### IN THE COURT OF APP EALS OF TENNESS EE AT JAC KSON O ct obe r 11, 200 5 S es sio n
M& M A UTO SA LES

v. OLD REPUBL IC SURET Y COMPANY

v. BRO OKS R OAD AU TO M AR T, LLC ; BR OOKS R OAD AU TO M AR T LLC D 

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### MEMPHI S AUTO W ORLD; SH ANE CHAPMAN, I NDIVI DUALLY AND

D 

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### MEM PHIS AU TO WOR LD
An Appeal f

romthe Circ uit Court for Sh elby County No. CT-006848 D’ Arm y Bailey, Jud ge

No. W2005-00656-C OA-R3-C V - F iled Dece m ber 29, 2005

Th is i s an ac tio n to re c ov e r on a sur e ty bo nd . The plaint if f a uto mob ile wh ole sa le r s oldve hic le s to the thi rd -p arty de fe nd a nt auto mob ile re ta ile r. Th e re ta ile r g a ve the wh ole sa le r the c e rt if ic a te s o f t itl e for the ve hicles as se curity , pending the re tailer’s pay ment in full f or the vehicle s. Subsequently , the reta iler sold the vehicles to third parties, but did not pay the wholesa ler. The wholesale r, there fore , reta ined the ce rtificate s of t itle. Consequently , the retailer wa s unable to transf er the certificates of title to the third-party

purcha ser s wh en they

boug ht the vehicles. L ater , in a sepa rate lawsuit, the wholesale r obtained a

judgme nt ag ainst the reta iler for brea ch of contra ct. The w holesaler then filed theins tant

la ws uit a g a ins t th e de fe nd a nt s ur e ty c omp a ny on there ta ile r’ s auto mob ile de a le rs hip
su re ty bo nd , c la imi ng that it

wa s d a ma g e d b y

there ta ile r’ s f

a ilu reto t rans fe r the c e rt if

ic a te s o f t itl e to the purcha sers of the vehicles. Thesurety company fi l ed a third-pa rty complaint ag ainst the reta iler, asse rti ng that the re tailer wa s require d to indemnify the surety

company for its attorney ’s fee s expended in defe nding the underlying lawsuit. The surety company filed a motion for summary jud g me nt. Th e tria l c ou rt g rante d s umm ary

jud g me nt in f

a vo r o f the su re ty

c omp a ny a g a ins t bo th the wholesa ler a nd the re tailer. The wholesale r and the reta iler now a ppeal. We af

firm. Tenn. R. App . P . 3 Appeal as of Right; Judgme nt of th e Circ uit Court is Aff irm ed

H OL L Y M. K I RBY , J ., delivere d the opinion of the Court, in which A L AN E. H I G H ERS , J ., and D A V ID R. F ARMER , J ., joined.Se e W i l s on v . Chapm an , 16 4 S.W

. 3 d 58 0 (T enn. C t

. A p p
. 20 0 4 ). 1


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- Roge r A. Stone, Memphis, Tenne ssee, f or the a ppellant, M& M Auto Sales.

Edwar d Wit t Chandler, Mountain Home, A rkansa s, for the a ppellant, Shane Chapma n.
J ohn D. Will et, Memphis, Tenne ssee, f or the a ppellee, O ld Republic Surety Company

. OP IN ION

Pla int if f/Ap pe llant M & M A uto Sa le s ( “ M& M A uto ” ) i s inthebu sin e ss o f w ho le sa le automobile sales. Third- Party Def endant/Appe llant Shane Chapman (“ Ch ap m an ”) owns Brooks Road Auto Mart a nd/or Memphis Auto World, a used ca r dea lership. Chapman purchase d a $25,000
a utomo bi le d eal er’s su ret y

bo nd fro m D efen dan t/ Th ir d-P art y P lai nt if f/ Appe lle eOl d Repu bli c Sure ty Compa ny (“ Ol d Rep ub lic ” ), wh ic h wa s in ef fe c t at a ll p e rt ine nt t ime s inthi s la ws uit . Ch apman is require d to have suc h a bond to maintain his used car dealership li cense for his dea lership, pursuant to Tennesse e Code Annotated § 55-17-111.

