SecurAmerica Business Credit v. Karl Schledwitz

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
January 23, 2014 Session

SECURAMERICA BUSINESS CREDIT v. KARL SCHLEDWITZ, ET AL

Appeal from the Circuit Court for Shelby County
No. CT00180307 Donna M. Fields, Judge

No. W2012-02605-COA-R3-CV - Filed March 28, 2014

This is the second appeal involving liability on personal guaranties securing the debt of a
transportation company. On remand after our first opinion, the trial court found that the
transportation company and the lender, through the actions of its president, entered into a
conspiracy to violate the Tennessee Consumer Protection Act and violated the duty of good
faith and fair dealing, relieving the guarantors of their liability under the continuing
guaranties. The trial court, however, declined to hold that the lender and transportation
company committed fraud or that the sale of the transportation company from the guarantors
to its current owner was a sham. We affirm the trial court’s rulings with regard to (1) the
actions of the lender’s president being imputed to the lender; (2) that the sale of the
transportation company was not a sham; (3) that no fraud was committed; and (4) that the
guaranties at issue are continuing. We further hold that the trial court was entitled to consider
both the underlying credit agreement and the guaranties in determining whether the duty of
good faith was breached. However, we vacate the trial court’s judgment with regard to its
findings of conspiracy, a violation of the Tennessee Consumer Protection Act, and breach
of the duty of good faith. We further vacate the trial court’s judgment that the guarantors may
avoid the obligations under the guaranties. We remand to the trial court for further findings
of fact and conclusions of law on these issues. A ffirm ed in part, vacated in part, and
remanded.

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

J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J.,
and D. M ICHAEL S WINEY, J., joined.
W.O. Luckett, Jr., Clarkdale, Mississippi and Lorrie K. Ridder, Memphis, Tennessee, for the
appellant, SecurAmerica Business Credit.

David J. Cocke, Memphis, Tennessee, for the appellees, Karl Schledwitz and Terry Lynch.

OPINION

I. Background

This is the second appeal in this case. In the first appeal, this Court remanded to the
trial court for further findings of fact and conclusions of law. See SecurAmerica Business
Credit v. Schledwitz, No. W2009-02571-COA-R3-CV, 2011 WL 3808232 (Tenn. Ct. App.
August 26, 2011) (hereinafter “SecurAmerica I”). On remand, the trial court adopted this
Court’s “background facts and procedural history . . . as correct,” noting that this Court’s
Opinion was “largely correct.” Accordingly, we take the background facts and procedural
history from our prior Opinion, with some minor changes to conform to the trial court’s
findings of fact1 According to our prior Opinion:

[Appellant] SecurAmerica Business Credit (“SecurAmerica”)
brought this action on March 27, 2001, against Southland
Transportation Co., LLC (“Southland Transportation”),
Southland Capital Co. (“Southland Capital”), and Appell[ees]
Karl Schledwitz and Terry Lynch. SecurAmerica’s claims arose
from an alleged default on the September 16, 1999 Secured
Revolving Credit Agreement (“Credit Agreement”), which was
entered by and between SecurAmerica and Southland
Transportation. This Credit Agreement was personally
guaranteed by Appell[ees], who were the co-equal owners of
Southland Transportation at that time.

1
For purposes of clarification, in SecurAmerica I, the trial court ordered Karl Schledwitz
and Terry Lynch to pay the amounts owed pursuant to identical individual guaranties. They appealed,
and thus, were designated as the Appellants on appeal. After the remand, however, the trial court
modified its previous decision to rule that Mr. Schledwitz and Mr. Lynch were relieved of
liability on the individual guaranties by SecurAmerica Business Credit’s bad faith and participation in
a civil conspiracy. SecurAmerica Business Credit has appealed that ruling, and thus, is the Appellant in
this appeal. Consequently, Mr. Schledwitz and Mr. Lynch will be referred to as the Appellees in this
Opinion.

2
 When it entered the Credit Agreement, SecurAmerica
was a lender licensed by the State of Tennessee under the
Tennessee BIDCO 2 Act, see Tenn.Code Ann. § 45-8-201 et seq.,
which gave it the authority to make loans to businesses that
would not otherwise qualify for traditional financing.
SecurAmerica’s typical client was a small-to medium-sized
business that was highly leveraged and presented a higher level
of lending risk. Southland Transportation, a trucking company,
was such a business.
The Credit Agreement between SecurAmerica and
Southland Transportation was structured as a revolving line of
credit and was intended to provide working capital for the
trucking company based on the value of certain current assets.
To secure the line of credit, SecurAmerica took a security
interest in several of the assets of Southland Transportation. The
primary assets with value, and the intended sources of repayment, however, were Southland
Transportation’s working assets, specifically, its accounts receivable.
Per the terms of the Credit Agreement, SecurAmerica
lent Southland Transportation money on a revolving basis based
on the value of certain current assets (i.e., the “borrowing
base”). Consequently, the assets that made up the borrowing
base were to be reported, monitored, and evaluated on a daily
basis. In order to obtain funds, Southland Transportation
submitted daily borrowing base certificates to SecurAmerica.
These borrowing base certificates identified the amount of
eligible accounts receivable that Southland Transportation
maintained on its books.3 Based upon the amount listed on the
borrowing base certificates, SecurAmerica would advance
monies to Southland Transportation to fund its daily operations.
To pay down the loan balance, Southland Transportation
maintained a bank account called a “blocked account,” into
which it directed its customers to send their invoice payments.
As these payments accrued in the blocked account, monies

2
BIDCO is an acronym for a “business and industrial development corporation.” Tenn. Code
Ann. § 45-8-203(4).
3
Eligible accounts were generally defined by the Credit Agreement to be accounts arising out of
sales in the ordinary course of business that were not more than ninety days old.

3
 would be wired directly to SecurAmerica to be applied to the
balance of the line of credit. This was the basic procedure for
lending and repaying monies as outlined in the Credit
Agreement.

SecurAmerica I, 2011 WL 3808232, at *1–*2 (footnotes in original). The terms of the
Credit Agreement further provide that: “Each Loan Party hereby waives any right to require
the Lender to marshal any of the Collateral or otherwise to compel the Lender to seek
recourse against or satisfaction of the Liabilities from one source before seeking recourse or
satisfaction from another source.”

In addition to the Credit Agreement and Promissory Note, Mr. Schledwitz and Mr.
Lynch both signed individual Guaranties securing the loan. As explained in SecurAmerica
I,
As a condition to lending money to Southland
Transportation, SecurAmerica required the interested parties to
take additional actions. First, Mr. Schledwitz agreed to sign a
Guaranty of Validity of Collateral in favor of SecurAmerica,
whereby he guaranteed that the collateral securing the Credit
Agreement, specifically the accounts receivable, were bona fide,
existing accounts in accordance with the terms of the Credit
Agreement. Mr. Schledwitz’s Guaranty of Validity of Collateral
stated that it was a continuing agreement that remained in effect
until any liabilities incurred under the Credit Agreement had
been paid in full. Second, Southland Capital, a separate
company owned and operated by Appell[ees], signed a
Subordination Agreement in favor of SecurAmerica. Southland
Capital regularly lent money and infused capital into Southland
Transportation as a means of supporting the struggling trucking
company. By this Subordination Agreement, Southland Capital
agreed to subordinate its rights to repayment by Southland
Transportation to the rights of SecurAmerica. Thus, as between
SecurAmerica and Southland Capital, the former was to be the
senior creditor to Southland Transportation. Third,
SecurAmerica required Messrs. Schledwitz and Lynch to sign a
personal guaranty in the amount of $500,000 each. The personal
guaranties [(“the Guaranties”)] were identical in substance, and
provided, in relevant part, as follows:

The Guarantor hereby (a) unconditionally

4
 and irrevocably guarantees the punctual payment
and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of
the Liabilities up to Five Hundred Thousand
Dollars ($500,000) and (b) agrees to pay any and
all costs and expenses (including attorney’s fees
and related expenses) incurred by the Lender in
enforcing any rights under this Guaranty.

SecurAmerica I, 2011 WL 3808232, at *2. The Guaranties further provided that:

The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:

(a) any lack of validity or enforceability of this Guaranty,
the Agreement, the Note or any other Loan Documents;

(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Liabilities, or any
amendment or waiver of any term of or any consent to departure
from the Agreement or any other Loan Document;

(c) any exchange, release or non-perfection of any
collateral, or any release, amendment or waiver of any term of,
or consent to departure from, any other guaranty for all or any
of the Liabilities;

(d) any failure on the part of the Lender or any other
person or entity to exercise, or any delay in exercising, any right
under the Agreement or any other Loan Document; or

(e) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Company, the Guarantor or any other guarantor with respect to
the Liabilities (including, without limitation, all defenses based
on suretyship or impairment of collateral, and all defenses that
the Company may assert to the repayment of the Liabilities,
including, without limitation, failure of consideration, breach of
warranty, fraud, payment, statute of frauds, bankruptcy, lack of
legal capacity, statute of limitations, lender liability, accord and

5
 satisfaction, and usury) or which might otherwise constitute a
defense to this Guaranty and the obligations of the Guarantor
under this Guaranty.

Both the Guaranty of Validity of Collateral and the Individual Guaranties were specifically
referenced in the Credit Agreement as exhibits. In addition, the Credit Agreement provided
that “THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND
SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS.”

As further explained in SecurAmerica I:

The Credit Agreement provided that advances were not
to exceed the lesser of (1) $1.5 million; or (2) 85% of eligible
accounts receivable. Two months after its inception, in
November 1999, the loan was fully funded (i.e., at its maximum
loan balance of $1.5 million), and more or less remained that
way while Southland Transportation was in existence. A field
examination performed by SecurAmerica in June 2000 revealed
that the eligible accounts receivable were sufficient to cover the
advances and to protect SecurAmerica in the event of default.4
However, this is not to say that Southland Transportation
was a profitable business. The company faced significant cash
flow problems, and Southland Capital repeatedly infused money
into the business. With a struggling business on their hands,
Appell[ees] explored opportunities to sell the trucking operation.
In August 2000, Appell[ees] sold Southland Transportation to
two of its employees—Michael Harrell and Michael Lucchesi.5
Messrs. Harrell and Lucchesi did not pay a cash purchase price
for their respective interests. Rather, the transaction was
structured so that Appell[ees] retained certain debts of
Southland Transportation, and Messrs. Harrell and Lucchesi
obligated themselves on a promissory note payable to

4
SecurAmerica generally conducted field examinations of Southland Transportation on a
quarterly basis. It did not perform a field examination in September or December 2000.
5
The sale was effective August 1, 2000; however, some of the closing documents were not
signed until September 2000.

6
 Appell[ees].6 Messrs. Harrell and Lucchesi envisioned a leaner
operation with less debt, and all four gentlemen apparently
believed that the trucking company could be a viable business
going forward.
This change in ownership constituted an event of default
under the Credit Agreement. However, SecurAmerica did not
accelerate the loan, nor did it release Appell[ees] from their
personal guaranties. Rather, after the sale, SecurAmerica
continued to lend money to Southland Transportation under the
Credit Agreement, and Appell[ees] remained as guarantors.
Notwithstanding the restructuring, or perhaps because of it,
Southland Transportation continued its descent into
unprofitability. Soon after the sale, thirty to forty truck drivers
left, striking a blow to the company’s revenue stream. Messrs.
Harrell and Lucchesi were likewise unsuccessful in their efforts
to bring other investors on board.
Sometime between August 2000 and February 2001,
Southland Transportation began falsifying the borrowing base
certificates that it submitted on a daily basis in order to acquire
additional funds from SecurAmerica. These borrowing base
certificates were falsely inflated to make it appear that
Southland Transportation had a higher eligible accounts
receivable balance than it actually did, which consequently
allowed it to obtain advances from SecurAmerica in excess of
that provided by the Credit Agreement. Essentially, this created
an out of balance debt-to-collateral ratio because monies were
advanced on the basis of accounts receivable that did not exist.
For example, in August 2000, $815,000 was collected from
accounts receivable and put in the blocked account to pay down
the loan. That amount fell to $604,000 in September; $414,000
in October; $187,000 in November; and $24,000 in December.
Thus, Southland Transportation’s actual accounts receivable
balance was dropping precipitously; however, all the while, the
line of credit remained at its maximum balance of approximately

6
SecurAmerica contended at trial that this purported sale was, in fact, a “gift” of a failing
business in order for Appell[ees] to avoid liability on their guaranties. The trial court determined that it
was a sale.

7
 $1.5 million.7
The genesis of the false borrowing base certificates is
sharply contested. Mr. Harrell testified that the falsifying began
in August 2000 at the suggestion of SecurAmerica’s President,
Mr. Randall Reagan. Mr. Reagan testified that he was unaware
of this practice until December 2000, and that he virtually
ceased lending to Southland Transportation after he discovered
that Mr. Harrell was falsifying the certificates. However, it is
uncontroverted that, for some period of time, both Mr. Harrell
and Mr. Reagan were aware that the borrowing base certificates
had been falsified; nevertheless, SecurAmerica continued to
make advances. In addition to the falsified borrowing base
certificates, Mr. Harrell, with the knowledge and complicity of
Mr. Reagan, began diverting accounts receivable remittances
around the blocked account. Now, instead of being used to pay
down the line of credit, as required by the terms of the Credit
Agreement, this money was diverted to fund the day-to-day
operations of Southland Transportation.
Mr. Reagan’s complicity in the falsified borrowing base
certificates apparently stemmed from his belief that continuing
to lend operating capital to Southland Transportation was the
best option to prevent the company from failing and defaulting
on its loan. At the same time that the Southland Transportation
loan was failing, SecurAmerica had several other “problem”
loans in its portfolio. In fact, SecurAmerica had been placed in
default by its own lender, TransAmerica. Consequently,
Southland Transportation’s eventual ability to pay off its debts
was pivotal to SecurAmerica’s ability to pay off its own debts.
Despite his knowledge that the Southland Transportation
loan was failing and was now based on falsified documentation,
Mr. Reagan did not inform anyone, particularly the Appell[ees]
or SecurAmerica’s board of directors, of the dire situation. After
selling Southland Transportation in August 2000, Appell[ees]
were unaware that money was being loaned based on false
borrowing base certificates or that money was being diverted
around the blocked account. Appell[ees] had retained the right

7
The collections in January and February 2001 were approximately $69,000 and $50,000,
respectively. The loan balance more or less remained at its maximum during these months as well.

8
 to inspect the books and records of Southland Transportation
when they sold the business to Messrs. Harrell and Lucchesi.
However, Appell[ees] had not exercised this right and so
remained uninformed as to the plight of the trucking company.
Meanwhile, Southland Transportation continued to struggle.
After losing its biggest customer in February 2001, Southland
Transportation ceased doing business, thereby defaulting on the
Credit Agreement.
In March 2001, Mr. Reagan revealed the fate of
Southland Transportation to SecurAmerica’s board of directors.
After the board of directors learned of his actions, he was
promptly fired.8 SecurAmerica accelerated the debt
($1,485,564.45 plus accrued interest according to
SecurAmerica’s records). Because Southland Transportation had
insufficient assets to satisfy the loan balance, SecurAmerica
sought repayment from Appell[ees] under their personal
guaranties. After learning of the actions of Mr. Harrell and Mr.
Reagan, Appell[ees] declined to honor their guaranties.

2. Procedural History

On March 27, 2001, SecurAmerica filed its complaint in
the Shelby County Chancery Court against Southland
Transportation, Mr. Schledwitz, Mr. Lynch, Mr. Lucchesi, and
Mr. Harrell. Essentially, the complaint sought a judgment
against Southland Transportation on the promissory note,
against all of the defendants for fraud in connection with the
falsified borrowing base certificates, against Mr. Schledwitz
individually on the Guarantee of Validity of Collateral, and
against Mr. Schledwitz and Mr. Lynch on their personal
guaranties.
On May 17, 2001, Appell[ees] Schledwitz and Lynch
filed their answer and asserted the affirmative defense of fraud
by SecurAmerica. See Tenn. R. Civ. P. 8.03. Appell[ees] also
asserted, inter alia, that SecurAmerica had: (1) breached the
implied covenant of good faith and fair dealing; (2) failed to

8
Mr. Reagan later entered into a settlement agreement with SecurAmerica in which he forfeited
his retirement account, worth approximately $540,000, in exchange for SecurAmerica’s covenant not to
sue.

