Malcolm Mills v. Ken Hancock, Ind.

MALCOLM MILLS, JR. and )
MALCOLM MILLS, III, )
)
Plaintiffs/Appellees, ) Appeal No.
) 01-A-01-9803-CV-00162
v. )
)
FILED
Davidson Circuit
KEN HANCOCK, individually and ) No. 95C-1080
November 25, 1998
d/b/a HANCOCK HOMES & )
HANCOCK ENTERPRISES, ) Cecil W. Crowson
) Appellate Court Clerk
Defendants/Appellants, )
)
IN RE: National Bond and Surety )
Corporation, )
)
Surety/Appellant. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE DAVIDSON COUNTY CIRCUIT COURT
AT NASHVILLE, TENNESSEE

THE HONORABLE HAMILTON V. GAYDEN, JR., JUDGE

ELLEN TAYLOR TURLEY
2620 Old Lebanon Pike
Nashville, Tennessee 37214
ATTORNEY FOR PLAINTIFFS/APPELLEES

JOEL H. MOSELEY
Moseley & Moseley
Suite 300, One Church Street
101 Church Street
Nashville, Tennessee 37201-1609
ATTORNEY FOR SURETY/APPELLANT

AFFIRMED AND REMANDED

WILLIAM B. CAIN, JUDGE
 OPINION

This appeal involves the liability of a surety upon a bond given for appeal
to the Tennessee Court of Appeals from a judgment in the Circuit Court of
Davidson County. We must determine whether this appeal bond covers the fees
awarded to the appellees' attorney on the basis of this court's determination that
the appeal was wrongfully prosecuted against the appellees. The trial court held
that the appeal bond did include the attorney fees and we affirm the court's
decision on appeal.

I. FACTS

The appellees in this action, Malcolm Mills, Jr. and Malcolm Mills, III
(hereinafter "Appellees"), were the successful plaintiffs in a consumer fraud case
which was tried in both the General Sessions and the Circuit Court of Davidson
County. Both courts found that the defendants, Ken Hancock, individually and
doing business as Hancock Homes & Hancock Enterprises (hereinafter
"Defendants"), were guilty of fraud and had violated the terms of the Tennessee
Consumer Protection Act in a deal involving the sale of a used mobile home.
Both courts awarded treble damages to Appellees and the Circuit Court ruled that
Defendants were guilty of conversion.

The appellant in this action is the surety on the appeal bond which was
filed by Defendants when they appealed the adverse judgment in the trial court.
The bond, which was in the amount of $1000, was filed with the Circuit Court
on a form provided by the court clerk and was signed by Defendants as principal
and by National Bond and Surety Corporation as surety (hereinafter
"Appellant"). The bond provides in relevant part as follows:
That we, Ken Hancock, individually, and d/b/a Hancock Homes and
Hancock Enterprises, Principal, and National Bond and Surety
Corp., Surety, are held and firmly bound unto Malcolm Mills, Jr.
and Malcolm Mills, III or their certain attorneys, executors,
administrators, or assigns in the penal sum of ONE THOUSAND
DOLLARS ($1,000), for the true payment whereof we bind
ourselves, our heirs, executors and administrators firmly by these
presents.

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The bond further designated that Defendants and Appellant "shall . . . in case
they fail [to prosecute their appeal with effect], pay and satisfy the damages and
costs which may be awarded against them for wrongfully prosecuting said
appeal, and satisfy the judgment of said Court of Appeals thereon."

The Court of Appeals dismissed the appeal finding that it was frivolous
and ordering that judgment be rendered against Defendants as principal and
against National Bond and Surety as surety for costs of this appeal. The court's
order directed that the case be remanded to the trial court for the entry of an
appropriate judgment as to Appellees' damages resulting from the frivolous
appeal. On remand, the trial court entered a final judgment which awarded
Appellees' attorney, Ellen Taylor Turley, a judgment of $920 against Defendants
only. In addition, the court awarded Appellees a judgment of $446 for the post
judgment interest which had accrued during the pendency of the appeal.

In January of 1998, Appellant paid the $978 balance of the bond into
court. Appellant had previously paid $22 in court cost. The next month, Ms.
Turley made a motion that the court release to her the funds deposited with the
court by Appellant since Defendants had not yet paid to her the fees the court had
awarded her.

The trial court ruled that the terms of the Circuit Court appeals bond
should be enforced such that the $978 held by the Circuit Court Clerk should be
paid to Ms. Turley as payment towards the trial court's award of attorney fees to
Ms. Turley for the Defendants' frivolous appeal.

II. ISSUE

Appellant insists that the court erred in holding that this bond, an appellate
court cost bond, can be used to satisfy a judgment for attorney fees. Appellant
relies on a line of cases which address the interpretation of statutory bonds,
particularly Aetna Casualty & Surety Co. v. Woods, 565 S.W.2d 861 (Tenn.
1978). Aetna involved a surety's liability on a bond entered into pursuant to

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 Tenn. Code Ann. 57-158(3)1, the statute which, at that time, required every
Tennessean with a liquor licences to post a bond with the Commissioner of
Revenue. The principal operated a hotel corporation which included a lounge
where liquor was sold by the drink. After the commissioner collected from the
surety the principal's delinquent tax liabilities not only from the sale of liquor but
also from the sales, franchise and excise taxes from the hotel operations, the
surety brought this action to recover all taxes other than those incurred from the
sale of liquor by the drink. In holding that the surety was only liable for the
latter taxes, the court made the following statements about statutory bonds:
We may assume . . . that the purpose of the parties in executing this
bond was to comply with the requirements of that statute, nothing
more and nothing less.
Although a bond is nonetheless a contract because it is
required by a statute, statutory bonds are construed in the light of
the statute creating the obligation secured and the purposes for
which the bond is required, as disclosed in the statute. The statute
which provides for the giving of a bond becomes a part of the bond
and imports into the bond any conditions prescribed by the statute
which are not in fact included in the bond as written. Although the
obligor and his surety may assume a greater obligation than that
required by the statute, it is presumed that the intention of the
parties was to execute such a bond as the law required. . . .
The obligations under a bond required by statute are to be
measured by the particular statute requiring the bond, together with
other applicable statutes. . . . And, if a statutory bond contains
conditions that are not prescribed by the statute, such conditions
may be eliminated as surplusage.

