Wilson Reynolds v. Lee Roy Roberson

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

November 8, 2011 Session

WILSON REYNOLDS V. LEE ROY ROBERSON, JR.

Appeal from the Circuit Court for Blount County

No. E21910 Hon. Jon Kerry Blackwood, Special Judge 1

No. E2010-02593-COA-R3-CV-FILED-MAY 4, 2012

This appeal involves a contract dispute over the purchase of more than 100 acres of rustic

property adjacent to the Great Smoky Mountains National Park. Wilson Reynolds offered

to purchase the property from Lee Roy Roberson, Jr. for 3 million dollars. The parties

formed a contract evidencing their agreement. Following the closing date, Wilson Reynolds

filed suit, alleging breach of contract. The trial court ruled that Lee Roy Roberson, Jr.

breached the contract and awarded Wilson Reynolds $600,000 in damages plus interest,

attorney fees, and other costs. Lee Roy Roberson, Jr. appeals. We affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court

Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the court, in which, H ERSCHEL P. F RANKS,

P.J., and D. M ICHAEL S WINEY, J., joined.

John M. Jackson and Barton C. Williams, Maryville, Tennessee, for the appellant, Lee Roy

Roberson, Jr.

Chris Ralls, Maryville, Tennessee, for the appellee, Wilson Reynolds.

OPINION

I. BACKGROUND

1

Pursuant to a standing order from the Administrative Office of the Courts, Special Judge Blackwood was

sitting by interchange for Judge Dale Young.

Wilson Reynolds (“Buyer”), a professional photographer, was in Cades Cove for the

weekend when he discovered Townsend, Tennessee. He “fell in love with the town” and was

reminded of his “dream [of] almost nine years to own [his] own outdoor resort.” He decided

to purchase some property in pursuit of that goal. When purchasing Karns Log Cabin

Development, he was informed of a similar property owned by Lee Roy Roberson, Jr.

(“Seller”). Seller’s property was more than 100 acres and contained antique Appalachian log

cabins designed and built by Seller, who used the cabins as a gallery to showcase his artwork

and to conduct church services.2

Buyer made an initial offer on the property that was rejected. Subsequently, Buyer

offered to purchase the property for the list price, subject to certain stipulations. Seller

accepted the offer and the accompanying contract. The contract provided for a purchase

price of 3 million dollars with a closing date of May 15, 2006. Buyer’s obligation to close

was not subject to a financial contingency, and Buyer could not obtain possession until the

deed was delivered. Buyer submitted $10,000 in earnest money when he signed the contract.

Several stipulations were handwritten into the contract. These provisions provided,

1) [Purchase is contingent] upon clean deed to easement to property.

2) Buyer intends to use this transaction to qualify as a tax free exchange under

section 1031 of the Internal Revenue Code and the seller agrees to cooperate

in that effort. [Buyer] will have the right to assign this contract so that the

transaction will qualify under Section 1031.

3) Down payment of $500,000, note to be held by [S]eller for 1 [year] payable

in full with interest of 5% ($125,000) on anniversary of note.

4) Seller to keep insurance on property until 8/15/06. Buyer to furnish

additional liability insurance on property. Seller has until 8/15/06 to remove

personal items from gallery.

5) Buyer will not place any liens or incumberances against property until Seller

is paid in full for property.

The parties executed a series of addendums to the contract. The first addendum (“Addendum

A”) allowed Buyer to obtain possession of the property prior to the closing date if he remitted

the $500,000 non-refundable down payment and paid all utilities. Two days after the

contract was signed, the parties agreed to the second addendum (“Addendum B”), which

2

The gallery was known as the Lee Roberson Gallery.

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charged Buyer with responsibility for “all maintenance and upkeep, to begin when $500,000

non-refundable down payment [wa]s paid to Seller on or before May 15, 2006.” The third

(“Addendum C”), fourth (“Addendum D”), and fifth addendums (“Addendum E”) extended

the deadline for the non-refundable deposit. The sixth addendum (“Addendum F”) provided,

1) Seller grants Buyer an option to extend the closing date to 12/01/07. If said

option is exercised by Buyer, Buyer shall tender an additional $50,000 non-

refundable payment to Seller. Seller further grants a second option to Buyer

for a second extension of the closing date until 6/01/08 in exchange for an

additional $50,000 non-refundable payment to Seller.

2) The parties hereto agree that the purchase price is not based on the quantity

of acres being conveyed.

3) Any and all portions of easement land lying on property owned by [Seller]

which are involved with easement contingency will be deeded, after a survey,

to [Buyer]. Seller will convey any fee interest in property lying in pull-offs or

other areas to be shown by survey to [B]uyer.

