Scott Jurgensmeyer v. James F. Prater ( 2003 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
September 6, 2001 Session
SCOTT JURGENSMEYER, ET AL. v. JAMES F. PRATER
Appeal from the Chancery Court for Davidson County
No. 99-305-III Ellen Hobbs Lyle, Chancellor
No. M2000-02986-COA-R3-CV - Filed April 24, 2003
In this consolidated case involving claims of fraud, negligent misrepresentation, breach of contract,
and violations of the Tennessee Consumer Protection Act, the trial court granted summary judgment
for the defendant on the ground that he had not acted individually and his corporation had not been
named as a defendant. For the following reasons, we reverse and remand the decision of the trial
court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Reversed and Remanded
PATRICIA J. COTTRELL, J., delivered the opinion of the court, in which BEN H. CANTRELL , P.J., M.S.,
and WILLIAM B. CAIN , J., joined.
Robin J. Gordon, Nashville, Tennessee, for the appellants Scott Jurgensmeyer and Jim Wise.
James H. Harris III, Nashville, Tennessee, for the appellee, James F. Prater.
OPINION
This appeal is from a summary judgment granted to the defendant, James F. Prater, in a case
which consolidated two separate cases, one brought by Scott Jurgensmeyer, and one brought by Jim
Wise, both of which arose from Mr. Prater’s involvement in arrangements to develop performers into
recording artists. In both situations another person, Mr. Thomas Wayne Oliver, was involved and,
it could be fairly said, was the primary actor.
I. Mr. Jurgensmeyer’s Complaint
In his complaint, Mr. Jurgensmeyer alleged the following facts. He is a farmer residing in
the State of Missouri. In August of 1995, Mr. Jurgensmeyer met with Mr. Prater and Mr. Oliver to
discuss the development of the musical career of an artist by the name of Hawke Montana. During
this conversation, Mr. Oliver and Mr. Prater represented to Mr. Jurgensmeyer that it would be
possible to secure a recording contract for Hawke Montana at Curb Records for a sum to be specified
at a later date. Mr. Oliver, Mr. Prater, and Mr. Jurgensmeyer entered into an oral agreement whereby
Mr. Jurgensmeyer would provide the financial backing to secure the record contract, and Mr. Prater
and Mr. Oliver would secure the recording contract. Mr. Jurgensmeyer caused to be delivered “a
check to Defendant Prater and Oliver” in the sum of fifty thousand dollars ($50,000.00) to secure
the recording agreement with Mr. Chuck Howard as producer.
On August 22, 1995, Mr. Oliver and Mr. Prater represented to Mr. Jurgensmeyer that they
had procured a recording agreement for Hawke Montana with Curb Records and that Chuck Howard
would be the producer for the record. On that date, Mr. Oliver and Mr. Prater provided him with a
copy of a written agreement between Mr. Oliver and Big Sky Entertainment, Inc. wherein Mr. Oliver
represented that he had procured a recording contract with Curb Records for Hawke Montana.
The referenced document, a letter, is signed solely by Mr. Oliver, and discusses the details
of the recording contract, the tasks that must be performed before the contract will be signed,
including delivery of master recordings for the album, and concludes:
The investment in this project is $500,000, as agreed. $50,000 is in escrow at this
time. The balance of $450,000 should be wire transferred on receipt of this signed
statement of agreement between Big Sky Ent., Inc. and Wayne Oliver Ent.
[Enterprises].
The Complaint does not identify Big Sky Entertainment, and we are unaware from the record
whether there is any connection between that entity and Mr. Jurgensmeyer. In any event, Mr.
Jurgensmeyer’s complaint further alleged the following facts.
A few days after Mr. Jurgensmeyer received a copy of the August 22 letter, Mr. Oliver
contacted Mr. Jurgensmeyer to solicit an additional $200,000 “to procure the alleged recording
agreement allegedly secured.” Mr. Jurgensmeyer alleges that he sent the money by wire transfer in
reliance upon the representations regarding the existence and details of the recording contract. He
never alleges to whom he sent the transfer, but rather asserts, “Defendant Prater and Oliver were in
receipt of a wire transfer” from him for $200,000.
On January 17, 1996, Mr. Oliver and Mr. Prater informed Mr. Jurgensmeyer at a meeting that
they would no longer work with Hawke Montana because he had become uncooperative. Mr.
