IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

August 27, 2014 Session

MIKE CRADIC v. MCCOY MOTORS, INC., ET AL.

Appeal from the Law Court for Sullivan County (Kingsport)

No. C39380(C) E. G. Moody, Chancellor

No. E2013-02857-COA-R3-CV-FILED-OCTOBER 20, 2014

This appeal arises from a dispute over payment on a note (“the Note”). McCoy Motors, Inc.

borrowed $90,000.00 from A. D. Kinkead (“Kinkead”). The Note provided, among other

things, that the loan could be renewed at the end of twelve month periods and that, if

Kinkead died before the Note was fully paid, the principal of the unpaid balance would be

paid to William L. McCoy, Jr. and Sue McCoy. Kinkead’s attorney-in-fact, Mike Cradic

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(“Cradic”), informed McCoy that Kinkead was demanding that the Note be paid in full.

McCoy refused to pay in full but instead continued to make payments on the Note. Kinkead,

through Cradic, sued the McCoys in the Law Court for Sullivan County (Kingsport) (“the

Trial Court”) to compel full payment on the Note. Kinkead died and Cradic pursued the suit.

The Trial Court found that demand had been made on the Note, and that at the end of the

twelve month period during which demand was made, the Note came due and payable. The

Trial Court entered judgment against McCoy Motors, Inc., and the McCoys, individually.

McCoy Motors, Inc. and the McCoys appeal. We affirm the Trial Court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Law Court Affirmed;

Case Remanded

D. MICHAEL SWINEY, J., delivered the opinion of the Court, in which CHARLES D. SUSANO,

JR., C.J., and JOHN W. MCCLARTY, J., joined.

R. Wayne Culbertson and T. Martin Browder, Jr., Kingsport, Tennessee, for the appellants,

William L. McCoy, Jr., Sue McCoy, and McCoy Motors, Inc.

Arthur M. Fowler and Arthur M. Fowler, III,Johnson City, Tennessee, for the appellee, Mike

Cradic, Executor of the Estate of A. D. Kinkead.

For purposes of convenience and as appropriate, we will refer to the Appellants at times collectively 1

as “McCoy.”
OPINION

Background

This case involves a loan between relativesthat ended up in a lawsuit. Kinkead

was an uncle to Mr. McCoy through a marriage to Mr. McCoy’s aunt. Cradic is Kinkead’s

nephew.

In January 1997, McCoy Motors, Inc., a company started and operated by Mr.

McCoy, borrowed $90,000.00 from Kinkead as evidenced by the Note. The Note provides

as follows:

McCOY MOTORS, INC.

1848 East Stone Drive

Kingsport, Tennessee 37660

(615) 246-3821

JANUARY 4, 1997

TO WHOM IT MAY CONCERN:

A.D. Kin[k]ead has loaned McCoy Motors, Inc. the sum of $90,000.00 at the

interest rate of 6% per year. This loan is for twelve months and interest is to

be paid on the first of the month on a monthly basis. Said loan can be renewed

at the end of each twelve months with the interest to be no more than one and

one half percent under NEW YORK prime interest rate or less than 6% per

year . . . .

In the event of the death of A.D. Kinkead, said principle [sic] of the unpaid

balance will be paid to William L. McCoy, Jr & Sue McCoy, at the end of

duration of said loan.

/s/Wm L. McCoy, Jr. /s/A.D. Kinkead

Wm L. McCoy, Jr., President A.D. Kinkead

The loan was not signed by the McCoys individually and states clearly that “A.D. Kin[k]ead

has loaned McCoy Motors, Inc. the sum of $90,000 . . . .” From January 1997 through

February 2007, McCoy Motors, Inc. paid Kinkead $500.00 per month on the Note. In

February 2007, McCoy Motors, Inc. paid $9,000.00 on the Note. Beginning in March 2007,

McCoy Motors, Inc. paid Kinkead $1,000.00 per month on the Note. The last payment was

made in December 2011. In December 2011, the amortized balance on the Note was

$28,676.98.

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In July 2010, the elderly Kinkead appointed Cradic, his nephew, as his

attorney-in-fact. On July 8, 2010, Cradic visited Mr. McCoy and requested full payment of

the Note on behalf of Kinkead. On July 20, 2010, Cradic returned to McCoy Motors, Inc.

to follow up with Mr. McCoy on receiving a lump sum check for the balance on the Note.

