Hanna (John) Nazi v. Jerry's Oil Company Inc.

IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

June 18, 2014 Session

HANNA (JOHN) NAZI, ET AL. V. JERRY’S OIL COMPANY INC.

Appeal from the Circuit Court for Madison County

No. C12289 Nathan B. Pride, Judge

No. W2013-02638-COA-R3-CV - Filed July 18, 2014

In this contract dispute, the parties disagree as to whether the signatory of the contracts may

be personally liable thereon, as well as to whether the contract provides for a fuel surcharge.

We affirm in part, vacate in part, and remand for further proceedings.

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

Part; Vacated in Part; and Remanded

J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J.,

and A NDY D. B ENNETT, J., joined.

Adam C. Crider, Jackson, Tennessee, for the appellant, Jerry’s Oil Co., Inc.

Robert T. Keeton, III, Huntingdon, Tennessee, for the appellee, Hanna (John) Nazi and

Banham (Ben) Nazi.

OPINION

Background

This case arises out of a dispute between Defendant/Counter-Plaintiff/Appellant

Jerry’s Oil Co., Inc. (“Jerry’s Oil”), a fuel supplier, and the Handy Peddler, a retail service

station owned and operated by Plaintiff/Counter-Defendants/Appellees, Hanna (John) Nazi

(“John Nazi”) and/or Banham (Ben) Nazi (“Ben Nazi,” together with John Nazi,

“Appellees”). There is no dispute in this case that the Handy Peddler operates as a sole

proprietorship, rather than a corporation. In the Spring of 2007, John Nazi executed four

separate contracts with Jerry’s Oil in order to purchase fuel and oil for the Handy Peddler:

a Petroleum Purchase Contract, a Security Agreement, a Fuel Supply Agreement, and a

Promissory Note. All of the contracts were prepared by Jerry’s Oil. Of the four contracts

entered into regarding Jerry’s Oil supplying fuel and oil to the Handy Peddler, all were

signed by John Nazi and none indicated that Ben Nazi was in any way involved.

The Petroleum Purchase Contract was executed on March 29, 2007. The introductory

clause of the Petroleum Purchase Contract states that the contract is “by and between Handy

Peddler and Jerry’s Oil Company, Inc.” John Nazi signed his name for Buyer’s

Representative, but indicated “Handy Peddler” thereunder. The Buyer is noted as “John Nazi

Handy Peddler.”

Also on March 29, 2007, John Nazi executed a Security Agreement on behalf of the

Handy Peddler in favor of Jerry’s Oil. The agreement provided that the Handy Peddler

granted Jerry’s Oil a security interest in the Handy Peddler’s furniture, fixtures, equipment,

inventory, machinery, and other items. On the Security Agreement, John Nazi signed his

name, but thereunder indicated that his title was “Manager.”

A few days later, on April 2, 2007, John Nazi executed a Fuel Supply Agreement. The

alleged breach of this agreement is the central issue in this case. The Fuel Supply Agreement

required the “Retailer” to pay Jerry’s Oil for various obligations under the contract. The

Retailer was defined by the contract as the Handy Peddler. On the signature block at the

conclusion of the document, John Nazi executed the agreement by only signing “John Nazi.”

Although the Fuel Supply Agreement included a space for the signatory to designate his or

her title, this space was left blank by John Nazi. Further, on April 20, 2007, John Nazi also

executed a Promissory Note in favor of Jerry’s Oil.1 The Promissory Note specifically

identified John Nazi “doing business as” the Handy Peddler, without any designation or title.

Under the Fuel Supply Agreement, Jerry’s Oil agreed to supply Handy Peddler with

fuel on an exclusive basis, and in exchange the Handy Peddler agreed to pay a price

calculated pursuant to “Exhibit B.” “Exhibit B,” in turn, provides that gasoline cost would

constitute the “BP rack price” plus a $0.01 markup. The diesel cost was similarly calculated

as a $0.00 markup over the “BP rack price.” Exhibit B further provides that the “rack price”

1

The obligations pursuant to the Promissory Note are not at issue in this appeal. The

Promissory Note is only at issue as evidence that relates to John Nazi’s personal liability under the Fuel

Supply Agreement.

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is defined as Jerry’s Oil’s “actual cost, from time-to-time, for Fuel according to [Jerry’s

Oil’s] most recent invoice for the appropriate grade of Fuel plus applicable taxes and

freight.” The agreement also set forth conditions for the Handy Peddler to become and

remain a BP2 -branded station and for earning potential rebates and incentive payments.

On June 29, 2012, Jerry’s Oil filed suit in the General Sessions Court of Madison

County against John Nazi, doing business as the Handy Peddler, for non-payment on

outstanding fuel invoices pursuant to the Fuel Supply Agreement. Counsel for John Nazi then

made it known that Ben Nazi, John Nazi’s brother, was the sole proprietor of the Handy

Peddler. An Amended Civil Summons was filed on August 28, 2012, in which Jerry’s Oil

added Ben Nazi as a defendant. The action alleged that John Nazi and/or Ben Nazi owned

and operated Handy Peddler, and Jerry’s Oil sought a judgment in the amount of $25,000

plus interest and attorney’s fees. Following trial, judgment was entered against both John and

Ben in the amount of $24,999.99, plus attorney’s fees and court costs.

On November 9, 2012, Appellees appealed the judgment to Circuit Court and also

filed a Complaint against Jerry’s Oil for breach of contract, alleging that Jerry’s Oil: (1)

failed to provide earned rebates; (2) failed to provide earned incentives; and (3) charged a

fuel surcharge on deliveries not authorized under the agreement.

Jerry’s Oil filed an Answer denying the allegations and asserting that the claims are

barred, in part, by the statute of limitations. Jerry’s Oil also brought a Counter-Claim against

Defendants for: (1) non-payment of outstanding fuel invoices; (2) lost profits on the

remainder of the term of the agreement: (3) contractual indemnification under the agreement

for failure of Handy Peddler to remain a BP-branded station; (4) punitive damages based on

Handy Peddler holding out to the public that it was a BP-branded station; and (5) possession

of personal property under the Security Agreement.

A bench trial was held on November 1, 2013. Specifically at issue in this appeal are

the questions of whether John Nazi should be personally liable for breach of the Fuel Supply

Agreement and whether fuel surcharges charged by Jerry’s Oil throughout the duration of the

parties’ business relationship were authorized by the parties’ contracts. With regard to the

issue of John Nazi’s individual liability, Appellees contend that John Nazi was merely

serving as a manager for Ben Nazi, the true proprietor of the Handy Peddler, and that, as

such, no personal liability may attach to John Nazi. In contrast, Jerry’s Oil focused on the

parties’ contracts, as discussed above, which Jerry’s Oil contended shows that John Nazi was

the proprietor of the Handy Peddler.

2

BP is sometimes referred to as British Petroleum.

