Steven H. Parker v. Brunswick Forest Homeowners Association, Inc. ( 2019 )

06/13/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
April 10, 2019 Session
STEVEN H. PARKER v. BRUNSWICK FOREST HOMEOWNERS
ASSOCIATION, INC.
Appeal from the Chancery Court for Shelby County
No. CH-16-1541 JoeDae L. Jenkins, Chancellor
___________________________________
No. W2018-01760-COA-R3-CV
___________________________________
Following a bench trial, the trial court awarded the Defendant/Appellee $28,372.06 in
attorney’s fees based upon an attorney’s fees provision in the parties’ written agreement.
Plaintiff/Appellant appeals the award of attorney’s fees on the basis that the relevant
provision is inapplicable under the circumstances. Because we conclude that the trial
court did not err in awarding the Appellee its attorney’s fees, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
J. STEVEN STAFFORD, P. J., W.S., delivered the opinion of the court, in which ARNOLD B.
GOLDIN and KENNY ARMSTRONG, JJ., joined.
John R. Candy, Collierville, Tennessee, for the appellant, Steven H. Parker.
Brandon F. McNary and Peter D. Baskind, Memphis, Tennessee, for the appellee,
Brunswick Forest Homeowners Association, Inc.
OPINION
BACKGROUND
This case is about fees assessed by the Brunswick Forest Homeowners
Association (“the Association”) against Steven H. Parker (“Homeowner”) related to
Homeowner’s residence in Shelby County, Tennessee. Homeowner purchased his home
in 2014 subject to various provisions enshrined in the Declaration of Covenants,
Conditions and Restrictions for Brunswick Forest (“CCRs” or “the Declaration”). One
such provision states that the homeowners in Brunswick Forest “shall be deemed to
covenant and agree to pay to [the Association] . . . annual assessments or charges.” As
such, the Association assessed charges against Homeowner for the years 2015 and 2016.
Homeowner, however, did not tender payment, and the Association mailed a letter to the
Homeowner indicating that Homeowner was delinquent. The Association requested that
Homeowner tender $280.00 to cover the late assessments, as well as $100.00 in related
attorney’s fees.
Homeowner again refused to pay the assessments. On July 18, 2016, the
Association sent a second letter to Homeowner, advising him that due to the delinquency
of the assessments, a lien on Homeowner’s property was to be recorded in the Shelby
County Register’s Office. In response, Homeowner, acting pro se, filed a complaint
against the Association on September 29, 2016, in the Chancery Court for Shelby County
(“the trial court”). Appellant also named two directors of the Association, Paul T. Ryan
and Garrett Temple, individually, in the complaint, however, both Mr. Ryan and Mr.
Temple were dismissed from the case early in the litigation and are not parties to this
appeal. In his complaint, Homeowner alleged that the Association did not follow the
relevant bylaws of the CCRs in calculating the assessments and because of that, the
assessments and the lien placed on Homeowner’s home were invalid. According to
Homeowner, the Association was liable for breach of fiduciary duty, a conflict of interest,
and for intentional harm inflicted upon the Homeowner. Homeowner sought the removal
of the lien from his property, and a declaration that “the amount of the assessment for
which the lien was filed was not set in accordance with the [CCRs] and the Tennessee
Code Annotated regarding Non-profit corporations.”
On November 7, 2016, the Association filed an answer denying the material
allegations contained in Homeowner’s complaint. The Association also filed a
counterclaim against Homeowner, asserting a cause of action for breach of contract on
the basis that Homeowner failed to fulfill his obligations under the CCRs, namely,
payment of the annual assessments for 2015 and 2016. The Association further asserted
that it was entitled to costs and attorney’s fees pursuant to the CCRs.
Contentious litigation ensued. The first trial judge assigned to the case recused
himself due to a conflict of interest; the case was thereafter transferred to a different
division of the Shelby County Chancery Court. In the meantime, Homeowner sought to
amend his complaint, and eventually filed an amended complaint wherein he also alleged
a breach of contract action; specifically, Homeowner averred that he was unlawfully
denied access to the “books and records” of the Association, in violation of the CCRs.
Eventually, on August 24, 2017, the Association filed a motion for partial summary
judgment asking the trial court to find Homeowner liable for breach of contract “for his
failure to pay assessments.” The motion was heard September 27, 2017, and on
September 29, 2017, the trial court entered an order granting the Association summary
judgment on its breach of contract claim.1
1
The trial judge relied on the following provision from the CCRs in rendering his decision:
-2-
Also on September 29, 2017, conflict with the second trial judge came to a head
after allegations from the Homeowner that the judge had been harassing Homeowner and
attempting to force him to retain counsel. While the trial judge denied these allegations,
he ultimately decided to recuse himself from the case. Accordingly, a second order of
recusal was entered September 29, 2017, and the case was again transferred to a different
division of the chancery court.