4) Seller to maintain insurance in full effect until 8/31/2006. Buyer shall

assume all maintenance, upkeep & utilities, except for gallery, beginning when

$500,000 non-refundable down payment is paid to Seller on or before June 7,

2006. Buyer to assume all utilities on 9/1/2006.

5) All other terms and conditions of aforementioned Purchase & Sale

agreement shall remain in full effect, other than as specifically modified

herein. Upon execution by all parties, this Amendment shall be attached to

and form a part of said Agreement.

On June 7, 2006, Buyer obtained possession of the property following his submission

of the $500,000 non-refundable deposit and the signing of the contract at Foothills Title

Services, Inc. One year later, Buyer sought to exercise the first $50,000 option to extend the

closing date. Seller refused the payment because he believed that Buyer was in breach of the

contract for failing to submit the interest payment on the anniversary of the signing of the

contract. Seller prohibited Buyer from entering the property.

Buyer filed suit, alleging breach of contract. Buyer sought specific performance per

the terms of the contract and a temporary injunction, enjoining Seller from interfering with

his occupancy of the property. The amended complaint, filed sometime later, sought specific

performance or recision and damages. Buyer also filed a lien against the property.

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The parties subsequently agreed that pending the outcome of the litigation, Buyer

could occupy the property. Seller accepted the $50,000 option payment, while maintaining

that he was owed interest. In Seller’s response to the complaint, he denied all allegations,

asserted that Buyer owed interest, and filed a counterclaim. Seller filed a motion to dismiss,

asserting that Buyer failed to state a claim upon which relief could be granted. Seller also

filed a motion for an emergency restraining order and permanent injunction, enjoining Buyer

from “all business activities or lodging activities to which the public at large is permitted

entry onto subject property.” Seller alleged that the only water source to the property had

been contaminated with Escherichia coli (“E. coli”) and posed a “substantial risk to anyone

and everyone who comes in contact with the water.” The court agreed and issued an

emergency restraining order.

Shortly thereafter, Buyer remitted and Seller accepted the second option payment of

$50,000, extending the closing date to June 1, 2008. Prior to closing, Buyer informed Seller

that he wanted to “exercise the option of having [Seller] finance the property for one year as

provided by the contract.” Buyer offered to “tender one year’s interest in the amount of

$125,000 in advance” with the understanding that if he paid off the note “prior to its due

date, then an appropriate amount of interest will be deducted from the principal balance.”

Seller refused the offer, asserting that Buyer could purchase the property if he remitted 2.5

million dollars pursuant to the contract.

At trial, Buyer alleged that Seller breached the contract by demanding interest and

refusing to finance the property, that there was a mutual mistake of the parties, and that Seller

materially misrepresented the property’s water system. Seller alleged that Buyer breached

the contract by failing to remit the interest payment, failed to maintain the property, and

“committed a slander of title by filing and refusing to release a lien on the property.”

Buyer, who was 57 years old at the time of the trial, testified that he and Seller

discussed the water source for the property because he anticipated bringing students and

nature photographers to the grounds, where they could take photographs and stay overnight.

Seller told Buyer about the spring water source that was located on the property and claimed

that the water was “wonderful” and that his employees used it and carried the water home

in bottles. Seller also claimed that he “had not just thousands but hundreds of thousands of

customers a year come through the gallery, and all had used the water.”

As the parties negotiated, Buyer informed Seller that he hoped to sell an office

building in Maryland and use the proceeds to purchase the property in a tax free exchange.

Buyer explained that he executed Addendum F, which added the optional extensions, because

he wanted to secure his down payment in case he was unable to maintain financing from the

bank in time for the closing date. He stated, “[i]t was always understood that if [he] needed

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the time to get the survey done, to get the appraisals done, to get conventional financing, that

[Seller] would carry the property for one year at five percent.”

Buyer testified that during one of his visits, Seller showed him how to maintain the

spring. Buyer said that the spring was cleaned once a year and that he maintained the

buildings and the property, ensuring that the grass was mowed on a regular basis, that the

weeds were cut, that the road was cleaned, and that the heating and air units were maintained.

He believed his employees “kept the place looking impeccable.”

Buyer stated that on June 1, 2007, he sent his manager to deliver the $50,000 check

for the optional extension. After learning that Seller refused the check, he returned to the

property to find that he was locked out. He was denied access to the property and his

belongings from June 7, 2007 to July 16, 2007. He received a letter, which provided, in

pertinent part,

I represent [Seller] with regard to the above matter. It is my client’s position

that your failure to comply with the terms of the Purchase and Sale Agreement;

specifically the payment of the interest due on June 7, 2007, and the

unrestricted tender of the $50,000 consideration for the extension, constitutes

a default. Mr. Roberson has reoccupied the premises.

