817 Partnership v. James Goins & Carpenter, P.C. ( 2015 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
May 18, 2015 Session
817 PARTNERSHIP v. JAMES GOINS & CARPENTER, P.C. ET AL.
Appeal from the Circuit Court for Hamilton County
No. 13C1120 W. Jeffrey Hollingsworth, Judge
No. E2014-01521-COA-R3-CV-FILED-SEPTEMBER 24, 2015
_________________________________
In 2009, James Goins & Carpenter, P.C. (JGC) leased office space from 817 Partnership
(817). JGC later decided to expand its law practice. It leased additional space in the
same building from 817. Thereafter, a bank that had occupied the ground floor of the
building moved out. Beginning in February 2011, Stuart F. James, an attorney with JGC,
began raising concerns about security in the building. Over the course of the next few
months, Mr. James repeatedly emailed 817‟s representatives about security, the heating
and air conditioning system, JGC‟s financial problems, the need for a rent reduction, and
a host of other issues. These emails eventually stopped; but in March 2013, Mr. James
responded to a notice from 817 that JGC had missed rent payments. At that point, JGC‟s
security issues resurfaced in a series of emails Mr. James sent from March to May of
2013. Ultimately, Mr. James informed 817 that JGC was dissolving and would be
vacating the premises well before its lease expired. As a result, 817 filed a detainer
action in general sessions court against JGC and Mr. James (collectively the Defendants).
The general sessions court granted 817 a judgment. The Defendants filed a “motion to
reconsider,” which was denied. The Defendants subsequently appealed. On appeal to the
trial court, the Defendants repeatedly failed to respond to 817‟s discovery requests,
precipitating multiple motions by 817 to compel and/or for sanctions. The Defendants
filed a pleading alleging constructive eviction and demanding a jury trial. The trial court
entered an order denying the jury demand pursuant to Tenn. R. Civ. P. 38.03. The trial
court eventually sanctioned the Defendants and awarded 817 attorney‟s fees and
expenses. Finally, the trial court determined that the Defendants had waived the defense
of constructive eviction and had breached the lease by failing to make multiple rent
payments. The court filed a memorandum opinion and entered a final judgment in favor
of 817 for $51,912.18, for unpaid rent, late fees, and interest under the lease. In addition,
817 received $49,815.47 to cover attorney‟s fees and expenses. The Defendants appeal.
We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded
CHARLES D. SUSANO, JR., C.J., delivered the opinion of the court, in which D. MICHAEL
SWINEY and THOMAS R. FRIERSON, II, JJ., joined.
Marvin B. Berke and Jeremy M. Cothern, Chattanooga, Tennessee, for the appellants,
James Goins & Carpenter, P.C. and Stuart F. James.
Scott M. Shaw, Chattanooga, Tennessee, for the appellee, 817 Partnership.
OPINION
I.
817 is the owner of a building located at 817 Broad Street in Chattanooga. On
January 9, 2009, 817 entered into a lease agreement with JGC, a Chattanooga law firm
that has since been dissolved. Under the terms of the lease, JGC agreed to rent half of the
second floor of 817 Broad Street for a period of six years, commencing February 1, 2009.
Thereafter, JGC sought to expand its law practice and entered into negotiations with 817
to lease more office space. On January 3, 2011, JGC and 817 signed a first amendment
to the lease agreement, wherein JGC agreed to rent the remainder of the second floor.
Both the original lease agreement and the first amendment to the lease agreement were
personally guaranteed by Mr. James.
When JGC entered into the original lease agreement, FSG Bank (FSG) occupied
the entire first floor of 817 Broad Street. On February 25, 2011, however, FSG moved
out of the building, subsequently leaving the entire ground floor unoccupied. Neither the
original lease agreement nor the first amendment to the lease agreement referenced any
requirement that the first floor be occupied.
Prior to FSG leaving 817 Broad Street, JGC was informed by a representative of
FSG that the bank‟s security system would be disabled when it vacated the building. Mr.
James then raised concerns, through a series of emails in the days leading up to February
25, 2011, about the security of the building once the bank left. As previously noted,
neither the lease agreement nor the first amendment to the lease agreement required 817
to provide security for the building.
Larry Parks, an authorized representative of 817, informed Mr. James that he had
contacted a security firm and, in addition, had asked FSG to put him in touch with its
security company. Mr. Parks inquired to Mr. James about the areas covered by FSG‟s
security system. In response, Mr. James admitted that FSG‟s security system only
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covered the portions of the building occupied by the bank, not the lobby or any other
areas of the building. Nevertheless, Mr. James maintained that “[w]ithout someone in the
ground floor, there is a security issue we believe.”
Over three weeks passed before a representative of JGC, on March 17, 2011, sent
another email raising security concerns. This email, however, was sent to Russ Elliott, a
broker with Luken Holdings who had represented 817 in connection with the original
lease agreement. Mr. Elliott, however, had previously informed JGC in a February 24,
2011 email that he did not have the authority to give an official response on 817‟s behalf
regarding measures taken to address JGC‟s security concerns. As he had done before,
Mr. Elliott forwarded JGC‟s email to Mr. Parks.