9
 preserve its collateral; and (3) significantly increased the risk of
nonpayment by Southland Transportation. Appell[ees] also filed
a cross-claim alleging conspiracy and fraud against Southland
Transportation and Mr. Reagan, in both his individual and
corporate capacities.
On January 21, 2004, SecurAmerica amended its
complaint to allege new claims against Southland Transportation
for breach of contract, and against Southland Capital for tortious
interference with contract. SecurAmerica sought a constructive
trust for the alleged breach of the Subordination Agreement.
SecurAmerica also added claims against Appell[ees] and their
wives, Gail Schledwitz and Robyn Lynch, for fraudulent
conveyance.9 On April 12, 2004, Appell[ees] filed their second
amended answer to raise additional affirmative defenses and to
amend their counterclaim against SecurAmerica and their
cross-claim against Mr. Reagan and Southland Transportation
to allege violations of the Tennessee Consumer Protection Act.
Myriad amended pleadings, motions, and responses followed.
All claims by all the parties against defendants Harrell,
Lucchesi, and Reagan were eventually voluntarily dismissed.
The trial court bifurcated the fraudulent conveyance claims
against Appell[ees] and their wives, and proceeded to try all
other claims at a bench trial held January 7–15, 2008.
More than a year later, on January 30, 2009, the trial
court entered its findings of fact and conclusions of law.
Therein, judgment was rendered in favor of SecurAmerica
against Appell[ees] on their personal guaranties for $500,000
each. The trial court declined to award pre-judgment interest due
to its finding that Mr. Reagan and SecurAmerica had committed
fraud. The trial court dismissed SecurAmerica’s claims on the
Guaranty of Validity of Collateral signed by Mr. Schledwitz,
and on the Subordination Agreement against Southland Capital,
and declined to award SecurAmerica punitive damages. The
court also dismissed Appell[ees]’ claims under the Tennessee
Consumer Protection Act.
On March 2, 2009, Appell[ees] filed a motion to alter or
amend the judgment. On July 17, 2009, Defendants Gail

9
SecurAmerica asserted that Appell[ees] had fraudulently transferred certain assets to their
wives in an attempt to shelter those assets from judgment.

10
Schledwitz and Robin Lynch moved for summary judgment on
SecurAmerica’s fraudulent conveyance claims against them,
which had previously been bifurcated and were not yet resolved.
On November 20, 2009, the trial court denied Appell[ees]’
motion to alter or amend, awarded SecurAmerica $125,000 in
attorney’s fees against each Appellant, and entered its final
amended judgment, which specifically incorporated its earlier
findings of fact and conclusions of law from January 30, 2009
On the same day that the trial court entered its final
amended judgment, November 20, 2009, it also entered an order
granting SecurAmerica a voluntary nonsuit “as to Defendants
Karl Schledwitz, Gail Schledwitz, Terry Lynch, and Robin
Lynch.”
Appell[ees] timely filed their notice of appeal on
December 4, 2009. Upon reviewing the appellate record, this
Court ascertained that the trial court’s orders of November 20,
2009, appeared contradictory. Specifically, it appeared that
SecurAmerica had voluntarily nonsuited all of its claims against
Appell[ees] on the same day that a final judgment was entered
granting relief on certain of those same claims. On January 5,
2011, we entered an order directing the parties to clarify these
seemingly incompatible rulings. Oral argument was held on
January 25, 2009, and the matter was argued by counsel.
Thereafter, on January 28, 2009, SecurAmerica filed a motion
styled “Appellee SecurAmerica’s Motion Pursuant to Rule 60.01
for Leave to Seek Correction of November 20, 2009 Orders by
Trial Court.” By order of February 15, 2011, we remanded the
matter to the trial court “for the limited purpose of permitting
Appellee relief regarding the ‘Order Granting Voluntary
Nonsuit.’ “ Following remand, SecurAmerica filed a motion in
the trial court seeking correction of the “Order Granting
Voluntary Nonsuit.” The trial court then entered an order
pursuant to Tenn. R. Civ. P. 60.01 styled, “Order Clarifying and
Correcting November 20, 2009 Order of Voluntary Nonsuit as
to the Fraudulent Conveyance Claims Only.” (Emphasis added).
Therein, the trial court stated that:

The Court hereby clarifies the November
20, 2009 Order of Voluntary Nonsuit by stating
that said Order dismissed only the fraudulent

11
 conveyance claims, as those were the only claims
then pending before the Court. Neither the
Plaintiff, SecurAmerica, nor this Court intended
to dismiss the entire case by entering the Order of
Voluntary Nonsuit.

On March 16, 2011, Appell[ees] filed a second notice of
appeal. By order of April 7, 2011, we consolidated Appell[ees]’
appeals and directed the parties to file a supplemental brief
regarding the trial court’s clarifying order.

SecurAmerica I, 2011 WL 3808232, at *3–*6 (footnotes in original).

A second oral argument in SecurAmerica I was held on July 19, 2011. On August 26,
2011, this Court filed its Opinion vacating the judgment of the trial court and remanding for
additional/clarified findings, stating:

We have conducted a painstaking review of the record,
and of the trial court’s judgment, and conclude that judicial
review is precluded by incomplete and contradictory findings by
the trial court. Specifically, the trial court made incomplete and
contradictory findings on the issue of fraud by SecurAmerica.
The trial court also neglected to address Appell[ees]’ defense
that SecurAmerica violated the implied covenant of good faith
and fair dealing. . . . [T]hese findings are foundational to
appellate review of this case, and without them we cannot
adjudicate these issues.

Id. at *10. Specifically, the Court noted that the trial court failed to make sufficient findings
with regard to: (1) whether SecurAmerica was liable for the actions of Mr. Reagan;10 (2)
when any allegedly fraudulent activity began; (3) whether the Appellees had proven their
fraud claim; and, (4) whether SecurAmerica violated the duty of good faith and fair dealing
implicit in its contract with the Appellees.11 Consequently, this Court vacated the judgment

10
According to SecurAmerica I, the trial court determined that SecurAmerica ratified the actions
of Mr. Reagan, although this was not a theory of liability that was argued at trial.

11
Specifically, the SecurAmerica I Court noted that the trial court made apparently
contradictory findings with regard to fraud, finding that SecurAmerica (through the actions of Mr.

12
and remanded to the trial court to make appropriate findings of fact and conclusions of law.

On February 1, 2012, SecurAmerica submitted Proposed Findings of Fact and
Conclusions of Law to the trial court. On March 6, 2012, the Appellees filed a Motion to
Strike SecurAmerica’s Proposed Findings of Fact and Conclusions of Law. The Appellees
subsequently submitted their own Proposed Findings of Fact and Conclusions of Law on
April 11, 2012. The trial court entered an amended judgment on October 12, 2012. In its
amended judgment, the trial court essentially reversed its prior decision with regard to
liability, finding that a conspiracy and lack of good faith on the part of SecurAmerica
released the Appellees from liability pursuant to the guaranties. Specifically, the trial court
ruled that Mr. Reagan was acting in the scope of his employment in all his dealings with
Southland Transportation, as discussed in more detail infra. The trial court then discussed
the falsification of the borrowing base certificates and the diversion of funds from the
blocked account after the sale of Southland Transportation to Mr. Harrell and Mr. Lucchesi:

According to Harrell’s testimony, he was instructed by
Reagan, President of SecurAmerica, in August 2000, to begin
falsifying the Borrowing Base Certificates. Harrell stated that he
was told by Reagan to “make the figures work.” Reagan testified
that he was unaware of this practice until December 2000, when
he discovered Harrell was falsifying the certificates. However,
it is uncontroverted that, for some period of time, both Harrell
and Reagan were cooperating in presenting falsified Borrowing
Base Certificates to SecurAmerica and on to TransAmerica.
Further, SecurAmerica, through Reagan, continued to make
advances to Southland Transportation.
In addition to the falsified Borrowing Base Certificates,
Harrell testified that, with the full knowledge and, in fact,
direction of Reagan, he began diverting accounts receivable
remittances around the blocked account. Instead of being used
to pay down the line of credit, as required by the terms of the
Credit Agreement, this money was diverted to fund the
day-to-day operations of Southland Transportation, thus eroding
the blocked account remittances used to repay and reduce the
loan balance of Southland Transportation to SecurAmerica. As
a result, less was paid to SecurAmerica on a monthly basis after

Reagan) had committed fraud, but later finding that there was no reliance on any false misrepresentation,
an essential element of any fraud claim. See Lopez v. Taylor, 195 S.W.3d 627, 634 (Tenn. Ct. App.
2005).

13
August 2000, and the receivables diminished, which was a
deviation from the Credit Agreement.
Reagan testified that SecurAmerica had a lending policy
and that he had discretion to make judgments with regard to the
lending policy in dealing with the debtors. His actions were not
monitored, in any way, nor were they limited in any manner.
Reagan further testified that he did not direct Harrell to make
false entries on the Borrowing Base Certificates. He stated that
“they (Southland Transportation) had submitted Borrowing Base
Certificates with false entries,” and that the only action he took
was to ask Harrell to provide a continuation of that false
information to support the loan advances to Southland
Transportation until he (Reagan) could fund additional monies
to try to rebuild receivables.
As the Court of Appeals noted, the testimony showed that
there was a precipitous drop in the “blocked account” receipts
from August 2000 through February 14, 2001.
Logically one can believe, as Harrell testified, that the
downturn in receipts was when funds began to be diverted to
day-to-day operations. This Court finds Harrell’s version of
events to be more credible in light of the figures presented to the
Court. Judging manner and demeanor, the Court finds that
Reagan was evasive and defensive in his answers. The Court
finds that Reagan’s testimony was not credible. Harrell, in this
Court’s opinion, was the more believable witness.
Reagan and SecurAmerica were both in serious trouble
with their lender, TransAmerica. Southland Transportation was
not the only loan which was trouble for their creditor,
SecurAmerica. Furthermore, SecurAmerica, was in a dangerous
position at this point with TransAmerica, after TransAmerica
had called their loan. Reagan sanctioned false Borrowing Base
Certificates to SecurAmerica, which were then presented
upstream to TransAmerica. Reagan testified he made bad
decisions, but that he was attempting to save SecurAmerica
from losing their funding from TransAmerica. He admitted that
he believed that salvaging Southland Transportation would
hopefully have prevented Reagan from having to make good on
his own personal Guaranty to TransAmerica. TransAmerica had
required that SecurAmerica obtain lending from other sources
to relieve TransAmerica of their involvement. Reagan was the

14
President of SecurAmerica and the only decision maker within
that corporation who dealt with Southland Transportation. The
Court finds that Reagan testified sufficiently to show that he was
operating on behalf of SecurAmerica, as well as himself. The
Court will note that the acts taken were within the scope of his
powers, or the powers of the President, since there was no proof
to the contrary at trial. No corporate documents were submitted
indicating limits upon his power, nor was any oversight alleged.
The acts were within the scope of power granted to him under
the terms of the Credit Agreement, which was acknowledged by
Reagan at trial.
. . . . SecurAmerica argued (through counsel) at trial that
Reagan’s actions were within the scope of the powers granted
to him by the Credit Agreement, as they clearly were. The Court
of Appeals noted that SecurAmerica (through counsel) argued
on appeal that Reagan was acting outside of the scope of his
agency. This Court finds that Reagan had complete authority to
act on behalf of SecurAmerica on this loan at all times. It is
clear from the proof, primarily the testimony of Reagan, that
both Reagan’s future and SecurAmerica’s future were
dependent upon the success of their portfolio of loans. Reagan
was cognizant of the fact that if Southland Transportation
folded, then his and his company’s future were in doubt.
In this Court’s opinion, and based upon all of the proof
in this matter, Harrell was the more credible witness with regard
to the timing of the falsifications. The Court of Appeals
correctly pointed out that the collections from the blocked
account by SecurAmerica dropped precipitously from August
2000 until February 2001. Both actors, Harrell and Reagan,
agreed that Reagan had given permission, or direction, (although
with disagreement about the time frame) to divert collections
from the blocked account to fund day-to-day operations of the
business of Southland Corporation to attempt to keep the doors
open and make the company a success. Regardless of the
authority granted by the Credit Agreement, it is logical to
conclude that the Agreement did not provide for falsifying of
loan documents. Reagan and Harrell conspired together to
submit false Borrowing Base Certificates and to divert funds,
contrary to the Credit Agreement, from the blocked account to
the operating account of Southland Transportation, and Harrell

15
and Lucchesi’s subsequent business, Bluff City Transportation.
This precipitous drop in repayments coincide with Harrell’s
testimony concerning the diversion of funds to the day-to-day
operating expenses.
Reagan testified that the employees of Southland
Transportation had put SecurAmerica in a very difficult position
and SecurAmerica was reacting to the damage that had been
created by the debtor. Reagan spoke for, acted for, and in fact,
was one in the same with SecurAmerica Business Credit, and
the Court so finds. Reagan’s actions were primarily motivated
by an attempt to save his company, SecurAmerica, which would
also protect him.
Once again, this Court finds that the actions of Reagan
are imputed to SecurAmerica. The business and loan
continuation were to the benefit of Reagan and his company,
SecurAmerica, so that they could hopefully continue their
arrangement and funding with TransAmerica.
Reagan testified that his actions were an effort on his part
to try and improve the situation and to get “us” to a position
where they were operating on a fully secured basis. This "us"
refers, in this context, to Southland Transportation and to
SecurAmerica. Reagan, in fact, was responsible for a personal
guaranty to TransAmerica for loans provided by that company
to SecurAmerica. Reagan’s complicity in the falsified
Borrowing Base Certificates apparently stems from his belief
that continuing to lend capital to Southland Transportation was
the best option to prevent the company from failing and
defaulting on its loan. At the same time that Southland
Transportation was failing, SecurAmerica had several other
"problem" loans in its portfolio.
. . . . After selling Southland Transportation, in August 2000,
Schledwitz and Lynch testified they were unaware that money
was being loaned based on false Borrowing Base Certificates or
that money was being diverted around the blocked account.
Schledwitz and Lynch had retained the right to inspect the books
and records of Southland Transportation when they sold the
business to Harrell and Lucchesi. However, the [Appellees] did
not exercise this right and so remained uninformed as to the
plight of the trucking company. Schledwitz testified that he
frequently saw Reagan during this time but nothing was

16
mentioned about problems with Southland Transportation,
except the need to infuse capital on a regular basis. . . .

* * *

In February 2001, Southland Transportation lost their
largest customer in Con-Agra, because Southland Transportation
did not pay some of their truck drivers. At that point, Harrell and
Lucchesi could no longer sustain the business and Southland
Transportation closed their doors, thereby defaulting on the
loan. David Jackson, a partner at Jackson, Howell and
Associates, was hired to audit the books and records of
Southland Transportation after the business closed. He was
unable to explain much of what he found in the Southland
Transportation books and records. He opined that the losses for
Southland Transportation were greater than earlier thought.
Further, he opined that Southland Transportation had
consistently, throughout the loan, overstated their accounts
receivables. These statements were contrary to the findings of
SecurAmerica’s previous auditor, Mr. David Gilcrest, who did
field examinations in April and June of 2000, and found
sufficient receivables to secure the loan. The Court finds that the
auditors who were involved with the business while it was
operational had a better grasp of the company’s condition than
did the auditor who came after the sudden closure of the
business, to books that were admittedly in disarray. The Court
finds Mr. Gilcrest’s June 2000 audit report, as confirmed and
adopted by Schledwitz and Reagan, to be more credible.
Therefore, this Court finds that the falsification began as Harrell
reported in August 2000, after the sale, and unknown to
Defendants.
In March of 2001, Reagan revealed the fate of Southland
Transportation to SecurAmerica’s Board of Directors. After the
Board of Directors learned of his actions, he was fired. Since
SecurAmerica accelerated the debt ($1,485, 564.25, plus
accrued interest according to SecurAmerica’s records),
Southland Transportation had insufficient assets to satisfy the
loan balance. SecurAmerica then sought repayment from
Appell[ees] under their personal guarant[ie]s. After learning of
the actions of Harrell and Reagan, Appell[ees] declined to honor

17
 the guaranty[ie]s.