Please make arrangements to remove your personal property now located on

the premises within thirty (30) days.

Buyer recalled that pursuant to their agreement allowing Buyer to reoccupy the

property, Seller had the right to inspect the property “from time to time, upon reasonable

notice,” while Buyer had the right to be present during the inspections. Buyer contended that

Seller visited the property on two occasions without Buyer.

Prior to the closing date, Buyer sent Seller a letter, which provided, in pertinent part,

Please be advised that [Buyer] desires to close this transaction pursuant to the

parties’ contract. He also chooses to exercise the option of having [Seller]

finance the property for one year as provided by the contract. In order to show

his good faith in this endeavor at closing, [Buyer] will tender one year’s

interest in the amount of $125,000 in advance. If [Buyer] chooses to pay off

the note prior to its due date, then an appropriate amount of interest will be

deducted from the principal balance. We expect to receive a full and sufficient

warranty deed for the property and for all of [Seller’s] rights in and to the

right-of-way leading from Wears Valley Road to the property, including the

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fee simple title to the pull offs and other areas as set forth in Addendum F

paragraph 3 to the parties[’] contract. The parties’ contract contemplates a

survey being done on the right-of-way; this will be done at [Buyer’s] expense,

but your client might have to sign a correction deed after the survey is

completed and we ask that he give us an express agreement in this regard.

[Seller] will have no rights to use this right-of-way ever again without

[Buyer’s] or his successor in interest’s permission.

Since your client will be the mortgagee, we understand that during the one year

period of the note he may desire to inspect the premises. We will need to have

a specific agreement concerning how this will be done. [Seller’s] continued

trespasses and visits to the property without proper notice have chilled

[Buyer’s] ability to utilize this property the way he intended.

We also make this offer to close conditional on both parties dismissing their

suits in full, paying their own fees and costs.

In response, Seller wrote, in pertinent part,

[O]ur conversation of June 3, 2008, indicated that your client was only

interested in closing on the subject property if he were able to tender only the

sum of [$125,000]. It appears to me that your client wishes to close on the

subject property, have a warranty deed executed thereby transferring

ownership of the property to him without paying the full purchase price. As

you will recall, the purchase price for the subject property is [3 million dollars]

and your client has made a down payment of [$500,000] toward that purchase

price. Accordingly, [2.5 million dollars] remains to be paid for the purchase

price of the property. As you know, we have asserted that [Buyer] owes

interest at the sum of [5 percent] for the past [2 years] which is the time frame

between the initial closing and the final closing which was set by contract to

occur on June 1, 2008.

Accordingly, [Seller] is not in a position to close and deed the property to

[Buyer] unless the full remaining purchase price of [2.5 million dollars] is

tendered to him at closing. My client has agreed to reserve the issue of the

interest, pending the outcome of current litigation. In accordance with my

previous correspondence, please note that we will be glad to execute a

warranty deed to [Buyer] contingent upon receiving [2.5 million dollars] from

him by June 4, 2008.

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I realize that during our conversation you indicated to me that your client was

not in a position to close on the property and pay the sum of [2.5 million

dollars] and accordingly, I have advised you that if the same does not occur,

that [Buyer’s] contract to purchase [Seller’s] land has expired.

Buyer testified that after he received the letter, he vacated the premises and returned the

property to Seller. He stated that he refused to remove the lien because he still wanted to

purchase the property and because he did not want to lose the down payment.

Troy David Brown, owner of Foothills Title and Title Services, testified that he

worked with the parties on the sale of the property at issue in this case. He believed the

transaction was “unusual” and “unique” because it was a “cash transaction, meaning for us

no lender, no outside third-party lender would be involved.” He stated that he received a call

from Seller in June 2006. Seller told him that he thought Buyer was in breach of the contract

for failing to remit an interest payment. Mr. Brown said that he told Seller that Buyer did not

owe interest because the note was not in existence at the time of the disbursement. Seller

told him that the terms of the contract served as a note.

Sandra Bates, Buyer’s real estate agent, related that Buyer desired to purchase the

property through a 1031 exchange, which was a “tax free exchange of like properties, one

for the other.” She recalled that she was present when the contract was drafted and opined

that the contract provided for a $500,000 down payment with an interest payment of 5

percent in one year. She admitted that a note for the property was never transcribed.

Jessie Beard testified that he managed the campgrounds in Townsend for Buyer and

that he also maintained the property at issue in this case. Mr. Beard testified that in June

2007, Buyer asked him to take a check for $50,000 to Seller. He recalled that Seller refused

the check and told him that the check was insufficient.

