March 16, 2009

Bank payment to joint venture is sufficient payment to either party in venture; Bank not negligent, unjustly enriched or fraudulent in paying just one

WADE LEE PHELPS v. BANK OF AMERICA (Tenn. Ct. App. March 16,2009).

Plaintiff appeals from the grant of summary judgment in a negligence and breach of contract action against bank which had closed loan and delivered loan proceeds to contractor. An agreement between contractor and third party providing financing for construction project stated that contractor and third party would be paid out of loan proceeds. Contractor failed to pay third party in accordance with their agreement. Trial court granted summary judgment to bank, holding that there was a joint venture between contractor and third party and that Bank’s delivery of loan proceeds to contractor was payment to joint venture. Court also held that finding of joint venture pretermitted negligence and breach of contract claims against bank. Finding no error, we affirm the judgment of the trial court.

Opinion may be found at the TBA website:

“The proof submitted by Mr. Phelps in his response was insufficient to negate BOA’s contention that Mr. Church and Mr. Phelps were joint venturers and, in fact, buttressed this conclusion and more clearly establishes the necessary elements of common purpose and agreement. Contrary to the contention of Mr. Phelps, the fact that the parties had different responsibilities does not detract from a finding that they had an equal right of control; rather, the action of the parties in dividing the responsibilities of constructing and financing the duplex is evidence that each had an equal right to control the venture, exercised that control for the benefit of the enterprise and agreed to the division of responsibilities. The trial court did not err in finding that Mr. Church and Mr. Phelps were engaged in a joint venture.” Id.

“In support of his contention that BOA owed him a duty and violated that duty, Mr. Phelps relies upon the statements of Mr. Howell, representative of BOA, that he would be paid at closing and that Mr. Howell would have the agreement between Mr. Angus, Mr. Phelps and Mr. Church sent to the closing agent. BOA correctly points out that the Statute of Frauds contained at Tenn. Code Ann. § 29-2-101(b)(1) precludes any claim against BOA relative to the loan to Mr. Angus not based on an instrument signed by BOA. The representations of Mr. Howell, consequently, cannot establish a duty on the part of BOA that would sustain a cause of action for breach of that duty in the absence of a writing. Moreover, any claim of negligence against BOA by Mr. Phelps would fail because of the uncontroverted proof that the cause in fact and proximate cause of Mr. Phelps’ failure to be paid was the action of Mr. Church in not paying him.” Id.

“Both Mr. Phelps and BOA acknowledge that, in order to establish a claim of unjust enrichment, Mr. Phelps must show: (1) a benefit was conferred on BOA; (2) that BOA appreciated the benefit; and (3) it would be unjust for BOA to retain the benefit without providing compensation for it. Of these requirements, the most significant is that the enrichment be unjust. Paschall’s, Inc., 407 S.W.2d at 155. The only benefit BOA received as a result of the transaction between Mr. Church, Mr. Phelps and Mr. Angus was any profit it received as a result of the loan made to Mr. Angus. At the time the loan was made, the duplex had been substantially completed and the property appraised at an amount sufficient to satisfy the BOA’s loan requirements. BOA had no interest in the property and, consequently, had no interest to be enriched prior to construction of the duplex; after construction, the sole interest it had in the property was to secure the indebtedness.” Id.