ÿWPC„  …# V %aUFg 0(­UFÕw@ 4[ o ~ 0l† 0Dò 0J6 0T€ 0^Ô 0h2 0rš 0| 0†ˆ 0 1už U, 0d?U,£U6ÏB)DC. AMq B¾ D3ÛU*78 0@o†¯T5–‰ov~ŽvÓ  AO߯. 0Dô D/8 Bg ˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 ò<Ú5 9Z ‹.Courier New Regular($¡¡<4šÛ 9Z ‹.Courier New Regular 5678D9:i-;‘-< =Ó€GDÒ 3|xG((3üÝ$¤¤Ý ƒ!ÝÝ  Ýà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)< Œ 9p`(ModernP ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(Monaco< Œ 9p`(Courier New% Line 7 d&&&&7Border 1dd€-'Cþÿ << Gÿÿ d))))'ÿÿdxd< Œ 9p`(Arial -Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ÔÔ€%ÔÔ€%ôÔÝ  ÝÔ€+ÔÔ€+ÔÓ  Óò òÔ YYY ÔFILEDÔ€+XÔÌÌJune€28,€1996ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó ó("ÿÿ$££Ò  ÒÒ  Ò |Ý ƒ!ÝÑ#€d#ÑÔ€ÔÔ€%ÔÔ€%ôÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€seventh€count€asked€the€court€to€judicially€dissolve€BTI.€€TheÏcourt€entered€an€order€pursuant€to€Rule€54.02€of€T.R.C.P.€that€its€order€wasÏfinal€as€to€all€other€counts€of€the€complaint.Ì JÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€%ÔÔ€%ôÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€business€judgment€rule€applies€to€both€directors€and€officers€andÏmay€even€apply€to€majority€shareholders.€€3A€òòFletcheróó€ðð€1036.Ì ŒÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€%ÔÔ€%ôÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€Thus,€the€business€judgment€rule€will€not€apply€if€the€director€orÏofficer€breached€his€duty€of€loyalty.€€For€this€reason,€courts€do€notÏtypically€apply€the€business€judgment€rule€to€duty€of€loyalty€issues.Ì eÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€%ÔÔ€%ôÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€sixth€issue€of€appellants'€appeal€involves€counts€eight€and€nine.€ÏIn€this€section€we€address€count€eight€only.€€See€section€V€for€a€discussionÏof€the€ninth€count.ÌPtPtHHÚ(ÿáÿâùFG(üHHØ(d'`Styl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑMonacoÑÑ ÑÒ  BA Op Monaco ÒÒ  BA Op Monaco Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÓ&€$$X„d&ÓÑ#€$$Xd#ÑÔ€%ÔÔ€%ôÔÝ  ÝÑ\R AØ'\ÑÔ€%XÔÑ7€&XXdÖdÈ7ÑÑ  Ñ›William€A.€Hall€and€Beefà àà à)ÌTransport,€Inc.,à àà àà à)Ìà àPlaintiffs/Appellants,à à)à àAppeal€No.Ìv.à àà àà àà àà àà à)à à01„A„01„9510„CH„00430ÌTennessee€Dressed€Beef€Co.à à)Ìand€Richard€N.€Hall,à àà à)Ìà àDefendants/Appellees,à à)à àChancery€Court€No.Ìandà àà àà àà àà àà à)à à93„1246„IIIÌWilliam€A.€Hall,€derivativelyà à)ÌÙ€€ÙœßL€(,';+'h|'` ç `€€Lß›on€behalf€of€Tennesseeà àà à)€ÌDressed€Beef€Co.,à àà àà à)Ìà àPlaintiff/Appellant,à à)Ìv.à àà àà àà àà àà à)ÌRichard€N.€Hall,à àà àà à)Ìà àDefendant/Appellee.à àà à)ÌÌÌÌÌÌÌà@ àÔ€% ÔCOURT€OF€APPEALS€OF€TENNESSEEÌÌà@ àMIDDLE€SECTION€AT€NASHVILLEÌÌà@ àAPPEAL€FROM€THE€CHANCERY€COURT,€PART€THREEÌÌà@ àAT€NASHVILLE,€TENNESSEEÌÌà@ àTHE€HONORABLE€ROBERT€S.€BRANDT,€CHANCELLORÔ€%XÔÌÌÌÌÌÌÌJEFFERY€A.€GREENEÌALVIN€L.€HARRISÌGreene€&€GreeneÌP.O.€Box€198768Ì323€Union€StreetÌNashville,€Tennessee€37219„8768Ìà àATTORNEYS€FOR€PLAINTIFFS/APPELLANTSÌÌÌJOHN€S.€HICKSÌDARWIN€A.€HINDMAN€IIIÌBaker,€Donelson,€Bearman€&€CaldwellÌA€Professional€CorporationÌ1700€Nashville€City€CenterÌ511€Union€StreetÌNashville,€Tennessee€37219Ìà àATTORNEYS€FOR€DEFENDANTS/APPELLEESÌÌÌÌÌà@ àAFFIRMED€IN€PART,€REVERSED€IN€PART,€AND€REMANDEDÌÔ€%¼ÔÌÌÌÌà àà àà àà àà àà àà àSAMUEL€L.€LEWIS,€JUDGEÌÓ  Óà@ àòòOPINIONóóÔ€%XÔÌÌÓÓà àThis€is€an€appeal€by€plaintiffs/appellants,€William€A.€HallÏand€Beef€Transport,€Inc.€œ("BTI"),›€from€an€order€of€the€chanceryÏcourt€granting€summary€judgment€in€favor€of€defendants/appellees,ÏRichard€A.€Hall€and€Tennessee€Dressed€Beef€Company€œ("TDBC").›ÌÌà àWilliam€Hall€and€Richard€Hall€are€brothers.€€In€1962,€theyÏincorporated€TDBC.€€From€1962€until€1992,€William€Hall€and€RichardÏHall€each€owned€one„third€(7,500€shares)€of€the€outstandingÏshares,€and€Louis€and€Patrick€McRedmond€each€owned€one„sixthÏ(3,750€shares)€of€the€outstanding€shares.€€Three€years€afterÏforming€TDBC,€the€Halls€incorporated€BTI€and€divided€œBTI's›Ïoutstanding€shares€equally.€€The€primary€purpose€of€BTI€was€toÏprovide€hauling€services€to€TDBC,€but€it€also€providedÏtransportation€services€to€third€parties.