Flagstar Enterprises Inc. v. Erie Hurst, Individually, and as of the Estate of Arnold Hurst ( 2010 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
July 27, 2010 Session
FLAGSTAR ENTERPRISES, INC. v. ERIE HURST, INDIVIDUALLY AND
AS EXECUTRIX OF THE ESTATE OF ARNOLD HURST, DECEASED
Direct Appeal from the Chancery Court for McNairy County
No. 8524 Martha B. Brasfield, Chancellor
No. W2010-00036-COA-R3-CV - Filed August 12, 2010
Defendant appeals the award of summary judgment to Plaintiff in this action for specific
performance of an option to purchase real property which Plaintiff asserts is contained in a lease
agreement. Finding a genuine issue of material fact exists regarding the authenticity of the option
to purchase, we reverse and remand for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and
Remanded
DAVID R. FARMER, J., delivered the opinion of the Court, in which HOLLY M. KIRBY , J. and J.
STEVEN STAFFORD , J., joined.
Terry Abernathy, Selmer, Tennessee, for the appellant, Erie Hurst, individually and as Executrix of
the Estate of Arnold Hurst.
Paul G. Summers, Joseph A. Woodruff and Eileen Burkhalter Smith, Nashville, Tennessee, for the
appellee, Flagstar Enterprises, Inc.
OPINION
The gravamen of this dispute is the authenticity of a lease agreement that Plaintiff Flagstar
Enterprises, Inc. (“Flagstar”) asserts contains a valid option to purchase real property. In November
2008, Flagstar filed an action against Defendant/Appellant Erie Hurst (Ms. Hurst), individually and
as Executrix of the Estate of Arnold Hurst (Mr. Hurst), in the Chancery Court for McNairy County.
In its complaint, Flagstar alleged that Ms. Hurst had breached a 1992 lease agreement executed by
Flagstar’s predecessor in interest and Ms. Hurst and Mr. Hurst. Flagstar asserted that Ms. Hurst had
failed to deliver a warranty deed conveying the real property to Flagstar as required by the option to
purchase clause contained in section 4(a) of the lease. Flagstar prayed for specific performance of
the option to purchase.1
Ms. Hurst answered in February 2009. In her answer, Ms. Hurst admitted the existence of
the lease but denied that she was in breach of the agreement where she did not “believe[] that the
Lease Agreement that she signed . . . contain[ed] an option to purchase.” She further asserted that
if the agreement “did contain an option to purchase, its inclusion was by oversight or mistake, and
that such did not in any fashion represent the true agreement of the parties at that time.”
Flagstar moved for summary judgment in July 2009, asserting that there were no genuine
issues of material fact and that it was entitled to specific performance of the option to purchase. Ms.
Hurst responded in October 2009, and denied that the lease agreement attached to Flagstar’s
complaint was an accurate copy of the lease agreement executed by her and Mr. Hurst. She attached
to her response an affidavit asserting that neither she nor Mr. Hurst would have signed a document
requiring the sale of the real property. Ms. Hurst admitted that the signature page of the purported
agreement contained her signature, but denied that the lease agreement attached to the complaint was
the true and accurate agreement executed by the parties.
The trial court granted Flagstar’s motion for summary judgment by order entered on
December 7, 2009. The trial court found that the terms of the lease were clear and unambiguous;
that there had been no mutual mistake asserted such that parol evidence should be admitted; and that
there was no genuine issue of material fact. Ms. Hurst filed a timely notice of appeal to this Court
on January 5, 2010.
Issues Presented
The issue presented on appeal, as we slightly reword it, is whether the trial court erred by
awarding summary judgment to Flagstar where a genuine issue of material fact exists regarding the
authenticity of the lease agreement.
Standard of Review
We review a trial court’s award of summary judgment de novo, with no presumption of
correctness, reviewing the evidence in the light most favorable to the nonmoving party and drawing
all reasonable inferences in that party's favor. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84
(Tenn. 2008) (citations omitted). Summary judgment is appropriate only where the “pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits ... show
that there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Id. at 83 (quoting Tenn. R. Civ. P. 56.04). The burden is on the
moving party to demonstrate that there are no genuine issues of material fact and that it is entitled
to judgment as a matter of law. Id. (citations omitted).
1
Ms. Hurst’s ownership interest in the real property following Mr. Hurst’s death is not in dispute.