Jurgensmeyer agreed with that decision. Mr. Jurgensmeyer alleged that Mr. Oliver and Mr. Prater
agreed that the $250,000 would remain in an escrow account to allow him to decide if he was
interested in working with another artist. He also alleged that he later asked that the money be
placed in an interest bearing certificate of deposit, but was informed that it was imperative to keep
it in a liquid account.
On February 1, 1996, Mr. Prater and Mr. Oliver represented to Mr. Jurgensmeyer that they
would return Mr. Jurgensmeyer’s investment if he did not want to work with the new artist. On May
-2-
1, 1996, Mr. Oliver and Mr. Prater telephoned Mr. Jurgensmeyer “with respect to [his] declining the
offer . . . to invest in the new artist.” In that conversation, Mr. Jurgensmeyer requested the
immediate return of the $250,000. Two days later, Mr. Jurgensmeyer met with Mr. Oliver and Mr.
Prater in Nashville, and Mr. Oliver and Mr. Prater told him that $250,000 would be paid to him
within two weeks.
When the money was not returned, Mr. Jurgensmeyer made other requests for it, and none
has never been returned to him. Some time later Mr. Jurgensmeyer learned from representatives of
Curb Records that no recording agreement ever existed in connection with Mr. Oliver, Mr. Prater,
or Hawke Montana and there had been no agreement by Chuck Howard to produce such a record.
II. Mr. Wise’s Complaint
Beginning in 1995, Mr. Wise met with Mr. Prater and Mr. Oliver to discuss the development
of Mr. Wise’s career as a musical recording artist, and they met or communicated regularly
thereafter. During initial conversations, Mr. Oliver and Mr. Prater told Mr. Wise that it would be
possible to secure a recording contract for him with Atlantic Records for a sum to be specified later.
Mr. Wise then entered into an oral agreement with Mr. Prater and Mr. Oliver whereby Mr. Wise
agreed to provide the necessary financial backing to secure a recording contract and Mr. Prater and
Mr. Oliver agreed to secure the contract.
Later, Mr. Prater and Mr. Oliver represented to Mr. Wise that a recording agreement had been
procured for Mr. Wise at Polydor or Atlantic Records and that Norro Wilson would be the producer
for the recording. Prior to October 10, 1995, Mr. Oliver represented that he had spoken with Rick
Blackburn, the president of Atlantic Records, regarding the recording agreement and that Mr.
Blackburn had agreed to sign Mr. Wise to such an agreement. On October 10, 1995, Mr. Wise was
provided “a copy of a written memorialization of the prior oral agreement” between himself and Mr.
Oliver and Mr. Prater “wherein Mr. Oliver and Defendant Prater represented that a recording
agreement had been procured for Plaintiff with Polydor or Atlantic Records and that Norro Wilson
would be the producer for such recording.” The unsigned letter agreement dated October 10, 1995,
is from Mr. Oliver, has no signature line for Mr. Prater, is addressed to Mr. Wise, and has blank
signature lines for Mr. Oliver and Mr. Wise. It states “as per our agreement” Mr. Oliver had
procured the recording agreement for Mr. Wise with Polydor Records or Atlantic Records of
Nashville, with the producer to be Norro Wilson. It stated the agreement would be signed upon
delivery of the album and the album project would take a few months to complete. It further stated:
The investment by Jim Wise in this project is $600,000, as agreed. $300,000 is in
escrow at this time and the balance of $300,000 should be placed in escrow by Jan.
15, 1996. Mr. Oliver will advise you as to the distribution of the funds. He will also
coordinate all meetings between the artist, producer and the record company.
-3-
Mr. Wise paid fifty thousand dollars ($50,000.00) for use in securing the recording agreement
and in reliance on the representations that such an agreement had been procured. His complaint
alleges he “delivered” the sum to Mr. Oliver and Mr. Prater.
Prior to providing any additional funds to Mr. Oliver, Mr. Wise discovered from Mr.
Blackburn at Atlantic Records that Atlantic Records had never agreed to sign Mr. Wise to a
recording agreement and that Mr. Blackburn had never spoken with Mr. Oliver or Mr. Prater
regarding such an agreement. Mr. Wise also discovered that Norro Wilson was not approved by
Polydor or Atlantic Records as a producer for a recording agreement for Mr. Wise. Mr. Wise never
received any of his $50,000 back.
