Tennessee Homes v. Dalton L. Welch

08/12/2022

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

Assigned on Briefs July 1, 2022

TENNESSEE HOMES v. DALTON L. WELCH, ET AL.

Appeal from the Circuit Court for Coffee County

No. 2020-CV-47049 William A. Lockhart, Judge

___________________________________

No. M2021-01383-COA-R3-CV

___________________________________

This appeal is a landlord-tenant dispute involving issues of liquidated damages and

material breach of contract. The landlord filed a civil warrant in general sessions court to

recover an early termination fee and other related fees pursuant to the parties’ lease

agreement. The general sessions court entered a judgment in favor of the landlord finding

that the early termination fee was reasonable and was not a penalty. The tenants appealed

the judgment to the circuit court. The circuit court also entered a judgment in favor of the

landlord finding that the early termination fee was reasonable and was not a penalty and

that the landlord did not breach the lease agreement. The tenants appeal. We affirm as

modified and remand to the circuit court for calculation of damages.

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

Remanded

CARMA DENNIS MCGEE, J., delivered the opinion of the court, in which W. NEAL

MCBRAYER and KRISTI M. DAVIS, JJ., joined.

Drew Justice, Murfreesboro, Tennessee, for the appellants, Dalton L. Welch and Alexis S.

Clark.

James D. Lane, II, Tullahoma, Tennessee, for the appellee, Tennessee Homes.

OPINION

I. FACTS & PROCEDURAL HISTORY

In March 2020, Dalton L. Welch and Alexis S. Clark (collectively, “Tenants”)

entered into a “Tennessee Residential Lease Agreement” with Tennessee Homes

(“Landlord”).1 The lease agreement consisted of 33 paragraphs and included six addenda

regarding the following: insurance; pest control; wi-fi end user acceptance agreement; zero

tolerance for criminal activity; pets; and a statement of facts. The lease agreement was for

a 12-month term and required monthly rent in the amount of $865.00. Additionally, the

lease agreement contained the following relevant provisions:

3. DAMAGE DEPOSIT: Upon the due execution of this Agreement,

Tenant shall deposit with Landlord the sum of [$500.00] receipt of which is

hereby acknowledged by Landlord, as security for any damage caused to the

Premises during the term hereof. Such deposit shall be returned to Tenant,

without interest, and less any set off for damages to the Premises upon the

termination of this Agreement. . . . .

...

5. CONDITION OF PREMISES: Tenant stipulates, represents and

warrants that Tenant has examined the Premises, and that they are at the time

of this Lease in good order, repair, and in safe, clean and tenantable

condition. Any damaged or non-working items on the Premises will be noted

on the attached and signed ‘Check-in Sheet’.

...

7. ALTERATIONS AND IMPROVEMENT: Tenant shall make no

alterations to the buildings or improvements on the Premises or construct any

building or make any other improvements on the Premises without the prior

written consent of Landlord. Any and all alterations, changes, and/or

improvements built, constructed or placed on the Premises by Tenant shall,

unless otherwise provided by written agreement between Landlord and

Tenant, be and become the property of Landlord and remain on the Premises

at the expiration or earlier termination of this Agreement.

...

13. INSPECTION OF PREMISES: Landlord and Landlord’s agents shall

have the right at all reasonable times during the term of this Agreement and

any renewal thereof to enter the Premises for the purpose of inspecting the

Premises and all buildings and improvements thereon. And for the purposes

of making any repairs, additions, or alterations as may be deemed appropriate

by Landlord for the preservation of the Premises of the building. . . . .

1

Ernest G. Hobbs, Jr. was the owner and property manager for Tennessee Homes, and we also refer

to him as “Landlord” in this opinion.

-2-

...

21. EARLY TERMINATION FEES: If this agreement terminates for

nonpayment or other listed defaults, other than a Landlord approved written

termination from Tenant, Tenant agrees to pay [$1,000.00], in addition to all

other fees, charges, and damages allowed, as an Early Termination Fee

(hereinafter referred to as ‘Early Termination Fee’). The Early Termination

Fee is not a penalty, but rather a charge to compensate Landlord for Tenant’s

failure to satisfy the terms of the agreement.

...

24. FEES: Should it become necessary for Landlord to employ an attorney

to enforce any of the conditions or covenants hereof, including the collection

of rent or gaining possession of the Premises, Tenant agrees to pay all

expenses incurred, including a reasonable attorney’s fee. . . . .

...

27. SEVERABILITY: If any provision of this Agreement or the application

thereof shall, for any reason and to any extent, be invalid or unenforceable,

neither the remainder of this Agreement nor the application of the provision

to other persons, entitles, or circumstances shall be affected thereby, but

instead shall be enforced to the maximum extent permitted by Law.

After entering into the lease agreement, Tenants moved in to the apartment. Pursuant to

paragraph 5 of the lease agreement, Tenants completed a check-in sheet and determined

that, non-figuratively, everything but the kitchen sink was in acceptable condition at the

time. They submitted a work order requesting that maintenance inspect the leaky sink.

Both the check-in form and the work order contained notations that the sink was checked

and/or repaired. However, according to Mr. Welch, he eventually had to fix the sink

himself after waiting for help to no avail. Shortly after they moved in, Tenants also

discovered that the refrigerator was not working properly, but this issue was not noted on

the check-in form.

In June 2020, Mr. Welch drafted a letter expressing his and Ms. Clark’s

dissatisfaction with the apartment and their desire to terminate the lease. He described

other issues such as the defective wi-fi and having to replace the refrigerator, and

complained about the lack of response they received in regard to these issues. He also

suggested that they should not have to pay anything further due to their trouble and that

they would be out of the apartment by the end of June. In response to this letter, Landlord

agreed to let them out of their lease, but he informed them that, per paragraph 21 of the

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lease agreement, they would have to pay the early termination fee of $1,000. In a text

message, Mr. Welch acknowledged that he would pay the early termination fee but

disagreed to pay any other fees beyond that. At the end of June, Tenants moved out of the

apartment as agreed but did not pay the early termination fee. Landlord was able to relet

the apartment to another individual on July 9, 2020.

As a result of Tenants’ failure to pay the early termination fee, Landlord filed a civil

warrant in general sessions court pursuant to paragraph 24 of the lease agreement.

Landlord sought to recover the “early termination fee of $1,000.00,” as well as the

“remaining monthly rent until property is relet at $865.00 (8 months) per month; damages

of $250.00; courts costs of $145.50; service fees of $75.00; [and] attorney’s fees of $600.00

for a total of $8,490.50.”2 Tenants disputed whether they caused any physical damage to

the apartment, but an affidavit was filed by Landlord claiming otherwise. They also argued

that the early termination fee was unenforceable because it was a penalty, which was

against public policy. The general sessions court held a trial on the matter in September

2020. The court entered judgment in favor of Landlord finding that the early termination

fee was reasonable and was not a penalty. The court held that Landlord was entitled to a

total of $1,870.50, less the $500.00 security deposit. The judgment for $1,870.50 included

the following fees: $1,000.00 for the early termination fee; $600.00 for attorney’s fees;

$145.50 for court costs; $75.00 for service fees; and $50.00 for damages. Thereafter,

Tenants timely appealed the judgment to the circuit court.

