Capstar Bank v. Perry

Filing 60

MEMORANDUM OPINION OF THE COURT. Signed by District Judge Aleta A. Trauger on 1/23/2019. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jm)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION

CAPSTAR BANK, a Tennessee state
chartered bank,
Plaintiff,
v.
ELIZABETH PERRY,
Defendant,

ELIZABETH PERRY,
Counter-Plaintiff,
v.
CAPSTAR BANK, a Tennessee state
chartered bank, SCOTT McGUIRE, and
GERIK DEGNER,
Counter-Defendants.

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Case No. 3:17-cv-01221
Judge Aleta A. Trauger

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MEMORANDUM
Before the court is the Motion for Summary Judgment and incorporated Memorandum of
Points and Authorities (Doc. No. 56) filed by defendant/counter-plaintiff Elizabeth Perry,
seeking summary judgment in her favor on the sole count in plaintiff/counter-defendant CapStar
Bank’s Complaint (Doc. No. 1), for breach of a guaranty agreement. For the reasons set forth
herein, the motion will be denied.
I.

FACTUAL BACKGROUND
CapStar brings suit for breach of a written contract; Perry’s defense is premised upon her

2
interpretation of subsequent contracts executed by the parties. The existence of the various
agreements and their wording are essentially undisputed. The parties simply disagree as to how
to construe some provisions of the contracts.
In November 2015, Elizabeth Perry, along with Stephen Fennelly and Mark Shandrow,
each personally guaranteed a loan made by CapStar to Solid Landings Behavioral Health, Inc.
and other entities. (See Doc. No. 1-2, Loan and Security Agreement (“Loan Agreement”); Doc.
No. 1-4, Perry Guaranty Agreement (“Guaranty”). 1) CapStar brings suit to enforce Perry’s
Guaranty, seeking to recover more than $6,000,000.
For her part, Perry maintains that CapStar is obligated to release her from the Guaranty
based either on the terms of a modified Asset Purchase Agreement executed in 2017, which the
parties refer to as the July 27 APA, or, alternatively, on a Conditional Release Agreement
(“CRA”) (Doc. No. 58-2) executed on June 1, 2017, the same day that Solid Landings and a
number of related entities (hereafter, “Debtors”) filed for Chapter 11 bankruptcy protection in
California.
The CRA stipulates that the Debtors had entered into the November 2015 Loan
Agreement and a 2016 Amended and Restated Revolving Note in the original principal amount
of $9,200,000.00, prompt payment of which was guaranteed by the Guaranties executed by Perry
and Shandrow (“Guarantors”). (CRA Stip. (A).) The CRA further acknowledges that,
contemporaneously with the execution of the CRA, the Debtors were entering into a specific
Asset Purchase Agreement (“APA” or “original APA”), dated June 1, 2017, with Alpine
Behavioral Holdco, LLC, Alpine Behavioral California, LLC, Alpine Behavioral Nevada, LLC,
Alpine Behavioral Texas, LLC, and Alpine Behavioral Toxicology, LLC (collectively, the
1

The Guaranties signed separately by Shandrow and Fennelly are not in the record.

3
“Stalking Horse”).
The Stipulations contained in the CRA provide in part that:
(E)
The Filing Debtors have determined it is in each of their respective
best interests to sell certain assets, as more specifically set forth in the APA
(“Assets”), pursuant to 11 U.S.C. § 363 (“Bankruptcy Sale”) via public auction,
and pursuant to the APA, Stalking Horse has agreed to act as a stalking horse
bidder for the sale. Creditor [CapStar] supports the Bankruptcy Sale.
(F)
Due to the filing of the Bankruptcy Cases and the execution of the
APA, Guarantors have requested that their guarantees of the Note be released
under certain conditions.
(G)
All parties realize that the APA has certain contingencies and
conditions precedent, which if such contingencies and conditions precedent are
not satisfied or waived, the Stalking Horse is under no obligation to purchase the
Assets. All Parties further realize that Creditor has a right to credit bid the
Indebtedness owed by Borrowers under the Loan Documents, and that it is
possible that the Assets may not be sold to a Third-Party Purchaser pursuant to a
Bankruptcy Sale.
(CRA Stips. (E)–(G).)
The CRA required CapStar to execute a Mutual Release substantially in the form of the
blank Mutual Release attached as Exhibit A to the CRA, upon the satisfaction of five specific
conditions (“Release Conditions”), including:
(a)
Consummation of the Bankruptcy Sale and the sale of all Assets to
a Third-Party Purchaser. As used herein, a “Third-Party Purchaser” means any
individual or entity, including Purchasers, that buys through the Bankruptcy Sale
all of the Assets. Third-Party Purchaser shall not include Creditor; and
(b)
The entry of a final, unappealable order by the Bankruptcy Court
approving the Bankruptcy Sale and the sale of all Assets to a Third-Party
Purchaser (“Final Order”); and
(c)

