Court Opinion

ID: 1077584
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:23:40.322262+00
Date Added: 2024-06-11T15:33:30.297257
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                                                              FILED
                             AT KNOXVILLE                   January 14, 1999

                                                           Cecil Crowson, Jr.
                                                           Appellate C ourt
                                                               Clerk
DAN ALEXANDER,                         )   C/A NO. 03A01-9807-CV-00205
                                       )
          Plaintiff-Appellee,          )
                                       )
                                       )
                                       )
                                       )
v.                                     )   APPEAL AS OF RIGHT FROM THE
                                       )   WASHINGTON COUNTY CIRCUIT COURT
                                       )
                                       )
                                       )
                                       )
JAY ARMENTROUT, JR., and               )
PATRICIA RUTH ARMENTROUT,              )
                                       )   HONORABLE LEWIS W. MAY,
          Defendants-Appellants.       )   JUDGE

For Appellants                             For Appellee

MICHAEL A. EASTRIDGE                       TIMOTHY S. BELISLE
Johnson City, Tennessee                    Johnson City, Tennessee

                            O P I N IO N

REVERSED AND REMANDED                                        Susano, J.

                                   1
               This jury case involves litigation arising out of the

dissolution of a dairy farm partnership.             Dan Alexander

(“Alexander”) sued his brother-in-law,1 Jay Armentrout, Jr. (“Mr.

Armentrout”), and Mr. Armentrout’s wife, Patricia Ruth Armentrout

(“Mrs. Armentrout”), seeking to recover monies allegedly due him

for the sale of his one-half interest in the Alexander-Armentrout

Dairy partnership (“the partnership”).             The jury returned a

verdict2 for Alexander, and the Armentrouts appealed.            They raise

issues that essentially present the following questions:

               1. Did the trial court err in denying the
               Armentrouts’ motions for directed verdict and
               judgment notwithstanding the verdict?

               2. Did the trial court err in refusing to
               grant the Armentrouts a new trial?

               3. Did Mr. Armentrout’s delivery of a
               promissory note to Alexander, and the
               latter’s unconditional acceptance of payments
               under the note, operate as a waiver and/or an
               estoppel so as to prevent Alexander from
               later denying the terms of the note under
               which the payments were made and from
               asserting different terms as to the repayment
               of the underlying obligation?

               4. Does an agent who signs a promissory note
               on behalf of a disclosed principal, leaving a
               personal signature line unsigned, incur
               personal liability for the debt evidenced by
               the promissory note?

               5. Is the spouse of the agent signing the
               promissory note liable for repayment of the
               note when the obligee on the note admits she
               never explicitly agreed to pay the note; she
               did not sign the note; and she did not
               participate in the agreement for the purchase
               of the partnership interest that was the
               consideration for the note?

      1
          Alexander is married to Mr. Armentrout’s sister.
      2
       The parties agreed that an award of $70,432.15 was appropriate in the
event the jury found in favor of Alexander.

                                         2
3
                                 I.

          Alexander and Mr. Armentrout owned and operated the

partnership, a dairy farm, from 1980 to 1993.    Having decided to

dissolve their business relationship in 1993, they agreed that

Mr. Armentrout would purchase Alexander’s interest in the

partnership for $111,000.   Under the parties’ agreement, Mr.

Armentrout was to receive all of the partnership’s assets and

assume all of its liabilities.   Mr. Armentrout paid Alexander

$50,000 in the form of a cashier’s check.     They agreed that the

balance of $61,000 would be paid over time on a promissory note.

The bank officer, who was present in July, 1993, when the $50,000

payment was made, expressed several suggestions as to the terms

of the note.   Alexander and Mr. Armentrout agreed that the latter

would arrange to have a promissory note prepared and would

present it to Alexander.

          Mr. Armentrout asked the partnership’s accountant,

Kenneth McCurry, to prepare a promissory note.    As requested, Mr.

McCurry drafted a note for $61,000 reciting that “[f]or value

received, Jay Armentrout d/b/a Armentrout Acres, Inc., promises

to pay to the order of Dan Alexander....”     At the bottom of the

note, the following typing can be found:

                     Armentrout Acres, Inc.

                     Signature ___________________
                               By Jay Armentrout

                     Signature ___________________
                               Jay Armentrout

                                 4
Mr. Armentrout affixed his signature on the line just underneath

“Armentrout Acres, Inc.”   He left the second signature line

blank.   He then delivered the note to Alexander around the end of

August, 1993 -- some six to eight weeks after the initial $50,000

payment had been made.

           The parties did not discuss the note when it was

delivered to Alexander.    Alexander took the note home, looked at

it that night, and reviewed it on two subsequent occasions.     He

testified that he had realized on the day he received the note

that it contained terms with which he did not agree.    Despite

this realization, he admitted that he had said nothing to Mr.

Armentrout.   The note burned in a fire at Alexander’s home in

September, 1993.

