                   IN THE COURT OF APPEALS OF TENNESSEE
                                AT JACKSON
                                  November 17, 2009 Session

                 DRAYTON D. BERKLEY
                          v.
  HOUSEHOLD FINANCIAL CENTER and BENEFICIAL TENNESSEE,
                         INC.

                        Appeal from the Circuit Court for Shelby County
                          No. CT-002643-07 D'Army Bailey, Judge



                    No. W2009-00287-COA-R3-CV - Filed December 22, 2009


This appeal concerns an attempt to obtain the discharge of a debt. The plaintiff attorney executed
two promissory notes in favor of the defendants financial institutions. The notes called for monthly
payments. Just over a year later, the plaintiff mailed correspondence and a check to the institution’s
payment processing center. The correspondence offered an amount in excess of the monthly
payment in exchange for extinguishing each debt. At the payment center, the envelopes were opened
by machine and the correspondence was separated from the checks. The checks were posted to the
plaintiff’s account. The correspondence was forwarded to another department. The plaintiff made
no more payments on the notes, and then filed a complaint for declaratory relief. The defendants
answered and counterclaimed for the amount owed under the note. After conducting a bench trial,
the trial court dismissed the complaint, granted a judgment on the counterclaim to the defendants,
and awarded attorney’s fees. The plaintiff appeals. We affirm.

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

HOLLY M. KIRBY , J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S., and
DAVID R. FARMER , J., joined.

Plaintiff/Appellant Drayton D. Berkley, Memphis, Tennessee pro se

Bradley E. Trammell and Robert F. Tom, Memphis, Tennessee for the Defendants/Appellees
Household Financial Center and Beneficial Tennessee, Inc.

                                  MEMORANDUM OPINION1

       1
           Rule 10. M emorandum Opinion

                                                                                          (continued...)
                                        FACTS AND PROCEDURAL HISTORY

        In the fall of 2005, Plaintiff/Appellant Drayton D. Berkley (“Berkley”), an attorney licensed
in Tennessee and Mississippi, executed two promissory notes in favor of Defendant/Appellee
Household Financial Center.2 Berkley executed the first note on September 7, 2005, for a loan of
$7,000.49. Under the terms of the note, interest accrued at the yearly rate of 24% and Berkley was
required to make monthly payments of $201.39 for sixty months. The note contained an acceleration
clause, stating that, in the event of default, all payments under the note would be immediately due
and owing. It also contained a clause providing for the recovery of attorney’s fees incurred in
enforcing the note. On October 17, 2005, Berkley executed the second note, with the same terms
and amount as the first note.

         From the fall of 2005 to December 2006, Berkley apparently made payments on the notes
without issue.3 In December 2006, as to each note, Berkley sent a check and a letter,4 offering $1500
in consideration for an agreement not to sue on the debt, to Household’s payment processing center
in Illinois.
         Household received Berkley’s correspondence and the payments. It processed the payments
and applied the amounts to Berkley’s outstanding balance on the notes. After application of these
payments, Berkley owed $8,257.35 on the first note and $9,052.84 on the second note. Thereafter,
Berkley stopped making any payment on the notes. Household Financial Center then assigned the
notes to its consumer lending subsidiary, Beneficial Tennessee, Inc. (“Beneficial”).


         1
          (...continued)
         This Court, with the concurrence of all judges participating in the case, may affirm, reverse or modify
         the actions of the trial court by memorandum opinion when a formal opinion would have no
         precedential value. W hen a case is decided by memorandum opinion it shall be designated
         “MEMORANDUM O PINION”, shall not be published, and shall not be cited or relied on for any
         reason in any unrelated case.

Tenn. Ct. App. R. 10.
         2
        Household Financial Center later assigned the notes to its consumer lending subsidiary, Beneficial Tennessee,
Inc. We will refer to Household Financial Center and Beneficial Tennessee, Inc. collectively as “Household.”
         3
        There record indicates that Berkley missed some payments on both notes during this time period; however,
Household accepted late payments and apparently never initiated the collection process.
         4
             Each letter read as follows:

                  Enclosed please find my check . . . in the amount of $1,500.00, which constitutes
         consideration for your agreement and covenant not to sue on the above note and account number and
         a renunciation of your rights in same. Additionally, the covenant not to sue and renunciation include
         any claims in the nature of quantum meruit or quasi-contract. Endorsing the check will constitute
         your agreement. If you do not agree to these terms then please return the check to me in the enclosed
         self-addressed return envelope.

