The opinion
STONES RIVER UTILITIES, INC., )
) Davidson Chancery
Plaintiff/Appellee, ) No. 94-1665-III
)
VS. )
)
METROPOLITAN GOVERNMENT ) Appeal No.
OF NASHVILLE, DAVIDSON COUNTY,) 01A01-9709-CH-00461
TENNESSEE, acting by and through )
the ELECTRIC POWER BOARD and
d/b/a “NASHVILLE ELECTRIC
SERVICE” or “NES”,
)
)
)
FILED
)
April 24, 1998
Defendant/Appellant. )
Cecil W. Crowson
Appellate Court Clerk
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
HONORABLE ELLEN HOBBS LYLE, CHANCELLOR
Stanley M. Chernau
R. Garry Chaffin
CHERNAU, CHAFFIN & BURNSED
424 Church Street, Suite 1750
Nashville, Tennessee 37219
ATTORNEYS FOR PLAINTIFF/APPELLEE
T. Larry Stewart, No. 3345 Cyrus L. Booker, No. 10747
Nancy A. Vincent, No. 16938 Ursula Y. Holmes, No. 18040
STOKES & BARTHOLOMEW BOOKER & ASSOCIATES
424 Church Street, Suite 2800 315 Deaderick Street, Suite 1280
Nashville, Tennessee 37219-2386 Nashville, Tennessee 37238-1280
Eugene W. Ward, No. 3119
Nashville Electric Service
1214 Church Street, Suite 235
Nashville, Tennessee 37203
ATTORNEYS FOR DEFENDANT/APPELLANT
REVERSED AND REMANDED.
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
WILLIAM C. KOCH, JR., JUDGE
WALTER W. BUSSART, JUDGE
STONES RIVER UTILITIES, INC., )
) Davidson Chancery
Plaintiff/Appellee, ) No. 94-1665-III
)
VS. )
)
METROPOLITAN GOVERNMENT ) Appeal No.
OF NASHVILLE, DAVIDSON COUNTY,) 01A01-9709-CH-00461
TENNESSEE, acting by and through )
the ELECTRIC POWER BOARD and )
d/b/a “NASHVILLE ELECTRIC )
SERVICE” or “NES”, )
)
Defendant/Appellant. )
OPINION
The defendant, Metropolitan Government and its Electric Power Board have appealed
from a jury verdict and judgment in favor of the plaintiff, Stones River Utilities, Inc., for
$210,436.24.
On March 18, 1993, defendant issued a six-page invitation to bid to furnish services to
defendant. The description of the services is only partly readable. Blanks in the following
indicate unprinted portions in the copy in this record. The invitation states:
Contract to furnish all labor and --- maximum of
twelve (12) meter reader --- person and vehicles for contract
meter read --- 93 through June 30, 1996, per attached spe---
eet (pages 1-5) which are a part of this cont --- approx.
average number of meter read --- meter/year approx. average
number job miles 150 --- year. Contract will include lead
person --- and cost.
Comments follow: Contract beginning July 1, 1993 --- 1996.
Please submit proposal in triplicate.
“Appendix A to Meter Reading Contract” contains a schedule of rates to be paid during
the successive years of the contract and the following text:
(This in no way guarantees a minimum of hours usage,
meters read, or obligates N.E.S. in any form.)
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“Contract Meter Reader Specifications” contained the following:
8. The contractor will furnish a maximum of
fifteen (15) Contract Meter Readers with twelve (12) Contract
Meter Readers normally being used.
9. N.E.S. does not guarantee any minimum
number of Contract Meter Readers to be used.
----
25. The contract can be terminated without cause
by either party upon thirty (30) days written notice.
The Electric Power Board, governing body of N.E.S. awarded the contract to plaintiff,
and the contract instrument was signed by the Chairman of the Board on May 8, 1993 and by
plaintiff on May 10, 1993.
On May 14, 1993, plaintiff’s president met with three supervisory employees of N.E.S.
Plaintiff asserts that said employees orally promised that, if plaintiff purchased new vehicles for
the meter readers, twelve meter readers would be used every day of the three-year duration of the
contract.
On June 9, 1993, at the request of plaintiff, the General Counsel of N.E.S. wrote plaintiff
as follows:
Dear Ms. Wilson:
It is standard policy of NES that all of its service
contracts state “...NES is not required to assign any amount of
work or any number of projects...”, and further, to have a 30-
day notice of cancellation of the contract.
NES is in the business of distributing electricity used
by its customers. In order to know how much is used, NES
has to have individuals to read these meters. As long as NES
is in this business, the program of reading meters will always
be utilized.
As to the 30-day notice of cancellation, NES reserves
this right in the event the contractor does not fulfill the terms
of the contract.
