HOLLY M. KIRBY, JUDGE.
The case involves a lease-purchase agreement. The plaintiff truck driver worked for the defendant hauling company. He entered into a lease-purchase agreement with the co-defendant leasing company, affiliated with the employer hauling company, to purchase the truck he drove in his employment. At the end of the lease, the leasing company refused to transfer title to the truck to the plaintiff. The plaintiff then filed this lawsuit against both defendant companies, alleging breach of contract, conversion, and violation of the Tennessee Consumer Protection Act. The defendants asserted the affirmative defenses of set-off and recoupment based on the plaintiff's employment agreement. After a bench trial, the trial court held in favor of the plaintiff on all of his claims. However, based on an arbitration provision in the employment agreement, it granted the plaintiff's motion to dismiss and to compel arbitration of the defendants' affirmative defenses of set-off and recoupment. The defendants now appeal. In light of the trial court's order compelling arbitration, we dismiss the appeal and remand for entry of an order staying the proceedings pending the arbitration.
Defendant/Appellants Empire Express, Inc. ("Hauling Co."), and Empire Transportation, Inc. ("Leasing Co."), are two affiliated Tennessee corporations. The Hauling Co. was formed by Ed Gatlin ("Gatlin") and his son, Tim Gatlin ("Tim"), in 1986 as an irregular route truckload carrier that hauls freight to the forty-eight continental United States. The Leasing Co. has the same owners, Gatlin and Tim, and was formed in 1989 or 1990. The Leasing Co. owns the trucks and trailers used by the Hauling Co.
The finances of the two affiliated corporations are interrelated. The Leasing Co. does not maintain a balance in its bank account. Rather, its bank account operates as a "sweep account," whereby its balance is swept to zero on a daily basis, and all funds at the end of each day are deposited in the Hauling Co. bank account. If the Leasing Co. writes a check, it is automatically covered as a draw from the Hauling Co. bank account. When the Leasing Co. acquires trucks for its lease-purchase program, the truck purchases are financed. The Hauling Co. provides cross-collateralization and a guaranty as part of the collateral that the Leasing Co. puts up for the financing of the trucks.
Plaintiff/Appellee David White ("White") began working for the Hauling Co. in 2000 as a "company employee" driving a company-owned truck. The next year, in 2001, the Leasing Co. began offering a lease-purchase program to drivers who wanted to own their own trucks. White decided to participate in this lease-purchase program.
To this end, on January 18, 2002, White executed a Lease-Purchase Agreement ("Lease") with the Leasing Co. for a 2000 Classic Freightliner XL truck, with the option to purchase the truck by paying its residual value at the end of the Lease. Under the Lease, White had several financial obligations. The Lease required White to (1) make rental payments of $1,909.05 per month for 48 months, payable in weekly installments of $440.55; (2) pay for fuel, excess mileage charges, insurance, certain taxes, and communication system costs; and (3) pay for all repairs and maintenance to the truck. Paragraph 15 of the Lease provided that any liability incurred by White to the Leasing Co. would become payable by White as additional rent for the truck.
If White fulfilled all of these obligations, paragraph 24 of the Lease gave White the right to purchase the truck at the end of the 48-month term by making a balloon payment of $22,908.60, which was the residual value of the truck. However, that same paragraph of the Lease included a proviso that White forfeited his right to purchase the truck if he failed "to have all payments required under this Lease paid in full at the end of this Lease." On January 21, 2002, White executed two more agreements that were related to the Lease. The first was a "Contract Hauling Agreement" (also called the "Employment Agreement") with the Hauling Co., which made White an independent contractor of the Hauling Co. and set out the terms of his employment. Under the Employment Agreement, White was responsible for "[s]electing, purchasing, financing, and maintaining" the truck, and paying "all operating expenses and repairs" to the truck. The second related contract White executed was a "Direct Pay Authorization," under which he agreed to allow the Hauling Co. to deduct from his earnings and pay to the Leasing Co. (on White's behalf) any amounts White owed under the Lease.
