                  IN THE COURT OF APPEALS OF TENNESSEE

                        EASTERN SECTION AT KNOXVILLE             FILED
                                                                 October 30, 1997

                                                                Cecil Crowson, Jr.
                                                                 Appellate C ourt Clerk



FIRST AMERICAN NATIONAL BANK, )                  KNOX CHANCERY
                              )
     Plaintiff/Appellee       )                  NO. 03A01-9704-CH-00131
                              )
v.                            )
                              )                  HON. FREDERICK D. McDONALD
JAMES FITZGERALD and          )                  CHANCELLOR
ERIC M. GEORGESON,            )
                              )
     Defendants/Appellants    )
                              )                  AFFIRMED



Neal S. Melnick and Lawrence E. Ault, Knoxville, for Appellants.
Cheryl E. Light, Knoxville, for Appellee.


                                     OPINION


                                                 INMAN, Senior Judge

       This is a suit on a promissory note executed on January 18, 1994 by the

defendant James Fitzgerald to the plaintiff. The payment of this note was

guaranteed by the defendant Eric M. Georgeson, who executed a separate

document. Each document appears to be facially regular and routine.

       The defendants filed a joint answer asserting a failure of consideration in that

the proceeds of the note were never received by either of them. They admitted the

execution and delivery of the promissory note, but denied the execution and delivery

of the guaranty, while later admitting its execution and delivery.

       The Chancellor sustained the complaint in all respects and entered a

judgment against both defendants in accordance with the provisions of the

promissory note. The defendants appeal and present for review the following issues:

       I.     Whether the trial court erred in finding that authorized advances
              were made on the subject promissory note.

       II.    Whether the trial court erred by admitting parol evidence to vary
              the terms of the promissory note and obligations of the parties
              where the appellee failed to establish any authorized advances
              to the appellants under the note.
      III.    Whether the trial court erred in failing to apply the statute of
              frauds in finding the appellants liable for money advances to a
              third party, Blakley Management Corporation, when no written
              promise to do so exists.

      IV.     Whether the trial court erred in not barring recovery on the basis
              that the appellee was equitably estopped by its conduct and
              negligence.

       Our review of findings of fact by the trial court is de novo upon the record of

the trial court, accompanied by a presumption of the correctness of the findings,

unless the preponderance of the evidence is otherwise. TENN. R. APP. P., RULE 13(d).

                                            I

       In 1989, James Fitzgerald and Eric Georgeson were business partners. The

partnership owned several properties in Chattanooga and Knoxville including

property commonly known as the Blakley Hotel. On December 3, 1989, they entered

into a Management Agreement with Blakley Management Corporation to manage

and oversee the operation of the Blakley Hotel including all of its food and beverage

operations.

       The Management Agreement provided that Joseph Parisi (hereinafter

“Parisi”), as major shareholder of Blakley Management Corporation, would be

responsible for hiring staff, maintaining rooms and accurate records, paying taxes,

collecting revenues, paying expenses and maintaining the physical condition of the

hotel. Parisi would receive a 20 percent interest in the profits for his management

services. Blakley Management Corporation would base its operation at the Blakley

Hotel and pay rental for the space. Fifty percent of net profits of Blakley

Management Corporation would be paid to the partnership of Georgeson and

Fitzgerald.

       In January, 1990, Parisi approached Dewitt Ingram, (hereinafter “Ingram”) a

loan officer at FANB, requesting a $25,000. loan. Parisi had no credit history nor

assets sufficient to secure the loan. Subsequently, Georgeson and Fitzgerald

discussed the loan with Ingram and the need for funds to equip and operate the

Blakley Hotel.

       Ingram had known Georgeson and Fitzgerald for some years, and they had

prior business dealings. Fitzgerald is currently head of the Real Estate Finance

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Department for Credit Lyonnaise, a New York bank, and has worked in banking for

20 years including international finance and investments. Fitzgerald first came to

Knoxville when he worked for the Federal Savings and Loan Insurance Corporation

(FSLIC). Financial statements were required for the loan approval, and those

statements were submitted to Ingram by both Fitzgerald and Georgeson.

          The $25,000. loan was made to Fitzgerald on January 18, 1990. Payment of

it was guaranteed by Georgeson. The purpose of the loan was the purchase of

equipment and supplies. Fitzgerald later talked with Ingram by phone requesting that

draws be made on the loan. A phone message from Fitzgerald for Ingram was taken

by Darlene White, a commercial loan secretary, and this message reflected a

request from Fitzgerald to advance $17,000. to the Blakley Management Corporation

account.

