Gerald Brown v. Waddell Wright ( 2019 )

10/07/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
June 4, 2019 Session
GERALD BROWN V. WADDELL WRIGHT ET AL.
Appeal from the Chancery Court for Davidson County
No. 17-805-III Ellen Hobbs Lyle, Chancellor
___________________________________
No. M2018-01743-COA-R3-CV
___________________________________
This appeal arises from a dispute over an unorthodox, two-page contract pursuant to
which the plaintiff sold his home to the defendant and continued to reside in the home, in
accordance with a lease-back provision, for “up to five years” with rent “not to exceed
$950 a month.” The contract also included provisions for “equity participation,”
including the option for the plaintiff to buy the property back “at prevailing market
value.” The plaintiff filed a complaint asserting, inter alia, claims for violations of the
Tennessee Consumer Protection Act, quiet title, and breach of contract. The defendant
answered and asserted counterclaims, inter alia, for breach of contract and to remove the
plaintiff from the property. Following a trial, the trial court dismissed the complaint upon
the principal findings that the plaintiff lacked credibility and was the first to materially
breach the contract. The trial court also ruled that the defendant owned the property and
was entitled to immediate possession but denied the defendant’s claim to recover his
attorney’s fees. Both parties appeal. We affirm the dismissal of all of the plaintiff’s
claims and the trial court’s determination that the defendant owned the property and was
entitled to immediate possession. As for the attorney’s fees, we hold that the defendant
was entitled to recover his reasonable attorney’s fees based on Section 6 of the contract
which provides that in the event suit is filed to enforce the contract, “the prevailing party
shall be entitled to recover all cost of such enforcement including reasonable attorney’s
fees as approved by the Court.”
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
in part, Reversed in part and Remanded
FRANK G. CLEMENT JR., P.J., M.S., delivered the opinion of the Court, in which D.
MICHAEL SWINEY, C.J., and RICHARD H. DINKINS, J., joined.
Joseph H. Johnston, Nashville, Tennessee, for the appellant, Gerald Brown.
Christopher B. Fowler, and Thomas V. White, Nashville, Tennessee, for the appellee,
Waddell Wright, individually and d/b/a W. Wright & Co., LLC.
OPINION
For 50 years Gerald Brown (“Plaintiff”) owned and resided on real property
located at 913 Lawrence Avenue in the 12th South/Waverly Belmont neighborhood in
Nashville (the “Lawrence Avenue Property”). In 2013, Plaintiff got behind on his
mortgage payments and, in August 2016, foreclosure proceedings began.
Waddell Wright (“Defendant”) is a real estate developer who buys, renovates,
leases, and resells properties. After Defendant saw a local publication of pending
foreclosure properties, including the Lawrence Avenue Property, he wrote a letter to
Plaintiff offering to purchase the property. Defendant identified himself as a real estate
professional in the business of assisting property owners during the foreclosure process
and encouraged Plaintiff to waste no time before reaching out. In response, Plaintiff
called Defendant and began to negotiate the sale of the property to halt foreclosure.
On November 28, 2016, Plaintiff and Defendant signed a two-page sales contract
selling the Lawrence Avenue Property to Defendant for $146,000, which was to be paid
to the mortgage company to release the lien on the property, plus a cash payment of
$10,000 to Plaintiff at closing, an “equity participation” in the future sale of the property,
and additional payment of $50,000 “on or before the end of the 5yr lease period” or
earlier if the parties agreed. The most relevant contractual provisions are set forth in
Sections 6 through 9 of the contract, which read:
6. Default. Should Purchaser default at any time in the performance of
this Agreement, Seller shall retain any Earnest Money paid as total
and complete liquidated damages and Purchaser shall have no
further obligation to the Seller. Should Seller default at any time in
the performance of this Agreement, any Earnest Money paid to
Seller shall be returned to the Purchaser and Purchaser shall have the
right to sue the Seller for specific performance and any other actions
permitted by law, including reasonable attorney’s fees, arising from
said breach. In the event that either party hereto shall file a law suite
[sic] to enforce this Agreement, the prevailing party shall be entitled
to recover all cost of such enforcement including reasonable
attorney’s fees as approved by the Court.
7. Possession. On or before 60 months after day of deed.
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8. Seller Lease Back. Seller to lease back the property for up to 5 years
after settlement date. Seller and purchaser will agree to enter into a
lease agreement not to exceed $950.00 per month.
