April Doris Schmidt v. Aaron Errol Ankrom

08/29/2018

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

July 19, 2018 Session

APRIL DORIS SCHMIDT v. AARON ERROL ANKROM

Appeal from the Circuit Court for Bradley County

No. V-14-312 Lawrence H. Puckett, Judge

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No. E2017-01909-COA-R3-CV

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In this appeal, the marital dissolution agreement at issue stated the parties’ intent to enter

into a separate farm lease agreement for up to 7 years, upon completion of which the ex-

wife could sell the property subject to the ex-husband’s right of first refusal. However,

the parties never entered into the contemplated farm lease. The ex-wife, desiring to sell

the property prior to the passing of 7 years, brought a declaratory judgment action

seeking a declaration of the rights of the parties under the marital dissolution agreement.

The trial court held that the ex-wife would be in breach of the agreement if she sold the

property prior to 7 years and awarded attorney’s fees to the ex-husband. The ex-wife

appeals. We reverse.

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

Reversed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the court, in which D. MICHAEL

SWINEY, C.J., and THOMAS R. FRIERSON, II, J., joined.

Adam U. Holland, Chattanooga, Tennessee, for the appellant, April Doris Schmidt.

Andrew J. Brown, Cleveland, Tennessee, for the appellee, Aaron Errol Ankrom.

OPINION

I. BACKGROUND

The parties were divorced by a Final Decree on July 15, 2014. The decree

referenced and incorporated an agreed upon Marital Dissolution Agreement (“MDA”).

This MDA awarded certain real property to April Doris Schmidt (“Schmidt” or “Wife”),

situated in Cleveland, Tennessee, provided that the parties entered into a separate rental

agreement allowing Aaron Errol Ankrom (“Ankrom” or “Husband”) to “farm, raise

crops, and livestock for up to (7) seven years.” Upon completion of such farm lease,

Schmidt might sell the property, subject to Ankrom’s right of first refusal.

The contractual language in the MDA at the center of this dispute reads as follows:

The parties agree the real property situated [in Cleveland]

shall be awarded to Wife free and clear of claims by

Husband. Husband and Wife will enter into a separate rental

agreement allowing the Husband to farm, raise crops and

livestock for up to (7) seven years. Wife shall be allowed to

claim the mortgage interest and taxes on the property for the

tax years 2014 and thereafter. Upon entry of the Final

Decree, Husband shall execute a Quitclaim Deed to be

prepared by Husband which transfers his interest in this

property to Wife. Wife shall be responsible for payment of

all costs associated with preparing and recording the

Quitclaim Deed. Wife shall be responsible for the mortgage,

taxes and insurance on the property, holding the other

harmless for the same. Husband during the term of the rental

agreement shall have use of the property and agrees to

maintain the property.

After seven (7) years, Should (sic) Wife elect to sell the

property, Husband shall have the option of the first refusal

regarding the purchase. If the parties cannot agree on a sales

price, the property shall be appraised by a professional

property appraiser and the appraisal shall set the sales price.

Husband is not obligated to purchase the property. Wife

agrees to pay the upcoming taxes and insurance on this

property that will be due later in 2014 and thereafter.

The MDA also provided the following Enforcement provision:

In the event it becomes reasonably necessary for either party

to institute or defend legal proceedings relating to the

enforcement of any provision of this Agreement, the

successful party shall also be entitled to a judgment for

reasonable expenses, including attorney’s fees, incurred in

connection with such proceedings.

Upon the conclusion of the parties’ divorce, Ankrom quitclaimed his interest in

the property to Schmidt via a quitclaim deed. However, the parties did not subsequently

enter into a farm lease as contemplated. The record reveals that Husband demonstrated

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no intention to farm the property. Schmidt, desiring to sell the property prior to 7 years

elapsing, brought an action for declaratory judgment to declare the farm lease provision

and attendant 7-year purchase option unenforceable as a matter of law.

At a hearing on Schmidt’s motion for partial summary judgment and Ankrom’s

motion for summary judgment, the trial court found in favor of Ankrom, holding that he

had a right of first refusal to purchase the property for 7 years from the date the parties’

executed the MDA and that selling the property prior to that time would result in a breach

of the agreement. Schmidt timely filed this appeal.

II. ISSUES

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

A. Whether the contractual language awarding Ankrom a 7-year

purchase option was valid and enforceable when the parties did not

subsequently enter into the contemplated farm lease.

B. Whether Ankrom was entitled to recover reasonable attorney’s fees

and costs as the prevailing party in a declaratory judgment action pursuant

to the enforcement provision of the MDA.

III. STANDARD OF REVIEW

Summary judgment is appropriate “when the undisputed facts, as well as the

inferences reasonably drawn from the undisputed facts, support only one conclusion-that

the moving party is entitled to a judgment as a matter of law.” Green v. Green, 293

S.W.3d 493, 513 (Tenn. 2009) (citing Griffis v. Davidson Cnty. Metro. Gov’t, 164

S.W.3d 267, 283-84 (Tenn. 2005)); Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d

614, 620 (Tenn. 2002); see Tenn. R. Civ. P. 56.04. “Questions of contract interpretation

are generally considered to be questions of law, and thus are especially well-suited for

resolution by summary judgment.” Ross Products Div. Abbott Labs. v. State, No.

