WPC/G j 0~ 0xZ 0k 0k= 0 0~B 0 0 0u 0 0  0 01: 0Ck 0V 0 0 0w 0 0 0 0U 0. 0UBt % 0z 06 1 0  0=  0FF 0P 1 0o& 0O!E! 0}! 0xx" 0" 0j}# 0e# 0WL$ 0W$ 0$ 0j~% 0% 0& 0m' 0' 0( 0) 0* 0-+ 0@ - 0`. 0/ 0/ 070 00 01 0/2 02 03 144n4 045 B545 05^6 0J6,7# 8U>9 0JQ9 0T9w@9 0^/: 0h: 0r: 0|g; 0; 0i< 1u< 0dn=U6=B)>1>v~?v\AV& 8Document[8]Document Style0..8` ..` V8Document[4]Document Style.. . V 8Document[6]Document Style8..V 8Document[5]Document Style0..V/8Document[2]Document Style 2A.3  Ԁ   V& 8Document[7]Document Style0..0` ..` zU :Right Par[1]Right-Aligned Paragraph Numbers..2I.3  Ԁ..0..zh :Right Par[2]Right-Aligned Paragraph Numbers..` ..2A.3  Ԁ..0` ..` V?8Document[3]Document Style.. 21.3  Ԁ   z{ :Right Par[3]Right-Aligned Paragraph Numbers..` ..`  ..P 21.3  Ԁ` ..` 0 .. z :Right Par[4]Right-Aligned Paragraph Numbers..` ..`  .. .. 2a.3  Ԁ .. 0..z :Right Par[5]Right-Aligned Paragraph Numbers..` ..`  .. ..h..2(1)3  Ԁ..0h..hz :Right Par[6]Right-Aligned Paragraph Numbers..` ..`  .. ..h..h..2(a)3  Ԁh..h0..z :Right Par[7]Right-Aligned Paragraph Numbers..` ..`  .. ..h..h....2i)3  Ԁ..0..z :Right Par[8]Right-Aligned Paragraph Numbers..` ..`  .. ..h..h....p..2a)3  Ԁ..0p..pVX8Document[1]Document Style  @..8  2I.3  Ԁ     Ԉ l2:Technical[5]Technical Document Style.. 2(1)3  Ԁ. l2:Technical[6]Technical Document Style.. 2(a)3  Ԁ. l/%:Technical[2]Technical Document Style 2A.3  Ԁ   .. l,!:Technical[3]Technical Document Style 21.3  Ԁ   .. l(!:Technical[4]Technical Document Style 2a.3  Ԁ   .. l:0:Technical[1]Technical Document Style  2I.3  Ԁ     .. l1:Technical[7]Technical Document Style.. 2i)3  Ԁ. l1:Technical[8]Technical Document Style.. 2a)3  Ԁ. <6X9`(*Courier 12pt10cpiQXR& 8BibliogrphyBibliography0....jo4Tech InitInitialize Technical StyleS   1 .1 .1 .1 .1 .1 .1 .1 S CuyTechnicalTechnical Document Style11.11.1.11.1.1.11.1.1.1.11.1.1.1.1.11.1.1.1.1.1.11.1.1.1.1.1.1.1fp2Doc InitInitialize Document StyleS #    I. 1. A. a.(1)(a) i) a)S !"($0 ($0 0 (($0 0 0   A_ekqwDocumentDocument StyleI.1.A.a.(1)(a)i)a)x?t2PleadingHeader for Numbered Pleading Paper % z &(  &XXXXX6G''*d66G''*d6HH1HH2HH3HH4HH5HH6HH7HH8HH910111213141516171819202122232425262728  .+('2$ FT!   p4Heading 2Underlined Heading Flush LeftV4Heading 1Centered Heading@..  b* 8Bullet ListIndented Bullet List0..0` ..` B& $1Document Style0..8` ..` B $2Document Style.. . B $3Document Style8..B $4Document Style0..B-$5Document Style 23  Ԁ   B& $6Document Style0..0` ..` dS $7Right-Aligned Paragraph Numbers..23  Ԁ..0..df $8Right-Aligned Paragraph Numbers..` ..` 23  Ԁ..0` ..` B=$9Document Style.. 23  Ԁ   fy &10Right-Aligned Paragraph Numbers..` ..`  .. 23  Ԁ` ..` 0 .. f &11Right-Aligned Paragraph Numbers..` ..`  .. ..23  Ԁ .. 0..f &12Right-Aligned Paragraph Numbers..` ..`  .. ..h..h23  Ԁ..0h..hf &13Right-Aligned Paragraph Numbers..` ..`  .. ..h..h..23  Ԁh..h0..f &14Right-Aligned Paragraph Numbers..` ..`  .. ..h..h....23  Ԁ..0..f &15Right-Aligned Paragraph Numbers..