RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Pressman v. Franklin Nat’l Bank, et al. No. 03-5592 ELECTRONIC CITATION: 2004 FED App. 0304P (6th Cir.) File Name: 04a0304p.06 WALLER, LANSDEN, DORTCH & DAVIS, Nashville, Tennessee, for Appellees. UNITED STATES COURT OF APPEALS _________________ FOR THE SIXTH CIRCUIT OPINION _________________ _________________

JERROLD S. PRESSMAN , X BOYCE F. MARTIN, JR., Circuit Judge. This dispute - arises from Franklin National Bank’s failure to make a loan Plaintiff-Appellant, to a partnership called Inglehame Farm, LP, of which Jerrold - - No. 03-5592 S. Pressman was a limited partner. Pressman alleges that the v. - Bank is liable for breach of contract, fraud and civil > conspiracy, and that Gordon E. Inman – the founder of the , Bank and president of the Bank’s parent company – is liable FRANKLIN NATIONAL BANK - and GORDON E. INMAN , for procurement of breach of contract and civil conspiracy. - Following a nine-day bench trial, the district court entered Defendants-Appellees. - judgment in favor of the defendants on all claims. For the - reasons discussed below, we AFFIRM. N Appeal from the United States District Court I. for the Middle District of Tennessee at Nashville. No. 00-00799—Todd J. Campbell, District Judge. The Inglehame Farm partnership was formed to accomplish one purpose: to purchase from different sellers several tracts Argued: August 10, 2004 of land in Williamson County, Tennessee, combine the tracts and develop them as a residential subdivision. The closing on Decided and Filed: September 9, 2004 one of the parcels of land, labeled the “Sharp property,” was originally scheduled for August 1, 1996. The partnership Before: KEITH, MARTIN, and ROGERS, Circuit Judges. sought to rezone the property prior to the closing. Robert Geringer, one of the general partners of the partnership, spoke _________________ with Charles Lanier, a loan officer at the Bank, about obtaining an acquisition loan for the Sharp property. The COUNSEL partnership had conducted business with the Bank on prior occasions. Lanier told Geringer that the Bank would need to ARGUED: Jeffrey Alan Greene, Nashville, Tennessee, for obtain a participating bank to finance a portion of the loan Appellant. Joseph A. Woodruff, WALLER, LANSDEN, because the size of the loan would exceed the Bank’s legal DORTCH & DAVIS, Nashville, Tennessee, for Appellees. lending limit. ON BRIEF: Jeffrey Alan Greene, Nashville, Tennessee, for Appellant. Joseph A. Woodruff, W. Travis Parham,

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When the rezoning hearing was set for a date that followed The rezoning plan for the Sharp property was officially the scheduled closing date, the partnership asked the sellers approved on August 12. Nevertheless, Banker’s Bank for an extension of the closing date, which was refused. decided not to participate in the loan to the partnership, and Lanier subsequently told Geringer that the loan had been it notified the Bank of its decision. Lanier, in turn, advised approved by the Bank’s loan committee. Still, however, the Geringer that the Bank would not make the loan, but he Bank needed to obtain a participating bank in order to provide mentioned that Inman was still willing to make a private loan. the loan. The Bank first asked its parent company, Franklin Steve Morriss, another general partner of the partnership, Financial Corporation, to participate in the loan, but Franklin urged the partnership to accept Inman’s proposal. Geringer Financial refused. The Bank then approached The Banker’s again rejected the offer, however, and subsequently obtained Bank of Atlanta, Georgia, which gave more consideration to a loan elsewhere, though on less favorable terms than the proposal. Shortly before the scheduled closing, Lanier originally proposed by the Bank. told Geringer that Banker’s Bank required approval of the rezoning prior to participating in the loan. Geringer testified The partnership suffered from in-fighting for the next two that Lanier told him that this was the only impediment to years, and eventually filed for bankruptcy. Pressman made an Banker’s Bank agreeing to participate, but Lanier and the offer to purchase all of the partnership’s claims as part of the Bank denied that Lanier made such a representation. The bankruptcy proceeding, which was approved by the district court did not make a factual finding as to whether bankruptcy judge over Morriss’s competing offer. Pressman Lanier represented that the rezoning approval was the only filed the instant lawsuit against the Bank and Inman. After a impediment to Banker’s Bank participating in the loan. nine-day bench trial, the district court