9. Equity Participation. Gerald Brown Sr. will receive $10,000 at
closing and $50,000 on or before the end of the 5yr lease period or if
both parties agree to a sooner date. Or Gerald Brown Sr. can
purchase the property back from purchaser at prevailing market
value at the end of the 5-year term. Gerald Brown Sr. will have to
pay back any and all funds purchaser advanced plus a return no less
than 25%. After that purchaser and seller at 50/50 partners.
The sale closed on December 12, 2016, at which time Defendant paid off the
mortgage of approximately $146,000 and remitted a cash payment to Plaintiff of an
additional $10,000 pursuant to Section 9 of the sales contract. Additionally, and as the
“Equity Participation” provision required, Defendant placed $50,000 in an escrow
account.
Plaintiff remained on the property as contemplated by the lease-back provision in
the contract. Three days after the closing, Defendant delivered a proposed lease
agreement to Plaintiff for the Lawrence Avenue Property but received no response.
Defendant subsequently delivered two additional lease proposals, still without a response
from Plaintiff. Nevertheless, Plaintiff has remitted a rent payment of $950 to Defendant
each month since the closing, which Defendant accepted, but the parties never executed a
written lease agreement.
A few months following the closing, Plaintiff asked Defendant to remodel the
Lawrence Avenue Property so that Plaintiff’s daughter, Ms. Marion Bowers, could live
there as well. Because the Lawrence Avenue Property was located in a design overlay
district that mandated the preservation of the historical appearances of the structures,
Defendant determined that an addition or remodel was not financially feasible.
Nevertheless, Defendant offered another property, a duplex located on Kings Lane
in Nashville (the “Kings Lane Property”) as an alternative so that Plaintiff and his
daughter could live next door to one another. Plaintiff and his daughter expressed interest
in moving to the properties on Kings Lane and met Defendant at the properties to view
them. Believing they had an agreement, Defendant remodeled the Kings Lane duplex.
Although Ms. Bowers moved to the Kings Lane Property, Plaintiff did not.
In the interim, on March 9, 2017, in reliance on Plaintiff’s assurances that he
intended to move to the Kings Lane Property, Defendant signed a contract to sell the
Lawrence Avenue Property for $450,000 to Province Builders, LLC, and the parties
closed on April 14, 2017. The sales contract expressly stated that “title shall be
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marketable, free and clear of all leasehold interest,” and that Province Builders would be
entitled to possession three months after the date of closing.
Shortly after the closing, Defendant informed Plaintiff of the sale and that he
would have to relocate by the end of July 2017.1 Plaintiff refused to move from the
property on Lawrence Avenue and repeatedly refused to sign any of the lease agreements
Defendant presented for either the Kings Lane or Lawrence Avenue Properties. Between
the original sale of the Lawrence Avenue Property on December 12, 2016, until the end
of July 2017, Defendant delivered several different lease proposals, some for the
Lawrence Avenue Property and some for the Kings Lane Property, and without any
substantive reason from Plaintiff as to why, none were returned signed.2
On July 26, 2017, Plaintiff asked Province Builders to honor the five-year lease
provided in the sales contract between Plaintiff and Defendant; Province Builders did not
respond. Defendant then offered the $50,000 to Plaintiff if he would relocate, but Plaintiff
refused the money as he desired to remain in possession of the Lawrence Avenue
Property.
On August 1, 2017, Plaintiff filed the complaint against Defendant and Province
Builders, asserting claims for violation of the Tennessee Consumer Protection Act (the
“TCPA”), commercial fraud, quiet title, and breach of contract. Plaintiff alleged that
Defendant violated the TCPA by “misrepresenting to Plaintiff that he had an enforceable
five (5) year leasehold interest in the Lawrence Property.” He claimed Defendant
perpetrated an unfair or deceptive business act on a consumer over the age of 60 by
drafting an illusory contract, knowing Plaintiff did not understand his rights and remedies
under the contract. Plaintiff also alleged that Defendant breached the contract because he
1
In his deposition, Defendant stated that he met with Plaintiff and Ms. Bowers during the
contingency period of the first sales contract with Province Builders. Plaintiff contends that Defendant
never told him he was in the process of selling the property or that the property closed. Rather, Plaintiff
stated that he only discovered the sale after going to the register of deeds office, but Plaintiff did not
clarify when he discovered this. After Defendant’s alleged meeting with Plaintiff at the Kings Lane
Property, Defendant believed Plaintiff was going to move to the Kings Lane Property and told Plaintiff to
meet him at Pinnacle Bank at 9:00 Monday morning to receive his $50,000 check. Plaintiff went to the
bank on Monday morning and presented Defendant with a list of questions “about who owned what and
who had whose interest.” Defendant and Plaintiff could not come to an agreement, and Plaintiff left
without the $50,000.
