N. C. Edwards, II v. Carlock Nissan of Jackson, LLC

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
January 17, 2007 Session
N. C. EDWARDS, II v. CARLOCK NISSAN OF JACKSON, LLC, ET AL.
A Direct Appeal from the Chancery Court for Madison County
No. 62829 The Honorable James F. Butler, Chancellor
No. W2006-01316-COA-R3-CV - Filed April 9, 2007
Lessor/Appellee sued Lessee/Appellant for breach of contract due to Lessee/Appellant’s
alleged failure to maintain the leased building as required under the lease. The trial court entered
Judgment in favor of Lessor/Appellee, which Judgment included damages for repairs to the building,
lost rent, and attorney fees. Lessee/Appellant appeals. On appeal, Lessor/Appellee asks for attorney
fees in defending this appeal. We affirm the judgment of the trial court and remand for a
determination of appropriate appellate attorney fees.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed and
Remanded
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and DAVID R. FARMER , J., joined.
Jeffrey P. Boyd of Jackson, Tennessee for Appellants, Carlock Nissan of Jackson, LLC, Grover
Clayborn Carlock, Sr., and Grover Clayborn Carlock, Jr.
William H. Shackelford, Jr. of Memphis, Tennessee for Appellee, N. C. Edwards, II
OPINION
On May 4, 1998, Mr. N.C. Edwards, II ( “Lessor,” “Plaintiff,” or “Appellee”) sold his Nissan
car dealership to Carlock Nissan of Jackson, L.L.C., which is owned and operated by Grover
Clayborn Carlock, Sr., and Grover Clayborn Carlock, Jr. (together with Carlock Nissan of Jackson,
L.L.C. and Grover Clayborn Carlock, Sr., “Carlock,” “Lessee,” “Defendant,” or “Appellant”). In
connection with the sale, Carlock entered into a lease agreement (the “Lease”) to lease the building
owned by Mr. Edwards at 721 South Highland Avenue in Jackson, Tennessee (the “Building”).1 By
1
Pursuant to Sections 12.1-12.6 of the Lease, Grover Carlock, Sr. And Grover Carlock, Jr. entered into the
Lease as guarantors consenting to the terms and conditions of the Lease.
its own terms, the Lease expired on April 30, 2003. However, Section 2.2 of the Lease provides for
hold over by the Lessee and reads, in relevant part as follows:
In the event Lessee does hold over after the expiration of this Lease
and continues to occupy or remain in the premises without a written
agreement with Lessor, any such holding over shall be deemed a
monthly tenancy but otherwise subject to all the terms of this Lease
and subject to the then designated rental amount.
Section 5.3 of the Lease requires Carlock to repair and maintain the Building and reads, in
pertinent part, as follows:
Lessee shall at its own expense, keep and maintain all improvements
on said real property. Lessor shall be under no obligation to repair or
replace any of the improvements on said Demised Premises. Lessee
shall, at its own expense, keep and maintain the interior of the
building in good condition and repair so as to return the Demised
Premises to Lessor upon the termination of this Lease Agreement in
the same condition as received, ordinary wear and tear, damage by
fire or other casualty excepted. Lessee shall also be responsible for
the maintenance and upkeep of the building exterior, all structural
portions of the building, including the roof, plumbing, heating and air
conditioning and wiring.
Furthermore, Sections 8.1 and 8.3 of the Lease read as follows:
Section 8.1. Expiration. Upon the expiration of this Lease, the
Lessee shall vacate the premises and return possession thereof to
Lessor in the same condition as when received, ordinary wear and tear
and casualty excepted.
* * *
Section 8.3. Lessee to Maintain and Return in Same Condition.
Lessee agrees to maintain said property and return it to Lessor in the
same condition as received by Lessee....
