### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE December 5, 2000 Session ALPHA FINANCIAL SERVICE S, INC., v. KARL KINDERVA TER Direct Appeal from the Circuit Court for Hamilton County No. 99C606 Hon. W. Neil Thomas, III., Circuit Judge 

### FILED JANU

ARY 22, 2001

No.E2000-01425-COA-R3-CV

This is a dispute over the amount of debt owing under a factoring agreement for which the defendant signed a “continuing guaranty.” The Trial Court granted summary judgment. We vacate.

Tenn. R. App. P.3 Appeal as of Right; Judgmen

t of the Circuit C ourt vacated.
H ERSCHEL P ICKENS F RANKS , J., delivered the opinion of the court, in which D. M ICHAEL S WINEY , J., joined. A separate opinion was delivered by C HARLES D. S USANO , J R ., J.
R. Deno Cole, Knoxville, Tennessee, for Defendant-Appellant, Karl Kindervater. Stephen R. Beckham, Chattanooga, Tennessee, for Plai ntiff-Appellee, Alpha Financial Services, Inc.

OPINION

Inthis action for debt brought by plaintiff, Alpha

Financial Services, Inc. (“Alpha”), against defendant, Karl Kindervater (“Kindervater”), the Tr ial Judge granted Alpha summary judgment.
In1998, Alpha entered into a fa

ctoring agre

ement, with Person

al Security

Specialists (“PSS”). PSS is a licensed sec urity compa

ny which pro

vides security

guards to in

divi duals and businesses. Kindervater, is the president of PSS. The Agreement provided that Alpha would make-2-

advances against the invoices issued by PSS in amounts equal to 80% of the face amoun t of the invoice, with

the remaining 20% to be remitted to a profit reserve account. When the invoice was paid in full to Alpha

, Alpha would remit

the remaining 20

% to PSS, after dedu

cting fees, inte

rest, debts, etc. Uncollecte

d and uncollectibl

e invoices, i.e.,

those remaining unpaid for 90 days, were “charged back” to PSS by a debit against the “prof it reserve.”
At the time the Agreement was signed, Kindervater signed, as an individual, a “Continuing Guaranty.”

The guaranty

stated that Kindervater would be personally liable to Alpha for amounts due under the Agreement between Alpha and PSS, plus “all expenses (including court cost s and attorn eys’ fees

), paid or incurr

ed by Alpha i

n endeavoring t

o collect such inde

btedness, obligations and liabilities, or any part thereof, and to enforce this gua ranty.”
In1999, PSS filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Ba nkruptcy Cour t for the Eastern District of Tennessee, Northern Division.
On March 18, 1999, Alpha filed suit against Kindervater, alleging that he was liable for debts accrued by PSS under its Agreement.

Alpha filed a Motion for Summary Judgement contending that there was no genuine issue as to any material fact concerning the amount owed. The Presid ent of Alpha W. Alexander Buttram gave an affidavit that as of March 11, 1999, the aggreg ate unpaid balance of the invoices against which Alpha made advances that ha d not been ch arged back to PSS was $36,997.83. He further stated that Alpha h

ad made advance

s to PSS, as evidence

d by a nega

tiv e balance in the “profit reserve,” and

the aggreg

ate unpaid balan

ce of the advanc

es was $14,105.44.

Buttram also testified that Alpha had collected from PSS $1,711.08 of the amount owed, but did not anticipa t e being able to collect more from PSS.

Kindervater, in respondin g to the Motion, filed an affidavit disputing the amount Alpha claimed was owned. He attached a “request for verification letter” that he had received from a CPA, which sought to c o nfirm the purporte d unpaid balance

of $27,467.96 alle

gedly own

ed to Alpha as of March 31, 1999. The accountant, is an “ independent auditor” of Alpha’s books and records. The Trial Judge denie d the Mo t ion for Summary Judgment without prejudice, and ruled that the “request for verification letter” submitted with Defendant’s affidavit constituted hear say. The Court further determined that the undisputed facts showed

that PSS owed $36,997.83 to Alpha as of March 1 6, 1999. Howeve r, the motion was denied on the grounds that there was insufficient proof to determine the exact amount owed to the Plaintiff as of March 31, 1999.