The circuit court ultimately held a de novo trial on the matter in October 2021.

Tenants raised an allegation not previously tried regarding a material breach by Landlord.

After closing arguments, the court made an oral ruling in favor of Landlord and stated that

Landlord could submit an affidavit for attorney’s fees. Counsel for Landlord subsequently

submitted an affidavit. On October 22, 2021, the circuit court then entered a judgment

detailing its findings. Like the general sessions court, the court found that the early

termination fee was reasonable and was not a penalty. Furthermore, the court found that

Landlord did not breach the lease agreement. Therefore, the court held that Landlord was

entitled to judgment and calculated the judgment amount as follows:

Rent: $252.00

Damages: $50.00

Early Termination Fee: $1,000.00

Subtotal: $1,302.00

2

Tenants signed the twelve-month lease in March 2020 and vacated the premises at the end of

June, so they remained on the property for approximately four months. Landlord filed a civil warrant

requesting rent in the amount of $865/month for the remaining eight months of the lease. The civil warrant

was filed on same day that the property was relet.

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Security Deposit: -$500.00

Subtotal: $802.00

Refrigerator: -$300.00

Subtotal: $502.00

Attorney’s Fees (General Sessions Court): $145.50

Service Fee (General Sessions Court): $75.00

Subtotal: $1,322.50

Attorney’s Fees for [Circuit Court] Appeal: $1,650.00

Total Judgment in the Amount of $3,695.003

Afterward, Tenants timely filed an appeal with this Court.

Tenants filed a statement of the proceedings, to which Landlord filed an objection.

After a hearing on the matter, the circuit court entered an order finding that all aspects of

the statement of proceedings were consistent with what had transpired, with the exception

of two clarifications concerning the lease agreement and the text messages between the

parties. The court explained that the lease agreement was properly submitted into evidence

without objection, the lease agreement was a binding contract entered into between the

parties, Tenants only argued that the early termination fee was unenforceable, and the

remainder of the lease agreement was enforceable. Additionally, the court explained that

the text messages between the parties were admitted into evidence over the objection of

Tenants, the objection was toward the relevance of the text messages and was overruled,

and the text messages did not form a contract or amend the lease agreement.

Upon review of the record, this Court found that it did not have subject matter

jurisdiction because the circuit court’s order from October 22, 2021, was not a final

judgment pursuant to Tennessee Rule of Civil Procedure 58. Therefore, we ordered

Tenants to obtain entry of a final judgment in the circuit court. A supplemental record was

subsequently filed with this Court which contained a final order that complied with

Tennessee Rule of Civil Procedure 58.

II. ISSUES PRESENTED

3

In its calculation of the judgment amount, the circuit court’s math fails to add up, which Tenants

point out in their appellate brief. Landlord attempts to clarify this discrepancy in its appellate brief,

explaining that the court inadvertently left out the actual attorney’s fees of $600 from general sessions court

and that the $145.50 represents the court costs, i.e., the filing fees for the civil warrant. Even assuming

arguendo that this Court accepts Landlord’s explanation, the math still falls short of the total judgment

amount of $3,695.00.

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Tenants present the following issues for review on appeal, which we have reordered

and slightly restated:

1. Whether Landlord materially breached the contract first, thereby justifying Tenants

moving out early;

2. Whether the early termination fee was a valid and enforceable liquidated damages

clause; and

3. Whether the final judgment improperly totaled the amount of damages from the

circuit court’s oral ruling and/or improperly awarded attorney’s fee without

evidence.

In addition to these issues, Landlord presents an issue of whether he is entitled to recover

attorney’s fees incurred as a result of this appeal. For the following reasons, we affirm and

remand to the circuit court for further proceedings consistent with this opinion.

III. STANDARD OF REVIEW

This is an appeal of a trial court’s decision made from a bench trial. “In an appeal

from a bench trial, we review the trial court’s findings of fact de novo with a presumption

of correctness, unless the evidence preponderates otherwise.” Smith v. Hi-Speed, Inc., 536

S.W.3d 458, 467 (Tenn. Ct. App. 2016) (quoting Foster-Henderson v. Memphis Health

Ctr., Inc., 479 S.W.3d 214, 223 (Tenn. Ct. App. 2015)). Furthermore, “great weight is

given to the trial court’s determinations of credibility.” Pless v. Pless, 603 S.W.3d 753,

770 (Tenn. Ct. App. 2019) (citing Walton v. Young, 950 S.W.2d 956, 959 (Tenn. 1997)).

Therefore, we give “great weight to a trial court’s factual findings that rest on

determinations of credibility.” Id. (quoting Nashville Ford Tractor, Inc. v. Great Am. Ins.

Co., 194 S.W.3d 415, 424 (Tenn. Ct. App. 2005) (citations omitted)). “Although we also

review the trial court’s resolution on a question of law de novo, no presumption of

correctness attaches to the trial court’s legal conclusions.” Hi-Speed, Inc., 536 S.W.3d at

467 (citing Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000)).

IV. DISCUSSION

A. Material Breach

We begin our discussion by first addressing the issue concerning material breach.

Tenants contend that Landlord was the first party to materially breach the contract, i.e., the

lease agreement. The circuit court found that Landlord did not breach the lease agreement.

The court concluded that there were minor issues that Tenants experienced, but those issues

did not constitute a breach of the lease agreement. We agree.

It is well established that a party must establish three elements in order to succeed

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on a breach of contract claim: “‘(1) the existence of an enforceable contract, (2)

nonperformance amounting to a breach of contract, and (3) damages caused by the breach

of the contract.’” Fitness & Ready Meals LLC v. Eat Well Nashville LLC, No. M2021-

00105-COA-R3-CV, 2022 WL 601073, at *3 (Tenn. Ct. App. Mar. 1, 2022) (quoting

Bynum v. Sampson, 605 S.W.3d 173, 180 (Tenn. Ct. App. 2020) (citation omitted)). The

parties’ dispute as to this particular issue pertains to the second element—a

nonperformance that amounts to breach of the lease agreement. This Court has held that

“in order for a contractual breach to be sufficient to relieve the non-breaching party of its

contractual obligations, the initial breach must be ‘material.’” M & M Elec. Contractor,

Inc. v. Cumberland Elec. Membership Corp., 529 S.W.3d 413, 423 (Tenn. Ct. App. 2016)

(quoting DePasquale v. Chamberlain, 282 S.W.3d 47, 53 (Tenn. Ct. App. 2008) (citation

omitted)). If the breach “‘was slight or minor, as opposed to material or substantial, the

nonbreaching party is not relieved of his or her duty of performance, although he or she

may recover damages for the breach.’” Id. (quoting Anil Constr. Inc. v. McCollum, No.

