Court of Appeals upholds judgment against former Paty Co.

By Thomas Wilson
STAR STAFF
twilson@starhq.com
The Tennessee Court of Appeals has upheld a judgment against a local company formerly known as Paty Lumber Company regarding payments for cement and masonry tools to a cement company.
In a ruling issued Thursday, the Court of Appeals denied the appeal of PLC, Inc., claiming that Chancellor Richard Johnson erred in setting aside a summary judgment granted to the ESSROC Cement Corp.
Judge Houston M. Goddard delivered the opinion of the court which was joined by Herschel P. Franks and D. Michael Swiney. The case was appealed out of Carter County Chancery Court by attorney Mark S. Dessauer, of Kingsport, on behalf of Paty.
According to Court of Appeals background summary, ESSROC filed a complaint against PLC in May 2001 seeking judgment in the amount of $112,551, plus service charges and attorney's fees, as payment for cement and masonry materials which it sold to PLC. The ESSROC filed a motion for summary judgment on Dec. 7, 2001.
According to case background of the Court of Appeals' ruling, the parties began negotiations in February 2002 and ultimately reached a settlement agreement, which provides that Paty would pay ESSROC $50,000 in two equal installments of $25,000, due on Feb. 25, 2002 and March 15, 2002. According to the appellate court's ruling and ESSROC court filings, PLC paid the first $25,000 installment but not the second.
This prompted ESSROC to file a motion in June 2002 to rescind the settlement agreement on grounds of fraudulent misrepresentation. In this motion ESSROC alleged that after PLC's failure to pay the second installment, Paty disclosed to ESSROC for the first time that payment of the second installment had been contingent on PLC selling certain real property that it owned, and that payment of the second installment of the settlement agreement would not be forthcoming unless the company sold such property.
In his order, Chancellor Richard Johnson granted the motion to set aside the settlement agreement and release and granted summary judgment to ESSROC. In his order Johnson found that "the Defendant, Paty, now known as PLC, fraudulently obtained this settlement" and "they did not act in good faith in obtaining this contract."
Johnson's ruling awarded ESSROC a judgment of $112,551 less $25,000, which would be the credit they've paid. In addition to the judgment, the court also awarded ESSROC $42,738 in service charges and $10,296 in attorney's fees and expenses pursuant to the credit agreement the parties entered into prior to the litigation.
The appeal by PLC questions whether the court erred in setting aside the settlement agreement and release between ESSROC and PLC and "in awarding judgment in favor of [ESSROC] absent an evidentiary hearing."
In its appeal, Paty argued that there was insufficient proof before the Court that PLC made a fraudulent misrepresentation to ESSROC during the course of the negotiations.
The Court of Appeals opinion reads that after ESSROC filed its properly-supported motion for summary judgment, PLC failed to present proof tending to raise any genuine issue of material fact regarding the amount owed, nor did it raise any affirmative defense.
PLC also argued on appeal that the Court erred in failing to order ESSROC to return the first installment of $25,000 to PLC, ordering instead that it be offset as a credit against the judgment. The Court of Appeals ruling agrees with the ESSROC statement that the issue was not raised at the trial level below.
The Court of Appeals ruling ordered the cause be remanded for collection of the judgment and costs below and taxed costs of the appeals to PLC.