Artist Building Partners v. Auto-Owners Mutual Insurance Company

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
NOVEMBER 15, 2012 Session
ARTIST BUILDING PARTNERS, ET AL. v. AUTO-OWNERS MUTUAL
INSURANCE COMPANY
Direct Appeal from the Circuit Court for Davidson County
No. 07C112 Thomas W. Brothers, Judge
No. M2012-00157-COA-R3-CV - Filed December 28, 2012
The orders of the trial court were designated as final pursuant to Rule 54.02 of the Tennessee
Rules of Appellate Procedure. Because we find that certification of the judgment under Rule
54.02 was in error, we dismiss the appeal for lack of appellate jurisdiction.
Tenn. R. App. P.3 Appeal as of Right; Appeal Dismissed
D AVID R. F ARMER, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and J. S TEVEN S TAFFORD, J., joined.
W. Timothy Harvey and Rebecca J. Garman, Clarksville, Tennessee, for the appellant, Auto-
Owners Mutual Insurance Company.
Raymond Graham Prince, Nashville, Tennessee, for the appellees, Artist Building Partners
and Howard Caughron.
MEMORANDUM OPINION 1
1
Rule 10 of the Rules of the Court of Appeals of Tennessee provides:
This Court, with the concurrence of all judges participating in the case, may affirm, reverse
or modify the actions of the trial court by memorandum opinion when a formal opinion
would have no precedential value. When a case is decided by memorandum opinion it shall
be designated “MEMORANDUM OPINION”, shall not be published, and shall not be cited
or relied on for any reason in any unrelated case.
Background
On June 13, 2005, fire damaged a building owned by Artist Building Partners and
Howard Caughron (collectively as “Plaintiffs”).2 The building was insured by Auto-Owners
Mutual Insurance Company (“Defendant”). On January 11, 2007, after a dispute arose over
the amount owed by the Defendant under the policy, the Plaintiffs filed suit alleging that the
Defendant had only paid a portion of the amount owed for the damage to the building and
lost business income, and had refused to pay the balance owed. The complaint further sought
damages for the Defendant’s alleged bad faith refusal to pay and for violation of the
Tennessee Consumer Protection Act (“TCPA”).
On February 5, 2007, the Defendant demanded an appraisal under the appraisal
clauses of the policy at issue, and submitted the following issues to appraisal: (1) the actual
cash value of the damages to the building, less reasonable depreciation; (2) the reasonable
time frame within which the repairs to the building should have been completed; and (3) the
actual business income loss incurred. On October 16, 2007, an appraisal award was made
finding the actual cash value of the building less depreciation to be $1,627,330.14, the actual
business income loss to be $1,060,297.66, and the reasonable time frame within which the
repairs should be completed to be six months from the date construction begins. Defendant
paid the balance for the actual cash value of the building, deducting previous payments.
Defendant paid only twelve months worth of lost business income, however, based on its
theory that the Business Income and Extra Expense Endorsement in the policy limited
recovery of actual business income to twelve months.
On April 16, 2008, Plaintiffs filed a motion for partial summary judgment asking the
trial court to find that the twelve month limitation only applied to extra expense and not
business income loss, and that the appraisal award established the amount of business income
loss and extra expense as $1,060,297.66. Thereafter, Defendant moved for partial summary
judgment seeking a finding that the twelve month limitation applied to both lost business
income as well as to extra expense. On July 31, 2008, the trial court entered an order
granting, in part, Plaintiffs’ motion that the twelve month limitation did not apply to lost
business income. Finding that a question of fact existed regarding the “period of
restoration,” the trial court declined to grant Plaintiffs’ motion establishing that the amount
of lost business income and extra expense was $1,060,297.66. According to the policy, the
“period of restoration” is the that time beginning with the date of the loss and ending with
the “date when the property at the described premises should be repaired, rebuilt or replaced
with reasonable speed and similar quality.”
2
Mr. Caughron is the sole remaining partner of Artist Building Partners.
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Both parties subsequently filed additional motions for summary judgment. Plaintiffs’
motion contended that, because the signatories to the appraisal award agreed that the “period
of restoration” was from June 2005 to April 2008, Plaintiffs were entitled to recover the full
amount for lost business income and extra expense during those thirty-four months less
Defendant’s previous payments. Thereafter, the trial court directed the parties to schedule
a deposition of the appraisal umpire, who was subsequently deposed on June 14, 2011. On
August 16, 2011, Defendant served a subpoena on the appraisal umpire seeking a copy of her
entire file regarding her work in this case. Following the appraisal umpire’s motion to quash,
or in the alternative, for a protective order, the trial court concluded that the Defendant’s
subpoena was unduly burdensome and granted the umpire’s motion.