The trial court then concluded that Mr. Harrell and Mr. Lucchesi entered into a civil
conspiracy with SecurAmerica to falsify the borrowing base certificates:

The Court finds, based upon the proof adduced at trial,
that this conspiracy existed, without the knowledge or consent
of the Defendants. Schledwitz and Lynch testified that they had
no knowledge of the falsified Borrowing Base Certificates until
the failure of the business. The Court finds the testimony of
Schledwitz and Lynch, in light of all the evidence, to be credible
in this regard. Further, Harrell and Reagan, individually and on
behalf of SecurAmerica and Southland Transportation, admitted
additionally to conspiring to divert the accounts payable from
the blocked bank account into the Southland Transportation
bank account for the purpose of running the day to day business.
Schledwitz and Reagan had numerous conversations and
Schledwitz testified that not once did Reagan indicate to him
that there was any internal problem with Southland
Transportation, other than short-term need for temporary loans.
The conclusion of a reasonable mind would be that Reagan kept
the falsifying information from Schledwitz purposefully, and in
furtherance of the conspiracy.
The Court finds that the fraudulent activity began in
August 2000, as testified to by Harrell. However, this Court
notes that the date of the conspiracy makes little difference.
Once the conspiracy has begun, all conspirators hands are
unclean. Not only did Southland Transportation and
SecurAmerica agree that there would be falsified Borrowing
Base Certificates, they agreed and conspired to divert funds
from the blocked account to the account of Southland
Transportation, and later Bluff City Transportation, (another
company created by Harrell and Luchessi) contrary to the
original Credit Agreement, and to the detriment of the
Guarantors.

The trial court, however, found that neither party had met their burden to prove fraud:

The Court finds that Plaintiff, SecurAmerica, has not
carried its burden to show fraud perpetrated by Schledwitz and

18
 Lynch, nor have Defendants’ Schledwitz and Lynch, shown
fraud toward them on the part of SecurAmerica or Southland
Transportation because of lack of reliance on the acts or
misrepresentations of either. The Court finds that both claims
for fraud fail.

In contrast, the trial court found that the Appellees had met their burden to show that
SecurAmerica breached the duty of good faith and fair dealing implied in all contracts:

This Court finds that the [Appellees’] affirmative defense
alleging that SecurAmerica violated the implied covenant of
good faith and fair dealing is valid and was shown through
testimony of Harrell and Reagan, individually and on behalf of
SecurAmerica. Further, the Court finds that the [Appellees’]
have proven their case of breach of the duty of good faith and
fair dealing against SecurAmerica and Southland
Transportation, both under the Common Law and the Tennessee
Consumer Protection Act,12 as well as failure to preserve
collateral and thereby significantly increasing the risk of
non-payment.

The trial court then concluded that SecurAmerica’s participation in the civil
conspiracy and violation of the covenant of good faith negated the Appellees’ duties pursuant
to the guaranties:

Any cause of action alleged by SecurAmerica against
Southland Transportation is negated by SecurAmerica’s
participation in the conspiracy. As testified to at trial, through
Reagan, SecurAmerica was aware of, and in fact encouraged,
infusion of funds into Southland Transportation by Capital and
was aware of the repayment of short term loans from Southland
Transportation to Capital, which fell short of the obligations.
Therefore, SecurAmerica has not proven a claim against Capital
for tortious interference. Further, this Court has found that there
was a civil conspiracy on the part of Harrell, Southland
Transportation, Reagan and SecurAmerica. Therefore, the Court

12
Although the trial court found a violation of the Tennessee Consumer Protection Act, the trial
court awarded no damages on that basis, finding: “No monetary damages are awarded herein and,
therefore, no additional damages are appropriate . . . .”

19
 finds that SecurAmerica has not proven breach of contract by
Southland Transportation.

From this order, SecurAmerica now appeals.13

II. Issues Presented

SecurAmerica raises the following issues, which are slightly modified from its brief:

1. Whether the trial court erred in finding SecurAmerica
engaged in a civil conspiracy, when the court specifically
found an absence of fraud and no other tort was alleged?
2. Did the trial court err in finding that the alleged
conspiracy precluded SecurAmerica from recovery?
3. Is the sale of Transportation to Mr. Harrell and Mr.
Lucchesi a sham sale, such that the Appellees are
vicariously liable for Mr. Harrell’s acts of which they
complain?

13
In our prior Opinion, we noted:

The parties provided an appellate record that is both excessive and
incomplete. The record is at times superfluous ( e.g ., it unnecessarily
contains: (1) full transcripts of the trial as well as extensive excerpts; (2)
motions and responses irrelevant to the issues on appeal; and (3) trial briefs
and discovery papers). At other times it lacks essential information ( e.g.,
it omits multiple evidentiary exhibits introduced at trial). See Tenn. R. App.
P. 24(a).

Despite this admonition, the parties do not appear to have made any effort to correct the errors in the record
before proceeding with this appeal. The language in Rule 24(a) regarding preparation of the record is not
advisory. See Tenn. R. App. P. 24(a) (outlining the contents of the record and noting that “all papers
relating to discovery, including depositions, interrogatories and answers thereto” should be excluded). We
are disappointed by the parties’ apparent lack of regard for either the Tennessee Rules of Appellate
Procedure or the Opinions of this Court. The record on appeal contains twenty-five volumes of technical
record, twenty-one trial transcripts, six full discovery deposition transcripts, several of which exceed two-
hundred pages, and eighteen volumes of exhibits, for a total record of over seventy volumes. Had the parties
adhered to the rule regarding the exclusion of discovery and duplicate filings, our record would have been
more streamlined and the interest of judicial economy would have been better served. We caution litigants
that “while in this case we chose to proceed with our review despite the fact that the parties chose not to
abide by the rules of this Court, we cannot say we will be so accommodating and choose to do the same in
the future.” Wells v. Wells, No. W2009-01600-COA-R3-CV, 2010 WL 891885, *4 (Tenn. Ct. App. March
15, 2010).

20
4. Did the Appellees breach the Credit Agreement in
transferring Southland Transportation without approval
by SecurAmerica?
5. If the transfer of Southland Transportation by the
Appellees is accepted by the court as a valid sale, do the
Appellees have standing to assert a breach of the credit
agreement, since they were no longer parties to the
agreement?
6. Under the Appellees’ good faith and fair dealing defense
and the Tennessee Consumer Protection Act claim, are
the sole contracts to be construed the Guaranty
Agreements?
7. If under the language of the Guaranty Agreements
Appellees agreed to modification of the Credit
Agreement terms, impairment of collateral, waiver of
fraud, and any other defense, can there be finding of
violation of the duty of good faith and fair dealing or the
Tennessee Consumer Protection Act against
SecurAmerica consistent with the Appellees’ agreement?
8. Does the continuing nature, and the absolute and
unconditional language of the Guaranty Agreements
preclude any defense based on lack of good faith and fair
dealing under the common law or Tennessee Consumer
Protection Act?
9. Whether the preponderance of the evidence supports that
the drop in funds deposited in the blocked account
related to a decline in the business of Southland
Transportation, rather than a diversion of funds?
10. Whether the Appellees have satisfied their burden of
proving a diversion of funds, or more generally, whether
they have proven harm or loss of any kind?
11. Can the Appellees’ Tennessee Consumer Protection Act
claim survive when they failed to prove a violation under
the Act, any harm, and failed to avoid injury?
12. Whether Mr. Reagan had authority under the Credit
Agreement to loan in excess of 85% of the eligible
accounts and to allow Southland Transportation to make
deposits in the operating or payroll accounts of
Southland Transportation to pay debts of Southland
Transportation?

21
 13. Whether the Guaranty Agreements gave Mr.
Reagan/SecurAmerica the authority to modify the terms
of the Credit Agreement, Appellees consented to same,
and waived any right to erosion of the collateral?
14. If Mr. Reagan acted consistent with the terms of the
Credit Agreement and/or the Guaranty Agreements, may
Appellees recover under any of their causes of action or
defenses?
15. Whether SecurAmerica should prevail on its claims
against Southland Transportation and the Appellees and
judgment entered in its favor, when the undisputed proof
is Transportation’s loan was in default and the plain
language of the governing documents and the evidence
shows that Appellees breached the agreements?
16. Whether Southland Transportation breached its
Agreements with SecurAmerica and the Appellees
breached their Guaranties, such that SecurAmerica is
entitled to a judgment against them including an award
of attorneys’ fees, interest and expenses?
17. Absent proof of knowledge or any affirming act, can
SecurAmerica be deemed to have ratified Mr. Reagan’s
acceptance of false borrowing base certificates from Mr.
Harrell?

In the posture of Appellee, the Appellees raise the following issues:

1. Did the trial court err in disallowing the Appellees’ claim
for fraud against SecurAmerica?
2. Did the trial court find a predicate tort to support its
finding that SecurAmerica participated in a conspiracy?
3. Was it proper for the trial court to find that
SecurAmerica had violated the duty of good faith and
fair dealing?
4. Was it proper for the trial court to find that the Appellees
did not breach the Secured Credit Agreement when they
sold Southland Transportation and that SecurAmerica
had breached that agreement?
5. Was the trial court’s finding that SecurAmerica violated
the Tennessee Consumer Protection Act proper in light
of SecurAmerica’s fraudulent conduct and breach of the

22
 duty of good faith and fair dealing?
6. Is the trial court required to find whether ratification
occurred before Mr. Reagan’s acts can to be imputed to
SecurAmerica?
7. Was it proper for the trial court to release Mr. Schledwitz
and Mr. Lynch from their limited guarantees in light of
SecurAmerica’s conspiracy to wrongfully modify the
nature of the loan?

III. Standard of Review

In non-jury cases, this Court’s review is de novo upon the record of the proceedings
in the trial court, with a presumption of correctness as to the trial court’s factual
determinations, unless the evidence preponderates against those findings. Tenn. R. App. P.
13(d); Union Carbide Corporation v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). The trial
court’s conclusions of law, however, are afforded no such presumption. Campbell v. Florida
Steel, 919 S.W.2d 26, 35 (Tenn. 1996).

IV. Analysis

The trial court’s decisions in this case rest first on its findings that the sale of
Southland Transportation was a valid transfer, that the sale did not constitute a material
breach of the Credit Agreement, and that Mr. Reagan was acting within the scope of his
authority and that his actions were, therefore, imputed to SecurAmerica Accordingly, we
begin with the issues concerning the sale of Southland Transportation.

A. Sham Sale

SecurAmerica first argues that the sale of Southland Transportation was a breach of
the Credit Agreement by the Appellees and that it was a sham sale. According to
SecurAmerica:

If it is a sham sale, the [Appellees] are vicariously liable for the
conduct of [Mr.] Harrell, their employee, a position
SecurAmerica has always maintained in this case. See generally,
Tucker v. Sierra Builders, 180 S.W.2d 109, 120 (Tenn. Ct.
App. 2005) (An agent acting within the scope of his
employment on his principal’s business, may hold his principal
liable (citations omitted)).

23
SecurAmerica cites no law supporting its contention that the sale of Southland Transportation
was merely a sham. It is well-settled that the failure to cite legal authority in the body of the
brief results in a waiver of the issues. See Hawkins v. Hart, 86 S.W.3d 522, 531 (Tenn. Ct.
App. 2001). Further, the trial court made specific findings of fact on this issue, which may
not be overturned absent a conclusion that the evidence preponderates against those findings.
For the evidence to preponderate against a trial court’s finding of fact, it must support
another finding of fact with greater convincing effect. 4215 Harding Road Homeowners
Ass’n. v. Harris, 354 S.W.3d 296, 305 (Tenn. Ct. App. 2011); Walker v. Sidney Gilreath &
Assocs., 40 S.W.3d 66, 71 (Tenn. Ct. App. 2000).

In this case, the trial court made the following, detailed findings:

The company faced significant cash flow problems. Southland
Capital repeatedly infused money into the business. With a
struggling business on their hands, Schledwitz and Lynch
explored opportunities to sell the trucking operation. Lucchesi
and Harrell were interested in purchasing the company, if certain
concessions could be made. In August 2000, Schledwitz and
Lynch sold Southland Transportation to these two employees.
Harrell and Lucchesi did not pay a cash price for their respective
interests. Rather, the transaction was structured so that
Defendants retained certain debts of Southland Transportation,
and Harrell and Lucchesi obligated themselves on a Promissory
Note payable to Defendants, Schledwitz and Lynch. Harrell
testified that there were certain pieces of equipment that he and
Lucchesi did not need or want for their operation, and they
expressed this to the sellers. Schledwitz removed those pieces of
equipment and continued to pay the notes on those. Lucchesi
and Harrell paid approximately ($9,000.00) per month to the
former owners for the purpose of paying on the notes on the
equipment that they retained.
According to the testimony of Patricia Cooper, the
accountant for Schledwitz and Lynch, confirmed the lengthy
negotiations of the parties and testified that this was an arms
length transaction.

Thus, the trial court held that the Appellees entered into a valid sale of Southland
Transportation. Given SecurAmerica’s failure to cite any legal authority for their assertion
that this was a sham sale and the presumption of correctness that attaches to the trial court’s
finding on this issue, we must conclude that the evidence in the record does not preponderate

24
against the trial court’s finding.

B. Breach of the Credit Agreement by the Appellees

SecurAmerica argues, however, that even if the sale of Southland to Mr. Harrell and
Mr. Lucchesi was a valid sale, the sale constituted a breach of the Credit Agreement between
SecurAmerica and Southland Transportation. SecurAmerica points to the plain language of
the Credit Agreement, which provides:

Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:

* * *

(m) Change in Control. A Change in Control shall have
occurred unless the Lender shall have given its prior written
consent.

The trial court agreed that the sale without prior written permission from SecurAmerica
“constituted an event of default” under the Credit Agreement, but, apparently, found that
SecurAmerica acquiesced in the sale:

This change in ownership constituted an event of default under
the Credit Agreement. However, SecurAmerica did not
accelerate the loan, nor did it release Schledwitz and Lynch
from their personal guaranties. Rather, after the sale,
Reagan/SecurAmerica continued to do business with the new
owners by lending money to Southland Transportation under the
same Credit Agreement, and [Appellees] remained as
guarantors.

In Crye-Leike, Inc. v. Carver, No. W2010-01601-COA-R3-CV, 2011 WL 2112768,
at * 11 (Tenn. Ct. App. May 26, 2011), this Court defined acquiescence as follows:

“Acquiescence” has been defined as a conduct from which may
be inferred an assent with a consequent estoppel or
quasi-estoppel, and also has been described as a quasi-estoppel,
or a form of estoppel. An acquiescence to a transaction is a
person’s tacit or passive acceptance, or an implied consent to an
act. Generally, acquiescence as a defense has a dual nature in

25
 that, it may on the one hand, rest on the principle of ratification
and be denominated an “implied ratification,” or, on the other
hand, rest on the principle of estoppel and be denominated as
“equitable estoppel.” The doctrine arises where a person knows
or ought to know that he or she is entitled to enforce his or her
right to impeach a transaction and neglects to do so for such a
time as would imply that he or she intended to waive or abandon
his or her right.