W2014-01979-COA-R3-CV, 2015 WL 4274109, at *12 (Tenn. Ct. App. July 15, 2015)

(no perm. app. filed) (citation omitted)). When determining the materiality of a party’s

breach, it is the “clear trend” of Tennessee courts “to apply the test found in section 241 of

the Restatement (Second) of Contracts.” Madden Phillips Constr., Inc. v. GGAT Dev.

Corp., 315 S.W.3d 800, 822-23 (Tenn. Ct. App. 2009); see, e.g., State v. Howington, 907

S.W.2d 403, 410-411 (Tenn. 1995); DePasquale, 282 S.W.3d at 53-54; Adams TV of

Memphis, Inc. v. ComCorp of Tenn., Inc., 969 S.W.2d 917, 921 (Tenn. Ct. App. 1997).

That test includes the following factors:

(a) the extent to which the injured party will be deprived of the benefit which

he reasonably expected;

(b) the extent to which the injured party can be adequately compensated for

the part of that benefit of which he will be deprived;

(c) the extent to which the party failing to perform or to offer to perform will

suffer forfeiture;

(d) the likelihood that the party failing to perform or to offer to perform will

cure his failure, taking account of all the circumstances including any

reasonable assurances;

(e) the extent to which the behavior of the party failing to perform or to offer

to perform comports with standards of good faith and fair dealing.

Restatement (Second) of Contracts § 241 (1981). However, when analyzing the materiality

of a breach, we have held that sometimes “these factors are only marginally helpful in

analyzing the materiality.” M & M Elec. Contractor, Inc., 529 S.W.3d at 423.

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In order to resolve this issue of first material breach, we examine the issues that

Tenants experienced during their time at the apartment. There were three specific issues

that Tenants experienced regarding the sink, the refrigerator, and the wi-fi. Landlord

testified that he observed a problem with the sink when the lease was first entered into in

March 2020, but the records he provided demonstrated that he sent someone to fix it just a

few days later. He explained that he did not receive any further complaints from Tenants

about the sink until June 2020. Mr. Welch testified that he informed someone about the

sink, but after about two weeks, he was unaware if anyone had come to fix it and decided

to fix it himself. He agreed that it was conceivable that someone might have come to fix

it while he was away, but he did not believe that someone should have entered his

apartment without his permission.

As for the refrigerator, Landlord testified that he was contacted and told that the

refrigerator was not working properly shortly after Tenants had moved in. He told Tenants

to load up the refrigerator with ice in order to keep the food cool temporarily because he

did not have anyone to fix it at the time. He learned a few days later, however, that Tenants

bought their own refrigerator from a relative. He admitted that the refrigerator was not

working and that he contracted to provide working appliances, but he maintained that he

was unaware of the defective refrigerator when he entered into the contract. Mr. Welch

testified that no one offered to replace the refrigerator at the time he communicated it was

not working, so after about three days he bought a new one from his mother. He stated that

Landlord never gave him any credit toward his rent for the expense and that he left this

refrigerator when they moved out of the apartment. At the time of his testimony, he was

unable to remember whether he paid $300 or $400 for the refrigerator. His letter from June

2020 reflected that he paid $500 for it.

With respect to the wi-fi, Landlord testified that he was never informed of any

problems with the wi-fi until June 2020. Tenants complained that it did not work or that it

worked only intermittently. As a result, Landlord asked maintenance to look into the

matter and checked with other tenants to see whether they were having any problems, but

he received no other complaints. Mr. Welch testified that the wi-fi “never really worked,”

but he admitted that he did not complain about it until later because of his prior complaints

regarding the sink and the refrigerator. Contrary to Landlord’s testimony, Mr. Welch stated

that other tenants expressed to him that their wi-fi did not work either. Ms. Clark testified

that there was never an offer to improve the wi-fi or reduce their rent due to its

defectiveness.

For a breach of contract claim, we have held that “[w]hether a party has fulfilled its

obligations under a contract or is in breach of the contract is a question of fact.” A & P

Excavating and Materials, LLC v. Geiger, 622 S.W.3d 237, 248 (Tenn. Ct. App. 2020)

(quoting Forrest Constr. Co., LLC v. Laughlin, 337 S.W.3d 211, 225 (Tenn. Ct. App.

2009)). Even assuming that these issues amounted to a breach, we find that the evidence

does not preponderate against the circuit court’s conclusion that the issues were minor, and

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therefore not material. Landlord was initially aware of the issue with the sink and

attempted to resolve it expeditiously by sending someone to fix it. After doing so, he was

unaware that any problem with the sink remained until he was informed by Tenants in June

2020. Mr. Welch admitted that someone might have come to fix the sink while he was

away, and the documents in the record demonstrate that someone did on March 17, 2020.

He did not believe that someone should have entered the apartment without his permission,

but paragraph 13 of the parties’ lease agreement clearly gave Landlord, and his agents, the

right to enter the apartment for the purposes of inspection and repair. Landlord was

unaware of the defective refrigerator at the time the parties entered into the lease

agreement. After he was informed of the issue, he offered a temporary solution to Tenants

until he could find someone to fix the refrigerator. After only a few days, however, Tenants

decided to replace the refrigerator themselves. They replaced the refrigerator without any

prior written consent of Landlord, which was in contravention of paragraph 7 of the parties’

lease agreement. Finally, both Landlord and Mr. Welch testified that the issue with the wi-

fi was not brought up until June 2020, which was shortly before Tenants decided to move

out of the apartment. Landlord then had someone look into the issue and checked with

other tenants to determine whether they were having issues with the wi-fi, but he received

no other complaints. In the addendum regarding the wi-fi, Tenants acknowledged that the

wi-fi “may not be uninterrupted or error-free.”

While we agree that the situation for Tenants was not ideal, the extent to which they

had been deprived of the benefit they reasonably expected did not rise to the level of

material. See Restatement (Second) of Contracts § 241(a) (1981). In regard to all three

issues mentioned above, Landlord attempted, or offered to attempt, to resolve them. From

our review of the record, Landlord acted reasonably and in good faith when these issues

were brought to his attention. See Restatement (Second) of Contracts § 241(e) (1981).

Additionally, it was likely that he would have cured these issues if Tenants had

communicated further about the sink, had waited more than a few days to allow him to

resolve the issue with the refrigerator, and had brought the issue with the wi-fi to his

attention sooner. See Restatement (Second) of Contracts § 241(d) (1981). We sympathize

with Tenants—no one wants to move into an apartment and encounter problems,

irrespective of the materiality. Nevertheless, we find that these issues were “slight or

minor, as opposed to material or substantial,” and therefore Tenants were not relieved of

their duty of performance. M & M Elec. Contractor, Inc., 529 S.W.3d at 423 (quoting Anil

Constr. Inc., 2015 WL 4274109, at *12 (no perm. app. filed) (citation omitted)). As such,

we conclude Landlord did not materially breach the lease agreement first.