` ..`  .. ..h..h....p..p23  Ԁ..0p..pDV!&16Document Style  @..  23  Ԁ     Ԉ X/&17Technical Document Style.. 23  Ԁ. X/&18Technical Document Style.. 23  Ԁ. X-(&19Technical Document Style 23  Ԁ   .. X*$&20Technical Document Style 23  Ԁ   .. X)$&21Technical Document Style 23  Ԁ   .. X83&22Technical Document Style  23  Ԁ     .. X/&23Technical Document Style.. 23  Ԁ. X/&24Technical Document Style.. 23  Ԁ.   CRight ParRight-Aligned Paragraph NumbersI.A.1.a.(1)(a)i)a)3|x<6X9`(*Courier 12pt10cpiXXx6X@JQX@( T$   dLJ"$(G.2\$ FT!   QaXQX     0  MARVINBERKELESLIEMcWILLIAMS($   0  HealthcareWIMBERLYGUYTONLEDFORDMarcumPinneyPacconConstrCt.ClHolbertRhotonHP LaserJet 4Si/4SiMX PS 600dpiPSCRIPT,,,,0<l9Z &Courier Regular2 0Indent123  2" 0Indent20 23  ++DUDDUV2, 0Indent30 0 23  26 0Indent40 0 0 23  2@ 0Indent50 0 0 0 23  2J 0Indent60 0 0 0 0 23  2T 0Indent70 0 0 0 0 0 23  2^ 0Indent80 0 0 0 0 0 0 23  RSVWYZ[\ ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P 8Mac DefaultMac Default ` X<  9p`(Courier New% Line 7 d  F!#d#e  I$e         Someoftheinformationfurnishedwasgrosslymisleading.Forexample,itwasrepresentedthatthebusinesspurchasedwasgeneratingagrossprofitof$10,000permonth,wheninfactthelossespermonthwereapproximatelythatamount.PtPtHHHV,(hh hd'0F Styl{WP}01  HH  2$HH  Geneva  <Px443!#4$*$$*$ KK  Geneva  Geneva .,6 Geneva   h HD: Geneva  h HD: Geneva F! . e  ݛ  7tXXdXXd7\RA'\ `    , 5  f u` ќ @ INTHECOURTOFAPPEALSOFTENNESSEE@ EASTERNSECTIONDAVIDT.BAILEYand@ ) KNOXCOUNTYE.LYNNWAGNER,intheirown@ ) 03A019606CV00190rightandderivativelyforthe @ )useandbenefitofSoutheastern@ )HealthcareServices,L.P.@ ) @ )  PlaintiffsAppellants @ )  @ ) v.@ )@ ) TOMHOLBERT,asgeneralpartner  @ ) ofSouthernHealthcare@ )Services,L.P.@ )and@ )MOORE'SPHARMACY,INC.@ ) HON.HAROLDW.WIMBERLY,d/b/aMARCUM'SHEALTHCARE@ ) JUDGESERVICES,andCARLMARCUM,@ )GINAMARCUMPINNEY,and@ )TOMHOLBERT,asofficers,@ )directorsand/oremployees@ )andagentsofandfor@ )Moore'sPharmacy,Inc.@ )and@ )TOMHOLBERT,CARLMARCUM,@ )andGINAMARCUMPINNEY,@ )Individually@ )@ ) AFFIRMEDINPART;VACATEDIN DefendantsAppellees@ ) PARTandREMANDED DALEC.ALLENandH.BRUCEGUYTONOFKNOXVILLEFORAPPELLANTSDAVIDT.BAILEYandE.LYNNWAGNERWILLIAMK.ROGERSOFKINGSPORTFORAPPELLEETOMHOLBERTPATRICKLEDFORDOFKINGSPORTFORAPPELLEESMOORE'SPHARMACY,CARLMARCUMandGINAMARCUMPINNEY    OPINION         Goddard,P.J.  ThisisasuitbyDavidT.BaileyandE.LynnWagnerintheirownrightandderivativelyfortheuseandbenefitofSoutheasternHealthcareServices,L.P.,aLimitedPartnershipinwhichtheywerepartners,againstTomHolbert,asgeneralpartner,Moore'sPharmacy,Inc.,d/b/aMarcum'sHealthcareServices,andCarlMarcumandGinaMarcumPinney,asOfficersandDirectorsand/orEmployeesandAgentsofandforMoore'sPharmacy,Inc.,andTomHolbert,CarlMarcumandGinaMarcumPinney,Individually.ThesuitstemsfromthepurchasebySoutheasternHealthcareServicesofaunitdosagepharmacybusinessfromMoore'sPharmacy,Inc.,forthesumof$275,000.Thecomplaintallegedacauseofactionfornegligentmisrepresentationandbreachofwarranty.  