1

FILED

MAY 29, 1997

Cecil Crowson, Jr.

Appellate Court Clerk

IN THE COURT OF APPEALS OF TENNESSEE

NATIONSBANK OF TENNESSEE, ) C/A NO. 03A01-9607-CH-00226

)

Plaintiff-Appellee, )

)

)

)

)

) APPEAL AS OF RIGHT FROM THE

) KNOX COUNTY CHANCERY COURT

v. )

)

)

JDRC CORPORATION, a/k/a JDRC )

DEVELOPMENT CORPORATION and )

BERNARD ARMSTRONG, )

) HONORABLE SHARON BELL,

Defendants-Appellants. ) CHANCELLOR

For Appellants: For Appellee:

DAVID L. BACON DEAN B. FARMER

Knoxville, Tennessee W. TYLER CHASTAIN

Hodges, Doughty & Carson, PLLC

Knoxville, Tennessee

O P I N I O N

VACATED AND REMANDED Susano, J.
1

This action was originally filed by Sovran Bank/Tennessee. That entity

subsequently merged with NationsBank of Tennessee. The latter was then

substituted as party plaintiff.

2

Numerous other entities and individuals were named as defendants in an

effort to clear the title to this condominium project. Their identity and the

suits against them are not material to this appeal.

3

The notice of appeal recites that the appellants appeal “as to the

dismissal of their [counterclaim] only.” (Emphasis added).

2

NationsBank of Tennessee (“the Bank”)1 sued the

defendants2 JDRC Corporation (JDRC) and Bernard Armstrong

(Armstrong) to recover on two notes executed by JDRC and

personally guaranteed by Armstrong, JDRC’s president. JDRC and

Armstrong filed a counterclaim for damages alleging that the Bank

had “breach[ed]... the financing agreement between the parties

and... the implied obligation of good faith.” The trial court

granted the Bank summary judgment on its original complaint. The

issue of liability having been found adverse to the defendants,

the parties agreed that the amount due on the notes was

$1,000,000. The trial court also found that the Bank was entitled

to summary judgment on the counterclaim, and accordingly dismissed

that action. JDRC and Armstrong appealed3 the dismissal of their

counterclaim. The only issue before us is whether there are

disputed facts that render summary judgment on the counterclaim

inappropriate.

I. Facts

The facts, when construed in favor of the defendants,

are as follows. In order to finance the development and

construction of a 216-unit condominium project called Marble Hill

Condominiums, JDRC obtained two $500,000 loans from the Bank. The

proceeds of the first loan were to be used for the initial
3

development of the project site, while the proceeds of the second

loan were to be utilized for construction of the condominium

units. As consideration for the loans, JDRC executed two $500,000

promissory notes. The first note was executed on January 29,

1988, and renewed for one year on January 29, 1989; the second was

executed on October 19, 1988, and renewed for an additional year

on October 27, 1989. Each obligation was secured by a separate

deed of trust on the condominium property. Interest was due

quarterly. Armstrong personally guaranteed both obligations.

In his deposition, Armstrong testified that he reached

an oral agreement with Richard Hayes and T.K. Wright of the Bank

regarding lot releases, whereby the Bank would receive $30,000

upon the closing of the sale of each condominium unit. From that

amount, $10,000 was to be applied toward the first loan, and

$20,000 toward the second loan. When a lot/unit was sold and

closed, the Bank agreed to release the deed of trust as to that

lot in return for the agreed-upon payment. JDRC was thus entitled

to any amount over $30,000 from each sale. Generally speaking,

the purchase price of the units was between $40,000 and $60,000. 

JDRC depended on this income for working capital to finish out the

units being sold and to build more units. 

According to Armstrong, the parties operated under this

arrangement until late 1989, when John Burke of the Bank informed

him that JDRC would henceforth be required to pay the Bank 100% of

the proceeds from future closings. Burke gave no reason for the

change but stated that the decision was final. Armstrong’s

subsequent efforts to discuss the matter with officials of the

Bank
4

were unsuccessful.

At the time the Bank demanded full payment of all net

sale proceeds, JDRC was preparing to close the sale of three of

the newly-constructed condominiums. According to Armstrong, this

change in repayment policy left JDRC with no working capital. 