On March 23, 2011, Mr. James emailed Mr. Elliott regarding an incident where
the overnight cleaning crew left the building unlocked. Mr. Elliott subsequently
forwarded this email to Mr. Parks. On April 7, 2011, Mr. James sent another email to
Mr. Elliott, this time mentioning the homeless people in front of the building as a security
risk. In addition, Mr. James stated, “I now regret doing the lease as I should have made
this issue a precondition to the lease and would not have rented the floor had I know [sic]
the bank was closing.” Mr. James acknowledged that Mr. Parks was a busy man, but said
that he would address the security issue if Mr. Parks did not. Mr. Elliott again forwarded
this email to Mr. Parks.
On April 8, 2011, Mr. James sent a lengthy email to both Mr. Elliott and Mr. Parks
restating his grievances with 817. Specifically, Mr. James (1) mentioned FSG‟s decision
to leave the building and his belief that 817 should have been on notice that FSG would
leave the building months before its lease ran out; (2) stated that there were only two
tenants in the building after FSG left and that the fourth floor was empty; (3) alleged that
the “two stairwells in the building are accessible for anyone to enter the building;” (4)
said that since the bank left “the front doors of the building have been left open by the
cleaning company;” (5) noted the changing weather conditions; (6) alleged that “more
and more homeless are hanging in front of the building” and that it was only a matter of
time before “they will discover they can find someplace to hide in the building [to] spend
the night out of the weather;” (7) hypothesized that “someone can break into any office
and take whatever they please and leave the building unnoticed when the front door is
unlocked during the day;” (8) detailed an unrelated incident at another building “on the
corner of eighth and cherry street” where a homeless man would allegedly hide in an
office building and steal food and money; and (9) mentioned an unrelated stabbing in
front of the downtown library, an unrelated shooting in front of the Tivoli Center, and his
belief that panhandling had increased in the area. Ultimately, Mr. James indicated that if
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he did not get an update about 817‟s efforts to provide security for the building, he would
“take appropriate action and let the landlord know what we plan to do.”
Mr. Parks later testified in July 2014 that he agreed to install “an apartment type
buzz-in system.” Nevertheless, this buzzer system was never installed, as Mr. Parks
testified that there “was a problem with the door frame and the way the door hardware
worked.” Though Mr. Parks stated that those problems could have been “easily
rectified,” he also mentioned that issues arose with the phone line running to the buzzer
system. Despite the fact that the Electric Power Board of Chattanooga was contacted in
June 2011, Mr. Parks testified that he was never given any notice that the phone line issue
was ever fixed. Thereafter, Mr. Parks stated that he tore his quadriceps muscle, which
necessitated emergency surgery in July 2011, and ultimately forgot about the installation
of the buzzer system. In addition, Mr. Parks noted that the buzzer system never came up
again until the spring of 2013.
On December 5, 2012, Walldorf Property Management (Walldorf), the company
which managed the building at 817 Broad Street, sent JGC notice regarding a large
outstanding balance on JGC‟s account. Specifically, Walldorf mentioned missing rent
payments from August 2010 and November 2011, as well as the fact that JGC‟s other
rent payments were consistently late. On March 12, 2013, Mr. James sent a lengthy
email to Cullon Hooks, a representative of Walldorf. Initially, Mr. James disputed the
amount of rent that JGC owed, before addressing a number of other issues. First, he
indicated that JGC was “pretty dismayed” when FSG left the building, which he believed
had led to the creation of “some serious security issues.” Mr. James also alleged that
“[p]eople from the streets of Chattanooga enter the building at will” and that an attorney
with JGC had a “frightening experience” when someone rattled the locked door handles
to the office when the attorney was working late one evening. He said that “[t]here are
many places in the first floor where people can hide, come in from the cold, enter the
building, and come into our offices at any time without being checked.” Mr. James stated
that he believed the building appeared abandoned and indicated that JGC “would not
have renewed the lease or expanded the second floor if [JGC] had known the bank was
moving out of the building.” Mr. James subsequently threatened that 817 would “face
serious liability issues” if any employee of JGC was injured because of these security
issues and hypothesized that loss of property or injury to a worker in the building “will
happen sooner rather than later.” Further, Mr. James raised issues with the building‟s
heating and air-conditioning system for the first time.