2
We have only referenced three leases that Defendant presented to Plaintiff for the Lawrence
Avenue Property; however, the trial court found that Defendant offered a total of seven proposed leases
for the Lawrence Avenue and the Kings Lane Properties. Having determined that the other proposed
leases are of little significance to the issues on appeal, we do not discuss them.
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“did not execute a separate five (5) year lease buy back agreement with Plaintiff as part
of the consideration required by the contract.”
Plaintiff later amended his complaint to add a claim for specific performance to
enforce the five-year lease agreement he had for the Lawrence Avenue Property and
requested the court direct Defendant to interplead the $50,000 being held in escrow as “a
buyout of Plaintiff’s five (5) year leasehold interest in 913 Lawrence Avenue” pending
the final disposition of the case.3
On September 22, 2017, Defendant filed an answer and counter-complaint against
Plaintiff asserting claims for (1) breach of contract; (2) promissory estoppel; and
(3) declaratory judgment. Defendant later amended the counter-complaint to include a
claim for (4) forcible entry and detainer to remove Plaintiff from the Lawrence Avenue
Property. Defendant alleged that Plaintiff breached the contract by refusing to sign any
lease agreement with Defendant. Defendant claimed he reasonably relied upon
representations that Plaintiff would move to the Kings Lane Property. Additionally,
Defendant prayed for a declaratory judgment to determine the meaning, validity, and
enforceability of the terms within the contract, that the $50,000 in escrow be returned to
Defendant, and that Plaintiff specifically perform the contract. The counter-complaint
asked the court to declare that Defendant was the legal owner and entitled to possession
of the property. Defendant also sought damages for the loss he suffered after
repurchasing the home from Province Builders as well as his attorney’s fees pursuant to
Section 6 of the sales contract.
In the interim, on September 18, 2017, Defendant repurchased the Lawrence
Avenue Property from Province Builders for $460,200, and the parties subsequently
entered into an agreed order dismissing Province Builders as a co-defendant.
A two-day bench trial was held May 22–23, 2018. In its final order entered on
July 13, 2019, the trial court found that Plaintiff’s testimony lacked credibility because
Plaintiff was evasive in his answers and was repeatedly impeached.
The proof established that the Plaintiff is nearly 80 years old with medical
issues of a pacemaker and diabetes. Nevertheless, he is mentally alert and
sharp and demonstrated keen understanding and intelligence. The proof
established that the Plaintiff was not misled or deceived, nor was he a
victim.
3
In his complaint, Plaintiff stated the $50,000 was being held in an escrow account, “which W.
Wright LLC claims is a buy out of Plaintiff’s five (5) year leasehold interest in 913 Lawrence Avenue.”
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The Court finds that the Defendant performed the Contract by: paying the
mortgage, paying judgments recorded against the Lawrence Property,
paying the Plaintiff $10,000, and delivering a lease to the Plaintiff three
days after the closing.
The Court finds that the Plaintiff was the first to breach by not responding
to the lease that was delivered either by executing it or providing
modifications.
The facts and the evidence did establish . . . that the Plaintiff led the
Defendant along that the Plaintiff was interested in the Kings Lane property
when the Plaintiff knew he was not. This deception combined with the
Plaintiff’s first and continuing breach of refusal to execute a lease on the
Lawrence Property deprive and preclude the Plaintiff from recovery of the
$50,000 on deposit in the registry of the Court, and the Clerk and Master
shall disburse the $50,000 to the Defendant.
The trial court also held that Plaintiff’s possessory interest and Plaintiff’s entitlement to
the $50,000 were conditioned on the parties entering into a valid lease agreement.
Based on the foregoing and other evidence in the record, the trial court ruled that
Defendant was the legal owner of the Lawrence Avenue Property and ordered Plaintiff to
vacate the property. The court further ordered that the $50,000 interplead under the
“Equity Participation” section of the sales contract was to be returned to Defendant. The
trial court awarded neither side any damages or attorneys’ fees.
On September 24, 2018, the trial court entered an order staying execution of the
judgment pending appeal under Rule 62.04 and 62.05(2) of the Tennessee Rules of Civil
Procedure. In its order, the trial court allowed Plaintiff to continue paying the rental rate
of $950 per month in lieu of bond.