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The parties also disagreed as to whether a fuel surcharge was authorized by the

contract. The term “fuel surcharge” is not found in any of the parties’ contracts. Both John

Nazi and Ben Nazi denied that they had contracted to pay a fuel surcharge. However, the

Appellees admitted that they noticed the fuel surcharge during the performance of the

contract, but decided not to dispute the charge until this lawsuit was filed. Another witness,

Alan Kee, a dispatcher of Espey Oil Company, when asked whether a fuel surcharge was

“industry standard,” replied that “we [i.e., Espey Oil Company] don’t charge fuel surcharge.”

Instead, he agreed that his company “just charge[s] freight and adjust[s] it accordingly.”

Moreover, Robert Gilliam, the sales manager in charge of the Handy Peddler’s accounts for

Jerry’s Oil during the time period at issue, answered in the negative when asked whether “a

fuel surcharge was ever contracted with the Handy Peddler for delivery of fuel?” However,

Jerry Wilhite, the owner of Jerry’s Oil, testified that the term “freight” as used in Exhibit B,

necessarily includes a fuel surcharge, which takes into account the rising cost of

transportation of the fuel. According to Mr. Wilhite, the authorized freight charge was

calculated as the sum of two related charges: the “base freight charge” of $0.05 per gallon

of fuel purchased and a “fuel surcharge” calculated by multiplying the base freight charge

by a figure generated weekly by the United States Department of Energy. In the invoices sent

to the Handy Peddler, the charges were separated. Mr. Wilhite testified that this charge was

customary in the industry.

After Jerry’s Oil presented its case, John Nazi moved for a directed verdict (more

properly termed an involuntary dismissal in a bench trial, discussed in detail, infra) on the

issue of John Nazi’s individual liability as an owner of the Handy Peddler. The court found

that Jerry’s Oil failed to prove its case against John Nazi, individually, and dismissed all

claims as to John Nazi. In ruling on this issue, the court stated that there was nothing

indicating that John Nazi was acting as an owner from 2011 through 2012, when the alleged

breach occurred. Thereafter, John Nazi voluntarily dismissed his claims against Jerry’s Oil.

At the close of trial, the court entered judgment in favor of Jerry’s Oil on its breach

of contract claim for non-payment of the fuel invoices and lost profits. The court denied

Jerry’s Oil’s claim for indemnification for any charges that may have been owed to BP. With

respect to Ben Nazi’s claims, the court found in favor of Jerry’s Oil on the rebates and

incentives, but ruled for Ben Nazi on the issue of the fuel surcharge, concluding that such a

charge was not contemplated in the parties’ contract. After offsetting damages awarded to

Ben Nazi, the final judgment was entered against Ben Nazi totaling $99,875.71, plus court

costs. Written orders on the dismissal of the claims against John Nazi and the remaining

issues were entered on November 8, 2013, and November 15, 2013, respectively. The order

dismissing the claims against John Nazi also noted that the claims asserted by John Nazi had

been voluntarily dismissed. While this appeal was pending, the trial court entered an order

granting Jerry’s Oil’s claims for possession of personal property pursuant to the Security

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Agreement and denying any claims for punitive damages. Jerry’s Oil appealed.

Issues Presented

Only two issues are presented in this appeal, as stated by Jerry’s Oil in its brief:

1. Whether the trial court erred by granting John Nazi’s

Motion for Directed Verdict on Jerry’s Oil’s claims for

damages against John Nazi individually.

2. Whether the trial court erred by finding for John and Ben

Nazi on the issue of Jerry’s Oil’s liability for breach of

contract related to the fuel surcharge.

3.

Analysis

Preliminary Matters

Before we can consider the substantive issues in this case, we must first discuss

certain preliminary matters that make resolution of the issues in this appeal more onerous.

We begin first with Jerry’s Oil’s argument regarding the dismissal of the claims against John

Nazi. Specifically, Jerry’s Oil argues that the trial court improperly granted a directed verdict

in John Nazi’s favor because the trial court was required to take “the strongest legitimate

view of the evidence” and disregard “all countervailing evidence.”

Jerry’s Oil’s argument on this issue is erroneous. Here, John Nazi moved for a

directed verdict at the close of Jerry’s Oil’s proof. However, a motion for a directed verdict

is not a proper motion in a bench trial. See Burton v. Warren Farmers Co-op., 129 S.W.3d

513, 520 (Tenn. Ct. App. 2002). Instead, a motion to dismiss a case at the close of plaintiff’s

proof in a bench trial is governed by Rule 41.02 of the Tennessee Rules of Civil Procedure.3

3

Rule 41.02(2) of the Tennessee Rules of Civil Procedure provides:

After the plaintiff in an action tried by the court without a jury has

completed the presentation of plaintiffs evidence, the defendant, without

waiving the right to offer evidence in the event the motion is not granted,

may move for dismissal on the ground that upon the facts and the law the

plaintiff has shown no right to relief. The court shall reserve ruling until all

parties alleging fault against any other party have presented their respective

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As this Court has previously explained:

A Tenn. R. Civ. P. 41.02(2) motion for involuntary

dismissal differs markedly from a Tenn. R. Civ. P. 50 motion for

a directed verdict. The most obvious, yet most overlooked,

difference is that motions for directed verdicts have no place in

bench trials, while Tenn. R. Civ. P. 41.02(2) motions have no

place in jury trials. Cunningham v. Shelton Sec. Serv., Inc., 46

S.W.3d 131, 135 n.1 (Tenn. 2001); City of Columbia v. C.F.W.

Constr. Co., 557 S.W.2d 734, 740 (Tenn. 1977); Scott v. Pulley,

705 S.W.2d 666, 672 (Tenn. Ct. App. 1985). Beyond this

obvious procedural difference, motions for involuntary dismissal

serve a different purpose than motions for directed verdict and

require the courts to employ a substantially different method of

analysis.

A Tenn. R. Civ. P. 50 motion for directed verdict

provides a vehicle for deciding questions of law. The question

presented is whether the plaintiff has presented sufficient

evidence to create an issue of fact for the jury to decide. Spann

v. Abraham, 36 S.W.3d 452, 462 (Tenn. Ct. App. 1999);

Ingram v. Earthman, 993 S.W.2d 611, 626 (Tenn. Ct. App.

1998). The courts do not weigh the evidence when they answer

this question, Conatser v. Clarksville Coca–Cola Bottling Co.,

920 S.W.2d 646, 647 (Tenn. 1995), nor do they evaluate the

credibility of the witnesses. Richardson v. Miller, 44 S.W.3d 1,

30 (Tenn. Ct. App. 2000). Rather, they review the evidence in

the light most favorable to the non-moving party, give the

non-moving party the benefit of all reasonable inferences, and

disregard all the evidence contrary to the non-moving party’s

position. Alexander v. Armentrout, 24 S.W.3d 267, 271 (Tenn.

2000); Addaman v. Lanford, 46 S.W.3d 199, 203 (Tenn. Ct.

App. 2000).

proof-in-chief. The court as trier of the facts may then determine them and

render judgment against the plaintiff or may decline to render any judgment

until the close of all the evidence. If the court grants the motion for

involuntary dismissal, the court shall find the facts specially and shall

state separately its conclusions of law and direct the entry of the

appropriate judgment.

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***

Motions for involuntary dismissal pursuant to Tenn. R.