Mr. McCoy refused to pay in full. Instead, McCoy Motors, Inc. continued to make monthly

payments on the Note.

In February 2011, attorney Raymond C. Conkin, Jr. demanded payment of the

Note on behalf of Kinkead. McCoy Motors, Inc. declined to pay the balance. In April 2011,

attorney Arthur M. Fowler again made demand for the monies on behalf of Kinkead. Still,

McCoy Motors, Inc. did not pay the balance. In October 2011, Kinkead, through Cradic,

sued McCoy Motors, Inc. and the McCoys individually to recover the monies. In December

2011, Kinkead died at the age of 91. Cradic continued to pursue the case.

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This matter was tried in May 2013. Cradic had recorded his July 2010

conversations with Mr. McCoy regarding the Note. At trial, partial transcripts of the

recordings were entered into the record. The July 8, 2010 transcript includes the following,

in part:

Mike Cradic: They’ve transferred him from the VA down here. Brookhaven.

Bill McCoy: Brookhaven . . . oh, it’s right down here across the creek.

Mike Cradic: Across the creek.

Bill McCoy: Oh, okay, I can go down there anytime I want to.

Mike Cradic: Yea. Yea, he’s down there. But what I was wantin’ to talk to

you about is that money. I’m going to have to have that dang money. Because

I’m fixin’ to incur more expense than I’ll ever get paid.

Bill McCoy: Now he’s got 60-some thousand dollars layin’ out there in the .

. . .

Mike Cradic: Yea, I know. I know.

Bill McCoy: Well anytime you want it, let me know and I will go get it.

Cradic filed a Notice of Suggestion of Death and a Motion for Substitution. A Consent Order

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Substituting Party granting Cradic’s motion for substitution was entered by the Trial Court.

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Mike Cradic: No, I can go get it. He put me on his bank account.

Bill McCoy: Well go get it.

Mike Cradic: I don’t want to until I have to but I need that “48” too.

***

Mike Cradic: Well is there anyway that you can cut me that check?

Bill McCoy: No. Let me tell you what I just went through . . . . [proceeds to

recount some recent personal problems]

***

Bill McCoy: See I told him (unintelligible), I’m gonna pay you 6% (six

percent).

Mike Cradic: Yea, I remember that.

Bill McCoy: and I said when it goes to 2, I’m gonna pay you that and I’m

gonna pay you this (unintelligible)

Mike Cradic: So, it’s paid down to 48, right? That last check said $48,000.

Right? I mean if you can, as soon as you can, I would like to get it and put it

in the bank. That is what I want to do. But I’m going to go down here to the

hospital.

On July 20, 2010, Cradic went to see Mr. McCoy again. Cradic again recorded their meeting.

The transcript reads in part as follows:

Bill McCoy: Come on over and sit down. Make yourself at home. You want

something cold to drink?

Mike Cradic: No, I’m gonna have to go. I wanted to come to see if you had

that check.

Bill McCoy: I’m not going to write you that check Mike.

Mike Cradic: Oh, you’re not??

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Bill McCoy: No.

Mike Cradic: How come?

Bill McCoy: ‘Cause I don’t need to.

***

Mike Cradic: Well my being Power of Attorney, I can request it to be paid in

full.

Bill McCoy: No you can’t.

***

Bill McCoy: Well, you may doubt it, but it may be true. I intend to pay him

and, here again, this was unspoken when I told him I was going to pay him

back $1000.00 (one thousand dollars) a month and I intend to do what I told

him I was going to do and I hope he lives to get every dime of it back.

***

Bill McCoy: I don’t want no hard feelins’ over this but I’m gonna do to him

exactly what I told him I would do.

Mike Cradic: Well . . . he asked me Friday night if I was going to come down

here and get it and I said “yea,” and he said “atta boy.” So, whatever.

In August 2013, the Trial Court entered its order granting judgment in favor

of Cradic against McCoy Motors, Inc. in the amount of $31,000.00 plus $2,675.69 interest

and post judgment interest. In its conclusions of law, the Trial Court explained its decision:

From July 2010, until January 4, 2011, McCoy Motors, Inc. knew that

Mr. Kinkead wanted the Note repaid but had no obligation to repay it until

January 4, 2011.