The expiration of all appeal periods related to the Final Order; and

(d)
The satisfaction of all conditions of closing and the closing of the
Bankruptcy Sale to a Third-Party Purchaser (“Closing”); and
(e)
All cash money required to be paid at Closing is indefeasibly paid
in full and received in full by Creditor.
(CRA ¶ 2(a)–(e).)

4
The original APA contemplated a bid by the Stalking Horse valued at $9,050,000.00 for
substantially all of the assets of the filing Debtors. (See Doc. No. 58-3, APA, §§ 2.01
(“Transferred Assets”), 4.01 (“Consideration”), and Exhibit B (“Bidding Procedures”) (“The
Debtors have computed the total value of the Stalking Horse Proposal to be $9,050,000.”).)
Ultimately, however, it became apparent that the Stalking Horse would not bid on the
Debtors’ assets and that the transaction contemplated by the original APA would not close. The
Debtors, along with CapStar, Perry, Fennelly, and Shandrow, later filed a Stipulation
(“Bankruptcy Stipulation”) (Doc. No. 58-1) describing the course of events and charting the path
forward:
L.
On July 11, 2017, the Debtors and CapStar received written notice
from the Stalking Horse Bidder that the financing contingency set forth in Section
13.06 of the APA was not satisfied and was not being waived by the Stalking
Horse Bidder, and that the Stalking Horse Bidder was not obligated to purchase
the Transferred Assets and to close the sale transaction contemplated by the APA
until such financing contingency was expressly satisfied or waived. Based upon
the foregoing notice from the Buyer 2 and subsequent discussions among the
parties, it became increasingly clear that the Stalking Horse Bidder was not able
and/or willing to proceed with the purchase of the Transferred Assets upon the
terms originally set forth in the APA and described in the Sale Motion.
M.
Having received no written overbids for the Transferred Assets by
the Bid Deadline, and recognizing that the opportunity to maximize the value of
the assets of the Debtors’ estates by consummating a sale of the Transferred
Assets to the Stalking Horse Bidder was quickly diminishing (and would
potentially be eliminated upon the termination of the Debtors’ post-petition
financing arrangement with CapStar), the Debtors, the Committee, CapStar, and
the Stalking Horse Bidder engaged in further discussions in an effort to negotiate
modified terms upon which the Transferred Assets could be sold to the Stalking
Horse Bidder with the consent of all parties (including the Committee).
N.
While the Debtors, the Committee, CapStar and the Stalking Horse
Bidder were in the process of negotiating the modified terms upon which the
Transferred Assets could be sold to the Stalking Horse Bidder with the consent of
all parties, the Debtors, the Committee, and CapStar received a written overbid
proposal from the Buyers [defined in the preamble as [Stephen Fennelly,
2

This reference to “Buyer” appears to refer to the Stalking Horse Bidder.