Civ. P. 41.02(2) require the courts to engage in an entirely

different analysis. These motions do not raise questions of law

but rather challenge the sufficiency of the plaintiff’s proof.

Smith v. Inman Realty Co., 846 S.W.2d 819, 821 (Tenn. Ct.

App. 1992); Merriman v. Smith, 599 S.W.2d 548, 560 (Tenn.

Ct. App. 1979). A claim may be dismissed pursuant to a Tenn.

R. Civ. P. 41.02(2) motion to dismiss if, based on the law and

the evidence, the plaintiff has failed to demonstrate a right to the

relief it is seeking. City of Columbia v. C.F.W. Constr. Co., 557

S.W.2d at 740. Motions under Tenn. R. Civ. P. 41.02(2) require

less certainty than motions for directed verdict. Smith v. Inman

Realty Co., 846 S.W.2d at 822.

Burton, 129 S.W.3d at 520.

In similar cases wherein a defendant has moved for a directed verdict in a bench trial,

this Court has construed the motion as one for involuntary dismissal pursuant to Rule

41.02(2). See, e.g., Kathryne B.F. v. Michael B., No. W2013-01757-COA-R3-CV, 2014

WL 992110, at *3 n.2 (Tenn. Ct. App. March 13, 2014); In re Adoption of Jordan F.J., No.

W2013-00427-COA-R3-PT, 2013 WL 6118416, * (Tenn. Ct. App. Nov. 20, 2013); Wilson

v. Monroe County, 411 S.W.3d 431, 438–39 (Tenn. Ct. App. 2013). Accordingly, despite

Jerry’s Oil’s assertion that this Court must give the strongest legitimate view to its evidence

and disregard all countervailing proof, we review the trial court’s decision to grant an

involuntary dismissal under the far less stringent standard outlined in Rule 13 of the

Tennessee Rules of Appellate Procedure.4 As explained by this Court:

[On appeal] [t]his court uses the familiar Tenn. R. App. P. 13(d)

4

Rule 13 of the Tennessee Rules of Appellate Procedure provides, in pertinent part:

Unless otherwise required by statute, review of findings of fact by the trial

court in civil actions shall be de novo upon the record of the trial court,

accompanied by a presumption of the correctness of the finding, unless the

preponderance of the evidence is otherwise.

Tenn. R. App. P. 13(d).

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standard to review a trial court’s disposition of a Tenn. R. Civ.

P. 41.02(2) motion because the trial court has used the same

reasoning to dispose of the motion that it would have used to

make a final decision at the close of all the evidence. Thus, we

must review the record on appeal de novo with a presumption

that the trial court’s findings are correct. We will affirm the trial

court’s decision unless the evidence preponderates against the

trial court’s factual determinations or unless the trial court has

committed an error of law affecting the outcome of the case. We

give great weight to the trial court’s assessment of the evidence

because the trial court is in a much better position to evaluate

the credibility of the witnesses.

Wilson, 411 S.W.3d at 439 (quoting Burton, 129 S.W.3d at 521). Thus, this Court will

review the trial court’s decision to grant an involuntary dismissal under the same standard

applicable for factual findings and legal conclusions made at the conclusion of a bench trial.

The same standard will apply to the question of whether the trial court properly granted Ben

Nazi damages for the fuel surcharge.

Having determined the proper standard for this Court to review the trial court’s

decision to dismiss the claims against John Nazi, we are now faced with the question of

whether the trial properly granted the involuntary dismissal. Our review, however, is again

constrained by the fact that the trial court’s order granting the dismissal contains no findings

of fact or conclusions of law, nor are any of the trial court’s oral pronouncements

incorporated into the written order by reference. See Alexander v. JB Partners, 380 S.W.3d

772, 777 (Tenn. Ct. App. 2011) (“It is well settled, however, that a court speaks through its

orders and not through the transcript.”) (citing Steppach v. Thomas, 346 S.W.3d 488, 522

(Tenn. Ct. App. 2011)). Further, the order subsequently entered on the remaining issues in

this case also fails to contain any findings of fact or conclusions of law. These omissions are

inconsistent with the Tennessee Rules of Civil Procedure.

First, we consider the trial court’s order grant of the involuntary dismissal. The plain

language of Rule 41.02 requires that: “If the court grants the motion for involuntary

dismissal, the court shall find the facts specially and shall state separately its conclusions of

law and direct the entry of the appropriate judgment.” As previously discussed, nothing in

the trial court’s written order includes findings of fact or conclusions of law in compliance

with Rule 41.02. Rule 41.02’s requirement is consistent with the Tennessee Rules of Civil

Procedure’s requirement with regard to bench trials as a whole. Indeed, Rule 52.01 of the

Tennessee Rules of Civil Procedure provides, in pertinent part:

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In all actions tried upon the facts without a jury, the court shall

find the facts specially and shall state separately its

conclusions of law and direct the entry of the appropriate

judgment. The findings of a master, to the extent that the court

adopts them, shall be considered as the findings of the court. If

an opinion or memorandum of decision is filed, it will be

sufficient if the findings of fact and conclusions of law appear

therein.

Id. (emphasis added). Prior to July 1, 2009, trial courts were only required to make specific

findings of fact and conclusions of law “upon request made by any party prior to the entry

of judgment.” See Poole v. Union Planters Bank N.A., No. W2009-01507-COA-R3-CV,

337 S.W.3d 771, 791 (Tenn. Ct. App. 2010) (noting the amendment). However, the current

version of Rule 52.01 requires the court to make these findings regardless of a request by

either party. Id. Thus, neither the November 8, 2013 order granting the involuntary dismissal

or the November 15, 2013 order disposing of the remaining issues in the case comport with

Rule 52.01.

This Court has previously held that the requirement to make findings of fact and

conclusions of law is “not a mere technicality.” In re K.H., No. W2008-01144-COA-R3-PT,

2009 WL 1362314, at *8 (Tenn. Ct. App. May 15, 2009). Instead, the requirement serves the

important purpose of “facilitat[ing] appellate review and promot[ing] the just and speedy

resolution of appeals.” Id.; White v. Moody, 171 S.W.3d 187, 191 (Tenn. Ct. App. 2004);

Bruce v. Bruce, 801 S.W.2d 102, 104 (Tenn. Ct. App. 1990). “Without such findings and

conclusions, this court is left to wonder on what basis the court reached its ultimate

decision.” In re K.H., 2009 WL 1362314, at *8 (quoting In re M.E.W., No.

M2003-01739-COA-R3-PT, 2004 WL 865840, at *19 (Tenn. Ct. App. April 21, 2004)).

Generally, the appropriate remedy when a trial court fails to make appropriate findings of

fact and conclusions of law is to “vacate the trial court’s judgment and remand the cause to

the trial court for written findings of fact and conclusions of law.” Lake v. Haynes, No.

W2010-00294-COA-R3-CV, 2011 WL 2361563, at *1 (Tenn. Ct. App. June 9, 2011).