          FANB records reflect that the loan proceeds were advanced as follows:

$17,000. was deposited on January 24, 1990 to the Blakley Management

Corporation account; a cashier’s check in the amount of $2,393. was issued to

Watkins Motor Lines per instructions on February 5, 1990; and the balance of

$5,156.74 was deposited to the Blakley Management Corporation account on

February 5, 1990. The Corporate Resolution on file at FANB for the Blakley

Management Corporation also dated January 24, 1990 authorized the establishment

of a checking account with Fitzgerald and Parisi as allowed signers. Accordingly, the

signature card dated the same date had two signatures, those of Fitzgerald and

Parisi.

          Interest payments were made on the note by Blakley Management

Corporation, but Ingram contacted Fitzgerald and Georgeson to advise them if

payments were not made timely. When interest payments ceased, Ingram

discussed with the Appellants the possibility of FANB collateralizing the loan or

working out the loan in some other way. The loan remained in default and past due,

resulting in a formal demand letter being sent to Fitzgerald from Ingram on February

10, 1992.




                                            3
                                            II

       All contracts in writing and signed by the party to be bound are prima facie

evidence of consideration, TENN. CODE ANN . § 47-50-103, and the burden of

overcoming the presumption of consideration is upon the Appellants. Atkins v.

Kirkpatrick, 82 S.W.2d 547, 552 (Tenn. App. 1991), citing Pinney v. Tarpley, 686

S.W.2d 574 (Tenn. App. 1984). The Appellants claim advances were not authorized

and deny that they received any consideration because funds were advanced directly

to suppliers for the Blakley Hotel or to the account of Blakley Management

Corporation.

       The Chancellor found:

              The evidence is very clear that the money that was being borrowed
       was to go to Mr. Parisi and his company and that, in fact, it did go there.
       There is evidence tending to show that Mr. Fitzgerald had some part in
       some of the advances, but that really is not a matter making much
       difference here inasmuch as the loan moneys went where they were
       intended and were used as intended in Mr. Parisi’s business.

       The Appellants’ argument focuses on the way advances were made and who

requested advances, with little or no attention to the evidence concerning the

purpose and need for the promissory note and guaranty. What was contemplated

and intended by the parties respecting the use of the proceeds when they entered

into the contract is relevant to the question of whether the Appellants received the

consideration they now deny.

       The Chancellor found that the method of advancing money was not

determinative of whether consideration was given. Consideration is defined as

“either a benefit to the party promising or a prejudice or trouble to the party to whom

the promise is made.” Dixon v. Manier, 545 S.W.2d 948, 950 (Tenn. App. 1976),

citing Johnson v. Central National Insurance Co., 356 S.W.2d 277 (Tenn. App.

1976). Consideration may pass to a third party and consist of detriment to the payee

for the benefit to a third party. Third National Bank in Nashville v. Lyons, No. 01A01-

9210-CH-00387, 1993 Tenn. App. LEXIS 192, (Middle Section, March 17, 1993). It

is not necessary that all or any of the consideration of a note pass directly to the

maker.




                                            4
       In Walker v. First State Bank, 849 S.W.2d 337, 342 (Tenn. App. 1992), citing

Palmer v. Dehn, 198 S.W.2d 827, 828 (Tenn. App. 1946), this Court held and

reiterated the following principle:

       For there to be a consideration in a contract between parties to the
       contract it is not necessary that something concrete and tangible move
       from one to the other. Any benefit to one and detriment to the other may
       be a sufficient consideration.”

       The plaintiff in Walker contended that there was an absence or lack of

consideration for her note and trust deed, but she testified that she realized that the

pledging of her interest in farm property was necessary as additional collateral to

secure the debt of her brother. The Court found the additional collateral was a

benefit to the bank, and an extension of time to pay the debt through renewal notes

constituted sufficient consideration to the plaintiff. The benefit to the plaintiff was the

extension of time given to her brother to pay the debt.

       The consideration to the Appellants in the present case is even more direct.

Appellants Fitzgerald and Georgeson were the owners of the Blakley Hotel in

Knoxville. As owners of this property, they contracted with the Blakley Management

Corporation and its major stockholder, Joe Parisi, to manage and oversee the

operation of the property as a hotel including its food and beverage operations.