M& M A uto so ld app ro xima te ly tw e nty -t wo (2 2) ve hic le s to Cha pman, d/b /a

B ro ok s A uto Ma rt a nd /or Me mph is Au to Wor ld. As se c urity pe nd ing pay me nt i n f ull fr om C ha

pman, M& M A uto reta ined possession of the ve hicles’ ce rt ificate s of title. Chapman sold most of the vehicles purcha sed from M&M Auto to third- party reta il c ustomers. The value of all the vehicles sold to third parties by Chapman exceede d $25,000, the amount of Chapman’ s surety bond. Be cause Chapman did not in turn pay

M&M Auto f

or those vehicles, the ce rtificate s of title were not transfe rre d to the reta il purchase rs of the vehicles when they boug ht the automobiles. The total amount due a nd owing from Chapman to M& M Auto for the ve hicles purc hased by Chapman, without interest or attorney ’s fee s, is $63,600. None of the r etail purc haser s who purcha sed those vehic les from Cha pman has
ma de a ny c la im or ins titute d a ny

a c tio n a g a ins t M& M A uto a s a re su lt o f C ha

pman’ s f a ilu reto deliver the certificates of

title to the indivi dual re tail purcha sers.
I n a sepa rate lawsuit, not the subject of this appeal, M& M Auto sued Chapman for brea ch of contra ct. M& M Auto obtained a judg ment ag ainst Chapman for $63,600.00. 1

On S eptember 10, 2003, M&M Auto initiated the present lawsuit in Shelby CountyGene ral Sessions Court ag ainst Old Republic for $25,000, plus inter est and attorney ’s fe es, under Chapman’s
auto mob ile de a le rs hip su re ty bo nd

. M& M Aut o all e g e d that it wa s d a ma g e d b e c aus e Cha pman d id not provide ce rtificate s of title to the reta il c ustomers to w hom he sold the vehicles that he purc hased fr om M & M A uto . O n N ov e mbe r 1 4, 20 03 , O ld R e pu bli c fi le d a mot ionto d ism iss fo r f

a ilu reto state a c laim upon which re lief could be g rante d. The g ener al sessions c ourt g rante d Old Republic’s motion to di smiss, and M&M Auto appe aled to the c ircuit court be low.

On J anuary

6, 2004, Old Republic filed a third- party complaint ag ainst Chapman, ind ivi du a lly

a nd d/b /a Me mph is Au to Wor ld, B ro ok s Roa d Aut o M art , L L C, andB ro ok s Ro a d A utoC h a p m a n c la im s tha t his a tto rn e y a p p e a re d o n his b e h a lf “a t t h e la st m inu te ” a n d w a s d e n ie d the o p p o rtu n ity 2
t o f i l e a res p o nse t o O l d R ep ub l i c’ s m o t i o n fo r summ ary judgm ent

. T he p rop ri et y o f t he t ri al co urt ’ s d eci si o n t o de ny C h a p m a n a c o n tinu a n c e is no t at issu e in this a p p e a l. 

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- Ma rt d/b/ a Mem ph is A uto Wor ld ( “ theCha pman D e fe nd a nts ” ). I n it s th ir d- pa rty c omp la int , O ld Re pu bli c so ug ht re c ov e ry un de r an ind e mni fi c a tio n ag re e me nt sig ne d by Cha pman f or a ny a nda ll da ma g e s r e su lti ng fr om h a vin g iss ue d th e bo ndto C ha pman, inc lud ing a tto rn e y ’s fe e s. Ol d Re pu bli c t h er ea ft erfi l ed a m o t i o n fo rs u m m ar y j u d gm en taga i n s tt h e C h ap m an d ef en d an t s , at t ac h i n g a su pp ortin g a ff

ida vit by Ki m Hans e n (“ Hans e n” ), a re pr e se ntativ e of

Ol d Re pu bli c . In h e r a ff

ida vit , Hanse n stated that Old Republic had inc urre d $5,999.08 in attorney ’s fe es in defe ndin g the underlying la wsuit and asserted that Old Republic was entitled to rec over those f ees a s well as the amount of any

judgme nt obtained by

M&M Auto in the law suit. M&M Auto and Old Republic then filed cr oss-motions for summary judgme n t