B. Liquidated Damages

While the parties differ on whether the lease agreement’s provision regarding an

early termination fee is enforceable, both of them appear to agree that the lease on its face

provides for the potential collection of an early termination fee in addition to “other fees,

charges, and damages.” Tenants contend that the provision in the lease agreement

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providing for an early termination fee was unenforceable. To support this contention, they

argue that the early termination fee was unenforceable because, when viewed

prospectively, damages were not difficult to ascertain and the early termination fee was not

a reasonable estimate of damages. They also argue that the early termination fee was a

penalty because it was cumulative to damages rather than a substitute for damages.

Additionally, they claim that the lease agreement’s language stating the early termination

fee was “not a penalty” is irrelevant and that Landlord had “less-than-zero damages”

without the early termination fee. In response to these arguments, Landlord contends that

the early termination fee was reasonable, bore a direct relationship with the monthly rental

amount, and was not a penalty. At trial, Landlord testified that the early termination fee

applied in addition to all other damages because he had other business expenses, besides

lost rent and physical damage, which the fee helped subsidize. In order to address this

issue, we review the Tennessee case law on liquidated damages.

i. Generally

Initially, although not technically raised as a separate issue, we determine the

finding that the “early termination fee” is, on its face, a purported liquidated damages

clause to be integral to our review. See Keck v. Meek, No. E2017-01465-COA-R3-CV,

2018 WL 3199220, at *7 (Tenn. Ct. App. June 28, 2018) (determining that whether the

trial court properly found that the buyers exercised their option to purchase the subject

property was integral to its review, although it was not raised as a separate issue by the

sellers). The lease agreement did not refer to the early termination fee as “liquidated

damages.” The provision reads as follows:

21. EARLY TERMINATION FEES: If this agreement terminates for

nonpayment or other listed defaults, other than a Landlord approved written

termination from Tenant, Tenant agrees to pay [$1,000.00], in addition to all

other fees, charges, and damages allowed, as an Early Termination Fee

(hereinafter referred to as ‘Early Termination Fee’). The Early Termination

Fee is not a penalty, but rather a charge to compensate Landlord for Tenant’s

failure to satisfy the terms of the agreement.

However, we note that “the parties’ choice of language does not determine the nature of

the provision.” Anesthesia Med. Grp., P.C. v. Buras, No. M2004-01599-COA-R3-CV,

2006 WL 2737829, at *2 (Tenn. Ct. App. Sept. 25, 2006) (citing Guiliano v. Cleo, Inc.,

995 S.W.2d 88, 97 (Tenn. 1999)). Our Supreme Court has explained that “[a] contractual

provision need not explicitly include the term ‘liquidated damages’ to constitute a

liquidated damages provision.” Guiliano, 995 S.W.2d at 97. Rather, “it is the task of the

Court and not of the parties to decide the true nature of the sum payable.” P.S. Atiyah, An

Introduction to the Law of Contract 316-17 (3d ed. 1981). “If the contract is for a matter

of uncertain value, and a reasonable sum is fixed by the parties as the amount to be paid on

breach, that sum, though actually called a ‘penalty’ in the instrument, is recoverable as

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liquidated damages if the obligation be not in fact performed.” Ill. Cent. R. Co. v. So.

Seating & Cabinet Co., 58 S.W. 303, 305 (Tenn. 1900) (citations omitted) (emphasis

added). Concomitantly, if the sum is “unreasonable . . . , the stipulation, however named,

is a penalty, and only actual damages, to be ascertained in the ordinary way, can be

recovered.” Id. at 306 (emphasis added).

Although it is not explicitly stated in the lease agreement, the provision was clearly

intended to be a stipulation for liquidated damages. See Buras, 2006 WL 2737829, at *2

(“The term ‘liquidated damages’ means a sum agreed upon by contracting parties at the

time they enter into their contract, to be paid as compensation for damages suffered by one

party in the event that the other breaches the contract.”) (citing V.L. Nicholson v. Transcon

Inv., 595 S.W.2d 474, 484 (Tenn. 1980)). We can conclude so because the clear language

of the provision made the fee due or conditioned upon termination “for nonpayment or

other listed defaults” and referred to the fee as a “charge to compensate Landlord for

Tenant’s failure to satisfy the terms of the agreement.” See id. (concluding that the

provision was clearly one for liquidated damages because the clear language of the

contract’s provision made the payment due or conditioned upon a breach, or, specifically,

an “event of default.”) (citing Guiliano, 995 S.W.2d at 97).

Therefore, as a preliminary matter, we find that the circuit court properly analyzed

the “early termination fee” as a provision for liquidated damages. The decisive question is

whether the liquidated damages provision at issue is enforceable.

ii. Enforceability4

We have found that “[t]he beginning point for any current day discussion of

liquidated damages is the Tennessee Supreme Court’s holding in Guiliano . . . .” Id. at *6.

Our Supreme Court discussed the issue of liquidated damages at length in Guiliano and

determined that the “prospective approach” best addresses the recovery of liquidated

damages. Guiliano, 995 S.W.2d at 100; see Allmand v. Pavletic, 292 S.W.3d 618, 630-31

(Tenn. 2009) (reaffirming and applying the principles of liquidated damages from

Guiliano); Hensley v. Cocke Farmer’s Coop., No. E2014-01775-COA-R3-CV, 2015 WL

4

If we find that the liquidated damages provision is unenforceable, the lease agreement contains a

severability provision in paragraph 27, which would allow the remainder of the lease agreement to still be

enforced. We note that:

Even if the [liquidated damages] provision is an unenforceable penalty, or where the clause

is invalid for other reasons, the injured party will not forfeit all rights to contract

enforcement, but may still seek its actual demonstrated damages. Where the liquidated

damages clause is unenforceable, and no bar exists to a damages remedy, this situation

might actually benefit the plaintiff where it can prove a loss, because the actual damages

could exceed liquidated damages.

22 Tenn. Prac. Contract Law & Prac. § 12:37 (footnote omitted).

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5121142, at *5-6 (Tenn. Ct. App. Aug. 31, 2015), perm. app. denied (Tenn. Ct. App. Jan.

21, 2016) (applying the principles of liquidated damages from Guiliano in a case involving

a contractual provision for severance pay). The Court explained that “there are two

important interests at issue: the freedom of parties to bargain for and to agree upon terms,”

such as a term providing for liquidated damages, “and the limitations set by public policy.”

Id. “Generally, the parties to a contract are free to agree upon liquidated damages and upon

other terms that may not seem desirable or pleasant to outside observers.” Id.; see Chapman

Drug Co. v. Chapman, 341 S.W.2d 392, 398 (Tenn. 1960); 22 Am. Jur. 2d Damages § 686

(1988). In that respect, we “should not interfere in the contract, but should carry out the

intentions of the parties and the terms bargained for in the contract, unless those terms

violate public policy.” Id.; see McKay v. Louisville & N.R. Co., 182 S.W. 874, 875 (Tenn.

1916) (citing Baltimore & Ohio S.W. Ry. Co. v. Voight, 176 U.S. 498, 505, 20 S.Ct. 385,

387, 44 L.Ed. 560 (1900)).

In the context of parties agreeing to a liquidated damages provision, the Court

further explained that:

[I]t is generally presumed that [the parties] considered the certainty of

liquidated damages to be preferable to the risk of proving actual damages in

the event of a breach. 22 Am. Jur. 2d Damages § 726.