At a hearing on November 4, 2011, the trial court ruled that the appraisal panel, in
calculating the amount of lost business income, had necessarily determined that the “period
of restoration” began on the date of loss, June 13, 2005, and ended six months after the
appraisal award was signed on October 16, 2007. Therefore, on December 19, 2011, the trial
court entered an amended order granting Plaintiffs’ motion for partial summary judgment and
denied Defendant's motion. The trial court concluded that Plaintiffs were entitled to recover
the $1,060,297.66 amount, less Defendant’s previous payments of $393,640.20, for a total
of $666,657.46. The trial court further concluded that the Plaintiffs were entitled to a
judgment for prejudgment interest at ten percent per annum on the award beginning
November 17, 2007, the date the award “should have been paid.” Thereafter, the trial court
entered an order finding that both its July 31, 2008 and December 19, 2011 orders be
designated as final pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure.
Defendant timely filed a notice of appeal to this Court.
Discussion
Defendant presents several issues for our review on appeal. The dispositive issue,
however, concerns this Court’s subject matter jurisdiction. “Subject matter jurisdiction
concerns the authority of a particular court to hear a particular controversy.” Meighan v. U.S.
Sprint Commc'ns Co., 924 S.W.2d 632, 639 (Tenn. 1996) (citing Landers v. Jones, 872
S.W.2d 674, 675 (Tenn. 1994)). The question of subject matter jurisdiction is one that
appellate courts must consider even if the parties do not raise the issue. Tenn. R. App. P.
13(b); Osborn v. Marr, 127 S.W.3d 737, 740 (Tenn. 2004). “[P]arties cannot confer subject
matter jurisdiction on a trial or an appellate court by appearance, plea, consent, silence, or
waiver.” Dishmon v. Shelby State Cmty. Coll., 15 S.W.3d 477, 480 (Tenn. Ct. App. 1999)
(citing Caton v. Pic–Walsh Freight Co., 211 Tenn. 334, 364 S.W.2d 931, 933 (Tenn. 1963);
Brown v. Brown, 198 Tenn. 600, 281 S.W.2d 492, 501 (Tenn. 1955)).
This Court’s subject matter jurisdiction is limited to final judgments except where
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otherwise provided by procedural rule or statute. Bayberry Assocs. v. Jones, 783 S.W.2d
553, 559 (Tenn. 1990) (citing Aetna Cas. & Sur. Co. v. Miller, 491 S.W.2d 85, 86 (Tenn.
1973)). An order adjudicating fewer than all the claims, rights, and liabilities of fewer than
all the parties is not a final judgment that is appealable as of right. See Tenn. R. App. P. 3(a).
Rule 3(a) of the Tennessee Rules of Appellate Procedure nevertheless permits parties to
appeal an order that does not adjudicate all of the claims, rights, and liabilities of all parties
if the trial court certifies its judgment as final pursuant to Rule 54.02 of the Tennessee Rules
of Civil Procedure. Rule 54.02 provides:
When more than one claim for relief is present in an action, whether as a
claim, counterclaim, cross-claim, or third party claim, or when multiple parties
are involved, the Court, whether at law or in equity, may direct the entry of a
final judgment as to one or more but fewer than all of the claims or parties
only upon an express determination that there is no just reason for delay and
upon an express direction for the entry of judgment. In the absence of such
determination and direction, any order or other form of decision, however
designated, that adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties shall not terminate the action as to any
of the claims or parties, and the order or other form of decision is subject to
revision at any time before the entry of the judgment adjudicating all the
claims and the rights and liabilities of all the parties.
Tenn. R. Civ. P. 54.02.
Rule 54.02 creates two prerequisites to the certification of final judgment: (1) the
order must eliminate one or more but fewer than all of the claims or parties, Bayberry, 783
S.W.2d at 558, and (2) the order must expressly direct the entry of final judgment upon an
express finding of “no just reason for delay,” Fox v. Fox, 657 S.W.2d 747, 749 (Tenn. 1983).
If the trial court certifies a judgment that is not conclusive as to “one or more but less than
all of the claims in the action or the rights and liabilities of one or more parties, an appeal
from it will be dismissed, even though the trial court decided to treat the order as final.” 10
Charles Alan Wright et al., Federal Practice and Procedure § 2655 & n. 8 (3d ed.1998)
(collecting cases). Similarly, an appeal will be dismissed if this Court determines that a
certified judgment does not contain the requisite express findings, Fagg v. Hutch
Manufacturing Co., 755 S.W.2d 446, 447 (Tenn. 1988) (citation omitted), or improperly
holds that “no just reason for delay” exists, Huntington National Bank v. Hooker, 840 S.W.2d
916, 922 (Tenn. Ct. App.1991).