. I n conjunction with their motions for summary jud g me nt, M& M A uto a ndOl d Re pu bli c fi le d a joi nt s tip ul ati on of fa c ts, sti pu latin g to the fa c ts described above . Counsel for Chapman r equeste d a continuanc e to file a response to Old Republic’s mot ion fo r sum mary jud g me nt, bu t that re qu e st wa s d e nie d. Th us , Ch apman d id n ot f ile a re sp on se 2 to O ld R e pu bli c ’s mot ionfo r s umm ary jud g me nt.
On Fe bruary

23, 2004, the motions for summary judgme nt were hear d by

the trial court. On Ma rc h 2, 200 5, the tria l cou rt e nte re d an or de r g ranti ng su mma ry jud g me nt i n f

a vo r o f O ld R e pu bli c as to the cla ims asserted a g ainst it byM&M Auto, finding that the bond issued by Old Republic on behalf of Chapman “ does not aff ord recovery

to a wholesa ler such a s the Plaintiff . . . that has supplied vehicles to a reta il de aler , has reta ined the titles a s security for pay ment for the ve hicles, but has not bee n paid by the retail deale r for the vehicle s supplied.” I n addition, the trial court g rante d summary judgme nt to Old Republic on its t hird-party claim for inde mn if

ic ation ag ainst the Chapman defe ndants for attorney ’s fe es incurr ed in the amount of $5,999.08. From that order , M&M Auto a nd Chapman now a

ppeal. On appe al, M& M Auto arg ues t hat the lang uag e in Tenne ssee Code A nnotated § 55-17- 111 is b ro a d en ou g h to a llo w r e c ov e ry un de r C ha

pman’ s auto mob ile de a le rs hip su re ty bo ndfo r a

pa rty other than a

reta il purchase r fr om an automo b i l e d eale rship. M&M Auto a rg ues that it suffer ed a loss because of Chapman’ s failure to deliver c ertificates of title to t h e re t ai l purcha sers of the vehicles in que stion. As a result, M& M Auto asserts, it should be entitled to r ecove r under the bond. Chapman ar g ues on appe al that the trial c ourt err ed i n al lowing O ld Republic to recove r a tto rn e y ’s fe e s inthi s c a se . Ch apman c la ims fi rs t tha t, be c aus e M& M Aut o w a s n ot s uc c e ssf ul i n its la ws uit , th e n c on se qu e ntl y Ol d Re pu bli c is n ot e nti tle d to ind e mni fi c a tio n u nd e r the ind e mni ty ag ree ment in the bond. Chapman further c ontends that Old Republic would be entitl ed to attorne y ’s fee s only in a suit ag ainst the purchaser s of vehicles, not third parties like M&M Auto who a re not entitled rec over unde r the bond.

The t ri al court’s g rant or de nial of summary judgme nt is reviewe d de novo , with no presumption of cor

rec tness in the trial court’ s conclusions. Bain v . W e lls , 936 S.W .2d 618, 622

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(Tenn. 1997). The fa cts in this case a re undisputed, and this appeal involves only issues of statutory and contract int erpr etation, which are also revie wed de novo , w ithno pr e su mpt ionof c or re c tne ss. Metro. Dev

. & Hous. Agency v. Trinity Marin e Nashville, Inc. , 40 S.W .3d 73, 75 (Tenn. Ct. App. 2 000). Statutes must be construed to g ive ef fec t to their plain and ordinary meaning

. Perrin v. Gaylord Entm ’t Co. , 120 S.W .3d 823, 826 (Tenn. 2003) . Simi larly , the terms of a written contra ct must al s o b e construed a ccor ding to the plain meaning of the terms in the contrac t. 94 Ae ro th S q u a dr on o f M e mphis, Inc . v . M

e mphis- She lby Coun ty Air po rt A uth. , 1 6 9 S.W .3d 627, 634 (Tenn. Ct. Ap p. 20 04 ); Osbourne v. Metro. Life Ins. Co. , 130 S.W .3d 769, 773 (Tenn. 2004)

