Opinion

Robert H. Edwards v. Urosite Partners

Court: Court of Appeals of Tennessee
Filed: Mar 30, 2017
Status: Published
On the bench: Judge Andy D. Bennett
Cited by: 0 cases
Authority: More cited than 3.6%

explaining parties’ intent is based on usual, natural, and ordinary meaning of words used in contract

How later courts described this case

explaining parties’ intent is based on usual, natural, and ordinary meaning of words used in contract
explaining that court may consider parties’ situation, business to which contracts relate, and circumstances surrounding transaction in ascertaining parties’ intent
stating where several documents are executed as part of the same agreement, the court reads them together and interprets them with reference to one other

Written by the judges who cited it.

The opinion

03/30/2017

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

February 21, 2017 Session

ROBERT H. EDWARDS V. UROSITE PARTNERS

Appeal from the Chancery Court for Davidson County

No. 15-946-BC Ellen Hobbs Lyle, Chancellor

No. M2016-01161-COA-R3-CV

Plaintiff was a partner of a physician practice and a limited partner in a real estate

investment limited partnership. Continuing employment with the physician practice was

a condition of remaining a limited partner. Following the termination of Plaintiff’s

employment with the physician group, Plaintiff, the physician group, and the limited

partnership entered into a Separation Agreement. The limited partnership agreed not to

redeem Plaintiff’s interest in the limited partnership if he did not expand his practice

outside Giles and Hickman Counties. Plaintiff began practicing outside these counties,

and the limited partnership redeemed Plaintiff’s interest. Plaintiff objected and filed a

complaint seeking declaratory relief. The trial court granted the limited partnership’s

motions to dismiss and for judgment on the pleadings. Plaintiff appealed, and we affirm

the trial court’s judgments.

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

and Remanded

ANDY D. BENNETT, J., delivered the opinion of the court, in which FRANK G. CLEMENT,

JR., P.J., M.S., and RICHARD H. DINKINS, J., joined.

Stephen C. Knight and Nader Baydoun, Brentwood, Tennessee, for the appellant, Robert

H. Edwards.

James N. Bowen and Elizabeth O. Gonser, Nashville, Tennessee, for the appellee, Urosite

Partners.

OPINION

I. FACTUAL AND PROCEDURAL BACKGROUND

Robert H. Edwards, M.D., was a urologist and partner of Urology Associates, P.C.

(“UA”). In 2000, Dr. Edwards and twenty-one other physicians/shareholders of UA

formed Urosite, L.P. (“Urosite” or “the Partnership”) for the purpose of purchasing,

owning, managing, and operating the real and personal property located at UA’s primary

office location. When they formed Urosite, Dr. Edwards and the other limited partners

entered into an Agreement of Limited Partnership (the “Agreement”). The Agreement

provided that partnership in Urosite was conditioned on continuing employment with

UA.

The redemption provisions of the Agreement provide that the Partnership has the

right to purchase a limited partner’s units in the Partnership “upon the termination of a

Limited Partner’s employment agreement with [UA] for any reason other than death,

disability or retirement from the practice of medicine.” Dr. Edwards worked pursuant to

an employment agreement with UA from July 1, 2004, through June 30, 2011. After this

date, Dr. Edwards continued working for UA as an employee at will until the end of

December 2013.

On January 10, 2014, Dr. Edwards, Urosite, and UA entered into a Separation

Agreement and Mutual Release (“Separation Agreement”). Paragraph 2 of the

Separation Agreement provides that if Dr. Edwards practices outside Hickman or Giles

Counties, the Partnership could exercise its right to redeem Dr. Edwards’ interest in

Urosite pursuant to the terms of the Agreement.

In the spring of 2014, the Veterans Administration asked Dr. Edwards to help it

provide medical care to veterans in Rutherford and Davidson Counties. Dr. Edwards

agreed and began providing medical services to veterans in those counties. On or about

March 31, 2015, Urosite informed Dr. Edwards that it was exercising its right to redeem

Dr. Edwards’ limited partnership interest for a price equal to the value of his capital

account, in accordance with the terms of the Agreement.

Dr. Edwards objected to Urosite’s redemption of his interest in the Partnership,

and he filed a complaint in August 2015 seeking declaratory relief and damages for

breach of contract. Dr. Edwards sought the following declaratory relief:

Dr. Edwards seeks a declaratory judgment that he remains a limited partner

in Urosite, and that Urosite does not have a right to acquire his partnership

interest. The legal bases for this claim include, but are not limited to: (1)

under the circumstances, the Urosite Agreement does not provide Urosite

the right to acquire Dr. Edwards’ ownership interest; (2) Urosite did not

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timely exercise any right it may have had under the Urosite Agreement; (3)

Dr. Edwards’ work for the Veterans’ Administration was not a material

breach of the Separation Agreement; and (4) the restrictions on Dr.

