                   IN THE COURT OF APPEALS OF TENNESSEE
                               AT KNOXVILLE
                            December 2, 2003 Session

                THE BRADLEY FACTOR, INC., v. PAT HOLMES

                 Direct Appeal from the Chancery Court for Bradley County
                        No. 02-157   Hon. Jerri S. Bryant, Chancellor

                                  FILED FEBRUARY 24, 2004

                                 No. E2003-01571-COA-R3-CV



In this action based on a personal guaranty agreement, the Trial Court determined there were no
disputed issues of material fact and awarded summary judgment on the agreement. Defendant has
appealed. We affirm.


Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.


HERSCHEL PICKENS FRANKS, J. delivered the opinion of the court, in which CHARLES D. SUSANO ,
JR., J., and D. MICHAEL SWINEY , J., joined.


Michael E. Richardson, Chattanooga, Tennessee, for Appellant.

Michael E. Jenne, Cleveland, Tennessee, for Appellee.



                                            OPINION


              In this action to recover under a personal guaranty agreement, the Trial Court granted
plaintiff summary judgment, and defendant has appealed.

                 Defendant Homes was a shareholder and CEO of Southern States Express, Inc.
(“Southern States”), a small regional trucking firm. Southern States had a $700,000.00 line of credit
with First Citizens Bank of Cleveland, secured by the company’s receivables and also by pledged
certificates of deposit personally owned by Holmes totaling $325,000.00. At some point, the bank
required additional security, either in additional collateral or a personal guaranty from Holmes.
Holmes enlisted the assistance of Robert Anderson, a CPA and financial consultant who had provided
services for the company in the past and was familiar with Southern States’ business. In December
of 2000, Anderson contacted Steve Campbell and Ron Williams, President and Vice-President
respectively of plaintiff, on behalf of Southern States about the possibility of entering into a factoring
agreement for Southern States’ receivables. The record establishes that Anderson made the initial
contact and handled all the negotiations and discussions with the plaintiff’s representatives, primarily
Williams, which culminated on January 30, 2001 in the execution of the factoring agreement, security
agreement, demand note, the continuing guaranty and related documents. Holmes had no contact with
the plaintiff’s representatives until shortly before the closing, relying upon Anderson to work out the
details of the deal. Holmes met Campbell and Williams at the closing on January 20, 2001.

               Plaintiff agreed to factor Southern States $700,000.00 receivables upon the pledging
of the $325,000.00 in CD’s personally owned by Holmes, plus a security interest covering the
company’s assets. The document at issue is entitled “Continuing Guaranty” and provided the
undersigned guarantors gave plaintiff “. . . as an absolute guaranty of the prompt payment in full of
any and all indebtedness, direct or indirect, absolute or contingent, owing by Debtor to the Factor, .
. .”

                 Holmes argues that there is material evidence of fraudulent misrepresentations by
plaintiff’s representatives to him, and that the parol evidence rule is not applicable. This argument is
without merit. Holmes, in his deposition, stated that under no circumstances did he intend to, nor
would he sign a guaranty with plaintiff that would make him personally liable for Southern States’
debts. He initially testified the only time he had been told there was no personal guaranty was at
closing by Steve Campbell. Later, he testified that he was given the impression he was not signing a
personal guaranty, “by officers of the Bradley Factor”, although he could not say who, and this was
well before the closing. Nevertheless, he eventually admitted that he could not be certain and that
maybe no one from Bradley advised him about the guaranty. He conceded that it was most probably
Anderson who he relied upon to negotiate the deal and relay the terms to him. Moreover, he testified:

                Q.      Did you read this agreement before you signed it, Mr. Holmes?

                A.      Yeah, I read most of it. I sure did.

                ...

                Q.      Do you recall Mr. Ron Williams going over with you this personal guaranty?

                A.      I’ve got it.

                Q.      Do you recall him going over this personal guaranty with you?

                A.      Ron was very thorough in this. We went over this. You know, we went into
                        this thing - - I understood that - - and Ron and I have worked together before
                        this document was done and then subsequent to the closing of the company.
                        Ron went over most of this stuff.


