FILED

April 24, 1998

Cecil W. Crowson

Appellate Court Clerk

STONES RIVER UTILITIES, INC., )

 ) Davidson Chancery

Plaintiff/Appellee, ) No. 94-1665-III

 )

VS. )

 )

METROPOLITAN GOVERNMENT ) Appeal No.

OF NASHVILLE, DAVIDSON COUNTY,) 01A01-9709-CH-00461

TENNESSEE, acting by and through )

the ELECTRIC POWER BOARD and )

d/b/a “NASHVILLE ELECTRIC )

SERVICE” or “NES”, )

 )

Defendant/Appellant. )

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

HONORABLE ELLEN HOBBS LYLE, CHANCELLOR

Stanley M. Chernau

R. Garry Chaffin

CHERNAU, CHAFFIN & BURNSED

424 Church Street, Suite 1750

Nashville, Tennessee 37219

ATTORNEYS FOR PLAINTIFF/APPELLEE

T. Larry Stewart, No. 3345 Cyrus L. Booker, No. 10747

Nancy A. Vincent, No. 16938 Ursula Y. Holmes, No. 18040

STOKES & BARTHOLOMEW BOOKER & ASSOCIATES

424 Church Street, Suite 2800 315 Deaderick Street, Suite 1280

Nashville, Tennessee 37219-2386 Nashville, Tennessee 37238-1280

Eugene W. Ward, No. 3119

Nashville Electric Service

1214 Church Street, Suite 235

Nashville, Tennessee 37203

ATTORNEYS FOR DEFENDANT/APPELLANT

REVERSED AND REMANDED.

HENRY F. TODD

PRESIDING JUDGE, MIDDLE SECTION

CONCUR:

WILLIAM C. KOCH, JR., JUDGE

WALTER W. BUSSART, JUDGE
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STONES RIVER UTILITIES, INC., )

 ) Davidson Chancery

Plaintiff/Appellee, ) No. 94-1665-III

 )

VS. )

 )

METROPOLITAN GOVERNMENT ) Appeal No.

OF NASHVILLE, DAVIDSON COUNTY,) 01A01-9709-CH-00461

TENNESSEE, acting by and through )

the ELECTRIC POWER BOARD and )

d/b/a “NASHVILLE ELECTRIC )

SERVICE” or “NES”, )

 )

Defendant/Appellant. )

O P I N I O N

The defendant, Metropolitan Government and its Electric Power Board have appealed

from a jury verdict and judgment in favor of the plaintiff, Stones River Utilities, Inc., for

$210,436.24.

On March 18, 1993, defendant issued a six-page invitation to bid to furnish services to

defendant. The description of the services is only partly readable. Blanks in the following

indicate unprinted portions in the copy in this record. The invitation states:

Contract to furnish all labor and --- maximum of

twelve (12) meter reader --- person and vehicles for contract

meter read --- 93 through June 30, 1996, per attached spe---

eet (pages 1-5) which are a part of this cont --- approx.

average number of meter read --- meter/year approx. average

number job miles 150 --- year. Contract will include lead

person --- and cost.

Comments follow: Contract beginning July 1, 1993 --- 1996.

Please submit proposal in triplicate.

“Appendix A to Meter Reading Contract” contains a schedule of rates to be paid during

the successive years of the contract and the following text:

(This in no wayguarantees a minimum of hours usage,

meters read, or obligates N.E.S. in any form.)
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“Contract Meter Reader Specifications” contained the following:

8. The contractor will furnish a maximum of

fifteen (15) Contract Meter Readers with twelve (12) Contract

Meter Readers normally being used.

9. N.E.S. does not guarantee any minimum

number of Contract Meter Readers to be used.

- - - -

25. The contract can be terminated without cause

by either party upon thirty (30) days written notice.

The Electric Power Board, governing body of N.E.S. awarded the contract to plaintiff,

and the contract instrument was signed by the Chairman of the Board on May 8, 1993 and by

plaintiff on May 10, 1993.

On May 14, 1993, plaintiff’s president met with three supervisory employees of N.E.S.

Plaintiff asserts that said employees orally promised that, if plaintiff purchased new vehicles for

the meter readers, twelve meter readers would be used every day of the three-year duration of the

contract.

On June 9, 1993, at the request of plaintiff, the General Counsel of N.E.S. wrote plaintiff

as follows:

Dear Ms. Wilson:

It is standard policy of NES that all of its service

contracts state “...NES is not required to assign any amount of

work or any number of projects...”, and further, to have a 30-

day notice of cancellation of the contract.

NES is in the business of distributing electricity used

by its customers. In order to know how much is used, NES

has to have individuals to read these meters. As long as NES

is in this business, the program of reading meters will always

be utilized.