Edwards’ practice of medicine in the Separation Agreement are not

enforceable and violate public policy.

In support of his breach of contract claim, Dr. Edwards alleged Urosite failed to meet its

contractual obligations to him, “including its obligation to pay [him] his share of

distributions from the partnership and its obligation to account to [him].”

II. TRIAL COURT PROCEEDINGS

Urosite filed a motion to dismiss pursuant to Tenn. R. Civ. P. 12.02(6) in

September 2015 and sought an award of its attorneys’ fees as provided in paragraph

thirteen of the Separation Agreement. The trial court filed a Memorandum and Order on

February 2, 2016, dismissing the majority of Dr. Edwards’ claims. The court wrote:

[T]he Court concludes as a matter of law, based upon the plain,

unambiguous wording of the Partnership Agreement, and the operation and

incentives of the [Agreement], that the Defendant’s exercise of its section

9.2(b) right to repurchase the Plaintiff’s interest for the value of his Capital

Account within 45 months of the termination of Plaintiff’s employment was

not untimely and, therefore, was not an invalid exercise of the right of

redemption.

....

The Court concludes that the disincentives at work in paragraph 2 of

the SA are too remote and attenuated from the Plaintiff’s practice of his

profession to come within the prohibitions of Spiegel, Murfreesboro, or

Tennessee Code Annotated section 63-1-148. Accordingly, the Court

grants that part of Defendant’s Motion to Dismiss asserting that paragraph

2 of the Separation Agreement does not violate Tennessee law or public

policy.

Urosite filed an answer with regard to the remaining issues, which were (a)

whether Dr. Edwards remained a limited partner of Urosite and (b) whether Dr. Edwards

committed a material breach of the contract when he decided to work for the VA in

Rutherford and Davidson Counties. Urosite then filed a motion for judgment on the

pleadings in March, and the court filed a Memorandum and Order granting Urosite’s

motion on May 3, 2016. The court wrote:

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1. The Court adopts the Defendants’ analysis that the “if and when Dr.

Edwards expands his practice of urology beyond Hickman County,

Tennessee and Giles County, Tennessee” of paragraph 2 of the SA is, under

Tennessee law, a condition and not a promise/contract obligation of the

Petitioner. In concluding this phrase is a condition, the Court relies upon

the plain wording of the phrase and that “if and when” wording is typically

used to express conditions . . . .

2. In enforcing the consequences of fulfilled conditions, a court does

not consider materiality unless there are extraordinary circumstances of

unfairness or injustice which demand equitable relief. . . .

3. The circumstances alleged by the Plaintiff in the complaint are not

extraordinary so as to require a materiality analysis of the condition and to

provide equitable relief.

4. Paragraph 2 of the SA is unambiguous. Its meaning is clear on its

face and, therefore, the Court is not authorized to take into account

allegations of the pleadings concerning motivation or design to construe the

SA. . . .

The court filed a Final Memorandum and Order on July 6, 2016, denying Dr. Edwards’

motion to revise and awarding Urosite its attorneys’ fees in the requested amount of

$103,792.50.

On appeal, Dr. Edwards contends the trial court erred in ruling that (1) Urosite

exercised its option to redeem his interest in the limited partnership within a reasonable

time; (2) his work for the Veterans Administration in Davidson and Rutherford Counties

satisfied the condition set forth in the Settlement Agreement permitting Urosite to

exercise its option; (3) the condition set forth in paragraph 2 of the Settlement Agreement

was not void as an unlawful restriction on competition; and (4) Urosite, rather than he,

was entitled to recover attorneys’ fees. Urosite requests an award of its attorneys’ fees

and costs incurred on appeal.

III. ANALYSIS

A. Standard of Review

A motion to dismiss filed pursuant to Tenn. R. Civ. P. 12.02(6) challenges “the

legal sufficiency of the complaint, not the strength of the plaintiff’s proof or evidence.”

Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011).

The defendant admits the truth of the relevant and material allegations set forth in the

complaint for purposes of the motion and contends that the allegations fail to establish a

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viable cause of action entitling the plaintiff to relief. Id. (citing Brown v. Tenn. Title

Loans, Inc., 328 S.W.3d 850, 854 (Tenn. 2010)).