€€œBTI's›€offices€were€inÏthe€same€building€as€the€offices€of€TDBC.ÌÌà àInitially,€the€Halls€were€both€active€in€the€daily€operationsÏof€TDBC€and€both€served€as€directors.€€Moreover,€Richard€HallÍserved€as€President€of€the€company.€€In€the€late€œ60's›€or€earlyÏœ70's,›€the€brothers€began€to€disagree€about€corporate€decisions.€ÏIn€the€summer€of€1988,€William€Hall€established€an€external€officeÏin€Brentwood,€Tennessee€in€order€to€assess€œTDBC's›€diversificationÏoptions.€€This€move€also€operated€to€separate€the€two€brothers€whoÏcould€no€longer€work€together.€€As€a€result€of€the€move,€WilliamÏHall€was€not€active€in€the€day€to€day€operations€of€TDBC.ÌÌà àNeither€of€the€McRedmonds€participated€in€the€management€ofÏTDBC.€€Further,€it€is€clear€that€the€McRedmonds€were€not€pleasedÏwith€the€way€the€Halls€carried€on€the€business€of€TDBC.€€In€fact,Ïthe€McRedmonds€even€filed€a€lawsuit€against€the€Halls,€but€wereÏunsuccessful.€€òòò òTennessee€Dressed€Beef€Co.€v.€Hallóóó ó,€519€S.W.2dÏ805€(Tenn.€App.€1974).ÌÌà àIn€1992,€the€Internal€Revenue€Service€œ("IRS")›€audited€œBTI's›Ïtax€returns.€€Because€the€brothers€also€owned€TDBC,€the€IRS€beganÏto€audit€œTDBC's›€books€as€well.€€œThe›€focus€of€the€investigation€wasÏthe€prices€charged€by€BTI€to€TDBC.€€The€high€prices€concerned€theÏIRS€because€they€caused€a€transfer€of€income€from€TDBC€to€BTI,€aÏsubchapter€S€corporation.€€Despite€the€œIRS's›€concern,€it€did€notÏrequire€either€company€to€make€any€adjustments.ÌÌà àThe€Halls€soon€began€to€negotiate€with€one€another€for€theÏsale€of€the€œother's›€TDBC€stock.€€Because€their€attempts€wereÏunsuccessful,€they€individually€approached€the€McRedmonds.€ÍWilliam€Hall€was€first€to€approach€the€McRedmonds,€but€was€unableÏto€strike€a€deal.€€He€claimed€that€his€unsuccessful€attempts€wereÏdue€to€the€deceit€of€Richard€Hall.€€To€explain,€TDBC€sold€productÏto€Nashville€Recycling,€Inc.,€a€company€owned€entirely€by€theÏMcRedmond€brothers.€€Over€the€years€Nashville€RecyclingÏaccumulated€an€overdue€account€with€TDBC€of€approximatelyÏ$500,000.00.€€William€Hall€œcontended›€that€Richard€HallÏintentionally€hid€this€account€receivable€from€him€so€that€RichardÏHall€could€use€this€debt€as€leverage€in€negotiating€with€theÏMcRedmonds.ÌÌà àAfter€negotiating€with€William€Hall,€the€McRedmonds€contactedÏRichard€Hall.€€On€behalf€of€himself€and€TDBC,€Richard€HallÏnegotiated€and€entered€into€a€Stock€Purchase€and€RedemptionÏAgreement€œ("the›€œAgreement")›€on€26€October€1992.€€The€AgreementÏprovided€that€TDBC€would€redeem€7,400€shares€of€the€œMcRedmonds'›Ïstock€at€$187.39€per€share€and€that€Richard€Hall€would€purchaseÏthe€remaining€100€shares€at€the€same€price.€€TDBC€agreed€to€payÏthe€McRedmonds€$280,000.00€in€cash€at€closing€and€promised€to€payÏthe€principal€of€$1,106,724.00€over€seven€years€at€8.75€percentÏinterest.€€In€addition,€the€Agreement€provided€that€NashvilleÏRecycling€would€repay€its€debt€to€TDBC€over€five€years€at€6.25Ïpercent€interest.€€Finally,€under€the€terms€of€the€Agreement,€theÏMcRedmonds€gave€Richard€Hall€proxies€to€vote€their€shares€pendingÏthe€closing€of€the€Agreement.€€ÌÌà àOn€27€October€1992,€one€day€after€executing€the€Agreement,ÏRichard€Hall€called€a€special€meeting€of€œTDBC's›€stockholders€for€9ÏNovember€1992.€œ€The›€purpose€of€the€meeting,€as€stated€in€theÏnotice,€was€to€amend€the€bylaws.€€The€existing€bylaws€contained€aÏprovision€granting€the€shareholders€a€right€of€first€refusal.€ÏAccording€to€the€provision,€before€a€shareholder€could€sell€hisÏshares€to€someone€other€than€the€original€four€shareholders,€theÏother€shareholders€had€a€right€to€purchase€the€shares€at€theÏlowest€price€at€which€the€shareholder€offered€to€sell.€€TheÏamended€bylaws,€proposed€by€Richard€Hall,€did€not€contain€aÏsimilar€restriction.€€William€Hall€voted€against€the€amendments,Ïbut€because€Richard€Hall€was€able€to€vote€two„thirds€of€theÏoutstanding€shares,€the€proposal€passed.€€William€Hall€œclaimed›Ïthat€neither€he€nor€the€œcorporation's›€attorney€had€any€knowledgeÏof€the€Agreement€prior€to€the€meeting.