The opinion
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
MAY 16, 2000 Session
REBECCA COLE-TURNER and JUDY SMITH v. CHRISTIAN
PSYCHOLOGICAL CENTER
Direct Appeal from the Chancery Court for Shelby County
No. 102122-2; The Honorable Floyd Peete, Chancellor
No. W1999-00707-COA-R3-CV - Filed October 4, 2000
This appeal involves a dispute over money Plaintiffs paid into a reserve fund while they were
employed by Defendant Christian Psychological Center. Plaintiffs believed that the money they
contributed to the fund would later be refunded. However, when Plaintiffs resigned from the Center
and requested that the money be returned, the Center refused to return the money. The Chancery
Court held that Plaintiffs might be entitled to a refund of a portion of monies that they had paid into
the reserve fund if the funds were not used by Defendant for ordinary and necessary operating
expenses. The Chancery Court then referred the case to a Special Master for a determination of how
the funds were spent by the Center. The Special Master held that the Plaintiffs were not entitled to
a refund, as the Defendant Center used the reserve funds for ordinary and necessary operating
expenses. For the reasons stated hereafter, we affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed
ALAN E. HIGHERS , J., delivered the opinion of the court, in which CRAWFORD , P.J., W.S., and
LILLARD , J., joined.
Frank Deslauriers, Covington, for Appellants
Stephen H. Biller, Memphis, for Appellee
OPINION
Facts and Procedural History
The Plaintiffs in this case, Rebecca Cole Turner and Judy Smith, were employed by the
Defendant Christian Psychological Center as staff psychologists. Dr. Cole Turner began her
employment in August of 1987 and Dr. Smith began in 1984. Prior to April of 1988, staff
psychologists at the Center were paid based upon their billable hours, and they were also eligible for
bonuses. This compensation structure, however, led to a revenue shortfall at the Center.
Due to the revenue shortfall caused by the old compensation structure, a new system was
devised in April of 1998 whereby each psychologist at the Center was required to pay into a
“reserve” or “contingency” fund. The “reserve” or “contingency” fund was designated to provide
for anticipated operating expenses. At first, from April 1988 through June 1989, each psychologist
at the Center was required to pay $1,000.00 per month into the reserve fund. Later, the monthly
amount psychologists were required to pay into the reserve fund was reduced to $400.00 from July
1989 through December 1989 and finally to $250.00 from January 1990 through December 1991.
Plaintiffs Turner and Smith claim to have been under the impression that the monies in the
reserve fund would be refundable. As a result, when Plaintiffs Turner and Smith submitted their
resignations on September 13, 1991, Plaintiffs asked for a return of all amounts they had paid into
the reserve fund. The Defendant informed the Plaintiffs that the monies paid into the reserve fund
were not refundable.
The Plaintiffs brought suit in Chancery Court in Shelby County claiming that they were
entitled to recover monies that they had paid into the reserve fund. At the conclusion of trial, the
chancellor determined that each Plaintiff had paid $22,000.00 into the reserve fund. The Chancellor
further found that the Plaintiffs were not entitled to recover the first $7,500.00 of the money paid into
the reserve fund. The trial court also determined that there was a unilateral mistake on the Plaintiff’s
part and that the Plaintiffs might be entitled to some recovery. However, the trial court found that
Plaintiffs would not be entitled to any recovery if the Defendant Center could show that the funds
were spent on necessary operating expenses. The trial court referred the case to a Special Master
for a determination of how the reserve fund monies were spent. Specifically, the court directed the
Master to examine the difference between the $7,500.00 and the $22,000.00 paid by each Plaintiff
into the reserve fund. The parties appeared before the Special Master on March 10, 1998. The
Special Master determined that the Plaintiffs were not entitled to a refund because the money paid
into the reserve fund was used for the ordinary and necessary expenses associated with operating the
Center. On July 14, 1998, the trial court entered its Order confirming the findings of the Special
Master, and judgment for the Defendant Center was entered on September 17, 1999.
On appeal, Appellants present the following issues for our review: 1) whether the trial court
erred in referring the matter of damages to a Special Master after the trial court found that a
unilateral mistake had occurred; and 2) whether the trial court erred by failing to find that the
Defendant was guilty of negligent misrepresentation.
Standard of Review
Since the trial court referred certain matters to the Special Master, our standard of review on
appeal is affected. A concurrent finding of a master and a trial court is conclusive on appeal, except
where it is upon an issue not proper to be referred, where it is based on an error of law or a mixed
question of fact and law, or where it is not supported by any material evidence. See Coates v.
Thompson, 713 S.W.2d 83, 84 (Tenn. Ct. App. 1986). This standard of review is similar to our
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standard when reviewing a jury verdict. We must affirm if there is any material evidence to support
the trial court’s concurrence. See id; see also T.R.A.P. 13(d).