On or about May 4, 1998, Carlock took possession of the Building. At that time, the
Building functioned as an active auto dealership. Carlock operated a Nissan dealership out of the
Building until August 2002. At that time, Carlock moved its dealership out of the Building and into
a new location on Vann Drive in Jackson, Tennessee. From August of 2002 until approximately
February of 2003, Carlock operated its wholesale business out of the Building. Thereafter, Carlock
allowed Uniserve (a company of which Mr. Carlock, Jr. Is a 50% partner) to operate out of the
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Building. During this period, Mr. Edwards, pursuant to the Lease, erected a sign in front of the
Building advertising its availability. However, Mr. Carlock, Jr. testified that old files and records,
along with some spare parts that Carlock had acquired with the dealership, were allowed to remain
in the Building after the April 30, 2003 expiration of the Lease. Furthermore, Carlock did not
change the responsible party for the Building’s utilities until June, 2003. Consequently, and pursuant
to section 2.2 of the Lease, see supra, Carlock became a month-to-month tenant.
On May 5, 2003, a tornado hit Jackson, Tennessee. The Building sustained substantial
structural and cosmetic damage as a result of this event. Both Mr. Carlock, Jr. and Mr. Edwards went
to the Building the day after the tornado to survey the damage. The insurance claim, which totaled
approximately $30,000 was paid by Mr. Edwards’ carrier. The insurance payment, however, covered
only the damage that was deemed to have occurred as a result of the tornado. Mr. Edwards alleges
that there was some $17,000 in additional damages that existed prior to the tornado and which were
caused by Carlock’s lack of maintenance as required under the Lease. Nonetheless, Mr. Edwards
bore the costs of refurbishing the Building. On or about April 4, 2004, Mr. Edwards sent a demand
letter to Carlock seeking reimbursement for repairs to the Building that were not covered by the
insurance settlement. The letter reads, in pertinent part, as follows:
[A]t the time of the expiration of the Lease, you did not remove your
property for almost two months, and the maintenance of the building
was neglected or performed in ways that caused damages that I have
had to repair....
* * *
...your lease expired on May 3, 2003. The tornado happened on May
4, 2003. You were to be totally out of the building by May 3, 2003.
Your possessions were not removed until late June, 2003. I therefore
was deprived of two months ability to rent the property. You did not
change the utilities until the first week of June, 2003, which is further
evidence of your continued possession of the property after surrender
possession, the lease continued on a month to month basis.
The letter included an itemized list of damages deemed to have been caused by Carlock’s lack of
maintenance along with the cost of repairing same, to wit:
Repairs to fix the damaged roof decking caused by
leaking roof. $5586.70
Repairs to fix all the damage done to light fixtures,
bathroom fans, and electrical fixtures. $5073.08
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Repairs to heating and air conditioning systems and repairs
to all bathroom fixtures. $2932.08
Removal of Daewoo sign. $435.00
Repair of handrails by service department, bookkeeping
office, guard rails around sales lot and replace missing
heat and air unit. $3328.94
These repairs were substantiated with copies of invoices that Mr Edwards had paid. When no
settlement was reached in response to this letter, Mr. Edwards filed a Complaint for breach of
contract against Carlock on January 19, 2005. The Complaint reads, in relevant part, as follows:
6. At the expiration of the term of the Lease Agreement on or about
April 30, 2003, Defendants: (a) did not remove their property from
the leased premises for two (2) months thereby extending the term of
said Lease Agreement for said period; and (b) left the leased premises
without making appropriate repairs and maintenance to the leased
premises as required by the Lease Agreement.
* * *
9. Plaintiff avers that once Plaintiff re-entered the leased premises
after Defendants had finally vacated same, Plaintiff discovered
various and [] sundry items which were in need of repair or
maintenance, said repair and maintenance having been neglected by
the actions or lack thereof by the Defendants.
10. The surrender of the leased premises in the afore-described
condition constituted a breach by the Defendants of the covenants in
sections 8.1-8.4 of the Lease Agreement and a violation of Tenn.
Code Ann. § 66-28-401.
11. Plaintiff avers that in accordance with section 5.3 and sections
8.1-8.4 of the Lease Agreement and Tenn. Code Ann. § 66-28-401,
Defendants had a duty to repair or maintain these items; that
Defendants failed to repair or perform said maintenance; and that
Plaintiff was required to employ third parties to perform such repairs
and maintenance at the cost of approximately $17,355.80....