However, this Court has indicated that we may “soldier on” with our review despite the trial

court’s failure to make sufficient findings of fact and conclusions of law, in certain limited

circumstances:

On occasion, when a trial judge fails to make findings of fact

and conclusions of law, the appellate court “may ‘soldier on’

when the case involves only a clear legal issue, or when the

court’s decision is ‘readily ascertainable.’” Hanson v. J.C.

Hobbs Co., Inc., No. W2011-02523-COA-R3-CV, 2012 WL

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5873582, at *10 (Tenn. Ct. App. Nov. 21, 2012) (quoting

Simpson v. Fowler, No. W2011-02112-COA-R3-CV, 2012 WL

3675321, at *4 (Tenn. Ct. App. Aug. 28, 2012)).

Pandey v. Shrivastava, No. W2012-00059-COA-R3-CV, 2013 WL 657799, at *5 (Tenn. Ct.

App. Feb. 22, 2013). Here, although they are not incorporated into either of the two orders

at issue,5 the trial court did make some findings of fact with regard to the two issues raised

in this appeal: the dismissal of the claims against John Nazi, and the award of damages for

the allegedly improperly charged fuel surcharge. Thus, the trial court’s decisions on these

specific issues are “readily ascertainable.” Pandey, 2013 WL 657799, at *5. Accordingly,

we will endeavor to consider the substantive issues raised in this appeal despite the lack of

written findings of fact and conclusions of law in the orders before us.

Involuntary Dismissal

Turning to the substantive issues in this case, Jerry’s Oil first argues that the trial court

erred in dismissing the claims against John Nazi in his individual capacity. This issue is

somewhat unusual because it involves a sole proprietorship rather than a partnership,

corporation, or other limited liability entity. Accordingly, a brief discussion of the sole

proprietorship is helpful to the resolution of this issue. According to the Tennessee Practice

Series:

The individual proprietorship or sole proprietorship—the

two terms being interchangeable—is the oldest, simplest, and

most prevalent form of business enterprise. Rules of contract,

torts, property, and agency law loom large in its legal character.

An individual may carry on business as sole proprietor.

Such assistance as is needed in the way of service may be

procured by hiring others, with whom the proprietor enters into

the relation of master and servant, or principal and agent. . . . If

there are losses, the proprietor must bear them alone, to the

extent of business and personal resources. If there are profits,

the proprietor does not have to share them, absent any

agreement to compensate employees, the landlord, or the money

lender with a share of profits in lieu of fixed wages, rent, or

interest.

In short, the individual proprietor is the "boss,"

personally employing others as employees or agents. The

5

We note that both orders were prepared by counsel, rather than drafted by the trial court.

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business contracts—those made personally or by agents

within their actual or apparent authority or, when made

beyond the agency power, ratified—are the proprietor’s

contracts.

* * *

The relation of master and servant or principal and agent or

employer and employee exists between the proprietor and

anyone else associated with the enterprise. The proprietor retains

all the profits of the business and likewise must bear all the

losses, and remains fully liable for any business debts even

though the business is dissolved.

14A Tenn. Prac., Legal Forms Business Organizations § 12:1 (emphasis added). In this case,

John Nazi argues that he was merely an agent of his brother Ben Nazi, the true owner of the

Handy Peddler, and that as such, personal liability for the fuel supply contract cannot attach

to him.6

In granting the dismissal, the trial court stated:

We have conflicting testimony in regard to Mr. John

Nazi’s relationship to the business. It’s clear that when the

contracts were first signed back in March of 2007 he said that

Ben Nazi was sick and he was acting on behalf of his brother as

agent for him, and I don’t think there’s nothing that keeps him

from acting as that. Whether he knew he should have put agent

or so forth on there, I don’t know. But he signed some

documents without saying he was owner, some documents

saying he was manager. He just said Handy Peddler. He signed

John Nazi. Didn’t say slash owner or anything like that.

The document that he did sign that said owner was not

prepared by him, but prepared, in fact, by Jerry’s Oil Company.

According to his testimony, Mr. Gilliam [a sales manager at

Jerry’s Oil] . . . prepared those documents. But the relevant

period here is what happened during the period that the invoice

was unpaid was determined, and that was from 2011 and 2012

6

On appeal, there is no dispute that Ben Nazi would be personally liable for any liability

that attaches to the Handy Peddler on the fuel contract.

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when he said that he was no longer involved with the business,

started his own business, went to New York and came back. So

for that time period I have nothing that indicates that he was

acting as owner at that time. So I’m going to dismiss Mr. John

Nazi from the lawsuit as being a party defendant . . . .

Having considered the evidence in the record, we agree with the trial court’s conclusion that

there was no evidence that John Nazi was involved in the Handy Peddler as of 2011 and

2012, when the alleged breach occurred. However, unlike the trial court, we do not agree that

this fact ends the inquiry as to whether John Nazi may be personally liable on the fuel

contract. Instead, that question must be determined by a close examination of the contract

upon which this breach of contract case is predicated. See 84 Lumber Co. v. Smith, 356

S.W.3d 380, 382–83 (Tenn. 2011). Further, there is no evidence in the record that the

contracts were amended prior to the alleged breaches in 2011 and/or 2012. Thus, the relevant

time period is when the contracts at issue were signed, rather than when the alleged breach

occurred. Indeed, it is well-settled that the intent of the contracting parties at the time of

executing the agreement should govern. See Planters Gin Co. v. Fed. Compress &

Warehouse Co., Inc., 78 S.W.3d 885, 890 (Tenn. 2002) (emphasis added). For these reasons,

as fully explained below, we must vacate the trial court’s judgment and remand for

reconsideration.

In determining when an individual is liable on a business contract, our Supreme Court

has offered some guidance:

In most cases, a representative who signs a contract is not

personally bound to the contract. See Dominion Bank of Middle

Tenn. v. Crane, 843 S.W.2d 14, 19 (Tenn. Ct. App. 1992);

Anderson v. Davis, 34 Tenn. App. 116, 234 S.W.2d 368,

369–70 (1950). A representative who signs a contract may be

personally bound, however, when the clear intent of the contract

is to bind the representative. See Lazarov v. Klyce, 195 Tenn.

27, 255 S.W.2d 11, 14 (1953) (citing Pope v. Landy, 1 A.2d 589

(Del. Super. Ct. 1938)) (“Whether or not a particular

contract shows a clear intent that one of the parties was

contracting as an individual or in a representative capacity,

must be determined from the contract itself.”).