Id. (quoting 31 C.J.S. Estoppel and Waiver § 178 (2008); citing Hinton v. Stephens, No.
W2000-02727-COA-R3-CV, 2001 WL 1176012, at *3 (Tenn. Ct. App. Oct. 4, 2001)).

The evidence in the record clearly supports the trial court’s finding that SecurAmerica,
through the actions of Mr. Reagan, as discussed infra, continued doing business with
Southland Transportation after it was informed of the sale of the company. SecurAmerica
took no action to declare Southland Transportation in default at that time. Accordingly, the
evidence in the record does not preponderate against the trial court’s finding that
SecurAmerica waived its right to assert that the sale placed the company in default with
regard to the Credit Agreement.14

C. Authority

We next consider whether the trial court properly imputed the actions of Mr. Reagan
to SecurAmerica. The trial court found that the evidence was uncontroverted that Mr. Reagan
participated for some time in the falsification of the borrowing base certificates. The trial
court further found that Mr. Reagan’s actions were imputed to SecurAmerica through the
theory of agency.15

14
We note that the Credit Agreement contains a term stating that “no delay, failure or omission
of the Lender to exercise any right upon the occurrence of any Default or Event of Default shall impair
any such right or shall be construed to be a waiver of any such Default or Event of Default or any
acquiescence therein.” However, SecurAmerica does not cite this provision in its brief, nor does it set
forth any argument that acquiescence was waived under the Credit Agreement. Accordingly, any
contention that SecurAmerica did not acquiesce is waived by the failure to properly brief this issue. See
Tenn. R. App. P. 13(b).
15
In its brief, SecurAmerica focuses on the issue of ratification. In the trial court’s original
order, it did hold that SecurAmerica ratified the actions of Mr. Reagan. However, upon reconsideration
of this issue, the trial court clearly set aside that ruling in favor of a ruling that Mr. Reagan’s actions were
imputed to SecurAmerica through the theory of agency. Thus, the question is whether Mr. Reagan is
properly considered an agent of SecurAmerica with regard to his actions in this case, and not whether
SecurAmerica ratified those actions after the fact.

26
 A basic principle of agency is that a corporation can act only through the authorized
acts of its corporate directors, officers, and other employees and agents. Thus, the acts of the
corporation’s agents are attributed to the corporation itself. “The two are not one and another.
So merged are their identities, when the agent is acting for the corporation (the only way it
can act at all)[ ], that the one may not be an accessory of the other.” Haverty Furniture Co.
v. Foust, 174 Tenn. 203, 212, 124 S.W.2d 694, 698 (1939) (citations omitted). The scope
and extent of an agent’s authority are questions of fact that must be determined from all of
the facts and circumstances of the particular case. Southland Express, Inc. v. Scrap Metal
Buyers of Tampa, Inc., 895 S.W.2d 335, 340 (Tenn. Ct. App.1994). Thus, the trial court’s
findings on this issue are entitled to a presumption of correctness. With regard to this issue,
the trial court specifically found:

Reagan was one of the creators of SecurAmerica, was the loan
officer, as well as a shareholder - recruiting investors and
working to bring this investment company into existence. . . .
The company, SecurAmerica, had a Board of Directors who had
little, if anything, to do with running the day-to-day business of
SecurAmerica. Those decisions were vested in Reagan, which
he admitted in his trial testimony. Reagan testified that he was
specifically allowed to modify the terms of the Credit
Agreement at will. No Board of Directors meeting was required
nor did there appear to be any oversight. Reagan was, for
business dealings purposes, the face of, and in fact and practice,
SecurAmerica. Reagan was, according to his testimony,
empowered with total responsibility for making decisions for
each “Credit Agreement” in the company’s portfolio of loans.
Reagan’s testimony that he could make decisions but had made
“bad decisions” does not dilute the fact that he, Reagan, at least
with regard to Southland Transportation, acted as, on behalf of
and in furtherance of, SecurAmerica. . . . The Court finds that
based upon the evidence at trial, Reagan was acting as and for
SecurAmerica and any finding against Reagan is a finding
against SecurAmerica. All actions of Reagan are imputed to
SecurAmerica.

SecurAmerica argues, however, that Mr. Reagan had neither actual, implied, nor apparent
authority to participate in the falsification of the borrowing base certificates and the diversion
of funds. We respectfully disagree.

27
 As stated in 3 C.J.S. Agency § 410 (1973), “[a] principal is bound neither by contracts
made by a person not his agent, nor by those of his agent beyond the scope of his actual and
apparent authority, which he has not ratified and is not estopped to deny.”Agency must be
proven by the party seeking to assert it and the “scope and extent of an agent’s real and
apparent authority” must “be determined . . . from all the facts and circumstances in
evidence.” John J. Heirigs Const. Co., Inc. v. Exide, 709 S.W.2d 604, 608 (Tenn. Ct. App.
1986); Sloan v. Hall, 673 S.W.2d 548, 551 (Tenn. Ct. App. 1984). An agency relationship
is created only “at the will and by the act of the principal and its existence is a fact to be
proved by tracing it to some act of the alleged principal and turns on facts concerning the
understanding between the alleged principal and agent.” 3 Am.Jur.2d Agency § 15; see also
Thornton v. Allenbrooke Nursing & Rehab. Ctr., LLC, No. W2007-00950-COA-R3-CV,
2008 WL 2687697, at *5 (Tenn. Ct. App. July 3, 2008). “For an agency relationship to arise,
the ‘principal must intend the agent to act for him or her, the agent must intend to accept the
authority and act on it, and the intention of the parties must find expression either in words
or conduct between them.’” Thornton, 2008 WL 2687697, at *5 (citing 3 Am.Jur.2d Agency
§ 15 (2007)).

We begin first with implied authority. Implied authority has been defined as:

[A]ctual authority given implicitly by the principal to his agent;
. . . it is actual authority circumstantially proved, or evidenced
by conduct, or inferred from a course of dealing between the
alleged principal and the agent. It differs from apparent
authority in that it is authority which the principal intended that
the agent should have.

* * *

. . . . Implied powers . . . must be bottomed on some act or
acquiescence of the principal, express or implied.

. . . their existence or nonexistence in any particular instance
being always determinable by reference to the intention of the
parties.

2A C.J.S. Agency § 153 (1972). “The term ‘implied authority’ is typically used to denote
actual authority either to do what is necessary to accomplish the agent’s express
responsibilities, or to act in a manner that the agent reasonably believes the principal wishes
the agent to act, in light of the principal’s objectives and manifestations.” Barbee v. Kindred
Healthcare Operating, Inc., No. W2007-00517-COA-R3-CV, 2008 WL 4615858, at *6

28
(Tenn. Ct. App. Oct. 20, 2008) (citing Restatement (Third) of Agency § 2.01 cmt.b.). It has
also been described as “authority given implicitly by the principal to his agent; . . . it is actual
authority circumstantially proved, or evidenced by conduct, or inferred from a course of
dealing between the alleged principal and the agent.” Bells Banking Co. v. Jackson Ctr.,
Inc., 938 S.W.2d 421, 424 (Tenn. Ct. App. 1996). “[Implied authority] differs from apparent
authority in that it is authority which the principal intended that the agent should have. . . .
Implied powers . . . must be bottomed on some act or acquiescence of the principal, express
or implied . . . their existence or nonexistence in any particular instance being always
determinable by reference to the intention of the parties.” Bells Banking Co., 938 S.W.2d
at 424.

Conversely, apparent authority has been described by Tennessee courts as follows:

(1) such authority as the principal knowingly permits the agent
to assume or which he holds the agent out as possessing;

(2) such authority as he appears to have by reason of the actual
authority which he has;

(3) such authority as a reasonably prudent man, using diligence
and discretion, in view of the principal’s conduct, would
naturally suppose the agent to possess.

See Barbee, 2008 WL 4615858, at *6 (citing Franklin Distrib. Co. v. Crush Intern.
(U.S.A.), Inc., 726 S.W.2d 926, 930–31 (Tenn. Ct. App. 1986)). In Barbee v. Kindred
Healthcare Operating, Inc., this Court went on to note that “a principal is responsible for
the acts of an agent within his apparent authority only where the principal himself by his acts
or conduct has clothed the agent with the appearance of authority, and not where the agent’s
own conduct has created the apparent authority.” Barbee, 2008 WL 4615858, at *9 (citing
S. Ry. Co., 197 S.W. at 677). Apparent authority is most often defined as:

Such authority as the principal knowingly permits the agent to
assume or which he holds the agent out as possessing; such
authority as he appears to have by reason of the actual authority
which he has; such authority as a reasonably prudent man, using
diligence and discretion, in view of the principal’s conduct,
would naturally suppose the agent to possess.

Rich Printing Co. v. McKellar’s Estate, 330 S.W.2d 361, 376 (Tenn. Ct. App.1959); see
V.L. Nicholson Co. v. Transcon Inv., 595 S.W.2d 474, 483 (Tenn. 1980).

29
 The Appellees argue that Mr. Reagan had both implied and apparent authority to act
as the agent of SecurAmerica with regard to its dealings with Southland Transportation. See
2 Fletcher Cyc. Corp. § 449 (noting that implied authority is merely actual authority,
circumstantially proven). We agree. The evidence in this case shows that SecurAmerica
vested Mr. Reagan with nearly unlimited authority and discretion to act as an agent for
SecurAmerica. Mr. Reagan was one of only three active employees of SecurAmerica at any
given time. SecurAmerica exercised little-to-no supervisory power over Mr. Reagan’s
decisions regarding the day-to-day activities of the company. Southland Transportation dealt
exclusively with Mr. Reagan when contracting with SecurAmerica. As this Court explained:

[W]here the agent is authorized to transact all the principal’s
business of a certain kind, or all the acts of a certain class, the
very breadth of the employment, the duration of time involved
and the variety of the duties to be performed necessarily involve
more or less of discretion and choice of methods, and render
impracticable, if not impossible, much of particularity or
precision, either as to the exact means and method to be
employed, or as to the scope or extent of the authority itself.
Where so little is expressed, more may well be implied.

O’Shea v. First Federal Sav. and Loan Ass’n of Columbia, 22 McCanless 619, 405 S.W.2d
180, 183 (Tenn. 1966) (citing Mechem on Agency §739 (2d ed. 1903)). Here, there is no
limit on Mr. Reagan’s authority put in place by SecurAmerica. In addition, Mr. Reagan’s
testimony was undisputed that he engaged in the inflation of the borrowing base certificates
not in an effort to defraud SecurAmerica, but to aid Southland Transportation to stay afloat,
which in turn, would help SecurAmerica realize the expected return on its investment. These
actions were clearly not designed to benefit Mr. Reagan personally. See 12 C.J.S. Building
& Loan Assoc. § 43 (noting that the president of a lending corporation is not generally acting
as an agent of the corporation when the action of the president “is intended to yield a profit
to him or her at the expense of, and to the detriment of, the association.”). Although Mr.
Reagan’s actions were allegedly deceptive and unknown to the SecurAmerica Board, that is
not sufficient to defeat the trial court’s finding that Mr. Reagan had authority to act in this
case. As explained in a treatise on the subject:

The fraud and deceit of the officers and agents of a corporation,
performed in the course of their employment, and for the benefit
of the corporation, is imputable to the corporation, although it
may have been unauthorized. This is true not only when the
fraud or deceit is set up by the other party as ground for
rescission of a contract [] that party was induced to enter, but

30
 also where it is relied upon as ground for an action of deceit
against the corporation. Any deceit practiced by the
corporation’s officers or agents acting on behalf of the
corporation, even though ultra vires, binds the corporation.

10 Fletcher Cyc. Corp. § 4886 (footnotes omitted). Thus, the evidence does not preponderate
against the trial court’s finding that Mr. Reagan’s actions were imputed to SecurAmerica.

D. Conspiracy

In our prior Opinion, this Court directed the trial court to consider whether either
conspiracy or fraud “affect[ed] the liability of the [Appellees].” SecurAmerica I, 2011 WL
3808232, at *11. As we explained in SecurAmerica I:

It is well settled in Tennessee that the courts of our State
will not be used to enforce a contract which is the product of
fraud; indeed, fraud vitiates all that it touches. Shelby Elec. Co.
v. Forbes, 205 S.W.3d 448, 455 (Tenn. Ct. App. 2005); see also
New York Life Ins. Co. v. Nashville Trust Co., 200 Tenn. 513,
292 S.W.2d 749, 754 (1956). Fraud arranged between a creditor
and a debtor can thus affect a guarantor’s obligation.

* * *

[I]t is apparent that, where a conspiracy or fraud between the
debtor and the creditor is alleged, as is the case here, such
fraudulent behavior may affect the liability of the guarantor. The
ultimate effect, however, is dependent upon a finding of fraud
or conspiracy in the first place.

SecurAmerica I, 2011 WL 3808232, at *10–*11 (footnote omitted). Thus, only if fraud or
a conspiracy is found, will the liability of the guarantors be affected. On remand, the trial
court determined that while the Appellees failed to prove fraud, they had proven conspiracy
sufficient to avoid their obligations pursuant to the Guaranties. We begin first with
SecurAmerica’s argument that the trial court erred in finding that SecurAmerica had engaged
in a civil conspiracy with Mr. Harrell and Southland Transportation.

This Court discussed the claim for civil conspiracy in Foster Business Park, LLC v.
Winfree, No. M2006-02340-COA-R3-CV, 2009 WL 113242 (Tenn. Ct. App. Jan. 15, 2009).
According to this Court:

31
 “An actionable civil conspiracy is a combination of two
or more persons who, each having the intent and knowledge of
the other’s intent, accomplish by concert an unlawful purpose,
or accomplish a lawful purpose by unlawful means, which
results in damage to the plaintiff.” Trau-Med of America, Inc.,
71 S.W.3d at 703; see Brown v. Birman Managed Care, Inc.,
42 S.W.3d 62, 67 (Tenn.2001) (citing Dale v. Thomas H.
Temple Co., 208 S.W.2d 344, 353 (Tenn. 1948)). The elements
for civil conspiracy under Tennessee common law, therefore,
are: (1) a common design between two or more persons; (2) to
accomplish by concerted action an unlawful purpose, or a lawful
purpose by unlawful means; (3) an overt act in furtherance of
the conspiracy; and (4) injury to person or property resulting in
attendant damage. Braswell v. Carothers, 863 S.W.2d 722, 727
(Tenn. Ct. App. 1993). In addition, civil conspiracy requires an
underlying predicate tort allegedly committed pursuant to the
conspiracy. Morgan v. Brush Wellman, Inc., 165 F.Supp.2d
704, 721 (E.D. Tenn.2001) (citing Tenn. Publ’g Co. v.
Fitzhugh, 52 S.W.2d 157, 158 (Tenn.1932)).
Conspiracy is not a cause of action, but a legal doctrine
that imposes liability on persons who, although not actually
committing a tort themselves, share with the immediate
tortfeasors a common plan or design in its perpetration.
Freeman Mgmt. Corp. v. Shurgard Storage Centers, LLC., 461
F.Supp.2d 629, 642–643 (M.D. Tenn. 2006). By participating in
a civil conspiracy, a coconspirator effectively adopts as his or
her own the torts of other coconspirators within the ambit of the
conspiracy. In this way, a coconspirator incurs tort liability
co-equal with the immediate tortfeasors. Id.; see also Applied
Equipment Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454,
457 (Cal. 1994); Accord. Beck v. Prupis, 529 U.S. 494, 503
(2000) (noting it was “sometimes said that a conspiracy claim
was not an independent cause of action, but was only the
mechanism for subjecting co-conspirators to liability when one
of their members committed a tortious act”).

Foster Business Park, 2009 WL 113242, at *16. Thus, there can be no finding of a civil
conspiracy before there is a finding that the participants committed a predicate tort. Two torts
were asserted in this case, fraud and a violation of the Tennessee Consumer Protection Act.
We begin with fraud.