Homeowner eventually retained counsel, and this matter proceeded to trial on
August 23, 2018. At the hearing, the court first heard testimony from the Homeowner,
who conceded that he purchased his home in 2014 and that he signed the CCRs at issue at
that time. Homeowner testified in support of his affirmative claims, generally testifying
that the Association did not provide access to information needed to support the
assessments, such as how the assessments were calculated, and that the assessments,
along with the lien to secure them, were invalid as a result.
The trial court also heard testimony from Mr. Ryan and Mr. Temple. Mr. Ryan
testified that he was one of the partners in the Brunswick Forest development and that he
was serving as a director of the Brunswick Homeowner’s Association when the dispute
with the Homeowner began.2 With regard to the assessments, Mr. Ryan testified that the
assessment amount had been the same for many years because the Association “had a
history with the expenses and knew what the expenses were.” He also testified that the
Association followed all provisions in the CCRs when assessing the various fees for each
lot, including estimating the annual amounts thirty days before each assessment period
and sending a notice of assessment to each homeowner. Mr. Ryan also confirmed that the
Homeowner refused to pay his assessments for 2015 and 2016.
Article VI, Section I of Declaration provides that:
[e]ach Owner of any Lot, by acceptance of a deed therefor, whether or not it shall be so
expressed in any such deed or other conveyance, shall be deemed to covenant and agree
to pay to the Association: (1) annual assessments or charges; (2) special assessments for
capital improvements; and (3) emergency assessments, such assessments to be fixed,
established and collected from time to time as hereinafter provided. The annual special
and emergency assessments, together with such interest thereon and costs of collection
thereof as are hereinafter provided, shall be a charge on the land and shall be a continuing
lien upon the Lot against which each such assessment is made. Each such assessment,
together with such interest thereon and cost of collection thereof as are hereinafter
provided, shall also be the personal obligation of the Person who was the Owner of such
Lot at the time when the assessment fell due.
Accordingly, the trial court found that “[Homeowner] failed to pay the assessments for 2015 and 2016.”
2
Mr. Ryan no longer serves as a director of the Association.
-3-
Mr. Temple’s3 testimony regarding how the assessments were calculated largely
reiterated that of Mr. Ryan. Mr. Temple also recalled a meeting with the Homeowner
during December of 2016, at which time the Homeowner’s delinquent assessments
totaled $280.00. Mr. Temple testified that in the meeting, Homeowner agreed to pay
assessments going forward if the Association would waive the outstanding $280.00 and
remove the lien from Homeowner’s property. Mr. Temple testified that when the
Association would not agree to those terms, Homeowner abruptly left the meeting.
Finally, Mr. Temple stated that because of the protracted litigation caused by this case,
the Association had been forced to raise the yearly assessment amount to $650.00.
The trial court issued an oral ruling in which it concluded that the Homeowner
failed to carry his burden of proof in showing that the Association breached its contract
with the Homeowner, or that Homeowner had suffered any damage as a result of the
Association’s actions. The trial court determined that Homeowner’s complaint should be
dismissed in its entirety; the issue of attorney’s fees, however, was reserved for a later
date.
The trial court held a final hearing on September 5, 2018 in order to determine the
issue of attorney’s fees, which both parties had requested they be awarded. At the
hearing, counsel for the Association testified about the fees incurred throughout the case,
stating that much of the Association’s work was done in response to the multitude of
motions and pleadings that were filed by the Homeowner while he was proceeding pro
se. Counsel’s overall testimony was that the fees incurred were reasonable under the
circumstances, and that the total amount including costs came to $32,371.06.
The dispute at this hearing, however, largely centered on the language of the
CCRs and whether, pursuant to that language, the Association could collect attorney’s
fees related to its defense of Homeowner’s claims. One provision of the CCRs, found in
Article VI, section five, provides that “[t]he Association may bring an action at law
against” a homeowner in the event that the assessments are unpaid, and that “the
Association may collect from the said [m]ember interest, costs and reasonable attorneys’
fees.” Further, Article XII, section 3 expressly discusses enforcement of the CCRs and
states that “[t]he expense of enforcement by the Association shall be chargeable to the
Owner of the Lot violating these covenants and restrictions and shall constitute a lien on
of the Lot, collectible in the same manner as assessments hereunder.”
Based upon the language in the CCRs, particularly the Article VI provision, the
Homeowner argued that most of the fees incurred by the Association arose in defense of
Homeowner’s actions, rather than from prosecuting its own breach of contract claim. As
such, the Homeowner argued that the Association’s attorney’s fees did not accrue as a
result of the Association “bring[ing] an action at law[.]” In support, the Homeowner
3
Mr. Temple was still serving as the president of the Association at the time of trial.
-4-
alleged that he had examined the bills submitted by the Association, and that the fees
accrued in prosecuting the Association’s counterclaim only amounted to approximately
$1,500.00. Based upon the language of the contract, Homeowner asserted that the
Association was not entitled to any award of attorney’s fees over and above what was
accrued in bringing the counterclaim. Essentially, Homeowner argued that the
Association should only be awarded, if anything, $1,500.00 in attorney’s fees.