In addition to the $17,355.80 in repair costs for damages that were allegedly not caused by the
tornado, Mr. Edwards also asked the court for $11,000 for an additional two (2) months of rent and
$720.31 for two (2) months of real estate taxes based upon the alleged hold over by Carlock. On
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April 5, 2005, Carlock filed its Answer, in which Carlock denied the material allegations of the
Complaint and raised, as affirmative defenses, failure to state a claim upon which relief may be
granted, accord and satisfaction, failure to mitigate, and laches.
The matter was heard by the trial court, sitting without a jury, on February 3, 2006. On
March 6, 2006, the trial court entered a Judgment in favor of Mr. Edwards in the amount of
$30,285.27, which amount included costs of repairing damage not caused by the tornado, twenty-five
(25) days of rent for Carlock’s hold over, and attorney fees incurred at the trial level. In a opinion
letter of February 14, 2006, the trial court specifically found that:
Plaintiff essentially took control of the building after the tornado and
contracted for all repairs. Plaintiff recovered insurance proceeds for
repairs that were determined to be “tornado damage” and has sued the
Defendants for repairs and maintenance items which Plaintiff claimed
were existing prior to the tornado and which Plaintiff alleges were not
caused by the tornado, one way or the other. Defendants also
defended on the basis that the Plaintiff was not entitled to recover on
a theory of accord and satisfaction based on the receipt of insurance
proceeds. The Defendant also alleges comparative fault on the part
of Plaintiff for failing to act to mitigate its damages, the doctrine of
laches, and waiver. The Court does not find any merit to those
specifically pled defenses.
RULING OF THE COURT
* * *
1. The Plaintiff is entitled to recover from the Defendants the sum of
$5,586.70 with reference to the damaged roof, and the repair thereof.
2. Plaintiff shall recover from the Defendants the sum of $435.00 for
expense related to removal of Defendant’s sign.
3. Plaintiff shall recover from the Defendant the sum of $5,073.08
for electrical repairs.
4. Plaintiff shall recover from the Defendants for HVAC and
plumbing repairs in the amount of $2,258.40...and the sum of
$70.42....
5. Plaintiff shall recover from the Defendants the sum of $3,328.94
for the repair and replacement of the hand-rails, guard-rails, sheetrock
repair and the missing HVAC unit.
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6. With reference to the claim for rent for the months of May and
June, 2003, including interest, the Court is persuaded that even
though there were maintenance items and repairs to be made, and
even if there were records and some items still left in the building,
that this, in and of itself, would not have prevented the Plaintiff from
renting out the building. The repairs could have been accomplished
within days, had it not been for the tornado damage and the resulting
loss of electricity in the area. Plaintiff took control of the building
immediately upon the expiration of the lease. Plaintiff had complete
and total access to the building to do the repairs for which it is
charging the Defendants. The Court finds that under ordinary
circumstances, the repairs could have been done in not less that 25
days after the lease expired and therefore, Plaintiff was basically
deprived of his building for 25 days by actions of the Defendants in
failing to maintain and repair....
Carlock appeals from the Judgment of the trial court and raises four (4) issues as stated
in their brief:
1. The trial court erred in holding that the Plaintiff carried his burden
of proof regarding liability of the Defendants for the alleged damages
to the building in question.
2. The trial court erred in holding Defendants liable for all damages
when Plaintiff did not mitigate his damages.
3. The trial court erred in holding that the Plaintiff was entitled [to]
25 days of rent following the expiration of the lease.
4. The trial court erred in holding that the Plaintiff is entitled to
attorney’s fees.
Mr. Edwards requests attorney fees in the amount of $6,965.00 for defending this appeal.
Because this case was tried by the court sitting without a jury, we review the case de novo
upon the record with a presumption of correctness of the findings of fact by the trial court. Unless
the evidence preponderates against the findings, we must affirm absent error of law. See Tenn. R.