I hope this clarifies the matter for you.
Plaintiff purchased twelve new vehicles on credit.
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On August 20, 1993, the “meter superintendent” of N.E.S. wrote a letter to plaintiff
calling attention to deficiencies in performance and qualifications of meter readers and
threatening cancellation.
The same supervisor compiled deficiency statistics for the months of July 1993 through
July 1994.
On January 10, 1994, the vice president of construction and maintenance operations of
N.E.S. wrote plaintiff as follows:
In accordance with paragraph XVI of NES Contract #93-94-
081, this letter is the required written notice that NES is
hereby terminating the mutual business contract for meter
reading services.
This business decision is based on convenience rather than
failure to perform per the referenced contract. The current
management at NES is in the process of reorganizing the
meter reading function and as part of this reorganization, the
meter reading is being returned to the control and
performance by permanent NES employees. This proposed
reorganization was announced to the employees on January 5
and 6, 1994.
NES management is making this move as part of the long
range plan to improve the NES public image and increase
productivity. To achieve these goals, it is felt that the return
to meter reading by permanent employees is the best
approach.
This action will in no way affect other contracts currently in
action between NES and your company, nor will it affect your
status as an approved and active vendor under the NES
purchasing policy. I have noted the improvement in the
performance under the referenced contract and your
cooperation and attention to problems is appreciated. If you
need to use NES as a reference in future business
negotiations, I will be glad to write or otherwise communicate
our positive impression of your business performance.
Please contact my office and arrange a meeting to discuss the
terms and timing for phasing out the contract services and
minimizing the impact on the NES customers and the affected
employees. I suggest that this meeting be scheduled for
Friday, January 14, 1994, or after to allow time to evaluate the
best possible transition.
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On February 4, 1994, the same official of N.E.S. wrote plaintiff as follows:
Due to recent announcements and the undetermined effects on
the meter reading function, the action to terminate the above
contract has been rescinded. The purpose of this action is to
keep options open to handle any meter reading contingencies.
Melvin Bell or Tyler Mills will notify you of any needs we
may have under this contract.
Plaintiff insists that N.E.S. hired its employees and refused to train substitutes, yet
insisted that plaintiff hold readers on standby to serve, if needed.
On February 16, 1994, plaintiff filed this suit. On March 2, 1995, the Trial Court granted
summary judgment of dismissal. On October 25, 1995, this Court affirmed the summary
judgment in regard to breach of the written contract or any modification. This former judgment
of this Court is now final and is the “law of the case” precluding any re-examination or revision.
Pierce v. Tharp, 224 Tenn. 328, 457 S.W.2d (1970).
The opinion of this Court in the former appeal reversed the summary judgment on the
issue of estoppel and said:
With respect to the estoppel issue, Stones River’s
president said in an affidavit filed in opposition to the motion
for summary judgment that, on May 14th, 1993, she met with
members of NES’s staff who strongly suggested that Stones
River obtain new vehicles to use in performing the contract.
Specifically, she said, “NES further assured us that we would
have twelve readers every day for the duration of the contract,
if we bought new trucks. Therefore, at the urging of NES we
decided to purchase all new vehicles.” Earlier, when she gave
her deposition, she was asked if NES told her she had to buy
new vehicles. She replied:
No, I don’t think they said you had to
purchase new vehicles, because they couldn’t
say that. I had to -- when the specs called for
properly functioning vehicles, but they said
we needed new vehicles. And they made that
very clear.
----
An action based on estoppel may be brought where the
promises of one party are relied on by another party to his
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detriment. In Foster & Creighton Co. v. Wilson Contracting,
579 S.W.2d 422 (Tenn. App. 1979), this court said:
[W]hen one man by his promise induces
another to change his situation, repudiation of
the promise would amount to a fraud. Where
one makes a promise which the promisor
should reasonably expect to induce action or
forbearance of a definite and substantial
character on the part of the promisee, and
where such promise does in fact induce such
action or forbearance, it is binding if injustice
can be avoided only by enforcement of the
promise. 579 S.W.2d at 427.
We are of the opinion that there are contested facts in
this case that make summary judgment on the estoppel issue
improper. See Byrd v. Hall, 847 S.W.2d 208 (Tenn. 1993).
Therefore, we reverse the judgment below on that point and
remand the cause to the trial court for further proceedings on
the issue of estoppel only. Otherwise, the judgment is
affirmed.
In the cited case of Foster & Creighton Co. v. Wilson Contracting Co., the defendant was
the general contractor and the plaintiff was a subcontractor in improving runways of an airfield.