                                                   -2-
                        And I’m just going to tell you. There was no way that this document or any of
                        this other deal would have been done if there was a personal guaranty on this
                        thing. Now, you can try to make a trick on words, a continuing and a personal,
                        and call them the same thing when they’re really not. That’s why this
                        document was signed as Patrick Holmes, C.E.O.1

                The Answer filed by the defendant does not raise fraud or fraud in the inducement as
an affirmative defense. There are no pleadings in the record that implicate a fraud or misrepresentation
defense.

               Tenn. R. Civ. P. 8.03 requires that the pleadings affirmatively set forth affirmative
defenses, including fraud, in plain and simple terms. Tenn. R. Civ. P. 9.02 provides:

                Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the
                circumstances constituting fraud or mistake shall be stated with particularity. Malice,
                intent, knowledge, and other condition of mind of a person may be averred generally.

                Generally, the existence of fraud is a question of fact, and the facts must show an intent
to deceive on a material matter. Womack v. Blue Cross and Blue Shield, 593 S.W.2d 294 (Tenn.1980).
There is no duty for the courts to create a claim or defense which has not been spelled out in the
pleadings. Donaldson v. Donaldson, 557 S.W.2d 60, 62 (Tenn. Ct. App. (Tenn. 1977)).

                As a rule, appellate courts will not entertain a defense on appeal which was not
presented in the trial court. Alumax Aluminum Corp v. Armstrong Ceiling Systems, 744 S.W.2d 907,
910 (Tenn. Ct. App. 1987). Holmes did not properly raise the theory in the Trial Court he now asserts
on appeal.2

               The record establishes that the issue before the Trial Court was whether there was
material evidence in the record that Holmes intended to sign the continuing guaranty in a representative
capacity. Appellant points out that the opinions of Cone Oil Co. v. Green, 669 S.W.2d 662 (Tenn. Ct.
App. 1983) and Campora v. Ford, 2003 WL 1610876 (Tenn. Ct. App. Mar. 28, 2003) cited in the Trial
Court’s Order, discuss the admissibility of parol evidence with respect to a signatory’s intent for
purposes of determining whether a document is ambiguous. In each of those opinions fraud in the
inducement was not raised, and obviously the Trial Court cited these opinions in response to
defendant’s argument that he signed the document in his representative capacity. Holmes did not




        1
        The record shows that Holmes signed his name to the document and subsequently his
accountant advised him to add “C.E.O.”
        2
        Assuming arguendo defendant had raised this issue in the Trial Court, there is no material
evidence to constitute fraud in the inducement.

                                                   -3-
express his intention not to be personally bound when he signed the guaranty.3


                Ron Williams went over each individual document with Holmes, and he had
opportunity to read each and ask any questions. Anderson, his financial advisor, had previously
reviewed the documents for him, and counseled it was ok to sign them. The fact that Holmes added
“CEO” after his signature does not transform an otherwise unambiguous instrument into an ambiguous
one. “Undersigned guarantor” is not ambiguous. An examination of the signature line“guarantor”
identifies who would be the “undersigned guarantor.” The fact that Holmes’ added “CEO” after his
name does not alter the plain wording of the document. As stated in Cone Oil: “It is possible for an
officer of a corporation to avoid personal liability by signing his name and adding his title and the
name of the corporation. However, even such a signature does not produce the presumptive effect.
. .” Cone Oil, 669 S.W.2d at 665. Holmes neither added the corporate name nor any words such as
“by” or “per” or similar indicia of representative capacity. The mere addition of “CEO” is simply a
description or identification of the individual signing the document, not the designation of capacity.


                The issues raised by defendant are without merit, and for all of the foregoing reasons,
we affirm the Judgment of the Chancery Court, and remand, with the cost of the appeal assessed to Pat
Holmes.




                                                       _________________________
                                                       HERSCHEL PICKENS FRANKS, J.




       3
         Homes’ argument that he signed a continuing guaranty and not a personal guaranty is
misplaced. These are not mutually exclusive terms. A continuing guaranty is one which is not
limited to a particular transaction or a specific transaction, but which is intended to cover future
transactions, until revoked. Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801 (Tenn. 1975);
Third Nat. Bank, 626 S.W.2d at 467.

                                                 -4-