JDRC was thus unable to close the three sales--or any subsequent

sales--and was forced to abandon the project and cease doing

business. The Bank declared JDRC in default in March, 1990, and

filed its complaint on the notes in June of the following year.

In its counterclaim, JDRC alleges that the Bank

breached the financing agreement between the parties and its

implied obligation of good faith. JDRC contends that such acts

proximately caused the loss of condominium sales, lost profits,

and other damages.

II. Summary Judgment

The trial court’s grant of summary judgment causes us

to focus on the rules that are applicable when a defendant,

counter-defendant, or other defending party, seeks to avoid a

plenary proceeding by moving for summary judgment.

When a party responds to a claim against it by filing a

summary judgment motion, it is incumbent upon that party to

support its motion with facts that establish an affirmative

defense, negate at least one of the essential elements of the

claim, or otherwise show that the claimant is not entitled to

relief. Byrd v. Hall, 847 S.W.2d 208, 213-14, 215 n.5 (Tenn.
5

1993). Typically, these facts are presented in the form of

affidavits, authenticated documents, depositions, and other

properly-verified factual matters developed through the discovery

process. See Rule 56.03, Tenn.R.Civ.P. The proffered sworn-to

testimony and/or properly-authenticated documents must be

admissible at trial before they can be considered by the trial

court on summary judgment. Byrd, 847 S.W.2d at 215. However,

they need not be in admissible form; hence, an affidavit, while

not admissible at trial in that form, can be considered by the

court if the testimony itself is otherwise admissible. Id. at

215-16.

If the material relied upon by the defending party

unwittingly or otherwise demonstrates disputed material facts; or

reflects undisputed material facts, but fails to show that the

movant is entitled to a judgment, then, in either event, the

nonmovant is not required to do anything to defeat summary

judgment. Id. at 211. The burden to satisfy the requirements of

Rule 56.03, Tenn.R.Civ.P., is clearly on the defending party. Id.

at 215. That party does not satisfy its burden by making

conclusory assertions that the claimant cannot prove its claim. 

Id. If, on the other hand, the material relied upon by the

defending party demonstrates undisputed material facts supporting

a judgment for that party, the nonmoving party must respond by

putting admissible facts before the trial court to show a dispute

as to those material facts in order to defeat summary judgment. 

Id. The nonmovant cannot, in that case, simply rely upon the

allegations of its claim. See Rule 56.05, Tenn.R.Civ.P.
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The nonmovant is entitled to the benefit of any doubt. 

Byrd, 847 S.W.2d at 211. The trial court must “take the strongest

legitimate view of the evidence in favor of the nonmoving party,

allow all reasonable inferences in favor of that party, and

discard all countervailing evidence.” Id. at 210-11. All facts

supporting the position of the nonmovant must be accepted as true

by the trial court. Id. at 212. It is only when the material

facts are not in dispute and conclusively show that the movant is

entitled to a judgment, that a trial court is justified in

depriving a claimant of its right to a plenary trial. In all

other instances, a trial on the merits is necessary. Summary

judgment “is clearly not designed to serve as a substitute for the

trial of genuine and material factual matters.” Id. at 210.

A request for summary judgment raises a question of

law. Gonzales v. Alman Const. Co., 857 S.W.2d 42, 44 (Tenn.App.

1993). Our perspective is the same as that of the trial court. 

Id. at 44-45. Therefore, we must decide anew if the movant is

entitled to summary judgment. Id. Since this determination

involves a question of law, there is no presumption of correctness

as to the trial court’s judgment. Id. at 44.

III. Law and Analysis

On the day the trial court heard the Bank’s motion for

summary judgment, the Bank filed with the trial court two

documents from its records as late-filed exhibits to the
4

The deponent Hayes identified the document as a “one-page cover sheet.” 

However, when filed with the trial court on November 2, 1995, the “one-page”

document had two pages that were stapled together--the Commercial Loan

Memorandum and the New Loan Summary. In view of the fact that the two pages

have different dates reflecting a significant lapse of time, i.e., January 4,

1988, and October 19, 1988, they appear to be independent documents.