When we interpret a contract, our role is to ascertain the

intention of the parties. Guiliano v. Cleo, Inc., 995 S.W.2d 88,

95 (Tenn. 1999). The intention of the parties is based on the

ordinary meaning of the language contained within the four

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corners of the contract. Kiser v. Wolfe, 353 S.W.3d 741, 747

(Tenn. 2011); see Planters Gin Co. v. Fed. Compress &

Warehouse Co., 78 S.W.3d 885, 889–90 (Tenn. 2002). The

interpretation of a contract is a matter of law, which we review

de novo with no presumption of correctness. Barnes v. Barnes,

193 S.W.3d 495, 498 (Tenn. 2006).

84 Lumber Co. v. Smith, 356 S.W.3d 380, 382–83 (Tenn. 2011) (emphasis added). In 84

Lumber, the Tennessee Supreme Court considered “whether [a corporation’s president’s]

signature on the credit application can bind him in both a representative capacity and as a

guarantor to the contract or whether he can be bound as a guarantor only if he signed the

application a second time in his individual capacity.” Id. at 383. The president signed his

name to the contract and clearly indicated that he was signing as a representative of the

corporation. The Court held that a representative of a corporation may sign a contract in both

a representative capacity and an individual capacity. Id.7

In making its decision that the president had signed in both capacities, the Court

considered the plain language of the contract, which provided that: “I DO

UNCONDITIONALLY . . . PERSONALLY GUARANTEE THIS CREDIT ACCOUNT

AND PAYMENTS OF ANY AND ALL AMOUNTS DUE BY THE ABOVE BUSINESS.”

Id. The Court concluded that the above language “establishes that the person signing the

application agrees to serve as the guarantor of the account established for the benefit of the

‘above business.’” Id. Further, the Court noted that the above language:

[C]learly distinguishes between “I,” the person signing the

contract, and the “above business.” The contract also contains

terms and conditions that apply to both the “applicant” and the

“personal guarantor.” These provisions demonstrate that the

parties intended that the individual who signed the contract

agreed to be personally responsible for amounts owed on the

contract.

Id. (footnote omitted). Thus, the Court held that the corporation’s president could be

personally liable on the guaranty, regardless of the fact that the president clearly indicated

that he was signing the contract in a representative capacity. Id. at 383–84.

The situation presented in this case is not analogous to the situation in 84 Lumber.

7

There appears to have been no dispute that the defendant president in 84 Lumber could and

did sign the contract in a representative capacity, binding the corporation of which he was president.

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First, 84 Lumber concerned a contract entered into by a corporation, rather than a sole

proprietorship. Further, the issue in 84 Lumber was with regard to a personal guaranty on

the contract, rather than the obligations in the underlying contract. In contrast, the only issue

raised in this appeal concerns the obligation to pay the underlying contract.8 Further, the

contract at issue requires that all payment obligations under the contract apply to the Retailer.

The Retailer is specifically defined as the Handy Peddler. Nothing in the contracts indicate

any intent to bind John Nazi personally, except through his alleged role as the sole proprietor

of the Handy Peddler. Thus, unlike in 84 Lumber, the contracts do not unambiguously

illustrate the clear intent to bind John Nazi in his individual capacity. See id. (requiring, in

order to impose personal liability on a representative of a corporation, “the clear intent . . .

to bind the representative” in an individual capacity).

The question remains, however, whether the contracts indicate that John Nazi is, in

fact, the sole proprietor of the Handy Peddler, or if he is signing as a representative of

another individual. The parties have cited no law with respect to the question of whether an

individual signing a contract is the actual owner of a sole proprietorship, when there has been

an allegation that another individual is the actual owner. Based on our review of the contracts

at issue, we conclude that they are ambiguous as to whether John Nazi was signing the

contracts as the owner of the Handy Peddler, or merely as its manager/representative.

Further, we conclude that other evidence in the record on this issue is also conflicting.

As previously discussed, in order to determine the parties’ intent, we look to the

“ordinary meaning of the language contained within the four corners of the contract.” 84

Lumber Co., 356 S.W.3d at 383. Only when there is an ambiguity in the language of the

contract, will this Court consider extrinsic evidence as to its meaning. Cummings Inc. v.

Dorgan, 320 S.W.3d 316, 333 (Tenn. Ct. App. 2009) (“ If a contract is ambiguous, then a

court may look beyond the four corners of the document and consider extrinsic evidence in

order to determine the parties’ intention[.]”). Thus, we begin first with a review of the

language contained in the contracts at issue.

The breach of contract claims in this case concern the Fuel Supply Agreement signed

by John Nazi on April 2, 2007. The Fuel Supply Agreement specifically states that it is

between Jerry’s Oil and the Handy Peddler, which is termed the “Retailer” throughout the

contract. The Retailer is the only party mentioned with regard to the obligation to pay Jerry’s

Oil under the contract. Further, the Fuel Supply Agreement notes that all correspondence

8

The contract does contain terms relating to a guaranty on the contract. However, neither

John Nazi nor Ben Nazi signed the contract as guarantor, nor is that term otherwise defined in the contract.

Further, Jerry’s Oil did not appear to argue in the trial court that John Nazi was liable as a guarantor, but only

that he was liable as the sole proprietor of the Handy Peddler.

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pursuant to the contract should be sent “c/o” John Nazi. Thus, the only person connected in

anyway with the Handy Peddler in the Fuel Supply Agreement is John Nazi. Unlike the

situation presented wherein a representative is signing a contract on behalf of a corporation,

this situation involves a sole proprietorship. A sole proprietorship necessarily involves

individual liability. See Dexter Ridge Shopping Center, LLC v. Little, 358 S.W.3d 597, 608

n.8 (Tenn. Ct. App. 2010) (noting that because the business was a sole proprietorship, the

question was whether its owner/proprietor was liable, as the business did not constitute a

“separate legal entity”).

The Fuel Supply Agreement also includes a space wherein the signatory on behalf of

the Retailer may indicate his or her title with the company. John Nazi did not take advantage

of this space to indicate that he was not the owner of the Handy Peddler. Thus, nothing in the

Fuel Supply Agreement indicates that John Nazi was signing the contract as a representative

of another sole proprietor. Ben Nazi’s name is not mentioned in the contract, nor is there any

other indication that John Nazi is acting on behalf of another person. Because John Nazi is

claiming that he was only a representative of the true owner of the Handy Peddler, this

situation is similar to the situation wherein a corporate representative signs a contract without

designating that he or she is merely a representative. For example, in Lazarov v. Klyce, 31

Beeler 27, 255 S.W.2d 11 (Tenn. 1953), the Tennessee Supreme Court held that: “[A]n

officer of a corporation who signs, without adding any words to his signature . . . cannot

show by parol evidence that a corporate liability was intended.” Id. at 13 (citing 8 Am.Jur.,

Bills & Notes, §500, p. 229). In Lazarov, one signatory of the contract indicated that he was

signing on behalf of the corporation. The defendant signatory included no such notation next

to his signature. Lazarov, 255 S.W.2d at 12–13. Under those circumstances, the Court held

that the defendant signatory could not submit parol evidence to show that he was merely

signing in a representative capacity. A similar situation recently occurred in Mudd v.

Goostree, No. M2012-00957-COA-R3-CV, 2013 WL 1402157 (Tenn. Ct. App. April 5,

2013), wherein a corporate representative signed a lease, under the space marked “Tenant,”

without any indication that he was signing in a representative capacity. Id. at *1. The

Tennessee Court of Appeals held that the representative could be personally liable for

damages as a result of the breach of lease, and that no parol evidence was admissible to show

that he was only signing in a representative capacity. Id. at *2. As explained by the Court:

In the case before us, however, in the space provided for

Tenant’s name and signature, Appellant printed his name and,

on the line preceded by the word “By”, signed his name. This is

a clear and unambiguous designation of Appellant as the Tenant

on the lease agreement. Only if a contract is ambiguous does a

court look beyond the four corners of the document and consider

evidence of the parties’ intentions.