ÌÌà àFollowing€the€9€November€meeting,€Richard€Hall€called€aÏmeeting€of€œTDBC's›€shareholders€and€a€meeting€of€œTDBC's›€Board€ofÏDirectors.€€Both€meetings€were€set€for€18€November€1992€with€theÏœshareholders'›€meeting€occurring€first.€€At€the€œshareholders'›Ïmeeting,€Richard€Hall€used€his€majority€vote€to€elect€a€Board€ofÏDirectors€which€consisted€of:€Richard€Hall;€Richard€œHall's›€son,ÏBryan€Hall;€the€new€plant€manager,€Robert€Rechter;€Dr.€LouisÏMiller;€and€William€Hall.€€While€at€this€meeting,€William€HallÏlearned€of€the€œMcRedmonds'›€delinquent€account.€€Following€theÏœshareholders'›€meeting,€Richard€Hall€convened€the€œdirectors'›Ímeeting.€€At€that€time,€Richard€Hall€disclosed€the€existence€ofÏthe€Agreement€to€William€Hall€and€corporate€counsel.€€Thereafter,Ïthe€new€board€approved€the€Agreement.ÌÌà àWith€the€œboard's›€approval€of€the€Agreement,€Richard€HallÏclosed€the€deal.€€As€a€result,€he€presently€holds€50.3€percent€ofÏthe€outstanding€shares,€and€William€Hall€is€now€the€minorityÏshareholder€with€49.7€percent€of€the€outstanding€shares.€€WilliamÏHall€œalleged›€that€Richard€Hall,€using€his€majority€power€and€theÏcooperation€of€the€new€board€members,€œ"engaged›€in€numerous€actionÏthat€benefit€himself€personally€and€work€to€the€detriment€of€W.ÏœHall."›€€Specifically,€William€Hall€œalleged›€that€Richard€Hall:€1)Ïterminated€William€œHall's›€employment€with€TDBC€and€his€income€fromÏTDBC€which€averaged€$150,000.00€per€year;€2)€prevented€WilliamÏHall€from€inspecting€TDBC€and€BTI€information;€3)€concealedÏmaterial€information€from€William€Hall;€4)€raised€Richard€œHall's›ÏTDBC€income€an€average€of€$150,000.00€per€year;€and€5)Ïunilaterally€changed€the€terms€of€the€haulage€contract€with€BTI€toÏsubstantially€eliminate€œBTI's›€profit€and€increase€œTDBC's›€profit.ÌÌà àWilliam€Hall€and€BTI€filed€a€complaint€in€the€chancery€courtÏon€29€April€1993.€€After€alleging€the€above€factual€scenario,€theyÏset€forth€eleven€causes€of€action.€€On€29€April€1993,€the€chanceryÏcourt€entered€a€temporary€restraining€order€and€set€a€date€for€aÏhearing€on€a€temporary€injunction.€€On€18€May€1993,€the€chanceryÏcourt€entered€an€order€entitling€William€Hall€to€inspect€the€booksÍand€records€of€BTI.€€ÌÌà àOn€12€August€1993,€Richard€Hall€and€TDBC€moved€for€partialÏsummary€judgment.€€Thereafter,€the€chancery€court€entered€an€orderÏgranting€the€motion€for€summary€judgment€as€to€William€œHall's›Ïderivative€claim€on€behalf€of€TDBC.€€On€8€February€1995,€RichardÏHall€and€TDBC€filed€a€motion€for€summary€judgment.€€The€chanceryÏcourt€entered€an€order€granting€the€motion€for€summary€judgmentÏand€dismissed€all€œof€the›€counts€except€œfor€the›€œseventh.× ƒ. ××  ×›€ÏThereafter,€William€Hall€and€BTI€filed€a€notice€of€appeal€andÏasked€this€court€to€address€the€following€issues:ÌÓÓà8 àà à1.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€William€œHall's›Ïindividual€claims€for€breach€of€contract€against€[TDBC]Ïand€interference€with€contract€against€Richard€Hall.Ìà8 àà à2.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€William€œHall's›Ïclaim€brought€derivatively€on€behalf€of€[TDBC]€againstÏRichard€Hall.Ìà8 àà à3.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€William€œHall's›Ïclaim€to€dissolve€[TDBC].Ìà8 àà à4.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€œ[BTI's]›€claimsÏfor€breach€of€fiduciary€duty€against€Richard€Hall.Ìà8 àà à5.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€œ[BTI's]›€breach€of€contractÏclaim€against€[TDBC].Ìà8 àà à6.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€William€œHall's›Ïclaims€for€oppression€of€minority€shareholder€againstÏRichard€Hall€based€on€his€controlling€actions€withÏrespect€to€both€[TDBC]€and€[BTI].Ìà8 àà à7.à àWhether€the€trial€court€properly€dismissed,€asÏa€matter€of€summary€judgment,€appellant€William€œHall's›Íclaim€to€remove€Richard€Hall€as€a€director€of€[TDBC]€andÏ[BTI].ÌÌÓÓÌò òI.à àSTANDARD€OF€REVIEWó óÌÌà àThis€court€reviews€the€decision€below€de€novo€applying€theÏsame€Rule€56€analysis€as€did€the€trial€court.