App. P. 13(d). Furthermore, when the resolution of the issues in a case depends upon the truthfulness
of witnesses, the trial judge who has the opportunity to observe the witnesses in their manner and
demeanor while testifying is in a far better position than this Court to decide those issues. See
McCaleb v. Saturn Corp., 910 S.W.2d 412, 415 (Tenn.1995); Whitaker v. Whitaker, 957 S.W.2d
834, 837 (Tenn.Ct.App.1997). The weight, faith, and credit to be given to any witness's testimony
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lies in the first instance with the trier of fact, and the credibility accorded will be given great weight
by the appellate court. See id.; see also Walton v. Young, 950 S.W .2d 956, 959 (Tenn.1997).
It is well settled that the measure and elements of damages upon the breach of a lease is
governed by the general principles which determine the measure of damages on claims arising from
breaches of other kinds of contracts. The general rule of contracts, to the effect that the plaintiff may
recover damages only to the extent of its injury, applies to leases. Damages for breach of a lease
should, as a general rule, reflect a compensation reasonably determined to place the injured party in
the same position as he would have been in had the breach not occurred and the contract been fully
performed, taking into account, however, the duty to mitigate damages. In addition, damages
resulting from a breach of a lease must have been within a contemplation of the parties; must have
been proximately caused by the breach; and must be ascertainable with reasonable certainty without
resort to speculation or conjecture. See 49 Am.Jur.2d Landlord & Tenant § 96 (2003).
Carlock first contends that the record in this case “is devoid of any competent evidence that
damage existed at the building in question prior to the tornado....” Having reviewed this record, we
disagree. In his testimony, Mr. Carlock, Jr. admits that Carlock should be held responsible for the
missing air conditioning unit, for removal of the signs, and for damage to the railings, to wit:
Q [to Mr. Carlock, Jr.]. Can you testify under oath today that you
didn’t–you didn’t replace that air-conditioning unit and there was a
hole in the wall?
A. Oh, yes.
* * *
Q. Okay. I guess it’s the same thing for the damage to the–to the
railings that had been damaged and–and both cut. Were you aware
that they had been cut–
A. Yes, the rails had been cut. Yes, I knew that.
Q. Based on your understanding of the lease, did you think you had
a duty to repair and replace those before you returned the premises
over to my client?
A. Yes, they should have been repaired.
Q. Can you agree with me that–that I guess the evidence is that you
didn’t do that?
A. Right.
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Q. Okay. And would you agree with me that you had a duty–or that
you should have removed the signs?
A. Yes.
Because Carlock admits to responsibility for the missing HVAC unit, damage to the railings, and
removal of signs, the only disputed damages concern damage to the roof, ceiling, and sheetrock due
to leaking, damages for electrical repairs, and damages for plumbing repairs. Concerning the
condition of the Building in February 2003, Sharon Fisher, who worked with Carlock in its
wholesale division and operated out of the Building, testified, in relevant part, as follows:
Q. Okay. Could you describe...the condition of the building...in
February of 2003.
A. Okay. There was–it was quite dirty. There was trash all over the
building. Things were piled up, like phones just piled in the floor,
books. There was [sic] several leaks in the building.... [W]hen you
would drive up in front of the building, you could see where the wood
had rotte[d].... It was just–it was in terrible shape. There was
garbage that I actually had to take out.
Q. What about the bathrooms?
A. The bathrooms–the bathrooms were horrendous. The water ran
all the time in the men’s. We’d have to go in there a lot of times just
to check on it. And the women’s did, too; [the toilets] would
overflow and run.
Q. Did–did you ever observe Mr. Carlock and the staff do much
maintenance to the building during that period of time?
A. No.
* * *
Q. Do you recall any particular leaks that you could describe....
A. There was one in the bookkeeping office. If it rained heavy, you
had to put a bucket or something down to catch the water. And there
was one outside on the showroom floor that came right down where
the light fixture was. It came down the wall. It would puddle up in
the floor. And there was one also that was across from the fireplace
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next to the showroom window where it was actually making the
plaster come off the wall. You could see the stains.
Don Neal worked as a service manager for Mr. Edwards until Mr. Edwards sold the business, then
Mr. Neal worked for Carlock until the Spring of 2002. Mr. Neal testified that there were no leaks
when Mr. Edwards turned the Building over to Carlock. Concerning Carlock’s maintenance of the
Building, Mr. Neal testified, in relevant part:
Q. ...What did you observe about the condition of the building during
the period of time that you worked for Mr. Carlock?
