IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE FILED December 17, 1998
Cecil Crowson, Jr. USI CAR EXCHANGE, INC. and CHARLES ) C/A NO. Appellate Court 03A01-9707-CV-00268 Clerk R. WEEMS, Individually, ) ) Plaintiffs, ) ) v. ) ) ) LONG PONTIAC COMPANY and ALLAN ) LEDFORD, Individually, ) ) Defendants. ) ) ) ) ) ) LONG PONTIAC COMPANY, ) ) Plaintiff-Appellant, ) APPEAL AS OF RIGHT FROM THE ) HAMILTON COUNTY CIRCUIT COURT ) v. ) ) ) ) ALLAN LEDFORD, Individually and wife, ) TERRI LEDFORD, Individually; ALLAN ) LEDFORD d/b/a PRESTIGE CLEANERS, ) a Sole Proprietorship; SIGNATURE AUTO ) CREDIT, INC.; MIDDLE TENNESSEE MOTOR ) CARS, INC.; GAMBLE MOTOR COMPANY, ) INC.; WSI CAR EXCHANGE, INC.; ) CHARLES R. WEEMS, Individually; ROBERT) OLIVER, Individually and wife, LOIS ) OLIVER, Individually, ) ) HONORABLE SAMUEL H. PAYNE, Defendants-Appellees. ) JUDGE
For Appellant For Appellee Charles R. Weems and USI Car Exchange, Inc. F. SCOTT LEROY Leitner, Williams, Dooley DAVID B. KESLER & Napolitan, PLLC STACIE L. CARAWAY Chattanooga, Tennessee Spears, Moore, Rebman &
1 Williams Chattanooga, Tennessee For Appellee Middle Tennessee Motor Cars, Inc.
NADER BAYDOUN STEPHEN KNIGHT Baydoun & Reese, P.A. Nashvile, Tennessee
For Appellee Gamble Motor Company, Inc.
K. STEPHEN POWERS LISA M. PATE Witt, Gaither & Whitaker, P.C. Chattanooga, Tennessee
O P I N IO N
2 AFFIRMED AND REMANDED Susano, J.
3 This is an action1 for damages filed by Long Pontiac
Company (“Long”), against multiple defendants, arising out of the
defalcations of Long’s agent, Allan Ledford (“Ledford”). Long
appealed from the trial court’s judgment, arguing that the trial
court erred in granting summary judgment to the defendants,
Charles R. Weems (“Weems”), USI Car Exchange, Inc. (“USI”),2
Gamble Motor Company, Inc. (“Gamble”), and Middle Tennessee Motor
Cars, Inc. (“MTMC”), all of whom acknowledge purchasing
automobiles from Ledford at Long’s place of business. Long, in
its complaint for fraud, conspiracy to defraud, conversion, and
gross negligence, alleges that the defendants knew or should have
known (a) that Ledford was engaging in criminal activity3 to
defraud Long and (b) that Ledford was exceeding the authority
granted to him by Long. The trial court concluded that no
genuine issues of material fact existed with respect to Long’s
claims and, furthermore, that the defendants were entitled to
summary judgment as a matter of law. On this appeal, Long
essentially presents the following question for our review:
In granting summary judgment, did the trial court err in determining that no genuine issue of material fact exists?
1 On the cover sheet of this opinion, we have reflected the styles of these consolidated cases as they appear on the parties’ briefs; however, the judgments appealed from only appear to relate to the litigation instituted by Long Pontiac Company. 2 USI is identified in one of the cases as WSI Car Exchange, Inc. All references in this opinion to USI include WSI Car Exchange, Inc. 3 Apparently, Ledford began defrauding Long in 1993. His criminal activity went undiscovered by Long until late 1994. During the period of this criminal activity, Ledford was General Sales Manager of Long. It is undisputed that Ledford had Long’s authority to act in this capacity in his dealings with the defendants.
4 I. Facts
The events leading to this litigation began in early
1994 when Weems, a wholesale dealer of used cars, went to Long in
search of used vehicles to purchase on behalf of his company,
USI,4 and on behalf of Gamble, another car dealership. Weems was
instructed by Long’s finance manager to see Ledford regarding
several used cars in which Weems had an interest. Ledford told
Weems that he was General Manager5 and a part owner of the
company. Weems and Ledford commenced a business arrangement
pursuant to which Weems thereafter purchased used cars at
wholesale prices set by Ledford and agreed to by Weems.
