Terry K. King v. Stephen S. Kelly

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
May 17, 2016 Session

TERRY K. KING, ET AL. v. STEPHEN S. KELLY

Appeal from the Circuit Court for Davidson County
No. 14C3764 Kelvin D. Jones, Judge

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No. M2015-02376-COA-R3-CV – Filed June 28, 2016
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Plaintiffs appeal from the trial court‟s order denying their motion to enforce two offers
of judgment offered serially by the defendant. Because the trial court improperly certified its
judgment as final pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure, we
dismiss this appeal for lack of subject matter jurisdiction.

Tenn. R. App. P. 3 Appeal as of Right; Appeal Dismissed

J. STEVEN STAFFORD, P.J., W.S., delivered the opinion of the Court, in which ANDY D.
BENNETT and BRANDON O. GIBSON, JJ., joined.

H. Anthony Duncan, Nashville, Tennessee, for the appellants, Terry K. King, and Roger A.
King.

C. Benton Patton and Christopher M. Jones, Nashville, Tennessee, for the appellee, Stephen
S. Kelly.

OPINION

Background
On September 8, 2014, Plaintiffs/Appellants Terry K. King (“Ms. King”) and Roger
A. King (“Mr. King,” and together with Ms. King, “Appellants”) filed a personal injury
lawsuit against Defendant/Appellee Stephen S. Kelly (“Appellee”). The complaint alleged
that Appellee was negligently operating his vehicle when he rear-ended Ms. King‟s
automobile on October 28, 2013, causing her injuries. Appellants sought a total of
$350,000.00 in damages for medical expenses, loss of earning capacity, pain and suffering,
loss of enjoyment of life, permanent injury and loss of consortium. Appellee filed an answer
on September 7, 2014, raising the affirmative defense of comparative negligence and denying
that Appellants were entitled to any relief.

On October 16, 2015, Appellee‟s counsel emailed counsel for Appellants with an offer
of settlement in the amount of $7,195.00. On the same day, Appellee‟s counsel also mailed
an offer of judgment pursuant to Rule 68 of the Tennessee Rules of Civil Procedure1 in the
same amount to Appellants. According to a later affidavit filed by Appellee‟s counsel, she
and counsel for Plaintiffs engaged in negotiations in which Appellants made a demand of
$19,995.00. In response, on October 19, 2015, Appellee‟s counsel then made another offer
of judgment in the amount of $8,000.00. On October 23, 2015, Appellants filed a notice in
the trial court of their acceptance of the two offers of judgment for a combined award of
$15,195.00. On October 26, 2015, Appellee filed a motion to stay the entry of judgment and
instead, to enforce the first offer of judgment in the amount of $7,195.00.

The trial court held a hearing on November 13, 2015. At the hearing, Appellants
argued that based upon our holding in McGinnis v. Cox, 465 S.W.3d 157 (Tenn. Ct. App.
2014), the first offer of judgment could not be revoked by the Appellee within the ten-day
period for acceptance. Because Appellants accepted both offers of judgment within ten days
of their initial offer, Appellants contended that both offers were valid and that they were
entitled to accept both offers for a combined judgment of $15,195.00. In contrast, Appellee
asserted that in responding to the first offer of judgment with a demand for $19,995.00, the
first offer had in fact been rejected by the Appellants, leaving Appellee free to make another
offer of judgment. Appellee further asserted that McGinnis indicated that good cause could
be utilized to revoke an offer of judgment; Appellee thus argued that his counsel‟s mistaken
belief that the first offer had been rejected was sufficient good cause to allow revocation.
1
Rule 68 provides:

