                                                                                        02/10/2017




                     IN THE COURT OF APPEALS OF TENNESSEE
                                AT KNOXVILLE
                                  December 14, 2016 Session

                PHYLLIS ARRINGTON, ET AL. V. B.J. BROYLES, ET AL.

                        Appeal from the Circuit Court for Greene County
                        No. 12CV372     Douglas T. Jenkins, Chancellor1


                                 No. E2016-00363-COA-R3-CV



This appeal involves the plaintiffs’ complaint for breach of common law and statutory
warranties, violations of the Tennessee Consumer Protection Act, and promissory
estoppel regarding the purchase of drywall that was later found defective. The plaintiffs
voluntarily dismissed their claim for breach of common law and statutory warranties,
while the seller sought summary judgment. Following a hearing, the trial judge recused
himself before ruling on the motion for summary judgment. Thereafter, he entered an
order granting partial summary judgment. The new judge then entered a final order of
dismissal, confirming the grant of summary judgment and dismissing the case in its
entirety. The plaintiffs appeal, claiming that remand is appropriate because not all issues
were resolved by the grant of summary judgment. We agree and reverse.


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


JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which CHARLES D.
SUSANO, JR., J. and D. MICHAEL SWINEY, C.J., joined.

Francis X. Santore, Jr., Greeneville, Tennessee, for the appellants, Phyllis Arrington and
Gary William Arrington.

F. Braxton Terry, Morristown and W. Lewis Jenkins, Jr., Tennessee, for the appellee, B.J.
Broyles, doing business as Bargain Salvage and Ace Development, Incorporated.




1
    Sitting by interchange.
                                               OPINION
                                     I.      BACKGROUND

       Phyllis and Gary Arrington (collectively “Plaintiffs”) purchased drywall from B.J.
Broyles, doing business as Bargain Salvage and Ace Development, Incorporated,
(“Seller”) on October 11, 2007. Plaintiffs later installed the drywall at some point in
2011. Upon discovering that the drywall was a banned product from China that
contained sulfur compounds, Plaintiffs spoke with Seller, who allegedly agreed to
remove the defective product.

        On July 7, 2012, Plaintiffs filed suit against Seller. An amended complaint was
later filed with the assistance of counsel. The amended complaint included claims for
breach of common law and statutory warranties, violations of the Tennessee Consumer
Protection Act (“TCPA”), and promissory estoppel.2 Plaintiffs alleged that Seller was
also individually liable because his “actions or inactions were not an appropriate use of
the corporate form” and because they were led to believe that they were “dealing with”
Seller in his “personal capacity as well as his business capacity.” Relative to the
promissory estoppel claim, they alleged that Seller should be estopped from relying upon
the applicable statute of limitations because Seller induced them not to file suit by
promising to “make things right.” They further claimed that they relied upon these
promises to their detriment.

        Seller responded by denying wrongdoing and filing a motion to dismiss the claim
in its entirety, alleging that dismissal was appropriate pursuant to the applicable statute of
limitations. Seller also claimed that dismissal was appropriate because Plaintiffs failed to
join the original seller and manufacturer of the drywall as indispensable parties. An
agreed order was later entered that documented the nonsuit of the breach of warranty
claims without prejudice and the voluntary withdrawal of the motion to dismiss. The
order did not address the TCPA or promissory estoppel claims.

       On June 3, 2015, Seller filed a motion for summary judgment of the TCPA claim.
Seller alleged that he had no knowledge of the defective nature of the product at the time
of the sale in 2007, that his company quit selling the product once the defect was
discovered, and that he advised Mrs. Arrington of the defective nature of the product
prior to her installation of the product. Seller alleged that he did not engage in a
deceptive practice, that Plaintiffs failed to present evidence of any damages, and that
Plaintiffs failed to mitigate any alleged damages by installing the drywall with full
knowledge of the potential defective nature of the product. Seller attached a statement of


2
    Plaintiffs phrased the claim as one for “breach of contract by estoppel.”
                                                       -2-
undisputed material facts and affidavits in support of his request for summary judgment
dismissal of the TCPA claim.