TheTrialJudgedismissedthecomplaint.Althoughhefoundthatmisleadinginformation g   ׀regardingtheprofitabilityofthebusinessinquestionwasnegligentlyfurnishedtothePlaintiffs,healsofoundthatbecausethebookkeepingforthebusinesssoldwaskeptinconjunctionwiththatofaseparatepharmacybusinessownedbyMoore'sPharmacy,Inc.,"itwasdifficulttodeterminewhatwaswhat,whatthisbusinesswasactuallyearningandwhattheotherbusinesswasearning,"andthattherewasnointentonthepartoftheDefendantstodeceive.Consequently,heconcludedthatthePlaintiffswereguiltyofatleastequalnegligenceinfailingtoinvestigatetheinformationfurnished,whichwouldhavedisclosedthetruefinancialconditionofthebusinesspurchased.(SeeAppendix.)  TheTrialCourtalsodismissedthebreachofwarrantyclaiminasuccinctcolloquywithcounselforthePlaintiffsattheconclusionofhismemorandumopinion:         Soforthatreason,thejudgmentoftheCourtisthatthedefendantsshouldprevailbecausethefaulthereisatleastequal.Andthereisnootherbasis,asIhavejustoutlined,Ithink,forrecovery. Now,isthereanythingelsethatyouwouldliketoaskmethatyoufeelIhaven'tcoveredwithoutrearguingthecase? MR.LEDFORD:No,YourHonor. MR.GUYTON:IstheCourt'sopinionalsotohaveincludedtheaddressingtheissueofthewarranty? THECOURT:Yes.ThesolebasisforrecoveryasIstatedit,andthatincludeseverything.It'smyintentiontoincludeeverything.         ThePlaintiffsappeal,raisingthefollowingtwoissues:        1. Whetherthetrialcourterredinitsfailuretoholddefendants/appelleesliableforbreachofwarrantyand/orbreachofcontract,wherethedefendants/appelleeswarrantedtheaccuracyofthefinancialstatementsprovidedtoplaintiffs/appellantspriortothistransaction,andtheplaintiffs/appellantsreliedonthefinancialstatements,butthefinancialstatementswerediscoveredtobeinaccurateandfalseafterthetransaction. 2. Whetherthetrialcourterredinitsfailuretoholddefendants/appelleesMarcumandPinneypersonallyandindividuallyliableforthemisrepresentationsandbreachesofwarrantymadebytheiragents,HolbertandRhoton?         Inconnectionwiththebreachofwarrantyclaim,Moore'sPharmacy,Inc.,actingthroughitsPresident,GinaMarcumPinney,anditsSecretary,CarlMarcum,executedan"AGREEMENTFORSALEANDTRANSFEROFASSETS,"whichcontainedthefollowingprovisions:       @ SECTIONFIVE@ WARRANTIESANDCOVENANTSOFSELLER̜ Selleragrees,represents,andwarrantsasfollows: ....̛ (d)SellerhasmadeavailabletoBuyeritsprofitandlossstatementsandsamehavecorrectlyreflected ` thefinancialconditions,assetsandliabilities,andoperationofSellerasofthedatesstatedinsuchdocuments. .... (p)SellerwillpromptlyadviseBuyerinwritingoftheoccurrenceofanymaterialeventswhichcometotheknowledgeofSelleraftertheexecutionofthisAgreementandpriortoorontheClosingDaterelatingtoanymatterswhicharethesubjectsofthesecovenants,representationsandwarrantiesoftheSellercontainedinthisSection. (q)NorepresentationsorwarrantiesbySeller,itsofficersordirectors,noranystatement,listorcertificatefurnishedortobefurnishedtoBuyerpursuanthereto,orinconnectionwiththetransactionscontemplatedhereby,containsorwillcontainanyuntruestatementofamaterialfactoromitsorwillomittostateamaterialfactnecessarytomakethestatementsthereinnotmisleading.Allsuchstatements,lists,orcertificatesaretrueandcorrectinallmaterialrespects. (r)Thewarranties,representationsandcovenantsoftheSellercontainedinthisAgreementshallbetrueandcorrectinallrespectsasoftheClosingDatewiththesameforceandeffectasifgivenandmadeonandasofthedateandtimeoftheClosingDate,andsuchrepresentations,warrantiesandcovenantsshallsurvivetheClosingDateandtheconsummationofthetransactionscontemplatedbythisAgreement.         AlthoughtheTrialCourtapparentlyfoundthatnegligencemayalsobaranactionforbreachofcontract,neithertheTrialCourtnorcounselfortheDefendantshavecitedanysuchauthority.Moreover,wehavenotbeenabletofindanyinourresearch.WeaccordinglyconcludethatthePlaintiffsareentitledtoajudgmentagainsttheCorporationbecauseofbreachofwarranty.  Insofinding,weacceptastruethatthePlaintiffsdidnotmakesuchaninvestigationthattheymighthavetodisclosethemisrepresentation,butpointoutthatthepurposeofawarranty,inpart,istorelieveonetowhomthewarrantyisgivenfromthatresponsibility.InPaccon,Inc.v.UnitedStates,399F.2d162,166(1968),theUnitedStatesCourtofClaimsmakesthispointinquotingwithapprovalfromanearliercase:       "Inessenceawarrantyisanassurancebyonepartytoanagreementoftheexistenceofafactuponwhichtheotherpartymayrely;itisintendedpreciselytorelievethepromiseeofanydutytoascertainthefactsforhimself.Thus,awarrantyamountstoapromisetoindemnifythepromiseeforanylossifthefactwarrantedprovesuntrue."DaleConstr.Co.v.UnitedStates,168Ct.Cl.692,699(1964).         IntheirbriefthePlaintiffscontendthatiftheremedytowhichtheyareentitledisrescission,the"measureofdamageswouldbethereturnoftheconsiderationpaid,...aswellastheamountinvestedinthebusiness,withinterest,andthevalueoftheirlabor,"whichtheycalculatetobeinexcessof$600,000.Inthealternative,theyassertthatiftheyareawardedcompensatorydamagesonly,"theyshouldreceivethedifferenceinvalueofwhattheypaidversusthevalueofwhattheyactuallyreceived."  Weconcludeunderallthefactsofthiscasethelattermeasureofdamageistheappropriateone.Itdoesnotappear,however,thatthisfigurewasadequatelyaddressedintheproof,andintheinterestofjusticetobothparties,wedeemitappropriatethatthecauseberemandedforsuchadeterminationandajudgmententeredagainsttheCorporationforthatamount.  Astothesecondissueraised,whereinthePlaintiffs'insistencethattheindividualDefendantsarelikewiseliableinwarranty,wefindtheonlywarrantyextendedwasthatcontainedintheagreementforsaleandtransferofassets,whichwasexecutedbytheCorporationandsignedbyMs.PinneyandMr.Marcumintheirrepresentativecapacities.  