At the conclusion of the hearing, the trial court ruled that it would award
attorney’s fees to the Association. In addressing the Homeowner’s argument that the
Association was entitled only to fees accrued in furtherance of its counterclaim, the trial
court noted the following:
It appears that this litigation rolls out of the Association’s right to
collect Association dues through annual assessments. [Homeowner]
disputed the Association’s right to collect the annual assessments and
refused to pay them, which gave rise to his lawsuit, which initiated this
litigation.
The gravamen of his lawsuit was to avoid the payment of annual
assessments, two years’ worth, plus an [sic] attorney fees of $100.00. The
litigation was protracted; although not overly complicated, it was protracted
based upon the numerous pleadings filed by [Homeowner] who did a pretty
decent job being a non-lawyer requiring the Association’s counsel to
respond to the various motions and pleadings that he filed.
Accordingly, the trial court found that the Association was entitled to attorney’s
fees in the amount of $28,372.06.
On September 10, 2018, the trial court entered two written orders finalizing its
rulings. The first order, titled Order Dismissing Plaintiff’s Complaint, provided that
although Homeowner was contractually required to pay assessments to the Association,
Homeowner failed to pay in 2015, 2016, and 2018.4 As such, the Association’s “lien on
the property was valid[,]” and, further, Homeowner failed to show how he was damaged
by the lien. Accordingly, it was the trial court’s conclusion that Homeowner did not carry
his burden of proof as to any of his claims. A separate order was entered addressing the
attorney’s fees, wherein the trial court found that “this matter arose solely out of the
[Association’s right to collect assessments[,]” and that Homeowner’s “lawsuit against
[the Association] was for the sole purpose of avoiding the payment of assessments.” The
trial court further noted that the Association was required to respond to Homeowner’s
4
It is undisputed that Homeowner did pay the assessments for 2017. It is also undisputed that
after trial, on August 28, 2018, the Homeowner remitted $980 to the Association in order to have the lien
on Homeowner’s property removed.
-5-
pleadings in order to fully prosecute its counterclaim, and that as such, the Association
was entitled to an award of attorney fees pursuant to the language in the CCRs. Finally,
the trial court determined that the requested attorney’s fees were reasonable in light of all
the circumstances.
Homeowner filed a timely notice of appeal to this Court on September 26, 2018.
ISSUE PRESENTED
The Homeowner raises a single issue for review: Whether the trial court erred in
awarding attorney’s fees to the Association.
STANDARD OF REVIEW
This case was resolved following a bench trial. Under rule 13 of the Tennessee
Rules of Appellate Procedure, the trial court’s findings of fact from a bench trial are
reviewed “de novo upon the record of 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). A trial court’s conclusions of law, however, are not entitled to a
presumption of correctness. Johnson v. Johnson, 37 S.W.3d 892, 894 (Tenn. 2001).
We also bear in mind that the single issue for review in this case centers on the
trial court’s interpretation and application of an attorney’s fees provision within a written
contract. “The interpretation of a written agreement is a question of law and not of fact.”
Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn.
2009). Moreover, “[t]hough normally review of an award of attorney’s fees is subject to
an abuse of discretion standard,” where the parties dispute the trial court’s “interpretation
and application of a contractual provision allowing for attorney’s fees[,]” our review is de
novo. Southwind Residential Prop. Ass’n, Inc. v. Ford, No. W2016-01169-COA-R3-CV
2017 WL 991108, at *10 (Tenn. Ct. App. Mar. 14, 2017) (citing Clark v. Rhea, No.
M2002-02717-COA-R3-CV, 2004 WL 63476, at *2 (Tenn. Ct. App. Jan. 13, 2004)).
DISCUSSION
The dispute in the present case turns on the trial court’s application of a provision
within the CCRs providing for attorney’s fees incurred in a collection action. We have
previously held that CCRs “arise from a series of overlapping contractual transactions”
and as such, “should be viewed as contracts.” General Bancshares, Inc. v. Volunteer
Bank & Trust, 44 S.W.3d 536, 540 (Tenn. Ct. App. 2000) (citing Maples Homeowners
Ass’n v. T &R Nashville Ltd. P’ship, 993 S.W.2d 36, 39 (Tenn. Ct. App. 1998)).
Accordingly, CCRs “should be construed using the rules of construction generally
applicable to the construction of other contracts.” Id.; see also Southwind, 2017 WL
991108, at *6 (“Because the instant case involves the interpretation of restrictive
-6-
covenants, we apply well-established rules of construction and law in order to construe
the terms of the covenants.”). Thus, because the CCRs at issue here are subject to the
rules of construction applicable to contracts, we turn first to an overview of those rules.
As we have previously noted,
“[t]he cardinal rule for interpretation of contracts is to ascertain the
intention of the parties and to give effect to that intention consistent with
legal principles.” Rainey v. Stansell, 836 S.W.2d 117, 118–19 (Tenn. Ct.