Sub seq uen tly, plaintiff resubmitted it s Motion for Summary Judgment, and in another affidavit B uttram testified th

at Alpha receiv

ed $1,946.56 in invo

ice receivable

s on behalf of PSS between March 16, 1999 and

March 31, 1999, but that

it charged back PSS an additional $7,583.31 to the profit reserve, modifying the net sum to

be $49,156.71 owned to Alpha as of March 31, 1999.-3-

Kin dervater

dis put ed t his in a not her a ffi dav it, but the Tri al J udge gran ted sum mar y j udgment , finding it undisputed that PSS owned Plaintiff $47,445.63 plus interest and attorney fees, for which defendant was liable. After attorney fees and expenses were established, the Court entered Judgment for $71,479.19, plus interest and costs.

In reviewing su

mmary judg

ments, no presumpti

on of correctn

ess attaches to the lowe r court’s judgment, Bain v. Wells , 936 S.W.2d 618, 622 (Tenn. 1997). Th e moving party has the burden of proving that its motion satisfies these requirements. Id.

The standards gove

rning the assess

ment of evidence

in the summ ary ju

dgment context are well established. The Court must view the evidence in the light most favorable to the nonmoving party and d

raw all reasona

ble inferences

inthe nonmoving party’s favor. Byrd v. Hall , 847 S.W.2d 208, 210-211 (Tenn. 19 93). Courts should g rant a summary judg

ment only whe

n both the facts and

the inferences

to be drawn from th

e facts permit a r

easonable pers

on to reach only

one conclusion. Id

.

While there is

no material dispute

as to some

amounts claimed by

Alpha, it states in its Statement of Und

isputed Material F

acts: 11. In addition, as of March 16, 1999, Alpha had made ad vance s to PSS, evidence by a negative balance in the “ profit reserve,” is $14,105.44.
* * * *
13. Between

March 16, 1999, and March 31, 1999, (i) Alpha received payments on Invoices agg regating $1 ,946.56 , and (ii) an additional $7,573.31 in

Invoices wa

s charged bac

k to PSS under the Agree ment, which (A) reduced the figure set forth in Paragraph 1 0 , above, from $36,997.83 to $27,467.96, and (B) increased the figure set forth in Paragraph 11, above, to $21,688.75. Alpha bases its figure for the “negative profit reserve ” solely on the affidavit of Buttram, and

does not submit any

accounting or o

ther records in s

upport. Buttram’ s affidavits state that he “has personal knowledge of t he facts state d herein and is authorized to make th[ese] affidavit[s] on behalf of the corporation.” As to the bal ance in the profit reserve, he provides the above figures based on his personal knowledge.

Defendant

attacks these figures as being unsupported by evidence, and su

bmitted his Response to the Undisputed Material Facts, stating that Defendant disputed paragraphs 11 and 13 regarding the negative bala

nce in the profit r

eserve accoun

t, and that PSS was neve

r paid the profits. Kindervater’s a

ffidavit is “based upon [his] personal knowledge, individually and as the president of PSS.” Kindervater testified that PSS never received the profits that the aging re po rt and the “Weekly Profit/Advance Analysis” indicate d were due PSS.-4- Alpha argues the affidavit

is insufficient to create a dispute as to the material fact, and in its brief to this Cou

rt states: [Defendant] argues that the Weekly Profit/Advance A

nalysis reports attached to the affidavit submitted in respon

se to Alpha’s ren

ewed motion for su

mm ary judgment somehow undermines Alpha’s president’s aff idavit, because those r

eports indicate “prof its” payable to PSS. However, there is not dispute that the “profits” were credited to the “profit reserve”but were never r emitted to PSS becaus

e the aggreg

ate a mount of the uncollectible invoices always exceeded the agg regate amount of

th e “profits,” i.e., the balance of the “profit reserve” was alway s negative. While this is how the arrangement was established, Alpha has offered no evidence of what monies actually went into or came out of

the profit reserve. The aging reports only a ddress those invoices that were not yet due.

