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:
-8-
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.
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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
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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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