# FILED
Ap ril 23, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk BLUE CROSS-BLUE SHIELD OF ) TENNESSEE, ) ) APPEAL NO. PLAINTIFF/APPELLANT, ) 01-A-01- 9611-CV- 00526 ) v. ) CIRCUIT COURT NO. ) CC-31-95 CITY OF LAWRENCEBURG, ) ) DEFENDANT/APPELLEE. )

COURT OF APPEALS OF TENNESSEE MIDDLE SECTION AT NASHVILLE APPEAL FRO M THE LAW RENCE COUN

TY CIRCUIT C OURT AT LAWRENCEBURG, TENNESSEE THE HONORABLE WILLIAM B. CAIN, JUDGE

ROBER T G. N ORRED , JR JANE M. STAHL Spe ars , Mo ore , Re bman & Wi ll iams 801 Pine St

reet, P .O. B ox 1749 Chattanoog a, Tenn essee 37401 -1749 ATTORNEYS FOR PLAINTIFF/APPELLANT ALAN C. BETZ Whit e & Be tz, A tto rne ys 22 Public S quare, P .O. B ox 488 Lawrenceburg, Tennesse e 38464 ATTORNEY FOR DEFENDANT/APPELLEE

AFFIRMED AND REMANDED

SAMUEL L. LEWIS, JUDGE-2- 

## O PINION This is an appeal by

plaintiff /appellant , Blue Cr

oss-Blue Shield of Tennessee (“B lue Cros s”), fr om the tr ial co urt’s d ecisi on whi ch di smisse d Blu e Cros s’s compl aint

requestin g reim

bursem ent from the City of Lawrencebur

g (“t he City ”) for certain c laims paid by Blue Cross. The facts out of which this matter ar ose are a s follows.
Blue Cross provided medical insurance to the Ci ty and i ts em ployee s from November

1984 until 31 January

1993. During thi s period, Blue Cros s denied ce rtain cla ims made

by the City a

nd its employees. Charles Brown, the City’ s Secretary /Treasu rer, a nd Ivan Johnst

on, the City’ s Mayo r, wro te letter s to Blue Cr oss asking Blue Cross to pay the

out of contract clai ms for the benef it of the City ’s em

ployee s. All the lette

rs also con

tained the followingparagra

ph: “W e und er stand that i f our group policy

with Blue

Cross & Blue Shield o f Tennes see term inates and we are

in
adeficit position we will be liable to reimburse Blue Cro ss & Blue Sh ield of Tennessee for a ny a mount pa id out of contract.” Therea fter, B lue Cross p aid the claim s.
The City c anceled t

he insuranc e contrac t on 31 Januar y 1993. Blue Cross was in a deficit position and demanded the Ci ty re imburse it for the out of contract paym ents. The City refused

and claimed it had not authorizedBrown or Johnston to make the agreements with Blue Cross.
Blue Cross file d a com

plaint on 23 February

1995. Blue

Cross cla

imed t he agreem ents found in the

letters entitled it

to reimbursement fro m the City. The City respo nded and claim

ed that nei ther Brow n nor Johnston had authori ty to e nt er int o abinding agreement on behalf of the City. Thereaf ter , Blue Cr

oss am ended its compl aint

to include

equitable estoppel and qua ntu m merui t as gro und s fo r rec ove ry. The trial cour

t entered its final j udgmen

t dismi ssing the compl aint on 5 Au gust 1996. The jud gment

included the

followingconclusion: Lawrenceburg is governed by a City Charter which provides that there will be five c omm

issioners who mak

e up the Board of Com

missio ners, and that there must be an af fir mativ e vote to ad opt any motion , resolution, or ordinance or pass any mea sure unless otherwise provided for in the act. The Charter further provides that th e Board of-3-

Comm issioners have and pos sess all administrative , judic ial and legislativ e powers a

nd duties and

have com

plete control over the affairs of the City . For a contract to be enfor

ceable a nd bi nding on Lawrenceburg, it must [sic] voted upon and adoptedin a public m eeting. The minutes of the m

eetings of the Board

of Com missio ners from

1984 through 1993 were introduced as Exhibit 6, and the

re is no m

ention of the alleged agreem

ent seekingreim

bur seme nt for out of contract payments. It was never votedupon, approved or disapproved, or even discussed by the Board. T his alleged co ntract bet ween Charles B rown and Mayor

Ivan Johnsto n and Blue C ross-Blue Shield th ere for e be come ultra vires, void and unenforceable. Blue Cross filed a timely notice of appeal and prese nted the fo llowing iss ue for our review: “W

hether the

trial cour t erred when it dism

isse d [ Blue Cros s’s] compl aint based upon finding t

hat [Blue Cross] was not en

titled t o r eimbu

rsem ent for out

of contractpayments because the Secretary/Tr easurer and Mayor of [the C ity] we re without au tho rit y to bind [the