ISSUES
Plaintiff raises several issues, which we have re-phrased and consolidated as
follows:
1. Whether Defendant violated Tenn. Code Ann. §§ 47-18-104(b)(12) and -125 of
the Tennessee Consumer Protection Act.
2. Whether Plaintiff was the first to materially breach the contract by refusing to sign
a lease agreement.
3. Whether Plaintiff was entitled to specific performance under the parties’ original
contract.
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Defendant also raises several issues, which we have re-phrased and consolidated as
follows:
1. Whether the trial court erred in not awarding damages and attorney fees pursuant
to the contract.
2. Whether the trial court erred in staying execution of the judgment without
requiring Plaintiff to post a bond.
STANDARD OF REVIEW
This is an appeal from a decision made by the trial court following a bench trial;
therefore, the standard in Tenn. R. App. P. 13(d) governs our review. Nashville Ford
Tractor, Inc. v. Great Am. Ins. Co., 194 S.W.3d 415, 424 (Tenn. Ct. App. 2005). “This
rule contains different standards for reviewing a trial court’s decisions regarding factual
questions and legal questions.” Id.
We review a trial court’s findings of fact following a bench trial de novo with a
presumption of correctness unless the preponderance of the evidence is otherwise. See
Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). We review
the trial court’s conclusions of law de novo with no presumption of correctness. Hughes
v. Metro. Gov’t of Nashville & Davidson Cty., 340 S.W.3d 352, 360 (Tenn. 2011).
“[F]or the evidence to preponderate against a trial court’s finding of fact, it must
support another finding of fact with greater convincing effect.” Realty Shop, Inc. v. R.R.
Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn. Ct. App. 1999). We will also give
great weight to a trial court’s factual findings that rest on determinations of credibility
and weight of oral testimony. Walton v. Young, 950 S.W.2d 956, 959 (Tenn. 1997);
Woodward v. Woodward, 240 S.W.3d 825, 828 (Tenn. Ct. App. 2007) (citations omitted);
B & G Const., Inc. v. Polk, 37 S.W.3d 462, 465 (Tenn. Ct. App. 2000) (citation omitted).
In Wells v. Tennessee Board of Regents, the Tennessee Supreme Court explained
that
trial courts are able to observe witnesses as they testify and to assess their
demeanor, which best situates trial judges to evaluate witness credibility.
See State v. Pruett, 788 S.W.2d 559, 561 (Tenn. 1990); Bowman v.
Bowman, 836 S.W.2d 563, 566 (Tenn. Ct. App. 1991). Thus, trial courts are
in the most favorable position to resolve factual disputes hinging on
credibility determinations. See Tenn-Tex Properties v. Brownell-Electro,
Inc., 778 S.W.2d 423, 425–26 (Tenn. 1989); Mitchell v. Archibald,
971 S.W.2d 25, 29 (Tenn. Ct. App. 1998). Accordingly, appellate courts
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will not re-evaluate a trial judge’s assessment of witness credibility absent
clear and convincing evidence to the contrary. See Humphrey v. David
Witherspoon, Inc., 734 S.W.2d 315, 315–16 (Tenn. 1987); Bingham v.
Dyersburg Fabrics Co., Inc., 567 S.W.2d 169, 170 (Tenn. 1978).
9 S.W.3d 779, 783 (Tenn. 1999).
ANALYSIS
I. TENNESSEE CONSUMER PROTECTION ACT
We first turn to Plaintiff’s contentions (1) that the sales contract was illusory,
deceptive, and misleading in violation of Tenn. Code Ann. § 47-18-104(b)(12); and
(2) that Defendant’s business practice was illusory and unenforceable as an unfair or
deceptive business practice targeted at elderly persons in violation of Tenn. Code Ann.
§ 47-18-125.
The relevant sections of the TCPA provide:
The following unfair or deceptive acts or practices affecting the conduct of
any trade or commerce are declared to be unlawful and in violation of this
part:
. . .
(12) Representing that a consumer transaction confers or involves
rights, remedies or obligations that it does not have or involve
or which are prohibited by law[.]
Tenn. Code Ann. § 47-18-104(b).
Any person who knowingly uses, or has knowingly used, a method, act or
practice which targets elderly persons and is in violation of this part is
liable to the state for a civil penalty of not more than ten thousand dollars
($10,000) for each violation. Each violation may include but is not limited
to, each elder person solicited, each advertisement that was distributed,
each misrepresentation or deceptive statement that appeared on a
solicitation, each time that an advertisement appeared on television or on
radio, each contact, i.e., telephone call, direct mail solicitation or in person
solicitation with an elder person to promote or solicit using unfair,
misleading or deceptive acts or practices.