. M&M Auto arg ues that it is entitled to r ecove r under Chapman’s surety bond based on the la ng ua g e in T e nn e sse e Cod e An no tate d Se c tio n 5 5- 17 -1 11 (g )( 1) & (2 ). Th a t st a tut e pr ov ide s:

(g )( 1) Ea c h a

pp lic a tio n f

or a lic e ns e or re ne wa l of a lic e ns e of a mot or ve hic le deale r shall be a ccompanied by evidenc e satisfac tory to such commission that such de a le r h a s a

su re ty bo ndin the a mou nt o f t we nty -f ive tho us a nd do lla

rs ($ 25 ,0 00 ) i n forc e. (2)( A) The bond is for the be nefit of any person who suf

fer s loss because of either: (i ) N on pay me nt b y thede a le r o f a

re ta il c us tom e r’ s p re paid title, reg istration or other r elated f ees or taxes; or (i i) Th e de a le r’ s f

a ilu reto de liv e r in c on

jun c tio n w iththesa le of a vehicle a valid vehicle title certificate fre e and c lear of any prior
ow ne r’s in ter e sts a nda ll l ie ns e xce pt a lie n c re a te d b y

or e xpre ssl y assumed in writing by

the buy er of

the vehicle

. T.C.A. § 55-17-111( g ) (2004) . Under this statute, a $25,000 bond must be obtained by a dea ler “ for thebe ne fi t of

a ny pe rs on wh o s uf

fe rs a los s because of

” the de a le r’ s failu re to de liv e r a c e rt if ic a te of title to a retail purchase r. Id. (empha sis added).

M&M Auto a

rg ues that it is permitted to se ek recove ry under the bond, pursuant to the statut e , b e c aus e it w a s d a ma g e d b y Cha pman’ s f a ilu reto d e liv e r c e rt if

ic a te s o f t itle t o th e re ta il pu rc ha se rs of

theve hic les in qu e sti on . M & M A uto arg ue s th a t, h a d th e ve hic le s n ot b e e n s old without the certificate s of t itle, then M &M Auto would have been able t o reposse ss the vehicle s from Chapman in order to satisfy the debt. It c ontends that the statute must be rea d to allow rec overy by persons other than reta il pur chase rs, beca use it c ould c onceiva

bly apply to situations i n which third pa rt ie s a reda ma g e d b y

thede a le rs hip ’s failu reto d e liv e r a c e rt if ic a te of tit le to r e ta il p ur c ha se rs
. I n t h i s ca s e, the undisputed fa cts show that M& M Auto was not damag ed “be cause of” Chapman’s failure to deliver certificates of title to the reta il pur chase rs of the ve hicles. Rather , as no te d b y Ol d Re pu bli c , M& M A uto ’s da ma g e s w e rec aus e d b y Cha pman’ s b re a c h o f c on tr a c t. T his damag e to M& M Auto would be the same reg ardle ss of whethe r the c ertificates of title wer e g iven to the re ta il pu rc ha se rs up on the ir pu rc ha se of the ve hic le s. It is u nd isp ute d th a t no ne of there ta il pu rc ha se rs ha ve fi le d a ny c la ims re late d to Cha

pman’ s f a ilu reto d e liv e r the c e rt if ic a te of tit le wi thU nd er the fac t s o f t his case , w e n ee d no t ad d ress w he t he r t he st atute all o w s rec o ve ry o nly fo r retail p urc ha sers. 3

Cha pman n ot es t h at M & M Au t o i s n ot a per s on , cor por at i on , or par t n er s h i p. T h er ef or e, h e cl ai ms , a mot i on 4
to d ism iss sh o u ld ha v e b e e n fi le d b a se d o n the fac t t h a t “M & M A u to S a le s” is a fictitio u s n a m e “ w it h n o m e a n ing in la w .” T h is issu e , ho w e v e r, w a s n o t ra ise d in the trial c o u rt b e lo w , so w e d e c line to a d d re ss it o n a p p e a l. 