issued a written memorandum and order entering judgment in favor of the Geringer later met with Inman, the founder of the Bank and defendants on all claims. the president of its parent company, who offered to make a personal loan to the partnership on certain terms, including II. the payment of $15,000 per lot profit. Geringer rejected the offer because, in his view, the terms were extremely On appeal from a judgment entered following a bench trial, unfavorable to the partnership. we review the district court’s factual findings for clear error and its legal conclusions de novo. Harrison v. Monumental Geringer then negotiated an extension of the closing date Life Ins. Co., 333 F.3d 717, 721-22 (6th Cir. 2003). on the Sharp property to August 15, at an additional, non- refundable cost of $100,000. Geringer and the Bank A. Breach of Contract Claim Against the Bank negotiated and executed a Commitment Letter, which was dated July 31, 1996. The Letter, which expresses the Bank’s Pressman’s breach of contract claim is premised upon two intent to make the loan to the partnership subject to certain theories: first, that the Bank breached its obligations under the terms and conditions, forms the basis for Pressman’s breach Commitment Letter by failing to make the loan to the of contract claim. Pursuant to the Commitment Letter, the partnership; and second, that the Bank breached its obligation Bank’s obligation to make the loan to the partnership was of good faith and fair dealing in connection with its search for contingent on its ability to find a participating bank to fund a a participating bank. We will address each theory in turn. portion of the loan. No. 03-5592 Pressman v. Franklin Nat’l Bank, et al. 5 6 Pressman v. Franklin Nat’l Bank, et al. No. 03-5592

1. Participating Bank Condition subject only to final rezoning approval. Pressman’s argument lacks merit. The district court rejected Pressman’s claim that the Bank breached its obligations under the Commitment Letter on the First, even if Lanier had the authority to effect such a ground that one of the conditions in the Letter – the so-called waiver on behalf of the Bank, there is no evidence that he “participating bank condition” – was not fulfilled. That possessed the requisite “intent” to do so. Second, Lanier’s condition, which is listed under the heading “Special alleged representation predated the execution of the Conditions for Loan,” provides as follows: Commitment Letter; in other words, at the time of Lanier’s alleged representation, the Bank had no rights under the (c) Participant. Lender shall obtain a participating participating bank condition that could be waived. Third, a lender that will commit to fund an aggregate of at least merger and integration clause contained in the Commitment $2,000,000 of the Loan on a pro-rata participation basis Letter precludes Pressman from relying upon alleged and on other terms and conditions acceptable to both representations made prior to the execution of the lenders. Should Lender be unable to locate an Commitment Letter. That clause provides: acceptable participant lender or to agree on the terms of the participation, then Lender shall refund the This Commitment Letter when accepted by Borrower Borrower’s Commitment Fee (or any portion thereof that constitutes the sole and entire agreement between Lender has been paid to Lender), and Lender shall have no and Borrower regarding Lender’s commitment to lend obligation to make the Loan, and this Commitment Letter money to Borrower and all previous negotiations, letters, shall be null and void . . . . proposals, understandings and other communications are superseded by this Commitment Letter. (Emphasis added). (Emphasis added.) Fourth, the Commitment Letter requires The district court found that as of the date set for closing, the any “waiver of [its] terms” to be “in writing” and “executed Bank had been unable to locate a participating bank. For this by both parties,” which was not done here. reason, the district court held that “the Bank’s obligation to make the loan was excused” because the participating bank Pressman also makes a promissory estoppel argument on condition in the Commitment Letter had not been satisfied. appeal. According to Pressman, Lanier’s alleged representation to the partnership that Banker’s Bank would Pressman argues that the district court’s conclusion was accept the loan proposal so long as the rezoning plan was erroneous because the Bank “waived” the participating bank approved constituted a “promise on the part of the Bank to condition. Under Tennessee law, a party may waive his or make the loan if the final [rezoning] approval was granted,” her known rights under