Berkley asserts that the checks bore similar notations; however, because the handwritten notations were illegible, the
trial court excluded duplicates of the checks from evidence.

                                                          -2-
        On May 17, 2007, Berkley filed a complaint for declaratory relief pursuant to Tennessee
Code Annotated § 29-14-101, et seq., naming Household as a defendant.5 Berkley sought a
declaration that the notes had been compromised and extinguished under Tennessee Code Annotated
§ 47-3-604(a)(ii). Household answered and asserted a counterclaim for the total amount due under
the notes, alleging that Berkley had defaulted on the notes. Household also sought reasonable
attorney’s fees pursuant to the terms of the notes. Berkley answered Household’s counterclaim,
asserting eight affirmative defenses. Discovery ensued.

         Berkley deposed David O,6 Beneficial’s Branch Manager, who explained the operations at
the payment processing center. When a piece of mail is received at the payment processing center,
it is opened by a machine. Any enclosed correspondence is separated from the check payment. The
check is sent to the accounting department to be immediately credited to the proper account. The
payment processing center employee does not read the correspondence; it is placed in a separate bin
and forwarded to the appropriate department. The payment is processed before the correspondence
is ever reviewed. After reviewing duplicates of Berkley’s checks, Mr. O testified that they had been
endorsed on behalf of Household after being processed in this manner.

       Mr. O also explained the role and authority of the payment processing center employees. The
employees are authorized only to separate payments from correspondence and to inspect the check
payments. In inspecting the check payments, the employee verifies that the account number is
written on the check and that the writing is legible. The employee is not authorized to review
account activity, credit payments, or enter into agreements on behalf of Household.

       Mr. O also testified that the Illinois payment processing center address is not the proper
address for a customer to send correspondence disputing a debt. He explained that Household
maintains offices in Florida and Virginia specifically for such correspondence, and said that
information on the Florida and Virginia offices is included in the monthly billing statements sent to
each of Household’s customers.

       After conducting discovery, the parties filed cross-motions for summary judgment. The trial
court denied both motions, finding that there was a genuine issue of material fact as to the
Household’s intent when Berkley’s checks were processed.




         5
            The complaint also named Citifinancial Auto Credit and Citifinancial as defendants: however, upon a motion
to sever, the trial court sua sponte dismissed Berkley’s claims against them. This is not raised as an issue on appeal.
         6
             The deposition included the following exchange:

         Q.         What is your name?
         A.         My name is David O.
         Q.         Spell your last name.
         A.         Just one letter, just O.



                                                         -3-
        On June 30, 2008, and July 1, 2008, the trial court conducted a bench trial. At the hearing,
Mr. O’s deposition was entered into evidence in its entirety. Berkley sought to submit into evidence
duplicates of the letters and checks mailed to Household; however, the trial court excluded this
evidence, finding that the duplicates were unreliable because the notations on the checks were
illegible.

         At the close of Berkley’s proof, the trial court held that Berkley had not carried his burden
of proof as to intent or the authority of Household’s agents to enter into an agreement to reduce
Berkley’s debt. The trial court also granted a $18,175.70 judgment to Household on its counterclaim
for the amount due on the notes. Pursuant to the terms of the notes, the trial court awarded attorney’s
fees to Household. Household requested $16,000 in attorney’s fees, but the trial court awarded
$9000, based on “the totality of the circumstances and the legal issues involved.” On July 14, 2008,
the trial court entered a written order consistent with its oral ruling.

       On August 1, 2008, Berkley filed a motion to alter or amend pursuant to T.R.C.P. 59, as well
as a motion for stay of execution pending appeal. Both motions were denied. Berkley now appeals.7

                             ISSUES ON APPEAL AND STANDARD OF REVIEW

        Berkley raises a plethora of issues on appeal:
        1. Whether the trial court erred in failing to find that Tennessee Code Annotated §
        47-3-604 is unambiguous as applied;
        2. Whether the trial court erred in its construction of Tennessee Code Annotated §
        47-3-604;
        3. Whether the trial court erred by violating the separation of powers doctrine;
        4. Whether the trial court erred in failing to find that the letters and signed checks
        constituted “signed writings” pursuant to Tennessee Code Annotated § 47-3-604;
        5. Whether the trial court erred in expanding the unambiguous language of Tennessee
        Code Annotated § 47-3-604 to require that the “signed writing” conform to billing
        statements or inserts which were not in evidence and not part of the notes;
        6. Whether the trial court erred in failing to find that the letters and signed checks
        were unambiguous;
        7. Whether the trial court erred in refusing to admit the executed checks into evidence
        under Rule 1003 of the Tennessee Rules of Evidence in light of Rule 902(9) and
        Tennessee Code Annotated § 47-3-308;
        8. Whether the trial court erred in failing to find that Household did not execute the
        checks in light of Household’s admission that the checks were signed;
        9. Whether the trial court erred in failing to find that Household was estopped to
        deny that it was bound by the terms of Berkley’s letters and checks because it
        accepted the benefits thereof;