During the seven-month period of his dealings with
Long, Weems dealt exclusively with Ledford on all purchases.
Weems and Ledford completed over 70 transactions involving more
than 100 used vehicles. In all of these transactions, Weems
inspected and took delivery of the vehicles at Long’s place of
business. He also paid for every purchase by writing a check on
the bank account of either USI or Gamble. After Weems tendered
the checks and received possession of the vehicles, Long6 sent
Weems the paperwork relating to the sales, including titles,
odometer statements, and sometimes bills of sale on the
vehicles.7
4 Weems was a shareholder, officer, and the principal agent of USI. 5 It is undisputed that Ledford’s official title was General Sales Manager and that he was a part owner of the company. 6 The record does not indicate which employee or department of Long was responsible for handling the paperwork. 7 It is not clear whether Weems received the paperwork on cars purchased by Weems on Gamble’s behalf or if he received only the paperwork on cars he purchased for USI.
5 In the beginning, Weems made all checks payable to
Long. Later, Ledford directed Weems to make the checks payable
to Signature Auto, Quality Motors, or to individuals or entities
whom Ledford identified as customers who had traded vehicles to
Long. He explained to Weems that this would expedite the title
process and that both Signature Auto and Quality Motors were
Long’s “tote-lots”. Tote-lots are off-site car lots used to sell
low-value vehicles that have been sold or traded to a dealer.
Thereafter, Weems wrote checks on his principals’ bank accounts
as directed by Ledford. Early on, Weems noted that the paperwork
on purchases for which he had written checks to Signature Auto or
Quality Motors, listed Long as the seller of the vehicles. When
he discussed this with Ledford, Ledford told him that he and
Nelson Long, president of Long, were involved in several
different companies, and that “it made no difference” as to whom
the check was made payable. Ledford represented to Weems that he
had Long’s “full authority and consent” to conduct these
transactions.
In some transactions, Ledford directed Weems to make
checks payable to him individually. He told Weems that he
personally owned the vehicles being sold. On one occasion,
Ledford told Weems to leave the payee on the check blank because
he did not know the company, i.e., Signature Auto, Quality
Motors, or Long, through whom the cars would be billed. This
check, written on Gamble’s account, was ultimately filled in by
Ledford with the name of Prestige Cleaners as the payee.
Prestige Cleaners was a company personally owned by Ledford. It
was not affiliated in any way with Long. Weems did not become
6 aware that Ledford had inserted Prestige Cleaners as the payee
until after Long discovered Ledford’s criminal activity. Also,
most of the checks written by Weems involved payment for more
than one vehicle. At Ledford’s direction, Weems did not note on
these checks the wholesale prices of the various vehicles
purchased in those transactions.
In addition to doing business with Weems in 1994,
Ledford also sold used cars to MTMC through Paul Kitchen
(“Kitchen”), an agent of MTMC. In September, 1994, Ledford
arranged with Kitchen to sell MTMC a “high dollar” used vehicle.
On this occasion, Kitchen took delivery of the vehicle at Long’s
place of business, without immediately writing a check for its
purchase. A few days later, an unidentified employee of Long
delivered the paperwork to MTMC and requested a check payable to
Signature Auto. Since Kitchen had been told previously by
Ledford that Signature Auto was a tote-lot for Long, and because
the paperwork, which included the title, odometer statement, and
bill of sale, listed Signature Auto as the seller, MTMC wrote a
check payable to Signature Auto for the purchase of the vehicle.
Sometime in late 1994, Long discovered Ledford’s
criminal activity. Long then pressed charges against him.
Ledford was convicted and given a sentence of ten years
imprisonment. He was ordered to pay restitution of $700,000.
Long then filed this suit against Weems, USI, Gamble, MTMC, and
others.8 The defendants answered, denying they were guilty of
any of the allegations set forth in the complaint.
