2008 to provide financial services for the corporation. In that role, he often reviewed the financial aspects of various settlement offers from the City. In 2014, Mr. Catron appointed him to represent the corporation in the ongoing settlement negotiations. His participation culminated in a written settlement agreement in early 2015. Throughout the settlement process, he maintained open communication with both Mr. Catron and individual board members.

Mr. Candy confirmed Mr. Lee's description of events. He also explained the circumstances surrounding the execution of the settlement agreement. On February 3, 2015, Mr. Candy took the agreement to the hospital for Mr. Catron to review. Mr. Catron, although in pain, appeared to be competent. After reviewing the agreement, Mr. Catron signaled that he was ready to sign it. But when Mr. Candy gave him the agreement, Mrs. Catron physically assaulted him and tore the agreement. Mr. Catron admonished his wife. And Mr. Candy gave Mr. Catron another copy of the settlement agreement, which he signed.

The City also submitted other documentary evidence including a newspaper article, the executed settlement agreement, and copies of seven cancelled checks. In January 2015, the Memphis Commercial Appeal ran a front-page article featuring the impending settlement. And, in compliance with the settlement terms, the City paid Beale Street $65, 000 between February and June of 2015.

According to Mrs. Catron, Mr. Candy never informed her of the settlement. She heard rumors. But she did not know that a settlement agreement had been executed until June or July of 2015. She was equally unaware of the City's settlement payments. As she explained, Mr. Lee deposited the funds in Beale Street's corporate account without the corporation's knowledge. She noted that Mr. Lee paid Mr. Candy's fee with the deposited funds. And he transferred some of the funds to Randle Catron's personal account.

After reviewing the evidence in the record, the court found that Beale Street failed to prove that it was entitled to Rule 60 relief. Proof that the board did not expressly approve the settlement agreement did not warrant setting aside the final judgment. And the record did not support Beale Street's fraud claims.

II.

A.

Beale Street argues that the Consent Order must be set aside because the board never expressly approved the settlement agreement. In Tennessee, an attorney cannot agree to dismiss litigation with prejudice "without the express authority of the client." Absar v. Jones, 833 S.W.2d 86, 89 (Tenn. Ct. App. 1992). Even so, once "a consent decree becomes final[, ] it can only be attacked either by a suit against counsel who consented to it, or by a bill of review or some original action." Kelly v. Walker, 346 S.W.2d 253, 256 (Tenn. 1961).^[1] Rule 60.02 has replaced former remedies for setting aside a final judgment. Tenn. R. Civ. P. 60.02. Now, a "party who waits more than thirty days after entry of an order to seek relief must do so under Rule 60.02." Hussey v. Woods, 538 S.W.3d 476, 482 (Tenn. 2017); see Silliman v. City of Memphis, 449 S.W.3d 440, 451 (Tenn. Ct. App. 2014) (noting that Rule 60.02 applies with equal force to consent orders).

We review a trial court's ruling on a Rule 60.02 motion under the abuse of discretion standard. Discover Bank v. Morgan, 363 S.W.3d 479, 487 (Tenn. 2012). We consider whether "the trial court applied incorrect legal standards, reached an illogical conclusion, based its decision on a clearly erroneous assessment of the evidence, or employed reasoning that cause[d] an injustice to the complaining party." Id. (quoting State v. Jordan, 325 S.W.3d 1, 39 (Tenn. 2010)). This is not an opportunity for the appellate court to substitute its judgment for that of the trial court. Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001). The "trial court's ruling 'will be upheld as long as reasonable minds can disagree as to [the] propriety of the decision made.'" Id. (quoting State v. Scott, 33 S.W.3d 746, 752 (Tenn. 2000)).

Relief under Rule 60.02 is "an exceptional remedy." Nails v. Aetna Ins. Co., 834 S.W.2d 289, 294 (Tenn. 1992). The rule "was designed to strike a proper balance between the competing principles of finality and justice." Jerkins, 533 S.W.2d 275, 280 (Tenn. 1976). It "acts as an escape valve from possible inequity that might otherwise arise from the unrelenting imposition of the principal of finality imbedded in our procedural rules." Thompson v. Firemen's Fund Ins. Co., 798 S.W.2d 235, 238 (Tenn. 1990). "This escape valve 'should not be easily opened.'" Hussey, 538 S.W.3d at 483 (quoting Furlough v. Spherion Atl. Workforce, LLC, 397 S.W.3d 114, 127 (Tenn. 2013)). So the moving party must prove "that it is entitled to relief by clear and convincing evidence." Henderson v. SAIA, Inc., 318 S.W.3d 328, 336 (Tenn. 2010).

Rule 60.02 permits a trial court to set aside a final judgment for four specified reasons plus a catch-all provision. Tenn. R. Civ. P. 60.02. Beale Street asked the trial court to set aside the Consent Order based on fraud and its contention that the judgment was void. See Tenn. R. Civ. P. 60.02(2), (3). We conclude that the trial court's refusal to set aside the final judgment for these reasons was not an abuse of discretion.

Beale Street's fraud argument focuses exclusively on the alleged fraudulent conduct of its former attorney. Under Rule 60.02(2), a court may set aside a final judgment for "fraud . . ., misrepresentation, or other misconduct of an adverse party." Tenn. R. Civ. P 60.02(2) (emphasis added). To obtain relief based on Rule 60.02(2), the moving party must come forward with proof connecting an adverse party to the fraud. See Everett v. Morgan, No. E2007-01491-COA-R3-CV, 2009 WL 113262, at *7-8 (Tenn. Ct. App. Jan. 16, 2009) (affirming the trial court's decision to set aside a final order for fraud perpetrated by a friend of the adverse party when there was evidence connecting the adverse party to the fraud). Federal courts have reached the same...