App. 1992) (quoting Bob Pearsall Motors, Inc. v. Regal Chrysler–
Plymouth, Inc., 521 S.W.2d 578 (Tenn. 1975)). “A primary objective in the
construction of a contract is to discover the intention of the parties from a
consideration of the whole contract.” Id. at 119 (citing McKay v. Louisville
& N.R. Co., 133 Tenn. 590, 182 S.W. 874, 875 (1916)). When resolving
disputes concerning contract interpretation, we are to ascertain the intention
of the parties based upon the “usual, natural, and ordinary meaning” of the
contractual language. Id. “All provisions in the contract should be
construed in harmony with each other, if possible, to promote consistency
and to avoid repugnancy between the various provisions of a single
contract.” Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.
1999) (citing Rainey, 836 S.W.2d at 118–19).
If the contract language is unambiguous, the written terms control, not the
“unexpressed intention of one of the parties.” Sutton v. First Nat’l Bank of
Crossville, 620 S.W.2d 526, 530 (Tenn. Ct. App. 1981). “The language of a
contract is ambiguous when its meaning is uncertain and when it can be
fairly construed in more than one way.” Gredig v. Tenn. Farmers Mut.
Ins. Co., 891 S.W.2d 909, 912 (Tenn. Ct. App. 1994) (citing Farmers-
Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn. 1975)). “A
strained construction may not be placed on the language used to find
ambiguity where none exists.” Id. (quoting Farmers-Peoples Bank, 519
S.W.2d at 805). “An ambiguous provision in a contract generally will be
construed against the party drafting it.” Allstate Ins. Co. v. Watson, 195
S.W.3d 609, 612 (Tenn. 2006).
Commerce Union Bank, Brentwood, Tennessee v. Bush, 512 S.W.3d 217, 22728
(Tenn. Ct. App. 2016).
Moreover, the present case centers on the trial court’s decision to award the
Association its attorney’s fees based upon the parties’ written agreement. “Tennessee,
like most jurisdictions, adheres to the ‘American rule’ for the award of attorney fees.”
Cracker Barrel, 284 S.W.3d at 309 (citing John Kohl & Co. v. Dearborn & Ewing, 977
S.W.2d 528, 534 (Tenn. 1998); Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336,
338 (Tenn. 1985)). “As a general principle, the American rule reflects the idea that public
-7-
policy is best served by litigants bearing their own legal fees regardless of the outcome of
the case.” Id. (citing House v. Estate of Edmondson, 245 S.W.3d 372, 377 (Tenn.
2008)). There are, however, recognized exceptions to the American rule; indeed, “a party
in a civil action may recover attorney fees only if: (1) a contractual or statutory provision
creates a right to recover attorney fees; or (2) some other recognized exception to the
American rule applies, allowing for recovery of such fees in a particular case.” Id. (citing
John Kohl, 977 S.W.2d at 534; Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn.
2005)).Thus, “[i]n the context of contract interpretation, Tennessee allows an exception
to the American rule only when a contract specifically or expressly provides for the
recovery of attorney fees.” Id. (citing House, 245 S.W.3d at 377) (emphasis in original);
see also Pinney v. Tarpley, 686 S.W.2d 574, 581 (Tenn. Ct. App. 1984) (“In the absence
of an express agreement to pay attorney’s fees for enforcement of a contract, such fees
are not recoverable in Tennessee.”); Eberbach v. Eberbach, 535 S.W.3d 467, 474 (Tenn.
2017) (noting that in the absence of a contractual provision providing for attorney’s fees,
“litigants are responsible for their own attorney’s fees.”). “Accordingly, parties who
have prevailed in litigation to enforce their contractual rights are entitled to recover their
reasonable attorney’s fees once they demonstrate that the contract upon which their
claims are based contains a provision entitling the prevailing party to its attorney’s fees.”
Eberbach, 535 S.W.3d at 474.
It has also been held, however, that a contractual provision allowing for attorney’s
fees must explicitly convey the right to recover those fees. For instance, on its own the
phrase “all costs and expenses” is not specific enough to include an award of attorney’s
fees. Cracker Barrel, 284 S.W.3d at 31011; compare Kultura, Inc. v. S. Leasing Corp.,
923 S.W.2d 536, 540 (Tenn. 1996) (determining that alone, the phrase “any loss” does
not include attorney’s fees), with Harris v. 4215 Harding Road Homeowners Ass’n, 74
S.W.3d 359, 361 (Tenn. Ct. App. 2001) (holding that an award of attorney’s fees was
appropriate where the master deed at issue provided that “all costs and expenses,
including a reasonable attorney’s fee,” was recoverable in an action to enforce the deed),
and Urbanavage v. Capital Bank, No. M2016-01363-COA-R3-CV, 2018 WL 3203100,
at *10 (Tenn. Ct. App. June 29, 2018) (recognizing that the language “late fee and
interest . . . and cost of collection when delinquent, including reasonable attorney’s
fees[,]” was a proper legal basis upon which to award attorney’s fees). Consequently, a
departure from the American rule is inappropriate in the absence of a provision expressly
providing for an award of attorney’s fees.