8 Long’s claims against the appellees are before us pursuant to Rule 54.02, Tenn.R.Civ.P.
7 Weems filed a motion for summary judgment on his and
USI’s behalf, stating that there were no genuine issues of
material fact.9 He supported his motion with his personal
affidavit; Ledford’s deposition; and various exhibits. Gamble
subsequently filed a motion for summary judgment, also averring
that no genuine issues of material fact existed as to the claims
against it. Gamble supported its motion with the affidavit of
its President, James T. Gamble; an affidavit from Weems;
Ledford’s deposition; and other documents. Finally, MTMC filed
its motion for summary judgment, also taking the position that no
genuine issues of material fact existed as to any of Long’s
claims. MTMC supported its motion with the pleadings; Long’s
discovery responses; Ledford’s deposition; and an affidavit from
Paul Kitchen.
Long responded10 to the motions of Weems and Gamble,
contending that genuine issues of fact did exist regarding the
movants’ knowledge of whether Ledford was exceeding his
authority. Long supported its response with the pleadings, the
affidavit of its President, Nelson Long; the deposition of Weems;
the interrogatory responses of Weems; and the entire record in
the case. Still later, Long responded to MTMC’s motion for
summary judgment, again stating that genuine issues of fact
existed regarding that defendant’s knowledge of whether Ledford
was exceeding his authority. It supported its motion with two
affidavits of Nelson Long and the entire record in the case. The
9 References to Weems in the opinion will include his company, USI. 10 Long’s motion before us to consider the portions of Weems’ deposition attached to its brief in response to the defendants’ motions for summary judgment, filed in the trial court, is granted.
8 trial court granted summary judgment on all claims against the
appellees, finding that no genuine issues of material fact
existed. The court later denied Long’s motion to alter or
amend11 the final judgment as to Weems, USI, and Gamble.
II. Standard of Review
We examine the trial court’s grant of summary judgment
under the standard set forth in Rule 56.04, Tenn.R.Civ.P.
Summary judgment is appropriate where:
the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Id. The moving party has the initial burden of producing
competent, material evidence showing that there is no genuine
issue as to any material fact. Byrd v. Hall, 847 S.W.2d 208, 211
(Tenn. 1993). The moving party can satisfy this burden by
offering evidence that “affirmatively negate[s] an essential
element of the nonmoving party’s claim,” or the moving party can
“conclusively establish an affirmative defense that defeats the
nonmoving party’s claim.” Id. at 215 n.5. The moving party is
entitled to summary judgment unless the nonmoving party
contradicts the factual predicate of the motion by presenting
11 Long’s outside auditors identified a considerable number of vehicles that are related to Ledford’s business arrangement with Weems, USI, and Gamble. Long moved to have the court consider this information on the grounds of mistake, surprise, fraud, and misrepresentation, or other misconduct of Weems, USI, or Gamble. The trial court denied the motion.
9 competent and admissible material evidence. Caldwell v. Nissan
Motor Mfg. Corp., 968 S.W.2d 863, 865 (Tenn.App. 1997). The
nonmoving party “must set forth specific facts showing that there
is a genuine issue of material fact for trial.” Byrd, 847 S.W.2d
at 211. (Emphasis in Byrd).
Our review of a grant of summary judgment involves only
a question of law, and hence no presumption of correctness
attaches to the trial court’s judgment. McCall v. Wilder, 913
S.W.2d 150, 153 (Tenn. 1995); Carvell v. Bottoms, 900 S.W.2d 23,
26 (Tenn. 1995); Gonzales v. Alman Constr. Co., 857 S.W.2d 42,
44 (Tenn.App. 1993). In evaluating a motion for summary
judgment, we must determine: “(1) whether a factual dispute
exists; (2) whether the disputed fact is material to the outcome
of the case; and (3) whether the disputed fact creates a genuine
issue for trial.” Byrd, 847 S.W.2d at 214. (Emphasis in Byrd).
In making our evaluation, we must “view the evidence in a light
favorable to the nonmoving party and allow all reasonable
inferences in his favor.” Id. at 215. Summary judgment should
be granted if the facts and conclusions permit a reasonable
person to reach only one conclusion. Carvell, 900 S.W.2d at 26.
III. The Parties’ Contentions
Long argues that the judgment of the trial court should
be vacated for several reasons. It contends that summary
judgment is inappropriate because the defendants have not carried
their burden of establishing (1) a lack of material factual
10 issues and (2) their entitlement to judgment as a matter of law.