Tenn. Code Ann. § 47-18-125(a).
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To recover damages under the TCPA, a plaintiff must prove: “(1) that the
defendant engaged in an unfair or deceptive act or practice declared unlawful by the
TCPA and (2) that the defendant’s conduct caused an ‘ascertainable loss of money or
property, real, personal, or mixed, or any other article, commodity, or thing of value
wherever situated . . . .’” Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App.
2005) (quoting Tenn. Code Ann. § 47-18-109(a)(1)).
The key terms “unfair” and “deceptive” are not defined by the TCPA. Therefore,
“the standards to be used in determining whether a representation is ‘unfair’ or
‘deceptive’ under the TCPA are legal matters to be decided by the courts.” Tucker,
180 S.W.3d at 116 (citations omitted). “However, whether a specific representation in a
particular case is ‘unfair’ or ‘deceptive’ is a question of fact.” Id. (citing Davidson v.
Gen. Motors Corp., 786 N.E.2d 845, 851 (Mass. App. Ct. 2003)). As a question of fact,
review on appeal is de novo with a presumption of correctness. Tenn. R. App. P. 13(d).
“A deceptive act or practice is one that causes or tends to cause a consumer to
believe what is false or that misleads or tends to mislead a consumer as to a matter of
fact.” Id. at 116. Thus, “the essence of deception is misleading consumers by a
merchant’s statements, silence, or actions.” Id. (citing Jonathan Sheldon & Carolyn L.
Carter, Unfair and Deceptive Acts and Practices § 4.2.3.1, at 118–19 (5th ed. 2001)).
“The concept of unfairness is even broader than the concept of deceptiveness, and it
applies to various abusive business practices that are not necessarily deceptive.” Id.
(citing Sheldon, supra § 4.3.3.1, at 156).4
In the 1994 legislation reauthorizing the Federal Trade Commission, Congress
stated “that an act or practice should not be deemed unfair ‘unless the act or practice
causes or is likely to cause substantial injury to consumers which is not reasonably
avoidable by consumers themselves and not outweighed by countervailing benefits to
consumers or to competition.’” Id. at 116–17 (quoting 15 U.S.C. § 45(n)). “To be
considered ‘substantial,’ consumer injury must be more than trivial or speculative.” Id.
at 117 (citing Tungate v. MacLean-Stevens Studios, Inc., 714 A.2d 792, 797 (Me. 1998);
Legg v. Castruccio, 642 A.2d 906, 917 (Md. Ct. App. 1994)). Pursuant to Tenn. Code
Ann. § 47-18-115, this description of unfairness guides our interpretation of Tenn. Code
Ann. § 47-18-104(b)(12). Id.
4
As for TCPA claims dealing with real property, our Supreme Court has explained that the “[t]he
Tennessee Consumer Protection Act forbids ‘unfair or deceptive acts or practices affecting the conduct of
any trade or commerce’” and “covers the transfer of real property.” Fayne v. Vincent, 301 S.W.3d 162,
172 (Tenn. 2009) (quoting Tenn. Code Ann. § 47-18-104(b)).
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Even if an act or practice causes or is likely to cause substantial injury, it
will not be considered unfair unless the injury is not reasonably avoidable
by consumers themselves. Consumers cannot reasonably avoid injury when
a merchant’s sales practices unreasonably create or take advantage of an
obstacle to the free exercise of consumer decision-making. Practices that
unreasonably interfere with consumer decision-making include (1)
withholding important information from consumers, (2) overt coercion, or
(3) exercising undue influence over a highly susceptible class of
consumers.
Id. (citations omitted).
After finding that Plaintiff was mentally sharp and alert, the court determined that
“[t]he proof established that [Plaintiff] was not deceived, nor was he a victim.” Notably,
the trial court found that it was Plaintiff who misled and deceived Defendant, not the
other way around. The court found it was never Plaintiff’s intention to leave the
Lawrence Avenue Property and that once Plaintiff used Defendant to save him from
foreclosure, Plaintiff refused to perform the contract and did not enter into a lease
agreement. Additionally, Plaintiff misled Defendant concerning the Kings Lane Property
when Plaintiff had no intention of moving there or engaging in that transaction.
Specifically, the trial court stated:
Trial exhibits 16, 17, 18, 19, 20, 21, 22 are lease/purchase agreements
Defendant’s Counsel sent to the Plaintiff and his Counsel. These exhibits
corroborate the testimony of the Defendant which the Court accredits that
the Defendant was misled by the Plaintiff and believed that the Plaintiff had
decided he wanted to move from the Lawrence Property to the Kings Lane
Property.