M2006-01113-COA-R3-CV, 2007 WL 4322016, at *2 (Tenn. Ct. App. Dec. 5, 2007)

perm. app. denied (Tenn. Apr. 28, 2008) (citing Doe v. HCA Health Servs. of Tenn., 46

S.W.3d 191, 196 (Tenn. 2001)); Campora v. Ford, 124 S.W.3d 624, 628 (Tenn. Ct. App.

2003); Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999); Hamblen Cnty. v. City of

Morristown, 656 S.W.2d 331, 335-36 (Tenn. 1983). The resolution of a motion for

summary judgment is a matter of law, which we review de novo with no presumption of

correctness. Bourland, Heflin, Alvarez, Minor & Matthews, PLC v. Heaton, 393 S.W.3d

671, 674 (Tenn. Ct. App. 2012) (citing Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84

(Tenn. 2008)). “We are required to review the evidence in the light most favorable to the

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nonmoving party and to draw all reasonable inferences favoring the nonmoving party.”

Martin, 271 S.W.3d at 84 (citing Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 89 (Tenn.

2000)).

IV. DISCUSSION

A.

i. Intent of the Parties

A marital dissolution agreement “is a contract and as such generally is subject to

the rules governing construction of contracts.” Johnson v. Johnson, 37 S.W.3d 892, 896

(Tenn. 2001). As such, MDAs have been found to be valid and enforceable contracts

between the parties. Barnes v. Barnes, 193 S.W.3d 495, 498 (Tenn. 2006). Interpretation

of an MDA is subject to the rules of construction governing contracts:

The resolution of this issue involves the interpretation of the

parties’ MDA. An MDA is contractual in nature and is

binding between the parties; therefore, the interpretation of

the MDA is “subject to the rules governing construction of

contracts.”

Minor v. Nichols, No. W2012-01720-COA-R3-CV, 2014 WL 356508, *5 (Tenn. Ct.

App. 2012) (citing Barnes, 193 S.W.3d at 498). “Each provision of an MDA should be

construed in light of the entire MDA, and the language in these provisions should be

given its natural and ordinary meaning.” Minor, 2014 WL 356508 at *5 (citing Elliott v.

Elliott, 149 S.W.3d 77, 84 (Tenn. Ct. App. 2004)).

The parties stipulated and the trial judge held that the terms of the disputed

provisions are not ambiguous. An unambiguous contract must be interpreted as written

“and not in accordance with a party’s unexpressed intent.” Pitt v. Tyree Org., Ltd., 90

S.W.3d 244, 252 (Tenn. Ct. App. 2002). “Where the contract’s language is clear and

unambiguous, the agreement is to be given effect according to its terms, and ‘the court

will interpret the contract’s terms by assigning language its ordinary meaning and without

resort to extrinsic evidence.’” Bourland, Heflin, Alvarez, Minor & Matthews, PLC, 393

S.W.3d at 676 (citations omitted). “When the language of the MDA is plain and

unambiguous, courts determine the intent of the parties from the four corners of the

contract and enforce its plain terms as written.” Minor, 2014 WL 356508 at *6; see Int’l

Flight Ctr. v. City of Murfreesboro, 45 S.W.3d 565, 570 (Tenn. Ct. App. 2000).

The court does not attempt to ascertain the parties’ state of mind at the time the

contract was executed but rather the parties’ intentions as “actually embodied and

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expressed in the contract as written.” Rainey v. Stansell, 836 S.W.2d 117, 118 (Tenn. Ct.

App. 1992). For this reason, we do not look to the testimony of the parties as to the

reason for inserting the 7-year purchase option into the MDA but instead look no further

than the four corners of the MDA.

“All provisions in the contract should be construed in harmony with each other, if

possible, to promote consistency and to avoid repugnancy between the various provisions

of a single contract.” Guiliano, 995 S.W.2d at 95. Construing the contract as a whole, as

we are required to do, we find that the 7-year purchase option was tied to the farm lease

contemplated by both parties. Obviously, the parties intended entering a farm lease prior

to the Wife selling the property. Here, the provision states: “Husband and Wife will enter

into a separate rental agreement allowing the Husband to farm, raise crops and livestock

for up to (7) seven years.” There is no serious debate as to the meaning of this provision.

It is clear, unambiguous, and susceptible to only one interpretation. The provision

continues that “after seven (7) years, Should (sic) Wife elect to sell the property, Husband

shall have the option of the first refusal regarding the purchase.” This second provision

gives the Husband a purchase option at the conclusion of the farm lease. The parties not

having subsequently entered into the contemplated farm lease, the 7-year restriction is

left orphaned. Separating these provisions therefore creates an ambiguity as to the

running of the option. Such interpretation ignores that the parties intended to first enter

into a farm lease.