Long insists that the defendants knew or should have known that
Ledford exceeded his authority as Long’s agent when he instructed
Weems and MTMC to make checks payable to individuals or entities
other than Long. It further argues that material factual issues
remain regarding the defendants’ knowledge of Ledford’s criminal
activities and their participation in practices that were
contrary to the usual and customary practices of the automobile
industry regarding the transfer of car titles.
The defendants, meanwhile, argue that Ledford’s actions
are the sole cause of Long’s losses. They argue that their
actions were in good faith and at the authorized direction of
Ledford, who had actual and apparent authority as the General
Sales Manager of Long.
IV. Applicable Law and Analysis
We begin our analysis of this case by noting that the
parties to this controversy appear to agree on the basic facts of
the case, i.e., that Ledford worked for Long as its General Sales
Manager; that he had the authority to sell cars on behalf of
Long; that vehicles were delivered to the defendants in every
transaction; and that Ledford engaged in criminal activities
during the time that Weems, Gamble, and MTMC were customers of
Long. We must now examine each claim, in turn, to determine if
any material facts are in dispute, so as to preclude summary
judgment.
11 12 A. Fraud
To prevail on a claim of fraud at trial, Long must
establish “an intentional misrepresentation with regard to a
material fact; knowledge of the representation’s falsity, i.e.,
it was made ‘knowingly’ or ‘without belief in its truth’ or
‘recklessly’ without regard to its truth or falsity; the
plaintiff reasonably relied on the misrepresentation and suffered
damages; and the misrepresentation relates to an existing or past
fact.” Hill v. John Banks Buick, Inc., 875 S.W.2d 667, 670
(Tenn.App. 1993).
In addition, the concealment or nondisclosure of a
material fact affecting a transaction constitutes fraud when it
is the duty of a party having knowledge of the facts to disclose
them to the other party. Id. Lonning v. Jim Walter Homes, Inc.,
725 S.W.2d 682, 685 (Tenn.App. 1986). Generally speaking, a duty
to disclose facts, otherwise concealed or not disclosed, exists
in three situations:
1. Where there is a previous definite fiduciary relation between the parties.
2. Where it appears one or each of the parties to the contract expressly reposes a trust and confidence in the other.
3. Where the contract or transaction is intrinsically fiduciary and calls for perfect good faith. The contract of insurance is an example of this class.
13 Justice v. Anderson County, 955 S.W.2d 613, 616-617 (Tenn.App.
1997) (quoting from In Domestic Sewing Machine Co. v. Jackson, 83
Tenn. 418 (Tenn. 1885)).
In the instant case, all three defendants -- Weems,
Gamble, and MTMC -- deny, through their affidavits and other
documents, that they possessed any intent to misrepresent any
fact to Long or that they had knowledge that any representation
made by them was false. Indeed, the defendants present evidence
that all of the representations made by them on their checks and
other documents related to the various sales were prompted by
Ledford’s directions. Long does not provide any specific facts
showing that the defendants knew that Ledford’s directions to
them were part of his scheme to defraud Long.12 The nonmoving
party has the burden of showing that a genuine issue of material
fact exists. Byrd, 847 S.W.2d at 211. While there appear to be
factual disputes regarding the customary and usual practices of
the automobile industry, we do not find that these facts are
material to Long’s claim of fraud. “A ‘material fact’ has been
12 Nelson Long asserts these facts in his affidavit:
It is not customary or a common trade practice to give blank checks to employees of automobile dealerships for the purchases of new or used vehicles.
It is not customary or ordinary for a wholesaler to purchase cars from a tote lot.
Some of the cars purchased by Mr. Weems had never been titled which in my experience . . . would constitute a rare occurrence in the automobile industry.
It is common practice for dealerships to prohibit employees and agents from selling and dealing in cars in competition with the dealership by which they are employed.
It would be very unusual and suspect for a dealership’s employee or agent to direct a wholesaler to make their check payable to an entity other than the dealership by which the agent or employee was employed.
14 defined as a fact ‘that must be decided in order to resolve the
substantive claim or defense at which the motion is directed.’”