Parisi was responsible for hiring staff, paying expenses and maintaining the physical

condition of the hotel owned by the Appellants. Fifty percent of net profits of Blakley

Management Corporation were to be paid to the Appellants. Blakley Management

Corporation operated the Blakley Hotel property as an ongoing business concern for

approximately two years.

       In his testimony about the loan, Fitzgerald testified:

       Q:     You were aware from your conversations with Mr. Ingram that Joe
              Parisi didn’t have the credit to get this loan, weren’t you?

       A:     He told me that Mr. Parisi on his own would not be able to secure this
              loan, correct.

       Q:     Did you have conversations with Dewitt Ingram about this loan and
              about the situation and how funds could be attained to operate the
              hotel and restaurant?

       A:     We only had a very short conversation. I had other business dealings
              with him, as I’ve already testified, at Third National Bank. He
              specifically asked me if Rick Georgeson and myself would co-sign for a


                                             5
            $25,000. loan for Joe Parisi. We didn’t talk about what it would be
            used for. I said, Yes.

      Q:    You did not talk about what it was going to be used for?

      A:    No, I simply assumed --I trusted Joe Parisi. I assumed it would go into
            Blakley Management Corp.

      Q:    And it did, didn’t it?

      A:    I couldn’t testify to that. I have no knowledge of that.

      Q:    Well, if you heard testimony today that deposits were made into the
            Blakley Management Corporation account, that’s what you understood
            would be done with the money; is that correct?

      A:    Correct.

            Ingram, the loan officer, testified regarding the purpose of the loan and

how it was to be advanced:

      Q:    What were your discussions with either Mr. Fitzgerald or Mr.
            Georgeson regarding what was to be done with the proceeds of this
            loan?

      A:    It was a $25,000. loan, and it was to be there. And when they called
            me, it was to be made a draw on or Joey could draw on it too. I think
            there was an emergency for this. They had some bakery items coming
            on a truck or something. I don’t remember strictly, but it was some kind
            of -- something coming in by a trucking company, and they did not have
            the money to pay for it, and they had to pay for some type of
            equipment.

      Q:    Did Jim Fitzgerald ever tell you that Joe Parisi was authorized to make
            draws on this note?

      A:    They understood that this money was to be used, and Joey had the
            discretion to draw on it and put it in -- I don’t know what account it was
            deposited in. It was some restaurant or the Blakley House Restaurant.
            I don’t have that in front of me.

      Q:    Did you ever talk to Jim Fitzgerald by phone after this loan was made
            about advances under the loan, under the note?

      A:    My secretary did, and I did too. There were several different draw
            requests made, and I got phone calls from Jim to advance money.

      Ingram also testified regarding his course of dealings with the Appellants

when payments were to be made:

      Q:    Okay. Do you know who made the interest payments on this note?

      A:    I know that several times I had to call Joe, and he couldn’t make them.
            And finally it got down to the end, and I called Jim and talked to him,
            and they offered me collateral from the hotel and different things to try
            to work the loan out.




                                          6
              I’m sure--I don’t have those checks in front of me, but I’m sure I talked
              to Rick and Joe several times about the interest payments. And I don’t
              have the checks in front of me, and it’s hard for me to answer. But I
              talked to them several times on the loan, and they helped me either get
              it paid or seen that it was paid.

       Q:     So if interest payments weren’t made, did you contact Rick Georgeson
              and Jim Fitzgerald?

       A:     I definitely contacted Jim and Rick both. I called Jim several times
              before I left the bank, at the end, about these, and they told me what
              they would do to work it out, give me collateral and stuff.

       There was additional testimony from Darlene White, secretary to Ingram, who

recalled taking a phone message from Appellant Fitzgerald who asked that $17,000.

be advanced to the checking account for Blakley Management Corporation. This

phone message was part of the Bank’s business record.

       The finding of the Chancellor that advances were authorized is fully supported

by the preponderance of the evidence.

                                             III

       Turning to the issue of whether the Chancellor erred in admitting parol

evidence respecting the intended use of the borrowed funds and the nature of the

consideration, it is well established in this jurisdiction that while parol evidence is not

admissible to contradict a written instrument, nevertheless parol evidence is

admissible as to collateral matters not varying the terms of the writing . . . or when

representations and statements are made as inducements to the contract, and form

the basis or consideration of it. Hines v. Wilcox, 33 S.W. 914 (Tenn. 1896).

       Appellants argue that “terms” were added which were not in the note,

including that no purpose is given for the note, advancements were not addressed

and Fitzgerald gave no written authority to anyone to request draws. These items or

questions were not specifically mentioned in the note. The Rule allows the

admission of parol evidence in this circumstance, since the matters addressed are

not inconsistent with the written document. See, McGannon v. Farrell, 214 S.W.