Courts resolve motions to dismiss for failure to state a claim by considering the

pleadings alone. Id. (citing Leggett v. Duke Energy Corp., 308 S.W.3d 843, 851 (Tenn.

2010)). In considering the motion, a court is to ‘“construe the complaint liberally,

presuming all factual allegations to be true and giving the plaintiff the benefit of all

reasonable inferences.”’ Id. (quoting Tigg v. Pirelli Tire Corp., 232 S.W.3d 28, 31

(Tenn. 2007)). Courts should not grant a motion to dismiss unless the plaintiff is unable

to prove any set of facts that would entitle him or her to relief on the claims asserted. Id.

(citing Crews v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852, 857 (Tenn. 2002)). On

appeal, we review a trial court’s ruling on a motion to dismiss de novo, affording the trial

court’s determination no presumption of correctness. TENN. R. CIV. P. 13(d); Webb, 346

S.W.3d at 426.

A motion for judgment on the pleadings is filed pursuant to Tenn. R. Civ. P. 12.03

and is similar to a motion to dismiss for failure to state a claim except that it is made after

an answer is filed rather than before. TENN. R. CIV. P. 12.03; Young v. Barrow, 130

S.W.3d 59, 63 (Tenn. Ct. App. 2003). As with a motion to dismiss, the courts “accept as

true ‘all well-pleaded facts and all reasonable inferences drawn therefrom’” that a

plaintiff asserts in his or her complaint. Cherokee Country Club, Inc. v. City of Knoxville,

152 S.W.3d 466, 470 (Tenn. 2004) (quoting McClenahan v. Cooley, 806 S.W.2d 767,

769 (Tenn. 1991)). Courts interpret the complaint liberally in favor of the plaintiff and

accept all factual allegations asserted in the complaint as true. Young, 130 S.W.3d at 63.

The Court of Appeals reviews a trial court’s grant of a motion for judgment on the

pleadings de novo and will affirm the trial court’s decision only if it determines that the

plaintiff is unable to prove any set of facts in support of any of his or her cause(s) of

action that would entitle him or her to relief. TENN. R. APP. P. 13(d); Young, 130 S.W.3d

at 63.

This case involves the interpretation of the parties’ contracts.1 Contract

interpretation is a matter of law, which means we conduct a de novo review with no

presumption of correctness awarded to the trial court’s interpretation. TENN. R. APP. P.

13(d); West v. Shelby Cnty. Healthcare Corp., 459 S.W.3d 33, 42 (Tenn. 2014); Allmand

v. Pavletic, 292 S.W.3d 618, 624-25 (Tenn. 2009); Allstate Ins. Co. v. Watson, 195

S.W.3d 609, 611 (Tenn. 2006).

Urosite attached a copy of the Agreement and the Separation Agreement to its complaint, rendering them

a part of the pleadings and appropriate for consideration by a court ruling on a motion to dismiss or

judgment on the pleadings. See McGhee v. Shelby Cnty., Gov’t, W2012-00185-COA-R3-CV, 2012 WL

2087188, at *1 n.2 (Tenn. Ct. App. June 11, 2012); Brewer v. Piggee, W2006-01788-COA-R3-CV, 2007

WL 1946632, at *6 (Tenn. Ct. App. July 3, 2007).

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B. Timeliness of Exercise

Dr. Edwards first argues that Urosite did not exercise its option to repurchase his

limited partnership interest in a timely manner. The documents concerning Urosite’s

redemption of Dr. Edwards’ interest in the Partnership include the Agreement, and the

Separation Agreement. Article 9 of the Agreement has the heading “Transfer of

Partnership Interests,” and section 9.2 is titled “Call Rights of the Partnership.” Section

9.2(a) addresses the situation when a limited partner dies, is declared incompetent,

declares bankruptcy, becomes insolvent, or ceases to exist. Section 9.2(b) addresses the

situation when a limited partner’s employment agreement with UA terminates, as here. It

provides as follows:

Upon the termination of a Limited Partner’s employment agreement with

the General Partner for any reason other than death, disability or retirement

from the practice of medicine, the Partnership shall have the right to

purchase all of such Limited Partner’s Units for a price equal to the value of

such Limited Partner’s Capital Account. The value of such Limited

Partner’s Capital Account shall be paid to the Limited Partner, his estate,

heirs or other designees over a three year term with interest at the prime

rate as quoted by The Wall Street Journal as of the closing date of the

Partnership’s purchase of the Units.

The Separation Agreement begins with “whereas” clauses stating, inter alia, (1)

that Dr. Edwards’ employment agreement expired by its terms on June 30, 2011; (2) that

Dr. Edwards’ employment with UA terminated on December 31, 2013; and (3) that Dr.

