# FILED April 24, 1998 Cecil W. Crowson Appellate Cou rt 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 AP PEALS OF TENNESSEE AT NASHVILLE APPEAL FROM

THE CHANCERY COURT OF DAVIDSON COUNTY AT NASHVILLE, TENNESSEE HONORABLE ELLEN HOBBS LYLE, C HANCELLOR Stanley M. Chernau R. Garry Cha

ffin 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, MIDDL E SECTION

CONCUR: WILLIA M C. KOCH, JR., JUDGE WALTER W. BUSSART, JUDGE-2-

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 B oard ha ve appealed from a jury verdict and judgment in favor of the plaintiff, St ones River Utilities, Inc., for $210,436.24.

On March 18, 19 93, defenda nt issued a six-page invitation to bid to fu rnish services to defendant. The description o f the services is o

nly partly readable. Bla

nks in the fo llowing indicate unprinte

d portions in the cop

y in this rec

ord. The invitation

states: Contract to fu rnishall labor and --- maximum of twelve (12) meter reader

--- person and vehicles for contract meter read --- 93 thro ugh June 30, 1996, per attached spe--- eet (pages 1-5) w hich are a part of t his cont --- approx. average number

of meter read --- meter/year approx. av erage number job miles 1 50 --- y ear. Contract will include lead person --- and c

ost. Comments follow: Contract beginningJuly 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 y

ears of the contr

act and the follow

ing text: (This in no wa y g uarantees a minimum of hours usage, meters read, or obligates N.E.S. in any form.)-3- “Contract M eter Reader S pecificati ons” contai ned the foll owing:

8. The contra ctorwill furnish a maximum of fifteen(15) Contract Meter Readers with t wel ve (12) Contract Meter Readers normally being used. 9. N.E.S. does not guar ant ee any minimum number of Contract Meter Readers to be used.

- - - - 25. The contract can be terminated withou

t 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, andthe contrac t in strument 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 supervisor

y employ ees of N.E.S. Plaintiff asserts that said e

mployees or

ally promisedthat, 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 i s standard policy of NES that all of its ser vic e contracts state “...N ES is not r equired to a ssign any amount of work or any number

of projects...”, and further, to have a 30- day notice o

f cancellation o

f the contract. NES is inthe business

of distributing electricity used by its customers. In order to know how much is u sed, NES has to have individuals

to read these

meters. As long as NES is in t his bus ine ss, the pro gram of r eadi ng me ter s wi ll a lwa ys be utilized. As to the 30-day notice of cancellation, NES reserves this right in the even

t the contractor

does not fulfill the

terms of the contract. I hope this clarifies the matter for you. Plaintiff purcha

sed twelve new ve

hicles on credit.-4- On August 20, 1993, the “meter superintendent” of N.E.S. wrote a letter to plaintiff calling attention to d eficiencies in performance and qualifications of meter readers and threatening cancellation.

The same supervisor compiled deficiency statistics for

the months of July 1993 t hrough July 1994.

On January 10, 1994, the vice president of construction and maintenance operations of N.E.S. wrote plain

tiff as follows: In accordance with paragraph XVI of N ES Contract #93-94- 081, this letter is the required written notice tha t N ES is hereby terminatin

g t he mutual business contract for meter reading servic

es. This business decision is based on convenience rat her th an failure to perform per the referenced cont ra ct. The current management

at N ES is in the process of reorganizing the meter reading function

and as part of this reorganization, the meter reading is

bei ng returned to the control and performance

by permanent NES employees. This proposed reorganization

was announced to the employees on J anu ary 5 and 6, 1994. NES management i s making t his move as part of the long range plan to improve th e NES pu blic image and in crease pro duc tiv ity. To achieve these goals, it is felt that the return to meter reading by perman e nt employee

s is the best approach. This action will in no way affe ct other contrac

ts currently

in action between NES and your company, nor will it affec t your status as an approved a nd acti ve v endor under the NES purchasing policy. I have noted the impr ovement in the performance

under the referenced con trac t and your cooperation and

attention to

problems is appreciated. If you needto use NES as a ref erence in

fut ure business negotiations,

I will be glad to write or otherw

ise communicate our positive impression of your business performance. Please contact my office and

arrange a me

eting to discuss

the terms and timing for phasing out the contrac t ser vices and minimizing the impact on the NES customers and theaffected employees. Isuggest that this meeting be scheduled for Frid ay, January 14, 1994, or after to allow time to evaluate the best possible transition.-5- On February

4, 1994, the same of

ficial of N.E.S. w

rote plaintiff as

follows: Due to recent an nounceme nts and the undetermined effects on the meter reading

function, the act

ion to terminate the above contract has beenrescinded. The p urpose of this act

ion is to keep options open to hand le any meter r

eading conting

encies. Melvin Bell or T yl e r Mills will notify you of any needs we may have un

der this contrac

t.
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
summ ary 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 i n the former appe

al reversed the

summary judg

me nt on th e issue of estoppel and said:

With respect to the es

to ppel 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 ve

hicles to use in performing

the contract. Spe cif ica lly, she said, “NES further assured us that we would have twelve readers every day for the duration o

f 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 th ey said y ou had to purchase new vehicles,

because they couldn’t say that. I had to -- whenthe specs called for properly functioning veh

icles, but they

said we needed new vehi

cles. And they made that very clear.