Spencer Davis, an environmental specialist for the State of Tennessee, Department

of Environment and Conservation, Division of Water Supply, recalled that Seller contacted

him about the property at issue in this case and told him that “he was concerned about

liability to him if water was being served and had some potential contamination in it.” Mr.

Davis visited Seller’s property in January 2008 to check the spring at Seller’s request. Seller

took him to the spring and the gallery building. Mr. Davis took a sample of the water from

the gallery kitchen faucet. He opined that further tests needed to be done to approve the

water supply as appropriate for the public. He related that E. coli was present in the water

but admitted that he was unable to determine when the E. coli initially contaminated the

water supply. He believed that if treated, the water could be appropriate for public

consumption but that “[i]t would be more feasible to pursue an alternative source.”

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Following the presentation of Buyer’s proof, Seller moved for an involuntary

dismissal. Following argument by counsel, the court denied the motion without explanation.

Seller, who was 76 years old at the time of the trial, testified that he had lived on the

property for approximately 40 years. He described the property as an approximately 125

acres of “rustic mountain country bordering the Great Smoky Mountains National Park.” He

and other employees built the gallery, the residence, and the out-buildings on the property.

He decided to sell the property because he wanted to retire, and he met Buyer shortly after

he listed the property. He recalled that Buyer’s initial offer was unacceptable because Buyer

wanted to set up a lease purchase agreement at an unacceptable interest rate.

Relative to the interest payment, Seller recalled that when he told Buyer they would

meet again in a year to receive the interest payment, Buyer said, “Well, we’ll need to talk

about that.” Seller wrote Buyer several letters about the interest payment but never received

a response. In one such letter, he wrote, in pertinent part,

Lines 301-307, of the Purchase and Sale Agreement, state that $125,000 will

be due and payable on the anniversary of the note. Although you stated that

this figure did not represent “interest,” the agreement is very explicit in that it

does indeed specify as 5% Interest. You have further suggested that, if you

choose to exercise your right to an extension of the Closing Date the above

amount will not be due until the arrival of the extended closing date. Since the

$125,000 is indeed interest, it is treated separately from principle and as such,

is due and payable on June 07, 2007. If for whatever reasons, this payment

should be deferred until the arrival of the extended closing date, the interest

rate, of 5% per annum will also apply to the accrued interest as well as the

unpaid interest.

Seller testified that he refused the first option payment of $50,000 because “there was

really no description of the purpose of it and no dates, so it was rather vague” and “unusual,

especially since we already had some potential problems developing that we were needing

to talk about.” He felt that it would be “unwise” to accept the money without speaking with

an attorney, and he believed “that the interest for the first year was due and should have

accompanied that payment.” When he returned to the property, he discovered that the

property was “basically in a situation you would expect of a property being abandoned.”

Seller stated that prior to closing, he received a letter from Buyer offering to pay the

interest payment if Seller accepted a note on the property for the remaining amount. Seller

was “astounded” by the letter because “[i]t was a completely new idea, and it was an idea that

[he] had actually rejected early on before the closing was ever done initially.” He was simply

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“unwilling to carry a note.” When he re-took possession of the property, he found that the

property was still in disrepair. He said that he placed the property back on the market for 3

million dollars but was unable to sell the property.

Relative to the spring, Seller testified that it was a natural spring that he developed

into a usable water source by “digging it out and putting in the necessary plumbing and

pumps.” He said that the spring was the only drinkable water source on the property but that

the spring was not approved for public consumption. He admitted that he and his employees

drank the water but stated that he offered visitors bottled water instead of water from the

spring. He told Buyer that he “had been using the water ever since [he’d] been there, that

[he] had no ill-effects from it, but that it was not approved.” He had the water inspected and

learned that there was “some natural bacteria that’s found in almost all springs” but that

“there was nothing found that was threatening to [his] health or well-being, and that was why

the family not only allowed it, but they encouraged it.” He recalled that he gave Buyer

instructions regarding how to maintain the water source.

Boyce Lamar Snyder testified that she visited Seller’s property in 2008 because she

needed property for “a spiritual-type retreat.” She did not purchase the property because her

research indicated that there was a lien on the property.

Following the presentation of the proof, the trial court found Seller’s credibility to be

questionable given his testimony regarding the spring on the property and his representations

to potential buyers. The court found that regardless of the credibility questions, Addendum

F “clearly modified the terms of the purchase and sales agreement which called for a down

payment of $500,000 and a note for 2.5 million bearing 5% interest.” The court continued,

This addendum clearly extends the closing date by providing [Buyer] with the

possibility of two option periods from the payment of $50,000 for each option.