32
 1. Fraud

As explained by this Court:

The essence of fraud is deception. In its most general
sense, fraud is a trick or artifice or other use of false information
that induces a person to act in a way that he or she would not
otherwise have acted. See Rawlings v. John Hancock Mut. Life
Ins. Co., 78 S.W.3d 291, 301 (Tenn. Ct. App. 2001). Fraud
occurs when a person intentionally misrepresents a material fact
or intentionally produces a false impression in order to mislead
another or to obtain an unfair advantage. Brown v. Birman
Managed Care, Inc., 42 S.W.3d 62, 66 (Tenn. 2001). The
elements of a claim for fraud include: (1) an intentional
misrepresentation of an existing material fact, (2) knowledge of
the representation’s falsity, and (3) injury caused by reasonable
reliance on the misrepresentation. Concrete Spaces, Inc. v.
Sender, 2 S.W.3d 901, 904 (Tenn. 1999); First Nat’l Bank v.
Brooks Farms, 821 S.W.2d 925, 927 (Tenn. 1991);
Metropolitan Gov’t v. McKinney, 852 S.W.2d 233, 237 (Tenn.
Ct. App. 1992).

Lopez v. Taylor, 195 S.W.3d 627, 634 (Tenn. Ct. App. 2005). The trial court found that the
Appellees had failed to prove fraud because the Appellees could show no reliance on the
misrepresentations. Appellees assert that this was error and contend that Southland and
SecurAmerica committed fraud by falsifying the borrowing base certificates and diverting
funds from the blocked accounts. SecurAmerica contends, however, that the evidence does
not preponderate against the trial court’s finding that the Appellees’ lack of justified reliance
defeats their fraud claim.

As previously explained, reliance is an essential element of fraud in Tennessee. See
Lopez , 195 S.W.3d at 634. The existence of reasonable or justified reliance is a question of
fact that is entitled to a presumption of correctness on appeal. See Island Brook
Homeowners Ass’n, Inc. v. Aughenbaugh, 2007 WL 2917781, at *7 (Tenn. Ct. App.
October 5, 2007) (citing Am.Jur.2d Fraud and Deceit § 502 (2001)). As recently explained
by the Tennessee Supreme Court:

Whether a person’s reliance on a representation is reasonable
generally is a question of fact requiring the consideration of a
number of factors. E.g., City State Bank v. Dean Witter

33
 Reynolds, Inc., 948 S.W.2d 729, 737 (Tenn. Ct. App. 1996).
The factors include the plaintiff’s sophistication and expertise
in the subject matter of the representation, the type of
relationship—fiduciary or otherwise—between the parties, the
availability of relevant information about the representation, any
concealment of the misrepresentation, any opportunity to
discover the misrepresentation, which party initiated the
transaction, and the specificity of the misrepresentation. See,
e.g., id.; accord Allied Sound, Inc. v. Neely, 58 S.W.3d 119,
122–23 (Tenn. Ct. App. 2001).

Davis v. McGuigan, 325 S.W.3d 149, 158 (Tenn. 2010).

The Appellees had the burden of proving fraud in order to affect their liability
pursuant to the Guaranties:

The party alleging fraud has the burden to prove the element of
reliance. Thus, a party who alleges that he or she was defrauded
through a false representation has the burden of proof to
establish that he or she did rely upon it, that he or she acted in
reliance upon it to his or her injury, and that the reliance was
justified or reasonable. It also has been held that the party
alleging fraud must show that he or she would not have acted as
he or she did but for reliance on the misrepresentation.

37 Am. Jur. 2d Fraud and Deceit § 465 (footnotes omitted). As further explained:

Reliance on a fraudulent misrepresentation, for purposes of
establishing a fraud claim, is established by showing that the
defendant’s actions and representations induced the plaintiff to
act or to refrain from action. In other words, the reliance element
of a fraud claim requires that the misrepresentation actually
induced the injured party to change its course of action.

37 C.J.S. Fraud § 51 (footnotes omitted).

There are no allegations in the Appellees’ brief that Southland and SecurAmerica made
a direct misrepresentation of material fact to them. Instead, the Appellees assert that
Southland and SecurAmerica concealed facts from the Appellees regarding the
collateralization of the loan. The misrepresentation in the case, thus, concerns concealment,

34
rather than an affirmative misrepresentation:

[W]here redress is sought for fraudulent concealment or
suppression, it must appear that the plaintiff relied on the
defendant to make a disclosure of the fact, and that the
concealment or suppression was a moving inducement to the
plaintiff’s change of position. A plaintiff may establish the actual
reliance element of an intentional concealment claim by showing
that had the omitted information been disclosed, he or she would
have been aware of it and would have behaved differently.
There can be no redress for representations which do not
influence the complainant . . . .

37 C.J.S. Fraud § 51 (footnotes omitted). Further, reliance will usually not be found when the
complainant has an equal opportunity to perform its own investigation of the facts: “As a
general rule, where the parties deal on equal terms, one who has failed to avail himself or
herself of the means of knowledge readily within his or her reach cannot complain of the other
party’s representations. . . .” 37 C.J.S. Fraud § 56. However, “[t]he fact that a party failed to
avail himself or herself of a means of knowledge does not bar a redress for fraud where the
speaker used an artifice or misrepresentation to prevent him or her from investigating and
learning the truth.” 37 C.J.S. Fraud § 58. Further, “[o]ne has no right to rely on representations
unless they were directly or indirectly made to him or her.” 37 C.J.S. Fraud § 60.

The Appellees cite no law to support their contention that the trial court erred in failing
to find reliance in this case. “It is not the role of the courts, trial or appellate, to research or
construct a litigant’s case or arguments for him or her . . . .” Sneed v. Bd. of Prof’
Responsibility of Sup.Ct., 301 S.W.3d 603, 615 (Tenn. 2010). Additionally, this Court’s
review is appellate only. See Tenn. R. App. P. 13(b) (noting that appellate review “generally
will extend only to those issues presented for review.”). We are directed only to consider those
issues that are properly raised, argued, and supported with relevant authority. See Hawkins
v. Hart, 86 S.W.3d 522, 531 (Tenn. Ct. App. 2001) (“In order for an issue to be considered
on appeal, a party must, in his brief, develop the theories or contain authority to support the
averred position . . . .”).

Considering the totality of the circumstances, including the Appellees’ failure to
properly brief this issue, we affirm the decision of the trial court that no reliance was proven
in this case. Nothing in the record shows that the Appellees changed their behavior due to the
alleged fraudulent activity in this case. See 37 Am. Jur. 2d Fraud and Deceit § 465. The
Appellees in this case are undisputedly sophisticated business persons, regarding both
business in general and this particular business operation. McGuigan, 325 S.W.3d at 158. The

35
Appellees do not argue in their brief that the Guaranty agreements created a fiduciary
relationship between SecurAmerica and the Appellees. Id.; see Foster Business Park, 2009
WL 113242, at *13 (holding that “the dealings between a lender and borrower are not
inherently fiduciary absent special facts and circumstances”) (quoting Oak Ridge Precision
Industries, Inc. v. First Tennessee Bank Nat. Ass’n, 835 S.W.2d 25, 30 (Tenn. Ct. App.
1992)); 1 Lender Liability: Law, Prac. & Prevention § 5:3 (noting that “the relationship
between a lender and any guarantors of the borrower’s loan” “does not, in and of itself,
establish a fiduciary relationship”). Further, the trial court found that the Appellees
themselves retained a right to inspect the records of Southland after the sale to Mr. Harrell and
Mr. Lucchesi, but chose not to exercise that right, instead choosing to remain “uninformed
as to the plight of” Southland Transportation. The evidence in the record does not
preponderate against this finding. Thus, information regarding the finances of Southland
Transportation was available to the Appellees and they had the opportunity to discover the
falsified documents. McGuigan, 325 S.W.3d at 158; see also 37 C.J.S. Fraud § 56 (noting that
reliance will usually not be found to be justifiable when the complainant had the opportunity
to learn of the deceit). Under these circumstances, the evidence in the record does not
preponderate against the trial court’s finding that the Appellees failed to prove justifiable
reliance. Without justifiable reliance, there can be no fraud.

2. Tennessee Consumer Protection Act

The Appellees argue that despite the trial court’s finding that fraud was not proven, the
trial court correctly concluded that Southland Transportation and SecurAmerica participated
in civil conspiracy because the trial court concluded that they had violated the Tennessee
Consumer Protection Act (“TCPA”).

The TCPA was enacted to provide statutory remedies beyond common-law fraud
actions for consumers and legitimate business enterprises victimized by unfair or deceptive
business acts or practices that were committed in Tennessee in whole or in part. See Tenn.
Code Ann. § 47-18-102; Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App.
2005). The TCPA applies to any “act or practice which is unfair or deceptive to the consumer
or to any other person.” Tenn. Code Ann. § 47-18-104(b)(27).16 The TCPA’s provisions,
however, are limited to those actions “affecting the conduct of any trade or commerce.” Tenn.

16
The provision at issue of the TCPA was recently amended to limit its application in private
suits such as the one in this case. See 2011 Pub.Acts, c. 510, §§ 15, 19. Accordingly, on all suits accruing
on or after October 1, 2011, only the Attorney General is vested with the authority to prosecute general
violations of the TCPA under the provision regarding “any other act or practice which is deceptive to the
consumer or to any other person.” Id. Because this suit was commenced in 2001, the prior version of the
statute containing no limitation on enforcement of this provision is applicable to this case.

36
Code Ann. § 47-18-104(a), (b); see also Pursell v. First American Nat. Bank, 937 S.W.2d
838, (Tenn. 1996) (limiting violations of the TCPA to conduct affecting trade or commerce).
A “deceptive” act or practice is “one that causes or tends to cause a consumer to believe what
is false or that misleads or tends to mislead a consumer as a matter of fact.” Tucker, 180
S.W.3d at 116 (citations omitted). An act or practice may be deemed unfair if it “causes or is
likely to cause substantial injury to consumers which is not reasonably avoidable by
consumers themselves and not outweighed by countervailing benefits to consumers or to
competition.” Id. at 116–17 (citing 15 U.S.C. § 45(n)). Because the TCPA is remedial, courts
have determined that it should be construed liberally in order to protect the consumer. Tucker,
180 S.W.3d at 115. In order to recover under the TCPA, a plaintiff must prove: (1) that the
defendant engaged in an unfair or deceptive act; and (2) that the defendant’s conduct caused
an “ascertainable loss of money or property. . . .” Tucker, 180 S.W.3d at 116 (quoting Tenn.
Code Ann. § 47-18-109(a)(1)); see also Cloud Nine, L.L.C. v. Whaley, 650 F.Supp.2d 789,
798 (E.D. Tenn. 2009) (“plaintiffs asserting claims under the [TCPA] are required to show
that the defendant’s wrongful conduct proximately caused their injury”).

The TCPA does not define the key terms “unfair” and “deceptive,” making the
determination of whether a particular act or practice is unfair or deceptive a legal matter to
be decided by the court. See Tucker, 180 S.W.3d at 116. However, whether a specific
representation in a particular case is “unfair” or “deceptive” is a question of fact. Audio
Visual Artistry v. Tanzer, 403 S.W.3d 789, 810 (Tenn. Ct. App. 2012). The General
Assembly has instructed us to look to the federal understanding of these terms in interpreting
them in the TCPA. See Tenn. Code Ann. § 47-18-115. “A deceptive act or practice is one that
causes or tends to cause a consumer to believe what is false or that misleads or tends to
mislead a consumer as to a matter of fact.” Tucker, 180 S.W.3d at 116; see Jonathan Sheldon
& Carolyn L. Carter, Unfair and Deceptive Acts and Practices § 4.2.3.1, at 118–19 (5th ed.
2001). The concept of unfairness is broader than the concept of deceptiveness and “it applies
to various abusive business practices that are not necessarily deceptive.” Tucker, 180 S.W.3d
at 116; see Unfair and Deceptive Acts and Practices § 4.2.3.1, at 156. “An act or practice
should not be deemed unfair ‘unless the act or practice causes or is likely to cause substantial
injury to consumers which is not reasonably avoidable by consumers themselves and not
outweighed by countervailing benefits to consumers or to competition.’” Tucker, 180 S.W.3d
at 116 (citing 15 U.S.C.A. § 45(n)). In addition, the Appellees’ claim pursuant to the TCPA
does not fail for lack of reliance, as this Court has held that reliance is not an essential element
of a TCPA claim. See Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131
S.W.3d 457, 469 (Tenn. Ct. App. 2003) (holding that “in TCPA cases involving
misrepresentation, a plaintiff is not required to show reliance upon a misrepresentation in
order to maintain a cause of action”).

The trial court in this case made little to no findings with regard to its ruling that

37
Southland Transportation and SecurAmerica violated the TCPA. First, we note that the trial
court made no finding that a violation of the TCPA could serve as an underlying tort for a
civil conspiracy claim. See Hagan v. Phipps, No. M2010-00002-COA-R3-CV, 2010 WL
3852310, at *5, n.7 (Tenn. Ct. App. Sept. 28, 2010) (noting, in dicta, that TCPA claims may
constitute a predicate tort for purposes of civil conspiracy because “claims under the TCPA
have been characterized as tort actions”). The trial court also failed to make any findings as
to whether the sophisticated commercial guarantors in this case are properly considered
“consumers” protected by the TCPA. See Tenn. Code Ann. § 47-18-103 (defining “consumer”
for purposes of the TCPA as “any natural person who seeks or acquires by purchase, rent,
lease, assignment, award by chance, or other disposition, any goods, services, or property,
tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of
value wherever situated”). The trial court also failed to make specific findings as to whether
the Appellees suffered an “ascertainable loss of money or property” as a result of the alleged
violation of the TCPA. See Tucker, 180 S.W.3d at 115. Additionally, the trial court failed to
make any finding as to whether the conduct of Southland Transportation and SecurAmerica
in this case was either deceptive or unfair. The facts in this case, as found by the trial court,
make this distinction critical to the resolution of this issue. If the acts of Southland
Transportation and SecurAmerica were merely unfair, rather than deceptive, the injury caused
by those acts must not be “reasonably avoidable by [the Appellees].” Tucker, 180 S.W.3d at
116. Here, the trial court found that the Appellees voluntarily chose to remain uninformed
as to the plight of Southland Transportation, even though the Appellees retained a right to
inspect the records of the company. This tends to suggest that the trial court would have found
that the injury in this case could have been reasonably avoided by the Appellees. However,
the trial court failed to address this issue. Thus, the question of whether the conduct of
Southland Transportation and SecurAmerica meet the higher standard of deception is critical
to the resolution of this issue. Finally, the trial court failed to make any findings as to whether
the allegedly unfair or deceptive acts at issue in this case “affect[] trade or commerce.”
Pursell, 937 S.W.2d at 841 (holding that “[t]he terms ‘trade or commerce’ are specifically
defined to limit the Act’s application”); see Tenn. Code Ann. § 47-18-103(defining trade or
commerce as “the advertising, offering for sale, lease or rental, or distribution of any goods,
services, or property, tangible or intangible, real, personal, or mixed, and other articles,
commodities, or things of value wherever situated”). Without these findings, this Court may
only speculate as to how the trial court reached its decision. See In re K.H., 2009 WL
1362314, at *8 (quoting In re M.E. W., No. M2003-01739-COA-R3-PT, 2004 WL 865840,
at *19 (Tenn. Ct. App. April 21, 2004) (“Without such findings and conclusions, this court
is left to wonder on what basis the court reached its ultimate decision.”)).

