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Posted by: Chandra Williams on Dec 22, 2015

Court: TN Court of Appeals

Attorneys 1:

Dan E. Huffstutter, Nashville, Tennessee, for the appellants, Carl Guye, Sr. and Juanita Guye.

Attorneys 2:

Jay S. Bowen and Lauren Kilgore, Nashville, Tennessee, for the appellee, Carlene Guye Judd.

Judge(s): CLEMENT

This shareholder derivative action involves a closely-held corporation founded by the plaintiff’s parents. In 1995, the parents sold all of the outstanding shares to the plaintiff and her brother on credit. A promissory note and security agreement were executed in conjunction with the sale. After managing the corporation with her brother for several years, the plaintiff filed this derivative action against her brother and parents, seeking to recover corporate funds her brother was allegedly using for personal expenses and to dissolve the corporation. During the litigation, the parents gave the plaintiff notice that they were accelerating the promissory note and exercising their right to recover all of the stock sold to her pursuant to the security agreement. The validity of the parents’ efforts to reclaim the stock went to trial along with the other issues. After a two-day trial, the court determined that the parents’ efforts to reclaim ownership of the shares were ineffective, that the plaintiff owned 50% of the outstanding shares, thus she maintained standing to pursue the relief sought in her complaint, and awarded a judgment to the plaintiff on behalf of the corporation. Pursuant to an agreed order, the trial court appointed a receiver to wind up the corporation’s business. During the pendency of this appeal, but prior to oral argument, all of the corporation’s assets were sold, and its business was wound up. In this appeal, the parents contend the trial court erred by granting the plaintiff any relief because the plaintiff lacked standing to pursue her claims after the parents reclaimed all of the plaintiff’s shares. Because the corporation was dissolved and all its assets sold, there is no meaningful relief this court can grant the parents in this appeal; therefore, the issue raised by the parents is no longer justiciable. Because the parents presented no justiciable issue for this court to consider on appeal, the plaintiff is entitled to recover damages for having to defend a frivolous appeal. Accordingly, we affirm the judgment of the trial court and remand for a calculation of just damages to be awarded to the plaintiff pursuant to Tenn. Code Ann. § 27-1-122.