White continued to work for the Hauling Co. as an independent contractor from January 2002 until August 2007, while participating in the lease-purchase program. During this time, in accordance with the Direct Pay Authorization and the Employment Agreement, the Hauling Co. made weekly deductions for amounts White owed to the Leasing Co. and to the Hauling Co., even if White did not earn enough money in a given week to cover the expenses. If White earned enough money during the week to cover the total amount of deductions, White was paid the difference. If, however, he did not earn enough money to cover the deductions, the Hauling Co. would make the deductions anyway, and the deficit became a debt that White owed to the Hauling Co. In this way, all of White's truck rental payments to the Leasing Co. were made in a timely manner, even though some of the rental payments were made with money borrowed from the Hauling Co. Every week, White received a settlement sheet from the Hauling Co. that detailed his earnings, expenses, and the amount of the debt that White accumulated for advances made to him by the Hauling Co.
In May 2006, after White had made his final rental payment under the Lease, he sought to exercise his option to purchase the truck by paying off its residual value pursuant to the Lease. Over the next year, White was permitted to continue to drive the truck for the Hauling Co., while he made the payments for the residual value in weekly installments. When he made his final rental payment in May 2006, White owed the Hauling Co. $2,271.77 in cash advances and loans as reflected in the weekly settlement sheets sent to White. However, the parties did not discuss how White's accumulated debt affected his ability to purchase the truck. From May 18, 2006, until May 3, 2007, White made weekly payments of $468.23 through payroll deductions to pay the $22,908.60 residual value of the truck. Over that year, however, White's debt to the Hauling Co. increased substantially as a result of these and other weekly deductions related to Lease expenses, repairs and maintenance on the truck, and other advances made to White by the Hauling Co.
On May 10, 2007, the balance remaining on the residual value of the truck, $1,370.02, was deducted from White's paycheck. By that time, as reflected in the settlement sheets, White's debt to the Hauling Co. totaled over $25,000.
Shortly after White made the final payment on the residual value, he went to Mr. Gatlin to ask for title to the truck. White also told Gatlin that the Hauling Co. needed to assign him more miles to drive, so that he could earn more money. Gatlin refused to give White the title to the truck, explaining that his refusal was because White owed money to "the company" in an amount that exceeded the value of the truck. Gatlin told White that he had to pay this accumulated debt in order to receive title to the truck.
Later, Gatlin and White had another conversation over the telephone. In this conversation, White told Gatlin that he wanted title to the truck so that he could drive routes for another carrier. Gatlin again refused, and he again told White that he could not have title to the truck because of his debt to "the company." On that day, Gatlin considered White to be in default on the Lease. Consequently, after that conversation, Gatlin had the truck repossessed from White's home and brought back to the Leasing Co., without giving prior notice to White. A week or two later, the Leasing Co. sold the truck to a third party for $18,000, again without giving notice to White.
On January 16, 2008, White filed the instant lawsuit against the Hauling Co. and the Leasing Co. (collectively, "Defendants") for declaratory judgment, breach of contract, violation of the Tennessee Consumer Protection Act ("TCPA"), and conversion.
On April 28, 2009, the Defendants filed a motion for summary judgment. The motion asserted that, based on the undisputed facts, White forfeited his option to purchase the truck and lost his right to possession because he was in default under multiple provisions of the contract.
On the same day, White filed a cross-motion for partial summary judgment. In White's cross-motion, he argued that the undisputed facts established that he had satisfied his obligations under the Lease by making all of the weekly rental payments, and that he exercised his option to purchase the truck by paying off the residual value of it. White asked the trial court to grant him partial summary judgment by declaring that the Defendants breached the Lease, and by holding that the Defendants were liable to him for conversion of the truck.
On June 5, 2009, the trial court conducted a hearing on the parties' cross-motions for summary judgment.