- - - - An action based on estoppel may be brought where the promises of one part y are relied on by another party

to his-6- 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 make s a promise which the promisor should reaso nabl y expect to induce action or forbear an ce of a definite and substantial character on the part of the p

romi see, and wheresuch promise

doe s in fact induce such action or forbearanc

e, it is binding if injustice canbe avoided only by enfor ceme nt of the promise. 579 S.W.2d at 427. We are of the opinionthat there are contested facts in this case that make summary judgment on the estoppel issue impro per. See Byrd v. Hall, 847 S.W.2d 208 (Tenn. 199 3)
. Therefore, we reverse the judgment b elo w on that point and remandthe cause

to the trial court

for further proceedings on the issue of e st oppel only. O therwise, the judg

ment 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 pa ving c ould not be performed untilgrading was completed by another subcontrac tor. The general contractor insisted that the plaintiff move extensive paving equipment to the job site before gr ading was complete and assuredplaintiff that

the grading w

ould be completed on time to avoid delay in paving. Plaintiff movedthe equipment on the job site early, but the grading was not completed promptly as promised, and pla int iffsuf fere d ex ten siv e dam age f rom the del ay. 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:

Gen er all y, a pro mis e un acco mpa nie d by a considerationis unenforceable. 17 C.J.S. Contracts § 71, pp. 748 et seq. However, when o ne man by his

promise induces another to chang

e his situation, a repudiation of the promise would amount to a fraud. Where one makes a promise which the promisorshould reasonably expect to induce action or forbearance

of a definite and substantial character on the part of the promisee, and where such p romise does in fact induce such action or forbearance, it is b inding if injustice can be a voidedonly by

enforcement of

the promise. 17 C.J.S. Contracts § 74, p. 764.-7- The same rule has b

een ca lled the doctrine of promissory estoppel. In 17 Am. Jur.2d, Contracts, § 89, pp. 431, 432, is found the

following text: “T he tr end of modern ca ses is to extend the rule of est

opp el to promissory statements,wherethe evidence clearly shows that the statements were made to induce action a n d the promisor was c ulpable in some respects. But in order for t he doc trine of pr omissory

estoppel to apply, the prom is e which is sou ght t o be enforced must have inducedaction of a definite a nd substantial characte r by the promis

ee. Also, justifia

ble relianceand irrep ar able detriment to the promisee are necessary

factors t o enable him to invoke the doctrine of promissory estoppel. G enerally speaking, the me

re fact that a promisee relies upon a prom ise made without other consideration does not impart validity to what before was void. There must b e some ground for saying

that the acts

done in reliance upon the promise we re contemplated by the contract,either impliedly or in t er ms, as the convention al induceme nt, motive, an d equivalent for the promise.” Defendants

r ep resented or promised to plaintiff that the grading would

proceed to comple

tion on a schedule

th a t would enable plaintiff to begin paving the new grading as so on as the resurfacing was completed (having been started on July 1). Def

end ants knew that plaintiff would rely upon the r epresentation or promise; plaintiff did indeed re l y ther eo n; the promise was not kept; and plaintiff suffered dam age t here by.

- - - - Def endantsurged plaintiff to begin sooner tha n he wa s obligated to begin, and promised the grad ing w oul d be read y. Plaintiff began wo rk earl y in reliance upon the promise, the promise was not fulfilled, and plaintiff was dam aged the reby. Defendants’ col lateral promise was made with good consideration, and it is enforceable. It is no defense

that the true wrongdoer wasScholes, or that defendants did the best they could to speed the work of Scholes. The pro mis e was tha t th e gra din g wou ld b e rea dy. It was an independ ent 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 defe

ndants’ promise th

at:
“You can start onthe asphalt andwhen you get through with that, we’ll have th e rest-8- o f the job where you can proceed along. S o come on in.” and not otherwise.

Foster & Creighton

Co. v. Wilson Con

tracting Co . is the authority for the creation of promissory

estoppel. There was no issue in that cas e as to the authori

ty of those

who spoke for the corporation. In the present case,after the former opinion of this Court, and on remand to the Trial Cou rt, the iss ue w as m ade b y t he d efen dan t, a gove rnm ent al e nti ty fo r wh om o nly a particular body has a

uthority 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 no

tice to plaintiff that the power

of binding the Na

shville Electric

Service was reposed in its Board and
was evidenced only by a document sig ned by its chairman. Without the action of the Board and its chairman, no other employee of the Board had

any author

ity to bind the

Board by c

ontract, quasi contract or

estoppel.

This record contains no evidence that any statement or commun icat ion relied upon by plaintiffs to establish estoppel was au tho riz ed b y the Nashville Elec tric Power Boar

d. In this situation, the verdict and judg ment must

be set aside and th

e remaining por

tion 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 remande

d to-9-

the Trial Court for

collection of cos

ts accrued in tha

t court.



### REVERSED AND REMANDED.

___________________________________ HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION

CONCUR:

_____________________________ WILLIA M C. KOCH, JR., JUDGE

_____________________________ WALTER W. BUSSART, JUDGE