The court also made credibility findings, wherein it did not credit Plaintiff’s
testimony because he was evasive and repeatedly impeached. For example, Plaintiff tried
to downplay that in 2016, he was in arrears on his mortgage, and foreclosure proceedings
had begun. Further, the trial court credited Defendant’s testimony that he delivered a
lease agreement to Plaintiff three days after closing on the Lawrence Avenue Property.
On appeal, Plaintiff requests that this court overrule the trial court’s credibility
findings and hold that Defendant’s business practice was illusory and unenforceable.
However, the determination of “whether a specific representation in a particular case is
‘unfair’ or ‘deceptive’ is a question of fact,” and we give deference to the trial court’s
ruling on this matter. Tucker, 180 S.W.3d at 116. “[F]or the evidence to preponderate
against a trial court’s finding of fact, it must support another finding of fact with greater
convincing effect.” Realty Shop, Inc., 7 S.W.3d at 596. We will also give great weight to
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a trial court’s factual findings that rest on determinations of credibility and weight of oral
testimony. Walton, 950 S.W.2d at 959.
“A party bringing a TCPA action must prove that there was some deception,
misrepresentation or unfairness, regardless of any breach of contract.” Hall v. Hamblen,
No. M2002-00562-COA-R3-CV, 2004 WL 1838180, at *4 (Tenn. Ct. App. Aug. 16,
2004) (citing Hamer v. Harris, No. M2002-00220-COA-R3-CV, 2002 WL 31469213,
at *1 (Tenn. Ct. App. Nov. 6, 2002)). After a thorough review of the record, we conclude
the evidence preponderates in favor of the trial court’s finding that Defendant did not
deceive Plaintiff. Accordingly, we affirm the dismissal of Plaintiff’s TCPA claim.
II. BREACH OF CONTRACT
The parties dispute what happened after closing on the Lawrence Avenue
Property. Defendant claimed he delivered a proposed lease agreement to Plaintiff three
days after the closing. Plaintiff testified that he never received the proposed lease
agreement. Conversely, Defendant testified that he presented multiple lease agreements
to Plaintiff, and Plaintiff failed to sign any of them. In the end, the parties never entered
into a separate, written lease agreement under Section 8 of the real estate purchase
contract.
Plaintiff argues that Defendant was the first to materially breach the sales contract
by failing to give Plaintiff notice, written or otherwise, that not signing a separate lease
agreement was a breach of the contract. In support of his position, Plaintiff contends
“[n]otice ought to be given when information material to the performance of a contract is
within the peculiar knowledge of only one of the contracting parties.” See McCain v.
Kimbrough Constr. Co., Inc., 806 S.W.2d 194, 198 (Tenn. Ct. App. 1990). In contrast,
Defendant asserts Plaintiff was the first to materially breach the contract by refusing to
sign or negotiate the lease, and both parties were aware they had not entered into a
written lease agreement.
“It is well-established that ‘[i]n Tennessee, the common law imposes a duty of
good faith in the performance of contracts.’” Dick Broad. Co. of Tennessee v. Oak Ridge
FM, Inc., 395 S.W.3d 653, 660 (Tenn. 2013) (quoting Wallace v. Nat’l Bank of
Commerce, 938 S.W.2d 684, 686 (Tenn. 1996)). However, “courts will not make a new
contract for parties who have spoken for themselves.” Vargo v. Lincoln Brass Works,
Inc., 115 S.W.3d 487, 492 (Tenn. Ct. App. 2003) (citing Petty v. Sloan, 277 S.W.2d 355,
359 (Tenn. 1955)); see Wallace, 938 S.W.2d at 687 (“[T]he common law duty of good
faith does not extend beyond the agreed upon terms of the contract and the reasonable
contractual expectations of the parties.”); Allmand v. Pavletic, 292 S.W.3d 618, 630
(Tenn. 2009) (“If the contractual language is clear and unambiguous, the literal meaning
controls[.]”).
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As part of the contract for the sale of the Lawrence Avenue Property, the parties
contemplated a future lease agreement. While the sales contract did not create such a
lease agreement, the trial court found it imposed upon both parties a duty of good faith to
meet the reasonable contractual expectations of the parties. The trial court credited
Defendant’s testimony that three days after the closing, Defendant delivered a lease to
Plaintiff and never received a response. By unreasonably refusing to sign any lease
agreements, the trial court ruled Plaintiff breached his duty of good faith and was the first
to materially breach.