As to the 30-day notice of cancellation, NES reserves

this right in the event the contractor does not fulfill the terms

of the contract.

I hope this clarifies the matter for you.

Plaintiff purchased twelve new vehicles on credit.
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On August 20, 1993, the “meter superintendent” of N.E.S. wrote a letter to plaintiff

calling attention to deficiencies in performance and qualifications of meter readers and

threatening cancellation.

The same supervisor compiled deficiency statistics for the months of July 1993 through

July 1994.

On January 10, 1994, the vice president of construction and maintenance operations of

N.E.S. wrote plaintiff as follows:

In accordance with paragraph XVI of NES Contract #93-94-

081, this letter is the required written notice that NES is

hereby terminating the mutual business contract for meter

reading services.

This business decision is based on convenience rather than

failure to perform per the referenced contract. The current

management at NES is in the process of reorganizing the

meter reading function and as part of this reorganization, the

meter reading is being returned to the control and

performance by permanent NES employees. This proposed

reorganization was announced to the employees on January 5

and 6, 1994.

NES management is making this move as part of the long

range plan to improve the NES public image and increase

productivity. To achieve these goals, it is felt that the return

to meter reading by permanent employees is the best

approach.

This action will in no way affect other contracts currently in

action between NES and your company, nor will it affect your

status as an approved and active vendor under the NES

purchasing policy. I have noted the improvement in the

performance under the referenced contract and your

cooperation and attention to problems is appreciated. If you

need to use NES as a reference in future business

negotiations, I will be glad to write or otherwise communicate

our positive impression of your business performance.

Please contact my office and arrange a meeting to discuss the

terms and timing for phasing out the contract services and

minimizing the impact on the NES customers and the affected

employees. I suggest that this meeting be scheduled for

Friday, January 14, 1994, or after to allow time to evaluate the

best possible transition. 
-5-

On February 4, 1994, the same official of N.E.S. wrote plaintiff as follows:

Due to recent announcements and the undetermined effects on

the meter reading function, the action to terminate the above

contract has been rescinded. The purpose of this action is to

keep options open to handle any meter reading contingencies.

Melvin Bell or Tyler Mills will notify you of any needs we

may have under this contract.

Plaintiff insists that N.E.S. hired its employees and refused to train substitutes, yet

insisted that plaintiff hold readers on standby to serve, if needed.

On February 16, 1994, plaintiff filed this suit. On March 2, 1995, the Trial Court granted

summary judgment of dismissal. On October 25, 1995, this Court affirmed the summary

judgment in regard to breach of the written contract or any modification. This former judgment

of this Court is now final and is the “law of the case” precluding any re-examination or revision.

Pierce v. Tharp, 224 Tenn. 328, 457 S.W.2d (1970).

The opinion of this Court in the former appeal reversed the summary judgment on the

issue of estoppel and said:

With respect to the estoppel issue, Stones River’s

president said in an affidavit filed in opposition to the motion

for summary judgment that, on May 14th, 1993, she met with

members of NES’s staff who strongly suggested that Stones

River obtain new vehicles to use in performing the contract.

Specifically, she said, “NES further assured us that we would

have twelve readers every day for the duration of the contract,

if we bought new trucks. Therefore, at the urging of NES we

decided to purchase all new vehicles.” Earlier, when she gave

her deposition, she was asked if NES told her she had to buy

new vehicles. She replied:

No, I don’t think they said you had to

purchase new vehicles, because they couldn’t

say that. I had to -- when the specs called for

properly functioning vehicles, but they said

we needed new vehicles. And they made that

very clear.

- - - -

An action based on estoppel may be brought where the

promises of one party are relied on by another party to his
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detriment. In Foster & Creighton Co. v. Wilson Contracting,

579 S.W.2d 422 (Tenn. App. 1979), this court said:

[W]hen one man by his promise induces

another to change his situation, repudiation of

the promise would amount to a fraud. Where

one makes a promise which the promisor

should reasonably expect to induce action or

forbearance of a definite and substantial

character on the part of the promisee, and

where such promise does in fact induce such

action or forbearance, it is binding if injustice

can be avoided only by enforcement of the

promise. 579 S.W.2d at 427.

We are of the opinion that there are contested facts in

this case that make summary judgment on the estoppel issue

improper. See Byrd v. Hall, 847 S.W.2d 208 (Tenn. 1993).

Therefore, we reverse the judgment below on that point and

remand the cause to the trial court for further proceedings on

the issue of estoppel only. Otherwise, the judgment is

affirmed.

In the cited case of Foster & Creighton Co. v. Wilson Contracting Co., the defendant was

the general contractor and the plaintiff was a subcontractor in improving runways of an airfield.