Turning to the instant case, the pertinent clause of the CCRs is found in Article VI,
section five of the Declaration:
Any assessment levied pursuant to this Declaration or any
installment thereof, which is not paid within ten (10) days after it is due,
may, upon resolution of the Board of Directors, bear interest at a rate not to
exceed the highest rate allowed under the laws of the State of Tennessee,
-8-
and may, by resolution of the Board of Directors, subject the Member
obligated to pay the same to the payment of such penalty or “late charge” as
the said Board may fix. The Association may bring an action at law
against the Member personally obligated to pay the same, or foreclose
the lien against the Lot or Lots subject to prior mortgages or Deeds of
Trust upon the Lot or Lots, then belonging to said Member; in either
of which events, the Association may collect from the said Member
interest, costs and reasonable attorneys’ fees. No Owner may waive or
otherwise escape liability for the assessments provided for herein by
abandonment of his Lot.
(emphasis added). Clearly, the CCRs at issue provide for an award of attorney’s fees
when the Association “bring[s] an action at law” to recover an unpaid assessment. Thus,
there can be no dispute that the Association was, in fact, at least entitled to its attorney’s
fees incurred solely in prosecuting its counterclaim for the unpaid assessments. Unlike
other contracts we have previously considered, however, the CCRs do not specifically
state whether the attorney’s fees also extend to defense of an action. The dispute, then,
involves whether the above language also authorizes the Association to recover the fees
incurred in ostensibly defending against Homeowner’s claims.
In the absence of specific language authorizing attorney’s fees for defending
actions, this Court has often rejected claims for attorney’s fees by defendants, albeit
based on different contractual language and factual situations not present in this case. For
instance, in Smith v. Crossman, No. M2003-01108-COA-R3-CV, 2004 WL 1732319
(Tenn. Ct. App. Aug. 2, 2004), we addressed the issue of an attorney’s fees provision
within a commercial lease. In Smith, the tenants of small grocery store sued their
landlord after a Dollar General store in the same complex began selling food items,
which the tenants alleged was in violation of a protective covenant within their lease.
2004 WL 1732319, at *1. In response, the landlord argued that it had no authority to
constrain the Dollar General from selling food, and also added a counterclaim for
attorney’s fees only. Id. Eventually, the tenants dismissed their lawsuit, but the landlord’s
counterclaim for attorney’s fees remained. Id. The trial court held that the landlord was
entitled to attorney’s fees in the amount of $14,320, based on the following provision in
the lease:
Tenant shall pay reasonable attorneys fees incurred by Landlord in the
enforcement of any terms, covenants, or provisions of this lease, and the
Landlord also agrees to reimburse tenant for reasonable attorney fees in the
enforcement of any terms, covenants, or provisions of this lease.
The tenants appealed, making a similar argument to that of the Homeowner in the
case-at-bar; specifically, the tenants asserted that the landlord’s attorney’s fees were only
-9-
incurred in defense of their claim, rather than through the landlord’s enforcement of his
rights under the lease. Id. at *2. We agreed:
In its counterclaim, [l]andlord merely invoked the attorney’s fees provision
and alleged that it was ‘incurring attorneys fees in the defense of this
action. . . .’ At no time did [l]andlord counter that [t]enants were in breach
of the lease or seek to enforce any term of the agreement.
Id. In the Smith lease, attorney’s fees were only recoverable where terms of the lease
were being enforced. Id. In that particular case, the landlord was not attempting “to
enforce any term, covenant or provision of the lease[,]” but rather only sought to defend
against the tenants’ claim. Id. As such, the award of attorney’s fees was inappropriate
under the circumstances, and we reversed the trial court’s decision. Id. at *3.
Similarly, in White v. Empire Exp. Inc., 395 S.W.3d 696 (Tenn. Ct. App. 2012),
we again considered the propriety of a trial court’s award of attorney’s fees. In that case,
the plaintiff truck driver brought suit against his employer and an affiliated company for
breach of contract and conversion over a rent-to-own lease of the plaintiff’s truck. 395
S.W.3d at 705. The defendants filed an answer, arguing that plaintiff had defaulted on the
contract by failing to make various payments, and sought a declaration “saying that
[plaintiff] failed to satisfy his obligations.” Id. Defendants also counterclaimed for money
damages, “including attorney fees incurred in defending the suit.” Id.
Eventually, the defendants sought summary judgment on the plaintiff’s breach of
contract claim, and also “claimed they were entitled to summary judgment on their
counterclaim for attorney’s fees and other damages pursuant to the [l]ease.” Id. Likewise,
the plaintiff filed a cross-motion for summary judgment asking the trial court to
determine that the defendants had breached the lease agreement. Id. at 706.The trial court
granted in part the plaintiff’s motion for summary judgment, finding that the plaintiff was
not in breach of contract; on the other hand, the defendants’ motion for summary
judgment was denied completely, and their counterclaim for attorney’s fees under the
terms of the lease was dismissed. Id. The case proceeded to trial, and the plaintiff
prevailed on all of the remaining claims. Id. at 71011. The defendants thereafter
appealed to this Court. Id.