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Id. (citing Cummings, Inc. v. Dorgan, 320 S.W.3d 316, 333 (Tenn. Ct. App. 2009)). Thus,

the failure to indicate that a party is signing in a representative capacity was held fatal to a

claim that the individual was merely signing in a representative capacity. The Fuel Supply

Agreement, however, is not the only contract entered into by the parties with regard to this

contract. The parties also entered into a Promissory Note, a contract to purchase petroleum

products, and a Security Agreement around the same time as the Fuel Supply Agreement. See

11 Williston on Contracts § 30:25 (4th ed.) (“Generally, all writings which are part of the

same transaction are interpreted together.”). The Petroleum Purchase Contract indicates that

John Nazi is the “Buyer’s Representative;” however, there is no indication that this means

that John Nazi is merely an agent of Ben Nazi, the alleged true sole proprietor of the Handy

Peddler. Because the Handy Peddler is a sole proprietorship, it essentially is its

representative. See 18 C.J.S. Corporations § 4 (“A sole proprietorship has no separate legal

existence or identity apart from the sole proprietor.”); see also Ferguson v. Jenkins, 204

S.W.3d 779, 786 (Tenn. Ct. App. 2006) (noting that with regard to a sole proprietorship, the

owner and the business are “one and the same”); Koch v. Koch, 874 S.W.2d 571, 576 (Tenn.

Ct. App. 1993) (“[A] sole proprietorship is nothing more than an individual conducting a

business for profit, which in turn becomes his income.”). The only individual mentioned in

any of these contracts is John Nazi. Further, neither the Fuel Supply Agreement nor the

Petroleum Purchase Agreement indicate that John Nazi is signing on behalf of another

proprietor. Therefore, following the reasoning in Lazarov and Mudd, these contracts

unambiguously indicate the John Nazi is the proprietor of the Handy Peddler.

Further, the Promissory Note indicates that John Nazi is “doing business as” the

Handy Peddler. However, the Promissory Note is again signed by John Nazi without any

indication that the signature is representative of another individual. In Simpson Operating

Co., Inc. v. Schwotzer, No. 1362, 1990 WL 130829 (Tenn. Ct. App. 1990), perm. app.

denied (Tenn. Dec. 31, 1990), this Court was faced with another question of whether an

individual who signed a lease, signed in his personal or representative capacity. Id. at *1. The

Court of Appeals concluded that the defendant signed in his personal capacity, despite the

fact that the preamble to the lease indicated that the tenant was “Eric H. Schwotzer d/b/a 9

Gem Parlor, Inc.” Id. According to the Court: “The words ‘doing business as” denote a trade

name, or fictitious name, and is merely descriptive of [the defendant] or his business.” Id.

Because Mr. Schwotzer signed the lease without indicating that he was signing merely as a

representative of the business entity, the Court held that he could be personally liable. Id.

Thus, the Promissory Note also unambiguously indicates that John Nazi was not signing on

behalf of another proprietor.

9

“D/b/a” refers to “doing business as.”

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In contrast, however, the March 29, 2007 Security Agreement10 does indicate that

John Nazi’s title is merely “manager.” John Nazi argues that this, as well as his failure to

expressly indicate that he was the owner of the Handy Peddler anywhere in the other

contracts, conclusively shows that he was merely a manager of the Handy Peddler and not

its proprietor. We respectfully disagree. In another case wherein only portions of a contract

indicated that the signatories were signing as representatives, while other portions of the

contracts indicated that the signatories were signing as individuals, the Tennessee Supreme

Court concluded that an ambiguity existed justifying the admission of parol evidence. In

Wilson v. Clinton Chapel African M.E. Zion Church, 138 Tenn. 398, 198 S.W 244 (Tenn.

1917), the Tennessee Supreme Court held that an ambiguity existed as to the personal

liability of the signatories, when on the bottom of the contract, a note was handwritten that

the signatories were “trustees A. M. E. Zion Church.” Id. at 246. Thus, the Court vacated the

judgment and remanded for the trial court to consider parol evidence regarding whether the

signatories were signing the contract in a representative capacity. Id.; see also Lazarov, 255

S.W.2d at 13 (citing Wilson with approval).

We likewise conclude that John Nazi’s decision to sign the different contracts

pertinent to this transaction in different ways creates an ambiguity as to the proprietor of the

Handy Peddler. Thus, the trial court was entitled to consider other evidence to determine

whether John Nazi was holding himself out as Handy Peddler’s owner. As explained by this

Court:

[W]here a contractual provision is ambiguous, i.e., susceptible

to more than one reasonable interpretation, the parties’ intent

cannot be determined by a literal interpretation of the language.

In that situation, courts must resort to other rules of

construction, and only if ambiguity remains after application of

the pertinent rules does the legal meaning of the contract

become a question of fact. Then, the court must examine other

evidence to ascertain that intention. Such evidence might

include the negotiations leading up to the contract, the course of

conduct the parties followed as they performed the contract, and

any utterances of the parties that might shed light upon their

intentions.

10

Although the trial transcript clearly reflects that the Security Agreement was admitted as an

exhibit, the Security Agreement is not included in the record from the trial. The Security Agreement,

however, is included in Jerry’s Oil’s Answer to the Complaint, which was filed as a supplement to the

record in this Court.

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Cummings, 320 S.W.3d at 333 (quoting Stephenson v. The Third Co., M2002-02082-COA-

R3-CV, 2004 WL 383317, at *4 (Tenn. Ct. App. Feb. 27, 2004) (citations omitted)). Because

we conclude that the contracts are ambiguous as to whether John Nazi was signing as the

owner/proprietor of the Handy Peddler, or merely as its manager, we will consider extrinsic

evidence to determine the parties’ intent.

From our review of the trial transcript, there was conflicting testimony as to whether

John Nazi was acting as the owner/proprietor of the Handy Peddler. As previously discussed,

John Nazi testified that he never acted as the owner of the Handy Peddler. John Nazi also

testified that he never held himself out to be the owner/proprietor of the Handy Peddler, but

that he was merely serving as his brother’s manager during a time when Ben Nazi was too

ill to run the business. Further, John Nazi testified that he had no contact with the Handy

Peddler in 2011 and 2012, when the alleged breach occurred. Ben Nazi also testified that it

was understood that John Nazi was merely the manager for the Handy Peddler during the

time that John Nazi signed the contracts at issue. However, Mr. Wilhite testified that all

contracts with the Handy Peddler were entered into by John Nazi. Further, a letter was

admitted into evidence in which John Nazi purported to be the owner of the Handy Peddler.