III. Causes of Action and the Trial Court’s Ruling
Mr. Jurgensmeyer’s complaint against Mr. Prater alleged:
(1) Mr. Prater had breached an oral agreement with Mr. Jurgensmeyer by failing to
procure a recording contract for Hawke Montana, by failing to keep funds sent by Mr.
Jurgensmeyer in an escrow account solely for use in procuring the recording contract,
and by failing to return his money when no record deal materialized.
(2) Mr. Prater knowingly made fraudulent statements and misrepresentations to
induce Mr. Jurgensmeyer to invest substantial sums of money by promising profits
from recordings and that Mr. Prater fraudulently used the money so invested for his
and Mr. Oliver’s personal benefit and not to procure a recording contract.
(3) Mr. Prater negligently made misrepresentations regarding the procurement of a
recording contract for Hawke Montana and regarding the arrangement with Mr.
Jurgensmeyer.
(4) Mr. Prater and Mr. Oliver engaged in fraudulent activities and schemes by
making fraudulent misrepresentations, all of which constituted unfair and deceptive
trade practices under the Tennessee Consumer Protection Act.
Mr. Wise’s complaint alleged the same causes of action on the facts set out above, except he
apparently relies on both an oral and a written contract.
After the trial court consolidated the two cases, Mr. Prater filed a motion for summary
judgment on the basis that he had “conducted all business pertinent to these proceedings by and
through his corporation, Prater Enterprises.” After a hearing on the motion, the trial court filed a
memorandum and order which granted Mr. Prater’s motion for summary judgment on the ground
that the plaintiffs failed to raise genuine issues of material fact that Mr. Prater engaged in the alleged
conduct individually. The court found that the record established that all actions taken by Mr. Prater
were in his capacity as an agent/employee of Prater Enterprises, Inc. Because there was no factual
-4-
issue as to Mr. Prater’s individual liability, and because the plaintiffs had not also sued the
corporation (the principal),1 the court granted summary judgment. In explaining its decision, the
court stated:
Tennessee law does provide that it is not necessary that a particular act or failure to
act be expressly authorized by the principal to bring it within the scope of the agent’s
authority. Conduct is within the scope of the agent’s authority if it occurs while the
agent is engaged in the duties that the agent was authorized to perform and if the
conduct relates to those duties. But the law requires that if the wrongful act is that
of an agent, either the agent and principal, or the principal must be sued because the
principal is the responsible party. Where, as here, the plaintiffs assert the defendant
is liable for his acts as an agent, Memorandum of Law in Response to Defendant’s
Motion for Summary Judgment at 2, it is not proper to sue the individual agent,
without alleging agency, because the individual is not the responsible party, the
principal is.
(emphasis added).
At this point, we simply note that the Memorandum of Law referenced by the trial court does
not appear in the record before us. The complaints do not allege that Mr. Prater was acting as an
agent for anyone or any entity. 2 In his answers, Mr. Prater asserted he did business by and through
his corporation, but, as an affirmative defense, Mr. Prater stated that the complaints failed to state
a claim because there were no allegations of wrongful conduct against Mr. Prater; that all the
allegations were jointly against Mr. Prater and a third-party, Wayne Oliver; and that Mr. Prater did
not participate with Mr. Oliver in any wrongful conduct.
It was Mr. Prater’s motion for summary judgment that raised the issue whether he could have
individual liability because he acted by and through his corporation. Although the record does not
include the memorandum filed in response to the motion, we can presume from the trial court’s
mention of the argument, as well as the briefs filed in this court, that the plaintiffs argued therein
that, even if Mr. Prater had been acting through his corporation, he was an undisclosed agent who
could be held personally liable.
1
The trial court noted that in their papers in opposition to summary judgment, the plaintiffs asked to add the
corporation as a defendant. Because this request was not made by proper mo tion to amend with a propo sed amendme nt,
the court determined that it lack ed au thority to grant the request.
2
The paragraph identifying the de fendant refers to “James F. Prater, individually and/or d/b/a/ Prater Boo king
& Management.” In his answers to both complaints, Mr. Prater denied that he did business as Prater Booking and
Management, stating, “T o the contrary, at all times p ertinent to this comp laint, Prater did business and is doing b usiness
by, through, and in the name of his corporation, Prater Enterprises, Inc.”