ќ̛  Inconclusion,wehavenotoverlookedtheDefendants'contentionsthatbreachofwarrantymaynotbeassertedbecausethecontractisambiguous,wasnotbreached,wasnotreasonablyreliedupon,anddidnotcausedamagestothePlaintiffs.UnderthefindingsoftheTrialCourt,thetestimonyadducedandtheentirerecord,wefindeachcontentiontobewithoutmerit.  FortheforegoingreasonsthejudgmentoftheTrialCourtisaffirmedinpart,vacatedinpart,andthecauseremandedforfurtherproceedingsnotinconsistentwiththisopinion.CostsofappealareadjudgedonehalfagainstthePlaintiffsandonehalfagainsttheCorporation.      _______________________________      HoustonM.Goddard,P.J.CONCUR:________________________________HerschelP.Franks,J.________________________________DonT.McMurray,J.  Ӝ  ћ          APPENDIXAndthisbusiness,whenitwasoperatedbythedefendants,wasoperated,ofcourse,withtheirotherbusinessinsuchawaythat,tothedefendantsandreallytoanybodyelse,itwasdifficulttodeterminewhatwaswhat,whatthisbusinesswasactuallyearningandwhattheotherbusinesswasearning.Andthismethodofaccountingthatwewentintogreatdetailindescribing,ineffect,concealedtheactualstatusandconditionofthisbusinessthatwasfinallypurchasedbytheplaintiff.Thisresultingconcealmentwasnot,intheCourt'smindandtheCourt'sopinion,doneinsomeintentionalwaytodeceiveanyone.Itwasjustsimplythewaythatitwassetup.  Whentheplaintiffspurchasedthebusiness,theywereprovidedthepapersthatwe'vespentalotoftimediscussing,andthesepapers,ineffect,gaveplaintiffwhatturnedouttobeafalseimpressionaboutthestatusofthisbusinessthattheypurchased.Now,plaintiffsacceptedthesewithoutquestion,andwhenofferedtheopportunitytodetermineforthemselvesthevalidity,ineffect,ofthosepapersthatthey'vebeenfurnishedandtheinformationthey'vebeenfurnished,theplaintiffswounduprelyingupontheiraccountantthattheysenttoinvestigate.Andtheaccountantactuallydidnoinvestigationand,repeatingseveraltimesthatthesepeopleinvolvedwerefraternitybrothersandiftheycouldnottrusteachotherandrelyoneachother,hedidnotseethathehadanypartinquestioningthemanyfurtherthanwhatappearedonthesurface.                      APPENDIX          Page2          misleading.Theydidnotdosointentionallyorwillfullyoractuallyknowingly.Theywererelyingupontheirpeople,theiraccountantwhopreparedthesestatements,andtheyareshownnottotakemuchdirectinterestindeterminingandseparatingtheaccountsofthatbusinessfromtheotherbusiness.Thenwhenthesalewasdone,theplaintiffs,havingtheopportunitytoinvestigatethebusinessandaccomplishwhatwereferredtointheτasatermofart,supposedly,duediligencewhichwasinthepapers,actuallydidnothingtodetermineforthemselvesinanymeaningfulwaywhatthetrueconditionofthebusinesswas.  Soinlegalterms,Ithinkyouwouldsaythatthedefendantsnegligentlymisrepresentedtheconditionofthatbusinessthatwaspurchased.Theplaintiffsthennegligentlypurchasedthebusiness.Andthat'stheproblemthere.Andthat'sthenatureoftheconductthatresultedinthissituationnegligenceonbothpartswhichtheCourtfeelswasatleastequal.Theotherindividualdefendantwefindwasnotactingforhimselfinsuchawaythatwouldimposeliabilityuponhim.̛