7

deposition of its loan officer, Richard Hayes.4 The first of

these documents is entitled “Commercial Loan Memorandum,” (see

Apendix No. 1). It is dated January 4, 1988, a short time before

the execution of the first note. In his deposition, Hayes

described the document as a “write-up,” apparently of the Bank’s

loan to JDRC. It is approved and signed by the members of the

Bank’s loan committee. The second bank document is dated October

19, 1988, the date on which the second $500,000 note was executed

by the defendants. It is entitled “New Loan Summary,” (see

Appendix No. 2). It contains no signatures.

Prior to the filing of these two documents, the Bank

had argued to the trial court that the defendants’ counterclaim,

at best, was based on an oral promise or commitment and was

therefore unenforceable under the Statute of Frauds, T.C.A. § 29-

2-101(b)(1), which provides that

[n]o action shall be brought against a lender

or creditor upon any promise or commitment to

lend money or to extend credit, or upon any

promise or commitment to alter, amend, renew,

extend or otherwise modify or supplement any

written promise, agreement or commitment to

lend money or extend credit, unless the

promise or agreement, upon which such action

shall be brought, or some memorandum or note

thereof, shall be in writing and signed by

the lender or creditor, or some other person

by him thereunto lawfully authorized.

Once the aforesaid documents were produced, the Bank’s argument
8

changed somewhat. Thereafter, and on this appeal, it argues that

neither of these documents satisfies the requirements of T.C.A. §

29-2-101(b)(1). It also argues that even if the Commercial Loan

Memorandum is sufficient to satisfy the “in writing” requirement

of T.C.A. § 29-2-101(b)(1), it is inadmissible since, so the

argument goes, it is an attempt to modify the notes by parol

evidence. The trial court concluded that the Commercial Loan

Memorandum was not a “public” document and therefore could not be

used to satisfy the Statute of Frauds.

At the outset, we would point out that the New Loan

Summary is not signed; hence, it is clear that it cannot satisfy

the Statute of Frauds, which expressly requires a document “signed

by the lender or creditor or some other person by him thereunto

authorized.” Id. However, unlike the New Loan Summary, the

Commercial Loan Memorandum is signed by officials of the Bank. It

raises two issues: first, does the latter document satisfy all of

the requirements of T.C.A. § 29-2-101(b)(1)?; and second, is this

document otherwise admissible?

In this case, the Bank attacks only one element of the

defendants’ counterclaim, i.e., whether there was a legally

enforceable promise or commitment. Therefore, the Bank’s motion

must rise or fall on this one issue. Since the Bank did not file

a properly-supported motion as to any of the other elements of the

counterclaim, the defendants, as counter-plaintiffs, were not

required to present facts with respect to these other elements.
9

We will now examine the two questions posed above.

A. Statute of Frauds

The defendants’ counterclaim is clearly subject to the

terms of the Statute of Frauds, T.C.A. § 29-2-101(b)(1). That

statute expressly applies to an action “against a lendor or

creditor... upon any promise or commitment to... supplement any

written promise, agreement or commitment to lend money or extend

credit....” Id. In order to satisfy this provision, there must

first be a promise, commitment, or agreement, “or some memorandum

or note thereof.” Id. We believe that, at a minimum, the

Commercial Loan Memorandum constitutes a “memorandum” of the

Bank’s commitment to release the deed of trust upon the sale of a

lot, provided it receives $30,000 of the net proceeds from the

sale.

The Memorandum contains the following notation: “Lot

release $30,000.00.” This is consistent with Armstrong’s

testimony that the Bank had agreed to release each lot from the

deed of trust upon payment of $30,000 of the purchase price of a

lot. Furthermore, the Memorandum states that “$250,000 of [the]

first loan would be paid from sales of [the] 1st 25 units.” This

figure corresponds to Hayes’ testimony that the Bank applied

$10,000 from each sale to the initial loan. Therefore, when

construed in a light most favorable to the defendants, as we are

required to do in this summary judgment determination, the

Commercial Loan Memorandum is evidence of a commitment by the Bank

to release each lot upon the payment of $30,000.
5

Interestingly enough, Armstrong identified both of these bank officials

as the ones who made the subject commitment. Apparently, he identified them

before he was aware of the existence of the Commercial Loan Memorandum.

10

T.C.A. § 29-2-101(b)(1) additionally requires that such

promise or commitment, or “memorandum or note thereof,” be in

writing. It is clear that the Commercial Loan Memorandum, a

written document, meets this requirement.