-5-
IV. Evidence on Summary Judgment
In support of his motion for summary judgment, Mr. Prater filed his own affidavit, a
statement of undisputed facts pursuant to Tenn. R. Civ. P. 56.03,3 the charter of Prater Enterprises,
Inc., a certificate of corporate existence for Prater Enterprises, Inc. authenticated by the Office of the
Tennessee Secretary of State, the affidavit of Mr. Oliver, and the affidavit of Donald Ruck.4
In response to the motion for summary judgment, Mr. Wise and Mr. Jurgensmeyer responded
to the statement of uncontested facts and filed “Late Filed Exhibits to Plaintiffs’ Responses to
Defendant’s Motions for Summary Judgment” which included the affidavit of Mr. Wise and excerpts
from the deposition of Mr. Prater.5
Mr. Prater testified that he provides, through his corporation, services in the music and
entertainment business, including working with new artists to develop them so they can successfully
fulfill the requirements of a recording contract if one is offered to them. This process includes a
number of activities and areas and is usually a twelve to eighteen month process “to prepare an artist
to become a star.”
Mr. Prater testified that Mr. Jurgensmeyer did not hire him or his corporation, did not
negotiate a fee for his services, and did not pay him or his corporation. Instead, he asserts, Mr.
Oliver hired Prater Enterprises to work with Hawke Montana and paid Prater Enterprises $50,000
as a one time fee “to act, in essence, as an interim manager for Mr. Montana and to get him ready
for the recording agreement Mr. Oliver was trying to secure for Mr. Montana.”
3
The record before us includ es a statement of und isputed facts only with regard to M r. Jurge nsmeyer’s
compla int. The record also contains responses to statements of undisputed facts in both cases, so we can assume
statements were filed as to bo th comp laints. Since the responses do not include the substance of the statements to which
they respond , however, this court is unawa re of the statements.
4
Mr. Ruck is M r. Prater’s accountant and his affidavit states that has prepared the federal income tax returns
for Prater Enterprises since its inception in 1993. His affidavit indicates that he has never known Mr. Prater to do
busine ss other than as Prater Enterprise s.
5
On appeal, Mr. W ise and Mr. Jurgensmeyer filed a motion in this court to supplement the record to include
the affidavit of Mr. Jurge nsmeyer, a letter fro m M r. Oliver to B ig Sky E ntertainm ent, and a letter from M r. Oliver to Mr.
W ise, that they argued were inadvertently omitted from the technical record by the trial court clerk. We denied that
motion because disputes concerning the content of the record on ap peal should be sub mitted to and settled by the trial
court. Tenn. R. A pp. P . 24(e ). Subsequent to our denial of that motion, a reply brief filed by M r. Wise and M r.
Jurgensmeyer states that “the Chancery Court . . . has entered an Order . . . to file a supplemental record [containing the
aforementioned documents].” Mr. W ise and Mr. Jurge nsmeyer attached these documents to their reply brief. Mr. Prater
also attached these docum ents to his brief in response to the reply brief and addressed the content of the documents in
his argum ent. Because the parties do not dispute that these documents were filed with the trial court and the trial court
approved their inclusion in a supplemental record, we will consider the documents in determining whether the grant of
summary judgment was appropriate.
-6-
Mr. Prater began providing those services until he decided he could not work with Mr.
Montana any longer because he had become uncooperative. At that point, according to Mr. Prater,
he and Mr. Oliver met with Mr. Jurgensmeyer and informed him they would not work with Mr.
Montana anymore, and Mr. Jurgensmeyer agreed. They met a month later, and Mr. Oliver offered
to return the money Mr. Jurgensmeyer had invested or to find another artist. Mr. Oliver found
another artist, but Mr. Jurgensmeyer did not agree to finance this artist’s preparation and demanded
that Mr. Oliver return his money. Mr. Prater testified he had agreed with Mr. Oliver to work with
the new artist under the same agreement and for the one-time fee he had already been paid. Mr.
Prater’s affidavit concludes:
I did not participate in nor do I have any independent knowledge of the financial
arrangements between Mr. Oliver and the plaintiff. I never negotiated for or received
any payment from Plaintiff and I never received any compensation for my services
other than that paid to Prater Enterprises, Inc. by Mr. Oliver.
The only acts that I performed relevant to these proceedings are the services that I
rendered on behalf of Mr. Montana at Mr. Oliver’s request. I performed no services
for the plaintiff.
The only involvement of my corporation was to make my services available and to
receive the payment from Mr. Oliver.
