Third Nat. Bank in Nashville v. Celebrate Yourself Productions, Inc.
| Decision Date | 28 November 1990 |
| Docket Number | No. 01-A-01-9006-CH00231,01-A-01-9006-CH00231 |
| Parties | THIRD NATIONAL BANK IN NASHVILLE, Plaintiff/Appellee, v. CELEBRATE YOURSELF PRODUCTIONS, INC., Robert M. Phillips, and Stephanie Taylor-Rountree, Defendants/Appellants. 807 S.W.2d 704 |
| Court | Tennessee Court of Appeals |
Stephanie Taylor-Rountree, pro se.
Robert M. Phillips, pro se.
Gary R. Thompson, Nashville, for plaintiff/appellee.
This is an appeal from a summary judgment rendered in favor of Third National Bank on its claim against the defendants for default on a promissory note, and on the counter-claim of the defendants for breach of deposit contracts. We hold that the trial court was correct in finding that the individual defendants, who are not attorneys, could not represent the corporate defendant, and that summary judgment was appropriately granted to the plaintiff on the defendant's counter-claim. We further hold that summary judgment was proper on the plaintiff's claim of default on the note, but that there exists a genuine issue of material fact regarding that part of the complaint alleging the existence of an overdraft of the corporate checking account. As to the issue of the overdraft only, we reverse.
The three individual defendants in this case, Phillips, Taylor-Rountree and Cory, formed a small Sub-Chapter S corporation known as Celebrate Yourself Productions, Inc. (CYPI), whose primary business was production of audio and video materials. On November 19, 1987, Third National Bank made a loan of $10,000.00 to the corporation for the purpose of funding a video project that CYPI was producing. It was anticipated that the royalties received from the distribution of the video would be used to repay the loan. The corporation executed a promissory note for the loan, and the three individual defendants signed personal contracts of guaranty on the note.
The loan proceeds were deposited into two corporate accounts that had been established with Third National Bank. At the time the accounts were opened, the bank was provided with corporate resolutions which required the signatures of at least two of the three individual defendants on all withdrawals. In December 1987, Third National Bank paid two checks drawn on the corporate account that were presented for payment without the signatures of at least two officers. One check, made payable to the defendant Cory, was for $100.00 and was signed only by Cory. The other check, made payable to Nashville Freeze, was for $280.00. Cory signed this check and forged Phillips' name on it.
On January 29, 1988, Phillips and Taylor-Rountree presented the bank with signed affidavits of forgery against Cory but then, on February 3, 1988, delivered to the bank a written request to withhold processing of those affidavits. Finally, on March 17, 1988, the bank received written notice from the two defendants that it would no longer be bound by their prior request to withhold prosecution of Cory for forgery.
The corporation was not able to pay the note when it matured on February 17, 1988, and the bank granted a ninety day extension. On October 12, 1988, the defendants submitted a written request to the bank's recovery agent for an additional extension of the loan. That request, which was subsequently denied, stated that the defendants were not trying to avoid payment of the loan and intended to make complete restitution of their obligation to the bank.
Third National Bank filed suit on November 9, 1988 against CYPI, as well as Taylor-Rountree, Phillips and Cory individually. The complaint alleges that the note is in default, that there exists an overdraft of $399.73 in the corporate checking account, and seeks judgment against the defendants, jointly and severally, for the principal amount of $10,000, the overdraft, and interest. Taylor-Rountree and Phillips, without the aid of a licensed attorney, prepared and filed an answer and a counterclaim. The counterclaim was on behalf of CYPI, Phillips and Taylor-Rountree individually, and alleges that the bank breached the deposit contracts by authorizing payment on the two checks written by Cory and that as a result of such breach, the defendants were unable to complete the video project. The defendants also denied the existence of the overdraft and the allegation that the note was in default.
Third National Bank subsequently filed a motion for summary judgment on its claim and on the defendants' counterclaim. In support of its motion, the bank filed the affidavit of its recovery agent, which states that the loan is still in default and that the overdraft remains unpaid. Phillips filed his own affidavit in opposition to summary judgment, in which he avers that as secretary/treasurer of the corporation he can attest to the fact that no overdraft exists on CYPI's corporate accounts. Phillips' affidavit also states that CYPI has experienced $100,000.00 in damages and losses as a result of the bank's mismanagement of the corporate accounts.
The parties appeared before the Davidson County Chancery Court on January 12, 1990 to argue the plaintiff's motion for summary judgment, at which time the court ruled that Phillips and Taylor-Rountree could not provide legal representation for CYPI. The Chancellor permitted these two defendants to represent themselves in their individual capacities and heard their arguments in opposition to the plaintiff's motion as to their liability under the guaranty contracts and on their individual counterclaims. The court reserved its ruling on the plaintiff's motion for twenty days so that the corporate defendant could engage legal counsel.
On February 1, 1990, the defendants filed a "Motion for Relief from Order", in which they asked the court to either appoint counsel, or to permit them to represent the corporation. The motion asserts that due to the actions of Third National Bank, the corporate defendant lacks the financial resources to employ an attorney. The defendants also filed a motion for a jury trial.
These matters were heard on February 16, 1990, at which time the court ruled that CYPI was in default since it did not obtain counsel, and that the bank's motion for summary judgment on its claim and the counterclaim should be granted. The court awarded judgment for the plaintiff on the $10,000.00 note and $399.73...
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