Rock Ivy Holding, LLC v. RC Properties, LLC et al

This multi-faceted business dispute, which arises in principal part from the real estate collapse of 2008, involves five limited liability companies, eight individuals who are either members or officers of the respective companies, 530 acres of undeveloped real estate, and $7 million of secured notes that were personally guaranteed by six of the individuals. Over the course of two years, SunTrust Bank, the holder of the notes, agreed to extensions of the original maturity date; a final extension was granted until August 7, 2008. A call for capital contributions was approved but it produced insufficient funds to payoff the debt.Thereafter, two of the individuals, one of whom was the president of Rock Creek, and both of whom personally guaranteed a portion of the debt, formed another entity which then acquired the notes from the bank. Rock Creek Development, LLC (“Rock Creek”), which owned the real estate, then agreed to sell a substantial portion of its property to pay off the balance owing on the notes. In an attempt to stop the sale, Rock Ivy Holding, LLC (“Rock Ivy”), one of three members of Rock Creek, filed this derivative action for itself and on behalf of Rock Creek against Rock Creek’s members: RC Properties, LLC; Linked, LLC; two officers of Rock Creek; and several individuals who were members of the defendant companies. The complaint alleged, inter alia, various conflicts of interests by the individual defendants and various breaches of statutory and contractual duties by members and/or officers. Pursuant to an agreed order, the sale proceeded, the net proceeds were held in the registry of the court, and the remaining claims went to trial. After eights days of a bench trial, the defendants moved to dismiss the complaint pursuant to Tenn. R. Civ. P. 41.02 at the close of the plaintiff’s case-in-chief.The trial court granted the motion and dismissed all of the plaintiff’s claims. Thereafter, several defendants filed various motions to recover their respective attorneys’ fees and expenses. Some of the motions were based on Tenn.Code Ann.§ 48-249804, which pertains to derivative actions, and others were based on indemnification provisions in Rock Creek’s Operating Agreement. The trial court granted some of the fee requests and denied others. In this appeal, Rock Ivychallenges the dismissal of its claims and the assessment of attorneys’ fees.Two individual defendants appeal the denial of their claims for attorneys’ fees. The holder of the notes appeals the denial of its claim for “default interest” and penalties. We affirm the trial court in all respects except for the trial court denying the claim for default interest on the notes. We have concluded that the holder of the notes is entitled to recover default interest from the time the notes were declared to be in default. Accordingly, this issue is remanded for further proceedings.