On August 19, 2009, the Defendants filed a motion to amend their answer to add the affirmative defenses of set-off and recoupment. The Defendants alleged that the undisputed evidence showed that White owed the Hauling Co. over $20,000 for the amounts advanced to him pursuant to the Employment Agreement. They argued that any amounts White recovered in this lawsuit should be reduced by the amount that he owed the Hauling Co. Over White's objection, on September 18, 2009, the trial court entered an order permitting the Defendants to amend their answer to include the affirmative defenses of set-off and recoupment.
On the eve of trial, February 1, 2010, White filed a motion to dismiss and to compel arbitration of the Defendants' affirmative defenses of set-off and recoupment. White's motion cited the provisions in the Employment Agreement which stated: "Any disagreement or litigation arising under this Contract shall be referred to mandatory arbitration . . . ."
On February 2, 2010, a bench trial was conducted on the parties' remaining claims — damages for the Defendants' breach of contract, White's claims under the TCPA, and White's claim of conversion, and also on the Defendants' affirmative defenses of set-off and recoupment. On April 15, 2010, the trial court entered its findings of fact and conclusions of law, holding in favor of White on all of his claims. The trial court awarded White a judgment of $18,000 in damages against the Leasing Co. for breach of the Lease, $18,000 for violations of the TCPA against both Defendants, and $18,000 for conversion of the truck against both Defendants. The trial court awarded punitive damages against the Defendants on the conversion claim, stating that the amount of the punitive damages would be determined at a future hearing. In addition, the trial court determined that the Defendants' actions justified an award of treble damages under the TCPA.
After a hearing, on September 16, 2010, the trial court entered an order awarding White $100,000 in punitive damages. In a separate order, after another hearing, the trial court awarded White $88,266.25 in attorney fees and $5,035.13 in expenses pursuant to the TCPA. On October 1, 2010, the trial court entered an order entitled "Final Judgment" detailing all of its previous awards.
The Defendants raise several issues for review in this appeal. However, pursuant to Rule 13(b) of the Tennessee Rules of Appellate Procedure, we must first consider whether this Court has subject matter jurisdiction to hear this appeal. Tenn. R. App. P. 13(b);
This appeal encompasses all of the trial court's rulings, set out in five separate orders: (1) the June 16, 2009 order granting in part White's motion for partial summary judgment and denying the Defendants' motion for summary judgment, (2) the April 15, 2010 findings of fact and conclusions of law resulting from the trial, (3) the September 14, 2010 order granting White attorney fees and costs, (4) the September 16, 2010 order awarding White punitive damages, and (5) the October 1, 2010 "Final Judgment" entered by the trial court capsulizing the rulings in the previous orders.
Although the "Final Judgment" details the various damage awards granted to the Plaintiff on all of his claims, it does not allude to the Defendants' affirmative defenses of set-off and recoupment. In its previous April 15, 2010 order, the trial court had granted White's motion to dismiss and to compel arbitration of these affirmative defenses. The order states:
In Tennessee, under the Tennessee Uniform Arbitration Act, ("TUAA"), Tennessee Code Annotated § 29-5-303(d),
It is well settled that, under the appealability provision of the TUAA, Tennessee Code Annotated § 29-5-319,
We note that, while the order of the trial court below, dismissing the affirmative defenses and compelling arbitration, may appear to "technically" satisfy the finality requirements of Rule 3(a), in reality it does not. The Tennessee Supreme Court has recognized that appellate courts have jurisdiction over final judgments only, "[u]nless an appeal from an interlocutory order is provided by the rules or by statute."
In this case, we must note that the affirmative defenses of set-off and recoupment are not separable "claims" brought by the Defendants.
The appeal is dismissed for lack of jurisdiction and remanded for further proceedings consistent with this Opinion. Costs on appeal are to be taxed to Appellants Empire Express, Inc., and Empire Transportation, Inc., and their sureties, for which execution may issue, if necessary.
Tenn. Code Ann. § 29-5-303(d) (2000).
Tenn. Code Ann. § 29-5-319 (2000). Notably, an order denying a motion to compel arbitration, although interlocutory, is specified as an appealable order in Section 29-5-319(a)(1).