Finally, T.C.A. § 29-2-101(b)(1) provides that the

promise, agreement or memorandum must be “signed by the lendor or

creditor, or some other person by him thereunto lawfully

authorized.” Id. The Commercial Loan Memorandum is signed by

“R.M. Hayes”, “T.K. Wright”,5 and several others on behalf of the

Bank. Accordingly, we find that the document meets the signature

requirement of T.C.A. § 29-2-101(b)(1).

The trial court concluded that the Commercial Loan

Memorandum could not be used to satisfy the Statute of Frauds

because it was an internal bank document, whose existence was

apparently not known outside the Bank. We disagree. There is

nothing in the statute requiring that “the memorandum or note” of

the promise or commitment be furnished to the borrower or

otherwise be a public document.

We therefore conclude that the Commercial Loan

Memorandum satisfies the Statute of Frauds. The notation, “Lot

release $30,000.00", is not, as the Bank argues, too indefinite to

form the basis of a promise or commitment. The Memorandum

evidences a promise or commitment to release each lot from the
11

deed of trust upon payment of $30,000.

With regard to the New Loan Summary, on the other hand,

we have previously indicated that that document--being unsigned--

does not satisfy the Statute of Frauds. While the New Loan

Summary, in and of itself, cannot constitute a binding commitment,

we believe it is nevertheless relevant, and hence admissible, on

the issue of the lot release agreement; specifically, it contains

evidence bearing upon the Commercial Loan Memorandum, a document

that does satisfy the Statute of Frauds. The New Loan Summary is

dated October 19, 1988 -- the same date as the second loan. It

contains, on a line designated “Repayment Agreement”, the

handwritten notation: “lot release 20,000 per sale this loan,

10,000 per lot 1st loan.” Again, these numbers correspond to

Armstrong’s testimony regarding the terms of the repayment

arrangement: the Bank would release each lot upon receipt of

$30,000 of its purchase price; it would then apply $20,000 toward

repayment of the second loan, and $10,000 toward the repayment of

the first loan. Thus, the New Loan Summary on the second loan

provides further evidence that the Bank made a promise or

commitment to release the lots from the deed of trust upon the

payment of $30,000.

B. Admissibility of Bank Documents

The Bank argues that even if the Commercial Loan

Memorandum satisfies the Statute of Frauds, it is inadmissible as

an attempt to modify the promissory notes by parol evidence. We

disagree. The parol evidence rule provides that
6

While the parol evidence rule typically involves an attempt to introduce

evidence of an oral promise or commitment, the Bank argues that it applies to

the written Commercial Loan Memorandum. In view of our disposition of this

case, we do not find it necessary to decide whether the parol evidence rule

applies to these written documents.

12

parol evidence is inadmissible to contradict,

vary, or alter a written contract where the

written instrument is valid, complete, and

unambiguous, absent fraud or mistake or any

claim or allegation thereof.

Airline Constr., Inc. v. Barr, 807 S.W.2d 247, 259 (Tenn.App.

1990). Our courts have held, however, that parol evidence is

admissible “to prove the existence of an independent collateral

agreement.” Starnes v. First American Nat’l Bank, 723 S.W.2d 113,

117 (Tenn.App. 1986). See also Early v. Street, 241 S.W.2d 531,

535 (Tenn. 1951) (“There are exceptions to the effect that an

independent collateral agreement may be proven...”). Furthermore,

as stated in Starnes,

[t]he terms of a written agreement may be

supplemented by evidence of additional terms

unless it is found that the writing was

intended as an exclusive statement of the

terms of the agreement.

Starnes, 723 S.W.2d at 118 (citing Strickland v. City of

Lawrenceburg, 611 S.W.2d 832 (Tenn.App. 1980); Kilday v. Baskette,

259 S.W.2d 162 (Tenn. 1953)).

The application of the parol evidence rule6 and its

exceptions depends upon the facts of each particular case. Early,

241 S.W.2d at 535; Starnes, 723 S.W.2d at 117.
13

In the Airline Construction case, this court addressed

the admissibility of evidence of an oral agreement to complete

part of a construction project within six months. After finding

that the written contract specified that substantial completion

was to be achieved within approximately eight months, the court

held that the parol evidence at issue contradicted and varied the

terms of the parties’ contract and was therefore inadmissible. 

