                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                                FEBRUARY 15, 2006 Session

 TERRY L. HARRIS, ET AL. v. JEFFREY L. STOVER and NATIONWIDE
            MUTUAL FIRE INSURANCE COMPANY

                  Direct Appeal from the Chancery Court for Shelby County
                          No. CH-04-0078-1    Walter Evans, Judge



                     No. W2005-02173-COA-R3-CV - Filed May 30, 2006


In this appeal, we are asked to determine whether the chancery court properly granted the plaintiffs’
motion for summary judgment. In this case, a lessor and his insurance company brought a direct
action against a lessee and the lessee’s insurance company seeking a declaration of the parties’ rights
under the lease agreement and reimbursement to the lessor’s insurance company for amounts paid
to the lessor for damages to the rental property as a result of a fire while the lessee resided on the
property. On appeal, the appellant argues that under the terms of the insurance policy maintained
by the lessee, no obligation to pay the lessor or his insurance company arose as a matter of law. We
reverse the decision of the chancery court and remand to the chancery court for the entry of an order
granting summary judgment to the appellant.


   Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Reversed and
                                       Remanded

ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and HOLLY M. KIRBY , J., joined.

Parks T. Chastain, David M. Hannah, Nashville, TN, for Appellant, Nationwide Mutual Fire
Insurance Company

Randall N. Songstad, Cordova, TN, for Appellees
                                             OPINION

                               I. FACTS & PROCEDURAL HISTORY

        On May 11, 2000, Terry L. Harris (“Harris”) and Jeffrey L. Stover (“Stover”) entered into
a lease agreement (the “Lease”) whereby Stover would lease a residence located in Cordova,
Tennessee (the “Property”) from Harris. The lease agreement granted Stover an option to purchase
the Property. If Stover exercised his option, the purchase price of the Property would reflect a $200
credit for each month’s rent Stover had paid. The effective date of the Lease was December 1, 1999.
The initial term of the lease was for six months, “subject to an automatic right of renewal at the
exclusive option of Stover (or his assignee) up to and including December 31, 2002.” If Stover did
not exercise his option to purchase the Property by December 31, 2002, the Lease and the option to
purchase would expire. Paragraph 3 of the Lease also required Stover to maintain insurance on the
Property. As a result, Stover maintained an insurance policy on the Property (the “Insurance Policy”)
with Nationwide Mutual Fire Insurance Co. (“Nationwide” or “Appellant”). Even though the Lease
required Stover to maintain insurance on the Property, Harris also maintained insurance on the
Property with Allstate Insurance Co. (“Allstate” or collectively with Harris, “Plaintiffs” or
“Appellees”).

         In December of 2001, a fire occurred on the Property, causing damage to the Property. As
of the date of the fire, Stover had not exercised his purchase option under the Lease. Harris then
filed a claim for damages with Allstate. Subsequently, Allstate paid to Harris $168,659.40 for the
damages incurred to the Property as a result of the fire.

        On January 12, 2004, Plaintiffs filed an action for declaratory judgment against Stover and
Nationwide requesting the chancery court to declare the rights and liabilities of the parties with
respect to paragraph 3 of the Lease, to find that Plaintiffs were not liable for the damages incurred
to the Property as a result of the fire, to find that Defendants must reimburse Allstate for the amount
paid to Harris as a result of the damages incurred to the property, to award costs to Plaintiffs, and
to award pre-judgment and post-judgment interest to Plaintiffs.

       On April 16, 2004, Nationwide filed an answer to Plaintiffs’ complaint. On March 28, 2005,
Nationwide filed a motion for summary judgment, which the chancery court denied on June 10,
2005. On June 21, 2005, Plaintiffs filed a motion for summary judgment. The chancery court
granted Plaintiffs’ motion for summary judgment.

                                      II. ISSUE PRESENTED

Appellant has timely filed a notice of appeal and presents the following appealable issue for review:

1.     Whether the chancery court erred when it granted Appellees’ motion for summary judgment.




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For the following reasons, we reverse the decision of the chancery court and remand to the trial court
for the entry of an order granting summary judgment to Appellant.

