84 Lumber Company v. R. Bryan Smith

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

September 1, 2010 Session

84 LUMBER COMPANY v. R. BRYAN SMITH, ET AL.

Appeal from the Circuit Court for Washington County

No. 27548 Jean A. Stanley, Judge

No. E2010-00292-COA-R3-CV - FILED OCTOBER 28, 2010

84 Lumber Company (“84 Lumber”) sued R. Bryan Smith (“Smith”) and Allstates Building

Systems, LLC (“Allstates”) for a balance owed on an open account. Both sides filed motions

for summary judgment. The Circuit Court granted 84 Lumber summary judgment, and

entered a judgment against Smith and Allstates in the amount of $27,611.31 plus attorney’s

fees and costs in the amount of $6,500.00. Smith appeals to this Court. We find that Smith

did not sign the credit application in his personal capacity and, therefore, did not guarantee

Allstates’ debt. We reverse the grant of summary judgment against Smith, and grant

summary judgment to Smith. We affirm the grant of summary judgment against Allstates.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court

Reversed, in part; Affirmed, in part; Case Remanded

D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which J OHN W. M CC LARTY,

J. joined. C HARLES D. S USANO, J R., J. separate concurring and dissenting opinion.

Rick J. Bearfield, Johnson City, Tennessee, for the appellant, R. Bryan Smith.

John M. Neal, Knoxville, Tennessee, for the appellee, 84 Lumber Company.

OPINION

Background

84 Lumber sued Smith and Allstates in the General Sessions Court for

Washington County alleging that Smith and Allstates were indebted to 84 Lumber for

approximately $23,000 on an open account that was past due and owing. The General

Sessions Court dismissed the claims against both defendants after a trial.

84 Lumber then appealed to the Circuit Court (“Trial Court”) for Washington

County. Both 84 Lumber and Smith filed motions for summary judgment. The operative

document in this case is the commercial credit application, which provides, in pertinent part:

BY SIGNING BELOW I HEREBY CERTIFY THAT I AM THE OWNER,

GENERAL PARTNER OR PRESIDENT OF THE ABOVE BUSINESS,

AND I DO UNCONDITIONALLY AND IRREVOCABLY PERSONALLY

GUARANTEE THIS CREDIT ACCOUNT AND PAYMENTS OF ANY

AND ALL AMOUNTS DUE BY THE ABOVE BUSINESS. AND THAT I

HAVE READ ALL OF THE TERMS AND CONDITIONS ON THE

REVERSE SIDE OF THIS APPLICATION AND UNDERSTAND AND

AGREE TO THE SAME. AND THAT ALL OF THE INFORMATION

CONTAINED IN THIS APPLICATION IS TRUE AND CORRECT TO THE

BEST OF MY KNOWLEDGE.

Below the above quoted paragraph there is a line for the “Applicant” to sign, which Smith

executed as “R. Bryan Smith, President.” The “Applicant” is identified at the top of the

credit application as Allstate Building System, LLC.

After a hearing on the motions for summary judgment, the Trial Court entered

its order on December 16, 2009 finding and holding that Smith had personally guaranteed

Allstates’ debt. The Trial Court granted summary judgment to 84 Lumber and entered a

judgment against Smith and Allstates in the amount of $27,611.31 plus attorney’s fees and

costs in the amount of $6,500.00. Smith appeals to this Court.

Discussion

Although not stated exactly as such, Smith raises one issue on appeal: whether

the Trial Court erred in granting summary judgment to 84 Lumber against Smith and not

granting summary judgment to Smith.

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Our Supreme Court reiterated the standard of review in summary judgment

cases as follows:

The scope of review of a grant of summary judgment is well

established. Because our inquiry involves a question of law, no presumption

of correctness attaches to the judgment, and our task is to review the record to

determine whether the requirements of Rule 56 of the Tennessee Rules of Civil

Procedure have been satisfied. Hunter v. Brown, 955 S.W.2d 49, 50-51 (Tenn.