We fully recognize that this is the second appeal of this case, which has been pending
for over a decade. In addition, the first appeal was remanded to the trial court for additional
findings of fact and conclusions of law. Remanding to the trial court at this juncture would

38
again delay a final resolution of the issues in this case. However, the General Assembly’s
decision to require findings of fact and conclusions of law in bench trials such as this case,
is “not a mere technicality.” In re K.H., No. W2008-01144-COA-R3-PT, 2009 WL 1362314,
at *8 (Tenn. Ct. App. May 15, 2009). Without findings of fact, we cannot discern the basis
for the trial court’s decision, “and we are unable to afford appropriate deference to the trial
court’s decision.” In re Connor S.L., No. W2012-00587-COA-R3-JV, 2012 WL 5462839,
at *4 (Tenn. Ct. App. Nov.8, 2012). Generally, the appropriate remedy when a trial court fails
to make appropriate findings of fact and conclusions of law is to “vacate the trial court’s
judgment and remand the cause to the trial court for written findings of fact and conclusions
of law.” Lake v. Haynes, No. W2010-00294-COA-R3-CV, 2011 WL 2361563, at *1 (Tenn.
Ct. App. June 9, 2011). However, this Court has indicated that we may “soldier on” with our
review despite the trial court’s failure to make sufficient findings of fact and conclusions of
law, in certain limited circumstances:

On occasion, when a trial judge fails to make findings of fact and
conclusions of law, the appellate court “may ‘soldier on’ when
the case involves only a clear legal issue, or when the court’s
decision is ‘readily ascertainable.’” Hanson v. J.C. Hobbs Co.,
Inc., No. W2011-02523-COA-R3-CV, 2012 WL 5873582, at *10
(Tenn. Ct. App. Nov. 21, 2012) (quoting Simpson v. Fowler, No.
W2011-02112-COA-R3-CV, 2012 WL 3675321, at *4 (Tenn. Ct.
App. Aug. 28, 2012)).

Pandey v. Shrivastava, No. W2012-00059-COA-R3-CV, 2013 WL 657799, at *5 (Tenn. Ct.
App. Feb. 22, 2013). As previously discussed, whether an act was unfair or deceptive is an
issue of fact, rather than a clear legal issue. See Tanzer, 403 S.W.3d at 810. In this case, the
trial court’s ruling with regard to the TCPA contains no findings as to the essential elements
of that claim or the facts that support the trial court’s ruling with regard to this issue. As such,
the trial court’s ruling is not “readily ascertainable.” Id. The trial court apparently based its
decision that SecurAmerica and Southland Transportation engaged in a civil conspiracy on
its finding that the two companies had committed a violation of the TCPA. However, without
findings to support its ruling with regard to the predicate tort, we are unable to affirm the trial
court’s ruling with regard to the civil conspiracy. Accordingly, we must vacate the judgment
of the trial court on these issues and remand for further findings of fact and conclusions of
law.

E. Duty of Good Faith and Fair Dealing

In addition to its finding with regard to conspiracy, the trial court also ruled that
SecurAmerica had violated the duty of good faith and fair dealing implied in the Guaranties.

39
As explained in our SecurAmerica I:

A guaranty is a contract and is to be construed according
to the ordinary meaning of the language used and with the view
to carry out the intent of the parties. First Nat’l Bank v. Foster,
451 S.W.2d 434, 436 (Tenn. Ct. App. 1969). Guaranties are
considered special contracts under Tennessee law. SunTrust
Bank v. Dorrough, 59 S.W.3d 153, 156 (Tenn. Ct. App. 2001).
Guarantors are disfavored in Tennessee, and we will construe a
guaranty against the guarantor as strongly as the language will
permit. Id. (citing Squibb v. Smith, 948 S.W.2d 752, 755 (Tenn.
Ct. App.1997); Farmers-Peoples Bank v. Clemmer, 519 S.W.2d
801, 805 (Tenn. 1975)).

SecurAmerica I, 2011 WL 3808232, at *9.

It is well-settled in Tennessee that “‘the common law imposes a duty of good faith in
the performance of contracts.’” Dick Broadcasting Co., Inc. of Tenn. v. Oak Ridge FM, Inc.,
395 S.W.3d 653, 660 (Tenn. Jan. 17, 2013) (quoting Wallace v. Nat’l Bank of Commerce,
938 S .W.2d 684, 686 (Tenn. 1996)). Our Supreme Court has reiterated that “‘[i]t is true that
there is implied in every contract a duty of good faith and fair dealing in its performance and
enforcement, and a person is presumed to know the law.’” Dick Broadcasting, 395 S.W.3d
at 660 (citations omitted). The duty of good faith, however, does not extend beyond the terms
of the contract and the reasonable expectations of the parties under the contract. Id. at *9. The
obligation of good faith and fair dealing does not create additional contractual rights or
obligations, and it cannot be used to avoid or alter the terms of an agreement. Id.

The duty of good faith is not specifically defined by our courts. As explained in the
Tennessee Practice Series:

The term “good faith” resists an exact definition . . .
because it arises in various contexts and its meaning will vary
accordingly. Indeed, “good faith” is “a term frequently defined
in the negative,” i.e., it represents the absence of bad faith.
Another authority makes these helpful observations about the
“good faith” concept:

[G]ood faith is an “excluder.” It is a phrase
without general meaning (or meanings) of its own
and serves to exclude a wide range of

40
 heterogeneous forms of bad faith. In a particular
context the phrase takes on specific meaning, but
usually this is only by way of contrast with the
specific form of bad faith actually or
hypothetically ruled out.

Notwithstanding this uncertainty over the exact nature of “good
faith,” parties are presumed to know the law and that the contract
contains this implied duty.
The implied covenant of good faith and fair dealing is not
limited to the specific contract terms but is a method of
effectuating the parties’ intent in unforeseen circumstances.
Further, a party may violate the covenant when it interprets the
contract purposely in a way to prevent the other party from
performing in a timely fashion or when a party conjures up a
pretended dispute with its interpretation.

21 Tenn. Prac. Contract Law and Practice § 8:33 (footnotes omitted). The Tennessee Court
of Appeals, in Winfree v. Educators Credit Union, 900 S.W.2d 285 (Tenn. Ct. App. 1995),
relied on American Jurisprudence, Second Edition, on Contracts, to define the parameters of
the duty of good faith. According to Winfree:

[T]here is an implied undertaking in every contract on the part of
each party that he will not intentionally or purposely do anything
. . . which will have the effect of destroying or injuring the right
of the other party to receive the fruits of the contract. Ordinarily
if one exacts a promise from another to perform an act, the law
implies a counterpromise against arbitrary or unreasonable
conduct on the part of the promisee. However, essential terms of
a contract on which the minds of the parties have not met cannot
be supplied by the implication of good faith and fair dealing.

Winfree, 900 S.W.2d at 289 (quoting 7 Am.Jur.2d Contracts § 256 (1964) (footnotes
omitted)). While the above quote seems to suggest that intentional or purposeful conduct is
required to breach the duty of good faith, other Tennessee Courts have noted that mere
“inaction” may suffice to breach the implied duty. See, e.g., Vraney v. Medical Specialty
Clinic, P.C., 2013 WL 4806902, at *31 (Tenn. Ct. App. Sept. 9, 2013) (“‘[B]ad faith may be
overt or may consist of inaction, and fair dealing may require more than honesty,’ and bad
faith can include ‘failure to cooperate in the other party’s performance.’”) (citing Restatement
(Second) of Contracts § 205 cmt.d (1981)). Tennessee Supreme Court Justice William C.

41
Koch, however, has cautioned against a broad definition of good faith in circumstances
involving arms-length commercial transactions, like the one in this case:

The courts should tread cautiously when asked to
recognize and enforce implied obligations that are not reflected
in a written contract. The freedom to contract is “a vital aspect of
personal liberty” [quoting Steven W. Feldman, Tennessee
Practice: Contract Law and Practice § 7:1, at 728 (2006)
(hereinafter, “Feldman, Contract Law and Practice”)] that
ensures the right of competent persons to enter into contracts or
to decline to do so, as long as the contract is not illegal or against
public policy. ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183
S.W.3d 1, 26 (Tenn. Ct. App. 2005) (quoting McCall v. Carlson,
63 Nev. 390, 172 P.2d 171, 187 (1946)). It also ensures that
contracting parties have “the right and power to construct their
own bargains.” Planters Gin Co. v. Federal Compress &
Warehouse Co., 78 S.W.3d 885, 892 (Tenn.2002) (quoting Blake
D. Morant, Contracts Limiting Liability: A Paradox with Tacit
Solutions, 69 Tul. L.Rev. 715, 716 (1995)).
The courts should “not lightly . . . interfere with [the]
freedom of contract.” McKay v. Louisville & Nashville R.R., 133
Tenn. 590, 600, 182 S.W. 874, 876 (1916) (quoting Baltimore &
Ohio Sw. Ry. v. Voigt, 176 U.S. 498, 506, 20 S.Ct. 385, 44 L.Ed.
560 (1900)). “In an arm’s length [commercial] transaction, the
parties’ freedom to contract is an important right that must be
jealously guarded . . . from unnecessary intervention by the
courts.” Potomac Leasing Co. v. Chuck’s Pub, Inc., 156
Ill.App.3d 755, 109 Ill.Dec. 90, 509 N.E.2d 751, 754 (1987); see
also 21 Feldman, Contract Law and Practice § 8:4, at 861; Friedrich Kessler & Edith Fine,
Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative
Study, 77 Harv. L.Rev. 401, 449 (1964). Accordingly, the courts should decline “to make a
new contract for parties who have spoken for themselves.” Smithart v. John Hancock Mut.
Life Ins. Co., 167 Tenn. 513, 525, 71 S.W.2d 1059, 1063 (1934). In the absence of fraud or
mistake, the courts should construe unambiguous written contracts as they find them. Ellis v.
Pauline S. Sprouse Residuary Trust, 280 S.W.3d 806, 814 (Tenn.2009).
Questions involving the scope and application of the
implied duty of good faith and fair dealing are far from settled.
. . . [T]he implied duty of good faith and fair dealing and
fiduciary duty are “variations on a theme” in that “[b]oth are
judicially imposed loyalty obligations designed to attack the

42
potential for opportunism in relationships.”[D. Gordon Smith,
The Critical Resource Theory of Fiduciary Duty, 55 Vand.
L.Rev. 1399, 1489, 1487–88 (2002).] However, absent
extraordinary circumstances, parties dealing at arm’s length in a
commercial transaction lack the sort of relationship of trust and
confidence that gives rise to a fiduciary relationship. Henneberry
v. Sumitomo Corp. of Am., 415 F.Supp.2d 423, 441
(S.D.N.Y.2006) (quoting National Westminster Bank, U.S.A. v.
Ross, 130 B.R. 656, 679 (S.D.N.Y.1991)); EBC I, Inc. v.
Goldman Sachs & Co., 5 N.Y.3d 11, 799 N.Y.S.2d 170, 832
N.E.2d 26, 31 (2005); see also Cude v. Couch, 588 S.W.2d 554,
557–58 (Tenn.1979) (Henry, J., dissenting) (quoting Meinhard
v. Salmon, 249 N.Y. 458, 164 N.E. 545, 546 (1928) (stating that
“[m]any forms of conduct permissible in a workaday world for
those acting at arm’s length, are forbidden to those bound by
fiduciary ties”)). Accordingly, the implied duty of good faith and
fair dealing, in the context of commercial transactions, is
“weaker” than the duty owed by fiduciaries because it “qualifies
rather than negates the assumption of selfishness that applies to
a contract.” Smith, 55 Vand. L.Rev. at 1488–89 & n.382.
The conduct of sophisticated parties engaged in
commercial transactions is dictated by the “impersonal laws of
the marketplace” [quoting Brunswick Hills Racquet Club, Inc.
v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 864 A.2d 387,
389 (2005),] and the demands of “practical business exigency.”
[quoting Marietta Fertilizer Co. v. Beckwith, 61 S.E. at 150.]
Parties engaged in a commercial transaction pursue their own
self-interest and understand and expect that the parties with
whom they are dealing are doing likewise. See Brunswick Hills
Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 864 A.2d
at 389; Strongsville Bd. of Educ. v. Cuyahoga Cnty. Bd. of
Revision, 112 Ohio St.3d 309, 2007-Ohio-6, 859 N.E.2d 540, at
¶ 13; 3 Dan B. Dobbs et al., The Law of Torts § 697 (2d
ed.2011); Agasha Mugasha, Evolving Standards of Conduct
(Fiduciary Duty, Good Faith and Reasonableness) and
Commercial Certainty in Multi–Lender Contracts, 45 Wayne
L.Rev. 1789, 1824 (2000); Tory A. Weigand, The Duty of Good
Faith and Fair Dealing in Commercial Contracts in
Massachusetts, 88 Mass. L.Rev. 174, 184 (2004).
The courts should be cautious about imposing a set of

43
morals on the commercial marketplace. See Brunswick Hills
Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 864 A.2d
at 399. Care must be taken to avoid overly broad applications of
the implied duty of good faith and fair dealing that could
“frustrate the policy interest in freedom of contract and
undermine the parties’ legitimate efforts to contractually
determine their obligations.” Sandra K. Miller, Legal Realism,
the LLC, and a Balanced Approach to the Implied Covenant of
Good Faith and Fair Dealing, 45 Wake Forest L.Rev. 729, 740
(2010). . . .

* * *

The scope of claims for breach of the implied duty of
good faith and fair dealing should be defined in a way that avoids
overly broad claims that could undermine the freedom of
commercial parties to contract as they see fit. In this context,
“good faith is best understood as the absence of bad faith.”
Smith, 55 Vand. L.Rev. at 1489; see Landry v. Spitz, 102
Conn.App. 34, 925 A.2d 334, 342 (2007); Continental Ins. Co.
v. Rutledge & Co., 750 A.2d 1219, 1234 (Del. Ch. 2000).
Construing the Uniform Commercial Code’s “obligation of good
faith,” the Court of Appeals noted that “[g]ood faith imposes ‘an
honest intention to abstain from taking any unconscientious
advantage of another, even through the forms and technicalities
of the law.’ ” Huntington Nat’l Bank v. Hooker, 840 S.W.2d
916, 926 (Tenn. Ct. App. 1991) (quoting Lane v. John Deere
Co., 767 S.W.2d 138, 140 (Tenn.1989)).
Bad faith has been defined in various ways. This Court
has construed “bad faith” as “actions in knowing or reckless
disregard of . . . contractual rights.” Glazer v. First Am. Nat’l
Bank, 930 S.W.2d 546, 549–50 (Tenn. 1996). Several courts,
addressing the scope of breach of the implied duty of good faith
and fair dealing claims have held that a showing of “bad motive
or intention” is a necessary element of the claim. Kolbe v. BAC
Home Loans Servicing, LP, 695 F.3d 111, 123 (1st Cir. 2012)
(quoting Brunswick Hills Racquet Club, Inc. v. Route 18
Shopping Ctr. Assocs., 864 A.2d at 396); Targus Grp. Int’l, Inc.
v. Sherman, 76 Mass.App.Ct. 421, 922 N.E.2d 841, 853 (2010)
(citation omitted) (stating that bad faith conduct implicates “a

44
 dishonest purpose, consciousness of wrong, or ill will in the
nature of fraud”); Limbert v. Mississippi Univ. for Women
Alumnae Ass’n, 998 So.2d 993, 998 (Miss.2008) (citation
omitted) (stating that “ ‘bad faith’ implies some conscious
wrongdoing ‘because of dishonest purpose or moral obliquity’ ”).
Thus, in this context, “bad faith” is not simply bad
judgment or negligence. Borzillo v. Borzillo, 259 N.J.Super. 286,
612 A.2d 958, 961 (Ch. Div.1992). It involves a dishonest
purpose. Landry v. Spitz, 925 A.2d at 342. In general, “[b]ad
faith . . . implies both actual or constructive fraud, or a design to
mislead or deceive another, or a neglect or refusal to fulfill some
duty or some contractual obligation, not prompted by an honest
mistake as to one’s rights or duties, but by some interested or
sinister motive.” Keller v. Beckenstein, 117 Conn.App. 550, 979
A.2d 1055, 1063–64 (2009). The Supreme Court of Montana has
likewise held that the implied duty of good faith and fair dealing
is breached “[w]hen one party uses discretion conferred by the
contract to act [dishonestly] or to act outside of accepted
commercial practices to deprive the other party of the benefit of
the contract.” Marshall v. State, 253 Mont. 23, 830 P.2d 1250,
1251 (1992).