Liquidated damages permit the parties to allocate business and litigation risks

and often serve as part of the contractual bargain. In addition, they lend

certainty to the contractual agreement and allow the parties to resolve

defaults and other related disputes efficiently, when actual damages are

impossible or difficult to measure. C.T. McCormick, Handbook on the Law

of Damages § 157 (1935).

Id. Thus, under the prospective approach, we “focus on the intentions of the parties based

upon the language in the contract and the circumstances that existed at the time of contract

formation.” Id. (footnote omitted). The Court explained that those circumstances include:

[W]hether the liquidated sum was a reasonable estimate of potential damages

and whether actual damages were indeterminable or difficult to measure at

the time the parties entered into the contract. If the provision satisfies those

factors and reflects the parties’ intentions to compensate in the event of a

breach, then the provision will be upheld as a reasonable agreement for

liquidated damages. However, if the provision and circumstances indicate

that the parties intended merely to penalize for a breach of contract, then the

provision is unenforceable as against public policy.

Id. at 100-01 (internal citation omitted). Following this approach, the circuit court properly

determined that the provision regarding the early termination fee must be viewed

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prospectively, rather than retrospectively, at the time the parties entered into the lease

agreement.

A liquidated damages provision is “subject to close scrutiny because of the public

policy against forfeitures.” Bachour v. Mason, No. M2012-00092-COA-R3-CV, 2013 WL

2395027, at *4 (Tenn. Ct. App. May 30, 2013) (citations omitted); Anesthesia Med. Grp.,

P.C. v. Chandler, No. M2005-00034-COA-R3-CV, 2007 WL 412323, at *9 n.7 (Tenn. Ct.

App. Feb. 6, 2007) (citations omitted); Buras, 2006 WL 2737829, at *7 n. 10 (citations

omitted). The viewpoint from which we are to analyze a liquidated damages provision is

described in both Chandler and Buras as follows:

The law continues to be that a liquidated damages provision will be upheld

if the amount of such damages bears a reasonable relationship to the amount

of actual damages that would likely be sustained in the event of a breach and

if the actual amount of damages would be difficult to determine or prove.

Conversely, liquidated damages will not be upheld if they are deemed to

constitute a penalty against the breaching party rather than a reasonable way

to guarantee compensation for damages to the non-breaching party.

Guiliano, 995 S.W.2d at 98.

Chandler, 2007 WL 412323, at *9; Buras, 2006 WL 2737829, at *7 (footnote omitted).

The circuit court found that the early termination fee was reasonable and not a penalty.

Yet, the court did not elaborate on why the early termination fee was reasonable and did

not make a finding that the actual amount of damages would have been difficult to

determine or prove.

When viewing the provision prospectively, it was a “reasonable prediction” that

Landlord could sustain damages if Tenants did not complete their 12-month term.

Guiliano, 995 S.W.2d at 99; see Buras, 2006 WL 2737829, at *7 (explaining that “at the

time the contract was signed it was clearly foreseeable, and in fact likely, that [the plaintiff]

would suffer damages if [the defendant] did not complete his three-year employment

commitment”). Tenants point out in their reply brief that the apartment could have been

filled in one day hypothetically, and the lost rent would have only been approximately

$29.00 ($865.00 monthly rent ÷ 30 days). Likewise, we point out that the apartment could

have not been filled during the remainder of the 12-month term, and the lost rent would

have been approximately $6,920.00 ($865.00 monthly rent × 8 months). Moreover, if

Tenants had moved out earlier than June 2020, the lost rent would have been even greater

if the apartment could not have been filled. The $1,000.00 early termination fee was not

disproportionate in Landlord’s favor; in fact, it was favorable to Tenants. See Buras, 2006

WL 2737829, at *7 (explaining that the liquidated damages were not disproportionate in

plaintiff’s favor, but were favorable to the defendant). When Tenants did move out,

Landlord was able to relet the apartment to another individual on July 9, 2020 and only

sustained approximately $252.00 in lost rent. Nevertheless, “the amount of actual damages

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at the time of breach is of little or no significance to the recovery of liquidated damages”

under the prospective approach. Guiliano, 995 S.W.2d at 99. The early termination fee in

the amount of $1,000.00 was a reasonable estimate of the damages Landlord could sustain

at time the parties entered into the lease agreement.

Still, “the actual amount of damages” must have been “difficult to determine or

prove” in order for a liquidated damages provision to be enforceable. Chandler, 2007 WL

412323, at *9; Buras, 2006 WL 2737829, at *7. In Buras, we found that the actual damages

could not be accurately predicted at the time of the contract formation because, among

other things, it could not be ascertained how long it would take to find a replacement for

the defendant who did not complete his three-year employment commitment. Buras, 2006

WL 2737829, at *7. Similarly, at the time the parties entered into the lease agreement in

this case, it would have been difficult to determine the following: (1) if and when Tenants

would breach by moving out and (2) if and when Landlord would be able to find a new

tenant to replace them. We are unable to find any Tennessee case law specifically

addressing the characterization of such fees in residential lease agreements.5 However, the

Missouri Court of Appeals has interpreted a similar lease provision to be a valid liquidated

damages clause. In Paragon Grp. Inc. v. Ampleman, 878 S.W.2d 878, 881 (Mo. Ct. App.

1994), the Court examined a provision from a lease agreement, which provided a $920.00

termination fee equal to the amount of two month’s rent. Nine months remained on the

lease when the tenant breached the lease, and the Court determined that that $920.00 was

not an unreasonable estimate of the damages the landlord would incur upon breach of a

$5,520.00 lease when nine months remained in the lease term. Id. (citations omitted).

Additionally, the Court disagreed with the tenant’s contention that the amount of damages

would not be difficult to ascertain, explaining that “Missouri courts have consistently held

actual damages for breach of real estate sales contracts are uncertain and difficult to prove.”

Id. (citations omitted). The Court further explained as follows:

Like real estate contracts, it is difficult to measure damages upon breach of

a lease by the tenant. While the amount of rent due under the lease is easily

measurable, it is hard to say how long the apartment will be vacant or how

much time, expense and energy will be expended to re-let the premises. It is

also difficult to estimate whether or how many prospective long-term tenants

were turned away while the leasing tenant occupied the premises or how this

damaged the landlord. Contrary to Tenant’s assertions, it is even harder to

measure the damages of a large apartment complex where marketing and

leasing activities are occurring daily. In that situation, putting a price on

5

We do note that the Keck case involved a dispute concerning a “Tennessee Residential Lease

Agreement,” in which this Court addressed an issue regarding liquidated damages, but it pertained to the

transfer of real property. Keck, 2018 WL 3199220, at *1, 15. The sellers in that case relied in part on a

provision for “liquidated damages” of the parties’ real estate contract, which provided that if the buyers

failed “to perform the covenants herein contained within the time specified,” the sellers would be able to

retain “as liquidated damages all sums which have theretofore been paid.” Id. at *15.

