GEORGE M. GREENWOOD, ETAL.
CITY OF LEBANON, TENNESSEE
Session Date: February 23, 2017
from the Chancery Court for Wilson County No. 2014-CV-183
Charles K. Smith, Chancellor
plaintiffs entered into a contract signed by the commissioner
of finance for the City of Lebanon to act as the City's
insurance broker for health care benefits. The plaintiffs
secured a group health care benefit contract for the City for
the period from July 1, 2013 through July 1, 2014. In
February 2014, the City informed the plaintiffs that it had
appointed another broker and refused to pay the monthly
service fees for the remaining months of the contract. The
City asserted that the contract was ultra vires
because it was not signed by the mayor or approved by
ordinance enacted by the city council as required by the
City's charter. The trial court found the contract to be
ultra vires, but determined that the City
"should be equitably estopped from denying the validity
of the agreement" and granted summary judgment in favor
of the plaintiffs. We affirm the judgment of the trial court.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Phillip Andrew Wright, Jr., Lebanon, Tennessee, for the
appellant, City of Lebanon, Tennessee.
Haynes, Goodlettsville, Tennessee, for the appellees, George
M. Greenwood and Janet Langley.
D. Bennett, J., delivered the opinion of the Court, in which
Richard H. Dinkins and W. Neal McBrayer, JJ., joined.
D. BENNETT, JUDGE
and Procedural Background
City of Lebanon ("the City") is a municipal
corporation of the State of Tennessee, chartered pursuant to
chapter 644 of the Tennessee Private Acts of 1911, as amended
through 2016. Article II, section 1 of the charter provides
that the City shall have numerous powers "by ordinance,
" including the power "to make contracts" and
"to expend the money of the City for all lawful
purposes." 2016 Tenn. Priv. Acts ch. 52, § 3. The
City has the authority to provide health insurance for its
employees. Charter, art. II, § 3, 1953 Tenn. Priv. Acts
ch. 414. Pursuant to article III, section 1 of the charter,
the City's governing body, the city council ("the
Council"), consists of a mayor and one alderman from
each ward of the City. 1929 Tenn. Priv. Acts ch. 685, as
amended. The Council "shall, by resolution, have the
power to approve all contracts and agreements that would
legally bind the City in some manner." Charter, art.
III, § 5, 2016 Tenn. Priv. Acts ch. 52, § 4. The
mayor is the "chief executive officer of the City"
and "shall execute all deeds, bonds, and contracts made
in the name of the City as approved by the City
Council." Charter, art. V, § 1, 2016 Tenn. Priv.
Acts ch. 52, § 7. The commissioner of finance and
revenue is to attest the mayor's signature. Id.
M. Greenwood filed suit against the City on May 7, 2014 for
breach of contract. Mr. Greenwood alleged that he entered
into an employment contract with the City on May 9, 2003 and
a substantially similar employment contract on June 14, 2013.
According to Mr. Greenwood, these contracts were approved by
the Council and signed by the commissioner of
finance. Pursuant to the terms of these contracts,
copies of which are attached to the complaint, Mr. Greenwood
was named the agent of record (May 2003) or broker/service
provider of record (June 2013) for purposes of employee
benefits. Because this lawsuit seeks to recover under the
June 2013 contract, we will focus on the terms of that
agreement. As broker/service provider ("Broker"),
Mr. Greenwood was to provide the following services:
1. Review the rate renewal information received from the
current carrier on behalf of the Customer Account [the City].
2. Create an analysis of the current plan and renewal premium
vs. current premium.
3. Negotiate the very best premium rates and/or benefits on
behalf of the Customer Account.
4. Seek proposals from other insurance companies when it
meets the needs of the Customer Account by providing the
maximum benefits and features at the lowest cost.
5. Prepare a spread sheet comparing the benefits, features
and cost of other options.
6. Recommend to the Customer Account as to employee benefits
which in the opinion of the Broker/Service Provider shall be
in the best interest of the Customer Account and the Customer
7. Assist the Customer Account on an ongoing basis with
8. Keep Customer Account updated with information on new
employee benefits which the Broker/Service Provider may
become aware of.