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After the moving party has made a properly supported motion, the nonmoving party must
establish the existence of a genuine issue of material fact. Id. (citations omitted). To satisfy its
burden, the nonmoving party may: (1) point to evidence of over-looked or disregarded material
factual disputes; (2) rehabilitate evidence discredited by the moving party; (3) produce additional
evidence that establishes the existence of a genuine issue for trial; or (4) submit an affidavit asserting
the need for additional discovery pursuant to Rule 56.06 of the Tennessee Rules of Civil Procedure.
Id. (citations omitted). The court must accept the nonmoving party’s evidence as true, resolving any
doubts regarding the existence of a genuine issue of material fact in that party’s favor. Id. (citations
omitted). A disputed fact that must be decided to resolve a substantive claim or defense is material,
and it presents a genuine issue if it reasonably could be resolved in favor of either one party or the
other. Id. (citations omitted). With this standard in mind, we turn to whether the trial courted erred
by awarding summary judgment in this case.
Discussion
There is no dispute that the lease agreement contained in the record and offered by Flagstar
as the agreement between parties contains an option to purchase clause, or that Ms. Hurst has refused
to perform under the terms of the option to purchase. Ms. Hurst’s contention here and in the trial
court is that the agreement offered into evidence by Flagstar is not the agreement signed by her and
Mr. Hurst. She argues that the pages in the agreement are unnumbered, were not initialed by the
parties, and that they include large blank areas. In short, that the agreement is not a flowing
document, but a compilation of pages, each containing separate clauses. Ms. Hurst does not allege
fraud. Rather, she asserts the agreement is “sloppy” and that individual pages or clauses were not
included in the original agreement.2
Flagstar, on the other hand, argues that the agreement is unambiguous, that Ms. Hurst does
not assert fraud, and that if there was a mistake in formation of the contract, it was not mutual.
Flagstar asserts that Ms. Hurst relies on inadmissable parol evidence to impeach the unambiguous
terms of the agreement. Flagstar further asserts that there is no genuine issue of material fact in this
case and that summary judgment accordingly was properly granted.
The parol evidence rule is a “quasi-statute of frauds” by which a party to a contract cannot
seek to alter written contractual terms based on parol evidence. Farmers & Merchants Bank v. Petty,
664 S.W.2d 77, 82 (Tenn. Ct. App. 1983). The rule contains numerous exceptions, however, and
has been considerably relaxed by the courts “‘in order that fraud may be thwarted, mistakes
corrected, accidents relieved against, trusts set up and enforced, and usury exposed and eliminated.’”
Lipford v. First Family Fin. Servs., Inc., No. W2003-01208-COA-R3-CV, 2004 WL 948645, at *3
2
We must agree with this characterization and note that the contract contained in the record does not
recite Ms. Hurst as a party to the lease agreement. Rather, it states that it was executed “by and between
ARNOLD HURST, party of the first part (referred to hereinafter as “Landlord”), and SPARDEE’S
RESTAURANTS, INC., a corporation. . .” The signature page is not disputed by Ms. Hurst, however, and
she acknowledges her signature and concedes to having been a party to the original agreement.
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(Tenn. Ct. App. April 29, 2004)(quoting Textron Fin. Corp. v. Powell, No.
M2001-02588-COA-R3-CV, 2002 WL 31249913, at *5 (Tenn. Ct. App. Oct. 8, 2002) (no perm.
app. filed) (quoting Gibson's Suits in Chancery, § 189 (William H. Inman ed., 6th ed. 1982))). In
this case, Ms. Hurst does not seek to alter the terms of the contract. Rather, she asserts the contract
is not authentic, and that the contract which she and Mr. Hurst signed did not contain the option to
purchase clause.
Whether the lease agreement contained in the record is an authentic copy of the agreement
signed by Mr. Hurst and Ms. Hurst in 1992 is a genuine issue of material fact to be determined by
the trial court. As we noted at oral argument of this matter, we are somewhat “flummoxed” by the
award of summary judgment in this case, which requires a determination of a single factual issue that
largely will be based on a credibility determination by the trial court. The parol evidence rule is not
applicable in this case, moreover, where Ms. Hurst does not seek to alter the terms of an authentic
contract, but challenges the authenticity of the document itself. In this case, where the pages of the
lease agreement are not numbered or separately signed or initialed, and where each provision is
contained on a separate page, a genuine issue of material fact exists regarding whether clause 4(a)
was contained in the agreement signed by Mr. Hurst and Ms. Hurst.
Holding
In light of the foregoing, the trial court’s award of summary judgment to Flagstar is reversed.
This matter is remanded for further proceedings consistent with this opinion. Costs of this appeal
are taxed to the Appellee, Flagstar Enterprises, Inc.
_________________________________
DAVID R. FARMER, JUDGE
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