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Landlord’s damages is difficult at best. Where the difficulty of loss is great,

significant latitude is allowed in setting the amount of anticipated damages.

Id. (internal citations omitted). Accordingly, the Court in Ampleman found that the trial

court did not err in finding the clause in question was a valid liquidated damages clause.

Like the Missouri Court of Appeals, we emphasize that “it is difficult to measure damages

upon breach of a lease by the tenant.” Id. Furthermore, “[w]hile the amount of rent due

under the lease is easily measurable,” it is difficult to ascertain, among other things, “how

long the apartment will be vacant or how much time, expense and energy will be expended

to re-let the premises.” Id. The damages Landlord would potentially suffer, if Tenants did

not complete the 12-month term, were “indeterminable or difficult to ascertain at the time

of contract formation.” Chandler, 2007 WL 412323, at *10 (quoting Guiliano, 995

S.W.2d at 99) (emphasis added).

As such, we find that at the time the parties entered into the lease agreement, the

early termination fee of $1,000.00 was a reasonable estimate of potential damages and such

damages were difficult to ascertain at the time the parties entered into the lease agreement.

iii. Scope of Liquidated Damages

Though we have analyzed the liquidated damages provision from the viewpoint

described in Chandler and Buras, our discussion does not end here. “If [a] contract

contains no criteria for determining the stipulated liquidated damages, these exactions will

be unenforceable.” 22 Tenn. Prac. Contract Law & Prac. § 12:36; see Cummins v. Vaughn,

911 S.W.2d 739, 742 (Tenn. Ct. App. 1995) (explaining that the parties eliminated the basis

for recovery of liquidated damages when they obliterated the criteria for the amount of

liquidated damages). The provision in the lease agreement contained such criteria, stating

that it was “a charge to compensate Landlord for Tenant[s’] failure to satisfy the terms of

the agreement.” Thus, the $1,000.00 early termination fee was an estimation of the

anticipated actual damages Landlord would suffer for Tenants’ failure to satisfy the lease

agreement. The following discussion on this issue, which has been called a “Have Cake

and Eat It” clause,6 is instructive:

Questions sometimes arise on whether a party in the same action for breach

may obtain both liquidated and conventional damages. Along with obtaining

liquidated damages, a party can exercise its conventional right to recover

other damages proximately related to a breach of the contract, but only where

they are outside the scope of the liquidated damages clause. On the other

hand, a party may not elect between its right to recover liquidated damages

versus actual damages for losses covered by a liquidated damages clause,

except as permitted by the contract.

6

J. Calamari & J. Perillo, The Law of Contracts, § 14.32 (4th ed. 1998).

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22 Tenn. Prac. Contract Law & Prac. § 12:36 (footnotes omitted). The liquidated damages

provision stated that Tenants agreed to pay the early termination fee “in addition to all other

fees, charges, and damages allowed . . . .” Therefore, Landlord could recover “other fees,

charges, and damages” that were not contemplated by the liquidated damages provision.

As we have explained, “[t]he liquidated damage clauses of contracts do not cover damages

flowing from ‘events’ not contemplated by the parties at the time they are signed ‘unless

the contract expressly provides that damages other than those enumerated . . . shall not be

recovered.’” Loveday v. Barnes, No. 03A01-9201CV0030, 1992 WL 136176, at *4 (Tenn.

Ct. App. June 19, 1992) (citing 22 Am. Jur. 2d Damages § 728).

By that same token, Landlord cannot have his cake and eat it too. “If a party elects

the remedy of liquidated damages, he or she cannot generally seek additional damages for

the same breach.”7 Wayne Boykin & Assocs. v. Tinsely, No. M2006-02465-COA-R3-CV,

2008 WL 820512, at *7 (Tenn. Ct. App. Mar. 26, 2008); see G.H. Swope Bldg. Corp v.

Horton, 338 S.W.2d 556, 568-69 (Tenn. 1960) (“Having retained the $250, the owner has

received all the damages he is entitled to receive under the accepted offer to buy. As the

Court views it, to hold otherwise would be to ignore the accepted meaning of the expression

‘liquidated damages.’”). The very nature of a liquidated damages provision is to settle in

advance the “anticipated actual damages” that might arise “from a future breach.” 22 Am.

Jur. 2d Damages § 506 (footnote omitted). “The effect of a clause for stipulated damages

in a contract is to substitute the agreed amount for the actual damages resulting from a

breach of the contract . . . . A valid liquidated damages clause precludes recovery for actual

damages; both actual damages and liquidated damages cannot be awarded.” 22 Am. Jur.

2d Damages § 535 (footnotes omitted).

Here, it is evident that the parties contemplated the $1,000.00 early termination fee

to be a reasonable estimate of the lost rent and related damages that Landlord would

potentially suffer in light of a breach by Tenants. Consequently, we determine that the

early termination fee was meant to compensate Landlord for the lost rent, and the lost rent

is not recoverable by Landlord.8 Therefore, to the extent that the circuit court awarded the

7

This Court has also briefly discussed this issue of “double recovery” in a case involving a breach

of a construction contract, though we did not reach the substance of the issue. Airline Const. Inc. v. Barr,

807 S.W.2d 247, 259-60 (Tenn. Ct. App. 1990). In Barr, the plaintiff alleged that the award of liquidated

damages was a penalty because the defendant was also awarded lost profits under an oral agreement

between the parties. Id. at 260. However, we ultimately concluded that the issue was moot because we

determined that that the admission of evidence surrounding the oral agreement violated the parol evidence

rule. Id.

8

We have noted that a breach of contract claim for unpaid rent may be “antithetical” to a claim that

liquidated damages are proper under the same contract. Keck, 2018 WL 3199220, at *15 n.5. In the Keck

case, which involved the transfer of real property, we found that the liquidated damages provision was

unenforceable under the circumstances. Id. at *15. In this case, we conclude that Landlord may not recover

both liquidated damages and actual damages in the form of lost rent, but, unlike the Keck case, we have

found that the liquidated damages provision is enforceable under these circumstances.

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$252.00 in lost rent, the total judgment amount should be reduced by that amount.9

iv. Intent

Lastly, we note that Tenants initialed the liquidated damages provision in the lease

agreement demonstrating that they agreed to it and were aware of it. They signed the

addendum regarding the statement of facts and initialed the statement: “I/We understand

and agree there is an early termination fee as stated in the lease agreement[.]”

Furthermore, just before moving out, Mr. Welch acknowledged through a text message in

June 2020 that he would pay the early termination fee “like it says in the lease.” At the

time the parties entered into the lease agreement, and even at the time the parties were

anticipating a breach through their correspondence in June 2020, they intended for the early

termination fee to resolve Tenants’ default efficiently, when actual damages were

impossible or difficult to measure. Guiliano, 995 S.W.2d at 100 (citing C.T. McCormick,

Handbook on the Law of Damages § 157 (1935).