There is no provision for interest in this addendum. The surrender of a note

and interest is clearly established by the fact that [at the June 2007] closing

wherein [Buyer] paid [Seller] $500,000 representing the non refundable down

payment . . . no note was given or even discussed. The clear implication being

that a note and interest were replaced with the two options that were granted

[to Buyer]. [Seller’s] insistence that [Buyer] pay interest . . . including the

other provisions of the contract precipitated the failure of these parties to

conclude the contract. Therefore[,] the [c]ourt finds that [Seller’s] actions

breached this contract.

The court denied the material misrepresentation claim because Buyer failed to prove “that

the water supply was contaminated prior to his possession or the entering into the contract.”

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Relative to damages, the court found that the contract price and the fair market value

of the property was 3 million dollars. The court stated,

[T]he aim of damages for the breach of contract is to place the parties in the

same situation they would have been in had the contract been performed. In

this case, the [c]ourt finds that [Buyer] has already paid $500,000 as a down

payment as well as $100,000 in other payments.

[Buyer’s] complaint, among other prayers for relief, included a claim for

recision based upon mutual mistake. The [c]ourt has found that no mutual

mistake existed that would justify recision. [Seller] breached the contract and

received the $500,000 non-refundable payment as well as $100,000 in option

payments. Clearly, the provision for the $500,000 non-refundable payment

was in the event [Buyer] did not fulfill the contract. However, [Buyer] was

ready to perform absent [Seller’s] breach. Consequently, [Buyer] is entitled

to $600,000 in damages plus interest at the rate of 10% to be determined as of

the date of the filing of the lawsuit. The agreement also provides for

reasonable attorney fees.

The court subsequently awarded $42,353.75 in attorney fees, $2,536 in discretionary costs,

and $923 in contractual costs. This timely appeal followed.

II. ISSUES

We consolidate and restate the issues raised on appeal by Seller as follows:

A. Whether the trial court erred in denying the motion to dismiss following

Buyer’s presentation of the proof.

B. Whether the trial court erred in ruling that Seller breached the contract.

C. Whether the trial court erred in calculating the amount of damages.

Buyer raised the following issue for our consideration:

D. Whether Buyer is entitled to attorney fees and costs on appeal.

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III. STANDARD OF REVIEW

On appeal, the factual findings of the trial court are accorded a presumption of

correctness and will not be overturned unless the evidence preponderates against them. See

Tenn. R. App. P. 13(d). The trial court’s conclusions of law are subject to a de novo review

with no presumption of correctness. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn.

2008); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). Mixed

questions of law and fact are reviewed de novo with no presumption of correctness; however,

appellate courts have “great latitude to determine whether findings as to mixed questions of

fact and law made by the trial court are sustained by probative evidence on appeal.” Aaron

v. Aaron, 909 S.W.2d 408, 410 (Tenn. 1995).

The trial court’s award of damages and award of prejudgment interest is reviewed

under an abuse of discretion standard. BankcorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d

223, 230 (Tenn. Ct. App. 2006); Franklin Capital Assocs., L.P. v. Almost Family, Inc., 194

S.W.3d 392, 405 (Tenn. Ct. App. 2005). “A trial court abuses its discretion only when it

‘applie[s] an incorrect legal standard or reache[s] a decision which is against logic or

reasoning that cause[s] an injustice to the party complaining.’” Eldridge v. Eldridge, 42

S.W.3d 82, 85 (Tenn. 2001) (quoting State v. Shirley, 6 S.W.3d 243, 247 (Tenn. 1999)). If

a discretionary decision is within a range of acceptable alternatives, we will not substitute

our judgment for that of the trial court simply because we may have chosen a different

alternative. White v. Vanderbilt Univ., 21 S.W.3d 215, 223 (Tenn. Ct. App. 1999).

IV. DISCUSSION

A. & B.

Seller asserts that the trial court erred in denying the motion for involuntary dismissal

because Buyer failed to “introduce proof to establish any damages to which [Buyer] was

entitled.” Seller also asserts that the trial court erred in ruling that he breached the contract.

Seller contends that Buyer breached the contract by failing to remit the interest payment as

provided in the contract and by insisting that Seller carry a note for the remainder of the

purchase price.

The Tennessee Rules of Civil Procedure provide for involuntary dismissal as follows:

After the plaintiff in an action tried by the court without a jury has completed

the presentation of plaintiff’s evidence, the defendant, without waiving the

right to offer evidence in the event the motion is not granted, may move for

dismissal on the ground that upon the facts and the law the plaintiff has shown

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no right to relief. The court shall reserve ruling until all parties alleging fault

against any other party have presented their respective proof-in-chief. The

court as trier of the facts may then determine them and render judgment

against the plaintiff or may decline to render any judgment until the close of

all the evidence. If the court grants the motion for involuntary dismissal, the

court shall find the facts specially and shall state separately its conclusion of

law and direct the entry of the appropriate judgment.