At any time more than 10 days before the trial begins, a party
defending against a claim may serve upon the adverse party an offer to allow
judgment to be taken against the defending party for the money or property,
or to the effect specified in the offer, with costs then accrued. Likewise a
party prosecuting a claim may serve upon the adverse party an offer to allow
judgment to be taken against that adverse party for the money or property or
to the effect specified in the offer with costs then accrued. If within 10 days
after service of the offer the adverse party serves written notice that the offer
is accepted, either party may file the offer and notice of acceptance, together
with proof of service thereof, with the court and thereupon judgment shall be
rendered accordingly. An offer not accepted shall be deemed withdrawn and
evidence thereof is not admissible except in a proceeding to determine costs.
If the judgment finally obtained by the offeree is not more favorable than the
offer, the offeree shall pay all costs accruing after the making of the offer.
The fact that an offer is made but not accepted does not preclude a
subsequent offer.
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 On November 24, 2015, the trial court entered an order finding that the McGinnis
case was distinguishable because it did not involve the particular situation presented in the
case-at-bar. The trial court therefore ruled that Appellants were not entitled to combine both
offers of judgment. The trial court also denied Appellee‟s motion to enforce the first offer of
judgment. Instead, the trial court ruled that Appellants “may elect to accept” either the first
offer of judgment in the amount of $7,195.00, or the second offer of judgment in the amount
of $8,000.00. The trial court further found that there was no just reason for delay and directed
that a final judgment be entered pursuant to Rule 54.02 of the Tennessee Rules of Civil
Procedure. Appellants immediately appealed to this Court.

Discussion

Appellants raise only one issue in this appeal: “Whether the trial court erred in failing
to render judgment upon two irrevocable offers of judgment made under Rule 68 after
Appellants simultaneously accepted both offers?” In addition to this issue, Appellee argues
that the trial court‟s decision to certify its judgment as final was not proper under Rule 54.02
of the Tennessee Rules of Civil Procedure and that therefore this Court lacks subject matter
jurisdiction to consider this appeal. Because our ability to rule on Appellants‟ substantive
issue is predicated on this Court having subject matter jurisdiction over this appeal, we begin
with Appellee‟s contention that we lack subject matter jurisdiction due to the lack of a final
judgment.

This Court “cannot exercise jurisdictional powers that have not been conferred
directly to [us] expressly or by necessary implication.” Tennessee Envtl. Council v. Water
Quality Control Bd., 250 S.W.3d 44, 55 (Tenn. Ct. App. 2007) (citations omitted). Our
subject matter jurisdiction is limited to final judgments except where otherwise provided by
procedural rule or statute. Bayberry Assocs. v. Jones, 783 S.W.2d 553, 559 (Tenn. 1990)
(citing Aetna Cas. & Sur. Co. v. Miller, 491 S.W.2d 85, 86 (Tenn. 1973)). An order that
adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties is
typically not a final judgment that is appealable as of right. See Tenn. R. App. P. 3(a). Rule
3(a) of the Tennessee Rules of Appellate Procedure nevertheless permits parties to appeal an
order that does not adjudicate all of the claims, rights, and liabilities of all parties if the trial
court certifies its judgment as final pursuant to Rule 54.02 of the Tennessee Rules of Civil
Procedure. Rule 54.02 provides:

When more than one claim for relief is present in an action,
whether as a claim, counterclaim, cross-claim, or third party
claim, or when multiple parties are involved, the Court, whether
at law or in equity, may direct the entry of a final judgment as to
one or more but fewer than all of the claims or parties only upon
an express determination that there is no just reason for delay
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 and upon an express direction for the entry of judgment. In the
absence of such determination and direction, any order or other
form of decision, however designated, that adjudicates fewer
than all the claims or the rights and liabilities of fewer than all
the parties shall not terminate the action as to any of the claims
or parties, and the order or other form of decision is subject to
revision at any time before the entry of the judgment
adjudicating all the claims and the rights and liabilities of all the
parties.

Tenn. R. Civ. P. 54.02.

As this Court explained:

Rule 54.02 creates two prerequisites to the certification of final
judgment: (1) the order must eliminate one or more but fewer
than all of the claims or parties, Bayberry, 783 S.W.2d at 558,
and (2) the order must expressly direct the entry of final
judgment upon an express finding of “no just reason for delay,”
Fox v. Fox, 657 S.W.2d 747, 749 (Tenn. 1983). If the trial court
certifies a judgment that is not conclusive as to “one or more but
less than all of the claims in the action or the rights and
liabilities of one or more parties, an appeal from it will be
dismissed, even though the trial court decided to treat the order
as final.” 10 Charles Alan Wright et al., Federal Practice and
Procedure § 2655 & n. 8 (3d ed.1998) (collecting cases).
Similarly, an appeal will be dismissed if this Court determines
that a certified judgment does not contain the requisite express
findings, Fagg v. Hutch Manufacturing Co., 755 S.W.2d 446,
447 (Tenn. 1988) (citation omitted), or improperly holds that
“no just reason for delay” exists, Huntington National Bank v.
Hooker, 840 S.W.2d 916, 922 (Tenn. Ct. App. 1991).