€€òòò òGonzales€v.€AlmanÏConstr.€Co.óóó ó,€857€S.W.2d€42,€45€(Tenn.€App.€1993).€€One€who€filesÏa€motion€for€summary€judgment€has€the€burden€of€establishing€thatÏthere€are€no€genuine€issues€of€material€fact€and€that€the€lawÏentitles€the€moving€party€to€a€judgment.€€òòò òByrd€v.€Hallóóó ó,€847ÏS.W.2d€208,€215€(Tenn.€1993).€€After€the€moving€party€makes€aÏproperly€supported€motion,€the€burden€shifts€and€the€nonmovingÏparty€must€œ"set›€forth€specific€facts,€not€legal€conclusions,€byÏusing€affidavits€or€the€discovery€materials€listed€in€Rule€56.03,Ïestablishing€that€there€are€indeed€disputed,€material€factsÏcreating€a€genuine€issue€that€needs€to€be€resolved€by€the€trier€ofÏfact€and€that€a€trial€is€therefore€œnecessary."›€€òòò òId.€óóó ó€In€addition,ÏRule€56€expressly€provides€that€œ"an›€adverse€party€may€not€restÏupon€the€mere€allegations€or€denials€of€his€pleading.€.€.€œ."›€ÏTenn.€R.€Civ.€P.€56.05€(1995).ÌÌò òII.à àISSUE€ONE:€COUNTS€ONE€AND€TWOó óÌÌà àœAppellants'›€first€issue€relates€to€the€first€two€counts€inÏthe€complaint.€€In€the€first€count,€William€Hall€set€forth€aÍbreach€of€contract€claim€against€TDBC.€€To€support€his€claim,ÏWilliam€Hall€relied€on€the€stock€transfer€restriction€found€in€theÏbylaws€which€the€shareholders€amended€on€9€November€1992.€€PriorÏto€the€amendment,€the€provision€provided€as€follows:ÌÓÓà8 àà à5.à àNo€stock€shall€be€sold€by€any€stockholderÏunless€he€has€given€the€corporation€twenty€days€noticeÏof€his€intention€to€sell,€during€which€time€the€otherÏstockholders€of€record€shall€have€the€privilege€ofÏpurchasing€same€at€the€lowest€price€at€which€saidÏstockholder€offers€to€sell,€but€this€restriction€shallÏnot€apply€to€sales€by€and€between€the€four€originalÏstockholders,€or€their€heirs€or€the€personalÏrepresentatives€of€their€estates.ÌÌÓÓIn€the€complaint,€William€Hall€alleged€that€œTDBC's›€bylaws€createdÏa€contractual€relationship€between€him€and€TDBC.€€He€then€arguedÏthat€the€stock€transfer€restriction€required€TDBC€to€notify€him€ofÏthe€œMcRedmonds'›€intent€to€sell€their€stock€back€to€the€corporationÏand€that€TDBC€breached€the€contract€when€it€failed€to€comply€withÏthis€provision€of€the€bylaws.€€In€addition,€William€Hall€includedÏa€second€count€against€Richard€Hall€for€tortious€interference€withÏcontract.ÌÌà àIt€is€the€opinion€of€this€court€that€the€chancery€courtÏproperly€granted€summary€judgment€in€favor€of€appellees€becauseÏTDBC€was€not€a€party€nor€a€privy€to€this€provision€of€the€bylaws.€ÏA€person€or€entity€which€is€neither€a€party€to€a€contract€nor€aÏprivy€thereto€is€a€stranger€to€the€contract.€€òòò òCherokeeÏFoundries,€Inc.€v.€Imperial€Assurance€Co.óóó ó,€188€Tenn.€349,Ï354,€219€S.W.2d€203,€205€(1949).€€Further,€œ"contract›€provisions€.Ï.€.€are€binding€upon€the€parties€to€the€agreement€and€do€not€bindÍœstrangers."›€€òòò òSmith€v.€Elrodóóó ó,€No.€63,€1990€WL€200584,€at€*1Ï(Tenn.€App.€14€Dec.€1990)€(citing€17€òòAm.€Jur.€2dóó€òòContractsóó€ðð€294Ï(1964)).€€It€follows€that€this€provision€did€not€create€a€bindingÏcontract€with€respect€to€TDBC.€€Thus,€as€a€matter€of€law,€WilliamÏHall€could€not€have€maintained€a€breach€of€contract€action€againstÏTDBC.€€Moreover,€he€could€not€have€maintained€a€tortiousÏinterference€claim€based€on€the€premise€that€Richard€HallÏinterfered€with€the€contractual€relation€between€TDBC€and€WilliamÏHall.€€Because€William€Hall€could€not€establish€a€necessaryÏelement€of€both€claims,€the€existence€of€a€contractualÏrelationship,€summary€judgment€was€appropriate.ÌÌò òIII.à àISSUE€TWO:€COUNT€THREEó óÌÌà àThe€third€count€of€the€complaint€is€a€derivative€actionÏbrought€by€William€Hall€on€behalf€of€TDBC€against€Richard€Hall.€ÏSpecifically,€William€Hall€alleged€that€Richard€Hall€breached€theÏfiduciary€duties€that€he€owed€to€TDBC.€€The€chancery€courtÏdismissed€this€count€after€reviewing€a€motion€for€partial€summaryÏœjudgment.›€€Although€the€œcourt's›€order€did€not€contain€any€insightÏinto€the€œcourt's›€reasoning,€the€only€basis€of€the€motion€was€theÏcontention€that€William€Hall€lacked€standing€to€bring€a€derivativeÏsuit.