9. Will repeat these services each year to make sure the
Customer Account is always getting the best coverage at the
contract further states that termination of the agreement
"shall in no way impair this Broker/Service
Provider's rights to all service fees and renewal service
fees for the remainder of the current contract year for and
on business placed by the Broker/Service Provider of record
and is hereafter considered earned as Broker/Service Provider
of Record." The Broker agrees to "accept a service
fee of 3.5% of medical premiums billed by the insurance
company as payment for services."
complaint alleges that, on February 5, 2014, the City's
commissioner of finance sent Mr. Greenwood a letter stating
that it had approved the appointment of a new broker for
health insurance. The City refused to pay Mr. Greenwood his
monthly service fees from February 5, 2014 through July 1,
2014, the end of the contract year. Mr. Greenwood asserts
that the City's refusal to pay him amounts owed under the
terms of the agreement constitutes a breach of contract. On
October 13, 2014, Mr. Greenwood was permitted, by agreed
order, to amend his complaint to add Janet Langley as a
plaintiff. The amended complaint states that the plaintiffs
secured group health benefits for the City's employees
from United HealthCare Services, Inc. ("UHC") and
that Mr. Greenwood and Ms. Langley executed a billing and
collection agreement with the City. The billing and
collection agreement provides that the City would collect a
3.5% service fee from UHC, which would be paid to the
plaintiffs: 75% to Mr. Greenwood and 25% to Ms. Langley.
answer to the amended complaint, the City denied the
existence of a valid contract between the parties or any
breach of such agreement. Citing its charter, the City stated
that any contract had to be approved by ordinance enacted by
the Council and that the Council had never approved any
contract between the City and Mr. Greenwood. Furthermore, the
City alleged that, contrary to the requirements of the
charter, the mayor had not signed the contract. Thus, the
City asserted, any alleged contract would be ultra
vires. Citing the principle that a person contracting
with officers of a municipal corporation is deemed to be on
notice of the authority of such officers to contract on
behalf of a city, the City further stated that the plaintiffs
failed to establish they exercised due diligence to insure
that the alleged contracts were enforceable. The City
requested that the amended complaint be dismissed.
April 2015, the plaintiffs moved for partial summary judgment
with respect to liability. In support of this motion, the
plaintiffs filed a statement of undisputed material facts,
the affidavit of Mr. Greenwood, the affidavit of Ms. Langley,
and the affidavit of Don Fox, mayor of Lebanon from January
1994 through December 2008. The City moved to strike the
plaintiffs' affidavits on the grounds that they were not
based on personal knowledge, set forth facts not admissible
at trial, and did not establish that the plaintiffs were
competent to testify to the matters addressed in their
affidavits. The City opposed the plaintiffs' motion for
summary judgment and filed a cross-motion for summary
judgment on the ground that there were no genuine issues of
material fact in dispute and the City was entitled to
judgment as a matter of law. In support of its motion for
summary judgment, the City responded to the plaintiffs'
statement of undisputed material facts and submitted its own
statement of additional material facts. In July 2015, the
plaintiffs filed amended affidavits of Mr. Greenwood and Ms.
Langley and opposed the City's motion to strike and
motion for summary judgment. According to the City's
brief, the trial court orally denied the plaintiffs'
motion for partial summary judgment and the City's motion
to strike and motion for summary judgment at a hearing on
July 10, 2015. There is nothing in the record on appeal to
reflect the trial court's rulings.
February 2016, the plaintiffs filed another motion for
summary judgment based on their amended affidavits, an
affidavit of Nick Arnold (an executive at UHC), and an
amended statement of undisputed material facts, as well as
requests for admissions submitted to the City to which the
City had failed to respond. The plaintiffs asserted that
these requests for admissions should be deemed admitted. The
City opposed the motion.
plaintiffs' motion for summary judgment was heard by the
court on March 23, 2016. The court accepted the affidavits
relied upon by the plaintiffs. The court further determined:
3. The Plaintiffs produced evidence that the June
4th, 2013, service provider agreement upon which
they rely was a valid contract that existed between the
Plaintiffs and the Defendant.
4. The service provider was a valid contract as the Mayor at
that time, Don Fox, had the authority to direct the Finance
Commissioner at that time, Russell Lee, to sign the service
provider agreement ...