Carr v. Valinezhad, No. M2009-00634-COA-R3-CV, 2010 WL 1633467, at *2 (Tenn. Ct.
App. Apr. 22, 2010).

We review the question of whether a trial court properly certified a judgment as final
under a dual standard. Carr, 2010 WL 1633467, at *2 (citing Brown v. John Roebuck &
Assocs., Inc., No. M2008-02619-COA-R3-CV, 2009 WL 4878621, at *5 (Tenn. Ct. App.
Dec. 16, 2009)). “Appellate courts must first determine whether an order disposes of one or
more but fewer than all of the claims or parties, which is a question of law we review de
novo.” Carr, 2010 WL 1633467, at *2 (citing Brown, 2009 WL 4878621, at *5). If the order
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properly disposes of one or more but fewer than all of the claims or parties, “appellate courts
must then, and only then, determine whether there is no just reason for delay, a question we
review under an abuse of discretion standard.” Carr, 2010 WL 1633467, at *2. Accordingly,
we begin with the question of whether the trial court‟s order disposes of one or more but
fewer than all of the claims before it.

A “claim” for the purposes of Rule 54.02 is defined as the “„aggregate of operative
facts which give rise to a right enforceable in the courts.‟” Brown, 2009 WL 4878621, at *6
(quoting McIntyre v. First Nat’l Bank of Cincinnati, 585 F.2d 190, 192 (6th Cir. 1978) (per
curiam)). In Carr v. Valinezhad, this Court indicated that an order that adjudicates “only two
transactions on a single count alleged in the complaint” does not dispose of a claim for
purposes of Rule 54.02. Carr, 2010 WL 1633467, at *4. In another case, this Court ruled that
Rule 54.02 certification was improper because the plaintiff‟s various claims involving
violations of property association rules “all involve the same parties and arise out of the same
operative facts.” Brentwood Chase Cmty. Ass’n v. Truong, No. M2014-01294-COA-R3-
CV, 2014 WL 5502393, at *2 (Tenn. Ct. App. Oct. 30, 2014). The Court therefore ruled that
these violations “do not constitute separate claims” for purposes of Rule 54.02. Id.

In yet another case, a plaintiff filed a complaint for legal malpractice against a law
firm alleging three separate incidents of negligence relating to: (1) failure to advise; (2)
failure to investigate; and (3) failure to act timely. See Christus Gardens, Inc. v. Baker,
Donelson, Bearman, Caldwell & Berkowitz, P.C., No. M2007-01104-COA-R3-CV, 2008
WL 3833613, at *2 (Tenn. Ct. App. Aug. 15, 2008). The trial court dismissed the first two
legal theories based upon the expiration of the applicable statute of limitations and
designated its ruling as final pursuant to Rule 54.02. Id. On appeal, however, we concluded
that “the multiple incidents of legal malpractice” described above were merely “different
theories of legal malpractice . . . aris[ing] from an aggregate set of operative facts.” Id. at *5.
Accordingly, we held Rule 54.02 certification was improper because the case involved only
one claim, that for legal malpractice. Id. We have also held that an order that dismissed a
plaintiff‟s entire breach of contract claim against a party sufficiently disposes of one claim to
qualify for Rule 54.02 certification. See FSGBank, N.A. v. Anand, No. E2011-00168-COA-
R3-CV, 2012 WL 554449, at *4 (Tenn. Ct. App. Feb. 21, 2012) (ruling that Rule 54.02
certification was proper because the trial court‟s order “completely adjudicated” the
plaintiff‟s breach of contract claim, leaving only the counterclaims to be adjudicated).

This case involves three remaining parties.2 There can be no dispute that none of these
parties were dismissed by the trial court‟s November 24, 2015 order. Appellants argue,

2
A fourth party, an unnamed insurance company serving as Appellants‟ uninsured motorist carrier was
dismissed by agreed order on March 8, 2015. This order was not certified as final pursuant to Rule 54.02 and
no party takes issue with the dismissal in this appeal.