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Elizabeth Perry, and Mark Shandrow], who are the shareholders, directors, and
current or former officers of the Debtors.
O.
Following extensive discussions with both the Stalking Horse
Bidder and the Buyers, the Debtors, the Committee, and CapStar have ultimately
reached an agreement with the Buyers regarding the modified terms upon which
the Transferred Assets will be sold to the Buyers (subject to documentation
acceptable to the parties hereto and the approval of the Court), which modified
terms are set forth in this Stipulation.
(Doc. No. 58-1, Bankruptcy Stipulation “Recitals” at 3–5.)
Based on these Recitals, which were also incorporated into the Stipulation itself (id. at 6),
CapStar and Perry, among the other parties thereto, stipulated (among other measures) that: (1)
the Buyers’ overbid proposal would be deemed a “Qualified Bid” under the Bidding Procedures,
and the Buyers would be permitted to participate in the Auction, assuming the parties were able
to enter into a “modified form of the APA (‘Modified APA’) . . . acceptable to the parties hereto”
(id.); (2) the Purchase Price would be significantly modified and reduced as set forth in the
Stipulation; and (3) Mark Shandrow would pay consideration in the amount of $200,000 to
CapStar upon Closing of the sale of Transferred Assets in exchange for a comprehensive release
by CapStar of all claims it might have against Shandrow “from the beginning of time, and related
to or arising out of . . . the Guaranty Agreement executed by Shandrow in favor of CapStar dated
November 20, 2015” (id. at 13).
After a hearing on July 28, 2017, the Bankruptcy Court entered an order approving the
Stipulations. (See Doc. No. 56-2, at 299.) The Debtors, CapStar, and Buyers, including Perry,
eventually entered into a modified Asset Purchase Agreement (the July 27 APA) 3 consistent with
the description of it contained in the Bankruptcy Stipulation. (Doc. No. 58-5.)
The only references to the Mutual Release in the July 27 APA are contained in Sections
3

The July 27 APA was not actually executed on that day, but the parties nonetheless
refer to it thus.

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4.09, and .10 thereof, which state:
Section 4.09. Items to be Delivered by Lender to the Equityholders
[Buyers] at the Closing. At the Closing, Lender shall execute and deliver or cause
to be delivered to the Equityholders the Mutual Release, duly executed by Lender
if such a release has been agreed to by the Equityholder(s) and the Lender.
Section 4.10. Items to be Delivered by the Equityholders to Lender at the
Closing. At the Closing, the Equityholders shall execute and deliver or cause to be
delivered to Lender the Mutual Release, duly executed by each Equityholder if
such a release has been agreed to by the Equityholder and the Lender.
(July 27 APA, Doc. No. 58-5, at 13.)
The final clause of each of these sections (“if such a release has been agreed to by the
Equityholder(s) and the Lender”) was added in redline form by Perry’s counsel prior to the
execution of the July 27 APA and after the parties had signed the CRA. (See July 28–29, 2017
emails from Nathan Fransen to counsel for other parties, referencing the revision and attaching a
redlined draft version of the July 27 APA, Doc. No. 58-6.) As noted in Fransen’s email, only
Shandrow and CapStar had reached an agreement to execute the Mutual Release. (Id.; see also
Bankruptcy Stipulation ¶ 13(d).) Unlike CapStar and Shandrow, CapStar and Perry never
reached a separate agreement to enter into the Mutual Release in connection with the July 27
APA. 4 Perry does not maintain that she appeared at the closing on the July 27 APA with a signed
release in hand or that she expected to receive one in return from CapStar.
CapStar received its portion of the Purchase Price as defined in the July 27 APA.
The July 27 APA provides that the rights of the parties under that agreement are to be
construed and enforced in accordance with California law. (Doc. No. 58-5, at 29 ¶ 17.09.)
4

Perry responds to this additional factual statement by CapStar by stating that “[n]o
evidence has been offered that establishes a lack of an agreement between CapStar and Ms. Perry
regarding a Mutual Release.” (Doc. No. 59-1, at 17.) However, she does not actually dispute the
non-existence of such a side agreement, nor does she offer affirmative evidence that such an
agreement exists. Instead, she argues, as a legal matter, that “the CRA and the July 27 APA
appear to provide for just such a release.” (Id.)

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II.

PROCEDURAL BACKGROUND
CapStar filed its Complaint, asserting breach of the Guaranty Agreement, on September