Tenn. R. Civ. P. 41.02(2). “When a motion to dismiss is made at the close of plaintiff’s

proof in a nonjury case, the trial court evaluates the case in the same manner as though the

trial court were making findings of fact at the conclusion of all evidence for both parties.”

Cole v. Clifton, 833 S.W.2d 75, 77 (Tenn. Ct. App. 1992) (citing City of Columbia v. C.F.W.

Const. Co., 557 S.W.2d 734, 740 (Tenn. 1977)). If the plaintiff failed to prove his or her

case “by a preponderance of the evidence, the trial court may render a judgment on the merits

for [the] defendant.” Id. (citing Brewer v. Haynes, 681 S.W.2d 551, 552 (Tenn. Ct. App.

1984)). On appeal, the court’s decision is subject to a de novo review, “with a presumption

of the correctness of the judgment unless the preponderance of the evidence is otherwise.”

Id. The court’s decision is subject to a de novo review with no presumption of correctness

if the court failed to make findings of fact on the record. Kesterson v. Varner, 172 S.W.3d

556, 566 (Tenn. Ct. App. 2005).

Among other claims for relief, Buyer alleged that Seller breached the contract and that

he was entitled to damages. In order to prevail in a breach of contract case, Buyer had to

prove that an enforceable contract existed between the parties. See Seramur v. Life Care

Ctrs. of Am. Inc., No. E2008-01364-COA-R3-CV, 2009 WL 890885, at *2 (Tenn. Ct. App.

Apr. 2, 2009) (citing Hatchel, 223 S.W.3d at 227). The parties did not dispute that an

enforceable contract existed. Thus, Buyer only needed to prove that Seller breached the

contract and that he was entitled to damages. Hatchel, 223 S.W.3d at 227.

The interpretation of written agreements is a matter of law, which this court reviews

de novo without a presumption of correctness. See Guiliano v. Cleo, Inc., 995 S.W.2d 88,

95 (Tenn. 1999). The cardinal rule of contract interpretation is that the court must attempt

to ascertain and give effect to the intention of the parties. Christenberry v. Tipton, 160

S.W.3d 487, 494 (Tenn. 2005). In attempting to ascertain the intent of the parties, the court

must examine the language of the contract, giving each word its usual, natural, and ordinary

meaning. See Wilson v. Moore, 929 S.W.2d 367, 373 (Tenn. Ct. App. 1996). The court’s

initial task in construing the contract is to determine whether the language is ambiguous.

Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885, 889-90 (Tenn. 2002).

A contract is ambiguous if its meaning is uncertain and is susceptible to more than one

reasonable interpretation. See Bonastia v. Berman Bros., 914 F.Supp. 1533, 1537 (W.D.

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Tenn. 1995); Frank Rudy Heirs Assocs. v. Moore & Assocs., Inc., 919 S.W.2d 609, 613

(Tenn. Ct. App.1995); Gredig v. Tennessee Farmers Mut. Ins. Co., 891 S.W.2d 909, 912

(Tenn. Ct. App. 1994). If we determine that the language of a contract is ambiguous, we

construe the ambiguity against the drafter of the contract. See Hanover Ins. Co. v. Haney,

425 S.W.2d 590, 592 (Tenn. 1968); Realty Shop, Inc. v. RR Westminster Holding, Inc., 7

S.W.3d 581, 598 (Tenn. Ct. App. 1999).

Nevertheless, if the language in a contract is plain and unambiguous, courts then

“determine the parties’ intention from the four corners of the contract, interpreting and

enforcing [the contract] as written.” Union Realty Co., Ltd. v. Family Dollar Stores of Tenn.,

Inc., 255 S.W.3d 586, 591 (Tenn. Ct. App. 2007) (citing Int’l Flight Ctr. v. City of

Murfreesboro, 45 S.W.3d 565, 570 (Tenn. Ct. App. 2000)). If the language is clear and

unambiguous, “the literal interpretation of the language controls the outcome of the contract

disputes.” Planters Gin Co., 78 S.W.3d at 890. We construe all provisions of a contract in

harmony with each other, “if such construction can be reasonably made, so as to avoid

repugnancy between the several provisions of a single contract.” Rainey v. Stansell, 836

S.W.2d 117, 119 (Tenn. Ct. App.1992).

This contract was clear and unambiguous. A straightforward reading of the contract

reveals that Addendum F significantly modified the terms of the contract. The contract

originally provided that a note was to be held for one year following the remittance of a

$500,000 down payment on the closing date, May 15, 2006. The note was to bear interest

at a rate of 5 percent, and the interest payment would be due on the anniversary of the note.