A. It–it had to be a major item before it got repaired....
* * *
Q. ...Did you have any plumbing problems while you were there that
were not fixed?
A. We had a plumbing problem in the lady’s bathroom. The
commode had a tendency to over-flood in there in the lady’s
bathroom....
* * *
Q. Did you see any leaks from the roof down into the facility while
you were there?
A. Just the–the only one that I observed personally myself was the
one in the girls’ office.
Q. There’s been some testimony about some possible rotted wood on
the front of the building. Are you familiar with any of that?
A. Yeah, I saw some that was up there. It would have been probably
within the last year that I was there...and I did notice some rotted
wood, areas where there was no paint on the eaves of the building in
the front.
Q. And did any of that–did any of those items exist when Mr.
Edwards had the building?
A. No, sir.
Concerning the light fixtures and electrical system, Robert Boren, a master electrician with
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Boren Electric who made repairs at the Building in July, 2003, testified that the light bulbs had not
been maintained in some time:
Q. Does it appear that these [light bulbs] had been replaced in a
timely manner?
A. No, sir, these hadn’t been replaced....
Q. That tells you that they’ve been damaged for awhile?
A. Yes, sir.
In August, 2003, Jim Webb of Cantrell Services repaired the air-conditioning units, thermostats,
faucets, vent fans, plug valves, and urinals in the Building. When asked the cause of the damage to
these items, Mr. Webb responded “[l]ack of maintenance.”
The above testimony is disputed by Rick Neely, a sales representative for Carlock, who
testified that, despite a leaky roof and problems with the toilets, Carlock made every effort to repair
these problems as they arose. Mr. Neely could not, however, testify as to Carlock’s maintenance
efforts after Carlock moved to the Vann Drive location. Kevin Slater, Mr. Carlock, Jr.’s business
partner in Uniserve, also testified that Carlock made every effort to clean and maintain the Building.
It is well settled, however, that the weight, faith, and credit to be given to any witness’ testimony lies
in the first instance with the trier of fact, and the credibility accorded will be given great weight by
the appellate court. See Whitaker v. Whitaker, 957 S.W.2d 834, 837 (Tenn.Ct.App.1997). From our
review of the entire record in this case, we conclude that the evidence supports the trial court’s
finding concerning Carlock’s liability for damage to the Building.
Carlock next argues that Mr. Edwards failed to mitigate his damages. Under the doctrine of
mitigation of damages, an injured party has a duty to exercise reasonable care and due diligence to
avoid loss or minimize damages after suffering injury. See Cook & Nichols, Inc. v. Peat, Marwick,
Mitchell & Co., 480 S.W.2d 542, 545 (Tenn.Ct.App.1971); Gilson v. Gillia, 321 S.W.2d 855, 865
(Tenn.Ct.App.1958)). Generally, one who is injured by the wrongful or negligent act of another,
whether by tort or breach of contract, is bound to exercise reasonable care and diligence to avoid loss
or to minimize or lessen the resulting damage, and to the extent that his damages are the result of his
active and unreasonable enhancement thereof, or due to his failure to exercise such care and
diligence, he cannot recover. Cook & Nichols, Inc., 480 S.W.2d at 545. In determining whether an
injured party has fulfilled its duty to mitigate, a court must examine “whether the method which he
employed to avoid consequential injury was reasonable under the circumstances existing at the
time.” Action Ads, Inc. v. William B. Tanner Co., Inc., 592 S.W.2d 572, 575 (Tenn.Ct.App.1979)
(quoting Tampa Electric Co. v. Nashville Coal Co., 214 F. Supp. 647, 652 (M.D.Tenn.1963)).
Despite this duty, an injured party is not required to mitigate damages where such a duty would
constitute an undue burden. Cummins v. Brodie, 667 S.W.2d 759, 766 (Tenn.Ct.App.1983).
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In the instant case, it is uncontested that Mr. Edwards went to the Building the day after the
tornado. Mr. Edwards immediately hired contractors to secure the building by boarding up damaged
or missing windows and doors, and placing a tarp on the roof. Mr. Edwards also instigated repairs
on the Building including damage that existed prior to the tornado. Concerning these damages, Mr.