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however, that the trial court‟s order “is dispositive and will conclude this civil action.”
Respectfully, we cannot agree. The trial court‟s order is not a final adjudication of this action.
Instead, the trial court‟s order merely denied Appellants‟ motion to accept both offers of
judgment for a combined judgment of $15,195.00, denied Appellee‟s motion to force
Appellants to accept the first offer of judgment, and instead directed Appellants that they had
the choice as to which offer of judgment to accept. Nothing in the record on appeal indicates
that Appellants ever actually accepted one offer of judgment, as allowed by the trial court.
Indeed, the trial court even indicated that Appellants “may elect” to accept either offer; as
such, nothing in the record indicates that Appellants may not choose to reject both offers of
judgment and instead proceed to trial on their claim. Because no judgment has been entered
in favor of either side, no conclusion of any claim has in fact been reached. Therefore,
without a final adjudication of at least one claim by the trial court, Rule 54.02 is simply
inapplicable. Although we might assume that Appellants would accept the higher offer of
judgment, this Court will not “do[] constructively what neither party has chosen to do in
actuality.” Church of God in Christ, Inc. v. L. M. Haley Ministries, Inc., No. W2015-
00509-COA-R3-CV, 2016 WL 325499, at *9 (Tenn. Ct. App. Jan. 27, 2016). As such, the
trial court‟s order allows Appellants the choice to accept one offer of judgment or proceed
with their case until a final resolution through other means, such as summary judgment or
trial. The case is therefore not concluded by the trial court‟s November 24, 2015 order.

We also cannot agree that the trial court‟s order disposes of one or more but fewer
than all the claims of the parties. Here, there are arguably three claims at issue: (1) Ms.
King‟s claim for compensatory damages due to Appellee‟s negligence; (2) Mr. King‟s claim
for loss of consortium due to Appellee‟s negligence; and (3) Appellee‟s affirmative defense
of comparative negligence.3 Nothing in the record on appeal indicates that any of the above
claims have been adjudicated in any way. While Appellants‟ acceptance of one offer of
judgment would finally conclude this case, as discussed above, Appellants have simply not
taken that action. The trial court‟s order, therefore, does not dispose of any of these claims,
which are all still awaiting final resolution by the trial court, as discussed above.
Accordingly, the trial court improperly certified its judgment as final pursuant to Rule 54.02
of the Tennessee Rules of Civil Procedure.

Finally, Appellants argue that holding Rule 54.02 certification improper places them
between the proverbial Scylla and Charybdis,4 in that if they had not filed their appeal within

3
We note that this Court recently granted an application for an interlocutory appeal on the question of
whether an affirmative defense constitutes a “claim, counterclaim, or cross-claim” for purposes of summary
judgment. See Young v. Jordan, et al., No. W2015-02453-COA-R9-CV. Our Opinion in this case should not
be read as expressing any Opinion as to the issue in that case.
4
Scylla is “a dangerous rock on the Italian side of the Straits of Messina, opposite the whirlpool of
Charybdis,” used to symbolize a place “between two perils, neither of which can be evaded without risking the
other.” Webster’s New World College Dictionary 1308 (5th ed. 2014).
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thirty days of the trial court‟s Rule 54.02 certification, their appeal may have been “time-
barred due to a failure to appeal the order in a timely manner as required by the Tennessee
Rules of [Appellate] Procedure.” We acknowledge that this situation places Appellants in a
precarious position. However, we note that had Appellants delayed their appeal until a final
judgment was properly entered, they could have argued in an appeal from that order that the
trial court‟s earlier Rule 54.02 certification was improper and that their appeal was not
untimely. In any case, Appellants did not choose to delay their appeal, and this Court cannot
waive subject matter jurisdiction requirements based upon hypothetical issues that simply are
not applicable in the present case. See Tenn. R. App. P. 2 (allowing this Court to suspend its
rules for “good cause”).5 Because no final judgment exists in this case, we lack subject matter
jurisdiction to adjudicate this appeal and it must be dismissed.

Conclusion

This appeal is dismissed for lack of subject matter jurisdiction. Costs of this appeal are
taxed to Appellants, Terry K. King and Roger A. King, and their surety.

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J. STEVEN STAFFORD, JUDGE

5
In addition, Appellants were entitled to seek an appeal of the trial court‟s interlocutory order by
permission pursuant to Rule 9 and 10 of the Tennessee Rules of Appellate Procedure. No application for an
interlocutory or extraordinary appeal, however, was filed in this Court.
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