        Seller attested that Mrs. Arrington installed the drywall after he advised her not to
install the product until he could determine whether it was defective. He later inspected
the home and found that some of the drywall had been obtained from a different
manufacturer whose products are sold at Lowes, Home Depot, and Drywall Wholesalers,
not Bargain Salvage. He “offered to potentially help [her] remediate the home, if needed,
if she would provide” the necessary contact information for the contractor who installed
the drywall. He claimed that she could not provide the necessary information and further
stated,

       At the time we sold the drywall that had high sulfur content, we had no idea
       that this occurred. The drywall was never recalled by the Federal Trade
       Commission; however, once we determined there was high sulfur content
       in some of the drywall, we immediately stopped selling it.

       In seeing the home [at issue], I was not able to determine that any drywall
       in the home came from Bargain Salvage.

Andy Broyles confirmed Seller’s account of the inspection of the residence and their lack
of knowledge of the defective nature of the product at the time of the purchase.

        Agreeing that the only germane issue left for the court to decide was the validity
of the TCPA claim, Plaintiffs responded by asserting that the motion for summary
judgment was untimely, that the affidavits were inadmissible because neither contained
an averment of personal knowledge, and that genuine issues of material fact remained.
Plaintiffs attached their own affidavits in support of their response, alleging, in pertinent
part, that they were not advised of the defective nature of the product at the time of
purchase, that Seller promised on several occasions to “make it right” or “see what he can
do” about the defective product, that Seller never advised them not to install or to test the
product prior to installation, and that they provided the contact information for the
contractor that installed the product.

       A hearing on the motion for summary judgment was held on June 11, 2015.
Following the hearing, Tom Wright, Circuit Court Judge, entered an order providing, in
pertinent part, as follows:

       During the course of arguments regarding the existence of genuine issues of
       material fact in this case it appeared to the Court that, although there is no
       genuine issue of material fact with regard to whether the alleged defective
                                            -3-
      drywall was sold by [Seller] with knowledge of [the] purported
      deficiencies, there is a dispute between the parties that may be a consumer
      protection act claim, a negligence claim or a misrepresentation claim
      relating to the actions of the parties after [Seller] discovered the potential
      defectiveness of the Chinese drywall. It appeared to the Court through the
      arguments that there were genuine issues of material fact in connection with
      such claims; however, such claims were not articulated in the [amended
      complaint] in this case.

      Counsel for [Plaintiffs] made an oral motion to amend the [complaint]
      during the hearing and the Court GRANTED the oral motion to amend.
      Accordingly, it is hereby

      ORDERED that [P]laintiffs shall have until July 11, 2015[,] within which
      to file an amended complaint. [Seller] shall answer the amended complaint
      by August 10, 2015.

(Emphasis added.). Judge Wright further found that a potential conflict of interest may
exist if the case proceeded to a trial. Accordingly, he continued as follows:

      [I]t is hereby ORDERED that the undersigned RECUSES himself from this
      case; and, with the consent of the parties, REASSIGNS this case to
      Chancellor Douglas T. Jenkins for all further proceedings.

The case was then transferred to Chancellor Jenkins by entry of an interchange order on
June 18, 2015.

        The next day, on June 19, 2015, Plaintiffs filed a second amended complaint that
recited the same allegations in the first amended complaint verbatim with the exception
of the following sentence:

      [Seller] knew that the suspect drywall was otherwise not fit for building
      purposes and was Chinese drywall but with reckless and wanton disregard,
      still let Plaintiffs, to their detriment, install said drywall in their house.

Seller responded by denying wrongdoing and requesting dismissal.

     Despite his recusal, on July 7, 2015, Judge Wright entered an order granting
summary judgment on the TCPA claim, finding as follows:



                                           -4-
      This matter came before the Court on June 11, 2015[,] on [the] Motion for
      Summary Judgment as it relates to the [TCPA claim].

      [Seller] contend[s] that there is no genuine issue of material fact as to
      whether or not [Seller] engaged in unfair and deceptive trade practices.
      [Plaintiffs] have responded to the same contending there is a genuine issue
      of material fact.

      The Court finds that [Plaintiffs] purchased drywall which had high sulfur
      content from [Seller].

      The Court further finds that [Seller] did not have any knowledge that the
      drywall in question had high sulfur content. The record further reflects that
      [Seller] did not have any knowledge of the high sulfur content drywall at
      the time he sold it to Ms. Arrington as can be found in his affidavit which is
      undisputed on the record.