                                         III.    STANDARD OF REVIEW

         As the Tennessee Supreme Court has stated,

                  [t]he standard for reviewing a grant of summary judgment is de novo
                  without any presumption that the trial court’s conclusions were
                  correct. See Mooney v. Sneed, 30 S.W.3d 304, 306 (Tenn. 2000).
                  Summary judgment is appropriate only when the moving party
                  demonstrates that there are no genuine issues of material fact and that
                  he or she is entitled to judgment as a matter of law. See Tenn. R. Civ.
                  P. 56.04; Penley v. Honda Motor Co., 31 S.W.3d 181, 183 (Tenn.
                  2000); Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn. 1993). In reviewing
                  the record, “courts must view the evidence in the light most favorable
                  to the nonmoving party and must also draw all reasonable inferences
                  in the nonmoving party’s favor.” Staples v. CBL & Assocs., Inc., 15
                  S.W.3d 83, 89 (Tenn. 2000). “If both the facts and conclusions to be
                  drawn therefrom permit a reasonable person to reach only one
                  conclusion, then summary judgment is appropriate.” Seavers v.
                  Methodist Med. Ctr., 9 S.W.3d 86, 91 (Tenn. 1999).

Brooks v. Bd. of Prof'l Responsibility of the Supreme Court, 145 S.W.3d 519, 524 (Tenn. 2004).

                                                 IV. DISCUSSION

       On appeal, Appellant asserts that the chancery court erred when it granted Appellees’ motion
for summary judgment. Since this case was decided on summary judgment, we must analyze it
within that context. As such, our analysis begins with whether there are any disputed issues of
material fact. As to this case, there are no disputed issues of material fact. Thus, we must affirm the
chancery court’s decision if Appellees were entitled to summary judgment as a matter of law.

        In this case, Appellees brought suit against Appellant and Stover to declare their rights under
paragraph 3 of the Lease1 and to have Allstate reimbursed for amounts paid to Harris for damages
to the Property as a result of the fire. However, Appellant was not a party to the lease. Thus, in
order for Appellant to be liable for any damages, an obligation for Appellant to pay pursuant to the
Insurance Policy must accrue to Appellees. Otherwise, Appellant is not liable.



         1
          Paragraph 3 of the Lease states that “[d]uring the term of this Agreement (any extensions or renewals thereof),
Stover shall be responsible for the maintenance and upkeep on said property, and shall also be responsible for
maintaining insurance coverage on said property. . . .”


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         “The interpretation of a contract is a matter of law . . . .” Teter v. Republic Parking Sys., 181
S.W.3d 330, 342 (Tenn. 2005) (citing Hamblen County v. City of Morristown, 656 S.W.2d 331,
335-36 (Tenn. 1983)). “Like any other contract, however, a court has a duty to enforce insurance
contracts ‘according to their plain terms. Further, the language used must be taken and understood
in its plain, ordinary and popular sense.’” Griffin v. Shelter Mut. Ins. Co., 18 S.W.3d 195, 200
(Tenn. 2000) (citing Alcazar v. Hayes, 982 S.W.2d 845, 848-49 (Tenn. 1998)).               “It is the universal
rule that a contract must be viewed from beginning to end and all its terms must pass in review, for
one clause may modify, limit or illuminate another.” Cocke County Bd. of Highway Comm’rs v.
Newport Utils. Bd., 690 S.W.2d 231, 237 (Tenn. 1985) (citing Associated Press v. WGNS, Inc., 348
S.W.2d 507 (Tenn. Ct. App. 1961)).