        7
         After perfecting an appeal, Berkley filed a motion in this Court, pursuant to Rule 7 of the Tennessee Rules
of Appellate Procedure, for review of the trial court’s order denying stay of execution pending appeal. In an order
entered November 16, 2009, we deferred our ruling on the motion. Berkley’s motion is denied.

                                                        -4-
       10. Whether the trial court erred in failing to find that Household was bound by the
       terms of the letters and signed checks;
       11. Whether the trial court erred in failing to find that the letters and signed checks
       are presumed valid pursuant to Tennessee Code Annotated § 47-50-112;
       12. Whether the trial court erred in failing to find that the letters and signed checks
       constituted binding contracts;
       13. Whether the trial court erred in failing to find that the notes merged into the
       contracts formed by the letters and signed checks;
       14. Whether the trial court erred in dismissing Berkley’s ratification claim;
       15. Whether the trial court erred in finding that Tennessee Code Annotated § 47-3-
       403 would not apply;
       16. Whether the trial court erred by failing to analyze the reasonableness of
       Household’s attorney fee request by utilizing the factors set forth in Rule 1.5 of the
       Tennessee Rules of Professional Conduct;
       17. Whether the trial court erred in awarding any fee pursuant to White v. McBride,
       937 S.W.2d 976.

        Since this case was tried by the trial court sitting without a jury, we review the trial court’s
factual findings de novo accompanied by a presumption of correctness unless the preponderance of
the evidence is otherwise. Columbus Med. Servs., LLC v. Thomas, No. W2008-00345-COA-R3-
CV, 2009 WL 2462428, at *14 (Tenn. Ct. App. Aug. 13, 2009) (citing Vantage Tech., LLC v.
Cross, 17 S.W.3d 637, 644 (Tenn. Ct. App. 1999); TENN . R. APP. P. 13(d)). The trial court’s legal
conclusions are reviewed de novo with no presumption of correctness. Id. (citing Campbell v. Fla.
Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996); Presley v. Bennett, 860 S.W.2d 857, 859 (Tenn.
1993)).

                                              ANALYSIS

                                Discharge under T.C.A. § 47-3-604

        Berkley first contends that Household discharged the notes pursuant to Tennessee Code
Annotated § 47-3-604(a)(ii) by executing a signed writing. In support of this contention, he asserts
that the unambiguous terms of section 47-3-604(a)(ii) do not contain an intent element. In the
alternative, he asserts that Household’s intent to discharge the debts is determined from the letters
he sent with the checks. He also asserts that Household’s endorsement on the checks is valid and
constitutes a signature under the statute, and that the trial court erred in declining to admit the
duplicates of the checks into evidence. In response, Household asserts that T.C.A. § 47-3-604(a)(ii)
requires intent to discharge and that the trial court did not err when it found that Berkley had not
proven intent to discharge or authority to discharge.

        Construction of a statute is a question of law. Cookeville Reg’l Med. Ctr. Auth. v. Cardiac
Anesthesia Servs., PLLC, No. M2007-02561-COA-R3-CV, 2009 WL 4113586, at *3 (Tenn. Ct.
App. Nov. 24, 2009) (citing Barge v. Sadler, 70 S.W.3d 683, 686 (Tenn. 2002)). As such, we
review the trial court’s conclusion de novo with no presumption of correctness. Columbus Med.
Servs., LLC, 2009 WL 2462428, at *14 (citing Vantage Tech., LLC, 17 S.W.3d at 644).

                                                  -5-
         Tennessee Code Annotated § 47-3-604(a) provides as follows:

         A person entitled to enforce an instrument, with or without consideration, may
         discharge the obligation of a party to pay the instrument (i) by an intentional
         voluntary act, such as surrender of the instrument to the party, destruction,
         mutilation, or cancellation of the instrument, cancellation or striking out of the party's
         signature, or the addition of words to the instrument indicating discharge, or (ii) by
         agreeing not to sue or otherwise renouncing rights against the party by a signed
         writing.