           In June, 1995, Alexander received a check for $6,310

that was drawn on the Armentrouts’ personal bank account as the

first payment on the note.    He deposited this check into his bank

account.   He received a second payment of $6,310 in January,

1996, in the form of a check drawn on Armentrout Acres, Inc.’s

bank account.   He again deposited the check into his bank

account.   Shortly thereafter -- now some two years plus since he

had received the note from Mr. Armentrout -- Alexander had his

attorney draw up a new promissory note for $61,000.    Alexander

sent this note, along with a check for $700 and a letter, to Mr.

Armentrout.   The letter stated that Mr. Armentrout had overpaid

the interest on the note and that Mr. Armentrout should sign and

return the new note because he owed the full $61,000 from the

buy-out of the partnership.

                                  5
           When Mr. Armentrout refused to sign the new note,

Alexander brought this suit against the Armentrouts alleging

breach of contract.

           Alexander contends that the note handed to him by Mr.

Armentrout does not contain the true terms of the contract.    He

argues that his agreement was with the Armentrouts and not with

Mr. Armentrout’s corporation, Armentrout Acres, Inc.    He contends

that the Armentrouts are both personally liable on the $61,000

obligation.   Mr. Armentrout, on the other hand, contends that

Alexander accepted the note and that his corporation, Armentrout

Acres, Inc., is liable on the note.   Mrs. Armentrout contends

that she is not a party to the contract, did not sign the note,

and is otherwise not liable on the note.

           Alexander argues that he did not accept the note, and

that both of the Armentrouts breached the contract for the

purchase of his share of the partnership.

                                II.

           Our standard of review is well-settled.   A directed

verdict is appropriate only when the evidence is susceptible to

but one conclusion.   Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn.

1994); Long v. Mattingly, 797 S.W.2d 889, 892 (Tenn.App. 1990).

We must “take the strongest legitimate view of the evidence

favoring the opponent of the motion when called upon to determine

whether a trial court should have granted a directed verdict.”

Id.   In addition, all reasonable inferences in favor of the

                                 6
opponent of the motion must be allowed and all evidence contrary

to the opponent’s position must be disregarded.            Eaton, 891
S.W.2d at 590; Long, 797 S.W.2d 892.

                                    III.

            We consider first the issue of whether Alexander is

equitably estopped from denying his acceptance of the promissory

note delivered by Mr. Armentrout.

            Alexander acknowledges that Mr. Armentrout gave him a

promissory note for $61,000 approximately six to eight weeks

after the closing of the sale in July, 1993.           It was not until

some time in 1996 that Alexander3 notified Mr. Armentrout that he

refused to accept the terms of the promissory note.             Nearly two

and one-half years elapsed from the time that Alexander received

the promissory note from Mr. Armentrout, until he first notified

Mr. Armentrout that he had not accepted the promissory note.

Alexander further admitted that during this period he accepted

two payments on the note.

            The rule of equitable estoppel is pertinent:

            [E]quitable estoppel embraces not only ideas
            conveyed by words written or spoken and
            things actually done but includes the silence
            of one under a duty to speak and his omission
            to act, as well; negligent silence may work
            an equitable estoppel, and acts or conduct
            which are calculated to mislead and do in

      3
       Although Alexander contacted Mr. Armentrout to obtain a copy of the
note on several occasions, he never disclosed to Mr. Armentrout on any of
these occasions that the terms of the note were unacceptable.

                                      7
          fact mislead will work an estoppel
          notwithstanding there was no intention to do
          so.

Lusk v. Consol. Alum. Corp., 655 S.W.2d 917, 920 (Tenn. 1983).

Alexander’s failure to express his dissatisfaction with the

tendered promissory note, and his acceptance of two payments on

the note, were uncontroverted at trial.   “Where the facts

constituting the estoppel are undisputed,... the question of

estoppel becomes one of law and may be determined by the Court.”

Consolidated Coal Co. v. O’Brien, 3 Higgins 252, 266 (Tenn.App.

1913).   Taking the strongest legitimate view of the evidence

favoring Alexander and disregarding all countervailing evidence,

we find that Alexander accepted the corporation’s note in

satisfaction of the underlying obligation to pay him $61,000.

           We recognize that Alexander testified as to his

unexpressed subjective intent not to accept the promissory note

because it did not accurately express the terms of his deal with

Mr. Armentrout.   Under the facts of this case, however, “the

unspoken subjective intent of a party is not relevant.”      See

Malone & Hyde Food Services v. Parson, 642 S.W.2d 157, 159

(Tenn.App. 1982).   Alexander accepted the note, and his claim

against Mr. Alexander must rise or fall on that instrument.

                                IV.

           Having determined that Alexander accepted the

promissory note, the sole issue remaining as to Mr. Armentrout is

                                 8
whether he is personally liable on that instrument.                T.C.A. § 47-

3-402(b)(1) is dispositive of this issue:

               (b) If a representative signs the name of
               the representative to an instrument and the
               signature is an authorized signature of the
               represented person, the following rules
               apply:

                     (1) If the form of the signature
                     shows unambiguously that the
                     signature is made on behalf of the
                     represented person who is
                     identified in the instrument, the
                     representative is not liable on the
                     instrument.

Id.