a contract by either express upon which the partnership relied in paying $100,000 to declarations or by acts manifesting an intent not to claim the extend the closing date. Therefore, Pressman contends, the rights. Jenkins Subway, Inc. v. Jones, 990 S.W.2d 713, 722- Bank’s promise to pay the loan should be enforced to avoid 23 (Tenn. Ct. App. Nov. 18, 1998). According to Pressman, injustice under the doctrine of promissory estoppel. Our the Bank’s waiver occurred even before the Commitment review of the record reveals that Pressman did not raise this Letter was executed, when Lanier orally represented to the issue in the district court, and the district court’s opinion does partnership that the participating bank was ready to close, not discuss it. “Issues not presented to the district court but No. 03-5592 Pressman v. Franklin Nat’l Bank, et al. 7 8 Pressman v. Franklin Nat’l Bank, et al. No. 03-5592

raised for the first time on appeal are not properly before the B. Exclusion of Evidence of Alleged Corruption Within court.” Wyckoff & Assocs. v. Standard Fire Ins. Co., 936 the Bank F.2d 1474, 1488 (6th Cir. 1991). For this reason, we decline to address Pressman’s promissory estoppel argument. At the bench trial, Pressman sought to admit affidavits from Ken Kiel, a former officer of the Bank, and E.A. Gregory, a 2. Good Faith and Fair Dealing Bank customer, in an attempt to show corruption within the Bank. Kiel’s affidavit stated that while employed at the Pressman also argues that the Bank breached its obligation Bank, he had been instructed by his superior to decline a of good faith and fair dealing in seeking a participating bank customer’s transaction because Mr. Inman wished to do the by failing to solicit more banks and failing to submit adequate deal individually. Relatedly, Gregory’s affidavit indicated proposal materials to the banks. The district court held that that Inman had provided private loans to him that involved it was enough for the Bank to solicit only two banks to high rates of interest coupled with payments in cash of participate, particularly given the Bank’s small size and the additional amounts. This evidence was apparently offered in short time until the closing date. The court also rejected connection with the breach of contract claim, as evidence that Pressman’s argument concerning the adequacy of the the Bank breached its obligation of good faith and fair proposal materials, citing testimony from officers of Banker’s dealing. The district court characterized this evidence as Bank indicating that their decision not to participate had “classic propensity evidence” and excluded it pursuant to nothing to do with anything that the defendant Bank did or Federal Rules of Evidence 404(b) and 403. failed to do, and was based solely on the fact that the terms of the proposal were not sufficiently favorable to Banker’s Bank. We review the district court’s exclusion of evidence for We agree with the district court’s reasoning and find no error abuse of discretion, and reverse only if we are “firmly in its conclusion that the Bank acted in good faith and used convinced” of a mistake that affects “substantial rights” and commercially reasonable efforts to secure a participating amounts to more than harmless error. United States v. bank. Copeland, 321 F.3d 582, 599 (6th Cir. 2003). Rule 404(b) states as follows: We also reject Pressman’s argument that the district court used the wrong legal standard by focusing on whether the Evidence of other crimes, wrongs, or acts is not Bank acted in bad faith, rather than on whether it failed to act admissible to prove the character of a person in order to in good faith. This argument elevates semantics over show action in conformity therewith. It may, however, substance. The district court cited and applied the proper be admissible for other purposes, such as proof of legal standard – which, as the district court recognized, is set motive, opportunity, intent, preparation, plan, forth in cases such as Wallace v. National Bank of Commerce, knowledge, identity, or absence of mistake or accident 938 S.W.2d 684, 686 (Tenn. 1996) and Spectra Plastics, Inc. .... v. Nashoba Bank, 15 S.W.3d 832, 843 (Tenn. Ct. App. 1999). The fact that its opinion also mentioned the phrase “bad faith” A three-part test is used to determine whether evidence is is simply of no consequence. admissible pursuant to Rule 404(b): First, the district court must decide whether there is sufficient evidence that the other act in question actually No. 03-5592 Pressman v. Franklin Nat’l Bank, et al. 9 10 Pressman v. Franklin Nat’l Bank, et al. No. 03-5592