Mr. Oliver testified by affidavit that Mr. Jurgensmeyer had engaged his services to develop
the career of an artist known as Hawke Montana. He further stated that he met with Mr.
Jurgensmeyer, Mr. Prater, and Mr. Montana in August of 1995 and shortly thereafter Mr.
Jurgensmeyer transferred to him $250,000. “This amount was to pay for my fees and the expenses
associated with developing Mr. Montana.”
Mr. Oliver also testified that after the August meeting he engaged the services of Mr. Prater
to provide interim management services for Mr. Montana while Mr. Oliver worked on securing a
recording contract. He agreed to pay Mr. Prater a one-time fee of $50,000 for his services; they
anticipated it would take 12 to 18 months to get a recording contract or determine one was not
available. Mr. Oliver paid Prater Enterprises, Inc. the entire $50,000 by check soon after he received
the funds from Mr. Jurgensmeyer. Mr. Oliver testified that Mr. Prater performed the management
services until they decided the arrangement with Mr. Montana was not going to work.
Mr. Prater included most of these statements in his Rule 56 Statement of Undisputed Facts.
In response, Mr. Jurgensmeyer disputed a number of them, specifically stating that in August of 1995
he had engaged both Mr. Prater and Mr. Oliver to provide services to prepare Hawke Montana for
a record agreement and that the $50,000 fee Mr. Prater received had come from money tendered by
Mr. Jurgensmeyer. In addition, Mr. Jurgensmeyer’s response stated that Mr. Prater had been present,
along with Mr. Oliver, during almost all discussions regarding the monetary arrangement necessary
to secure the alleged recording contract.
-7-
Neither the affidavit of Mr. Prater nor the affidavit of Mr. Oliver that are included in the
record presented to us addresses any of the particular circumstances regarding the arrangement with
Mr. Wise. The Statement of Undisputed Facts which is included in the record also does not address
any facts specific to Mr. Wise’s complaint or allegations. Mr. Wise testified by affidavit that Mr.
Prater, along with Mr. Oliver, entered into an oral agreement with him to secure a recording contract.
He also testified that Mr. Prater, as well as Mr. Oliver, made oral misrepresentations that a contract
had been procured. He also stated that Mr. Prater was present during and participated in almost all
conversations regarding the financial arrangements for the recording contract.
Mr. Wise testfied, “At no time prior to the filing of this lawsuit did Defendant hold himself
out to me as a corporation.” Mr. Jurgensmeyer made the same statement. Mr. Prater does not
dispute this assertion.
V.
Plaintiffs sued only Mr. Prater, not his corporation. The issue of whether an agent for a
corporation can be individually liable for misrepresentations has been addressed previously. In
Brungard v. Caprice Records, Inc., 608 S.W.2d 585 (Tenn. Ct. App. 1980), the individuals argued
they could not be liable on the contracts of their corporation, but the court found this argument had
no application to the plaintiff’s claims in tort for fraudulent misrepresentation. Id. 608 S.W.21d at
590. Following Brungard, we held:
A corporation acts through its agents. An agent is one who undertakes to transact
some business or to manage some affair, for another by authority and on account of
the latter, and to render an account of it. Security Federal Sav. and Loan Ass’n. v.
Riviera, Ltd., 856 S.W.2d 709, 715 (Tenn. App. 1992). We note that “an agent
cannot escape liability for tortious acts, including fraud or misrepresentation, against
third persons simply because the agent was acting within the scope of the agency or
at the direction of the employer.” Brungard v. Caprice Records, Inc., 608 S.W.2d
585, 590 (Tenn. App. 1980). . . . If KRI [the corporation] made misrepresentations,
some individual or individuals had to make them for it. The complaint in this
litigation identifies those individuals as Neely and Davis [officers and directors of the
corporation].
Allied Sound, Inc. v. Neely, 909 S.W.2d 815, 821 (Tenn. Ct. App. 1995).
Thus, an individual may be liable for fraud or misrepresentation even when acting as an agent
for a corporation. In Allied, the plaintiff had, in an earlier suit, obtained a judgment against the
individuals’ principal, the corporation. This court found that judgment did not preclude the action
against the individuals. “An officer or director of a corporation who commits or participates in the
commission of a tort is likewise liable to third parties regardless of the liability of a corporation.”
Brungard, 608 S.W.2d at 590-91 (citing Cooper v. Cordova Sand and Gravel Co., Inc., 485 S.W.2d
261, (Tenn. Ct. App. 1971)) (emphasis added).