The only evidence offer

ed on this point was through the affidavit of Buttram, and that affidavit does not clearly

establish the neg

ative amount of tha

t reserve. Buttr

am states in his firs

t affidavit, according to hi

s personal knowled

ge “[t]hat Alpha ha

d made advances

to PSS, evidenced by a negative bal

ance in the ‘prof

it reserve,’ and

the aggreg

ate unpaid balan

ce of such advan

ces is $14,10 5.44.” This is in addition to the “aggregate unpaid balance of the invoices aga inst which Alpha made advances under the A gre ement that had not by then been charged back to PSS.” Buttram’s second affidavit indicates that “an additional $7,583. 31 in invoices was c harged back to PSS under the Agre

ement,” and ther

eby “incre

ased the negat

ive balance in

the ‘profit reserve ’ to $21,688.75.” Taking the evidence in a light most favorable to the opponent of the motion, there is a genuine dispute as to the amount of money owed with rega

rd to the negativ

e balance in

the profit re serve account. No suppo rting financia

l records for Alp

ha’s figure of

$21,688.75 was presented , and Alpha also fails to

provide evidence as to the total amount of accounts that were “credited back” to PSS or the amount of profits due PSS against which the former is offset. Kind ervater d isputes Alpha’s claimed amount o f debt bas ed upon his own know ledge and the f

act that the Weekly Profit/Advance sheets showed profits due to PSS that PSS never received. While Alpha argues that these profits were credited t o the account and that Kindervater has offered no evidence to the con tra ry, Alpha failed to provide evidence that a credit took place, o ther than those transaction occurring between March 16 and March 31, 1999.

Kindervater’s affidavit, statin g that he did not ow

e the amo unt cl aimed by Alpha because profits du e to PSS were never paid, also establishes a ge

nuine issue of a ma

terial fact, rendering the summary judgment improper.

Finally Alpha attacks Kin

dervater’s af

fidavit as not bein

g in compliance with the Rules of Civil Procedure

and therefore n

ot sufficient to es

tablish a genuine

issue of material

fact.-5-

Alpha argues that the

“bald statements that the

Guarantor disput

es the amounts

set forth in Alpha’s affidavits are clearly insufficient to withstand a motion for summary judgment.” Alpha analogizes the statements in Kindervater’s affidavits to those that were held insufficient in Fowler v. Happy Goodman Family

, 575 S.W.2d 496 (Tenn. 1978): The affidavit the

n concludes: “Upon the information I

have, I belie

ve that all of the aforementioned

representations of

the plaintiffs were made by them knowing that they we re false and they were intended to mislead me.” The sources of the “information” upon which petitioner based this “belief” are not revealed. Petitioner’s ow n belief does not constitute ‘such facts as w

ould be admissible

in evidence’ as required by Rule 56.05, supra. Nor

does the affidav

it show ‘affirmatively that th e affiant is competent to testify to the matters stated therein,’ as required by the rule.” Fowler , at 498.

Notwithstanding Alpha’s argume nt, the case at ha

nd presents

fact s significantly divergent from those

in Fowler

. In Fowler , the affiant was testifying as to what he believed was the intention of

the opposing party. Without stating that he has specific knowledge of this, he does not establish that he is competent to testify to this. On the other hand, Kindervater tes tified t o facts regarding the financial situation of the company of which he was presiden t, and the refore had the knowledge. The language that he “disputes” the amounts is similar to saying that he “does not owe” th e amount charged, and is not akin to saying that he “believes” the amount to b e wrong . Kindervater’s affidavits are s ufficient to esta

blish disputed material

facts with

regard to the amount due as a result of the negative balance in the profit reserve account.

Acco rdi ngly, the summary judgment is vacated and the cause

is remanded for further proceedings consistent with this Opinion. The costs are ad judged agains

t Alpha Financia

l Services, Inc.

_________________________ H ERSCHEL P ICKENS F RANKS , J.