Suddath v. Parks, 914 S.W. 2d 910, 913 (Tenn.App. 1995) (quoting
Byrd, 847 S.W.2d at 211. Accordingly, we find that Long has
provided no evidence to establish that a material factual issue
exists on the element of intent to misrepresent information, or
with respect to the defendants’ knowledge of the falsity of their
representations.
Long claims that the fraudulent actions of Ledford
should be imputed to Weems, Gamble, and MTMC because of the
defendants’ knowledge of the usual and customary practices of the
automobile industry. We are not persuaded by this argument.
There are simply no facts before us demonstrating that the usual
and customary practices of the automobile industry were such as
to put the defendants on notice that Ledford was acting in a
fraudulent manner. The fact that a general sales manager of an
automobile dealership directs a customer to make out a check in a
manner that does not coincide with the customary practice of the
industry does not, in and of itself, put that customer on notice
that the general sales manager is acting in a fraudulent manner,
especially when the transaction, as directed by that general
sales manager, is not fraudulent on its face. Here, the
customers did as they were directed by Long’s chief salesman,
whose directions were reasonable, given his explanations for
those directions. There was nothing about those directions to
put the purchasers on notice that Ledford was acting
fraudulently. It is not enough in this case to show that the
transactions were not handled in the customary manner; it is
15 necessary to show that the manner in which they were handled
reasonably should have put the purchasers on notice that Ledford
was acting fraudulently. Such a showing is required in order to
overcome the facts presented by the purchasers showing that the
purchasers had no knowledge of Ledford’s illegal activity.
Long’s proof simply does not make out a genuine issue of material
fact as to whether the purchasers knew or should reasonably have
known that Ledford was engaged in fraudulent activity.
Long has not advanced any evidence that Weems, Gamble,
or MTMC were in a fiduciary relationship, or one of trust and
confidence, with Long. Furthermore, Long has not presented any
direct and material evidence that the transactions at issue were
not transactions at arms length between Ledford, on the one hand,
and Weems, Gamble, and MTMC on the other. In each and every
transaction at issue in this case, the sales price was negotiated
and agreed upon by the parties, and paid by the defendants.
Ledford, as General Sales Manager, or another Long employee, gave
specific instructions to Weems and MTMC as to how their checks
were to be made out. We do not find any basis in law to
establish that Weems, Gamble, and MTMC had a duty to detect and
disclose to Long the fraudulent activity of Ledford.
Furthermore, even if a party has a duty to disclose, it cannot be
expected to disclose fraudulent activity of which it is not
aware. There is absolutely no evidence in this case reflecting
fraud by concealment or nondisclosure. All of the evidence is to
the contrary.
16 The defendants’ filings negate essential elements of
Long’s fraud claim. Long’s responses do not make out a genuine
issue of material fact precluding a grant of summary judgment.
B. Conspiracy to Defraud
To prevail on a claim for conspiracy to defraud, Long
must establish the following elements:
[a] “conspiracy to defraud” on the part of two or more persons means a common purpose, supported by a concerted action to defraud, that each has the intent to do it, and that it is common to each of them, and that each has the understanding that the other has that purpose.
Pusser v. Gordon, 684 S.W.2d 639, 642 (Tenn.App. 1985), (quoting
Dale v. Thomas H. Temple Co., 208 S.W.2d 344, 353-54 (Tenn.
1948)). Further, conspiracy, without proof of fraud, is not a
cause of action. Pusser, 684 S.W.2d at 642.
As we have previously explained, the record contains
uncontroverted evidence by which Weems, Gamble, and MTMC
affirmatively negated essential elements of the claim of their
participation in fraud. Therefore, the claim of conspiracy to
defraud does not lie. The trial court’s grant of summary
judgment in favor of Weems, Gamble and MTMC on this claim was
appropriate.
C. Conversion
17 To be liable for conversion, a defendant “need only
have an intent to exercise dominion and control over the property
that is in fact inconsistent with the plaintiff’s rights, and do
so.” Mammoth Cave Production Credit Ass’n v. Oldham, 569 S.W.2d
833, 836 (Tenn.App. 1977). In the instant case, the undisputed
facts reflect that the purchasers took possession of the vehicles
through transactions involving the top sales official of Long.