1997); Cowden v. Sovran Bank/Cent. S., 816 S.W.2d 741, 744 (Tenn. 1991).

A summary judgment may be granted only when there is no genuine

issue of material fact and the moving party is entitled to judgment as a matter

of law. Tenn. R. Civ. P. 56.04; Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn.

1993). The party seeking the summary judgment has the ultimate burden of

persuasion “that there are no disputed, material facts creating a genuine issue

for trial . . . and that he is entitled to judgment as a matter of law.” Id. at 215.

If that motion is properly supported, the burden to establish a genuine issue of

material fact shifts to the non-moving party. In order to shift the burden, the

movant must either affirmatively negate an essential element of the

nonmovant’s claim or demonstrate that the nonmoving party cannot establish

an essential element of his case. Id. at 215 n.5; Hannan v. Alltel Publ’g Co.,

270 S.W.3d 1, 8-9 (Tenn. 2008). “[C]onclusory assertion[s]” are not sufficient

to shift the burden to the non-moving party. Byrd, 847 S.W.2d at 215; see also

Blanchard v. Kellum, 975 S.W.2d 522, 525 (Tenn. 1998). Our state does not

apply the federal standard for summary judgment. The standard established

in McCarley v. West Quality Food Service, 960 S.W.2d 585, 588 (Tenn. 1998),

sets out, in the words of one authority, “a reasonable, predictable summary

judgment jurisprudence for our state.” Judy M. Cornett, The Legacy of Byrd

v. Hall: Gossiping About Summary Judgment in Tennessee, 69 Tenn. L. Rev.

175, 220 (2001).

Courts must view the evidence and all reasonable inferences therefrom

in the light most favorable to the non-moving party. Robinson v. Omer, 952

S.W.2d 423, 426 (Tenn. 1997). A grant of summary judgment is appropriate

only when the facts and the reasonable inferences from those facts would

permit a reasonable person to reach only one conclusion. Staples v. CBL &

Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000). In making that assessment, this

Court must discard all countervailing evidence. Byrd, 847 S.W.2d at 210-11.

Recently, this Court confirmed these principles in Hannan.

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Giggers v. Memphis Housing Authority, 277 S.W.3d 359, 363-64 (Tenn. 2009).

In resolving a dispute concerning contract interpretation, our task is to ascertain

the intention of the parties based upon the usual, natural, and ordinary meaning of the

contract language. Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78 S.W.3d

885, 889-90 (Tenn. 2002)(citing Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999)).

A determination of the intention of the parties “is generally treated as a question of law

because the words of the contract are definite and undisputed, and in deciding the legal effect

of the words, there is no genuine factual issue left for a jury to decide.” Planters Gin Co.,

78 S.W.3d at 890 (citing 5 Joseph M. Perillo, Corbin on Contracts, § 24.30 (rev. ed. 1998);

Doe v. HCA Health Servs. of Tenn., Inc., 46 S.W.3d 191, 196 (Tenn. 2001)).

As pertinent to this appeal, Tenn Code Ann. § 29-2-101 provides:

29-2-101. Writing required for action. – (a) No action shall be brought:

***

(2) To charge the defendant upon any special promise to answer for the debt,

default, or miscarriage of another person;

***

unless the promise or agreement, upon which such action shall be brought, or

some memorandum or note thereof, shall be in writing, and signed by the party

to be charged therewith, or some other person lawfully authorized by such

party.

Tenn. Code Ann. § 29-2-101 (Supp. 2009).

As this Court has stated:

The general rule is that a corporate officer’s signature preceded by a

corporation’s name and followed [by] a designation of the signature’s

corporate capacity is evidence that the officer was acting as an agent of the

corporation. See Bill Walker & Assoc., Inc. v. Parrish, 770 S.W.2d 764, 770

(Tenn. App. 1988). This general rule, however, does have exceptions when

the contract reveals a different intention. Id.

It is possible for an officer of a corporation

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to avoid personal liability by signing his name and

adding his title and the name of the corporation.

