TRANSFILL EQUIPMENT SUPPLIES & SERVICES, INC.
ADVANCED MEDICAL EQUIPMENT, LLC
Session January 18, 2017
from the Circuit Court for Sumner County Nos.
83CC1-2013-CV-1241, 83CC1-2013-CV-1242 Joe Thompson, Judge
breach of contract case, Transfill Equipment Supplies &
Services, Inc. (TESS) sued Advanced Medical Equipment, LLC
(AME) for delinquent payments of (1) rent due on TESS's
equipment, (2) purchases of medical oxygen, and (3) the fair
market value of rented equipment that AME had not returned to
TESS. AME filed a separate lawsuit against TESS seeking
damages for conversion of oxygen tanks. After consolidating
the cases, the Sumner County General Sessions Court awarded
damages to TESS and dismissed all of AME's claims. AME
appealed to the trial court. The court found that AME was
guilty of breach of contract due to its failure to make
timely payments. As a consequence, the court awarded judgment
to TESS in the amount of $34, 999.45. The trial court also
found that TESS had not converted AME's oxygen tanks. AME
appeals. We affirm.
R. App. P. 3 Appeal as of Right; Judgment of the Circuit
Court Affirmed; Case Remanded
Clement J. Carlton, Huntsville, Alabama, and Walter Stubbs,
Gallatin, Tennessee, for the appellant, Advanced Medical
E. McClellan, Gallatin, Tennessee, for the appellee,
Transfill Equipment Supplies & Services, Inc.
Charles D. Susano, Jr., J., delivered the opinion of the
court, in which Andy D. Bennett and W. Neal McBrayer, JJ.,
CHARLES D. SUSANO, JR., JUDGE.
engaged in the business of filling tanks with medical oxygen,
as well as renting and selling oxygen tanks for medical use.
AME provides already filled oxygen tanks for patients with
respiratory needs. TESS and AME commenced doing business
under the terms of a written pricing contract executed by AME
on September 30, 2004. The contract establishes the prices
for filling various sizes of oxygen tanks, the prices for
renting oxygen tanks, and delivery fees. The contract also
provides that, in case of litigation, "[t]he prevailing
party shall be awarded its costs and legal fees." The
contract contains the following provision:
Replacement Cost for the Rental Cylinders and Equipment if
lost will be Market Replacement Price, and Rental Charges
continue until Equipment and Cylinders are returned o[r]
purchased at Market Value.
(Bold font in original.) The parties operated under this
contract until May 3, 2010, when the parties executed a new
contract that adjusted the prices.
the course of the business relationship, AME would provide
TESS with AME's own tanks and AME would pay for the
oxygen to fill the tanks. AME also rented tanks from TESS.
AME paid rental charges and also paid for the medical oxygen
provided by TESS. In addition to delivering filled tanks to
AME, TESS would pick up its empty rental tanks and the AME
tanks to be filled. TESS provided a delivery ticket to AME.
The delivery ticket, signed by the TESS driver and by AME,
contains the following language: "[b]y signing this
delivery ticket, I agree that all items and quantities are
correct." (Bold font in original.) In addition to the
delivery ticket, TESS provided AME with a distribution log
specifying the size, type, and number of tanks that were
the delivery vehicle arrived back at the TESS facility, TESS
verified the accuracy of the information on the delivery
ticket. David Graves, TESS's president and CEO, testified
regarding this process as follows:
[E]very time a truck goes out and makes a delivery, somebody
other than a driver goes on and reverifies every cylinder on
that truck. . . . [T]here are times that deliverers will pick
up a tank and pick up a customer tank that should have been a
rental. They'll pick up a rental tank that was a
customer's tank. That's the whole purpose in
verification. There are times that they'll go in and pick
up cylinders, and . . . there are times there may be 20 and
they say there's 19. And if there is, we correct the
delivery ticket, fax a copy back to the customer, and we bill
off of the corrected delivery ticket before it's there
when it gets back in our facility, if there's an error[.]
AME asserts that this verification process has led to
overbilling by TESS and, further, that TESS has converted
AME-owned tanks through this process. Furthermore, AME claims
that this verification process at the TESS facility indicates
that TESS has conducted its business with AME in bad faith,
unfairly, or in a commercially unreasonable manner.