Dick Broadcasting Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 673–75
(Tenn. Jan. 17, 2013) (Koch, J., concurring).

As discussed above, the duty of good faith is based on the reasonable expectations of
the parties based on the terms of the contract. Accordingly, before the trial court could have
found a violation of the duty of good faith, the trial court must have first determined what
constituted the agreement between the parties, including which documents were to be
considered. Accordingly, we begin with that question.

1. The Parties’ Agreement

The trial court made no express findings as to the parties’ reasonable expectations in
this case, nor did the trial court make any findings as to which documents in the record
represented the agreement of the parties. The interpretation of a contract is a question of law.
Guiliano v. CLEO, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). Therefore, the trial court’s
interpretation of a contractual document is not entitled to a presumption of correctness on
appeal. Angus v. Western Heritage Ins. Co., 48 S.W.3d 728, 730 (Tenn. Ct. App. 2000). The
Tennessee Supreme Court discussed the court’s role in interpreting contracts in Maggart v.

45
Almany Realtors, Inc., 259 S.W.3d 700 (Tenn. 2008), stating:

“The cardinal rule for interpretation of contracts is to
ascertain the intention of the parties and to give effect to that
intention, consistent with legal principles.” Bob Pearsall Motors,
Inc. v. Regal Chrysler–Plymouth, Inc., 521 S.W.2d 578, 580
(Tenn. 1975); see also Christenberry [v. Tipton], 160 S.W.3d
[487,] 494 [(Tenn. 2005)]. If the language of the contract is clear
and unambiguous, the literal meaning controls the outcome of the
dispute. Planters Gin Co. v. Fed. Compress & Warehouse Co.,
78 S.W.3d 885, 890 (Tenn. 2002). In such a case, the contract is
interpreted according to its plain terms as written, and the
language used is taken in its “plain, ordinary, and popular sense.”
Bob Pearsall Motors, Inc., 521 S.W.2d at 580; Planters Gin Co.,
78 S.W.3d at 890. The interpretation should be one that gives
reasonable meaning to all of the provisions of the agreement,
without rendering portions of it neutralized or without effect. See
Davidson v. Davidson, 916 S.W.2d 918 922–23 (Tenn. Ct. App.
1995). The entire written agreement must be considered. D. & E.
Const. Co. v. Robert J. Denley Co., 38 S.W.3d 513, 518–19
(Tenn. 2001).

In construing a contract, the entire contract
should be considered in determining the meaning
of any or all of its parts. It is the universal rule that
a contract must be viewed from beginning to end
and all its terms must pass in review, for one
clause may modify, limit or illuminate another.

Cocke County Bd. of Highway Comm’rs v. Newport Utils. Bd.,
690 S.W.2d 231, 237 (Tenn.1985) (internal citations omitted).

Maggart, 259 S.W.3d at 703–04.

The Appellees, in their brief, argue that the parties intended the loan from
SecurAmerica to Southland Transportation to be, at all times, secured by appropriate
collateral, as evidenced by unfalsified borrowing base certificates. To support this contention,
the Appellees argue that the terms of the Guaranties and the Credit Agreement must be
construed as a whole. As explained by the Tennessee Supreme Court:

46
 Other writings, or matters contained therein, which are
referred to in a written contract may be regarded as incorporated
by reference as a part of the contract and therefore, may be
properly considered in the construction of the contract. Where a
written contract refers to another instrument and makes the terms
and conditions of such other instrument a part of it, the two will
be construed together as the agreement of the parties.
Construing contemporaneous instruments together means
simply that if there are any provisions in one instrument limiting,
explaining, or otherwise affecting the provisions of another, they
will be given effect as between the parties themselves And all
persons charged with notice so that the intent of the parties may
be carried out and the whole agreement actually made may be
effectuated.

McCall v. Towne Square, Inc., 503 S.W.2d 180, 183 (Tenn. 1973) (quoting 17 Am.Jur.2d,
Contracts §§ 263–65); see also 11 Williston on Contracts § 30:25 (4th ed.) (“Generally, all
writings which are part of the same transaction are interpreted together.”).

SecurAmerica, in contrast, argues that because the Appellees are no longer parties to
the Credit Agreement by virtue of the sale of Southland Transportation, the trial court may
only consider the Guaranty agreements in determining whether SecurAmerica breached the
duty of good faith. Because the trial court did not find a violation of any specific duty
pursuant to the Guaranties, SecurAmerica argues that the trial court erred in finding a
violation of the duty of good faith.

On the first point, we must agree with the Appellees. The Credit Agreement and
Individual Guaranties in this case were clearly “part of the same transaction.” See 11 Williston
on Contracts § 30:25. Indeed, the parties do not dispute this Court’s prior characterization
that the Appellees were required to enter into the Guaranties “[a]s a condition to lending
money to Southland Transportation.” Additionally, the Credit Agreement specifically
references the Individual Guaranties and provides that the Credit Agreement, as well as the
other attached documents, such as the Guaranties, represent the agreement of the parties.
Finally, the Guaranties also make specific reference to the Credit Agreement: the Guaranties
state that the terms used in the Guaranties will be defined using the glossary contained in the
Credit Agreement. See McCall, 503 S.W.2d at 183. Under these circumstances, we conclude
that the trial court was required to construe the Credit Agreement and the Guaranties together.

In a somewhat similar case to the case-at-bar, two companies entered into an agreement
to develop a subdivision. Robert J. Denley Co., Inc. v. Neal Smith Const. Co., Inc., No.

47
W2006-00629-COA-R3-CV, 2007 WL 1153121 (Tenn. Ct. App. 2007). The parties signed
a form agreement that incorporated by reference an agreement to arbitrate contained on
another document. The facts were undisputed that the parties never discussed an agreement
to arbitrate and never executed the document containing the arbitration clause. When a dispute
arose, the plaintiff filed suit. Eventually, the defendant filed a motion to compel arbitration.
The plaintiff argued that it had never signed any document requiring arbitration and that any
document referenced in the contract to that affect was not binding, as there was no meeting
of the minds on that term. Id. at *1. The trial court denied the motion and the defendant
appealed. Id. at *2. The Court of Appeals reversed, holding that the parties had entered into
an agreement to arbitrate. Id. at *3–4. The Court reasoned that because the agreement to
arbitrate was incorporated by reference in the parties’ agreement, “the two instruments are
construed together as the agreement between the parties.” Id. at *4 (citing T.R. Mills
Contractors, Inc. v. WRH Enters., LLC, 93 S.W.3d 861, 870 (Tenn. Ct. App. 2002)). Thus,
the agreement to arbitrate was binding on both parties.

In another case, Hall v. Tennessee Workers Credit Union, 2002 WL 31728875 (Tenn.
Ct. App. Dec. 5, 2002), this Court considered whether a deed of trust, promissory note, and
credit agreement should be construed together, even though the credit agreement was signed
several years prior to the execution of the other documents. In concluding that they should be
construed together, the Court noted:

The terms of separate agreements forming integral parts
of a single transaction may be considered together. Where several
documents are integral parts of the same transaction, we will
construe each of them in light of the other documents
memorializing the transaction. McCall v. Towne Square, Inc.[,]
503 S.W.2d 180, 182–83 (Tenn. 1973); Oman Constr. Co. v.
Tennessee Cent. Ry., 212 Tenn. 556, 573-74, 370 S.W.2d 563,
570-71 (1963); The Realty Shop, Inc. v. RR Westminster
Holding, Inc., 7 S.W.3d 581, 599 (Tenn. Ct. App. 1999); Stovall
v. Dattel, 619 S.W.2d 125, 127 (Tenn. Ct. App. 1981)

Hall, 2002 WL 31728875, at *7. The Court first noted that the documents signed by the
plaintiffs specifically incorporated the earlier credit agreement. The Court, thus, concluded
that the earlier credit agreement, deed of trust, and promissory note were integral parts of the
same transaction. In Hall, the earlier credit agreement provided that the loan could be
accelerated for default. The deed of trust conveying the real property provided that failure to
pay insurance and taxes was an event of default. Because the contracts were construed
together, the Court concluded the creditor was entitled to utilize the credit agreement
acceleration clause when an event of default occurred under the deed of trust. Thus, the terms

48
of all the agreements were construed as one.

Although we recognize that other Courts have come to different conclusions, we note
that these decisions have focused on the fact that the two contracts at issue did not specifically
reference the other. For example in Saeedpour v. Virtual Medical Solutions, LLC, 2013 WL
1400616 (Tenn. Ct. App. April 5, 2013), this Court held that a Purchase Agreement and a
Money Back Guarantee were not to be construed together. The Court reasoned:

Neither agreement, however, refers to the other or incorporates
the other by reference. No language within either agreement
indicates that the parties intended for the agreements to be
construed together. To the contrary, the language of the Purchase
Agreement states:

14. ENTIRE AGREEMENT

This instrument . . . constitutes the entire and only
agreement between the parties hereto . . . .

Id. at *6. Thus, there was nothing in the parties’ agreement that evinced an intent to construe
the agreements together.

The facts of this case are in favor of a finding that the documents must be construed
together. Here, the party to be held to conform to their agreement is SecurAmerica.
SecurAmerica has not argued, and indeed, cannot argue, that it was in any way uninformed
as to the contents of the Credit Agreement. Like in Denley, the Credit Agreement was
specifically referenced in the Guaranties and vice versa. Although we recognize that the
parties to the Credit Agreement and the Guaranties were different (i.e., the Appellees signed
one as representatives of a company and one as individuals), we conclude that it would be
unreasonable to hold that the Guaranties and the Credit Agreement must be construed
separately when the agreements were entered into as part of the same business transaction, one
agreement was a condition precedent to the other, there is no dispute that the parties were
fully aware of both agreements, and both contracts specifically reference the other.
Accordingly, both the Credit Agreement and the Guaranties are properly considered in order
to determine whether SecurAmerica breached the duty of good faith.

2. Breach

SecurAmerica next argues that even considering the terms of both the Credit
Agreement and the Guaranties, it did not breach the duty of good faith and fair dealing

49
because neither the Credit Agreement nor the Guaranties place any duty on SecurAmerica to
ensure the collateral was sufficient to cover the indebtedness. SecurAmerica points to the
language of the Credit Agreement, the nature of the Guaranties at issue, as well as the express
waivers contained therein. We begin first with the language of the Credit Agreement.

First, SecurAmerica argues that neither the Appellees nor the trial court can point to
any specific, express provision of the Credit Agreement that has been breached in this case.
Essentially, SecurAmerica argues that neither the Credit Agreement nor the Guaranties place
any affirmative obligation on SecurAmerica to ensure that the advances conform to the
accounts receivable. Thus, SecurAmerica contends that it did not breach any of the express
terms of the contract and, therefore, cannot be found in violation of the duty of good faith and
fair dealing. To support this contention, SecurAmerica relies on the Tennessee Court of
Appeals case of Beach Community Bank v. Labry, W2011-01583-COA-R3-CV, 2012 WL
2196174 (Tenn. Ct. App. June 15, 2012), which held that a guarantor’s failure to show breach
of a specific provision in a guaranty agreement was fatal to a claim of good faith and fair
dealing. Id. at *11. Beach Community Bank was decided under Florida law, which
specifically required that the covenant of good faith “relate to the performance of an express
term of the contract and is not an abstract and independent term of a contract which may be
asserted as a source of breach when all other terms have been performed pursuant to the
contract requirements.” Id. (quoting Ament v. One Las Olas, Ltd., 898 So.2d 147, 149 (Fla.
Dist. Ct. App. 2005)). However, the holding in Beach Community Bank is supported by
Tennessee law:

“The implied covenant does not . . . ‘create new contractual
rights or obligations, nor can it be used to circumvent or alter the
specific terms of the parties’ agreement.’”[Ike v. Quantum
Servicing Corp., No. 11-02914, 2012 WL 3727132, at *5 (W.D.
Tenn. 2012)] (quoting Goot [v. Metro. Gov’t of Nashville and
Davidson County, No. M2003-02013-COAR3-CV,] 2005 WL
3031638, at *7 [(Tenn. Ct. App. Nov.9, 2005)]). “Notably, a
breach of the implied covenant of good faith and fair dealing is
not an independent basis for relief, but rather ‘may be an element
or circumstance of recognized torts, or breaches of
contracts.’[Weese v. Wyndham Vacation Resorts, No.:
3:07–CV–433,] 2009 WL 1884058 [at *5 (E.D. Tenn. June 30,
2009)] (quoting Solomon v. First Am. Nat’l Bank of Nashville,
774 S.W.2d 935, 945 (Tenn. Ct. App. 1989)). “Thus, ‘absent a
valid claim for breach of contract, there is no cause of action for
breach of implied covenant of good faith and fair dealing.’ “ Ike,
2012 WL 3727132, at *5 (citing Envoy Corp. v. Quintiles

50
 Transnat’l Corp., No. 3:03cv0539, 2007 WL 2173365, at *8
(M.D. Tenn. July 26, 2007 (applying North Carolina law)).

Berry v. Mortgage Elec. Registration Systems, No. W2013-00474-COA-R3CV, 2013 WL
5634472, at *7 (Tenn. Ct. App. Oct. 15, 2013); see also Duke v. Browning-Ferris Industries
of Tennessee, Inc., No. W2005-00146-COA-R3-CV, 2006 WL 1491547, at *9 (Tenn. Ct.
App. May 31, 2006), perm. app. denied (Nov. 13, 2006) (holding that a breach of the duty of
good faith is merely an element of a claim for “recognized torts, or breaches of contracts”).
Thus, SecurAmerica argues that without a finding of a specific breach of contract, the trial
court should not have found a violation of the duty of good faith. We thus turn to consider
the trial court’s findings with regard to this issue.

While the trial court generally sets out the law regarding the implied duty of good faith,
in reaching the decision that the duty was breached in this case, the trial court merely states:
“This Court finds that the [Appellees’] affirmative defense alleging that SecurAmerica
violated the implied covenant of good faith and fair dealing is valid and was shown through
the testimony of [Mr.] Harrell and [Mr.] Reagan, individually and on behalf of
SecurAmerica.” Thus, the trial court fails to identify which of the provisions contained in
either the Credit Agreement or the Guaranties was not performed in good faith in this case.

The Appellees urge this Court to affirm the trial court’s judgment despite this
deficiency, pointing to the provisions in the Credit Agreement pertaining to the limits placed
on borrowing. Indeed, as discussed above, the Credit Agreement specifically provides that
advances “shall not exceed an amount . . . equal to the lesser of (A) [$1.5 million], [and] (B)
85% of Eligible Accounts[.]” The Credit Agreement goes on to state that SecurAmerica “in
the exercise of its sole discretion exercised in good faith, may establish and increase or
decrease the allowance . . . [or] impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth [previously].” Thus, it appears that the Appellees are arguing
that SecurAmerica did not exercise good faith in continuing to lend to Southland
Transportation once it was notified that the advances were in excess of 85% of the eligible
accounts receivable.

In contrast, SecurAmerica argues that the above language does not create an
affirmative duty to ensure that the advances made by SecurAmerica were sufficiently
collateralized, pointing to the nature and language of the Guaranties. First, SecurAmerica
argues that even if the above language creates a cap on the lending allowed under the Credit
Agreement, the language of the Guaranties allows SecurAmerica to depart from the lending
cap. Indeed, the Guaranties provide that:

The liability of the Guarantor under this Guaranty shall be

51
 absolute and unconditional irrespective of:

* * *

(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Liabilities, or any
amendment or waiver of any term of or any consent to departure
from the Agreement or any other Loan Document; . . . .