In the March 12, 2013 email, Mr. James went on to acknowledge that JGC had
been behind on its payments every month, attributing these delays to “the slow pay
conditions in the insurance defense profession,” “the slowdown in the economy,” and
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“extensive storm damage throughout the country.” Mr. James admitted that JGC needed
to reduce its overhead “[i]n order to survive this economic downturn and the potential for
further downturn due to legislative action regarding the legal system in the state of
Tennessee.” He then stated that JGC “has come to the point where we are not willing to
put our safety and safety of our employees at issue or to pay for more space than we can
use.” Mr. James subsequently offered 817 a deal: “If a termination of the lease is not
agreeable to you and the owners, we could continue to stay provided the security issues
are taken care of and provided we can agree to a substantial rent reduction.” He then
referenced a financial analysis done by JGC before stating that “the rent has to be
reduced to below $3200 for us to continue our operations at this location.” Mr. James
went on to surmise that “the building is probably a financial drain on the owners,” “the
owners are losing money with [JGC] occupying the second floor,” and “it is probably in
the best interest of all parties concerned [if JGC] can terminate the lease.” Thereafter,
Mr. James proposed a new rent structure, acknowledged that 817 would be unlikely to
accept a rent reduction, reiterated the need for security issues to be addressed, and again
threatened 817 with a lawsuit in the event an employee of JGC suffered an injury as a
result of lax security. Further, for the first time, he brought up the issue of mold,
mentioned problems with the heating and cooling system for the second time, and
demanded installation of new thermostats by June 2013. Finally, Mr. James unilaterally
concluded that “it is best that all agree to amicably terminate the lease agreement and that
[JGC] vacate the building within the next 90 days.”
On March 19, 2013, Mr. James sent an email to Mr. Hooks indicating the need to
make some decisions quickly. In particular, he stated that JGC would remain as a tenant
if there was a rent reduction and the issues that he had previously raised were addressed.
Mr. James, however, noted that JGC could not continue to pay its current rent and would
need to be released from the lease to move into a cheaper office space because “[t]he
survival of [JGC] depends on this issue.”
On March 21, 2013, Mr. James sent another email to Mr. Hooks raising several
issues. First, he mentioned that “security continues to be a major concern” and
referenced a well-known panhandler in the downtown Chattanooga area as evidence of
lax security. Second, he reiterated that the first floor vacancy was still an issue for JGC.
Third, he discussed issues with the heating and cooling system and the need for updates.
Fourth, Mr. James broached the issue of rent once again, highlighting the recent
economic downturn affecting insurance companies and stating that “due to these
unforeseen circumstances, we can no longer afford the rent and we have to make tough
choices including our desire to reduce the rent.” Ultimately, he demanded answers by the
end of the month regarding his proposal to reduce the rent and potential security
measures.
5
On April 1, 2013, Mr. James sent an email to Mr. Hooks noting that the issue of
security was “nonnegotiable.” In addition, Mr. James reiterated his position that 817
would be liable for “any injury or loss that occurs to any individual occupying or
working” in the building and for “any loss to the firm‟s property.” From there, he again
discussed the first floor vacancy, the issues with the heating and cooling system, and
JGC‟s need for a reduction in rent.
On April 30, 2013, Mr. James sent an email to Mr. Parks blaming Walldorf for
JGC‟s delinquent rent payments. Similar to his previous emails, Mr. James raised a
number of topics. In particular, he (1) conceded that JGC would be unable to make up
two months of missing rent payments in the foreseeable future; (2) requested JGC be
released from its lease if a rent reduction was not possible; (3) offered to manage the
building at 817 Broad Street in lieu of Walldorf; (4) raised the issue of security once
again in light of the first floor vacancy; (5) offered to pay for a security system and its
monthly maintenance if there was a rent reduction; and (6) concluded by stating that the
“situation on security is beyond dire.”
On May 9, 2013, Mr. James sent an email to Mr. Parks regarding the issues he had
raised in his previous emails. However, Mr. James added that JGC would be dissolving
and vacating the building on August 9, 2013. He attributed this decision to “the greatest
economic downturn in American history next to the Great Depression . . . the issues
facing the building . . . the risk of property loss, personal injury, or the potential loss of
life,” and the first floor vacancy.
Before JGC could vacate the building, 817 filed a detainer action on July 2, 2013,
against the Defendants in the General Sessions Court of Hamilton County. On July 15,
2013, the general sessions court granted a judgment in favor of 817, awarding it
possession of the premises and damages in the amount of $30,728.14. On July 25, 2013,
the Defendants filed a motion to reconsider and set aside the July 15, 2013 judgment. At
an August 12, 2013 hearing, the Defendants‟ motion to reconsider was denied.
Thereafter, on August 20, 2013, the Defendants filed a notice of appeal. The Defendants‟
notice of appeal did not contain a jury demand.
On November 12, 2013, 817 filed a motion for a scheduling order and to set a trial
date. In addition, on November 26, 2013, 817 filed a motion to compel the Defendants to
respond to 817‟s discovery requests, which had previously been served on October 21,
2013. The Defendants replied to both of these motions on December 6, 2013, contending
that entry of a scheduling order and the request for discovery responses were both
premature in light of a companion action that was pending in the Hamilton County
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Chancery Court and the proposed consolidation of that action with this case. On
December 11, 2013, the trial court granted 817‟s motion to set a trial date and noted that
there “is no jury demand by either party, so [the trial] will be scheduled on a non-jury
day.” The trial court subsequently set April 8, 2014, as the trial date for this case. In
addition, the trial court issued an order on January 8, 2014, setting January 16, 2014, as
the deadline for the Defendants to respond to 817‟s discovery requests. Despite the clear
court order, the Defendants failed to respond by the January 16, 2014 deadline. As a
result, 817 filed a motion for contempt and for sanctions on January 22, 2014.