1, 2017. Perry filed her Answer and Counterclaim for damages in January 2018. As relevant
here, the Counterclaim seeks specific performance of the CRA, by requiring CapStar to execute
the Mutual Release attached thereto, damages for breach of the November 2015 Loan
Agreement, and breach of the duty of good faith and fair dealing. (Doc. No. 22.)
Although this appears to be a relatively straightforward breach-of-contract case, the
litigation has been protracted by unnecessary delays and groundless motions. An Amended
Initial Case Management Order (Doc. No. 54) was entered on August 3, 2018, after numerous
continuances. The dispositive motion deadline is September 30, 2019.
Perry, in her capacity as defendant, filed her Motion for Summary Judgment on
CapStar’s single claim for breach of contract in October 2018, supported by a Memorandum of
Points and Authorities and Statement of Undisputed Material Facts, to which was attached an
undifferentiated mass of 400 pages of exhibits. (Doc. Nos. 56, 56-1, 56-2.) CapStar filed
responses to the motion and the statement of facts, along with a Statement of Additional
Undisputed Material Facts 5 and its own set of exhibits. (Doc. Nos. 57, 58 and attached exhibits,
58-1 through 58-6.) Perry filed a Reply brief, Reply to CapStar’s Response to her factual

5

This court’s Local Rules anticipate that the party opposing summary judgment may file
a statement of separate facts as to which it believes a material factual dispute exists. See Local
Rule 56.01(c)(3) (“In addition, the non-movant’s response may contain a concise statement of
any additional facts that the non-movant contends are material and as to which the non-movant
contends there exists a genuine issue to be tried.”). Here, it appears that there are no true factual
disputes, but simply a dispute as to how the various documents should be read in conjunction
with each other.

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statements, and a Response to CapStar’s statement of additional facts. (Doc. Nos. 59, 59-1.) 6
III.

STANDARD OF REVIEW
Rule 56 requires the court to grant a motion for summary judgment, if “the movant shows

that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). To win summary judgment on a particular claim, the
moving defendant must show that, as a matter of undisputed material fact, the plaintiff cannot
establish at least one essential element of that claim. Once the moving defendant makes its initial
showing, the burden shifts to the plaintiff to provide evidence beyond the pleadings, “set[ting]
forth specific facts showing that there is a genuine issue for trial.” Moldowan v. City of Warren,
578 F.3d 351, 374 (6th Cir. 2009); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23
(1986). “In evaluating the evidence, the court must draw all inferences in the light most

6

Perry also filed a separate document titled “Objections to CapStar Bank’s Evidence”
(Doc. No. 59-2), in which she purports to object to certain evidence relied upon by CapStar on
the basis that it is irrelevant and therefore inadmissible under Rules 401 and 402 of the Federal
Rules of Civil Procedure. The evidence to which she thus objects includes (1) CapStar’s Exhibit
6 (Doc. No. 58-6), consisting of emails from Perry’s attorney in the underlying transactions,
Nathan Fransen, dated July 28 and 29, 2017, because they “do not purport to reduce Elizabeth
Perry’s rights to a Mutual Release” (Doc. No. 59-2, at 1–2); (2) Paragraph 13(d) of the
Bankruptcy Stipulation, on the grounds that the cited paragraph “says nothing about the Mutual
Release from the CRA” (id. at 2); and (3) Paragraphs 4.09 and 4.10 of the July 27 APA, on the
grounds that the referenced “sections’ release refers to the Mutual Release that Elizabeth Perry
and CapStar agreed to back on June 1 in the CRA” but “say[] nothing about the mutual release in
the Bankruptcy Stipulation” (id.).
Ironically, Perry herself introduces into evidence and relies upon the Bankruptcy
Stipulation and the July 27 APA. (See Doc. No. 56-2.) Relevance, moreover, is clearly in the eye
of the beholder. Perry does not argue that CapStar’s factual statements are not supported by
citations to the record, see Fed. R. Civ. P. 56(c)(1)(A), that the information contained within the
cited documents is incorrect or subject to dispute as a factual matter, see Fed. R. Civ. P.
56(c)(1)(B), or that that the documents cannot be presented in a form that would be admissible in
evidence, Fed. R. Civ. P. 56(c)(2). In short, Perry’s “objections” amount to nothing more than
argument in support of her interpretation of the various agreements. The court does not construe
the Objections as a motion requiring a ruling.

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favorable to the non-moving party.” Moldowan, 578 F.3d at 374 (citing Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
At this stage, “‘the judge’s function is not . . . to weigh the evidence and determine the
truth of the matter, but to determine whether there is a genuine issue for trial.’” Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). But “[t]he mere existence of a
scintilla of evidence in support of the [non-moving party’s] position will be insufficient,” and the
party’s proof must be more than “merely colorable.” Anderson, 477 U.S. at 252. An issue of fact
is “genuine” only if a reasonable jury could find for the non-moving party. Moldowan, 578 F.3d
at 374 (citing Anderson, 477 U.S. at 252).
IV.