               Our cases addressing the liability arising from the

signature of an authorized representative applied an earlier

version of the pertinent statute.4            However, our case law

uniformly holds that the ambiguity of a document must be

determined from its face, and, as such, is a question of law.

Warrior Transport, Inc. v. Thompson, 1989 WL 9561 (Tenn.App.,

February 10, 1989), petition to rehear, 1989 WL 25253 (Tenn.App.,

March 21, 1989); Malone & Hyde Food Services, 642 S.W.2d at 159;

Sutton v. First Nat’l Bank of Crossville, 620 S.W.2d 526, 530

(Tenn.App. 1981).

               In FDIC v. Tennessee Wildcat Services, Inc., 839 F.2d
251 (6th Cir. 1988), the use of the word “by” preceding a

signature was held to be unambiguous:

      4
          The earlier version of this statute is T.C.A. § 47-3-403 (1979).

                                         9
            Where the principal is identified and shown
            on the face of the note as the maker and the
            word “by” precedes the signature of the
            signer, there is no ambiguity and the signer
            is not personally liable, absent some showing
            of fraud or other circumstance that requires
            a court to look beyond the face of the note.

Id. at 256.    “If the language of a written instrument is clear

and unambiguous, the court must interpret it as written, rather

than according to the unexpressed intention of one of the

parties.”     Sutton, 620 S.W.2d at 530.   See Malone & Hyde Food

Services, 642 S.W.2d at 159.    It is clear from the face of the

promissory note that Mr. Armentrout signed on the signature line

denoted for the representative of Armentrout Acres, Inc.         Because

Mr. Armentrout’s signed in a representative capacity for

Armentrout Acres, Inc., he is not personally liable on the

promissory note.     See T.C.A. § 47-3-402(b)(1).   The trial court

erred in denying Mr. Armentrout’s motion for a directed verdict.

                                  V.

            We next consider the issue of whether Mrs. Armentrout

is liable on the promissory note or otherwise responsible for any

portion of the obligation to Alexander.

            The trial court denied Mrs. Armentrout’s motion for a

directed verdict because it believed that Alexander’s acceptance

of the promissory note was at issue.       However, as we have

previously stated, Alexander is estopped to deny acceptance of

the note.     Since Mrs. Armentrout is not a party to the note and

did not sign the note, she is not liable on it.       See T.C.A. § 47-

                                  10
3-401(a).5      The trial court erred in not directing a verdict for

Mrs. Armentrout on this issue.

              Even if we were to hold otherwise on the issue of

Alexander’s acceptance of the note, Alexander’s theory as to Mrs.

Armentrout’s liability is without merit.             Alexander testified

that Mrs. Armentrout was not present at the time that he and Mr.

Armentrout reached their agreement to dissolve the partnership.

He further testified that he and Mrs. Armentrout were not

partners, and that although she was listed as a remitter on the

$50,000 cashier’s check, she never expressly promised to pay any

portion of the $110,000 obligation.

              Alexander predicates Mrs. Armentrout’s liability on the

circumstances surrounding the dissolution of the partnership.              He

urges us to find that she is liable on a theory of implied

contract because she was present at closing; because her name was

on the $50,000 cashier’s check as a remitter; because she signed

the loan papers at the bank from which the $50,000 down payment

came; because her name was reflected as a grantee along with her

husband on the deed from Alexander conveying the dairy farm; and

because her name was printed on a personal check used by Mr.

Armentrout to make the first payment on the note.

     5
         T.C.A. § 47-3-401(a) provides as follows:

              (a) A person is not liable on an instrument unless
              (i) the person signed the instrument, or (ii) the
              person is represented by an agent or representative
              who signed the instrument and the signature is binding
              on the represented person under § 47-3-402.

                                        11
            We cannot agree with Alexander’s analysis.   Under

general principles of contract law, a contract “must result from

a meeting of the minds of the parties in mutual assent to the

terms.”   Sweeten v. Trade Envelopes, Inc., 938 S.W.2d 383, 386

(Tenn. 1996).    Alexander relies on Scandlyn v. McDill Columbus

Corp., 895 S.W.2d 342 (Tenn.App. 1994), for the proposition that

we must “look to the conduct of the parties in light of all the

circumstances to determine whether an implied contract exists.”

Id. at 345-46.   However, Alexander points to no specific facts to

indicate that Mrs. Armentrout’s words or conduct at closing give

rise to such circumstances as support a contract implied in law.

The mere presence of Mrs. Armentrout at closing and the

appearance of her name on documents associated with the purchase

of Alexander’s interest are not enough to establish an implied

contract holding her responsible for the obligation to Alexander.

                                 VI.

            The judgment of the trial court is reversed.   The

complaint is dismissed.    Costs on appeal are taxed against the

appellee.    This case is remanded to the trial court for entry of

a judgment consistent with this opinion, and for collection of

costs, all pursuant to applicable law.

                                       __________________________
                                       Charles D. Susano, Jr., J.

CONCUR:

______________________
Herschel P. Franks, J.

                                 12
______________________
Don T. McMurray, J.

                         13