City] to such a co ntract. ” Blue Cr oss contends it is entitled to reimbursement bas ed on the t heory of quant um meruit.
Ini tia lly, we note

that we a gree wit h the trial cour

t’s holdin g that the c ontracts w ere ultra vires. “Under T ennessee law, a municipal action m ay be declared ultr a vires for eithe

r of two r easons: (1 ) because

the action

was whol ly outsi de the scope of the city 's authori ty unde

r its char ter or a s tatute, o r (2) because t he action w as not undertaken consistent with the m andatory provisions of

its charter or a st atute.” City of Lebanon v. Baird , 756 S.W .2d236, 241 (T enn. 1988) . The second re ason clea

rly ap plies to the fac ts of this c ase. T he charte r require d the Boar

d of Com missio ne r s approvethe contracts. The Board never approved th e contrac ts. Thus, the contra cts were ult ra vires.

A find in g that a con

tract is u ltra vire s does not pr eclude a p laintiff from
recover ing funds from a municip al corporat ion. A plaintif f ma y still recover under equitable principl es if certain conditi ons are met. See City of L ebanon , 756 S.W .2d at242. A municipal corporation m ay still be liable if the contract is ultra vires because “the ci ty fa

iled to exerci se a powe

r it has in t

he ma nner pres cribed by controllinglaw.” Id. at 243. T he second c onditio n is t hat the contract not b e exe cut ory. Id. The f acts of t his case sat isf y b oth requirements. First, the contrac t was ultra vires because, although the City had the authority to enter into the contra

cts, itdid not com

ply wi th the requirem

ents of the

charter . Second , the cont racts w ere not-4-

exe cut ory, i.e., Blue Cros s paid the ou t of contra ct claim s. Thus, Blue Cros s may be able to recoup t

he amount of the

cla ims f rom t he City

if Blue C ross is able

to establish it is entitled to equitable relief.
The re are several t

erms used to desc ribe the e quitable r elief soug ht by Blue Cross in thi s case. The Te nnessee S uprem e Court sta

ted: Actions brought upon theories of u njust enrichm ent, quasi contract , contract s impli ed in law, and quantu m m eruit ar e essentia lly the same . Courts frequent ly em ploy the various te

rmino logy intercha ngeably to describe

that class of im

plied obliga

tions wher

e, on the basis of j ustice and equity, the law will impose a contractual relations hip betwe en partie s, regar dless of their assent t

hereto.

. . . .

. . . They are

founded on th e principl e that a party rec eiving a benefit desired by him, under circumstances renderin g it inequita ble to retain it without m

aking com

pensation, must doso.

. . . .

. . . Ea

ch case m ust be decided a

ccording tothe essent

ial elem ents of quasi contract, to- wit: A benefit conf erred upo n the defen dant

by the plaintiff, apprecia

tion by the defendant of suchbenefit, and acceptance of such benefit under such circum stances th at it would be inequita

ble for him to retain the benefit without paym ent of the value thereof. The most significant requirement f or a recoveryon quasi contract is that the enrichm

ent to the de fendant be

unjust. Paschall ’s, Inc. v. Dozier , 219 Tenn. 45, 53- 7, 407 S. W.2d 15 0, 154-55 ( Ten n. 1966); see also Es tate of Atk inson v. A llied Fen ce and Improvement Co. , 746 S.W. 2d 709, 711 (T enn. App. 1987) (applying the ele men ts listed in Paschall’s to quantum mer uit). T hus, the City m ust have rec eived a be nefit as a result of Blue Cross payingthe City ’s em ployee ’s clai ms for

Blue Cross to recover under quantum meruit.
Unfo rtu nat ely, we are unable to conclude the City received a ny tang ible benefit. The City’s em

ployees received

the benef it. If t here we re any benefit tothe Cit y, it was int angible. That is, it is possible to conclude

the City benefite d because its em ployee s were h ealthier

and happier . Neve

rtheless, there is n o evidence in the record that the employees w ere healthierand happier or of the v alue of the

intangible benefit. Evidence of the value of the benefit is necessary to the clai m because t

he amount of damages recoverable under the theory of quantum

mer uit equals t

he value of th e ben efit conferr ed. See Paschall’s , 407 S.W .2d at 155. Thus, B lue Cross i s-5-

eit her not entitle d to reim

bursem ent becau se the City

did not rec eive a ben efit o r because Blue Cross failed to provide evidence of thevalue of th e intangible benefit receive d. Either conclusion requires this court a ffirm the decisi on of the trial judge.
Therefore, it follows thatthe judgm ent of the t

rial cour t is affir med a nd the case is rem anded to the

trial cour t for any further necessar

y proc eedings. Costs on appeal are taxed to plaintiff/appellant, Blue Cross-Blue Shield of Tennessee.

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_ ______________

_ SAMUEL L. LEWIS, JUDGE CONCUR:

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______________ HENRY F. T ODD, P.J., M.S.

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______________ WILL IAM C. KOCH , JR., J.