Edwards intended to continue practicing urology in Hickman County and Giles County,

Tennessee. Section 1 has the heading “Redemption of Dr. Edwards’s Interests,” and

subsection 1(f) states:

As discussed further in Section 2 below, the Partnership agrees based on

certain representations by Dr. Edwards that it will not exercise any right to

demand that Dr. Edwards redeem his interest in Urosite, L.P. consistent

with the terms of Section 2 below.

Section 2 provides as follows:

Urosite, L.P. Consistent with Section 1f above, the Partnership agrees that

it will not exercise any right to demand that Dr. Edwards redeem his

interest in Urosite, L.P. as of, or after, the date of his departure from the

Practice in consideration for and based on Dr. Edwards’s representation

that his ongoing practice in the field of urology will be limited to Hickman

County, Tennessee and Giles County, Tennessee. The Partnership reserves

any right to call Dr. Edwards’s interest in Urosite, L.P. pursuant to the

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Agreement of Limited Partnership if and when Dr. Edwards expands his

practice of urology beyond Hickman County, Tennessee and Giles County,

Tennessee.

“A cardinal rule of contractual interpretation is to ascertain and give effect to the

intent of the parties.” Allmand, 292 S.W.3d at 630; see also West, 459 S.W.3d at 41-42;

Allstate Ins. Co., 195 S.W.3d at 611. The parties’ intent is determined by considering the

“plain meaning of the words” used in the contract. Allmand, 292 S.W.3d at 630; Allstate

Ins. Co., 195 S.W.3d at 611. If the words used are clear, unambiguous, and not

susceptible to more than one reasonable interpretation, courts are to rely on the literal

language used in the contract to determine the parties’ intent. Allmand, 292 S.W.3d at

630; Allstate Ins. Co., 195 S.W.3d at 611; see also Planters Gin Co. v. Fed. Compress &

Warehouse Co., Inc., 78 S.W.3d 885, 889-90 (Tenn. 2002) (explaining parties’ intent is

based on usual, natural, and ordinary meaning of words used in contract). A court will

not look beyond the four corners of the document to determine the parties’ intent when

the contract is unambiguous. Williams v. Larry Stovesand Lincoln Mercury, Inc., No.

M2014-00004-COA-R3-CV, 2014 WL 5308634, at *4 (Tenn. Ct. App. Oct. 15, 2014);

West, 459 S.W.3d at 42. A contract is not ambiguous if its meaning is clear and it is not

subject to more than one interpretation. Allstate Ins. Co., 195 S.W.3d at 611.

Section 9.2(b) of the Agreement specifies when the Partnership first acquires the

right to purchase Dr. Edwards’ Units (upon the termination of his employment agreement

with UA), but it neither specifies an end date for this right nor indicates that this right

expires if not exercised within a particular period. It is noteworthy that the Agreement

does not provide a limited partner whose employment agreement has terminated the right

to require Urosite to purchase his interest in the Partnership. However, section 9.3 of the

Agreement gives such right to those (or their heirs/representatives) who are no longer

limited partners due to retirement, death, incompetence, bankruptcy, or insolvency.

Section 9.3 is titled “Put Rights of the Limited Partners,” and it provides:

Upon the retirement, death, adjudication of incompetence, dissolution or

cessation of existence of a Limited Partner, such Limited Partner or his

legal representative shall have the right to require the Partnership to

Purchase all of such Limited Partner’s Units for the Purchase Price, as such

term is defined in Section 9.2. . . .

When a contract contains different sections, a court is not to read the sections in

isolation; it is to read the sections together to determine the meaning of the document as a

whole. Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 705 (Tenn. 2008); S. Trust

Ins. Co. v. Phillips, 474 S.W.3d 660, 668 (Tenn. Ct. App. 2015). ‘“All provisions of a

contract should be construed as in harmony with each other, if such construction can be

reasonably made, so as to avoid repugnancy between the several provisions of a single

contract.”’ Wager v. Life Care Ctrs. of Am., Inc., No. E2006-01054-COA-R3-CV, 2007

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WL 4224723, at *10 (Tenn. Ct. App. Nov. 30, 2007) (quoting Rainey v. Stansell, 836

S.W.2d 117, 119 (Tenn. Ct. App. 1992)). Moreover, “[w]here an executed agreement

refers to the other documents, all of the documents must be construed together as the

contract of the parties.” Williams, 2014 WL 5308634, at *5; see also Real Estate Mgmt.

v. Giles, 293 S.W.2d 596, 599 (Tenn. Ct. App. 1956) (stating where several documents

are executed as part of the same agreement, the court reads them together and interprets

them with reference to one other).