There is no evidence of any intent to exercise dominion and
control over the vehicles in a manner inconsistent with Long’s
rights, id.; on the contrary, the defendants exercised dominion
and control over the vehicles in a manner that was consistent
with the various sales transactions entered into with Long, as
represented by Ledford. The uncontradicted facts negate
conversion.
D. Gross Negligence
To prevail on a claim for gross negligence, Long must
establish that the transactions in which Weems, Gamble, and MTMC
participated with Ledford constitute “negligent act[s] done with
utter unconcern for the safety of others, or [acts] done with
such a reckless disregard for the rights of others that a
conscious indifference to consequences is implied in law.” Odum
v. Haynes, 494 S.W.2d 795, 807 (Tenn.App. 1972). See Inter-City
Trucking Co. v. Daniels, 178 S.W.2d 756 (Tenn. 1944); Craig v.
Stagner, 19 S.W.2d 234 (Tenn. 1929).
Long contends that Weems, Gamble and MTMC acted with
reckless disregard for the truth regarding the ownership of the
18 vehicles when they relied on representations made by Ledford.
However, Long has set forth no specific facts supporting a claim
for gross negligence. In his affidavit, Nelson Long contends
that various circumstances surrounding many of the transactions
were “very unusual and suspect.” He cites examples such as
leaving the payee blank on one check; making checks payable
directly to tote-lots; buying cars from employees, individually;
buying demonstrator cars; making checks payable to individual
trade-in customers; and others.
However, for each circumstance cited by Nelson Long in
his affidavit, Weems, Gamble and MTMC provide evidence that they
acted at the specific direction of Long’s General Sales Manager.
Nelson Long’s affidavit does not dispute this. In all cases,
vehicles were inspected and delivered to Weems, Gamble and MTMC
by Ledford at the business premises of Long, where Nelson Long,
was present on a full-time basis and available to discuss any
transaction or vehicle. Long would have us decide that the
defendants’ participation in those transactions, at the direction
of its General Sales Manager, and at Long’s place of business
where Nelson Long was available on a full-time basis, constitutes
reckless disregard for Long’s rights. We do not find a factual
predicate for such a finding. The record contains uncontroverted
evidence that the defendants were not reckless in their dealings
with Ledford.13 Long has not set forth material facts to
13 In Weems’deposition, when questioned about the difference between the payee on the checks and the seller on the titles, he answers as follows:
Q: ...[D]id you ever ask Mr. Ledford about why that was?
A: We had a discussion or two about that early.
Q: Okay. Tell me what you recall about those discussion or two.
19 establish that Weems, Gamble, or MTMC acted with reckless
disregard for Long’s ownership rights in the vehicles.
Accordingly, we find that the trial court’s grant of summary
judgment to the defendants Weems, Gamble and MTMC on the claim of
gross negligence was appropriate.
V. Conclusion
For the foregoing reasons, we conclude that Weems, Gamble
and MTMC have demonstrated that there are no genuine issues of
material fact, and, further, that they are entitled to judgment
as a matter of law. Accordingly, the judgment of the trial court
is affirmed. This case is remanded to the court below for the
collection of costs assessed there. The costs of this appeal are
taxed against the appellant and its surety.
____________________________ Charles D. Susano, Jr.
CONCUR:
A: He indicated to me early on, as you’ll already find that I have already said, that he and Nelson Long were involved in some other car companies, of which Signature, I specifically remember, was one of them, and it made no difference.
In addition, in the single transaction at issue between Long and MTMC, Kitchen asserts the following in his affidavit:
Several days after I took the vehicle, another employee of Long Pontiac delivered the title and bill of sale to me in Davidson County. This employee represented to me that the check for payment of the purchase price should be made payable to “Signature Auto Credit, Inc.” as the “tote lot” for Long Pontiac. This employee also provided me with a bill of sale, odometer statement and duly executed title reflecting that “Signature Auto Credit, Inc.” was the transferor dealer for this car. Mr. Ledford had also told me that “Signature Auto Credit, Inc.” was the “tote lot” for Long Pontiac.
20 ________________________ Houston M. Goddard, P.J.
________________________ Don T. McMurray, J.