Clearly, the evidence on this issue is sharply contested and its resolution turns on the relative

credibility of the witnesses. However, from our review of the trial court’s decision, and given

the lack of findings contained in the order of dismissal, we discern no findings as to this

particular issue. Instead, the trial court simply determined that John Nazi could not be liable

because he was no longer involved with the Handy Peddler at the time the breaches occurred,

which was an improper basis for the involuntary dismissal. In our view, on these sharply

disputed issues of fact, the credibility of the witnesses is first to be determined by the trial

court. See Edmunds v. Delta Partners, L.L.C., 403 S.W.3d 812, 825 (Tenn. Ct. App. 2012)

(noting that because the trial court “has the opportunity to observe the manner and demeanor

of the witnesses while testifying” the trial court is “in a far better position than this Court to

decide those issues”). Accordingly, we vacate the trial court’s judgment and remand for

reconsideration in light of the above analysis.11

Fuel Surcharge

We next consider Jerry’s Oil’s argument that the trial court erred in awarding Ben

11

We note that Mr. Gilliam, who dealt with John Nazi in signing the contracts at issue,

testified that he was aware that John Nazi was merely serving as the manager of the Handy Peddler and that

Ben Nazi was the true proprietor. However, this testimony was not adduced prior to the trial court’s dismissal

of the individual claims against John Nazi. Because we have vacated the trial court’s decision to grant an

involuntary dismissal on this issue, the trial court may, in its discretion, consider this evidence, as well as

any other proof adduced at the hearing after the dismissal of John Nazi.

-18-

Nazi a judgment for fuel surcharges paid by the Handy Peddler. In its brief, Jerry’s Oil

contends that the fuel surcharges were contemplated by the contract and course of

performance, and therefore, the trial court erred in finding that Ben Nazi had been improperly

invoiced for this charge. In the alternative, Jerry’s Oil argues that Ben Nazi’s claim for the

fuel surcharge is barred by the applicable statute of limitations.

We begin with Jerry’s Oil’s argument regarding the statute of limitations. Jerry’s Oil

argues that the trial court erred in awarding damages to Ben Nazi for the fuel surcharges

dating back to the initiation of the contract in April 2007. Jerry’s Oil asserts that the contract

dispute in this case is governed by Tennessee Code Annotated Section 47-2-725, which

provides, in pertinent part:

(1) An action for breach of any contract for sale must be

commenced within four (4) years after the cause of action has

accrued. By the original agreement the parties may reduce the

period of limitation to not less than one (1) year but may not

extend it.

Because Ben Nazi did not file his claim for damages until November 9, 2012, more than four

years from the execution of the contract, Jerry’s Oil argues that the claim is barred.

The expiration of the statute of limitations is an affirmative defense pursuant to Rule

8.03 of the Tennessee Rules of Civil Procedure. Rule 8.03 provides: “In pleading to a

preceding pleading, a party shall set forth affirmatively facts in short and plain terms relied

upon to constitute . . . statute of limitations, . . . and any other matter constituting an

affirmative defense.” “As a general rule, a party waives an affirmative defense if it does not

include the defense in an answer or responsive pleading.” Pratcher v. Methodist Healthcare

Memphis Hospitals, 407 S.W.3d 727, 736 (Tenn. 2013) (citing Tenn. R. Civ. P. 12.08). In

addition, the Tennessee Supreme Court has held that a party may waive an affirmative

defense by failure to plead it with specificity. As explained by our Supreme Court:

A generic invocation of the words “failure to state a claim” cannot be

used as a vehicle to assert an affirmative defense. An affirmative defense must

be “specifically pleaded.” George v. Bldg. Materials Corp. of Am., 44 S.W.3d

481, 486 (Tenn. 2001). Rule 8.03 clearly contains a “specificity requirement.”

Allgood, 309 S.W.3d at 925. Rule 8.03 requires that a party “set forth

affirmatively facts in short and plain terms relied upon to constitute . . . [a]

statute of repose [or statute of limitations]” defense. “Conclusory allegations”

do not satisfy the specificity requirements of Rule 8.03. ACG, Inc. v. Se.

Elevator, Inc., 912 S.W.2d 163, 170 (Tenn. Ct. App. 1995); see also In re

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Estate of Brown, 402 S.W.3d 193, 199 (Tenn. 2013) (“[U]nlike challenges to

subject matter jurisdiction which cannot be waived, defenses based on the

statute of limitations are affirmative defenses that can be waived unless they

are specifically pleaded.”); George, 44 S.W.3d at 487 (“The specific pleading

requirements of [Rule] 8.03 are designed to prevent trial by ambush . . . .”).

Pratcher, 407 S.W.3d at 736. Thus, the Tennessee Supreme Court has held that an

affirmative defense, such as the statutes of limitations and repose, may be waived by failure

to plead facts supporting the defense. Id.; Allgood v. Gateway Health Systems, 309 S.W.3d

918, 925 (Tenn. Ct. App. 2009) (“Failure to comply with Rule 8.03 will result in a waiver

of the defense.”); Barker v. Heekin Can Co., 804 S.W.2d 442 (Tenn. 1991) (concerning the

affirmative defense of insufficiency of service of process); see also Young ex rel. Young v.

Kennedy, 429 S.W.3d 536 (Tenn. Ct. App. 2013) (considering whether the statute of

limitations defense was waived by failure to timely plead specific facts to support the

defense).

In this case, Jerry’s Oil timely raised its affirmative defense regarding the statute of

limitations in its Answer. See Tenn. R. Civ. P. 12.08. However, we conclude that Jerry’s Oil

waived this defense by failure to properly plead facts to support it. Specifically, Jerry’s Oil

averred in its Answer that the “allegations asserted against [Jerry’s Oil] are barred by the

applicable statute of limitations in whole or in part.” Thus, Jerry’s Oil asserted no specific

facts to support its invocation of the statute of limitations defense in its Answer. See

Pratcher, 407 S.W.3d at 736 (citing Allgood, 309 S.W.3d at 925). Additionally, Jerry’s Oil

never attempted to amend its Answer to add additional facts to support this affirmative

defense. Instead, Jerry’s Oil appears to have relied on the “generic invocation of the words,”

Pratcher, 407 S.W.3d at 736, “barred by the applicable statute of limitations” to assert its

defense. Moreover, from our review of the record, the issue of the statute of limitations was

never argued to the trial court in any way. Instead, Jerry’s Oil “conclusory” allegation in its

Answer is the only mention of the statute of limitations in the trial court record. Id. (citing

ACG, 912 S.W.2d at 170). Under these circumstances, we conclude that the affirmative

defense of the expiration of the statute of limitations is waived.

We next consider Jerry’s Oil’s argument that the trial court erred in concluding that

the fuel surcharge was not authorized by the contract. As this question involves the

interpretation of a contract, our review is de novo with no presumption of correctness.

Barnes v. Barnes, 193 S.W.3d 495, 498 (Tenn. 2006). While not incorporated by reference

into the trial court’s written order, the trial court did make findings with regard to this issue

at the conclusion of the proof. According to the trial court:

Now, I do feel that there was some dispute about the surcharge.

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The contract doesn’t call for it. If you look at the contract, it

says, Make reference to Exhibit B. When you look at Exhibit B,

it doesn’t call it a surcharge. It talks about a . . . markup, which

[a witness from Jerry’s Oil] testified is figured into the [lost

profits calculation], so I think that [Ben] Nazi is entitled to a

credit of that surcharge of $26,182[.00].