***

The Note did not “automatically” renew on January 4, 2011, since Mr.

Kinkead, through his attorney-in-fact, Mr. Cradic, gave McCoy Motors, Inc.

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notice in July 2010 that the Note was to be paid in full. If the parties had

varied the terms of the Note to allow an “automatic” renewal, Mr. Kinkead’s

notice to McCoy Motors, Inc., through his attorney-in-fact, that he was

insisting that the original terms of the Note was sufficient to require McCoy

Motors, Inc. to comply with those terms. Livey v. Drake, 629 S.W.2d 900, 904

(Tenn. 1982) The notice did not need to be in writing as the contract could be

modified orally. Galbreath v. Harris, 811 S.W.2d 88, 91 (Tenn. App. 1990).

Such notice would be proper to require McCoy Motors, Inc. to comply with the

clear terms of the Note because collateral agreements to a written contract

must be limited to subject matter which does not contradict or vary the terms

which are plainly expressed in the Note. Airline Constr., Inc. v. Barr, 807

S.W.2d 247, 259 (Tenn. App. 1990)

The acceptance of monthly payments after January 4, 2011, did not act

as a renewal of the Note by waiver. To constitute abandonment or waiver of

a legal right, there must be a clear, unequivocal and decisive act by Mr.

Kinkead showing such a purpose, or acts amounting to estoppel, on his part.

Waiver cannot be made out of an uncertain application but must be clear,

unequivocal and decisive. The monthly payments were received under protest

and did not constitute a waiver to bar this lawsuit to collect the balance of the

Note. (See Ramos v. Knoxville Emergency Physicians, 1998 Tenn. App.

LEXIS 248, copy attached). The proof does not establish the required action

or inaction inconsistent with the claim or right being waived. Jenkins Subway,

Inc. v. Jones, 990 S.W.2d 713, 722 (Tenn. App. 1998) The Plaintiff did not

acquiesce in McCoy Motors, Inc.’s continued monthly payment of the Note but

instead objected to the payment, demanded payment of the overdue Note in

February and April and filed suit in October to recover the monies due on it.

The Plaintiff never waived demand for payment of the Note and promptly and

aggressively took action to collect the balance due and owing.

William F. McCoy, Jr. and Sue McCoy did not sign the Note

individually; therefore, they are not liable for the Note.

(Format modified). Both parties filed motions to alter or amend after entry of the order. In

November 2013, the Trial Court entered an order granting and denying certain of the

motions’ requests. The Trial Court modified the judgment to $28,676.98, “the amount

reflected by the amortization schedule and which is the most equitable amount.” Also, the

Trial Court entered judgment against the McCoys individually. McCoy Motors, Inc., as well

as Mr. and Mrs. McCoy, timely appealed to this Court.

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Discussion

Although not stated exactly as such, McCoy raises two issues on appeal: 1)

whether the Trial Court erred in finding as a matter of law that the note executed January 4,

1997 was not renewed at the end of the twelve month period ending in January 2011; and,

2) whether the Trial Court erred in finding the McCoys individually liable for the $28,676.98

balance on a note they never signed.

Our review is de novo upon the record, accompanied by a presumption of

correctness of the findings of fact of the trial court, unless the preponderance of the evidence

is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001).

A trial court's conclusions of law are subject to a de novo review with no presumption of

correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.

2001).

This appeal requires interpretation of the terms of a note. As this Court

explained in Kafozi v. Windward regarding construction and interpretation:

In resolving a dispute concerning contract interpretation, our task is to

ascertain the intention of the parties based upon the usual, natural, and

ordinary meaning of the contract language. Planters Gin Co. v. Fed.

Compress & Warehouse Co., Inc., 78 S.W.3d 885, 889-90 (Tenn. 2002)(citing

Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999)). A determination of

the intention of the parties “is generally treated as a question of law because

the words of the contract are definite and undisputed, and in deciding the legal

effect of the words, there is no genuine factual issue left for a jury to decide.”

Planters Gin Co., 78 S.W.3d at 890 (citing 5 Joseph M. Perillo, Corbin on

Contracts, § 24.30 (rev. ed. 1998); Doe v. HCA Health Servs. of Tenn., Inc.,

46 S.W.3d 191, 196 (Tenn. 2001)). The central tenet of contract construction

is that the intent of the contracting parties at the time of executing the

agreement should govern. Planters Gin Co., 78 S.W.3d at 890. The parties’

intent is presumed to be that specifically expressed in the body of the contract.