T.C.A. § 47-3-604(a) (2001). This Court has clearly held that discharge of such a debt by voluntary
act requires intent. See Muse v. First State Bank, 1987 WL 4022, at *1-2 (Tenn. Ct. App. Feb. 10,
1987), no perm. app.; Carter County Bank v. Craft Indus., Inc., 639 S.W.2d 661, 663 (Tenn. Ct.
App. 1982).8 Other states applying this U.C.C. provision are consistent with the Tennessee case law.
Gover v. Home & City Sav. Bank, 574 So.2d 306, 306-07 (Fla. Dist. Ct. App. 1991) (“We join the
unanimity of other jurisdictions and hold that cancellation or renunciation of an instrument is
ineffective if it is unintentional or procured by mistake.” (citing Peoples Bank of S.C., Inc. v.
Robinson, 249 S.E.2d 784 (S.C. 1978); Reid v. Cramer, 603 P.2d 851 (Wash. Ct. App. 1979))); see
Gloor v. BancorpSouth Bank, 925 So.2d 984, 989 (Ala. Civ. App. 2005) (citing Guar. Bank &
Trust Co. v. Dowling, 494 A.2d 1216 (Conn. App. Ct. 1985); Gover v. Home & City Sav. Bank, 574
So.2d 306 (Fla. Dist. Ct. App.1991); Richardson v. First Nat’l Bank of Louisville, 660 S.W.2d 678
(Ky. Ct. App.1983); FirsTier Bank, N.A. v. Triplett, 497 N.W.2d 339 (Neb. 1993); Los Alamos
Credit Union v. Bowling, 767 P.2d 352 (N.M. 1989); Peoples Bank of S.C., Inc. v. Robinson, 249
S.E.2d 784 (S.C. 1978)). Thus, we agree with the trial court’s holding that intent is required.

        A finding of intent to enter an agreement is, of course, a finding of fact. See, e.g., IJ Co.,
Inc. v. Collier Dev. Co., Inc., No. E2009-00020-COA-R3-CV, 2009 WL 3806138, at *11 (Tenn.
Ct. App. Nov. 13, 2009). Therefore, Berkley’s assertion that intent is presumed as a matter of law
is without basis in law. From our review of the record, we conclude that the evidence does not


         8
             The statute was amended in 1995. The prior version of the statute is as follows:

         Cancelation [sic] and renunciation.-(1) The holder of an instrument may even without consideration
         discharge any party:

         (a) in any manner apparent on the face of the instrument or the endorsement, as by intentionally
         canceling the instrument or the party’s signature by destruction or mutilation, or by striking out the
         party’s signature; or

         (b) by renouncing his rights by a writing signed and delivered or by surrender of the instrument to the
         party to be discharged.

Muse,1987 W L 4022, at *1 (quoting T.C.A. § 47-3-605). The amendment to the statute does not affect the question in
this appeal, namely, whether intent to discharge is required. Therefore, the Muse and Carter County Bank cases remain
authoritative on the issue.



                                                           -6-
preponderate against the trial court’s finding that Berkley produced essentially no evidence that, by
processing the checks, Household intended to enter into an agreement to discharge Berkley’s debt.
The evidence before the trial court indicated only that the employees who handled the checks were
without authority to enter into any such agreement on behalf of Household.

        Berkley also contends that the trial court erred in declining to admit duplicates of the
processed checks into evidence. We find no abuse of discretion in the trial court’s decision.
Sanford v. Waugh & Co., Inc., No. M2007-02528-COA-R3-CV, 2009 WL 1910957, at *19 (Tenn.
Ct. App. June 30, 2009) (citing Mercer v. Vanderbilt Univ., Inc., 134 S.W.3d 121, 131 (Tenn.
2004)).


                                              Estoppel

        Berkley argues that Household is estopped to deny that it is bound by the terms of the letters
because Household accepted the benefits of the offer to compromise by endorsing and processing
the checks. In response, Household asserts that it had a preexisting right to payment for the amounts
offered because Berkley was already obligated to repay the entire amount of the notes. We agree.