      The Court further finds that [Plaintiffs] are not able to put forth any
      evidence, at this time, that [Seller] had any knowledge there was something
      wrong with the drywall at the time it was sold.

      The Court notes that [Seller] actually placed the high sulfur content drywall
      in . . . homes for resale and; thus, sustained damages . . . which had to be
      remediated.

      The Court finds that [Seller] could not have engaged in unfair deceptive
      trade practices if [he] did not know of the existence of any problems with
      the drywall at the time of the initial sale.

      WHEREFORE, [Seller’s] Motion for Summary Judgment as it pertains to
      the violation of the [TCPA] at the time of the sale of the drywall is granted.

Plaintiffs moved to set aside the order, arguing that Judge Wright recused himself prior to
granting partial summary judgment. Seller filed a motion to dismiss, claiming that
dismissal was appropriate because all claims had been ruled upon in his favor. He noted
that the second amended complaint raised claims that had either been voluntarily
dismissed or rejected following the hearing on the motion for summary judgment.

       The case proceeded to a hearing before Chancellor Jenkins, who entered an order
of final dismissal that provided as follows:

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      After hearing the statements and arguments of counsel, counsel answering
      questions of the Court and the Court’s own review of the file and the law
      applicable to this case, the Court finds that the Order entered on July 7,
      2015[,] granting Summary Judgment to [Seller] by Judge Wright is
      appropriate under the circumstances and that [Seller has] successfully
      negated [Plaintiffs’] ability to prove the allegations in their Complaint.
      This Court finds that Judge’s Wright’s Order of Summary Judgment was
      appropriate after an independent review of the file, the law, arguments and
      statements of counsel.

      The Court finds that [Seller’s motion to dismiss] is well taken since there
      are no other issues left to be decided in the case; therefore, the case should
      be dismissed.

This timely appeal followed.

                                      II.   ISSUES

   We consolidate and restate the issues on appeal as follows:

      A.     Whether the trial court possessed the requisite subject matter
      jurisdiction to adjudicate the matter.

      B.     Whether the trial court erred in dismissing the case in its entirety.

                               III.   STANDARD OF REVIEW

        The grant of a motion to dismiss is subject to a de novo review with no
presumption of correctness. Phillips v. Montgomery Cnty., 442 S.W.3d 233, 237 (Tenn.
2014). “In considering a motion to dismiss, courts must construe the complaint liberally,
presuming all factual allegations to be true and giving the plaintiff the benefit of all
reasonable inferences.” Stewart v. Schofield, 368 S.W.3d 457, 462 (Tenn. 2012). “A
trial court should grant a motion to dismiss only when it appears that the plaintiff can
prove no set of facts in support of the claim that would entitle the plaintiff to relief.”
Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011)
(internal quotation and citations omitted).




                                            -6-
                                             IV.     DISCUSSION

                                                         A.

       As a threshold issue, we must first address the question of the court’s subject
matter jurisdiction. See Tenn. R. App. P. 13(b) (providing this court with the authority to
consider the trial court’s subject matter jurisdiction whether or not the issue is raised on
appeal). “The concept of subject matter jurisdiction involves a court’s power to
adjudicate a particular type of controversy.” Dishmon v. Shelby State Cmty. Coll., 15
S.W.3d 477, 480 (Tenn. Ct. App. 1999) (citing Meighan v. U.S. Sprint Commc'ns Co.,
924 S.W.2d 632, 639 (Tenn. 1996); Turpin v. Conner Bros. Excavating Co., 761 S.W.2d
296, 297 (Tenn. 1988)). “Judgments or orders entered by courts without subject matter
jurisdiction are void.” Id. (citations omitted). Moreover, a trial court’s lack of subject
matter jurisdiction requires an appellate court to vacate the judgment and dismiss the
action without reaching the merits of the appeal. Id.

       Here, Judge Wright granted summary judgment on the TCPA claim after he
entered an order of recusal and appointed Chancellor Jenkins to hear the case in his stead.
This order is void and must be vacated because Judge Wright was without jurisdiction to
further adjudicate the matter following the entry of an order of recusal. However, we
need not dismiss the action without considering the merits of the appeal because a
subsequent order was entered by Chancellor Jenkins, who possessed subject matter
jurisdiction to adjudicate the matter based upon the entry of an interchange order.