ÌÌà àTennessee€law€provides€that€a€shareholder€may€bring€aÏderivative€action€in€the€name€of€the€corporation€to€enforce€theÍrights€of€the€corporation.€€Tenn.€Code€Ann.€ðð€48„17„401(a)€(1995).€ÏIn€order€to€bring€the€action,€the€shareholder€must€have€been€aÏœ"shareholder›€of€the€corporation€when€the€transaction€complained€ofÏoccurred€or€.€.€.€the€person€became€a€shareholder€through€transferÏby€operation€of€law€from€one€who€was€a€shareholder€at€that€œtime."›€Ïòòò òId.€óóó ó€€Also,€the€shareholder€must€allege€with€particularity€thatÏthe€shareholder€made€a€demand€and€the€board€of€directors€refusedÏor€ignored€the€demand€or€that€the€shareholder€chose€not€to€make€aÏdemand€and€the€reason€for€that€decision.€€òòò òId.óóó ó€ðð€48„17„401(b).€ÏAdditionally,€the€Tennessee€Rules€of€Civil€Procedure€provide€thatÏthe€shareholder€must€œ"fairly›€and€adequately€represent€theÏinterests€of€the€shareholders€or€members€similarly€situated.€.€.Ïœ."›€€Tenn.€R.€Civ.€P.€23.06.€€The€parties€do€not€dispute€thatÏWilliam€Hall€fulfilled€the€requirements€of€the€statute.€€They€do,Ïhowever,€disagree€as€to€whether€William€Hall€met€the€additionalÏrequirement€found€in€Rule€23.06€of€the€Tennessee€Rules€of€CivilÏProcedure.ÌÌà àIn€support€of€his€argument,€Richard€Hall€cited€a€case€fromÏthe€Eastern€Section€of€the€Court€of€Appeals.€€òòò òWaterhouse€v.ÏCumberland€County€Bankóóó ó,€No.€03A01„9102„CH„00056€and€No.€03A01„9106„CH„00079,€1991€WL€199480€(Tenn.€App.€Oct.€8,€1991).€€InÏòòò òWaterhouse,óóó ó€the€court€held€that€a€patent€conflict€of€interestÏexists€when€a€plaintiff€attempts€to€maintain€a€derivative€actionÏon€behalf€of€a€corporation€at€the€same€time€the€plaintiff€pursuesÏa€second,€individual€action€against€the€corporation.€€òòò òId.óóó ó€at€*2.€ÍThe€court€then€concluded€that€œ"as›€a€matter€of€law,€the€resultingÏconflict€of€interest€disqualifies€the€appellant€.€.€.€as€aÏplaintiff€who€may€maintain€a€derivative€action€pursuant€to€RuleÏ23.06,€Tennessee€Rules€of€Civil€œProcedure."›€€òòò òId.ó óóóÌÌà àThe€facts€of€the€present€case€are€easily€distinguished€fromÏthose€in€òòò òWaterhouseóóó ó.€€The€critical€distinction€is€that€inÏòòò òWaterhouseó óóó,€the€plaintiff/appellant€was€attempting€to€represent€aÏnumber€of€other€similarly€situated€shareholders€in€a€derivativeÏaction€while€representing€his€own€interests€in€his€individualÏsuit.€€òòò òId.€ó óóóat€*1.€€In€contrast,€in€this€case,€the€minorityÏshareholders€represented€in€the€derivative€action€consist€only€ofÏWilliam€Hall,€that€is,€he€is€the€only€similarly€situatedÏshareholder.€€Rule€23.06€does€not€require€a€specific€number€ofÏsimilarly€situated€shareholders€in€order€to€maintain€a€derivativeÏaction.€€Moreover,€other€courts€addressing€this€issue€in€relationÏto€similar€rules€of€civil€procedure€have€held€that€the€class€ofÏshareholders€represented€by€the€derivative€plaintiff€may€consistÏof€only€one€person.€€òòò òLarson€v.€Dumkeóóó ó,€900€F.2d€1363,€1368„69Ï(9th€Cir.),€ò òòòcert.€œden'd›€sub€nomóóó ó.€òòò òRound€Table€Pizza,€Inc.€v.ÏLarsonóóó ó,€498€U.S.€1012,€111€S.€Ct.€580,€112€L.€Ed.€2d€585€(1990);Ïòòò òJordon€v.€Bowman€Apple€Prods.€Co.óóó ó,€728€F.€Supp.€409,€412„13Ï(W.D.€Va€1990);€òòò òHalsted€Video,€Inc.€v.€Guttilloó óóó,€115€F.R.D.Ï177,€179„80€(N.D.€Ill.€1987);€òòò òBrandon€v.€Brandon€Constr.€Co.óóó ó,Ï776€S.W.2d€349,€353„54€(Ark.€1989);€òòò òEye€Site,€Inc.€v.ÏBlackburnóóó ó,€796€S.W.2d€160,€161„63€(Tex.€1990).€€It€is€the€opinionÍof€this€court€that€the€class€of€shareholders€contemplated€by€RuleÏ23.06€of€the€Tennessee€Rules€of€Civil€Procedure€may€consist€of€oneÏshareholder.€€Were€this€not€the€law,€it€is€very€likely€that€RuleÏ23.06€would€deprive€the€shareholders€of€closely€held€corporationsÏof€their€ability€to€bring€derivative€actions.€€ÌÌà àIn€œappellees'›€motion,€Richard€Hall€argued€that€William€HallÏlacked€standing€because€there€was€an€actual€conflict€of€interestÏand€because€William€Hall€was€using€the€derivative€suit€as€aÏbargaining€chip.€€As€discussed€above,€the€first€argument€isÏwithout€merit€because€Richard€Hall€is€not€a€similarly€situatedÏshareholder.