Alexander v. Armentrout, Jr. ( 1999 )

IN THE COURT OF APPEALS OF TENNESSEE
FILED
AT KNOXVILLE January 14, 1999
Cecil Crowson, Jr.
Appellate C ourt
Clerk
DAN ALEXANDER, ) C/A NO. 03A01-9807-CV-00205
)
Plaintiff-Appellee, )
)
)
)
)
v. ) APPEAL AS OF RIGHT FROM THE
) WASHINGTON COUNTY CIRCUIT COURT
)
)
)
)
JAY ARMENTROUT, JR., and )
PATRICIA RUTH ARMENTROUT, )
) HONORABLE LEWIS W. MAY,
Defendants-Appellants. ) JUDGE
For Appellants For Appellee
MICHAEL A. EASTRIDGE TIMOTHY S. BELISLE
Johnson City, Tennessee Johnson City, Tennessee
O P I N IO N
REVERSED AND REMANDED Susano, J.
1
This jury case involves litigation arising out of the
dissolution of a dairy farm partnership. Dan Alexander
(“Alexander”) sued his brother-in-law,1 Jay Armentrout, Jr. (“Mr.
Armentrout”), and Mr. Armentrout’s wife, Patricia Ruth Armentrout
(“Mrs. Armentrout”), seeking to recover monies allegedly due him
for the sale of his one-half interest in the Alexander-Armentrout
Dairy partnership (“the partnership”). The jury returned a
verdict2 for Alexander, and the Armentrouts appealed. They raise
issues that essentially present the following questions:
1. Did the trial court err in denying the
Armentrouts’ motions for directed verdict and
judgment notwithstanding the verdict?
2. Did the trial court err in refusing to
grant the Armentrouts a new trial?
3. Did Mr. Armentrout’s delivery of a
promissory note to Alexander, and the
latter’s unconditional acceptance of payments
under the note, operate as a waiver and/or an
estoppel so as to prevent Alexander from
later denying the terms of the note under
which the payments were made and from
asserting different terms as to the repayment
of the underlying obligation?
4. Does an agent who signs a promissory note
on behalf of a disclosed principal, leaving a
personal signature line unsigned, incur
personal liability for the debt evidenced by
the promissory note?
5. Is the spouse of the agent signing the
promissory note liable for repayment of the
note when the obligee on the note admits she
never explicitly agreed to pay the note; she
did not sign the note; and she did not
participate in the agreement for the purchase
of the partnership interest that was the
consideration for the note?
1
Alexander is married to Mr. Armentrout’s sister.
2
The parties agreed that an award of $70,432.15 was appropriate in the
event the jury found in favor of Alexander.
2
3
I.
Alexander and Mr. Armentrout owned and operated the
partnership, a dairy farm, from 1980 to 1993. Having decided to
dissolve their business relationship in 1993, they agreed that
Mr. Armentrout would purchase Alexander’s interest in the
partnership for $111,000. Under the parties’ agreement, Mr.
Armentrout was to receive all of the partnership’s assets and
assume all of its liabilities. Mr. Armentrout paid Alexander
$50,000 in the form of a cashier’s check. They agreed that the
balance of $61,000 would be paid over time on a promissory note.
The bank officer, who was present in July, 1993, when the $50,000
payment was made, expressed several suggestions as to the terms
of the note. Alexander and Mr. Armentrout agreed that the latter
would arrange to have a promissory note prepared and would
present it to Alexander.
Mr. Armentrout asked the partnership’s accountant,
Kenneth McCurry, to prepare a promissory note. As requested, Mr.
McCurry drafted a note for $61,000 reciting that “[f]or value
received, Jay Armentrout d/b/a Armentrout Acres, Inc., promises
to pay to the order of Dan Alexander....” At the bottom of the
note, the following typing can be found:
Armentrout Acres, Inc.
Signature ___________________
By Jay Armentrout
Signature ___________________
Jay Armentrout
4
Mr. Armentrout affixed his signature on the line just underneath
“Armentrout Acres, Inc.” He left the second signature line
blank. He then delivered the note to Alexander around the end of
August, 1993 -- some six to eight weeks after the initial $50,000
payment had been made.
The parties did not discuss the note when it was
delivered to Alexander. Alexander took the note home, looked at
it that night, and reviewed it on two subsequent occasions. He
testified that he had realized on the day he received the note
that it contained terms with which he did not agree. Despite
this realization, he admitted that he had said nothing to Mr.
Armentrout. The note burned in a fire at Alexander’s home in
September, 1993.
In June, 1995, Alexander received a check for $6,310
that was drawn on the Armentrouts’ personal bank account as the
first payment on the note. He deposited this check into his bank
account. He received a second payment of $6,310 in January,
1996, in the form of a check drawn on Armentrout Acres, Inc.’s
bank account. He again deposited the check into his bank
account. Shortly thereafter -- now some two years plus since he
had received the note from Mr. Armentrout -- Alexander had his
attorney draw up a new promissory note for $61,000. Alexander
sent this note, along with a check for $700 and a letter, to Mr.