                                                         B.

       Plaintiffs do not appeal the summary judgment dismissal of their TCPA claim.
Instead, they argue that the court erred in dismissing the case in its entirety without
addressing the outstanding claims not disposed of by the grant of summary judgment.
They explain that their second amended complaint included claims for breach of common
law and statutory warranties, violations of the TCPA, promissory estoppel,3 and “piercing
the corporate veil.” Seller responds that dismissal was appropriate because the TCPA
claim was the only remaining claim at the time of dismissal.

       The record reflects that Plaintiffs voluntarily dismissed their breach of common
law and statutory warranty claims prior to the hearing on the TCPA claim. Plaintiffs
were granted leave to file a second amended complaint; however, such leave was limited
to the filing of a potential claim concerning Seller’s actions following the discovery of
the defective nature of the product. Plaintiffs responded by re-filing the second amended

3
    Plaintiffs again refer to this claim as “breach of contract via estoppel.”
                                                         -7-
complaint, with the addition of one sentence in further support of their TCPA claim. The
re-filing of the same complaint was not in keeping with the court’s grant of leave to
amend; however, neither Judge Wright nor Chancellor Jenkins ruled upon the claim for
promissory estoppel that was included in the first and second amended complaints.

       While titled as a claim for “breach of contract by estoppel inducement by
defendant” and inartfully drafted, the outstanding claim concerned Seller’s actions
following the discovery of the defective nature of the product. Indeed, Plaintiffs alleged
in both the first and second amended complaint as follows:

      [Seller is] estoppeled [sic] to rely on any statute of limitations defense as
      [he has], on several occasions, induced Plaintiffs not to file any lawsuit and
      “make things right”.

      In reasonable and detrimental reliance on these allegations, Plaintiffs
      continued to rely upon [Seller’s] representations to “make things right”.

      As a result of waiting on [Seller] to “make things right”, Plaintiffs suffered
      diminution in value, lost rents, upkeep (utilities, insurance, taxes, etc.), loss
      of use, loss of sales, and loss of use of their money (prejudgment interest).

In Tennessee, “[p]romissory estoppel is explained as: ‘A promise which the promisor
should reasonably expect to induce action or forbearance on the part of the promisee or a
third person and which does induce such action or forbearance is binding if injustice can
be avoided only by enforcement of the promise.”’ Calabro v. Calabro, 15 S.W.3d 873,
878 (Tenn. Ct. App. 1999) (quoting Amacher v. Brown-Forman Corp., 826 S.W.2d 480,
482 (Tenn. Ct. App. 1992) (quoting Restatement (Second) of Contracts § 90)); see also
Barnes & Robinson Co. v. OneSource Facility Servs., Inc., 195 S.W.3d 637, 645 (Tenn.
Ct. App. 2006) (upholding denial of promissory estoppel claim because the reliance was
unreasonable in light of the circumstances of the case). A plaintiff may not recover
pursuant to a theory of promissory estoppel unless

      1.     the detriment suffered in reliance [was] substantial in an economic
      sense;

      2.     the substantial loss to the promisee in acting in reliance [was]
      foreseeable by the promisor; [and]

      3.    the promisee . . . acted reasonable in justifiable reliance on the
      promise as made.

                                            -8-
Calabro, 15 S.W.3d at 879. The doctrine of promissory estoppel is also referred to as
“detrimental reliance” because the plaintiff must show not only that a promise was made,
but also that the plaintiff reasonably relied on the promise to his detriment. Id. (quoting
Engenius Entm't, Inc. v. Herenton, 971 S.W.2d 12, 19-20 (Tenn. Ct. App. 1997)).

       With these considerations in mind, we conclude that dismissal was prematurely
granted when the trial court failed to address the outstanding claim of promissory
estoppel. Upon remand, the trial court should also consider whether Seller may be held
individually liable for his actions as pled by Plaintiffs.

                                 V.     CONCLUSION

      The decision of the trial court is reversed. The case is remanded for further
proceedings. Costs of the appeal are taxed to the appellee, B.J. Broyles, doing business
as Bargain Salvage and Ace Development, Incorporated.


                                                 _________________________________
                                                 JOHN W. McCLARTY, JUDGE




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