Significantly, the MDA makes no provision for the parties not entering into a farm

lease. There is no provision stating that Schmidt cannot sell the property prior to 7 years,

only that “[a]fter seven years, Should (sic) Wife elect to sell the property, Husband shall

have the option of the first refusal regarding the purchase.” Giving the language of the

provision its usual and ordinary meaning, it is obvious that the parties intended for

Schmidt to be free to sell it, subject to Ankrom’s right of first refusal. Construing the

contract as a whole, it appears to this court that the parties intended that Ankrom have the

right of first refusal once a farm lease was no longer in the picture. It is uncontroverted

that the parties did not subsequently enter into the contemplated farm lease, so Schmidt

will not be in breach of contract for selling the property, as long as she gives Ankrom the

right of first refusal.

The intent of the parties within the four corners of the document reveals that the

parties intended Ankrom to have a right of first refusal once Schmidt was free to sell the

property. Considering how the law abhors restrictions on alienation, we reverse the trial

court’s holding restricting Schmidt from selling the property prior to June 26, 2021.

Schmidt may sell the property at any time, but Ankrom’s right of first refusal stands

intact.

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ii. Agreement to Agree Provision

The contract provision that the parties would enter into a separate farm lease

agreement stipulates an agreement to agree, a provision unenforceable as a matter of law.

It is well settled in contract law that mere agreements to agree are not enforceable. Four

Eights, LLC v. Salem, 194 S.W.3d 484, 485-87 (Tenn. Ct. App. 2005); see Engenius

Entm’t, Inc. v. Herenton, 971 S.W.2d 12, 17-18 (Tenn. Ct. App. 1997).

The trial court correctly held that the farm lease provision is unenforceable as a

matter of law, as the courts cannot enforce an agreement to agree, but the court erred in

finding that the 7-year purchase option is valid and enforceable apart from the parties

entering into the contemplated farm lease. Ankrom contends that the provision allows

him to enter into a farm lease for any duration, from one day up to 7 years. There is

nothing in the MDA specifying from what date the 7 years begins to run. A contract for

future action must specify all material and essential terms. Four Eights, 194 S.W.3d at

487. The MDA at issue sets out no definite terms, dates, prices, or duration, other than

the requirement that the lease extends up to 7 years, with an option for Husband to

purchase after 7 years. We find that the provision is unenforceable because of its

uncertainty, vagueness, and its reference to future action without sufficiently definite

terms.

B.

The American Rule is well-established for the award of attorney’s fees, and parties

are generally responsible for their own attorney’s fees. State v. Brown & Williamson

Tobacco Corp., 18 S.W.3d 186, 194 (Tenn. 2000). One exception to the rule, however, is

that a party may recover attorney’s fees when a contractual provision creates a right to

recover such fees. Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303,

308 (Tenn. 2009). Accordingly, prevailing parties are entitled to recover their reasonable

attorney’s fees to enforce their contractual rights. Cracker Barrel Old Country Store,

Inc., 284 S.W.3d at 309.

The parties’ MDA Enforcement provision provides:

In the event it becomes reasonably necessary for either party

to institute or defend legal proceedings relating to the

enforcement of any provision of this Agreement, the

successful party shall also be entitled to a judgment for

reasonable expenses, including attorney’s fees, incurred in

connection with such proceedings.

We have previously held that when an MDA provision mandates an award of attorney’s

fees to the prevailing party, the courts do not have discretion to deny such an award. See,

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e.g., Eberbach v. Eberbach, 535 S.W.3d 467, 476 (Tenn. 2017); Beem v. Beem, No.

W2009-00800-COA-R3-CV, 2010 WL 1687782, at *9-10 (Tenn. Ct. App. 2010).

Schmidt contends that an award of attorney’s fees to Ankrom in this action is

inappropriate because her action was not to enforce the MDA, but rather sought a

declaratory judgment on the rights of the parties under the MDA. The parties’ MDA

states that the successful party is entitled to a judgment for reasonable attorney’s fees and

costs in any action brought “relating” to enforcement of any MDA provision. Schmidt’s

counsel points to New Covenant Baptist Church v. Sark, No. E2002-02693-COA-R3-CV,

2003 WL 21544248, *1 (Tenn. Ct. App. 2003), where we reversed an award of attorney’s

fees, finding that a close reading of the language in the underlying contract awarded

attorney’s fees solely in actions to “enforce” the agreement.

The MDA at issue provides an award of attorney’s fees and costs to the prevailing

party in any action “relating” to the enforcement of any provision of the MDA; as such,

the parties’ enforcement provision is broader than the contractual language in New

Covenant. While an action for declaratory judgment is not an action to enforce the

MDA, such action does “relate” to the enforcement of the MDA. The contractual

language in the parties’ MDA is different from the narrow language in the underlying

contract in New Covenant and is therefore distinguishable. In this case, however, because

we reverse the trial court below and allow Schmidt to sell the property, costs and

attorney’s fees are awarded to Schmidt as the prevailing party. We remand the case to

the trial court to establish the amount of reasonable attorney’s fees.

V. CONCLUSION

We reverse the decision of the trial court and remand this cause for all further

proceedings as may be necessary and consistent with this opinion. The costs of this

appeal are assessed to the appellee, Aaron Errol Ankrom.

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JOHN W. MCCLARTY, JUDGE

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