Armentrout. The letter stated that Mr. Armentrout had overpaid
the interest on the note and that Mr. Armentrout should sign and
return the new note because he owed the full $61,000 from the
buy-out of the partnership.
5
When Mr. Armentrout refused to sign the new note,
Alexander brought this suit against the Armentrouts alleging
breach of contract.
Alexander contends that the note handed to him by Mr.
Armentrout does not contain the true terms of the contract. He
argues that his agreement was with the Armentrouts and not with
Mr. Armentrout’s corporation, Armentrout Acres, Inc. He contends
that the Armentrouts are both personally liable on the $61,000
obligation. Mr. Armentrout, on the other hand, contends that
Alexander accepted the note and that his corporation, Armentrout
Acres, Inc., is liable on the note. Mrs. Armentrout contends
that she is not a party to the contract, did not sign the note,
and is otherwise not liable on the note.
Alexander argues that he did not accept the note, and
that both of the Armentrouts breached the contract for the
purchase of his share of the partnership.
II.
Our standard of review is well-settled. A directed
verdict is appropriate only when the evidence is susceptible to
but one conclusion. Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn.
1994); Long v. Mattingly, 797 S.W.2d 889, 892 (Tenn.App. 1990).
We must “take the strongest legitimate view of the evidence
favoring the opponent of the motion when called upon to determine
whether a trial court should have granted a directed verdict.”
Id. In addition, all reasonable inferences in favor of the
6
opponent of the motion must be allowed and all evidence contrary
to the opponent’s position must be disregarded. Eaton, 891
S.W.2d at 590; Long, 797 S.W.2d 892.
III.
We consider first the issue of whether Alexander is
equitably estopped from denying his acceptance of the promissory
note delivered by Mr. Armentrout.
Alexander acknowledges that Mr. Armentrout gave him a
promissory note for $61,000 approximately six to eight weeks
after the closing of the sale in July, 1993. It was not until
some time in 1996 that Alexander3 notified Mr. Armentrout that he
refused to accept the terms of the promissory note. Nearly two
and one-half years elapsed from the time that Alexander received
the promissory note from Mr. Armentrout, until he first notified
Mr. Armentrout that he had not accepted the promissory note.
Alexander further admitted that during this period he accepted
two payments on the note.
The rule of equitable estoppel is pertinent:
[E]quitable estoppel embraces not only ideas
conveyed by words written or spoken and
things actually done but includes the silence
of one under a duty to speak and his omission
to act, as well; negligent silence may work
an equitable estoppel, and acts or conduct
which are calculated to mislead and do in
3
Although Alexander contacted Mr. Armentrout to obtain a copy of the
note on several occasions, he never disclosed to Mr. Armentrout on any of
these occasions that the terms of the note were unacceptable.
7
fact mislead will work an estoppel
notwithstanding there was no intention to do
so.
Lusk v. Consol. Alum. Corp., 655 S.W.2d 917, 920 (Tenn. 1983).
Alexander’s failure to express his dissatisfaction with the
tendered promissory note, and his acceptance of two payments on
the note, were uncontroverted at trial. “Where the facts
constituting the estoppel are undisputed,... the question of
estoppel becomes one of law and may be determined by the Court.”
Consolidated Coal Co. v. O’Brien, 3 Higgins 252, 266 (Tenn.App.
1913). Taking the strongest legitimate view of the evidence
favoring Alexander and disregarding all countervailing evidence,
we find that Alexander accepted the corporation’s note in
satisfaction of the underlying obligation to pay him $61,000.
We recognize that Alexander testified as to his
unexpressed subjective intent not to accept the promissory note
because it did not accurately express the terms of his deal with
Mr. Armentrout. Under the facts of this case, however, “the
unspoken subjective intent of a party is not relevant.” See
Malone & Hyde Food Services v. Parson, 642 S.W.2d 157, 159
(Tenn.App. 1982). Alexander accepted the note, and his claim
against Mr. Alexander must rise or fall on that instrument.
IV.
Having determined that Alexander accepted the
promissory note, the sole issue remaining as to Mr. Armentrout is
8
whether he is personally liable on that instrument. T.C.A. § 47-
3-402(b)(1) is dispositive of this issue:
(b) If a representative signs the name of
the representative to an instrument and the
signature is an authorized signature of the
represented person, the following rules
apply:
(1) If the form of the signature
shows unambiguously that the
signature is made on behalf of the
represented person who is
identified in the instrument, the
representative is not liable on the
instrument.
Id.