ANALYSIS
In her motion, Perry argues that (1) the July 27 APA requires CapStar to sign a Mutual

Release releasing her from her Guaranty; and (2) alternatively, that each of the criteria for release
set forth in the CRA has been met, requiring CapStar to execute the Mutual Release. CapStar’s
position is that Perry and CapStar never reached an agreement to enter into the Mutual Release
under the July 27 APA and that the requirements for a release enumerated in the CRA have not
been met.
A.

The July 27 APA

As set forth above, the July 27 APA states, “[a]t the Closing, Lender shall execute and
deliver or cause to be delivered to the Equityholders the Mutual Release, duly executed by
Lender if such a release has been agreed to by the Equityholder(s) and the Lender.” (July 27
APA§ 4.09, Doc. No. 58-5, at 13.) A parallel provision requires the “Equityholders” to “execute
and deliver or cause to be delivered to Lender the Mutual Release, duly executed by each
Equityholder if such a release has been agreed to by the Equityholder and the Lender.” (Id. §

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4.10.)
The term “Equityholder” is defined in the agreement to include Perry. (Id. at Preamble.)
The term “Mutual Release” is defined as “the mutual release contemplated by that certain
Conditional Release Agreement . . . by and between Lender and the applicable Equityholders.”
(Id. Exhibit A, Doc. No. 58-5, at 42.) “Equityholders” is modified in that definition by the term
“applicable,” because only Shandrow and Perry, and not Stephen Fennelly, executed the CRA,
while all three are defined as Equityholders in the July 27 APA.
As stated in the Bankruptcy Stipulation entered into by all the parties and approved by
the Bankruptcy Court, Mark Shandrow and CapStar did enter into a separate agreement pursuant
to which Shandrow agreed to pay consideration in the amount of $200,000 to CapStar upon
Closing of the sale of Transferred Assets, in exchange for a comprehensive release by CapStar of
all claims it might have against Shandrow under the November 2015 Guaranty Agreement he
executed in favor of CapStar. (Bankruptcy Stipulation ¶ 13(d), Doc. No. 58-1, at 13.)
On July 29, 2017, Perry’s attorney at the time, Nathan Fransen, in recognition of the fact
that Perry had not entered into such a separate agreement with CapStar, proposed a modification
to a draft version of what would become the July 27 APA, to make it clear that § 4.09 of that
agreement only pertained to Shandrow:
I modified a reference to a Mutual Release between Capstar and Equityholders
reflecting that it is only applicable if there is an agreement between the parties
(specifically in this case for Mark Shandrow and Capstar).
(July 29, 2017 Email from Fransen to other attorneys, Doc. No. 58-6.) The language he proposed
to add, “if such a release has been agreed to by the Equityholder(s) and the Lender,” was
incorporated into the final version of the July 27 APA. (Compare id. with July 27 APA § 4.09.)
In her motion, Perry argues that the July 27 APA required CapStar to execute the Mutual

11
Release that had been contemplated by the CRA. She suggests that the reference to “applicable
Equityholders” in the definition of the term “Mutual Release” makes sense in light of the fact
that Fennelly was not a party to the CRA. She suggests that the mere fact that she and CapStar
were parties to the CRA meant that they had already agreed to the Mutual Release. She makes no
attempt to explain the fact that Shandrow had separately negotiated and entered into a separate
agreement. She insists that, “[u]nder the terms of the July 27 APA, the Mutual Release should
either be signed and delivered by Capstar to Ms. Perry or otherwise be given effect. Either way,
Ms. Perry is supposed to be released; summary [j]udgment should issue.” (Doc. No. 56, at 9.) 7
CapStar, for its part, points to the fact that CapStar and Perry never reached an agreement
to enter into a Mutual Release in connection with the July 27 APA, as memorialized in ¶ 13(d) of
the Bankruptcy Stipulation, and that Perry’s own counsel added the language incorporating that
requirement into the July 27 APA after the parties had signed the CRA but before they had
finalized and signed the July 27 APA.
The July 27 APA, by its terms, is to be construed under California law. “Under California
law, the interpretation of a written contract is a matter of law for the court even though questions
of fact are involved.” Pemberton v. Nationstar Mortgage LLC, 331 F. Supp. 3d 1018, 1035 (S.D.
Cal. 2018) (quoting Southland Corp. v. Emerald Oil Co., 789 F.2d 1441, 1443 (9th Cir. 1986)).
Where the parties have reduced their contract to writing, the parties’ mutual intent at the time of
the contract is determined from the writing alone if possible. Id. (citing Founding Members of
the Newport Beach Country Club v. Newport Beach Country Club, Inc., 135 Cal. Rptr. 2d 505,
513 (Cal. Ct. App. 2003)); see also Kashmiri v. Regents of Univ. of Cal., 67 Cal. Rptr. 3d 635,