Further, the trial court made a specific finding that Mr. Reagan’s actions were “clearly” within
his power pursuant to the Credit Agreement. Accordingly, SecurAmerica argues that it was
at liberty to depart from the Credit Agreement and that any such departure did not constitute
a defense to the enforceability of the Guaranties.

Next, SecurAmerica directs this Court’s attention to the trial court’s finding that the
Guaranties at issue are “continuing,” unconditional, and absolute. The language of the
Guaranties specifically provides that the Appellees “unconditionally and irrevocably
guarantee[] the punctual payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all of the Liabilities.” (emphasis added). According to
SecurAmerica, “[a]n absolute and continuing guaranty may be cancelled or terminated only
as stated in the guaranty or by the acceptance of a new guaranty as a replacement for the prior
one.” First American Nat. Bank of Nashville v. Hall, 579 S.W.2d 864, 868 (Tenn. Ct. App.
1978). Thus, SecurAmerica asserts that the Guaranties are not voidable merely due to the
“erosion of the collateral or any other circumstance” not specifically stated in the Guaranties
to constitute termination of the agreements.

A continuing guaranty is one which is not limited to a particular transaction or specific
transactions, but which is intended to cover future transactions until revoked. Third Nat.
Bank in Nashville v. Friend, 626 S.W.2d 464, 647 (Tenn. Ct. App. 1981) (citing
Farmers-Peoples Bank v. Clemmer, Tenn. 1975, 519 S.W.2d 801; Mountain City Mill Co.
v. Lindsey, 8 Tenn. App. 337 (1928)). “A contract of guaranty is continuing in nature, if it
contemplates a future course of dealing during an indefinite period or is intended to cover a
series of credit transactions or to give the principal a standing credit to be used from time to
time.” 23 Williston on Contracts § 61:45 (4th ed.). American Jurisprudence further discusses
the distinction between a continuing, absolute guaranty and a conditional, limited or restricted
guaranty:

A guaranty may be either a “restricted guaranty,” which
is limited to a single transaction, or a “continuing guaranty,”
which is not limited to a single transaction but contemplates a

52
 future course of dealing encompassing a series of transactions.
The guaranty is restricted if it is limited to a single transaction or
a limited number of transactions and is not effective with regard
to transactions other than those guaranteed. A guaranty is
continuing if it contemplates a future course of dealing during an
indefinite period, or is intended to cover a series of transactions,
an overall debt, or all future obligations of the principal to the
obligee, and is frequently used in connection with a line of credit.
A continuing guaranty covers all transactions, including those
arising in the future, that are within the contemplation of the
agreement and may include subsequent indebtedness without new
consideration being given.

The determination whether a guaranty is continuing or
restricted centers on the parties' intention, as revealed by the
language of the guaranty—such as any money owed “now or at
any time hereafter” or all obligations of a company under notes
“however and whenever incurred" and”now existing or hereafter
contracted”—as construed in view of the circumstances.

38 Am. Jur. 2d Guaranty § 17. This Court previously discussed the framework to determine
whether a guaranty is continuing and absolute or conditional and limited:

The authorities generally recognize that a guaranty of
payment of a debt is materially different from a guaranty of
collection thereof, the former being regarded as absolute and the
latter as conditional. The guaranty of payment binds the
guarantor to pay the debt at maturity in the event the money has
not been paid by the principal debtor; and upon default by the
latter, the obligation of the guarantor becomes fixed.

Hassell-Hughes Lumber Co. v. Jackson, 33 Tenn.App. 477, 232 S.W.2d 325, 329 (Tenn. Ct.
App. 1949) (citing 24 Am.Jur. Guaranty § 17).

Here, SecurAmerica argues that the Guaranties at issue clearly and unequivocally state
that they are unconditional and absolute. Based on the plain language of the Guaranties, we
agree. The Appellees argue, however, that despite the fact that the Guaranties are absolute and
unconditional, the terms of the Guaranties do not create a “continuing” guaranty obligation
on the part of the Appellees. According to the Appellees, the Guaranties at issue were
intended to cover only specific transactions and, therefore, are not continuing Guaranties.

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Again, the trial court determined that the Guaranties as issue were continuing, but did not state
its reasoning in reaching that decision.

From our review of the language of the Guaranties, we conclude that the Guaranties
at issue are continuing in nature. First, the Guaranties specifically apply to “all Liabilities,”
up to a stated amount, rather than a specific transaction or series of transactions. The
Guaranties, construed together with the Credit Agreement, clearly “contemplate[] a future
course of dealing during an indefinite period.” 38 Am. Jur. 2d Guaranty § 17. Indeed, the
Guaranties and the Credit Agreement were entered into for the express purpose to provide
Southland Transportation with future advances. Finally, the Guaranties specifically state that
the Appellees “guarantee[] . . . payment” rather than merely collection. See Hassell-Hughes
Lumber, 232 S.W.2d at 329. Accordingly, the trial court did not err in concluding that the
Guaranties at issue are continuing.

Despite the trial court’s conclusion that the Guaranties are continuing, SecurAmerica
next argues that the trial court failed to consider the continuing nature of the Guaranties and
the expressed waivers contained therein in finding that SecurAmerica breached the duty of
good faith. Indeed, the trial court’s only indication of its reasoning regarding the breach of the
duty of good faith is a statement that there was a “failure to preserve collateral.” However,
impairment of collateral is specifically waived as a defense to enforcement of the Guaranties.
As previously discussed, the Guaranties contain specific waiver provisions, purporting to
waive all defenses, including defenses based on departures from the agreement, impairment
of collateral, and breach of warranty. In addition, as previously discussed, the Guaranties
contain an express provision allowing SecurAmerica to depart from the terms of the
agreement and waiving any defense based thereon. Thus, the only statements of breach noted
by the trial court in its order, impairment of collateral and departure from the Credit
Agreement, appears to have been waived by the Appellees in signing the Guaranties.

Tennessee Courts have upheld similar waivers in analogous situations. For example
in Suntrust Bank, East Tennessee, N.A. v. Dorrough, 59 S.W.3d 153 (Tenn. Ct. App. 2001),
the Tennessee Court of Appeals considered impairment of collateral as a defense to a
continuing guaranty. In Dorrough, the guarantor signed two guaranties guaranteeing “any and
all sums of money that may now, or may at anytime hereafter, be owing” by the debtor. Id.
at 155. Like the Guaranties in this case, however, the guarantor was only liable on the
guaranties up to a specific amount. Id. After the guaranties were signed, the creditor allowed
the underlying note to become “under-secured” when the debtor, with the knowledge of the
lender, released the collateral securing the underlying note. Unlike in this case, the guaranties
at issue contained no express waiver of impairment of collateral. Regardless, the Court of
Appeals ruled that the guarantor waived impairment of collateral as a defense to liability
under the guaranties:

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 As a general rule, the surrender or release by a creditor
without the consent of the guarantor of any security held at the
time when the debt is guaranteed will operate to discharge the
guarantor. Ottenheimer Publishers, Inc. v. Regal Publishers,
Inc., 626 S.W.2d 276, 279 (Tenn. Ct. App. 1981). A necessary
component of this rule is that the guarantor must not consent to
the release of the collateral. Id. The burden is on the creditor to
show that the guarantor consented to the release of the collateral,
and that consent is normally manifest in the note itself. Id. at 280.

* * *

There is a recognized exception to the general rule of
discharge upon release of collateral where the debtor has
consented to the release. See Ottenheimer Publishers, p. 280. In
FDIC v. Associated Nursery Systems, 948 F.2d 233, 240 (6th
Cir.1991), the Court found that even though the guarantor had no
prior notice of the sale of certain assets, the guarantor had
consented to the release of collateral through his signing of the
continuing guaranty agreement.

* * *

While the guaranties do not contain specific language consenting
to the release of collateral, they implicitly consent to such
changes by the fact that it is a continuing guaranty securing all
debts owing to the [creditor].

Dorrough, 59 S.W.3d at 156–57. The Dorrough Court explained that its holding was based
on the nature of a continuing guaranty:

The reason lies in the distinction between a continuing
guaranty and a specific or limited guaranty. A guarantor who
guarantees a specific note, which is also secured by collateral, is
responsible solely for that note. When he becomes a guarantor,
his obligations are tied up with the specific note and his
agreement to become a guarantor might hinge upon the fact that
the note is secured by collateral. Thus, the potential risk of a
guarantor on a particular note may not be altered by the
unjustifiable impairment of the collateral by the creditor.

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 The circumstances of a continuing guarantor are far
different, however. A continuing guarantor does not guarantee a
particular note, but rather guarantees an overall indebtedness. A
continuing guarantor is thus obliged to pay the debts of the
defaulting principal whether those debts are secured by collateral
or not. In short, a continuing guarantor cannot rely on the
presence of collateral securing a particular note, absent a specific
provision providing that the collateral secures all notes. See
Union Planters Nat’l Bank of Memphis v. Markowitz, 468
F.Supp. 529, 535 (W.D. Tenn. 1979). As long as the continuing
guaranty in this case was in effect, nothing prevented Toyota of
Morristown from incurring new debts to plaintiff secured by no
collateral whatever. Under these circumstances, the fact that the
note in question was secured by collateral was largely fortuitous
from the point of view of the continuing guarantor.
[The guarantor] claims that in signing the guaranty
agreements, he relied upon the existence of collateral securing
the debt and upon certain statements made by the Bank regarding
the collateral. While the cardinal rule in the construction of
contracts is to ascertain the intention of the parties, Frizzell
Construction Co., Inc. v. Gatlinburg, L.L.C., 9 S.W.3d 79, 85
(Tenn. 1999), where the contract is plain and unambiguous, the
Court’s function is to interpret the contract as written according
to its plain terms. Bradson Mercantile, Inc. v. Crabtree, 1
S.W.3d 648, 652 (Tenn. Ct. App.1999). Accordingly, [the
guarantor] cannot be relieved from his written obligation because
of an unfortunate and erroneous assumption.
Where the guaranty is a continuing guaranty, there is no
obligation to give notice to the guarantor that new obligations are
being incurred for which the guarantor will be liable, absent a
contractual undertaking to do so. See Third National Bank in
Nashville v. Friend, 626 S.W.2d 464 (Tenn. Ct. App. 1981). As
the Court in Friend stated:

This Court is not entirely comfortable with the
present state of the law as to continuing guaranties.
However, it is part of the law of contracts which
allows great freedom and latitude in the contracts
which may be made by the parties, but places upon
the parties a heavy burden to minutely examine

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 and understand what they sign.

626 S.W.2d at 467.

Dorrough, 59 S.W.3d at 157–58.

In this case, we have not only held that the Guaranties at issue are continuing
guaranties like in Dorrough, but unlike in Dorrough, the Guaranties signed by the Appellees
contain an express and unequivocal waiver of impairment of collateral. This waiver is clearly
valid, based on the holding in Dorrough; however, the trial court does not appear to have
considered the waiver in reaching its decision.

The Appellees argue, however, that regardless of the waiver of impairment of
collateral, the duty of good faith “cannot be avoided unless the parties explicitly state their
intention to do so.” See Dick Broadcasting Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395
S.W.3d 653, 660 (Tenn. Jan. 17, 2013) (“To avoid the imposition of the implied covenant of
good faith and fair dealing, the parties must explicitly state their intention to do so.”) (citing
17A C.J.S. Contracts § 437 (2011)). It is undisputed that the Guaranties do not include an
express waiver of the duty of good faith, and indeed, expressly require that some obligations
be performed in good faith. However, as previously discussed, a breach of the duty of good
faith must relate to an obligation expressly contained in the contract. These obligations may
be disclaimed. Indeed, this Court has previously indicated that when considering liability
under a continuing, absolute guaranty with express waiver provisions, like the Guaranties in
this case, a lack of good faith in failing to inform the guarantor of financial issues affecting
the collectability of the debt may not be sufficient to avoid liability, absent conspiracy or
fraud. As we explained in SecurAmerica I:

In Transouth Mortgage Corp. v. Keith, 1985 WL 4677 (Tenn.
Ct. App. Dec. 24. 1985), this Court reviewed a judgment based
upon a guaranty. The defendant in Transouth executed a
personal guaranty in favor of the plaintiff bank guaranteeing an
auto dealer’s debt. Id. at * 1. The auto dealer defaulted, and the
bank sued the guarantor. Id. The guarantor counterclaimed
fraudulent concealment, alleging that the bank had a duty to
inform the guarantor of the debtor’s financial difficulties prior to
the guaranty and “to notify the defendant when the plaintiff knew
or should have known that [the debtor] was floor planning the
same vehicle more than once, had sold some vehicles out of trust,
and had written checks that bounced.” Id. at *3. We stated:

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 [A]bsent a conspiracy which is not alleged, we
hold that unless the guaranty agreement provides
otherwise, there is no duty on the party to whom
the guaranty is directed to notify the guarantor of
the business practices or financial difficulties of
the party whose performance is being guaranteed,
whether such practices occurred prior to the
execution or during the term of the guaranty and
whether such activities were known or should have
been known by the party guaranteed. To hold
otherwise would make one party the de facto
guardian of the other. Certainly in business
practices one is required to act fairly and in good
faith. See T.C.A. § 47-1-203. However, “fairly”
does not mean hold the other’s hand, and guide
and properly advise him through the transaction.
This is especially so when such tender care is not
requested and the pleadings do not reveal such
request. Absent a trust relationship or fraud,
contracting parties are charged with the duty of
looking out for themselves.

Transouth, 1985 WL 4677, at *3 (emphases added); see also
Walker v. First State Bank, 849 S.W.2d 337, 342 (Tenn. Ct.
App. 1992) (noting, in a case with similar facts and result, that
the guarantor had not plead that a conspiracy existed between the
creditor and the debtor).

SecurAmerica I, 2011 WL 3808232, at *10–*11 (footnote omitted).

Thus, the Court in Transouth held that although the duty of good faith and fair dealing
is implied in guaranty contracts, the duty does not extend to require a creditor to whom a
guaranty is made to notify the guarantor of the financial difficulties of the borrower, absent
conspiracy or fraud. We have previously determined that the trial court did not err in declining
to find fraud in this case. We have further held that the trial court must make additional
findings of fact to support its TCPA claim. Without a finding of a violation of the TCPA,
there can be no conspiracy. See Foster Business Park, 2009 WL 113242, at *16. Further,
without a finding of conspiracy, under the holding in Transouth, it appears that there can be
no avoidance of the obligations of the Guaranties.

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 Here, the trial court failed to make any findings as to what terms of either the Credit
Agreement or the Guaranties were breached in holding that SecurAmerica breached the duty
of good faith and fair dealing. In addition, the trial court failed to consider how either the
continuing nature of the Guaranties or the express waivers contained therein affected the
obligations of the parties in this case, nor did the trial court consider this Court’s previous
holding in Transouth. The question of whether a party materially breached an agreement is
question of fact for the trier of fact. Carter v. Krueger, 916 S.W.2d 932, 934–35 (Tenn. Ct.
App. 1995). The trial court’s ruling on this issue is, thus, entitled to a presumption of
correctness on appeal. Tenn. R. App. P. 13(d); Wood v. Starko, 197 S.W.3d 255, 257 (Tenn.
Ct. App. 2000). In light of the fact that we have vacated and remanded to the trial court to
make appropriate findings to support its decision with regard to the Appellees’ TCPA claim,
we think it prudent to also remand this issue to the trial court for appropriate findings, taking
into consideration the above considerations. All other issues are pretermitted.

V. Conclusion

The judgment of the Circuit Court of Shelby County is affirmed in part, vacated in part,
and remanded to the trial court for further proceedings, which are necessary and consistent
with this Opinion. Costs of this appeal are taxed one-half to Appellant SecurAmerica Business
Credit, and its surety, and one-half to Appellees Karl Schledwitz and Terry Lynch, for all of
which execution may issue if necessary.

_________________________________
J. STEVEN STAFFORD, JUDGE

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