Edwards instructed those doing the repairs to differentiate tornado damage from damage existing
prior to that event. Given the facts of this case, and especially in light of Mr. Edwards prompt action
in not only securing the Building but also in getting the repair work started, we cannot conclude that
Mr. Edwards failed to mitigate his damages.
Carlock contends that the trial court erred in awarding Mr. Edwards twenty-five (25) days
rent following the expiration of the Lease. As set out above, Mr. Carlock, Jr. testified that certain
Carlock property was allowed to remain in the Building following the expiration of the Lease on
April 30, 2003. Furthermore, it is uncontested that Carlock continued the Building’s utilities in its
name until early June, 2003. The fact that Mr. Edwards put up a sign advertising the Building for
lease, and the fact that Mr. Edwards stored some of his own property in the Building, has no bearing
on whether Carlock was a hold over tenant under the Lease. The fact that Carlock kept property and
utilities at the Building provides sufficient evidence to support the trial court’s finding that Carlock
held over at least twenty-five (25) days.
Finally, Carlock contends that the trial court erred in awarding Mr. Edwards’ attorney fees
in this case. We disagree. The Lease clearly provides for recovery of attorneys fees for breach of
the agreement, to wit:
Section 7.4. Agreement to Pay Attorneys’ Fees and Expenses. In the
event [that] either party should default under any of the provisions of
this Lease Agreement and the other party should employ attorneys or
incur other expenses for the collection of rent or the enforcement of
performance or observation of any obligation or agreement herein
contained, the prevailing party shall be entitled [to] the reasonable fee
of such attorneys and such other reasonable expenses so incurred in
the collection or enforcement of this Lease Agreement.
Having determined above that the trial court was correct in finding that Carlock had breached the
Lease agreement by failing to properly maintain the Building, Section 7.4 of the Lease clearly
supports an award of attorney fees in this case.
We now turn to address Mr. Edwards’ request for $6,965.00 in attorney fees and expenses
(as supported by the affidavit of attorney William H. Shackelford, Jr.) incurred in defending this
appeal. In support of his argument, Mr. Edwards relies upon the case of Killingsworth, et al. v. Ted
Russell Ford, Inc., 205 S.W.3d 406 (Tenn. 2006). In granting attorney fees for the appeal, our
Supreme Court relied upon the language of the TCPA, which states that “[u]pon a finding by the
court that a provision of [the TCPA] has been violated, the court may award to the person bringing
such action reasonable attorney’s fees and costs.” T.C.A. § 47-18-102(e)(1). The Court found that
the award of appellate attorney fees were permissible under this provision and reasoned that “[i]f an
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appeal ensues the wronged plaintiff’s monetary judgment is at risk of being consumed by the
resulting appellate attorney’s fees unless they are also subject to be awarded. A plaintiff at trial is
therefore at risk of being ‘de-remedied’ if unable to collect his or her reasonable appellate legal
fees.” Killingsworth, 205 S.W.3d at 410. Mr. Edwards asks this Court to apply the same reasoning
to the case at bar. Because Killingsworth involves the violation of a statute that specifically allowed
for attorneys fees, we decline to extend the reasoning of that case to the one at bar, which does not
involve violation of a statute but, rather, breach of contract. That being said, section 7.2 of the
Lease, see supra, clearly provides for the recovery of attorneys fees and we see no language limiting
that award to the trial level. Rather, the defense of this appeal, which was brought by Carlock,
involves expenses incurred by Mr. Edwards “in the collection or enforcement of the Lease
agreement.” We, therefore, hold that Mr. Edwards is entitled to recover his appellate attorneys fees.
For the foregoing reasons, we affirm the Judgment of the trial court. We remand the case to
the trial court for a determination of appropriate appellate attorney fees. Costs of this appeal are
assessed to the Appellant, Carlock Nissan of Jackson, L.L.C., Grover Clayborn Carlock, Sr., Grover
Clayborn Carlock, Jr., and their surety.
__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.
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