On February 4, 2014, the Defendants filed an answer, demand for a jury trial,
counterclaim, and third party complaint against Walldorf, which charged 817 with
negligence, gross negligence, common law breach of quiet enjoyment, intentional
misrepresentation, negligent misrepresentation, gross misrepresentation, and constructive
eviction. That same day, the Defendants also filed a motion to continue to remove the
case from the trial court‟s non-jury calendar, citing the companion action in chancery
court and the fact that the third party complaint had demanded a jury trial.
On February 3, 2014, the trial court held a hearing regarding 817‟s motion for
contempt and for sanctions. Thereafter, on February 4, 2014, an order was entered
requiring the Defendants to serve responses to 817‟s discovery requests by 5:00 p.m. that
day. On February 6, 2014, 817 filed a third motion to compel and/or for contempt,
contending that the Defendants‟ responses and objections to 817‟s discovery requests
were procedurally invalid, did not comply with the trial court‟s previous orders, and were
ill-founded. On February 17, 2014, the trial court ordered the Defendants to respond to
817‟s discovery requests in full before February 27, 2014. After the Defendants failed to
comply with the February 17, 2014 court order, 817 filed its fourth motion to compel
and/or for contempt on February 28, 2014. On March 12, 2014, the Defendants filed
another jury demand, which 817 opposed, citing Tenn. R. Civ. P. 38.03.
Following a March 25, 2014 status conference, the trial court issued a
memorandum order on April 4, 2014. In that order, the trial court denied the Defendants‟
demand for a jury after finding that the Defendants had not complied with Tenn. R. Civ.
P. 38.03 and had waived their right to a jury. In addition, the trial court imposed
sanctions against the Defendants for discovery abuse, awarding 817 attorney‟s fees for
the preparation and filing of its second motion to compel and court appearances related to
that motion. The memorandum opinion directed 817 to submit an affidavit detailing the
attorney‟s fees and gave the Defendants seven days to file an objection after the affidavit
had been submitted. As directed, 817 submitted an affidavit of fees on April 11, 2014,
which documented 4.1 hours of work related to 817‟s second motion to compel totaling
$1,025 in attorney‟s fees. The Defendants subsequently filed an objection on April 28,
7
2014, ten days after the seven day deadline to file an objection. The Defendants
contended that “too many hours [were] spent for a simple motion” and concluded that
“there should not be fees awarded.”
On May 1, 2014, 817 filed a fifth motion to compel and/or for contempt, noting
that the Defendants had still not adequately responded to discovery requests, which had
originally been served on October 21, 2013, and had failed to comply with multiple court
orders requiring the Defendants to respond. In addition, on May 29, 2014, 817 filed a
motion to compel payment of previously awarded sanctions, as the Defendants had failed
to pay in full the monetary sanctions earlier awarded by the trial court. On May 30, 2014,
the trial court entered an order, originally submitted to the court on May 13, 2014, that
required the Defendants to serve full and complete responses to all of 817‟s discovery
requests by 5:00 p.m. on May 19, 2014. Pursuant to Tenn. R. Civ. P. 68, the Defendants
made an offer of judgment on June 23, 2014, proposing $8,177.50 and a subsequent
hearing to determine attorney‟s fees. On June 26, 2014, the trial court entered an order
imposing sanctions in the amount of $1,025 and requiring full payment of the sanctions
within thirty days.
The parties appeared for a trial before the trial court on July 1 and July 2, 2014.
On July 2, 2014, the trial court announced a number of findings of fact and conclusions
of law from the bench. First, it determined that the Defendants had waived their
constructive eviction claim. Second, the trial court concluded that the Defendants had
breached the lease agreement by failing to pay rent in a timely manner, missing rent
payments, and moving out before the end of the lease. Third, the trial court stated that
JGC‟s counterclaim was dismissed because JGC was an administratively dissolved
corporation. Thereafter, on July 25, 2014, the trial court issued a memorandum opinion
and final judgment, which awarded 817 unpaid rent, late fees, and interest under the lease
totaling $51,912.18. In addition, the judgment granted 817 attorney‟s fees and expenses
incurred in enforcing the terms of the lease totaling $49,815.47.
The Defendants filed a notice of appeal on August 4, 2014, regarding (1) the April
4, 2014 memorandum order denying the Defendants‟ demand for a jury and imposing
sanctions for discovery abuse; (2) the June 26, 2014 order imposing sanctions against the
Defendants for attorney‟s fees incurred by 817 in the filing of 817‟s motion to compel;
and (3) the July 25, 2014 memorandum opinion and final judgment that awarded 817
unpaid rent, late fees, interest under the lease agreement, attorney‟s fees, and expenses
totaling $101,727.65. On September 11, 2014, the trial court entered an order imposing a
$500 sanction for the Defendants failure to pay $1,025 in attorney‟s fees that was
previously awarded to 817. The Defendants subsequently filed an additional notice of
appeal on October 2, 2014, regarding the sanction of $500.