               Equitable estoppel, in the modern sense, arises from the ‘conduct’ of the
       party, using that word in its broadest meaning, as including his spoken or written
       words, his positive acts, and his silence or negative omission to do any thing. Its
       foundation is justice and good conscience. Its object is to prevent the unconscientious
       and inequitable assertion or enforcement of claims or rights which might have
       existed, or been enforceable by other rules of law, unless prevented by an estoppel;
       and its practical effect is, from motives of equity and fair dealing, to create and vest
       opposing rights in the party who obtains the benefit of the estoppel.

Baliles v. Cities Serv. Co., 578 S.W.2d 621, 624 (Tenn., 1979) (quoting Evans v. Belmont Land
Co., 21 S.W. 670, 673-74 (Tenn. 1893)). Berkley cites no facts warranting application of the
doctrine of estoppel. This argument is without merit.
                                          Ratification

       Berkley argues that Household ratified the terms of the letters by retaining the proceeds of
the checks. He also contends that the trial court failed to consider this argument. In response,
Household asserts that ratification was in fact considered by the trial court, that ratification should
not have been considered because it was not pled, and that there was no agreement between Berkley
and Household to be ratified.




                                                 -7-
        After reviewing the record, we find that, in dismissing Berkley’s claim, the trial court
implicitly rejected his argument on ratification.9 We find no error in the trial court’s decision.

        “Ratification of a contract occurs when one approves, adopts, or confirms a contract
previously executed ‘by another[,] in his stead and for his benefit, but without his authority.’”
Webber v. State Farm Mut. Auto. Ins. Co., 49 S.W.3d 265, 270 (Tenn. 2001) (quoting James v.
Klar & Winterman, 118 S.W.2d 625, 627 (Tex. Ct. App. 1938)). Here, there is no proof that the
payment processing center employees entered into any “contract” to be ratified. Thus, ratification
is inapplicable, and Berkley’s argument is without merit.

       Our holdings above pretermit all other issues raised on appeal except for those relating to
attorney’s fees, addressed below.

                                                  Attorney’s Fees

         Berkley contends that Household is not entitled to an award of attorney’s fees because the
fee it requested was excessive. In support of this argument, Berkley cites White v. McBride, 937
S.W.2d 796 (Tenn. 1992). Berkley also contends that the trial court erred in failing to review the
factors articulated in Rule 1.5 of the Tennessee Rules of Professional Conduct to determine if the
fee was reasonable. In support of this argument, Berkley cites Kline v. Eyrich, 69 S.W.3d 197
(Tenn. 2006). In response, Household asserts that both White and Kline are inapplicable because
they pertain to contingency fees and the case at bar concerns an award of attorney’s fees pursuant
to a contractual provision.

        We must agree with Household’s position. White and Kline are clearly inapplicable where
a party is contractually entitled to an award of reasonable attorney’s fees. See Hosier v. Crye-Leike
Commercial, Inc., No. M2000-01182-COA-R3-CV, 2001 WL 799740, at *6 (Tenn. Ct. App. July
17, 2001), no perm. app. “However, determining the amount of the attorney’s fee that is reasonable
is within the trial court’s discretion.” Id. (citing Albright v. Mercer, 945 S.W.2d 749, 751 (Tenn.
Ct. App. 1996); Airline Constr. Inc. v. Barr, 807 S.W.2d 247, 270 (Tenn. Ct. App. 1990)). As such,
we review a trial court’s determination of the reasonableness of attorney’s fees under an abuse of
discretion standard. Id. Reviewing the record in its entirety, we must conclude that the trial court’s
award of $9000 in attorney’s fees to Household was reasonable; indeed, it was conservative.

                                           Attorney’s Fees on Appeal

         On appeal, Household requests, pursuant to the terms of the notes, an award of attorney’s
fees and costs incurred in answering this appeal. We find such an award to be clearly warranted.
Therefore, we remand the cause to the trial court for a determination of reasonable attorney’s fees
for this appeal.

         9
           At the opening of the bench trial, Household made a motion to strike Berkley’s ratification theory. The trial
court considered the motion “premature” and did not rule upon it. The matter was not mentioned again until after the
trial court announced its ruling. The trial court did not reconsider or change its ruling after ratification was raised a
second time.

                                                          -8-
                                          CONCLUSION

        The decision of the trial court is affirmed, and the cause is remanded for an award of
attorney’s fees on appeal. The costs of this appeal are taxed to the Appellant Drayton D. Berkley,
and his surety, for which execution may issue if necessary.




                                                     ___________________________________
                                                     HOLLY M. KIRBY, JUDGE




                                               -9-