7

She adds that “Ms. Perry’s claims would also go away because it was a Mutual
Release.” (Doc. No. 56, at 9.)

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660 (Cal. Ct. App. 2007), as modified (Nov. 15, 2007), as modified (Nov. 28, 2007) (“Under
contract law, the relationship between the [parties] is to be interpreted to protect the reasonable
expectations of the parties at the time the contract is formed. Such intent is to be inferred, if
possible, solely from the written provisions of the contract.” (internal quotation marks and
citations omitted)).
California statutes require that “[t]he whole of a contract is to be taken together, so as to
give effect to every part, if reasonably practicable, each clause helping to interpret the other.”
Cal. Civ. Code § 1641. California law directs the courts to interpret the words of a contract in
their ordinary and popular sense, unless the contract uses words in a technical manner or defines
certain terms. Pemberton, 331 F. Supp.3d at 1035 (citation omitted).
A contract is ambiguous if it is capable of more than one reasonable interpretation. “[I]t is
the court’s task to determine the ultimate construction to be placed on the ambiguous language
by applying the standard rules of interpretation in order to give effect to the mutual intention of
the parties. . . . [The ambiguous language] must be interpreted in the sense in which the promisor
believed, at the time of making it, that the promisee understood it.” Kashmiri, 67 Cal. Rptr. 3d at
660 (internal quotation marks and citation omitted).
In this case, the court finds that the July 27 APA is not ambiguous. Interpretation of the
contract—specifically § 4.09, read in the context of the contract as a whole and particularly in
light of the definitions of the various terms—does not require resort to anything other than the
contractual language itself. CapStar, as Lender, incurred an obligation to execute and deliver a
duly executed Mutual Release, in substantially the same form as that contemplated by the CRA,
only “if such a release ha[d] been agreed to” by Perry and CapStar. The record is clear that they
had not agreed upon any such release, so CapStar was not obligated to sign and deliver it.

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If there were any ambiguity, the parties’ conduct establishes their understanding that §
4.09 did not apply to Perry, because Perry and CapStar had not reached a separate agreement
regarding the execution of a mutual release. Specifically, Paragraph 13(d) of the Bankruptcy
Stipulation spells out, in great detail, that CapStar and Mark Shandrow had reached an agreement
to execute mutual releases arising out of the entirety of their relationship but specifically
including the November 2015 Guaranty Agreement executed by Shandrow in favor of CapStar.
The Bankruptcy Stipulation details other release agreements—releases of the Buyers by the
Debtors and the Debtors’ bankruptcy estates (“Estates”), of CapStar by the Debtors and the
Estates, and of the Joint Committee of Creditors by CapStar and the Buyers. (Bankruptcy Stip. ¶
13(a)–(c), Doc. No. 58-1.) It contains no reference to a release between Perry and CapStar, as
apparently recognized by her attorney in the July 29, 2017 email to the attorneys for the other
parties to the July 27 APA. (Doc. No. 58-6.)
Based on the unambiguous language of the July 27 APA, Perry is not entitled to summary
judgment in her favor.
B.