One of the many issues raised on appeal was whether the trial court erred in
denying the defendants’ motion for summary judgment for attorney’s fees under the
terms of the parties’ agreement. Id. at 71112. In that lease, the attorney’s fees clause
provided that “[plaintiff] agrees to pay all expenses incurred by [the defendant] in
enforcing its rights after the occurrence of any event of default hereunder, including the
reasonable fees of any attorneys retained by [the defendant] . . . .” Id. at 718. On appeal,
we concluded that pursuant to the particular language of the lease at issue, the trial court
was correct in determining that the defendants were not entitled to attorney’s fees. Id. In
- 10 -
so holding, we pointed out that the defendants were “being required to defend their own
actions rather than seeking to enforce their rights as provided in [the lease].” Id. Because
the lease indicated that attorney’s fees were only available through action by the
defendant “enforcing its rights” after a default, this Court determined that the
counterclaim for attorney’s fees, on its own, was insufficient to bring the counterclaim
within the purview of the attorney’s fees clause at issue. Id. Consequently, the trial
court’s decision to deny the defendants their attorney’s fees was upheld on appeal in
White.
Finally, in Southwind Residential Prop. Ass’n, Inc. v. Ford, No. W2016-01169-
COA-R3-CV, 2017 WL 991108, at *10 (Tenn. Ct. App. Mar. 14, 2017), we yet again
addressed a situation in which the parties disputed the applicability of an attorney’s fees
provision, as it relates to fees incurred defending and pursuing a claim. In that case, the
plaintiff homeowner’s association filed suit against two homeowners after a dispute arose
over the homeowners’ refusal to pay the full amount of the annual assessments on their
property. Id. at *2. In addition to the assessments, the association’s petition asked for
costs and attorney’s fees. Id. The homeowners responded by answering the petition but
also by filing a counterclaim for other various actions such as negligent
misrepresentation, intentional misrepresentation, and breach of contract. Id. The parties
litigated for several years before the matter proceeded to trial, and the association was
eventually awarded a judgment for the assessments at issue, as well as an award of nearly
$67,000 in attorney’s fees. Id. at *6. The homeowners appealed, raising, inter alia, the
trial court’s decision to grant the association its attorney’s fees. Id.
In addressing the attorney’s fees issue on appeal, we looked to the language of the
relevant CCRs, which provided that “[e]ach such assessment, together with interest and
costs of collection, including reasonable attorney’s fees, shall be a personal obligation of
the person who was the owner of such Member’s Property at the time when the
assessment fell due.” Id. at *10. Based upon the foregoing language, the homeowners
argued that
the attorney’s fees incurred in this case are not properly categorized as
‘costs of collection,’ because the fees awarded by the trial court include
fees incurred in the defense of two separate lawsuits, [n]either [of which]
involves the collections of assessments, nor [are] reasonably related to the
collection of assessments in the present action.
Id.
Essentially, the homeowners asserted that to the extent the attorney’s fees at issue
were incurred in defense of the homeowners’ claims unrelated to the assessments, those
could not be construed as “costs of collection.” Id. at *11. However, because we
concluded that the homeowners failed to preserve a specific objection to the attorney’s
- 11 -
fees award at trial, this argument was waived on appeal. Id. Notably, however, we stated
in dicta that “typically, we would agree with [the homeowners] that costs incurred in
separate litigation not related to this collection action cannot be categorized as costs
of collection for purposes of the CCRs.” Id. (emphasis added). Accordingly, although
the homeowners in Southwind failed to properly raise the argument that the association
could not recover certain fees accrued in defense of a separate, unrelated claim, we
acknowledged that under different circumstances, such an argument could have merit.
Distilled to their essence, the above cases stand for the proposition that, in the
absence of an express provision authorizing attorney’s fees for the defense of an action,
the defendant cannot recover attorney’s fees where the defendant: (1) did not assert a
claim for affirmative relief, such as a breach of contract action, against the plaintiff, see
Smith, 2004 WL 1732319 at *2–*3; (2) did not prevail in showing that the plaintiff
breached some duty to the defendant, see White, 395 S.W.3d at 718; and (3) sought
attorney’s fees related to a wholly separate action unrelated to the present enforcement
proceeding. See Southwind, 2017 WL 991108, at *10 (involving fees related to an action
involving landscaping rather than assessments). In this case, however, the Association
promptly filed a counterclaim for breach of contract against Homeowner, prevailed on all
claims, both in prosecution of the counterclaim and defense of Homeowner’s claims, and
the claims were clearly interrelated as they both concerned the validity of the assessments
and the lien. Consequently, none of the above cases prohibit the award of fees in this
case.