The plaintiff contracted to do all finish paving, but part of the paving could not be performed

until grading was completed by another subcontractor. The general contractor insisted that the

plaintiff move extensive paving equipment to the job site before grading was complete and

assured plaintiff that the grading would be completed on time to avoid delay in paving. Plaintiff

moved the equipment on the job site early, but the grading was not completed promptly as

promised, and plaintiff suffered extensive damage from the delay. No issue was raised as to the

authority of defendant’s employee to make the promises of prompt grading. This Court affirmed

a judgment for damages and said:

Generally, a promise unaccompanied by a

consideration is unenforceable. 17 C.J.S. Contracts § 71, pp.

748 et seq. However, when one man by his promise induces

another to change his situation, a repudiation of the promise

would amount to a fraud. Where one makes a promise which

the promisor should reasonably expect to induce action or

forbearance of a definite and substantial character on the part

of the promisee, and where such promise does in fact induce

such action or forbearance, it is binding if injustice can be

avoided only by enforcement of the promise. 17 C.J.S.

Contracts § 74, p. 764.
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The same rule has been called the doctrine of

promissory estoppel. In 17 Am. Jur.2d, Contracts, § 89, pp.

431, 432, is found the following text:

“The trend of modern cases is to

extend the rule of estoppel to promissory

statements, where the evidence clearly shows

that the statements were made to induce action

and the promisor was culpable in some

respects. But in order for the doctrine of

promissory estoppel to apply, the promise

which is sought to be enforced must have

induced action of a definite and substantial

character by the promisee. Also, justifiable

reliance and irreparable detriment to the

promisee are necessary factors to enable him

to invoke the doctrine of promissory estoppel.

Generally speaking, the mere fact that a

promisee relies upon a promise made without

other consideration does not impart validity to

what before was void. There must be some

ground for saying that the acts done in reliance

upon the promise were contemplated by the

contract, either impliedly or in terms, as the

conventional inducement, motive, and

equivalent for the promise.”

Defendants represented or promised to plaintiff that

the grading would proceed to completion on a schedule that

would enable plaintiff to begin paving the new grading as

soon as the resurfacing was completed (having been started

on July 1). Defendants knew that plaintiff would rely upon

the representation or promise; plaintiff did indeed rely

thereon; the promise was not kept; and plaintiff suffered

damage thereby.

- - - -

Defendants urged plaintiff to begin sooner than hewas

obligated to begin, and promised the grading would be ready.

Plaintiff began work early in reliance upon the promise, the

promise was not fulfilled, and plaintiff was damaged thereby.

Defendants’ collateral promise was made with good

consideration, and it is enforceable.

It is no defense that the true wrongdoer was Scholes,

or that defendants did the best they could to speed the work of

Scholes. The promise was that the grading would be ready.

It was an independent assurance of a condition which

defendants were bound to make good or to indemnify plaintiff

for loss.

In summary, plaintiff is entitled to damages for the

breach of defendants’ promise that:

“You can start on the asphalt and when

you get through with that, we’ll have the rest
-8-

of the job where you can proceed along. So

come on in.”

and not otherwise.

Foster & Creighton Co. v. Wilson Contracting Co. is the authority for the creation of

promissory estoppel. There was no issue in that case as to the authority of those who spoke for

the corporation. In the present case, after the former opinion of this Court, and on remand to the

Trial Court, the issue was made by the defendant, a governmental entity for whom only a

particular body has authority to speak. One dealing with municipal officers, boards or

committees is bound at his peril to take notice of the limitation of their authority. J. A. Kreis &

Co. v. City of Knoxville, 145 Tenn. 297, 237 S.W. 55 (1921). The contract with plaintiff was

approved by the Electric Power Board and signed by its chairman. This was adequate notice to

plaintiff that the power of binding the Nashville Electric Service was reposed in its Board and

was evidenced only by a document signed by its chairman. Without the action of the Board and

its chairman, no other employee of the Board had any authority to bind the Board by contract,

quasi contract or estoppel.

This record contains no evidence that any statement or communication relied upon by

plaintiffs to establish estoppel was authorized by the Nashville Electric Power Board. In this

situation, the verdict and judgment must be set aside and the remaining portion of plaintiff’s suit

must be dismissed. Camurati v. Sutton., 48 Tenn. App. 54, 342 S.W.2d 732 (1961).

The judgment of the Trial Court under review in the present appeal is reversed and the

suit is dismissed. Costs of this appeal are taxed against the plaintiff. The cause is remanded to
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the Trial Court for collection of costs accrued in that court.

 REVERSED AND REMANDED.

___________________________________

HENRY F. TODD

PRESIDING JUDGE, MIDDLE SECTION

CONCUR:

_____________________________

WILLIAM C. KOCH, JR., JUDGE

_____________________________

WALTER W. BUSSART, JUDGE