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- the vehicle . Under

these c ircumstance s, we must conclude that the statute does not permit recove ry by M&M Auto, and the trial court did not er r in g ranting summary

judgme nt to Old Republic on the claim of M& M Auto. 3

Cha pman a rg ue s o n a

pp e a l that th e tria l c ou rt

e rr e d ing ranti ng su mma ry jud g me nt t o O ld Republic and in aw arding it $5,999.08 in atto rn ey ’s fee s under the inde mnityag ree ment. The ind e mni ty

a g re e me nt p ro vid e s inpe rt ine nt p art :

. . . Sho uld [Old Re pu bli c ] e xec ute sa id bon d( s) , the un de rs ig ne d ag re e a s f oll ow s:

. . . ( 2 ) T o i n d e m n i f

y [ O l d R e p u b l i c ] a n d h o l d i th ar m l e s s a g a i n s ta l l l o s s , l i ab i l i t y, costs, claim damag es, expense, includi ng, butnot li m ited to, attorn ey’s fee s , inv e sti g a tiv e c os ts, e tc. wh ic h may inc ur by re a so n o f [O ld R e pu bli c ] writi ng sa id bond(s) or f

or the e nforc ement of this ag ree ment. (Emphasis added.) Thus, the agr eeme nt states that Chapman a g ree s to indemnify Old Republic for
a ll l os s, inc lud ing a tto rn e y ’s fe e s, “ wh ic h may inc ur by reas on of [ Old Re pu bli c ] writi ng sa id bond(s).”

Cha pman a rg ue s th a t, u nd e r the fa c ts i n th is c a se , O ld R e pu bli c is no t e nti tle d to re c ov e r i ts a tto rn e y ’s fe e s p ur su a nt t o th e ind e mni ty a g re e me nt. Cha

pman do es no t con te st the jud g me nt i n favor of Old Republic ag ainst M&M Auto, because he ag ree s that M&M Auto ha d no rig hts under t h e b o n d. He c ontends that the indemnification ag ree ment is not applicable he re, w here the

4 underlying la wsuit is brought by a third-party wholesale r rather than a reta il purchase r of a

vehicle. Chapman asse rts that M&M Auto’ s lawsuit is “absurd, fr i v o l o us, and g roundless,” and that the indemnification ag ree ment applies only to f ees incurre d in a suit by

purcha sers, not to suits brought by “bog us third parties.” ( Emphasis in orig inal). Chapman claims that Old Republic should have
so ug ht r e c ov ery for fees a g a ins t M& M A uto un de r R ule11 of theTe nn e sse e Rul e s o f C ivi l Procedur e for

filing a frivolous lawsuit, rathe r than see king r ecovery ag ainst Chapman under

the indemnity

ag ree ment. Chapman conc edes that he di d n o t re s p o n d to Old Republic’s motion for summary judgme nt. He claims, howeve r, t hat hi s arg ument is not prec luded because it is based on the lang uag e of the indemnity ag ree ment, the re cord, and the applica ble law.

Th e ind e mni ty

a g re e me nt i n th is c a se re qu ir e s Cha pman to ind e mni fy

Ol d Re pu bli c a g a ins t

“ a ll l os s, lia

bil ity , c os ts, c la im d a ma g es, expen se inc lud ing , b ut n ot l imi te d to , atto rn e y ’s fe e s, inv e sti g a tiv e c os ts, e tc . whi c h [Old Re pu bli c ] ma y inc ur by re a so n o f [O ld R e pu bli c ] writi ng sa id bond.” This l ang uag e is quite broad, in that it cove rs “all loss” incurred “ by rea son of” the w riting of the bond. The ag ree ment contains no exclusion for so-ca lled “bog us” cl ai m s , nor is there any

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-

ind ic a tio n th a t it

is i nte nd e d to app ly

on ly to cla im s on thebo ndbr ou g ht b y re ta il p ur c ha se rs
. There fore , based on the broad lang uag e in the indemnity ag ree ment, we must c onclude that the trial court did not err in holding that Old Republic is entitled to summary judgme nt ag ainst Chapman for indemnification of its attorney ’s fe es expended in def ending the lawsuit ag ainst M&M Auto.

Th e de c isi on of

thetria l c ou rt

is a ffi rm ed. Co st s on a pp e a l areto b e ta xede qu a lly to Appellant M&M Auto Sales and Appe llant Shane Chapman, a nd their sure ties, for whic h execution may issue, if nec essary
.

___________________________________ HOLL Y M. KI RBY, JUDGE