€€In€fact,€the€potential€for€William€Hall€toÏinadequately€represent€other€shareholders€is€nonexistent.€€GivenÏthis,€the€existence€of€a€derivative€action€and€an€individualÏaction€does€not,€as€a€matter€of€law,€create€a€conflict€ofÏinterest.€€Next,€Richard€œHall's›€contention€that€William€Hall€isÏusing€the€derivative€suit€as€a€bargaining€chip€is€whollyÏunfounded.€€Moreover,€there€is€no€other€evidence€in€the€record€toÏsupport€a€finding€that€William€Hall€is€incapable€of€fairlyÏrepresenting€his€own€interests€and€the€interests€of€theÏcorporation€while€at€the€same€time€maintaining€his€individualÏsuit.ÌÌà àAs€a€final€point,€we€note€that€any€conflict€of€interest€whichÏmay€have€existed€as€a€result€of€filing€both€a€derivative€suit€andÏan€individual€suit€is€no€longer€present.€€To€explain,€in€sectionÍII€of€this€opinion,€we€held€that€the€chancery€court€properlyÏdismissed€William€œHall's›€claim€against€TDBC€for€breach€ofÏcontract.€€The€only€remaining€action€brought€by€William€HallÏagainst€TDBC€is€one€for€judicial€dissolution.€€It€is€the€opinionÏof€this€court€that€the€judicial€dissolution€action€and€theÏderivative€action€do€not€necessarily€conflict;€therefore,€theÏexistence€of€both€is€not€a€reason€to€deny€William€Hall€standing.€€ÌÌà àFor€the€foregoing€reasons,€the€chancery€court€erred€when€itÏdismissed€the€third€count€of€œappellants'›€complaint.€€ÌÌò òIV.à àISSUES€THREE,€FOUR,€FIVE,€SIX,€AND€SEVENó óÌÌà@ àò òA.€€Fiduciary€Duties€and€the€Business€Judgment€Ruleó óÌÌà àCorporate€officers€and€directors€owe€certain€duties€to€theÏcorporation€as€a€result€of€their€fiduciary€relation€to€theÏcorporation.€€òòò òKnox„Tenn€Rental€Co.€v.€Jenkins€Ins.,€Inc.óóó ó,Ï755€S.W.2d€33,€36€(1988);€ò òòòsee€Neese€v.€Brownóóó ó,€218€Tenn.€686,Ï692„93,€405€S.W.2d€577,€580„81€(Tenn.€1964);€Tenn.€Code€Ann.€ðð€48„18„301,€„302,€„403€(1995);€3€òòFletcher€Cyclopedia€of€the€Law€of€PrivateÏCorporationsóó€ðð€837.60€(per.€ed.€rev.€vol.€1994)€[hereinafter€òòFletcheróó].€ÏThese€duties€are€the€duty€of€loyalty€and€the€duty€of€care.€€3ÏòòFletcheróó€ðð€837.60.ÌÌà àœ"The›€duty€of€loyalty€in€essence€involves€conflicting€economicÍor€other€similar€interests€[and]€is€transgressed€when€a€corporateÏfiduciary,€whether€director€or€officer,€uses€his€or€her€corporateÏoffice€to€promote,€advance€or€effectuate€a€transaction€between€theÏcorporation€and€such€person,€and€that€transaction€is€notÏsubstantively€fair€to€the€œcorporation."›€€òòò òId.óóó ó€(footnotes€omitted).€ÏThe€Tennessee€General€Assembly€codified€this€concept€of€duty€withÏthe€enactment€of€Tennessee€Code€Annotated€ðð€48„18„302€(1995).€ÏSpecifically,€a€conflict€of€interest€transaction€in€Tennessee€œ"is›Ïa€transaction€with€the€corporation€in€which€a€director€or€officerÏof€the€corporation€has€a€direct€or€indirect€œinterest."›€€Tenn.€CodeÏAnn.€ðð€48„18„302(a)€(1995).€€If€certain€circumstances€exist,€suchÏas€when€a€director€fully€discloses€his€or€her€interest,€theÏcorporation€may€not€void€the€transaction€solely€because€of€theÏœdirector's›€or€œofficer's›€interest.€€òòò òId.óóó ó€€The€question€of€whether€aÏdirector€or€officer€has€breached€their€duty€of€loyalty€is€one€ofÏfact€and€depends€on€all€of€the€surrounding€circumstances.€3€òòFletcheróóÏðð€837.60€(citing€òòò òFitch€v.€Midland€Bank€&€Trust€Co.óóó ó,737€S.W.2dÏ785,€788€(Tenn.€App.€1987));€òòò òsee€Neeseóóó ó,€405€S.W.2d€at€581.ÌÌà àThe€duty€of€care€requires€both€directors€and€officers€to€actÏin€good„faith€and€in€the€best€interest€of€the€corporation€œ"[w]ith›Ïthe€care€an€ordinarily€prudent€person€in€a€like€position€wouldÏexercise€under€similar€circumstances.€.€.€œ."›€€Tenn.€Code€Ann.€ððððÏ48„18„301(a),€„403(a)€(1995);€òòò òsee€Neeseóóó ó,€405€S.W.2d€at€580„81.€Ïœ"Courts›€apply€the€duty€of€care€in€cases€involving€allegedÏnegligence,€mismanagement,€or€intentional€decisions€to€commitÍunlawful€œacts."›€€3A€òòFletcheróó€ðð€1029.€€The€issue€of€whether€a€breachÏof€the€duty€of€care€occurred€is€one€of€fact.€€òòò òId.óóó ó€ðð€1030.