Accordingly, we conclude that the early termination fee, as a liquidated damages

provision, was valid and enforceable. Enforcing this provision “gives effect to the original

intentions of the parties and furthers the goals and purposes of stipulating in advance to

potential damages.” Buras, 2006 WL 2737829, at *8. However, as previously discussed,

Landlord may not recover the actual damages of $252.00 in the form of lost rent. As such,

the total judgment amount should be reduced by $252.00.

C. Final Judgment Amount

i. Calculation

Tenants’ final issue concerns the calculation of the final judgment amount and the

award of attorney’s fees. They state in their appellate brief, “the math on the final judgment

simply does not add up.” After struggling with the math provided in the circuit court’s

judgment, we agree. Moreover, Landlord admits in his appellate brief that the math was

“incorrect” and a certain fee was “omitted by mistake.” Landlord attempts to clarify the

discrepancies in his appellate brief, explaining that the court inadvertently left out the

9

We note here that the lease agreement contained a separate provision concerning the security

deposit, and, incidentally, any damages to the apartment. The deposit was intended to be “security for any

damage caused to the Premises during the term hereof.” Additionally, the provision stated that “such

deposit shall be returned to Tenant, without interest, and less any set off for damages to the Premises upon

the termination of this Agreement.” In light of this separate provision, we determine that the damages to

the apartment were not contemplated by the liquidated damages provision. Furthermore, the early

termination fee was recoverable “in addition to all other fees, charges, and damages allowed,” and recovery

of damages to the apartment were permitted because they were provided for elsewhere in the lease

agreement. As such, pursuant to the security deposit provision, the circuit court properly found that the

$500.00 deposit should be returned to Tenants less the $50.00 for damages to the apartment.

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actual attorney’s fees of $600.00 from general sessions court and that the $145.50

represents the court costs, i.e., the filing fees for the civil warrant. It is evident that this

explanation solves the discrepancy of how the court reached the subtotal of $1,322.50:

Rent: $252.00

Damages: $50.00

Early Termination Fee: $1,000.00

Subtotal: $1,302.00

Security Deposit: -$500.00

Subtotal: $802.00

Refrigerator: -$300.00

Subtotal: $502.00

[Court Cost’s] [$145.50]

Attorney’s Fees (General Sessions Court): [$600.00]

Service Fee (General Sessions Court): $75.00

Subtotal: $1,322.50

Regardless of this explanation, the math still falls $722.50 short of the total judgment

amount of $3,695.00:

Subtotal: $1,322.50

Attorney’s Fees for [Circuit Court] Appeal: $1,650.00

Total Judgment in the Amount of $3,695.00

In light of these mathematical discrepancies, we remand this issue to the circuit court to

determine the correct amount for the total judgment to be awarded to Landlord. See St.

John-Parker v. Parker, 638 S.W.3d 624, 649 (Tenn. Ct. App. 2020) (remanding to the trial

court for an inadvertent omission of discretionary cost from its final judgment). We also

reiterate that Landlord may not recover the actual damages of $252.00 in the form of lost

rent because that amount was contemplated by the liquidated damages provision. On

remand, the correct amount for the total judgment to be awarded to Landlord should be

reduced by $252.00. However, Landlord may recover “all other fees, charges, and

damages” that were not contemplated by the liquidated damages provision.

ii. Reasonable Attorney’s Fees

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Tenants also argue that attorney’s fees should not be awarded at all without

sufficient evidence to assess the reasonableness of the fees. The lease agreement contained

language providing for attorney’s fees as follows: “Should it become necessary for

Landlord to employ an attorney to enforce any of the conditions or covenants hereof,

including the collection of rents or gaining possession of the Premises, Tenant agrees to

pay all expenses incurred, including a reasonable attorney’s fee.” After trial, counsel for

Landlord submitted an affidavit, stating in pertinent part, “My current hourly rate for

creditor clients is $250.00/hour. However, I currently represent the Plaintiff in this matter

and charge an hourly rate of $150.00/hour.” Counsel for Landlord did not include the

number of hours or an estimated amount of attorney’s fees incurred. In its judgment, the

circuit court found that Landlord was entitled to a judgment of attorney’s fees pursuant to

paragraph 24 of the lease agreement. The court found that Landlord was entitled to

$1,650.00 in attorney’s fees for the proceedings in circuit court, but, as discussed above,

the court’s calculation of the total judgment inadvertently omitted the $600.00 attorney’s

fees for the proceedings in general sessions court.

Tenants concede in their appellate brief that the record suggests the attorney’s fees

from general sessions court were $600.00.10 Similar to the previous issue on the calculation

of the total judgment, Landlord explains how the court reached the amount of attorney’s

fees incurred. He explains that the amount of attorney’s fees contained in the court’s

judgment reflected that attorney’s fees from the circuit court were a total of $1,650.00.

Therefore, he states that this amount, when divided by the hourly rate of $150.00, disclosed

that the amount of time expended was 11 hours. In regard to this issue, we have explained

that:

Where an attorney’s fee is based upon a contractual agreement expressly

providing for a reasonable fee, the award must be based upon the guidelines

by which a reasonable fee is determined. Wilson Mgmt. Co. v. Star Distrib.

Co., 745 S.W.2d 870, 873 (Tenn. 1988). Obviously, the burden of proof on

the question of what is a reasonable fee in any case is upon the plaintiff, and

plaintiff should be in a position to tender such proof. Id. However, a trial

judge may fix the fees of lawyers in causes pending or which have been

determined by the court, with or without expert testimony of lawyers and

with or without a prima facie showing by plaintiffs of what a reasonable fee

would be. Id. The trial judge may feel that the proceedings which he or she

has heard have sufficiently acquainted him or her with the appropriate factors

to make a proper award of an attorney’s fee without proof or opinions of

10

The circuit court’s judgment notes that the attorney’s fees from general sessions court were

$600.00 when recounting the general sessions court’s judgment. The general sessions court’s judgment

found that Landlord was entitled to attorney’s fees in the amount of $600.00. Landlord also references the

$600.00 fee in its trial brief.

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other lawyers. Kahn v. Kahn, 756 S.W.2d 685, 696-97 (Tenn. 1988).

Therefore, reversal of a fee award is not required merely because the record

does not contain proof establishing the reasonableness of the fee. Kline v.

Eyrich, 69 S.W.3d 197, 210 (Tenn. 2002). Should a dispute arise as to the

reasonableness of the fee awarded, then in the absence of any proof on the

issue of reasonableness, it is incumbent upon the party challenging the fee to

pursue the correction of that error in the trial court by insisting upon a hearing

on that issue, or to convince the appellate courts that he was denied the

opportunity to do so through no fault of his own. Id. (citing Wilson Mgmt.

Co., 745 S.W.2d at 873); Kahn, 756 S.W.2d at 697. Absent a request for a

hearing by the party dissatisfied by the award, a trial court is not required to

entertain proof as to the reasonableness of the amount of attorney’s fees

awarded. Richards v. Richards, No. M2003-02449-COA-R3-CV, 2005 WL

396373, at *15 (Tenn. Ct. App. W.S. Feb. 17, 2005).