        Pursuant to the terms of the Insurance Policy, Appellant agreed to provide two different types
of coverage to Stover for the Property: property coverage and personal liability coverage. Under the
terms of the Insurance Policy related to property coverage, Appellant had an obligation to pay,
subject to certain limitations, for damages to the Property to Stover because of certain perils up to
the lesser of (1) Stover’s interest in the Property and (2) the policy’s limits for this type of damage.
Thus, Appellant may be liable to Stover for any ownership interest he had in the property subject to
the terms of the Insurance Policy. While both parties have argued at length in their briefs as to the
amount of insurable interest Stover had in the Property prior to its damage, there is nothing in the
record to demonstrate that Harris is a party or third party beneficiary to the property coverage portion
of the Insurance Policy or that Stover assigned any right to any insurance claim under the property
coverage section of the Insurance Policy to Appellees. As a result, regardless of the amount of
insurable interest Stover had in the Property, Appellees, as a matter of law, may not collect under
the property coverage provisions of the Insurance Policy. 17B C.J.S. Contracts § 610 (1999) (“One
who is not a party to a contract has no right to enforce it, unless such person is an intended third
party beneficiary of the contract, or an assignment of the contract has occurred.” (footnotes omitted)).

        Under the terms of the personal liability coverage provisions, Appellant had an obligation
to pay for damages to the Property which Stover was legally obligated to pay due to an occurrence
up to the policy’s limits for such occurrence. However, the personal liability coverage provisions
of the Insurance Policy also contained a “no action” clause, which prevents a third party from
bringing a direct action against Appellant to recover under the personal liability coverage provisions
of the Insurance Policy unless the third party obtained a final judgment of a court or an agreement
signed by Appellant creating an obligation of the insured that was covered in the Insurance Policy.
As this clause creates a condition precedent to a right of action against Appellant that Appellees have
not met, Appellees, as a matter of law, cannot bring suit against Appellant as it was premature. See
Jones Masonry, Inc. v. W. Am. Ins. Co., 768 S.W.2d 686, 688-89 (Tenn. Ct. App. 1988) (quoting
Willett’s Plumbing v. Nw. Nat’l Cas. Co., 548 S.W.2d 830, 831 (Ark. 1977)).

       Thus, Appellees, as a matter of law, cannot maintain a direct action against Appellant under
the property coverage and personal liability coverage provisions of the Insurance Policy.
Accordingly, the chancery court improperly granted summary judgment. Generally, this finding
would require a remand to the chancery court to proceed with a trial on the merits. However, in


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certain instances, “summary judgment may be granted in favor of a nonmovant.” Griffis v. Davidson
County Metro. Gov't, 164 S.W.3d 267, 284 (Tenn. 2005) (citing Thomas v. Transp. Ins. Co., 532
S.W.2d 263, 266 (Tenn. 1976)). “Such action should be taken[, however,] only in rare cases and
with meticulous care.” Id. “Further, the party against whom summary judgment is to be rendered
must have had notice and a reasonable opportunity to respond to all the issues to be considered.”
Id. (citing Thomas, 532 S.W.2d at 266; March Group, Inc. v. Bellar, 908 S.W.2d 956, 959 (Tenn.
Ct. App. 1995)).

         In this case, no genuine issue of material fact exists. Thus, this Court must decide the legal
conclusions de novo to determine whether the non-movant was entitled to summary judgment. We
are aware that the chancery court denied summary judgment to Appellant some time before granting
summary judgment to Appellees. We find, for the foregoing reasons, that, as a matter of law,
Appellees cannot maintain a direct action against Appellant. Consequently, Appellant is entitled to
summary judgment. Accordingly, we reverse the decision of the chancery court and remand to the
trial court for the entry of an order granting summary judgment to Appellant. See CMH Homes, Inc.
v. McEachron, No. E2004-02189-COA-R3-CV, 2005 Tenn. App. LEXIS 672 (Tenn. Ct. App.
2005).

                                         V. CONCLUSION

         For the foregoing reasons, we reverse the decision of the chancery court and remand to the
chancery court for the entry of an order granting summary judgment to Appellant. Costs of this
appeal are taxed to Appellees, Terry L. Harris and Allstate Insurance Co., for which execution may
issue if necessary.



                                                       ___________________________________
                                                       ALAN E. HIGHERS, JUDGE




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