€€œ"[I]t›Ïis€difficult,€and€in€many€cases€impossible,€to€decide€in€advance,Ïor€to€formulate€tests€for€deciding€as€a€matter€of€law,€whetherÏdirectors€or€other€officers€have€been€guilty€of€that€degree€ofÏnegligence€which€will€render€them€œliable."›€€òòò òId.ó óóó€€ÌÌà àThe€ordinarily€prudent€person€standard€is€very€low,€butÏcourts€do€not€generally€apply€it€because€of€the€common„lawÏdoctrine€known€as€the€business€judgment€rule.× ƒ/ ××  ×€€œ"Tennessee's›€courtsÏhave€consistently€followed€a€noninterventionist€policy€with€regardÏto€internal€corporate€matters.€€They€have€recognized€thatÏdirectors€have€broad€discretion.€.€.€.€These€decisions€squarelyÏalign€Tennessee€with€the€jurisdictions€recognizing€and€followingÏthe€œ'business›€judgement€œrule.'"›€òòò òLewis€v.€Boydóóó ó,€838€S.W.2d€215,Ï220€(Tenn.€App.€1992)€(citations€omitted)€òòò òaccordóóó ó€òòò òFrench€v.ÏAppalachian€Elec.€Coop.óóó ó,€580€S.W.2d€565,€570€(Tenn.€App.€1978).€ÏFurther,€for€reasons€which€will€become€evident€later,€courts€doÏnot€apply€the€business€judgment€rule€to€duty€of€loyalty€issues.€€3ÏòòFletcheróó€ðð€837.60.€€ÌÌà àThe€business€judgment€rule€œ"is›€a€presumption€that€in€making€aÏbusiness€decision€the€directors€[and€officers]€of€a€corporationÏacted€on€an€informed€basis,€in€good€faith€and€in€the€honest€beliefÍthat€the€action€taken€was€in€the€best€interest€of€the€œcompany."›€Ïòòò òAronson€v.€Lewisóóó ó,€473€A.2d€805,€812€(Del.€1984)€òòò òaccordó ó€ò òLewisóóó ó,Ï838€S.W.2d€at€220„21.€€The€protections€of€the€rule€will€not€applyÏwhen€the€director€or€officer€is€interested,× ƒ0 ××  ×€did€not€actually€makeÏa€decision,€made€an€uninformed€decision,€or€was€grossly€negligent.€Ïòòò òAronsonóóó ó,€473€A.2d€at€812;€òòò òsee€óóó ó3A€òòFletcheróó€ðð€1036;€18B€òòAm.€Jur.€2dóóÏòòCorporationsóó€ðð€1703€(1985);€19€C.J.S.€òòCorporationsóó€ðð€482€(1990).€€ÏOnce€the€plaintiff€has€shown€that€the€business€judgment€rule€doesÏnot€apply,€the€burden€shifts€to€the€director€or€officer€toÏestablish€that€the€act€at€issue€satisfied€the€ordinary€careÏstandard.€€3A€òòFletcheróó€ðð€1031.ÌÌà@ àò òB.€€Issue€Three:€Count€Fouró óÌÌà àThe€third€issue€of€œappellants'›€appeal€involves€the€fourthÏcount€of€the€complaint.€€In€that€count,€William€Hall€asked€theÏcourt€to€dissolve€TDBC.€€William€Hall€first€asserted€that€courtÏshould€dissolve€the€corporation€because€the€actions€of€RichardÏHall€were€œ"illegal,›€oppressive,€or€fraudulent.€.€.€œ."›€€Tenn.€CodeÏAnn.€ðð€48„24„301(2)(B)€(1995).€€In€support€of€this€contention,ÏWilliam€Hall€argued€that€Richard€Hall€had€breached€the€fiduciaryÏduties€he€owed€to€TDBC€and€that€such€a€breach€was€constructiveÏfraud.€€William€Hall€also€argued€that€the€court€should€dissolveÍthe€corporation€because€œ"corporate›€assets€are€being€misapplied€orÏwasted.€.€.€œ."›€€òòò òIdóóó ó.€ðð€48„24„301(2)(D).€ÌÌÌà@ àò òC.€€Issue€Four:€Count€Fiveó óÌÌà àIn€count€five€of€the€complaint,€BTI€alleged€that€Richard€HallÏbreached€his€fiduciary€duties€which€he€owed€to€BTI€as€an€officerÏand€director€of€that€company.€€Specifically,€BTI€alleged€thatÏRichard€œHall's›€breaches€included€lowering€the€haulage€rates€paidÏto€BTI,€diverting€back€haul€revenues€derived€from€BTI€to€TDBC,Ïdiverting€business€from€BTI,€borrowing€an€excessive€amount€ofÏmoney€from€BTI,€and€purchasing€a€truck€for€personal€use€with€BTIÏassets.€€BTI€claimed€that€these€actions€increased€œTDBC's›€profitsÏand€decreased€œBTI's›€profits.€ÌÌà@ àò òD.€€Issue€Five:€Count€Sixó óÌÌà àThis€issue€involves€a€cause€of€action€for€conflict€ofÏinterest€brought€by€BTI€against€TDBC.€€BTI€alleged€that€RichardÏHall,€acting€on€behalf€of€BTI,€improperly€lowered€the€haulageÏrates€and€that€such€action€was€a€conflict€of€interest€transaction.€ÏThis€is€the€same€cause€of€action€as€described€under€issue€four.ÌÌà@ àò òE.€€Issue€Six:€Count€Eightó ó× ƒ1 ××  ×ÌÌà àIn€the€eighth€count,€William€Hall€alleged€that€Richard€HallÏbreach€his€fiduciary€duties,€but€in€this€instance,€William€HallÏclaimed€that€Richard€Hall€breached€fiduciary€duties€owed€toÏWilliam€Hall€as€a€result€of€Richard€œHall's›€position€as€a€majorityÏshareholder€of€TDBC.