-8-
Obviously, a party who makes misrepresentations when not acting as an agent for a
corporation or other entity may be liable personally.
With regard to the breach of contract claim, Mr. Jurgensmeyer and Mr. Wise claim they had
an agreement with Mr. Prater. Mr. Prater asserts he conducted any activities with regard to the
plaintiffs only through his corporation, but also asserts there was no agreement with the plaintiffs
on the part of either his corporation or himself individually.
If a contract existed, the question of who was the contracting party is answered by the
circumstances surrounding the making of the agreement. See Anderson v. Surbin, 740 S.W.2d 417(Tenn. Ct. App. 1987). In Anderson, a homeowner entered into an agreement for substantial
renovations to his home. When the homeowner sued the contractor, naming him individually and
also his corporate entity, judgment was awarded against the contractor individually. On appeal, the
contractor asserted that the trial court should not have pierced the corporate veil or disregarded the
corporate entity. This court found this argument to be irrelevant because questions of piercing the
corporate veil arise only where the corporation has been found liable and the trial court had found
no corporate liability, but instead had found the homeowner’s dealings had been with the defendant
in his personal capacity. The court then addressed whether the evidence preponderated against that
finding, and held:
Plaintiff testified that Durbin [the contractor] never orally represented himself as
having any corporate status and that he never knew of such alleged status until after
the parties had their dispute over the quality of the workmanship and alleged breach
by Durbin. The defendant Durbin in his testimony did not contradict the plaintiff’s
testimony that he, Durbin, never mentioned either before or during the negotiations
that he was an agent for a corporation. Therefore, as we see matters, in order for
appellant to prevail on this point, we must find that other proof, either written or oral,
preponderates in favor of a finding that plaintiff knew or was bound to know that he
was dealing with Durbin as an agent for a corporation at the time the agreement was
struck. This is so because the rule holds that if an agent fails to reveal his true status
as agent, he is bound as principal. Louisville & Nashville R. Co. v. McKay &
Morgan, 133 Tenn. 503, 182 S.W. 585 (1916).
Anderson, 740 S.W.2d at 418.
In Anderson, the relevant facts were that the defendant had a charter for his corporation, but
the actual corporate name appeared nowhere else in the documentary evidence. The written proposal
for the renovation work included the word “Inc.” in two places, but also could be read to be from the
individual. The court determined the proposal was submitted by the individual with no qualifying
provisions. In addition, the sign placed by the contractor in the home’s front yard did not show any
corporate entity, and none of the checks given by the homeowner bore “any hint of a deposit to a
corporate account” but were made out to the individual.
-9-
Based on these circumstances, this court found that the evidence preponderated in favor of
the trial court’s finding that the homeowner contracted with the defendant in his individual capacity.
As the Anderson court also stated, failure to disclose one’s status as an agent can result in
individual liability.
Tennessee follows the venerable common law rule that an agent for an undisclosed
principal is personally liable on a contract. Anderson v. Durbin, 740 S.W.2d 417,
418 (Tenn. Ct. App. 1987). Restatement (Second) of Agency, § 322 states, in part:
“An agent purporting to act upon his own account, but in fact making a contract on
account of an undisclosed principal, is a party to the contract.”
And an agent who makes a contract in his own name, without
disclosing the identity of his principal, renders himself personally
liable, even though the person with whom he deals knows that he is
acting as agent, unless it affirmatively appears that it was the mutual
intention of the parties to the contract that the agent should not be
bound.
Siler v. Perkins, 149 S.W. 1060, 1061, 126 Tenn. 380, 387 (1912). A party who
deals with such an agent may sue either the principal or the agent, but not both. Holt
v. American Progressive Life Ins. Co., 731 S.W.2d 923, 925 (Tenn. Ct. App. 1987).
Certain Interested Underwriters at Lloyd’s London, England v. Layne, 26 F.3d 39, 43-44 (6th Cir.
1994).
VI. Standard of Review
The standards for reviewing summary judgments on appeal are well settled. Summary
judgments are proper in virtually any civil case that can be resolved on the basis of legal issues alone.