8
The following issues are now before us on appeal: (1) whether the trial court erred
by denying the Defendants‟ demands for a jury trial; (2) whether the trial court erred by
holding that the Defendants waived the claim for constructive eviction; (3) whether the
trial court erred by dismissing the counterclaim of JGC because that firm had already
been administratively dissolved; (4) whether the trial court erred by awarding sanctions
and determining the amount of sanctions without a factual hearing; and (5) whether the
trial court erred by awarding 817 attorney‟s fees and expenses totaling $49,815.47.
II.
The trial court‟s decisions to deny the Defendants‟ demands for a jury trial directly
implicate Tenn. R. App. P. 38.03. In Tennessee, the “[i]nterpretation of the Tennessee
Rules of Civil Procedure is a question of law.” Thomas v. Oldfield, 279 S.W.3d 259, 261
(Tenn. 2009). Our standard of review for questions of law is de novo with no
presumption of correctness. Kinsler v. Berkline, LLC, 320 S.W.3d 796, 799 (Tenn.
2010) (citing Blair v. W. Town Mall, 130 S.W.3d 761, 763 (Tenn. 2004)). Even though
our rules of civil procedure are not statutes, “the same rules of statutory construction
apply in the interpretation of rules.” Thomas, 279 S.W.3d at 261 (citing Crosslin v.
Alsup, 594 S.W.2d 379, 380 (Tenn. 1980)). As a result, we must “ascertain and give
effect to the legislative intent without unduly restricting or expanding [the rule‟s]
coverage beyond its intended scope.” Houghton v. Aramark Educ. Res., Inc., 90
S.W.3d 676, 678 (Tenn. 2002) (quoting Owens v. State, 908 S.W.2d 923, 926 (Tenn.
1995)).
Tenn. R. Civ. P. 38.03 states,
In cases removed by appeal or otherwise to the chancery or
circuit courts or to courts of similar jurisdiction, any party
may demand a trial by jury of any issue triable of right by
jury by filing written demand for jury within 10 days after the
papers are filed with the clerk. If such a case is set for trial
within 10 days after the papers are filed with the clerk, any
party may make demand for jury trial when the case is called
for trial. In every case removed to the chancery or circuit
courts or to courts of similar jurisdiction the clerk shall
promptly give notice to the appellee of the filing of the
papers.
9
Tenn. R. Civ. P. 38.03 (emphasis added). In the present case, the Defendants filed their
notice of appeal to the circuit court on August 20, 2013. As a result, under Tenn. R. Civ.
P. 38.03, the Defendants had ten days to request a jury trial. The Defendants, however,
did not raise a jury demand until February 4, 2014, when they filed an answer, jury
demand, counterclaim, and third party complaint. Clearly, this jury request fell far
beyond the ten day deadline pursuant to Tenn. R. Civ. P. 38.03.
The Defendants contend in their brief that, when viewing their jury demand, we
should apply Tenn. R. Civ. P. 38.02, which states,
Any party may demand a trial by jury of any issue triable of
right by jury by demanding the same in any pleading
specified in Rule 7.01 or by endorsing the demand upon such
pleading when it is filed, or by written demand filed with the
clerk, with notice to all parties, within 15 days after the
service of the last pleading raising an issue of fact.
Tenn. R. Civ. P. 38.02. As 817 argues in its brief, however, the Defendants are
attempting to rely on a broad rule of general applicability to the exclusion of a specific
rule that directly addresses the type of case now before us. The explicit wording of Tenn.
R. Civ. P. 38.03 makes obvious that this rule is applicable to “cases removed by appeal or
otherwise to the chancery or circuit courts or to courts of similar jurisdiction.” Tenn. R.
Civ. P. 38.03 (emphasis added). The present action originated in general sessions court,
which entered a judgment that was subsequently appealed to the circuit court. Thus, this
case fits squarely within the parameters of Tenn. R. Civ. P. 38.03. Further, “[s]pecific
statutory provisions control over conflicting general provisions.” Arnwine v. Union
Cnty. Bd. of Educ., 120 S.W.3d 804, 809 (Tenn. 2003); see also Woodroof v. City of
Nashville, 192 S.W.2d 1013, 1015 (Tenn. 1946) (“[W]here the mind of the legislature
has been turned to the details of a subject and they have acted upon it, a statute treating
the subject in a general manner should not be considered as intended to affect the more
particular provision.”) As mentioned earlier, even though our rules of civil procedure are
not statutes, “the same rules of statutory construction apply in the interpretation of rules.”
Thomas, 279 S.W.3d at 261. Thus, we conclude that the trial court correctly relied upon
Tenn. R. Civ. P. 38.03 when it dismissed the Defendants‟ jury demands.
III.