€€Specifically,€William€Hall€stated€in€hisÏbrief€that€Richard€Hall€breached€his€fiduciary€duties€by€causingÏTDBC€to€enter€into€the€stock€purchase€agreement,€by€using€œTDBC's›Ïassets€to€finance€the€stock€redemption,€by€eliminating€WilliamÏœHall's›€income,€and€by€increasing€his€own€salary€as€president€ofÏTDBC.€€Ìà@ àò òE.€€Issue€Seven:€Counts€Ten€and€Elevenó óÌÌà àThe€last€two€counts€of€the€complaint€ask€the€court€to€removeÏRichard€Hall€as€a€director€of€both€BTI€and€TDBC.€€Specifically,ÏWilliam€Hall€argued€the€such€action€is€appropriate€because€removalÏis€in€the€best€interest€of€the€company€and€because€Richard€HallÏhas€acted€fraudulently€and€dishonestly€and€has€committed€grossÏabuses€of€authority.€€Tenn.€Code€Ann.€ðð€48„18„109(a)€(1995).ÌÌà@ àò òF.€€Conclusionó óÌÌà àAll€of€the€claims€described€above€depend€on€a€determinationÏof€whether€Richard€Hall€breached€either€his€duty€of€loyalty€or€hisÏduty€of€care.€€Both€of€these€issues€involve€questions€of€fact.€ÏGenerally,€courts€may€not€determine€questions€of€fact€on€summaryÏjudgment,€however;€this€is€not€always€the€case.€€In€negligenceÏcases,€courts€often€explain€that€proximate€cause€is€a€question€ofÏfact€best€left€to€the€jury.€€òòò òHaynes€v.€Hamilton€Countyóóó ó,€883ÏS.W.2d€606,€612€(Tenn.€1994).€€They€then€concede€that€courts€mayÏaddress€questions€of€fact€when€œ"the›€uncontroverted€facts€andÏinferences€to€be€drawn€from€[the€facts]€make€it€so€clear€that€allÏreasonable€persons€must€agree€on€the€proper€œoutcome."›€€òòò òId.óóó ó€€It€isÏthe€opinion€of€this€court€that€this€same€rule€of€law€is€applicableÏto€the€question€of€whether€a€fiduciary€breached€his€duties.€ÏNevertheless,€the€facts€of€this€case€are€such€that€reasonableÏpersons€could€disagree€as€to€the€issue€of€whether€Richard€HallÏbreached€either€his€duty€of€care€or€his€duty€of€loyalty.€ÏTherefore,€the€trial€court€erred€in€granting€œappellees'›€motion€forÏsummary€judgment.ÌÌò òV.€€ISSUE€SIX:€COUNT€NINEó óÌÌà àAs€to€the€ninth€count,€William€Hall€argued€that€Richard€HallÏbreached€his€fiduciary€duty€as€a€majority€shareholder€of€BTI€byÏlowering€the€haulage€rates€paid€to€BTI,€diverting€back€haulÏrevenues€derived€from€BTI€to€TDBC,€diverting€business€from€BTI,Ïborrowing€an€excessive€amount€of€money€from€BTI,€and€purchasing€aÍtruck€for€personal€use€with€BTI€assets.€€The€problem€with€WilliamÏœHall's›€argument€is€that€Richard€Hall€does€not€own€a€majority€ofÏœBTI's›€stock€and€William€Hall€does€not€own€a€minority€of€the€stock.€ÏThe€brothers€each€own€fifty€percent€of€the€company.€€Moreover,ÏWilliam€Hall€is€the€president€of€BTI€and€Richard€Hall€is€theÏsecretary.€€In€his€brief,€William€Hall€admitted€this€problem€andÏstated:€œ"Strictly›€speaking,€appellant€is€not€a€œ'minority'›Ïshareholder€of€Beef€Transport,€because€both€he€and€Richard€HallÏeach€own€50%€of€the€stock€of€that€company.€€Nevertheless,€RichardÏHall€controls€and€dominates€the€corporation€because€its€businessÏoperations€are€run€out€of€Tennessee€Dressed€Beef,€leaving€[WilliamÏHall]€no€influence€on€the€business€affairs€of€the€œcorporation."›€ÏWilliam€Hall€has€failed€to€cite€any€authority€to€support€hisÏproposition€that€one€of€two€equal€shareholders€who€œ"controls"›€theÏcompany€owes€a€fiduciary€duty€to€the€other€equal€shareholder€as€aÏresult€of€their€positions€as€shareholders.€€This€court€is€unawareÏof€any€such€rule€of€law.€€Because€William€Hall€failed€to€establishÏan€essential€element€of€the€case,€i.e.€that€Richard€Hall€was€aÏmajority€shareholder,€the€trial€court€properly€granted€summaryÏjudgment.ÌÌò òVI.€€Conclusionsó óÌÌà àFor€the€foregoing€reasons,€the€chancery€court€correctlyÏgranted€summary€judgment€as€to€counts€one,€two,€and€nine,€butÏerred€in€granting€summary€judgment€as€to€counts€three,€four,€five,Ísix,€eight,€ten,€and€eleven.€€The€case€is€remanded€to€the€chanceryÏcourt€for€any€further€proceedings,€and€the€costs€are€taxed€equallyÏto€appellants€and€appellees.ÌÌÓÓÌÌÌÌà àà àà àà àà àà à________________________________Ìà àà àà àà àà àà àà àSAMUEL€L.€LEWIS,€JUDGEÌÌÌCONCUR:ÌÌÌ_____________________________ÌHENRY€F.€TODD,€P.J.,€M.S.ÌÌÌ_____________________________ÌWILLIAM€C.€KOCH€JR.,€J.