Fruge v. Doe, 952 S.W.2d 408, 410 (Tenn. 1997); Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn. 1993);
Church v. Perales, 39 S.W.3d 149, 156 (Tenn. Ct. App. 2000). They are not, however, appropriate
when genuine disputes regarding material facts exist. Tenn. R. Civ. P. 56.04. Thus, a motion for
summary judgment should be granted only when the undisputed facts, and the inferences reasonably
drawn from the undisputed facts, support one conclusion - that the party seeking the summary
judgment is entitled to a judgment as a matter of law. Webber v. State Farm Mut. Auto, Ins. Co., 49
S.W.3d 265 (Tenn. 2001); Brown v. Birman Managed Care, Inc., 42 S.W.3d 62, 66 (Tenn. 2001);
Goodloe v. State, 36 S.W.3d 62, 65 (Tenn. 2001).
Summary judgments enjoy no presumption of correctness on appeal. Scott v. Ashland
Healthcare Ctr., Inc., 49 S.W.3d 281, 284 (Tenn. 2001); Penley v. Honda Motor Co., 31 S.W.3d
181, 183 (Tenn. 2000). Accordingly, appellate courts must make a fresh determination that the
requirements of Tenn. R. Civ. P. 56 have been satisfied. Hunter v. Brown, 955 S.W.2d 49, 50-51
-10-
(Tenn. 1997); Mason v. Seaton, 942 S.W.2d 470, 472 (Tenn. 1997). We must consider the evidence
in the light most favorable to the non-moving party, and we must resolve all inferences in the non-
moving party's favor. Doe v. HCA Health Servs., Inc., 46 S.W.3d 191, 196 (Tenn. 2001); Memphis
Hous. Auth. v. Thompson, 38 S.W.3d 504, 507 (Tenn. 2001). When reviewing the evidence, we
must determine first whether factual disputes exist. If a factual dispute exists, we must then
determine whether the fact is material to the claim or defense upon which the summary judgment
is predicated and whether the disputed fact creates a genuine issue for trial. Byrd v. Hall, 847
S.W.2d at 214; Rutherford v. Polar Tank Trailer, Inc., 978 S.W.2d 102, 104 (Tenn. Ct. App. 1998).
The moving party has the burden of proving that its motion satisfies the requirements of Rule
56, including its entitlement to judgment as a matter of law. Staples v. CBL Assocs., Inc., 15 S.W.3d
83, 88 (Tenn. 2000); Carvell v. Bottoms, 900 S.W.2d 23, 25 (Tenn. 1995); Jones v. City of Johnson
City, 917 S.W.2d 687, 689 (Tenn. Ct. App. 1995) overruled on other grounds by Hawks v. City of
Westmoreland, 960 S.W.2d 10 (Tenn. 1997). When a party seeking summary judgment makes a
properly supported motion, the burden shifts to the nonmoving party, in this case Mr. Wise and Mr.
Jurgensmeyer, to set forth specific facts which must be resolved by the trier of fact. Staples, 15
S.W.3d at 88; Byrd, 847 S.W2d at 215.
To properly support its motion, the moving party must either affirmatively negate an
essential element of the non-moving party’s claim or conclusively establish an
affirmative defense. If the moving party fails to negate a claimed basis for the suit,
the non-moving party’s burden to produce evidence establishing the existence of a
genuine issue for trial is not triggered and the motion for summary judgment must
fail. If the moving party successfully negates a claimed basis for the action, the non-
moving party may not simply rest upon the pleadings, but must offer proof to
establish the existence of the essential elements of the claim.
Staples, 15 S.W.3d at 88-89.
The nonmoving party may carry its burden by: “(1) pointing to evidence either overlooked
or ignored by the moving party that creates a material factual dispute, (2) by rehabilitating the
evidence attacked in the moving party’s papers, (3) by producing additional evidence showing the
existence of a genuine issue for trial, or (4) submitting an affidavit explaining why further discovery
is necessary as provided for in Tenn. R. Civ. P. 56.06.” Staples, 15 S.W.3d at 89 n.2 (citing
McCarley v. West Quality Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998)).
This court’s role in review of the grant of summary judgment is to review the record and
determine whether the requirements of Tenn. R. Civ. P. 56 have been met. Staples, 15 S.W.3d at
88. Our perspective is the same as that of the trial court. Gonzales v. Alman Const. Co., 857 S.W.2d
42, 44-45 (Tenn. Ct. App. 1993). Therefore, we must decide anew if the movant is entitled to
summary judgment; that is, whether the material facts are not in dispute and conclusively show that
Mr. Prater is entitled to judgment.