Of course, determining that our caselaw does not prohibit the award in this
situation does not settle the matter of whether the fees were authorized by the language in
the CCRs. As such, we turn to caselaw from our sister jurisdictions to inform our
analysis. For example, several states have held that where attorney’s fees were authorized
for bringing certain claims under a statute, fees incurred in defending such a claim could
be authorized where “the claim and counterclaim are so interrelated that segregation of
fees incurred in prosecution of the claim and defense of the counterclaim is not
necessary.” G.R.A.V.I.T.Y. Enterprises, Inc. v. Reece Supply Co., 177 S.W.3d 537, 551
(Tex. App. 2005); see also Regency Homes of Dade, Inc. v. McMillen, 689 So. 2d 1204
(Fla. Ct. App. 1997) (noting that where the issues involved both defense of a lien and a
counter-petition for breach of contract, the issues were so intertwined that the attorney’s
time could not reasonably be apportioned); Jerels v. Begue, No. 24700, 2010 WL
1780140, at *3 (Ohio Ct. App. May 5, 2010) (finding under an Ohio landlord/tenant
statute that when a trial court concludes that work completed in support of a claim and
the work completed in defending the related counterclaim are indivisible, “it is within the
trial court’s discretion to award the prevailing [party] the attorney fees he or she
reasonably incurred in both pursuing the claim and defending against the counterclaim.
To hold otherwise would be illogical.”). The attorney’s fee award in this case, however,
is not based upon statute, but based upon a contract; accordingly, the trial court had
considerably less discretion in the award of fees in this case. See Eberbach, 535 S.W.3d
- 12 -
at 47879 (“[T]he trial court does not have the discretion to set aside the parties’
agreement and supplant it with its own judgment.”).
Other courts, however, have come to similar conclusions after considering
attorney’s fees based solely on a contract. First, in Heyde v. State Sec., Inc., 1958-
NMSC-009, 63 N.M. 395, 400, 320 P.2d 747, the New Mexico Supreme Court held that
where attorney’s fees were authorized “to enforce covenants” in a lease, attorney’s fees
were authorized not only for the fees associated with their complaint, but also with
defending against the tenants’ counterclaim. Id. at 11. The Wyoming Supreme Court
soon adopted an arguably more expansive rule on this issue. See Barker v. Johnson, 591
P.2d 886 (Wyo. 1979). In Barker, the parties entered into a sales contract that provided
that if the seller “must bring an action to foreclose . . . or to collect any damages,” the
buyers would be responsible for “all costs” of the action including attorney’s fees. Id. at
890. The buyers eventually sued the seller for specific performance; the seller answered
and filed a counterclaim for possession and quiet title. Although the buyers prevailed in
their claim for specific performance in the trial court, the trial court awarded the seller
attorney’s fees. Id. at 888. The Wyoming Supreme Court reversed the trial court, ruling
in favor of the seller on the substantive merits of the claim. The court, however, affirmed
the award of attorney’s fees to the seller, despite the fact that the lawsuit was “instituted
by the [buyers]” because the buyers’ action “added to the necessity for [the seller] to
obtain a decree quieting its title.” Id.
Federal courts have adopted a similar rule. First, in Exchange Nat. Bank of
Chicago v. Daniels, 763 F.2d 286 (7th Cir.), on reh’g in part, 768 F.2d 140 (7th Cir.
1985), the United States Court of Appeals for the Seventh Circuit held that attorney’s
fees associated with defending against counterclaims were authorized by the contract as
costs to enforce the debt, as “the Borrowers’ counterclaims . . . were integral to the
‘enforcement’ of the note, and that the other litigation commenced by the Borrowers was
designed to frustrate the enforcement of the note.” Id. at 294.
Again, the situation was reversed and the rule somewhat expanded in Duryea v.
Third Nw. Nat. Bank of Minneapolis, 606 F.2d 823 (8th Cir. 1979). In Duryea, the
United States Court of Appeals for the Eigth Circuit agreed with the district court that
attorney’s fees were authorized to the defendant creditor where attorney’s fees were
authorized by the contract as “costs of collection.” Id. at 826. As the Court explained:
If the Bank had instituted suit to collect the note and plaintiff had, by
way of counterclaim, served the complaint that is the basis of this action, all
costs of both bringing suit and defending against the counterclaim would be
“costs of collection” of the note. See Taylor v. Continental Supply Co., 16
F.2d 578 (8th Cir. 1926). This court sees little difference where plaintiff
brings suit to prevent collection of the note. Because it is necessary for the
Bank to defend against such an action in order to collect on the note,
- 13 -
attorney’s fees incurred in defending against plaintiff’s suit are a “cost of
collection” as that term is used in the note. A contrary result would permit
the maker of a note by winning the “race to the courthouse” to coerce
settlement. This would render the “cost of collection” provision of little
value, apparently contrary to what the parties to the note intended.
Id. (quoting the district court with approval). District courts considering the above
opinions describe them as creating as a rule allowing the recovery of attorney’s fees
where the debtor’s action has “been brought as a roadblock to collection” on the debt.
Kennington Ltd., Inc. v. Wolgin, No. CIV. A. 89-0080, 1989 WL 83556, at *3 (E.D. Pa.