Whether the Defendants waived their constructive eviction claim is a question of
fact. Tenn. R. App. P. 13(d) provides that, “Unless otherwise required by statute, review
of findings of fact by the trial court in civil actions shall be de novo upon the record of
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the trial court, accompanied by a presumption of the correctness of the finding, unless the
preponderance of the evidence is otherwise.” Tenn. R. App. P. 13(d). In Tennessee,
“[w]hen a landlord disturbs his tenant‟s possession, rendering the premises unfit for
occupancy for the purposes for which they were demised or depriving the tenants of the
beneficial enjoyment of the premises, causing him to abandon them, the tenant has been
constructively evicted” so long as the tenant abandons the premises within a reasonable
time. Morrison v. Smith, 757 S.W.2d 678, 682 (Tenn. Ct. App. 1988) (quoting Couch v.
Hall, 412 S.W.2d 635, 637 (Tenn. 1967)) (quotation marks omitted). Further, a tenant
shall have a reasonable amount of time to exercise the right of abandonment before that
right is waived. Morrison, 757 S.W.2d at 682.
In the present action, Mr. James testified at trial that, starting in February 2011,
JGC was constructively evicted from the office space it rented from 817. As proof of
their constructive eviction claim, the Defendants cited FSG‟s departure from the building,
the lack of security in the building after FSG‟s departure, the building‟s “appearance of
abandonment,” issues with the heating and air conditioning system, dirty windows, and
trash and homeless people in front of the building. The record reflects that, after FSG‟s
departure, the Defendants raised a number of these issues in a series of emails with 817‟s
representatives from February 2011 through April 2011. At that point, the record
contains no further communication until December 2012, when 817‟s representatives
contacted the Defendants about delinquent and consistently late rent payments.
Thereafter, in March 2013, the Defendants‟ issues with the building resurfaced in another
series of emails from March 2013 through May 2013. This time, however, these emails
also focused on the Defendants‟ growing financial issues and their desire to reduce their
monthly rent.
JGC operated as a functioning law firm in the space it rented for nearly two years
after the Defendants first raised their initial concerns in 2011. As a result, one can hardly
say that 817 rendered the premises unfit for the operation of a law firm. Moreover, the
Defendants did not attempt to locate a different office space until January 2013,
coincidentally after they had received notice about delinquent and consistently late rent
payments. We find it interesting that the Defendants‟ issues with the building, which had
been tolerated for nearly two years, suddenly constituted a constructive eviction when
financial problems arose and 817 did not indulge the Defendants‟ repeated requests for a
rent reduction or amicable split. Ultimately, JGC failed to abandon the premises within a
reasonable amount of time, even occupying the office space until August 2013, despite a
July 15, 2013 judgment awarding 817 possession of the premises. Thus, the evidence
does not preponderate against the trial court‟s conclusion that the Defendants waived any
claim for construction eviction.
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IV.
Whether the trial court erred by dismissing the counterclaim of JGC on the ground
that the firm had already been administratively dissolved presents a question of law,
which we review de novo with no presumption of correctness. Kinsler, 320 S.W.3d at
799. Tenn. Code Ann. § 48-24-202(c) states, “A corporation administratively dissolved
continues its corporate existence but may not carry on any business except that necessary
to wind up and liquidate its business and affairs under § 48-24-105 and notify claimants
under §§ 48-24-106 and 48-24-107.” Tenn. Code. Ann. § 48-24-202(c) (2012) (emphasis
added). In the present action, the record reflects that JGC was administratively dissolved
by the State in August 2013, a fact that Mr. James acknowledged in his testimony at trial.
JGC‟s counterclaim, however, was not filed until February 4, 2014, several months after
it had already been administratively dissolved. As a result, JGC had no standing to assert
a counterclaim against 817 under Tenn. Code Ann. § 48-24-202(c).
The Defendants make two separate arguments in an attempt to counter the clear
wording of Tenn. Code Ann. § 48-24-202(c). First, they argue that “an administrative
dissolution is a curable defect” and that the court “could, and should, have continued the
hearing 30 days to allow JGC to provide proof of reinstatement, rather than pounce upon
a technical error of which JGC was unaware as a means to dismiss its claims.”1 This
contention is rather perplexing. To start, the Defendants admonish the trial court because
the Defendants were apparently unfamiliar with a clear procedural rule. In support of this
point, they argue that the trial court elevated form over substance, citing a case where a
property owners association was allowed to pursue a lawsuit filed thirteen days before its
corporate charter was reinstated. See Grand Valley Lakes Prop. Owners Ass’n, Inc. v.
Cary, 897 S.W.2d 262, 268-69 (Tenn. Ct. App. 1994). In that case, this Court noted that
“reinstatement of the charter validates the corporation‟s existence and privileges from the
date of revocation.” Id. at 269 (quoting Loveday v. Cate, 854 S.W.2d 877, 880 (Tenn.
Ct. App. 1992)). This case, however, is quite distinguishable, as the record contains no
evidence that JGC ever sought reinstatement of its charter. Had JGC done so,
reinstatement of the charter would have retroactively validated JGC‟s actions dating back
to August 2013 when it was administratively dissolved. Loveday, 854 S.W.2d at 880. As
a result, JGC‟s failure to seek reinstatement of its charter renders its “form over
substance” argument meritless.