Malibu Equestrian Est., Inc. v. Sequatchie Concrete Serv., Inc., No. M2005-02954-COA-

R3-CV, 2007 WL 2200171, at *7 (Tenn. Ct. App. July 30, 2007).

Tenants did not request a hearing with the circuit court expressing their

dissatisfaction with the award of attorney’s fees. Therefore, the circuit court was not

“required to entertain proof as to the reasonableness of the amount of the attorney’s fees

awarded.” Id. (citing Richards, 2005 WL 396373, at *15). Given that Tenants failed to

pursue any correction of the award of attorney’s fees in circuit court, they must convince

this Court that they were denied the opportunity to do so through no fault of their own. Id.

(citing Kline, 69 S.W.3d at 210). In their appellate brief, they argue that neither the final

judgment nor the attorney’s fees affidavit were served upon them prior to entry of

judgment. Counsel for Tenants argues that he did not even see the attorney’s fees affidavit

at all until he acquired the appellate record from this Court. Additionally, both the final

judgment and the attorney’s fees affidavit were missing a proper certificate of service.

Counsel admits that, conceivably, he had some obligation to object to these errors, but

argues that there was no opportunity to do so.

Tenants contend that they were denied the opportunity to challenge the award of

attorney’s fees, but after the circuit court’s oral ruling, they were on notice that Landlord

would be filing an affidavit for attorney’s fees. Therefore, we find that Tenants were not

denied the opportunity to challenge the attorney’s fees. Despite Tenants’ arguments, we

find that the circuit court was capable of adjudging the value of the attorney’s services. See

id. at *8 (“Having overseen the proceedings below, the trial court was capable of adjudging

the value of the attorney’s services.”). Furthermore, we have reviewed the record and

conclude that the $1,650.00 award of attorney’s fees was reasonable. The attorney’s fees

affidavit demonstrated that counsel for Landlord charged $150.00/hour, and the $1,650.00

award of attorney’s fees shows that he was compensated for 11 hours of services. We find

no error in the circuit court’s handling of this issue.

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D. Appellate Attorney’s Fees

Landlord presents an additional issue requesting attorney’s fees for this appeal. The

parties’ lease agreement contained language providing for reasonable attorney’s fees:

“Should it become necessary for Landlord to employ an attorney to enforce any of the

conditions or covenants hereof, including the collection of rent or gaining possession of

the Premises, Tenant agrees to pay all expenses incurred, including a reasonable attorney’s

fee.”

In Tennessee, we have “long followed the ‘American Rule’ with regard to attorney’s

fees.” Eberbach v. Eberbach, 535 S.W.3d 467, 474 (Tenn. 2017) (citing State v. Brown &

Williamson Tobacco Corp., 18 S.W.3d 186, 194 (Tenn. 2000)). Under the American Rule,

“a party in a civil action may recover attorney’s fees only if: (1) a contractual or statutory

provision creates a right to recover attorney’s fees; or (2) some other recognized exception

to the American Rule applies, allowing for recovery of such fees in a particular case.” Id.

(quoting Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn.

2009) (citing Taylor v. Fezell, 158 S.W.3d 352, 359 (Tenn. 2005); John Khol & Co. P.C.

v. Dearborn & Ewing, 977 S.W.2d 528, 534 (Tenn. 1998))). When an agreement exists

between parties that entitles the prevailing party to recover attorney’s fees, “[o]ur courts

long have observed at the trial court level that parties are contractually entitled to recover

their reasonable attorney’s fees . . . .” Id. at 478; see, e.g, Seals v. Life Invs. Ins. Co. of

Am., No. M2002-01753-COA-R3-CV, 2003 WL 23093844, at *4 (Tenn. Ct. App. Dec. 30,

2003); Hosier v. Crye-Leike Com., Inc., No. M2000-01182-COA-R3-CV, 2001 WL

799740, at *6 (Tenn. Ct. App. July 17, 2001). Our Supreme Court has stated that this

observation is also true at the appellate court level and explained its reasoning as follows:

Absent fraud, mistake, or some other defect, our courts are required to

interpret contracts as written, giving the language used a natural meaning.

U.S. Bank, N.A. v. Tennessee Farmers Mut. Ins. Co., 277 S.W.3d 381, 386-

87 (Tenn. 2009). This axiomatic rule does not change or lose its force

because the parties to an agreement are before an appellate court. Indeed,

one of the bedrocks of Tennessee law is that our courts are without power to

make another and different contract from the one executed by the parties

themselves. Dubois v. Gentry, 182 Tenn. 103, 184 S.W.2d 369, 371 (1945);

see also Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521

S.W.2d 578, 580 (Tenn. 1975) (“The courts, of course, are precluded from

creating a new contract for the parties.”).

Id. Following this reasoning, the Court concluded that our appellate courts “do not have

discretion to deny an award of fees mandated by a valid and enforceable agreement

between the parties . . . .” Id. at 479. Therefore, if the parties’ lease agreement provided

for attorney’s fees under certain circumstances, that provision must be enforced.

- 21 -

As mentioned before, the parties’ lease agreement contained language providing for

“a reasonable attorney’s fee” if it became “necessary for Landlord to employ an attorney

to enforce any of the conditions or covenants” of the agreement.11 There is a valid and

enforceable lease agreement which contains language providing for “a reasonable

attorney’s fee.” Landlord initiated this lawsuit in general sessions court when it became

“necessary for [him] to employ an attorney to enforce” the liquidated damages clause of

the lease agreement. Tenants appealed the general sessions court’s decision and the circuit

court’s decision, both of which awarded judgment in favor of Landlord, and Landlord was

forced to defend his award. The defense of those judgments qualifies as “enforc[ing] any

of the conditions or covenants” of the lease agreement. Therefore, we conclude that the

parties’ lease agreement entitles Landlord to an award of reasonable attorney’s fees for this

appeal.

As such, we conclude that Landlord is entitled to an award of reasonable attorney’s

fees incurred before this Court. We grant Landlord’s request for an award of reasonable

attorney’s fees on appeal and remand the case to the circuit court for a determination of the

appropriate amount of those fees.

V. CONCLUSION

For the aforementioned reasons, we affirm the decision of the circuit court in regard

to the issues of material breach of contract and the enforceability of the early termination

fee. We affirm the award of damages to Landlord. However, we remand for the circuit

court to determine the correct amount for the total judgment to be awarded to Landlord and

to reduce the total judgment amount by $252.00 to exclude the lost rent awarded. We also

remand the case to the circuit court for a determination of the appropriate amount of

attorney’s fees to be awarded to Landlord for this appeal. Costs of this appeal are taxed to

the appellants, Dalton L. Welch and Alexis S. Clark, for which execution may issue if

necessary.

_________________________________

CARMA DENNIS MCGEE, JUDGE

11

There were two Tennessee cases involving a lease agreement that employed similar language,

which we found instructive in our analysis of this issue. See Country Mile, LLC v. Cameron Props., No.

M2017-01771-COA-R3-CV, at *28 (Tenn. Ct. App. Mar. 13, 2019); Keck, 2018 WL 3199220, at *2.

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