However such a signature does not produce the

presumptive effect of a signature in which the

name of the corporation appears first followed by

the word, “by” or “per” and the name of the

corporation. In the former case, additional

evidence, such as test of the instrument or

evidence of the joint intent of the parties, would

be required to establish that only the corporation

was to be bound. In the latter case, the intention

of the parties is self evident from the form of the

signature.

Cone Oil Co., Inc. v. Green, 669 S.W.2d 662, 664 (Tenn. App. 1983).

Fleet One, LLC v. Cook, No. M2001-03048-COA-R3-CV, 2002 Tenn. App. LEXIS 395, at

**6-7 (Tenn. Ct. App. June 5, 2002), no appl. perm. appeal filed.

To begin, we note that in its brief on appeal 84 Lumber cites Pennsylvania law

in addition to Tennessee law. The contract in the instant case states that it is to be construed

in accordance with Pennsylvania law. In the Trial Court, however, neither party raised an

issue regarding whether Pennsylvania law should be applied. Instead, both parties cited

Tennessee law to the Trial Court, and the Trial Court, not surprisingly, applied Tennessee

law. Because this issue was raised for the first time on appeal, we consider it waived, and

we will apply Tennessee law. See Crossley Const. Corp. v. Nat. Fire Ins. Co. of Hartford

wherein we stated:

Except for some limited exceptions not applicable here,

we will not consider issues, let alone claims, raised for the first

time on appeal. See City of Cookeville ex rel. Cookeville Reg’l

Med. Ctr. v. Humphrey, 126 S.W.3d 897, 905-06 (Tenn. 2004)

(noting the general rule that “questions not raised in the trial

court will not be entertained on appeal.” (quoting Lawrence v.

Stanford, 655 S.W.2d 927, 929 (Tenn. 1983))).

Crossley Const. Corp. v. Nat. Fire Ins. Co. of Hartford, 237 S.W.3d 652, 656 (Tenn. Ct. App.

2007).

We next note that both parties cite to several cases that involve a guaranty

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document containing a signature or signatures separate and apart from the contract with its

signature or signatures that formed the underlying indebtedness. E.g., Kelso Oil Co., Inc. v.

East West Truck Stop, Inc., 102 S.W.3d 655 (Tenn. Ct. App. 2002); Kubota Tractor Corp.

v. Fugate Implement Co., Inc., 1989 Tenn. App. LEXIS 398 (Tenn. Ct. App. June 2, 1989),

no appl. perm. appeal filed; Cone Oil Co., Inc. v. Green, 669 S.W.2d 662 (Tenn. Ct. App.

1983). In the case now before us on appeal we are faced with a situation wherein the one

signature at issue appears only on the document which created the contractual indebtedness.

There is no separate guaranty document and no separate signature involved in this case. As

such we find these cited cases to be easily distinguishable from the instant case.

84 Lumber argues on appeal, in part, that Creative Resource Management, Inc.

v. Soskin, should control the outcome in this case because the language in the Creative

Resource Management, Inc. contract was similar to the language contained in the contract

in the instant case. Creative Resource Management, Inc. v. Soskin, No. 01-A-01-9808-CH-

00016, 1998 Tenn. App. LEXIS 788 (Tenn. Ct. App. Nov. 25, 1998), no appl. perm. appeal

filed. Importantly, however, the contract in Creative Resource Management, Inc. also

contained definitions for pronouns used within the contract and the entire contract read in

light of those defined terms compelled the result that the signator had signed in his personal

capacity and was personally liable for the debt.

In contrast, the contract in the case now before us does not contain any

definitions for the terms used within the contract. A careful reading of the contract, however,

shows that on its second page the contract makes a distinction between the terms ‘Applicant’

and ‘Guarantor.’ Specifically, while the majority of the contract provisions refer only to the

‘Applicant,’ paragraphs eight and nine contain the language: “APPLICANT AND

PERSONAL GUARANTOR(S) AGREE …,” and “Applicant and Personal Guarantor(s)

hereby authorize …” respectively. Smith signed the contract on the signature line labeled

“Applicant” and added his title of “President” after his signature. Smith did not sign the

contract in any other place.