1
Despite this argument, the Defendants never requested a continuance so that they could
seek to reinstate JGC‟s corporate charter. Further, the Defendants cite no authority indicating
that the trial court was under a duty to grant a continuance, on its own volition, so that the
Defendants could cure a defect, about which they apparently had no knowledge.
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The Defendants also contend that 817 should have disclosed the fact that it
intended to raise the administrative dissolution of JGC as a defense to JGC‟s
counterclaim. On this point, we must agree with 817 that this argument is inconceivable,
especially given the fact that the Defendants conducted no written discovery and took no
depositions prior to trial. The Defendants failure to conduct discovery precipitated this
issue, and it would defy logic to hold 817 accountable here for the clear shortcomings of
the Defendants. Thus this argument is without merit, and the trial court was correct in
dismissing JGC‟s counterclaim.
V.
In Tennessee, appellate courts “review a trial court‟s decision to impose contempt
sanctions using the more relaxed „abuse of discretion‟ standard of review.” Freeman v.
Freeman, 147 S.W.3d 234, 242 (Tenn. Ct. App. 2003) (quoting McDowell v. McDowell,
No. M2000-00164-COA-R3-CV, 2001 WL 459101, at *5 (Tenn. Ct. App. M.S., filed
May 2, 2001)). A party “seeking to have a lower court‟s holding overturned on the basis
of abuse of discretion undertakes a heavy burden.” State ex rel. Jones v. Looper, 86
S.W.3d 189, 193 (Tenn. Ct. App. 2000). In particular, the “abuse of discretion standard
of review envisions a less rigorous review of the lower court‟s decision and a decreased
likelihood that the decision will be reversed on appeal.” Miller v. Miller, No. E2012-
01414-COA-R3-CV, 2013 WL 2382595, at *4 (Tenn. Ct. App. E.S., filed May 30, 2013)
(quoting Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 524 (Tenn. 2010)). Further, the
abuse of discretion standard “does not permit an appellate court to merely substitute its
judgment for that of the trial court.” Henry v. Goins, 104 S.W.3d 475, 479 (Tenn. 2003)
(citing Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001)). Nevertheless, the abuse of
discretion standard does not immunize the discretionary decisions of the trial court from
appellate review. Boyd v. Comdata Network, Inc., 88 S.W.3d 203, 211 (Tenn. Ct. App.
2002) (citing Duncan v. Duncan, 789 S.W.2d 557, 561 (Tenn. Ct. App. 1990)).
Specifically, we will find an abuse of discretion “when a court strays beyond the
applicable legal standards or when it fails to properly consider the factors customarily
used to guide the particular discretionary decision.” Miller, 2013 WL 2382595, at *5.
Ultimately, an appellate court will only find an abuse of discretion when “the court that
made the decision applied incorrect legal standards, reached an illogical conclusion,
based its decision on a clearly erroneous assessment of the evidence, or employs
reasoning that causes an injustice to the complaining party.” Konvalinka v.
Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d 346, 358 (Tenn. 2008) (citing
Mercer v. Vanderbilt Univ., 134 S.W.3d 121, 131 (Tenn. 2004)).
Pursuant to Tenn. R. Civ. P. 37.02, the trial court had the authority to require the
Defendants to “pay the reasonable expenses, including attorney‟s fees, caused by the
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failure” to obey an order compelling discovery responses. In this case, 817 originally
served its discovery requests on October 21, 2013. After the Defendants failed to
respond, 817 filed a motion to compel on November 26, 2013. On January 8, 2014, the
trial court entered an order, agreed to by both parties, setting January 16, 2014, as the
deadline for the Defendants to respond to discovery requests. Despite agreeing to the
January 16, 2014 deadline, the Defendants failed to respond in a timely fashion,
prompting 817 to file a motion for contempt and sanctions on January 22, 2014.
Thereafter, the trial court entered an order requiring the Defendants to respond to 817‟s
discovery requests by 5:00 p.m. on February 4, 2014. Again, the Defendants failed to
comply, as they opted to submit objections in lieu of responses, failed to produce
requested documents, and failed to provide complete responses.
The Defendants‟ noncompliance precipitated a third motion to compel by 817, and
the trial court subsequently entered yet another order requiring the Defendants to serve
full and complete responses to 817‟s discovery requests by 5:00 p.m. on February 27,
2014. As before, the Defendants failed to comply, and 817 filed a fourth motion to
compel on February 28, 2014, positing that sanctions against the Defendants would be
appropriate. In an April 4, 2014 memorandum order, the trial court noted the multiple
motions by 817, the repeated noncompliance by the Defendants, and the need to continue
the trial as a result of the Defendants‟ noncompliance. As a result, the trial court imposed
sanctions for discovery abuse, awarding 817 attorney‟s fees for only the preparation and
filing of its second motion to compel and its attorney‟s appearance in court for that
individual motion. Despite an order imposing sanctions, the Defendants still failed to
respond to 817‟s discovery requests. Thus, 817 filed a fifth motion to compel and/or for
contempt on May 1, 2014, and the trial court entered another order requiring the
Defendants to serve full and complete responses to all of 817‟s discovery requests by
5:00 p.m. on May 19, 2014.