Although there was no written lease, because Defendant accepted Plaintiff’s
payment of rent each month in the amount of $950, Plaintiff had a possessory interest in
the property as a month-to-month tenant. See Tenn. Code Ann. § 66-28-202(a) (“If the
landlord does not sign a written rental agreement, acceptance of rent without reservation
by the landlord binds the parties on a month to month tenancy.”) However, this interest
was subject to a month’s notice of termination before commencement of the next month’s
term. R & E Props. v. Jones, No. 03A01-9804-CV-00133, 1999 WL 38282, at *2 (Tenn.
Ct. App. Jan. 13, 1999) perm. app. denied (Tenn. June 14, 1999).
Both sides agree that in March or April of 2017, Defendant and Plaintiff discussed
Plaintiff moving to the property on Kings Lane. It was at that point that Defendant sold
the Lawrence Avenue Property and informed Plaintiff that he would need to move from
the Lawrence Avenue Property by the end of July 2017. Accordingly, Defendant gave
Plaintiff ample notice, and the trial court correctly found that Plaintiff was the first to
materially breach. As such, Defendant is entitled to possession.
III. SPECIFIC PERFORMANCE
Plaintiff contends he is entitled to specific performance under Sections 8 and 9 of
the contract, which provide that Plaintiff and Defendant will enter into a five-year lease
of the Lawrence Avenue Property with an option to purchase the property at the end of
the term.
“An agreement to lease is not a lease, just as a contract to sell is not a sale.” Ryan
v. Stanger Inv. Co., 620 S.W.2d 505, 508 (Tenn. Ct. App. 1981). Nevertheless, in either
case, “the owner may be required to perform by a Court of Equity.” Id. Where specific
performance for the lease or sale of realty is decreed, “[t]he contract must be clear,
definite, complete and free from any suspicion of fraud or unfairness.” Johnson v.
Browder, 207 S.W.2d 1, 3 (Tenn. 1947); see Ryan, 620 S.W.2d at 509. Specific
performance “is not available to either party as a matter of right, but rests in “the sound
discretion of the chancellor under the facts appearing in the particular case.” T. J. Moss
Tie Co. v. Hill, 235 S.W.2d 587, 589 (Tenn. 1951).
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The trial court ruled that Plaintiff was not entitled to specific performance because
Plaintiff was the first to materially breach the contract. When one party materially
breaches, the other party has the right to terminate the agreement. Restatement (Second)
of Contracts, § 237. Because Plaintiff neither signed nor negotiated the lease agreements
provided by Defendant, he was the first to materially breach. As such, the trial court did
not abuse its discretion by denying equitable relief.
IV. DAMAGES
Defendant contends the trial court erred in declining to award damages.
Defendant’s brief failed to cite to any legal authority in support of his claim for damages,
and “the failure to make appropriate references to the record and to cite relevant authority
in the argument section of the brief as required by Rule 27(a)(7) constitutes a waiver of
the issue.” Bean v. Bean, 40 S.W.3d 52, 55 (Tenn. Ct. App. 2000) (listing cases).
Accordingly, Defendant has waived this issue on appeal.
V. ATTORNEYS’ FEES
The trial court declined to award either party costs or attorneys’ fees. Defendant
contends this was an error because the contract provides that the prevailing party shall be
entitled to recover his costs and attorney’s fees. He also contends he is entitled to recover
his costs and attorney’s fees for successfully defending a frivolous claim pursuant to the
TCPA.
Section 6 of the contract provides in pertinent part: “In the event that either party
hereto shall file a law suite [sic] to enforce this Agreement, the prevailing party shall be
entitled to recover all costs of such enforcement including reasonable attorney’s fees as
approved by the Court.”
“Tennessee, like most jurisdictions, adheres to the ‘American rule’ for the award
of attorney fees.” Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303,
308 (Tenn. 2009) (footnote omitted). A party may recover attorney fees only when “a
contractual or statutory provision creates a right to recover attorney fees,” or some other
recognized exception applies. Id. “Accordingly, parties who have prevailed in litigation
to enforce their contractual rights are entitled to recover their reasonable attorney’s fees
once they demonstrate that the contract upon which their claims are based contains a
provision entitling the prevailing party to its attorney’s fees.” Eberbach v. Eberbach,
535 S.W.3d 467, 474 (Tenn. 2017).
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Section 6 of the sales contract is clear. As the prevailing party in this action,
Defendant is entitled to recover his reasonable costs and attorneys’ fees. Therefore, we
reverse the trial court’s ruling on this issue and remand for a determination and award of
reasonable attorneys’ fees incurred by Defendant.