Addendum E extended the closing date to June 6, 2006, while Addendum F allowed Buyer

to extend the closing date until June 1, 2008. When the parties signed the contract in 2006,

Buyer remitted the down payment to obtain possession. A note was never signed because

Addendum F removed the necessity for Seller to carry a note for the remainder of the

purchase price. Instead, Buyer was allowed to extend the closing date by remitting two

optional payments of $50,000. Seller breached the contract by demanding interest when

Buyer attempted to exercise his first option to extend the closing date. Buyer offered to

continue with the transaction by having Seller carry a note for the purchase price following

closing; however, Seller rejected the offer.

Buyer asserted that he was entitled to damages in the amount of 3 million dollars. It

is well settled that “[t]he party seeking damages has the burden of proving them.” Waggoner

Motors, Inc. v. Waverly Church of Christ, 159 S.W.3d 42, 57 (Tenn. Ct. App. 2004).

“Damages may never be based on mere conjecture or speculation.” Overstreet v. Shoney’s,

Inc., 4 S.W.3d 694, 703 (Tenn. Ct. App. 1999). “Uncertain, contingent, or speculative

damages should not be awarded.” Western Sizzlin, Inc. v. Harris, 741 S.W.2d 334, 336

(Tenn. Ct. App. 1987) (quoting Redbud Coop. Corp. v. Clayton, 700 S.W.2d 551 (Tenn. Ct.

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App. 1985)). An award for damages “requires proof of damages within a reasonable degree

of certainty.” Id. at 336 (citing Wilson v. Farmers Chem. Ass’n, 444 S.W.2d 185, 189 (Tenn.

Ct. App. 1969)). “‘The law does not require exactness of computation in suits that involve

a question of damages growing out of contract or tort.’” Hatchel, 223 S.W.3d at 230

(quoting St. John v. Bratton, 150 S.W.2d 727, 729 (Tenn. Ct. App. 1941)).

“The purpose of assessing damages in a breach of contract suit is to place the plaintiff,

as nearly as possible, in the same position he would have had if the contract had been

performed.” Wilhite v. Brownsville Concrete Co., 798 S.W.2d 772, 775 (Tenn. Ct. App.

1990). “The injured party is not entitled to profit from the defendant’s breach.” Hatchel, 223

S.W.3d at 228. In real estate transactions, damages are assessed by awarding the non-

breaching party with ‘“the difference between the contract price and the fair market value of

the property at the time of the breach.”’ Id. (quoting Turner v. Benson, 672 S.W.2d 752, 754

(Tenn. 1984)).

Buyer failed to prove that he was entitled to 3 million dollars in damages and did not

present any testimony regarding the fair market value of the property prior to Seller’s motion

for involuntary dismissal. However, Buyer presented proof “that would enable the trial court

to establish [] damages within a reasonable degree of certainty.” Id. at 230. Indeed,

“[d]amages for breach of contract are permissible even when the plaintiff is unable to prove

the exact amount of those damages.” Id. (citing Provident Life & Accident Ins. Co. v. Globe

Indemnity Co., 3 S.W.2d 1057, 1058 (Tenn. 1928)). Like the trial court, we believe that

Buyer was at least entitled to the return of his down payment and the extension payments

following Seller’s breach of the contract in order to place him in the same position he would

have been in if Seller had not breached the contract. Accordingly, we conclude that the trial

court did not err in denying the motion for involuntary dismissal because Buyer proved that

he was entitled to recover for Seller’s breach of the contract. We also conclude that Seller’s

insistence upon interest was the first material breach of the contract. Therefore, we hold that

Buyer’s subsequent insistence that Seller carry a note on the property did not preclude his

recovery. See McClain v. Kimbrough Const. Co., 806 S.W.2d 194, 199 (Tenn. Ct. App.

1990) (“A party who has materially breached a contract is not entitled to damages stemming

from the other party’s later material breach of the same contract.”).

C.

1.

Seller asserts that the return of the $500,000 was “effectively a recision measure of

damages for which [Buyer] did not plead or otherwise offer proof at trial.” Buyer responds

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that the court did not rescind the contract but merely awarded damages to make him “whole

based on monies actually tendered to [Seller].”

Here, the court specifically found that the contract price and the fair market value of

the property at the time of the breach was the same. Accordingly, the usual measure of

damages relevant to real estate transactions was inappropriate. As stated previously, we

believe that the return of the payments made to Seller was appropriate to place Buyer in the

same position he would have been in if Seller had not breached the contract.

2.