Our review of a Rule 54.02 certification is conducted under a dual standard. Brown
v. John Roebuck & Assocs., Inc., No. M2008-02619-COA-R3-CV, 2009 WL 4878621, at *5
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(Tenn. Ct. App. Dec.16, 2009)(no perm. app. filed). Appellate courts must first determine
whether an order disposes of one or more but fewer than all of the claims or parties, which
is a question of law we review de novo. Id. (citing Gen. Acq., Inc. v. GenCorp., Inc., 23 F.3d
1022, 1027 (6th Cir. 1994)); see also Christus Gardens, Inc. v. Baker, Donelson, Bearman,
Caldwell & Berkowitz, P.C., No. M2007-01104-COAR3-CV, 2008 WL 3833613, at *5
(Tenn. Ct. App. Aug.15, 2008) (no perm. app. filed) (impliedly deciding the question of
whether the court’s order disposed of a single claim under a de novo standard). If the order
properly disposes of one or more but fewer than all of the claims or parties, appellate courts
must then, and only then, determine whether there is no just reason for delay, a question we
review under an abuse of discretion standard. See Brown, 2009 WL 4878621, at *5; see also
Wright et al., supra, § 2655 (“An appellate court need concern itself with the other Rule
54(b) prerequisite-that the trial court make a determination ‘that there is no just reason for
delay’-only when it is satisfied that the district court properly has reached a final decision as
to any of the claims or parties and has directed the entry of judgment on that decision.”).
In the case at bar, our review focuses on the question of whether the trial court’s order
disposes of one or more but fewer than all of the claims before it. A “claim” for the purposes
of Rule 54.02 is defined as the “‘aggregate of operative facts which give rise to a right
enforceable in the courts.’” Brown, 2009 WL 4878621, at *6 (quoting McIntyre v. First Nat'l
Bank of Cincinnati, 585 F.2d 190, 192 (6th Cir. 1978) (per curiam)); accord Christus, 2008
WL 3833613, at *5 (citations omitted) (finding certification of final judgment pursuant to
Rule 54.02 erroneous where the court’s order resolved some but not all of the plaintiff’s
claims for legal malpractice arising out of a closely related series of occurrences); Tucker v.
Capitol Records, Inc., No. M2000-01765-COA-R3-CV, 2001 WL 1013085, at *1-3, 8 (Tenn.
Ct. App. Sept. 6, 2001) (finding certification improper where the court's order did not entirely
dispose of the plaintiff's claim, which concerned a single aggregate of operative facts arising
out of a contract). Accordingly, “‘a complaint asserting only one legal right, even if seeking
multiple remedies for the alleged violation of that right, states a single claim for relief.’”
Christus, 2008 WL 3833613, at *5 (quoting Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737,
744, 96 S. Ct. 1202, 47 L. Ed. 2d 435 (1976)).
After thoroughly reviewing the record, we conclude that the trial court’s order does
not dispose of a “claim” for purposes of Rule 54.02. In its order certifying its previous
orders as final pursuant to Rule 54.02, the trial court held as follows:
It is therefore ORDERED, that the Court’s Order entered on the 31st
day of July, 2008, regarding the Plaintiffs’ Motion for Partial Summary
Judgment and the Defendant’s Motion for Partial Summary Judgment is now
hereby designated as a final Order pursuant to Tennessee Rule of Civil
Procedure 54.02, as a ruling of the Court for which an immediate appeal may
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be taken.
It is further ORDERED that the Court’s ruling on the Plaintiffs’ Motion
for Partial Summary Judgment and the Defendant’s Motion for Partial
Summary Judgment, entered on the 19th day of December, 2011, is hereby
designated as a final Order pursuant to Tennessee Rule of Civil Procedure
54.02, as a ruling of the Court for which an immediate appeal may be taken.
It is further ORDERED that the two Orders entered on July 31, 2008,
and December 19, 2011, respectively, dispose of the Plaintiffs’ breach of
contract claim in its entirety and are therefore proper Orders to be designated
as final Orders pursuant to Rule 54.02 of the Tennessee Rules of Civil
Procedure.
It is further ORDERED that the designation of these two Orders entered
July 31, 2008, and December 19, 2011, respectively, as final Orders pursuant
to Rule 54.02 of the Tennessee Rules of Civil Procedure is effective upon
entry of this Order.
Although the trial court’s order disposed of Plaintiffs’ breach of contract claim, Plaintiffs’
bad faith refusal to pay and TCPA claims are still being litigated in the court below. Clearly,
these claims arise out of the same aggregate of operative facts–the alleged failure of the
Defendant to pay Plaintiffs for losses covered by the policy of insurance. Thus, for purposes
of Rule 54.02, Plaintiffs’ complaint stated a single claim for relief. Accordingly, we
conclude that the Rule 54.02 certification was improper. Furthermore, the trial court’s order
from which the Defendant appeals does not contain an express determination that there is no
just reason for delay, and thus is not a final, appealable order. As a result, we must dismiss
this appeal for lack of appellate jurisdiction.
Conclusion
In light of the forgoing, the appeal is dismissed and the case remanded to the trial
court for further proceedings consistent with this opinion. Costs of this appeal are taxed to
the Appellant, Auto-Owners Mutual Insurance Company, and its surety, for which execution
may issue if necessary.
_________________________________
DAVID R. FARMER, JUDGE
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