VI. BOND
Defendant contends the trial court erred in allowing Plaintiff to retain possession
on appeal without posting the requisite bond. In support of this position, Defendant relies
on Rule 62.05 of the Tennessee Rules of Civil Procedure. Particularly, Defendant relies
on the portion reading:
A bond for stay shall have sufficient surety and:
. . .
(2) if an appeal is from a judgment ordering the . . . sale, delivery or
possession of . . . real property, the bond shall be conditioned to
secure obedience of the judgment and payment for the use,
occupancy, detention and damage or waste of the property from the
time of appeal until delivery of possession of the property and costs
on appeal. . . .
Tenn. R. Civ. P. 62.05(2). However, Rule 62.05(2) continues to state:
(2) . . . . Upon motion submitted to the trial court and for good cause
shown, the bond for stay may be set in an amount less than that
called for in the first sentence of this section of this rule. In ruling on
such a motion, the trial court may consider all appropriate factors
including, but not limited to, the appealing party’s financial
condition and the amount of the appealing party’s insurance
coverage, if any. If the motion is granted, the party may obtain a
stay by giving such security as the court deems proper. If leave to
obtain a stay required by this rule is denied, the court shall state in
writing the reasons for denial.
Defendant also relies on Tenn. Code Ann. § 29-18-1255 to contend that Plaintiff,
who appeals following a judgment from which he lost possession in a landlord/tenant
5
Tennessee Code Annotated § 29-18-125 states:
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scenario, must post a bond equal to one year’s rent to retain possession. We, however,
have determined that his reliance is misplaced because the statute pertains to appeals
“from general sessions to circuit court.” See Johnson v. Hopkins, 432 S.W.3d 840, 844–
45 (Tenn. 2013), and this case was never in general sessions court.
Rather, we have determined that Rule 62.05(2) of the Tennessee Rules of Civil
Procedure is applicable because it specifies the requirements for bonds when a judgment
ordering the delivery or possession of real property is stayed. Further, the Tennessee
Rules of Civil Procedure “govern procedure in the circuit or chancery courts in all civil
actions.” Tenn. R. Civ. P. 1. As our Supreme Court explained in Johnson v. Hopkins:
The Tennessee Rules of Civil Procedure “govern procedure in the circuit or
chancery courts in all civil actions,” and “apply after appeal or transfer of a
general sessions civil lawsuit to circuit court.” Tenn. R. Civ. P. 1. Thus,
Rule 62.05 applies to Tenants’ appeal to Circuit Court. Rule 62.05 states
plainly that when an appeal is taken from a judgment “ordering
the . . . possession of personal or real property,” the bond to secure a stay
pending appeal shall “secure obedience of the judgment and payment for
the use, occupancy, detention and damage or waste of the property from the
time of appeal until delivery of possession of the property and costs on
appeal.” Tenn. R. Civ. P. 62.05(2) (emphasis added). Where real property is
concerned, Rule 62.05 requires a bond in an amount sufficient to cover rent
and waste to the property only “until delivery of possession of the
property.” Id. Once possession of the property has been relinquished, Rule
62.05 does not require that the bond include an amount sufficient to cover
rent of the property during an appeal.
432 S.W.3d at 850 (footnote omitted) (emphasis in original).
Rule 62.05(2) requires a bond in an amount sufficient to cover rent and waste to
the property. The trial court determined the case at bar was an exceptional case after
considering the facts and circumstances described in Plaintiff’s motion for a stay and
declaration, as well as those in Plaintiff’s Response and Motion to Set Appropriate Bond.
The trial court’s decision on this issue was discretionary, and we find no abuse of the trial
court’s discretion.
In all cases of forcible entry and detainer, forcible detainer, and unlawful detainer, the
judge of the court of general sessions trying the cause shall be authorized and it shall be
the judge’s duty to ascertain the arrearage of rent, interest, and damages, if any, and
render judgment therefor if the judge’s judgment shall be that the plaintiff recover
possession.
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IN CONCLUSION
The judgment of the trial court is affirmed in part and reversed in part, and this
matter is remanded to the trial court for further proceedings consistent with this opinion.
Costs on appeal are assessed against the appellant, Gerald Brown.
________________________________
FRANK G. CLEMENT JR., P.J., M.S.
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