Both the Agreement and the Separation Agreement reference the Partnership’s

right to purchase Dr. Edwards’ interest in the Partnership. Dr. Edwards does not deny

that Urosite’s right to purchase his interest in the Partnership first ripened when his

employment agreement with UA terminated on June 30, 2011. When he and Urosite

entered into the Separation Agreement two and a half years later, in January 2014, the

language of the Separation Agreement reveals that both Dr. Edwards and Urosite

believed the Partnership’s option to purchase Dr. Edwards’ interest in Urosite was still

viable. Subsection 1(f) and section 2 clearly and unambiguously identify the

circumstances under which Urosite could exercise its option. As section 2 states, “The

Partnership reserves any right to call Dr. Edwards’s interest in Urosite, L.P. pursuant to

the Agreement of Limited Partnership if and when Dr. Edwards expands his practice of

urology beyond Hickman County, Tennessee and Giles County, Tennessee.” The parties’

intent is clear that Urosite was to have the right to exercise its option to purchase Dr.

Edwards’ interest in the Partnership if and when Dr. Edwards practiced urology outside

of Hickman or Giles Counties.

In his complaint, Dr. Edwards asserts that the Veterans Administration asked him

in the spring of 2014 to provide urology services in Rutherford and Davidson Counties

and that he began to provide these services as requested. Dr. Edwards further asserts that

the Partnership exercised its option to redeem his shares in Urosite the following March

2015. The Separation Agreement does not limit the time within which Urosite must act

to purchase Dr. Edwards’ shares once he begins practicing urology outside Hickman or

Giles Counties. However, the inclusion of paragraph 9.3 in the Agreement, giving a

limited partner the right to require the Partnership to purchase his shares in certain

circumstances (¶9.2(a) of the Agreement), without a corresponding provision for limited

partners whose employment agreements with UA terminate (¶9.2(b) of the Agreement),

evidences the parties’ intent that Urosite was to have the sole discretion about when, or if,

it redeemed the interest held by a limited partner whose employment agreement with UA

terminated. Likewise, in the absence of a provision in the Separation Agreement limiting

the period within which Urosite must act to redeem Dr. Edwards’ shares in the event he

practices urology outside Hickman or Giles Counties, we conclude there is no firm period

within which Urosite was required to redeem Dr. Edwards’ shares following the

expansion of his practice outside these counties.

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Dr. Edwards relies primarily on cases involving real estate to support his argument

that Urosite’s exercise of its right to purchase his interest in the Partnership forty-five

months after his employment agreement terminated was too long and not reasonable

under the circumstances. In Norton v. McCaskill, 12 S.W.3d 789 (Tenn. 2000), for

example, the lease agreement provided that the lessee could renew its lease “at the end of

10 years” but did not specify a time period within which the lessee was required to

exercise the option. Norton, 12 S.W.3d at 792. The Supreme Court in Norton stated that

when a lease does not include a specific time designation, an option to renew “remains

effective only during the term of the lease.” Id. at 793-94. The Court found that

exercising the option ten days after the lease expired was too late. Id. at 794. However,

the Norton Court expressly limited its holding to “those leases that require renewal ‘at the

end of’ or ‘at the termination of’ the lease or that contain similar language conveying the

same requirement.” Id. Because the facts here do not involve a lease and because the

Agreement does not contain language similar to that in the Norton case, the holding in

Norton does not control here.

By arguing that Urosite did not act in a timely fashion to redeem his interest in the

Partnership, Dr. Edwards essentially asks us to insert a term into the agreements where no

term currently exists to limit the period within which Urosite was required to exercise its

option. Tennessee courts, however, “must interpret contracts as they are written,” Tenn.

Div. of United Daughters of the Confederacy v. Vanderbilt Univ., 174 S.W.3d 98, 118

(Tenn. Ct. App. 2005), and they “are ‘not at liberty to make a new contract for parties

who have spoken for themselves,”’ Ellis v. Pauline S. Sprouse Residuary Trust, 280

S.W.3d 806, 814 (Tenn. 2009) (quoting Smithart v. John Hancock Mut. Life Ins. Co., 71

S.W.2d 1059, 1063 (Tenn. 1934)). Courts do not consider whether a party was wise or

foolish to enter into a particular contract, and they will not rewrite a party’s contract just

because it later becomes “burdensome or unwise.” Vanderbilt Univ., 174 S.W.3d at 118;