The CRA

The CRA specifically provides that it is to be construed under Tennessee law (CRA ¶
12), which, as it pertains to the construction of a written contract, differs little from California
law as referenced above. Under Tennessee law, too, “[t]he central tenet of contract construction
is that the intent of the contracting parties at the time of executing the agreement should govern.”
Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885, 890 (Tenn. 2002). That
intent generally should be gleaned from the plain meaning of the pertinent documents. Allstate
Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn. 2006). Unless a contract is ambiguous, its
“literal meaning controls the outcome of the dispute.” Id. A contract term is “ambiguous only

14
when it is of uncertain meaning and may fairly be understood in more ways than one.” Id.
Further, however, under both Tennessee and California law, the doctrine of merger
provides that “the last agreement concerning the same subject matter that has been signed by all
parties supersedes all former agreements, and the last contract is the one that embodies the true
agreement.” Magnolia Grp. v. Metro. Dev. & Hous. Agency of Nashville, Davidson Cty., 783
S.W.2d 563, 566 (Tenn. Ct. App. 1989); see also Pedus Sec. Servs., Inc. v. Con-Way W. Exp.,
Inc., No. A092479, 2001 WL 1660036, at *3 (Cal. Ct. App. Dec. 28, 2001) (“[A] written
contract containing the entire agreement of the parties supersedes all prior and contemporaneous
negotiations.” (quoting Schmidt v. Macco Constr. Co., 119 Cal. App. 2d 717, 730 (Cal. Ct. App.
1953))). And, even if no actual merger occurs, it is also clear that “several contracts relating to
the same matters are to be construed together.” Mountain Air Enters., LLC v. Sundowner Towers,
LLC, 398 P.3d 556, 566 (Cal. 2017) (citations omitted); accord Oman Constr. Co. v. Tenn. Cent.
Ry. Co., 370 S.W.2d 563, 570 (Tenn. 1963).
In the alternative to her argument under the July 27 APA, the plaintiff asserts that the
CRA requires CapStar’s execution of the Mutual Release contemplated by that agreement,
because the conditions precedent to such a release, as set forth in the CRA, have all been met. In
response to this argument, CapStar argues that those prerequisites have not been met, because (1)
Perry is not a “Third-Party Purchaser”; and (2) Perry did not purchase the Debtors’ assets
through the Bankruptcy Sale transaction as defined in and contemplated by the CRA.
The court finds that Perry is not entitled to summary judgment on the basis of the CRA
either. The salient question with respect to the CRA is not whether its conditions for release have
been met, but whether, even if they have, the agreement was effectively superseded or modified
by the Bankruptcy Stipulation and the July 27 APA, based either on merger or on a reading of

15
the CRA in conjunction with the subsequent agreements. The parties have not effectively briefed
this issue. In light of that open question, the court finds that some ambiguity exists as to whether
Perry purchased the Debtors’ assets through the Bankruptcy Sale that was contemplated by and
defined in the CRA and the original APA and as to whether the CRA’s release provision
remained operative at all.
In particular, the court observes that Bidding Procedures set forth in the original APA
clearly contemplated a sale of the Debtors’ assets either to the Stalking Horse or to some other
purchaser making a bid “on terms that . . . are substantially the same or more favorable to the
Debtors and their estates” than that made by the Stalking Horse. (See Doc. No. 58-3, June 1 APA
Ex. B (“Bidding Procedures”).) It is also clear that the terms of the sale as finally consummated
under the July 27 APA were substantially less favorable, both to the Debtors and to CapStar,
than the terms of the original APA. Moreover, Shandrow’s agreement to pay CapStar $200,000
in exchange for a release of his obligations under his Guaranty would have been wholly
superfluous if the July 27 APA were not read to supersede both the original APA and the CRA
that accompanied it. In that regard, it appears that, at the time the Bankruptcy Stipulations and
the July 27 APA were drafted, the parties and their attorneys all understood that CapStar had no
obligation to release the “Buyers,” including both Perry and Shandrow, from their individual
Guaranty Agreements unless CapStar and each guarantor had negotiated the terms of a release,
as CapStar and Shandrow had done.
The court finds that Perry is not entitled to summary judgment in her favor on CapStar’s
claim for breach of the Guaranty Agreement based on the CRA either.
IV.

CONCLUSION
For the reasons set forth herein, Perry’s Motion for Summary Judgment will be denied,

16
and the deadlines set forth in the Amended Initial Case Management Order entered on August 3,
2018 (Doc. No. 54) remain in effect.
An appropriate Order is filed herewith.
ENTER this 23rd day of January 2019.

____________________________________
ALETA A. TRAUGER
United States District Judge