Our cases addressing the liability arising from the
signature of an authorized representative applied an earlier
version of the pertinent statute.4 However, our case law
uniformly holds that the ambiguity of a document must be
determined from its face, and, as such, is a question of law.
Warrior Transport, Inc. v. Thompson, 1989 WL 9561 (Tenn.App.,
February 10, 1989), petition to rehear, 1989 WL 25253 (Tenn.App.,
March 21, 1989); Malone & Hyde Food Services, 642 S.W.2d at 159;
Sutton v. First Nat’l Bank of Crossville, 620 S.W.2d 526, 530
(Tenn.App. 1981).
In FDIC v. Tennessee Wildcat Services, Inc., 839 F.2d
251 (6th Cir. 1988), the use of the word “by” preceding a
signature was held to be unambiguous:
4
The earlier version of this statute is T.C.A. § 47-3-403 (1979).
9
Where the principal is identified and shown
on the face of the note as the maker and the
word “by” precedes the signature of the
signer, there is no ambiguity and the signer
is not personally liable, absent some showing
of fraud or other circumstance that requires
a court to look beyond the face of the note.
Id. at 256. “If the language of a written instrument is clear
and unambiguous, the court must interpret it as written, rather
than according to the unexpressed intention of one of the
parties.” Sutton, 620 S.W.2d at 530. See Malone & Hyde Food
Services, 642 S.W.2d at 159. It is clear from the face of the
promissory note that Mr. Armentrout signed on the signature line
denoted for the representative of Armentrout Acres, Inc. Because
Mr. Armentrout’s signed in a representative capacity for
Armentrout Acres, Inc., he is not personally liable on the
promissory note. See T.C.A. § 47-3-402(b)(1). The trial court
erred in denying Mr. Armentrout’s motion for a directed verdict.
V.
We next consider the issue of whether Mrs. Armentrout
is liable on the promissory note or otherwise responsible for any
portion of the obligation to Alexander.
The trial court denied Mrs. Armentrout’s motion for a
directed verdict because it believed that Alexander’s acceptance
of the promissory note was at issue. However, as we have
previously stated, Alexander is estopped to deny acceptance of
the note. Since Mrs. Armentrout is not a party to the note and
did not sign the note, she is not liable on it. See T.C.A. § 47-
10
3-401(a).5 The trial court erred in not directing a verdict for
Mrs. Armentrout on this issue.
Even if we were to hold otherwise on the issue of
Alexander’s acceptance of the note, Alexander’s theory as to Mrs.
Armentrout’s liability is without merit. Alexander testified
that Mrs. Armentrout was not present at the time that he and Mr.
Armentrout reached their agreement to dissolve the partnership.
He further testified that he and Mrs. Armentrout were not
partners, and that although she was listed as a remitter on the
$50,000 cashier’s check, she never expressly promised to pay any
portion of the $110,000 obligation.
Alexander predicates Mrs. Armentrout’s liability on the
circumstances surrounding the dissolution of the partnership. He
urges us to find that she is liable on a theory of implied
contract because she was present at closing; because her name was
on the $50,000 cashier’s check as a remitter; because she signed
the loan papers at the bank from which the $50,000 down payment
came; because her name was reflected as a grantee along with her
husband on the deed from Alexander conveying the dairy farm; and
because her name was printed on a personal check used by Mr.
Armentrout to make the first payment on the note.
5
T.C.A. § 47-3-401(a) provides as follows:
(a) A person is not liable on an instrument unless
(i) the person signed the instrument, or (ii) the
person is represented by an agent or representative
who signed the instrument and the signature is binding
on the represented person under § 47-3-402.
11
We cannot agree with Alexander’s analysis. Under
general principles of contract law, a contract “must result from
a meeting of the minds of the parties in mutual assent to the
terms.” Sweeten v. Trade Envelopes, Inc., 938 S.W.2d 383, 386
(Tenn. 1996). Alexander relies on Scandlyn v. McDill Columbus
Corp., 895 S.W.2d 342 (Tenn.App. 1994), for the proposition that
we must “look to the conduct of the parties in light of all the
circumstances to determine whether an implied contract exists.”
Id. at 345-46. However, Alexander points to no specific facts to
indicate that Mrs. Armentrout’s words or conduct at closing give
rise to such circumstances as support a contract implied in law.
The mere presence of Mrs. Armentrout at closing and the
appearance of her name on documents associated with the purchase
of Alexander’s interest are not enough to establish an implied
contract holding her responsible for the obligation to Alexander.
VI.
The judgment of the trial court is reversed. The
complaint is dismissed. Costs on appeal are taxed against the
appellee. This case is remanded to the trial court for entry of
a judgment consistent with this opinion, and for collection of
costs, all pursuant to applicable law.
__________________________
Charles D. Susano, Jr., J.
CONCUR:
______________________
Herschel P. Franks, J.
12
______________________
Don T. McMurray, J.
13