The plaintiff contracted to do all finish paving, but part of the paving could not be performed
until grading was completed by another subcontractor. The general contractor insisted that the
plaintiff move extensive paving equipment to the job site before grading was complete and
assured plaintiff that the grading would be completed on time to avoid delay in paving. Plaintiff
moved the equipment on the job site early, but the grading was not completed promptly as
promised, and plaintiff suffered extensive damage from the delay. No issue was raised as to the
authority of defendant’s employee to make the promises of prompt grading. This Court affirmed
a judgment for damages and said:
Generally, a promise unaccompanied by a
consideration is unenforceable. 17 C.J.S. Contracts § 71, pp.
748 et seq. However, when one man by his promise induces
another to change his situation, a repudiation of the promise
would amount to a fraud. Where one makes a promise which
the promisor should reasonably expect to induce action or
forbearance of a definite and substantial character on the part
of the promisee, and where such promise does in fact induce
such action or forbearance, it is binding if injustice can be
avoided only by enforcement of the promise. 17 C.J.S.
Contracts § 74, p. 764.
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The same rule has been called the doctrine of
promissory estoppel. In 17 Am. Jur.2d, Contracts, § 89, pp.
431, 432, is found the following text:
“The trend of modern cases is to
extend the rule of estoppel to promissory
statements, where the evidence clearly shows
that the statements were made to induce action
and the promisor was culpable in some
respects. But in order for the doctrine of
promissory estoppel to apply, the promise
which is sought to be enforced must have
induced action of a definite and substantial
character by the promisee. Also, justifiable
reliance and irreparable detriment to the
promisee are necessary factors to enable him
to invoke the doctrine of promissory estoppel.
Generally speaking, the mere fact that a
promisee relies upon a promise made without
other consideration does not impart validity to
what before was void. There must be some
ground for saying that the acts done in reliance
upon the promise were contemplated by the
contract, either impliedly or in terms, as the
conventional inducement, motive, and
equivalent for the promise.”
Defendants represented or promised to plaintiff that
the grading would proceed to completion on a schedule that
would enable plaintiff to begin paving the new grading as
soon as the resurfacing was completed (having been started
on July 1). Defendants knew that plaintiff would rely upon
the representation or promise; plaintiff did indeed rely
thereon; the promise was not kept; and plaintiff suffered
damage thereby.
----
Defendants urged plaintiff to begin sooner than he was
obligated to begin, and promised the grading would be ready.
Plaintiff began work early in reliance upon the promise, the
promise was not fulfilled, and plaintiff was damaged thereby.
Defendants’ collateral promise was made with good
consideration, and it is enforceable.
It is no defense that the true wrongdoer was Scholes,
or that defendants did the best they could to speed the work of
Scholes. The promise was that the grading would be ready.
It was an independent assurance of a condition which
defendants were bound to make good or to indemnify plaintiff
for loss.
In summary, plaintiff is entitled to damages for the
breach of defendants’ promise that:
“You can start on the asphalt and when
you get through with that, we’ll have the rest
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of the job where you can proceed along. So
come on in.”
and not otherwise.
Foster & Creighton Co. v. Wilson Contracting Co. is the authority for the creation of
promissory estoppel. There was no issue in that case as to the authority of those who spoke for
the corporation. In the present case, after the former opinion of this Court, and on remand to the
Trial Court, the issue was made by the defendant, a governmental entity for whom only a
particular body has authority to speak. One dealing with municipal officers, boards or
committees is bound at his peril to take notice of the limitation of their authority. J. A. Kreis &
Co. v. City of Knoxville, 145 Tenn. 297, 237 S.W. 55 (1921). The contract with plaintiff was
approved by the Electric Power Board and signed by its chairman. This was adequate notice to
plaintiff that the power of binding the Nashville Electric Service was reposed in its Board and
was evidenced only by a document signed by its chairman. Without the action of the Board and
its chairman, no other employee of the Board had any authority to bind the Board by contract,
quasi contract or estoppel.
This record contains no evidence that any statement or communication relied upon by
plaintiffs to establish estoppel was authorized by the Nashville Electric Power Board. In this
situation, the verdict and judgment must be set aside and the remaining portion of plaintiff’s suit
must be dismissed. Camurati v. Sutton., 48 Tenn. App. 54, 342 S.W.2d 732 (1961).
The judgment of the Trial Court under review in the present appeal is reversed and the
suit is dismissed. Costs of this appeal are taxed against the plaintiff. The cause is remanded to
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the Trial Court for collection of costs accrued in that court.
REVERSED AND REMANDED.
___________________________________
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
_____________________________
WILLIAM C. KOCH, JR., JUDGE
_____________________________
WALTER W. BUSSART, JUDGE
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