Airline Constr., 807 S.W.2d at 259. The court stated that

[p]arol proof of “inducing representations”

or “collateral agreements” to the written

contract must be limited to subject matter

which does not contradict or vary terms which

are plainly expressed in the writing.

Id. (emphasis in original)(citing Searcy v. Brandon, 68 S.W.2d 112

(Tenn. 1934); Litterer v. Wright, 151 Tenn. 210, 268 S.W. 624

(Tenn. 1925); Dupont Rayon Co. v. Roberson, 12 Tenn.App. 261

(1930); Seaton v. Dye, 263 S.W.2d 544 (Tenn.App. 1954)).

In Early v.Street, the Supreme Court found that various

oral agreements, which a buyer sought to establish by parol

evidence, were independent of and collateral to a deed of sale

between the parties. The court held that such evidence was

admissible and noted that

it certainly was not the intention of the

parties, nor did they deem it necessary to

incorporate all of these collateral

agreements in the deed.

Early, 241 S.W.2d at 535.
14

Under the facts of the instant case, we conclude that

the arrangement between the parties as to the release of an

individual lot from the deed of trust upon payment of $30,000 was

an independent agreement, collateral to the promissory notes. See

Early, 241 S.W.2d at 535; Airline Constr., 807 S.W.2d at 259; and

Starnes, 723 S.W.2d at 117-18. Therefore, such agreement may be

established by evidence in the form of the Commercial Loan

Memorandum and the New Loan Summary, provided such evidence does

not contradict or vary terms that are clearly expressed in the

notes. Airline Constr., 807 S.W.2d at 259.

Upon review of the relevant documents, it is clear that

the lot release agreement in no way varies or contradicts the

terms of the promissory notes. Unlike the contract in the Airline

Construction case, which included a specific provision that

directly contradicted the alleged oral agreement, the notes in the

instant case contain no specific provision regarding the release

of the lots from the deed of trust. As previously indicated, the

collateral agreement in this case did not vary or change the notes

in any way--they continued to be due and payable precisely

according to their terms as found within the four corners of the

notes.

Furthermore, it appears that, as in the Early case, the

parties did not deem it necessary to include every aspect of their

agreement in the notes. On the contrary, it appears that the

notes were not intended to be an “exclusive statement of the terms

of the agreement.” Starnes, 723 S.W.2d at 118. As a practical

matter, to facilitate the sale of individual condominiums free of

the underlying mortgage, there had to be some additional
15

arrangement regarding the release of the lots from the deed of

trust. The collateral agreement had the effect of addressing an

obvious and
16

essential element otherwise missing from the parties’ “deal”--the

amount of the sales price of each lot that was to be paid to the

bank in order to obtain a release of the deed of trust as to the

individual lots. In a multi-unit condominium project, there has

to be some understanding between the borrower and lender regarding

the release of the individual lots if sales are to be effected and

financed.

We therefore conclude that the Commercial Loan

Memorandum and the New Loan Summary are admissible evidence of an

independent, collateral agreement between the parties. Under the

facts of this case, the parol evidence rule does not operate to

bar their admission. See Early, 241 S.W.2d at 535; Airline

Constr., 807 S.W.2d at 259; and Starnes, 723 S.W.2d at 117-18.

IV. Conclusion

We conclude that the Commercial Loan Memorandum is

sufficient to satisfy the Statute of Frauds. Therefore, the

Bank’s motion fails in its attempt to negate the defendants’ claim

of a commitment by the Bank to release lots from the deed of trust

upon the payment of $30,000 out of the net proceeds of a closing. 

There is admissible evidence of this commitment. Since this was

the only element of the counterclaim attacked by the motion for

summary judgment, we find and hold that the Bank is not entitled

to summary judgment.
17

We express no opinion as to the merits of the

counterclaim. We simply hold that the Bank is not entitled to

judgment in a summary fashion.

The judgment of the trial court awarding the appellee

summary judgment on the counterclaim is vacated. This case is

remanded to the trial court for further proceedings not

inconsistent with this opinion. Costs on appeal are taxed to the

appellee.

__________________________

Charles D. Susano, Jr., J.