"In other words, the object to be attained in construing a contract is to ascertain

the meaning and intent of the parties as expressed in the language used and to

give effect to such intent if it does not conflict with any rule of law, good

morals, or public policy." Id. (quoting 17 Am. Jur. 2d, Contracts, § 245).

This Court's initial task in construing the Contract at issue is to

determine whether the language of the contract is ambiguous. Planters Gin

Co., 78 S.W.3d at 890. If the language is clear and unambiguous, the literal

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meaning of the language controls the outcome of the dispute. Id. A contract

is ambiguous only when its meaning is uncertain and may fairly be understood

in more than one way. Id. (emphasis added). If the contract is found to be

ambiguous, we then apply established rules of construction to determine the

intent of the parties. Id. Only if ambiguity remains after applying the pertinent

rules of construction does the legal meaning of the contract become a question

of fact. Id.

Kafozi v. Windward Cove, LLC, 184 S.W.3d 693, 698-99 (Tenn. Ct. App. 2005).

We first address whether the Trial Court erred in finding as a matter of law that

the note executed January 4, 1997 was not renewed at the end of the twelve month period

ending in January 2011. The Note, evidencing Kinkead’s loan of $90,000.00 to McCoy

Motors, Inc., provides that “[s]aid loan can be renewed at the end of each twelve months .

. . .” From 1997 through 2011, McCoy Motors, Inc. made monthly payments on the Note.

McCoy argues that the conduct of the parties was such that it established a pattern of

expected payments, and that the parties never varied from this framework.

The option to renew the loan, contained in the Note, is significant. If either of

the parties wished to end the arrangement, they could decline to renew the Note at the end

of the twelve month period. The record on appeal reflects that in July 2010, an ailing

Kinkead, through his attorney-in-fact Cradic, demanded that the Note terminate and that full

payment should be rendered. When this intention was manifested by Kinkead through

Cradic, and never revoked, the Note was due in full at the end of the then 12 month period,

January 4, 2011. The evidence does not preponderate against any of the Trial Court’s

findings of fact. The record is clear that Kinkead demanded payment through Cradic’s

conversations with Mr. McCoy in July 2010 and through subsequent actions. McCoy could

not unilaterally keep the agreement going on his own terms in spite of Kinkead’s expressed

demands. In short, McCoy Motors, Inc. should have paid the balance of the Note in January

2011. The Trial Court did not err in awarding a judgment against McCoy Motors, Inc.

We next address whether the Trial Court erred in finding the McCoys

individually liable for the $28,676.98 balance on a note they never signed. Both parties on

appeal approach this issue in terms of a third-party beneficiary theory, to different ends.

However, a third-party beneficiary theory need never be reached. When the loan terminated

in January 2011 based upon Kinkead’s demands of July 2010, the balance was due to

Kinkead. Therefore, the McCoys, individually, never should have received the balance. At

trial, when asked if he and Mrs. McCoy had been paid the balance of the Note, Mr. McCoy

testified: “Yes. . . . That is – it’s still in our account, yes.” Had Kinkead never made demand,

upon his death the balance of the principal would have gone to the McCoys as provided in

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the Note. This, however, is not what happened. Kinkead, through Cradic, did end the loan,

which became due and payable months before Kinkead’s death. McCoy cannot by the

wrongful refusal of McCoy Motors, Inc. to pay the balance due as demanded by Kinkead

keep the Note unpaid until Kinkead’s death in order to trigger the provision providing for the

balance of the principal to go to Mr. and Mrs. McCoy. Therefore, the Trial Court did not err

in entering a judgment against the McCoys individually for monies, the balance of the Note,

they never should have received initially. We affirm the judgment of the Trial Court in its

entirety.

Conclusion

The judgment of the Trial Court is affirmed, and this cause is remanded to the

Trial Court for collection of the costs below. The costs on appeal are assessed against the

Appellants, William L. McCoy, Jr., Sue McCoy, and McCoy Motors, Inc., and their surety,

if any.

_________________________________

D. MICHAEL SWINEY, JUDGE

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