Id. at 864.

After determining that the authorizing statute required the surety to
indemnify the principal against only those taxes incurred as a result of selling
liquor by the drink, the court stated that it could "assume that the Commissioner
in drafting the bond intended to exact from the obligor and surety the obligation
required by the statute and no more, since that was the extent of the
Commissioner's duty in this respect under the statute." Id. at 866. The bond
itself stated that it covered taxes which included "but [were] not limited to" those
in Section 57-157. Id. In light of the context of these words and the overall
purpose of the statute, the court rejected the Commissioner's argument that this

1
This statute is now codified at Tenn. Code Ann. § 57-4-302(3)(A) (Supp. 1998).

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language indicated an intent to include taxes other than those imposed by Section
57-157. Id.

Appeal bonds are mandated by Rule 6, Tenn. R. App. P., which is entitled
"Security for Costs on Appeal." This rule requires that, with a few exceptions,
an appellant must file in the trial court a bond for the costs on appeal. The rule
is clear that its purpose is "to secure the payment of costs if the appeal is finally
dismissed." Tenn. R. App. P. 6. At the time these bonds were filed, Rule 6
required the cost bond to be in the amount of $1000.

Appellant argues that the obvious intent of the parties was to post only a
bond for appellate court costs. Had Defendants and Appellant intended the bond
to cover more, it would have been higher than $1000 and would have involved
a stay pursuant to Tennessee Rule of Civil Procedure 62. Rule 62.05 requires
that a bond staying the judgment be in the amount "of the judgment in full,
interest, damages for delay, and costs on appeal." It is Appellant's contention,
that when the obligations of this bond are measured by Rule 6 of the Rules of
Appellate Procedure and Rule 62 or the Rules of Civil Procedure, the only proper
conclusion is that this was a bond for appellate court cost, nothing more and
nothing less. Thus, the portion of the appeal bond referencing attorney fees
should be disregarded as surplus language.

After carefully considering Appellant's argument, we respectfully disagree
finding that we can not ignore the plain and clear language of this appeal bond.
The attorney fees at issue here were damages awarded for the wrongful
prosecution of this appeal. The bond, on its face, obligates the surety to satisfy
the damages awarded against Defendant "for wrongfully prosecuting [this]
appeal." In addition, the bond begins by stating that the Principal and the Surety
"are held and firmly bound unto [Appellees] or their certain attorneys . . . in the
penal sum of . . . $1,000.00." (emphasis added). As a well-known principle of
contract interpretation, our courts have stated that "[t]he court will look to the
material contained within the four corners of the instrument to ascertain its
meaning as an expression of the parties' intent." Gredig v. Tennessee Farmers
Mut. Ins. Co., 891 S.W.2d 909, 912 (Tenn. Ct. App. 1994) (citing Bob Pearsall

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Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580
(Tenn.1975)).

We do not find that the reasoning pronounced in Aetna is applicable in the
instant case where the bond language indisputably obligates the surety to pay the
damages and costs for wrongfully prosecuting the appeal. In Aetna, the language
in the bond was unclear as to which taxes were covered, and the court resolved
the uncertainty in the bond by looking to the statute. See also Shelton Dental
Assoc. v. LaFevre, 767 S.W.2d 665 (Tenn. Ct. App. 1989) (where language in
bond created ambiguity, court looked to statute which required the bond to
determine the parties' intent and then disregarded ambiguous surplus language).
However, where, as in the instant case, the meaning of the bond's plain language
is uncontrovertible, there is no need to look outside of the four corners of the
bond to ascertain the parties' intent.

We therefore find that the trial court did not err in holding that the terms
of the appeal bond should be enforced. The bond, as we have interpreted it, does
not conflict with Rule 6 of the Tennessee Rules of Appellate Procedure. It
merely provides that, in addition to covering the costs as required by Rule 6,
Defendants and Appellant are responsible for satisfying any damages awarded
for the wrongful prosecution of the appeal. Our courts have acknowledged that
"the obligor and his surety may assume a greater obligation than that required by
the statute." Aetna, 565 S.W.2d at 864 (citing Varner Constr. Co. v. Mid-South
Specialties, Inc., 547 S.W.2d 569, 571 (Tenn. 1977)). In this case, Appellant did
assume additional liability by signing this particular bond. It can not now escape
its contractual obligation as outlined in the four corners of the bond.

III. CONCLUSION

We hold that Appellant as surety is liable under the appeal bond for the
attorney fees awarded to Appellees' attorney as a result of the frivolous appeal
brought by Defendants. We direct that the Circuit Court clerk, who holds the
$978 balance of the bond on deposit, pay this sum to Appellees' attorney to the
extent that the judgment has not yet been satisfied. Therefore, the judgment of

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the trial court is affirmed and the cause is remanded for any further necessary
proceedings in conformity with this opinion. The costs on appeal are taxed to
Appellants.

_______________________________
WILLIAM B. CAIN, JUDGE

CONCUR:

_________________________________________
BEN H. CANTRELL, PRESIDING JUDGE, M.S.

_________________________________________
HENRY F. TODD, JUDGE

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