occurred. Second, if so, the district court must decide other partners of the Inglehame Farm partnership. Pressman whether the evidence of the other act is probative of a asserts that Morriss had been engaged in a scheme to defraud material issue other than character. Third, if the evidence his partners from the initial formation of the partnership, and is probative of a material issue other than character, the that the Bank and Inman provided financing to support the district court must decide whether the probative value of scheme, knowing that Morriss’s intent was to defraud the the evidence is substantially outweighed by its potential partnership. prejudicial effect. In Tennessee, a civil conspiracy is a “combination between United States v. Trujillo, No. 02-1521, 2004 WL 1630518, at two or more persons to accomplish by concert an unlawful *8 (6th Cir. July 22, 2004) (citations omitted). purpose, or to accomplish a purpose not in itself unlawful by unlawful means.” Chenault v. Walker, 36 S.W.3d 45, 52 Pressman argues that “the excluded evidence showed that (Tenn. 2001) (citation and quotation marks omitted). “Each Mr. Inman had the power and opportunity to cause officers of conspirator must have the intent to accomplish this common the Bank to make business decisions based on his personal purpose, and each must know of the other’s intent.” Brown interests and that the motivation of the Bank and Mr. Inman v. Birman Managed Care, Inc., 42 S.W.3d 62, 67 (Tenn. in these matters was to advance Mr. Inman’s personal 2001). interests, not to engage in normal banking practices.” According to Pressman, these allegations are relevant to The district court acknowledged that there was some whether the Bank breached its obligation of good faith and evidence indicating that Morriss may have been involved in fair dealing. The events to which Kiel and Gregory testified, a scheme to defraud the partnership, though it made no formal however, are wholly unrelated to the facts of this case. findings on this issue. The court reasoned, however, that even Therefore, the probative value of the excluded testimony is if Morriss was involved in such a scheme, the evidence did extremely slight, and is outweighed by its prejudicial effect. not establish that either the Bank or Inman possessed the Under these circumstances, the district court did not abuse its requisite intent to be liable as civil conspirators. The relevant discretion in excluding these affidavits. evidence, as recited by the district court, is as follows: C. Claim of Procurement of Breach of Contract Against The evidence indicates that Mr. Morriss, through a Inman company controlled by him, purchased property adjacent to the Inglehame development (the “Hollis Property”) Pressman argues that Inman is liable for procurement of the that would have been valuable to the Partnership for the Bank’s breach of contract. In light of our holding that the access it provided to Wilson Pike, without disclosing that Bank committed no breach of contract, however, Inman purchase to the Partnership. The evidence also indicates cannot be held liable for the procurement of that alleged that the Bank refinanced the loan on that property. breach. The evidence indicates that Mr. Morriss purchased a D. Civil Conspiracy Claim Against the Bank and Inman large amount of stock in the holding company that owns the Bank; and that, at that same time, Defendant Inman Pressman argues that the Bank and Inman, along with was selling a substantial number of shares of stock he Morriss and others, conspired to defraud Pressman and the owned in the holding company. That stock was later No. 03-5592 Pressman v. Franklin Nat’l Bank, et al. 11

used as collateral for one of the loans Mr. Morris[s] or one of his companies received from the Bank. Plaintiff has also established that the Bank made several loans to Mr. Morriss or to companies controlled by him on terms that were exceptionally favorable to the borrower, and “out of policy.” The evidence also indicates that two of those companies to which the Bank provided loans, Pete’s Landscaping and Mid-Tenn Utilities, were used by Mr. Morriss to harm the Partnership. Finally, the evidence indicates that Mr. Morriss conducted certain of his business with the Bank through Defendant Inman, and that the two men travel[ed] to California together in 1996. We agree with the district court that this evidence does not establish that either the Bank or Inman intended to defraud the partnership – or even that the Bank or Inman knew that Morriss intended to defraud the partnership. Therefore, the district court properly awarded judgment in favor of the Bank and Inman on Pressman’s civil conspiracy claim. For these reasons, the district court’s judgment is AFFIRMED.