Seller contends that the trial court erred in ruling that Buyer was entitled to

reimbursement for the $50,000 optional extension payments. Seller notes that the parties did

not intend to apply the $50,000 payments toward the purchase price but that these payments

were made to extend the closing date. Seller argues that Buyer received the benefit of these

payments because the closing date was extended pursuant to the agreement.

We acknowledge that the payments were meant to be non-refundable. However, as

stated previously, the return of the payments was appropriate to place Buyer in the same

position he would have been in if Seller had not breached the contract.

3.

Seller contends that he was entitled to compensation from the Buyer for use of the

property because the trial court effectively rescinded the contract. Seller asserts that the

$500,000 down payment represented the fair market rental value of the property because that

is the sum Buyer paid to obtain possession of the property.

We acknowledge that a seller is generally entitled to compensation for a buyer’s use

of real estate if the trial court rescinds the contract. Harrison v. Laursen, No. 01-A-

019204CV00177, 1992 WL 301309, at *2 (Tenn. Ct. App. 1992). However, as mentioned

previously, the trial court did not rescind the contract but merely attempted to place Buyer

in the same position he would have been in had the contract been performed. This issue is

without merit.

4.

Seller asserts that the trial court abused its discretion by awarding Buyer prejudgment

interest for the period prior to the date of any alleged breach. Buyer maintains that the award

of prejudgment interest was appropriate.

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In its subsequent judgment, the court ruled that interest should accrue on the $500,000

payment from and after June 25, 2007, the date Buyer filed the complaint. The court also

ruled that interest should accrue on the two $50,000 payments from and after July 18, 2007,

two days after Buyer made the first payment, and from and after January 18, 2008, the date

Buyer made the second payment.

The trial court may award prejudgment interest “as an element of, or in the nature of,

damages . . . in accordance with the principles of equity at any rate not in excess of a

maximum effective rate of ten percent (10%) per annum.” Tenn. Code Ann. § 47-14-123.

“The usual means of compensating for [loss of use of funds] is the allowance of interest.

Interest recovered in order to make the obligee whole is the relief usually sought, and the

allowance of prejudgment interest under such circumstances is ‘familiar and almost

commonplace.’” Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn. 1994) (quoting Deas v.

Deas, 774 S.W.2d 167, 170 (Tenn. 1989)). “The purpose of pre-judgment interest is to fully

compensate a plaintiff for the loss of the use of funds to which he or she was legally entitled,

not to penalize a defendant for wrongdoing.” Hunter v. Ura, 163 S.W.3d 686, 706 (Tenn.

2005) (quoting Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998)).

In determining whether to award pre-judgment interest courts should consider the

principles of equity and two additional factors. Mitchell, 876 S.W.2d at 830. First, an award

of interest is allowed when “the amount of the obligation is certain” or reasonably

ascertainable “by a proper accounting” and “is not disputed on reasonable grounds.” Myint,

970 S.W.2d at 927. Second, an award of interest is allowed when “the existence of the

obligation itself is not disputed on reasonable grounds.” Id. However, “[t]he uncertainty of

either the existence or amount of an obligation does not mandate a denial of prejudgment

interest, and a trial court’s grant of such interest is not automatically an abuse of discretion,

provided the decision was otherwise equitable.” Id. at 928.

Here, the amount of the obligation was certain, and the award of interest was equitable

because Buyer lost the use of the payments while the case progressed in litigation.

Moreover, the court’s decision to award prejudgment interest was wholly within the court’s

discretion. See Tenn. Code Ann. § 47-14-123. Following our review, we conclude that the

trial court did not abuse its discretion in awarding prejudgment interest.

D.

Buyer asserts that he is entitled to additional attorney fees and costs on appeal.

Tennessee Code Annotated section 27-1-122 provides for an award of damages, including

attorney fees, when an appeal is determined to be frivolous. To find an appeal frivolous, the

appeal must be wholly without merit and lacking in justiciable issues. See Davis v. Gulf Ins.

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Group, 546 S.W.2d 583, 586 (Tenn. 1977); Inds. Dev. Bd. of Tullahoma v. Hancock, 901

S.W.2d 382, 385 (Tenn. Ct. App. 1995). An appellate court’s decision on this issue is

discretionary, and this court is generally reluctant to award such damages because we do not

want to discourage legitimate appeals. Whalum v. Marshall, 224 S.W.3d 169, 180-81 (Tenn.

Ct. App. 2006). We respectfully deny Buyer’s request for attorney fees on appeal in this case

because Seller’s appeal was not wholly devoid of merit.

V. CONCLUSION

The judgment of the circuit court is affirmed, and the case is remanded for such

further proceedings as may be necessary. Costs of the appeal are taxed to the appellant, Lee

Roy Roberson, Jr.

______________________________________

JOHN W. McCLARTY, JUDGE

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