Analysis
First, the appellants assign error in that the trial court referred the matter of damages to a
Special Master after the trial court found that a unilateral mistake had occurred. We find this
argument to be without merit. In Archer v. Archer, 907 S.W.2d 412, 415-416 (Tenn. Ct. App. 1995),
this court stated that the main issue of a controversy and the principles on which these issues were
to be adjudicated should be determined by the court, and that subordinate and incidental issues and
the determination of ancillary facts are matters properly to be referred to a Special Master. In the
case sub judice, the Chancellor decided the main issue of controversy; whether the plaintiffs were
entitled to any refund of monies that they had contributed to the Center’s reserve fund. Only after
the Chancellor found that the plaintiffs might be entitled to a refund depending on how the Center
used the monies from the reserve fund did the Chancellor direct the Master to examine the ancillary
issue of accounting. Specifically, the court ordered the Master to determine how the monies from
the reserve fund were spent. The Chancellor stated in his order of reference to the Master, “The
Court is of the opinion that if Defendant can show that the funds were spent as necessary expense
of operations, there will not be any recovery. . . .” After the Special Master heard the matter, he
stated in his ruling, “it is therefore the finding of the Special Master that the funds collected by the
Defendant were spent as ordinary and necessary expenses of operations of the Christian
Psychological Center.” It is our opinion that the accounting issue was an ancillary matter properly
referred to the Special Master. Moreover, the Special Master did not go beyond the trial court’s
order of reference in his decision. As a result, we must affirm the finding of the Special Master that
all monies contributed by Plaintiffs to the reserve fund were spent for ordinary and necessary
expenses. Therefore, the appellants are not entitled to a recovery on this basis.
The Appellants also assign as error the failure of the trial court to find that the Defendant
Center was guilty of negligent misrepresentation. Appellants rely on Restatement of Contracts, 2d
Edition, §161(b), which provides,
A person’s non-disclosure of a fact known to him is equivalent to an
assertion that the fact does not exist in the following cases only: . . .
(b) where he knows that disclosure of the fact would correct a mistake
of the other party as to a basic assumption on which that party is
making the contract and if non-disclosure of the fact amounts to a
failure to act in good faith and in accordance with reasonable
standards of fair dealing.
The Appellants’ reliance on the aforementioned section is misguided. First, the appellants have
failed to prove that the Center knew all along that the monies contributed to the fund would not be
refunded. In fact, the evidence in the record is clear that the issue was not decided until after
Plaintiffs resigned from the Center. The only evidence present in the record is the Appellants’ mere
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assertions that the Board knew from the beginning that the monies paid into the fund would not be
refunded. This is not sufficient to warrant overturning the decision of the trial court on this issue.
Second, we fail to find that any misrepresentations were made to the Appellants regarding
the reserve fund. The record is filled with several hopeful statements by Appellants that the reserve
fund money would be refunded to them. However, the record is devoid of any misrepresentations
made to appellants. For example, at trial, when Plaintiff Cole Turner was asked about her
conversations with Jenelle Reeves, the Center’s business manager, regarding whether monies
contributed to the reserve fund would ever be refunded, Cole Turner responded, “I was always very
hopeful.” (emphasis added).
Plaintiffs have conceded that no one ever told them that the monies contributed to the fund
would eventually be refunded. When Ms. Cole Turner was asked, “Was there anybody from the
Board of Trustees that indicated to you that the fund was refundable?”, she responded, “No, no one
indicated that it was refundable.” Moreover, when Dr. Smith was asked, “Did any person in
authority such as a Board Member or Dr. Elkin or even Dr. Stenberg of [sic] tell you that these
operating funds were refundable?”, Appellant Smith responded, “No. No clear answer was given.”
Finally, when Dr. Cole Turner spoke with Dr. Elkin, the Center’s executive director, regarding the
possibility of a refund, Dr. Elkin’s response was, “It was the Board’s discretion.”
The Appellants failed to prove that anyone from the Center ever affirmatively represented
to them that the money would be refunded. Moreover, we fail to find in the record that the Center
acted unreasonably or in bad faith. It is unfortunate that Appellants made a mistake and wrongfully
assumed that the monies they contributed to the reserve fund would later be refunded to them.
However, just because the Plaintiffs believed or hoped or assumed that the monies in the reserve
fund would later be refunded to them does not make their assumption legally operative. In the
narrow circumstances of this case, we are of the opinion that no negligent misrepresentations were
made to the Appellants. Therefore, we overrule the Appellant’s assignment of error on this point
and affirm the judgment of the lower court.
Conclusion
Accordingly, for the aforementioned reasons, we hereby affirm the trial court and dismiss this
case. Costs on appeal are taxed to the Appellants, Rebecca Cole-Turner and Judy Smith, for which
execution may issue if necessary.
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ALAN E. HIGHERS, JUDGE
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