TESS fills both customer-owned tanks and its own tanks that
are rented to customers, TESS must differentiate between its
tanks and those of AME for accurate billing. Graves testified
regarding how TESS differentiates between tanks. He stated
TESS rental cylinders are very clearly marked. They either
have "TESS" spray painted down the side of them and
they have a green ring spray-painted at the very bottom of
them or else they've got our logo under the clear coat of
the cylinders. And our steel tanks have TESS neck rings on
the top of them they say "property of the TESS Company,
Gallatin, Tennessee." . . . They are clearly identified.
record reflects that it is common in the medical gas industry
for tanks to be lost. Graves testified about this problem,
stating that in "the durable medical equipment industry
and the home oxygen equipment, it is an accepted standard
that [tanks] are lost. . . . They're constantly lost. In
the industry, . . . tanks don't always come back to the
home care company that puts them out on the patients."
AME acknowledged this problem when it questioned Graves at
trial. AME's counsel asked Graves whether he had
"told [AME] that the average loss in the industry, for
rental tanks, is 17 percent per year[.]" Suffice it to
say that both parties agreed that it is common in the
industry for tanks to become lost.
in the business relationship, AME struggled to keep its
payment account with TESS current. Graves testified that
[f]rom the day this account opened in 2004, they have been
delinquent. There have been phone calls, credit holds, trying
to get payment and everything else."
October 2007, TESS notified AME that it was placing a hold on
AME's account and that it would cease doing business with
AME until the delinquency on the account was resolved. AME
responded with a proposed payment plan under which it would
pay $4, 000 and then would set up weekly payments of $1, 000.
AME made the $4, 000 payment, and business between the
parties resumed. Subsequently, AME continued to have trouble
making timely payments to TESS. In September 2008, Graves
sent a letter to AME regarding the growing past due balance
on AME's account, stating that the balance on the account
was $30, 046.54 with $27, 995.29 past due. He also claimed
that AME still had equipment rented to AME with a replacement
value of $22, 646. In that letter, Graves notified AME that
its account was being put on hold until a payment arrangement
could be reached. Business between the parties recommenced
after AME made a payment to TESS. In February 2010, a payment
that AME made to TESS in the amount of $500 was returned for
insufficient funds. As a result, TESS again placed AME's
account on hold. TESS ceased doing business with AME on June
pressured AME to make arrangements to pay the balance on its
account. AME expressed concerns over the balance due,
questioning the validity of the number of outstanding rental
tanks for which it was being charged. AME made some payments
on its balance, but failed to bring its account current. In a
September 2012 email to TESS, AME asked if TESS could
"please try to make a decent offer . . . to settle the
equipment issue. I would like to be fair." In October
2012, Graves provided AME with the number of and types of
rental tanks that had not been returned and an amount for
which TESS was willing to settle the equipment charges. He
also scheduled a meeting with AME to review all of the
delivery tickets and the charges for outstanding rental
tanks. In November 2012, TESS provided AME with its business
records detailing AME's account balance in an attempt to
resolve the parties' disagreement.
matter was not resolved. AME remained in a delinquent status.
In December 2012, counsel for AME sent a letter to TESS
asserting that AME-owned tanks that TESS had picked up for
filling had not been returned, and he demanded the return of
such tanks. Counsel for TESS responded with a letter
demanding payment of AME's account balance by January 8,
January 10, 2013, TESS filed a civil warrant against AME in
the Sumner County General Sessions Court seeking damages for
breach of contract on a sworn account. TESS claimed that AME
owed payments for medical gas provided by TESS, rent on TESS
tanks, and the replacement cost for TESS-owned tanks that had
not been returned. AME disputed the amount of TESS's
claim. AME filed a sworn denial stating that
[t]here [are] multiple errors and changes made by TESS upon
documents it uses. I cannot authenticate or dispute Delivery
Tickets without the originals. I will not agree to use copies
at a trial. The [audit] is unreliable. TESS never provided a
complete history of payments by AME to verify a claimed
filed a separate action in the same court against TESS
alleging conversion of personal property. The Sumner County
General Sessions Court consolidated the cases. It dismissed
AME's conversion claim and awarded $18, 094 in damages to
TESS for breach of contract and $4, 099.50 in attorney's
appealed to the trial court. In awarding TESS a judgment, the
court made extensive findings of fact:
TESS entered into a contract with [AME] on September 24, 2004
(the "2004 Agreement").
The parties operated under the 2004 Agreement until they
executed a new contract on May 3, 2010 (the "2010
Agreement"). The 2010 Agreement was very similar to the
2004 Agreement, with only minor price adjustments.
Significantly, both the 2004 Agreement and the 2010 Agreement
contained the following provision:
Replacement Cost for the Rental Cylinder and Equipment if
lost will be Market Replacement Price, and Rental Charges
continue until Equipment and Cylinders are returned or
purchased at Market Value.
The 2004 and 2010 Agreements each contained an attorney's
fee provision that awarded "costs and legal fees"
to the prevailing party ...