We find this case to be factually analogous to Fleet One, LLC v. Cook, No.

M2001-03048-COA-R3-CV, 2002 Tenn. App. LEXIS 395 (Tenn. Ct. App. June 5, 2002),

no appl. perm. appeal filed; and Topline Auto. Eng’g, Inc. v. Arney, C.A. 66, 1989 Tenn.

App. LEXIS 28 (Tenn. Ct. App. Jan. 20, 1989), no appl. perm. appeal filed. In Fleet One,

LLC, the contract contained the words: “I assume personal and individual responsibility and

liability, and guarantee payment of all charges due and payable ….” Fleet One, LLC, 2002

Tenn. App. LEXIS 395 at *3. The contract in Topline Auto. Eng’g, Inc. contained the

following language: “the undersigned does jointly and severally personally guarantee to pay

and be responsible for payment of all sums, balances, and accounts due seller by buyer ….”

Topline Auto. Eng’g, Inc., 1989 Tenn. App. LEXIS 28 at *1.

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Despite the personal guarantee language, in both the Fleet One, LLC contract

and the Topline Auto. Eng’g, Inc. contract, this Court held that the signator in each case had

signed in a representative capacity only and not in a personal capacity. Specifically, the Fleet

One, LLC contract was found to be too vague to constitute a personal guarantee with “no

logical variation between the debtor and guarantor.” Fleet One, LLC, 2002 Tenn. App.

LEXIS 395 at *10. In Topline Auto. Eng’g, Inc., this Court determined that two signatures

were required “one, for the credit application, and another for the guaranty,” but that only one

signature appeared on the document. Topline Auto. Eng’g, Inc., 1989 Tenn. App. LEXIS 28

at *3.

In the case now before us on appeal, a careful and thorough reading of the

entire contract supports the conclusion that Smith signed the contract only for the

“Applicant,” Allstates, in his capacity as the president of the “Applicant.” There is no

question but that the “Applicant” in the contract is Allstates. It was this signature of Smith

as president of Allstates that bound Allstates to its obligations under the contract, including

liability for reasonable attorney fees if the “ACCOUNT IS PLACED FOR COLLECTION.”

It is clear that the Trial Court properly found Allstates contractually liable under the contract

signed by Smith as president of Allstates. The Trial Court granted judgment against not just

Smith but also against Allstates “in the amount of $27,611.31, together with Plaintiff’s

reasonable attorney’s fees and costs in the amount of $6500.00.” The only basis the Trial

Court had for awarding attorney fees against Allstates in 84 Lumber’s judgment was the

specific provision contained in the credit application providing for reasonable attorney fees.

The Trial Court found that Allstates was contractually obligated for the attorney fees as

provided in the credit application based upon Smith’s signature as president of Allstates.

Unless Smith signed the credit application on behalf of Allstates, there would be no legal

basis for awarding 84 Lumber its attorney fees against Allstates as the Trial Court did.

In order for Smith also to have been personally liable under this contract, Smith

needed to have executed the contract a second time showing that he was signing as the

guarantor and not for the “Applicant.” This he did not do. There is no writing signed by

Smith showing that he would answer for the debt of Allstates. We, therefore, hold that Smith

cannot be held personally liable on this debt. We reverse the summary judgment against

Smith.

There are no genuine disputed issues of material fact, and, as a matter of law,

Smith cannot be held liable for Allstate’s debt. We, therefore, grant summary judgment in

favor of Smith. The remainder of the Trial Court’s judgment is affirmed.

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Conclusion

The judgment of the Trial Court granting summary judgment to 84 Lumber

against Smith is reversed, and Smith is granted summary judgment. The remainder of the

judgment is affirmed, and this cause is remanded to the Trial Court for collection of the costs

below. The costs on appeal are assessed against the appellee, 84 Lumber Company.

_________________________________

D. MICHAEL SWINEY, JUDGE

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