In this case, it is undisputed that the contracts at issue do not include the term “fuel

surcharge.” Appellees argue that this fact is sufficient to conclude that the contract

unambiguously indicates that a fuel surcharge is not authorized pursuant to the contract. In

contrast, Jerry’s Oil argues that the term “freight” as used in Exhibit B is unambiguous, and

necessarily includes a fuel surcharge, as testified to by Mr. Wilhite. To support this argument,

Jerry’s Oil relies on the Tennessee Court of Appeals case of Moore v. Moore, 603 S.W.2d

736 (Tenn. Ct. App. 1980), which held that:

A contract must be enforced according to the ordinary

meaning of its words unless both parties understand and agree

at the time of the contract that its meaning is otherwise. Its

ordinary meaning is that meaning which would have been

derived from its words by reasonable persons dealing in the

same situation as that of the contracting parties.

Id. at 739 (citing Hardwick v. American Can Co., 113 Tenn. 657, 88 S.W. 797 (1905)).

Accordingly, Jerry’s Oil argues that Mr. Wilhite’s testimony that the term “freight”

customarily includes a fuel surcharge is sufficient to show that the charge was, in fact,

authorized by the contract. However, Jerry’s Oil fails to include additional language from

Moore that is important to the resolution of this issue: “The fact that one party unilaterally

conceived a peculiar meaning not shared by the other party will not avail to disturb the plain

and ordinary meaning of the words of the contract.” Moore, 603 S.W.2d at 739. In this case,

both John Nazi and Ben Nazi testified that they did not believe that a fuel surcharge was

authorized by the contract, or the use of the term “freight.” In addition, as previously

discussed, Mr. Kee, a witness from another fuel supply company, testified that his fuel

company did not charge a fuel surcharge. Moreover, Mr. Gilliam testified that he was not

aware that the Handy Peddler had ever contracted to pay a fuel surcharge.

The term “freight” is defined as the “compensation paid to a carrier for transporting

goods.” Black’s Law Dictionary 738 (9th ed. 2009). The invoices at issue specifically

charge for “Freight Gasoline” in accordance with this definition. These charges are clearly

contemplated by the contract. However, the invoices also include an additional “fuel

surcharge.” Nothing in the contract indicates that the Handy Peddler was contracting to pay

-21-

this additional charge beyond the “freight” allowed pursuant to Exhibit B. Further, as

previously discussed, both Mr. Kee and Mr. Gilliam indicated that this additional charge was

not typically contemplated in a fuel supply agreement. Under these circumstances, we

conclude that the contract at issue contains no provision requiring the Handy Peddler to pay

a fuel surcharge to Jerry’s Oil, and that the evidence in the record does not support Jerry’s

Oil’s contention that the term “freight” unambiguously includes a fuel surcharge. Although

this charge may have been intended to have been included in the contract by Jerry’s Oil, there

is simply insufficient evidence in the record to support it. As recently discussed by this Court:

Courts defer to the contracting process by enforcing contracts

according to their plain terms without favoring either

contracting party. Cocke County Bd. of Highway Comm’rs v.

Newport Utils. Bd., 690 S.W.2d 231, 237 (Tenn.1985). Courts

will decline to rewrite contracts made by the parties and will

decline to relieve parties of their contractual obligations, absent

an inability to contract or an unconscionable agreement. Petty

[v. Sloan], 197 Tenn. [630,] 640, 277 S.W.2d [355,] 359

[(Tenn.1955) ]; Jaffe v. Bolton, 817 S.W.2d 19, 25 (Tenn. Ct.

App. 1991).

Rickman v. Rickman, No. M2013-00251-COA-R3-CV, 2013 WL 5656214, at *8 (Tenn.

Ct. App. Oct. 15, 2013) (quoting Seraphine v. Aqua Bath Co., Inc., No. M2000-02662-

COA-R3-CV, 2003 WL 1610871, at *8 (Tenn. Ct. App. March 28, 2003)).

Finally, Jerry’s Oil argues that the trial court erred in considering the parties course

of performance regarding the fuel surcharge. According to Tennessee Code Annotated

Section 47-2-202:

Terms with respect to which the confirmatory memoranda of

the parties agree or which are otherwise set forth in a writing

intended by the parties as a final expression of their agreement

with respect to such terms as are included therein may not be

contradicted by evidence of any prior agreement or of a

contemporaneous oral agreement but may be explained or

supplemented:

(a) By course of performance, course of dealing or usage of

trade, pursuant to § 47-1-303; and . . . .

Thus, Jerry’s Oil argues that the terms of the contract may be explained or supplemented by

-22-

evidence of the parties’ course of performance. A course of performance is defined as:

[A] sequence of conduct between the parties to a particular

transaction that exists if:

(1) The agreement of the parties with respect to the transaction

involves repeated occasions for performance by a party; and

(2) The other party, with knowledge of the nature of the

performance and opportunity for objection to it, accepts the

performance or acquiesces in it without objection.

Tenn. Code Ann. § 47-1-303(a). Because the Appellees admit that they had been charged

the fuel surcharge multiple times throughout the duration of the contract, without objecting,

Jerry’s Oil argues that this Court should reverse the trial court’s decision to award Ben Nazi

damages on this issue.

We have thoroughly reviewed the record in this case and conclude that this argument

was not raised in the trial court. Nothing in Jerry’s Oil’s Answer to the Appellee’s Complaint

indicates that it intends to rely on an argument regarding the parties’ course of performance.

Furthermore, this argument does not appear to have been raised during trial on this cause.

It is well-settled that arguments not raised in the trial court may not be raised for the first time

on appeal. See Southern Sec. Fed. Credit Union v. Cumis Ins. Soc., Inc., No. W2004-

02700-COA-R3-CV, 2005 WL 3527662, at *7 (Tenn.Ct.App. Dec. 27, 2005) perm. app.

denied (Tenn. June 5, 2006) (“It is well established that the appellate courts of this state will

not entertain issues raised for the first time on appeal.”) (citing City of Cookeville v.

Humphrey, 126 S.W.3d 897, 905–06 (Tenn. 2004)). “Since these arguments were not made

by [Jerry’s Oil] in the proceedings before the trial court or ruled upon by that court, they may

not be raised on appeal.” State v. Chaney, No. W2013-00914-CCA-R9-CD, 2014 WL

2016655, at *9 (Tenn. Crim. App. May 14, 2014) (citing State v. Johnson, 970 S.W.2d 500,

507–08 (Tenn. Crim. App. 1996)). Therefore, we affirm the trial court’s judgment in favor

of Ben Nazi on the issue of the fuel surcharge.

Conclusion

Based on the foregoing, the judgment of the Circuit Court of Madison County is

affirmed in part, vacated in part, and remanded to the trial court for all further proceedings

as may be necessary and are consistent with this Opinion. Costs of this appeal are assessed

one-half to Appellant Jerry’s Oil, and its surety, and one-half to Appellees John Nazi and Ben

Nazi, for all of which execution may issue if necessary.

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________________________________

J. STEVEN STAFFORD, JUDGE

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