Ultimately, the Defendants habitual noncompliance with clear and unambiguous
court orders delayed this matter for several months for no legitimate reason. Further, we
find no merit in the Defendants‟ attempts to blame their repeated failure to respond on
817. In light of these conclusions, we find no abuse of discretion with the trial court‟s
decision to impose contempt sanctions.
VI.
A trial court‟s calculation of a “reasonable attorney‟s fee is a subjective judgment
based on evidence and the experience of the trier of facts.” Wright ex rel. Wright v.
Wright, 337 S.W.3d 166, 176 (Tenn. 2011) (quoting United Med. Corp. of Tenn., Inc. v.
Hohenwald Bank & Trust Co., 703 S.W.2d 133, 137 (Tenn. 1986)) (quotation marks
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omitted). In Tennessee, there “is no fixed mathematical rule . . . for determining
reasonable fees and costs.” Killingsworth v. Ted Russell Ford, Inc., 104 S.W.3d 530,
534 (Tenn. Ct. App. 2002). As a result, “an appellate court will normally defer to a trial
court‟s award of attorney‟s fees unless there is a showing of an abuse of the trial court‟s
discretion.” Id. (quoting Threadgill v. Threadgill, 740 S.W.2d 419, 426 (Tenn. Ct. App.
1987)) (quotation marks omitted). Further, when “evaluating the lower court‟s exercise
of its discretion in a non-jury setting, we review its award de novo.” Killingsworth, 104
S.W.3d at 534. We must not “disturb the trial court‟s award unless we find that the
evidence preponderates against the trial court‟s factual findings.” Id. (citing Tenn. R.
App. P. 13(d)).
The original lease agreement, signed by both parties on January 9, 2009, contained
a specific section regarding attorney‟s fees and expenses. That clause read as follows:
In the event that [817] shall be required to engage legal
counsel for the enforcement of any of the terms of the Lease,
whether such employment shall require institution of suit or
other legal services required to secure compliance on the part
of Tenant, Tenant shall be responsible for and shall promptly
pay to [817] the reasonable value of said attorney‟s fees, and
any other expenses, including without limitation, court costs
incurred by [817] as a result of Tenant‟s default so long as it
is adjudicated that the tenant is in default. Any party
defaulting any provision of this agreement shall be
responsible for attorney‟s fees and expenses incurred by the
non defaulting party, if a party is adjudicated to be in default
of a provision of this agreement.
On July 2, 2014, the trial court concluded that the Defendants had defaulted on their lease
agreement and instructed 817 to file an affidavit detailing the fees and expenses it sought
to claim. 817 subsequently filed an affidavit on July 11, 2014, which included a thorough
breakdown from July 2013 through July 2014 detailing the time spent, fees incurred, and
costs expended during this litigation. In response, the Defendants filed an objection on
July 21, 2014, which stated:
The Defendants object to the amount of fees requested for
many reasons, among which are the unreasonableness of the
fees, the fact that much of the work and time was
unnecessary, the fact that much of the work that was done
would not be covered by the attorney‟s fees provisions, [the
15
fact that] some of the fees were on another case, and the fact
that the affidavit is insufficient. Moreover, much of the time
expended was due to the lack of cooperation on the part of
[817‟s] counsel.
This objection is wholly devoid of any specificity or legal authority that would call into
question the reasonableness of the fees and expenses detailed in 817‟s affidavit. Rather,
when given the opportunity to object, the Defendants simply presented a short opinion
that questioned the final sum awarded with generalities offered as the sole form of proof.
The Defendants never objected to the trial court‟s decision to determine attorney‟s
fees by having 817 submit an affidavit and allowing a chance for objections. Further, the
Defendants never requested a hearing on the issue of attorney‟s fees. In Tennessee,
“[a]bsent a request for a hearing by the party dissatisfied by the award [of attorney‟s
fees], a trial court is not required to entertain proof as to the reasonableness of the amount
of attorney‟s fees awarded.” Moran v. Willensky, 339 S.W.3d 651, 664 (Tenn. Ct. App.
2010) (citing Richards v. Richards, No. M2003-02449-COA-R3-CV, 2005 WL 396373,
at *15 (Tenn. Ct. App. M.S., filed Feb. 17, 2005)). Ultimately, when judging the
Defendants‟ conclusory objection against the thorough affidavit that 817 presented to the
trial court, we find no abuse of discretion in the trial court‟s decision to award 817
attorney‟s fees totaling $49,815.47.
VII.
The judgment of the trial court is affirmed. Costs on appeal are assessed to the
appellants, James Goins & Carpenter, P.C. and Stuart F. James. The case is remanded to
the trial court, pursuant to applicable law, for enforcement of the judgment and collection
of costs assessed below.
_____________________________________
CHARLES D. SUSANO, JR., CHIEF JUDGE
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