432, 434 (Tenn. 1919).




                                             7
       As to this, the Chancellor found:

              The terms of the note and continuing guaranty cannot be varied by
       oral testimony as to that some other understanding or agreement at the
       time of execution of the document might have been. The law is extremely
       clear on that point and leaves us, so that we must really disregard
       contentions about who else was supposed to sign the note, or who else
       was supposed to be obligated on it.

       We agree with this finding.

       The Appellant Fitzgerald is a New York banker currently serving as head of

Real Estate for Credit Lyonnaise with 20 years of experience in the banking industry

including international finance and investments. He is a graduate of St. John’s

University and came to Knoxville to liquidate various properties for the FSLIC. He

then purchased several properties in the Knoxville area and went into business with

Appellant Georgeson. He now asserts that the note he signed did not contain the

provisions he negotiated and agreed to including the fact that there were to be other

makers. While he admits the execution of the note for $25,000. his argument that he

did not follow-up with the Bank about the proceeds of the note and that he knew

nothing of the advances under the note is unavailing.

       The Chancellor found ample evidence that the understanding of the parties

with regard to these documents was not inconsistent with the written terms and that

the contemplated and acknowledged consideration was given. We agree with this

finding. The Chancellor did not vary the terms of the documents.

                                             IV

       There is no evidence that the plaintiff loaned money to anyone other than

Appellant Fitzgerald, and the fact that he directed those funds be utilized for the

operation of the Blakley Hotel through its manager does not change his obligation.

Consideration can flow to a third party if that is what the obligor directs it to do.

Walker, supra.

       The Statute of Frauds has no application. The Chancellor found:

              Mr. Fitzgerald contends that Mr. Parisi was supposed to be a co-
       signor on the note and that Mr. Fitzgerald would not have signed had he
       known that Mr. Parisi was not signing. Essentially that defense requires
       a disregard of the note itself, the note that shows the name typed in of Mr.
       Fitzgerald and below that is his signature. Below that further is the typed
       indication that Defendant Georgeson guarantees the note.



                                             8
            There is no indication on either the note or continuing guaranty that
      Mr. Parisi or his corporation were in any way directly obligated on the
      note.

      We agree with this finding.

                                           V

      Lastly, the appellants argue that the Chancellor should have applied the

doctrine of equitable estoppel to bar the plaintiff’s recovery because the Bank

allegedly did not honor its promise to advance the proceeds to him and thereby

prejudiced him, as he relied on that promise in the signing of the promissory note.

      Estoppels are not favored, and the burden is upon the party seeking to invoke

the estoppel to prove each and every element thereof. Third National Bank v.

Capital Records, 445 S.W.2d 476 (Tenn. App. 1969). Estoppel requires, at a

minimum: (1) reliance upon the statement or action of another without the

opportunity to know the truth, and (2) action based on that reliance which results in

detriment to the actor. W. F. Holt Co. v. A & E Electric Co., Inc., 665 S.W.2d 722,

735 (Tenn. App. 1983), citing Warren Brothers Co. v. Metropolitan Government, 540

S.W.2d 243, 247 (Tenn. App. 1976). For equitable estoppel, the party must have

taken actions “calculated to convey the impression that the facts are otherwise than,

and inconsistent with, those which the party subsequently attempts to assert.” Id.,

citing McClure v. Wade, 235 S.W.2d 835, 842 (Tenn. App. 1950).

      As found by the Chancellor, and as heretofore noted, the loan at issue was

made to Fitzgerald. The testimony was clear that the Bank and Fitzgerald intended

the proceeds to be utilized for the operation of the Blakley Hotel. Equitable estoppel

is not available as a defense to the Appellants when there have been no subsequent

inconsistent assertions made by the Bank. The evidence is clear that the Bank

honored its obligation and representations to Fitzgerald by making the advances he

bargained for when he obtained the loan.

       We agree with the Chancellor that the evidence reveals no reason why the

plaintiff should be equitably estopped from enforcing the promissory note.




                                           9
      The judgment is affirmed and the case is remanded for all appropriate

purposes. Costs are assessed to the appellants and their sureties for which

execution may issue if necessary.



                                        ___________________________________
                                        William H. Inman, Senior Judge


CONCUR:


______________________________
Herschel P. Franks, Judge



______________________________
Don T. McMurray, Judge




                                        10