-11-
VII. Conclusion
The trial court determined there was no factual dispute as to Mr. Prater’s acting in his
individual or corporate capacity, stating, “ The record before the Court, including the affidavit of Mr.
Prater, establishes that all action taken by the defendant was in his capacity as an agent/employee
of Prater Enterprises, Inc. . . .” From our review of the record, we conclude there are disputes of fact
as to whether Mr. Prater participated in the arrangements with Mr. Jurgensmeyer and Mr. Wise as
an individual or as an agent of his apparently solely-owned corporation.
Whether he was acting individually or on behalf of his corporation is irrelevant to his
possible liability for fraud or negligent misrepresentation. Thus, even if he were acting as an agent
of the corporation, he could nonetheless be held personally responsible for any misrepresentations.
While we disagree with the trial court as to whether Mr. Prater’s assertions regarding his custom of
always conducting business through his corporation constitute undisputed proof that he was acting
as an agent of his corporation, we also conclude that even if we agreed with that determination, Mr.
Prater was not entitled to judgment because he could still be liable on the tort claims.
Similarly, even if Mr. Prater was acting as an agent for his corporation, he could also be held
liable on the breach of contract claim because he would have been acting as an undisclosed agent.
Mr. Prater does not dispute that he never informed the plaintiffs that he was acting on behalf of the
corporation. While we disagree with the trial court’s conclusion that no material disputes exist as
to Mr. Prater’s acting as an agent of the corporation, again that conclusion is not dispositive because
he could nonetheless be held individually liable on the breach of contract claims.
On appeal, Mr. Prater asserts that the summary judgment was appropriate because the
plaintiffs failed to come forward in opposition to the motion with proof that there was a contractual
relationship between each of them and Mr. Prater. Obviously, a party claiming breach of contract
must prove the existence of a contract. Mr. Prater testified that he never had a contractual
relationship with either plaintiff and that his only business relationship herein was with Mr. Oliver
who hired and employed him. However, he admits to taking part in the initial meetings and in later
meetings and conversations. Of course, the plaintiffs claim an oral agreement whereby Mr. Prater,
along with Mr. Oliver, agreed to secure a recording contract in exchange for the money paid by the
plaintiffs.
Thus, it appears to us that the question of whether a contract existed is a dispute of fact and
that the “proof” submitted herein consists of contradictory sworn statements by the opposing parties
as to the existence of oral agreements. Consequently, we conclude that there are disputed facts
material to whether an agreement existed upon which the breach of contract claim can be predicated.
As to the claims of negligent misrepresentation, a plaintiff must prove:
-12-
(1) that the defendant was acting in the course of its business, profession, or
employment, or in a transaction in which it had a pecuniary (as opposed to
gratuitous) interest;
(2) that the defendant supplied faulty information meant to guide others in their
business transactions;
(3) that the defendant failed to exercise reasonable care in obtaining or
communicating the information; and
(4) that the plaintiff justifiably relied upon the information provided by the defendant.
Robinson v. Omer, 952 S.W.2d 423, 427 (Tenn. 1997); Ritter v. Custom Chemicides, Inc., 912
S.W.2d 128, 130 (Tenn. 1995); John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428, 431 (Tenn.
1991).
Fraud, on the other hand, is established by proof of a false representation of an existing or
material fact made knowingly, without belief in its truth, or recklessly. The plaintiff must show that
he or she reasonably relied on the misrepresentation and suffered some damage as a result of that
reliance on the false representation. Pusser v. Gordon, 684 S.W.2d 639, 641 (Tenn. Ct. App. 1984).
Mr. Prater did not, in his statement of undisputed facts or in his affidavit, specifically assert
that he never made representations to the plaintiffs that contracts, including the description of the
record company and producer involved, existed. He simply took the position that his only
involvement was to make his services available through his corporation to Mr. Oliver and to receive
payment from Mr. Oliver. While the letters included in the record reflect misrepresentations only
by Mr. Oliver, Mr. Jurgensmeyer and Mr. Oliver alleged oral misrepresentations by Mr. Prater at the
meetings or other communications where he took part.
Based upon the record before us, we conclude that the defendant, Mr. Prater, is not entitled
to summary judgment because the undisputed facts do not establish that he is entitled to such
judgment as a matter of law. Consequently, we reverse the decision of the trial court and remand
for further proceedings. Costs are taxed to the appellee, Mr. Prater.
___________________________________
PATRICIA J. COTTRELL, JUDGE
-13-