July 28, 1989). As the district court explained, without such a rule, “costs of defense
would be made to depend on which party files first (‘the race to the courthouse’), an
arbitrary and undesirable result.” Id.
State courts have relied on the federal precedent to reach similar conclusions. See
State Bank of Cokato v. Ziehwein, 510 N.W.2d 268, 270 (Minn. Ct. App. 1994) (“For
example, where a debtor sued a creditor to prevent collection and the creditor
successfully counterclaimed for the amount due, the creditor was entitled to recover
attorney fees incurred in both defending the debtor’s claim and prosecuting the
counterclaim as ‘costs of collection.’ Similarly, where a debtor brought a counterclaim
which, if successful, would have reduced the amount due under the note, the creditor was
entitled to fees related to its action on the note as well as fees for the counterclaim.”)
(citations omitted) (citing Duryea, 606 F.2d at 826). But see Carefree Foliage, Inc. v.
Am. Tours, Inc., 153 Ill. App. 3d 190, 196, 505 N.E.2d 1039, 1043 (1987) (holding that
the Daniels rule only applies when the contract provides for attorney’s fees related to
both “collection” and “enforcement” of the debt); see also Kaiser v. Olson, 105 Ill. App.
3d 1008, 1017, 435 N.E.2d 113, 120 (1981) (holding that “some language more express
than ‘costs of collection’ should have been employed to have placed the party charged on
notice that he was undertaking to protect the obligee from costs incurred in defending
against a separate claim and not just the ordinary collection expenses in recovering upon
a defaulted promissory note”).
Keeping the above authority in mind, we again turn to the language of the CCRs at
issue here. See Sutton v. First Nat’l Bank of Crossville, 620 S.W.2d 526, 530 (Tenn. Ct.
App. 1981) (holding that, in general, the written terms control interpretation of a
contract). As previously stated, the CCRs expressly provide that the Association may
recover its attorney’s fees when the Association “bring[s] an action at law” related to
unpaid assessments. This language is both broad and vague. Black’s Law Dictionary
defines “bring an action” as “[t]o sue; institute legal proceedings.” Black’s Law
Dictionary 219 (9th ed. 2009). The contract therefore simply states that where such an
action is brought against a homeowner obligated to pay assessments, the Association may
recover its attorney’s fees; neither the terms “collection” nor “enforcement” are included
- 14 -
in this provision. Clearly, here the Association did institute legal proceedings against
Homeowner, albeit in the posture of counter-plaintiff.
The language of this provision, however, should not be read in isolation but must
be construed in light of the contract as a whole. Fisher v. Revell, 343 S.W.3d 776 (Tenn.
Ct. App. 2009) (quoting 77 C.J.S. Contracts § 304) (“[In interpreting a contract,] the
whole instrument must be considered, and not an isolated part, such as a single sentence
or paragraph. The language in a contract must be construed in the context of that
instrument as a whole, and in the circumstances of that case, and cannot be found to be
ambiguous in the abstract.”). Elsewhere in the contract the Association’s right to enforce
the terms of the CCRs is discussed. Article XII General Provision Section 3 expressly
discusses enforcement of the CCRs and states that “[t]he expense of enforcement by the
Association shall be chargeable to the Owner of the Lot violating these covenants and
restrictions and shall constitute a lien on of the Lot, collectible in the same manner as
assessments hereunder.”
We agree with Homeowner that a contract providing only that a party is entitled to
recover “costs” and “expenses” does not authorize the award of attorney’s fees. See
Cracker Barrel, 284 S.W.3d at 310 (“The term ‘costs’ has not generally been construed
to encompass attorney fees.”); Nyrstar Tennessee Mines-Strawberry Plains, LLC v.
Claiborne Hauling, LLC, No. E2017-00155-COA-R3-CV, 2017 WL 5901017, at *2
(Tenn. Ct. App. Nov. 29, 2017) (holding that a provision allowing for “expenses” or even
“legal expenses” did not authorize an award of attorney’s fees). Such is not the case here.
In this case, while the “expense of enforcement” provision of the CCRs does not
expressly contain an attorney’s fees provision, this provision explicitly references the
manner in which assessments are collected. The provision regarding collection of
assessments expressly provides that the Association may recover its attorney’s fees when
its provisions are met, i.e., when an action is brought. Reading the contract as a whole, as
we must, we conclude that the contract provides for collection of attorney’s fees and
costs where the Association “bring[s]” an action for collection of assessments and
enforcement of the terms of the CCRs.
Further, we conclude that all actions taken in this particular case, including the
action of defending against Homeowner’s complaint, fall within the ambit of the CCRs’
attorney’s fee provision. The constellation of facts shown at trial demonstrate that this
collection action was initiated by the mailing of a letter pursuant to the Fair Debt
Collection Practices Act, 15 U.S.C. 1692(g). Thereafter, Homeowner filed the instant
action whose primary goal was to rescind the lien placed on his property for the unpaid
assessments and be awarded damages that allegedly resulted from the lien. In support of
that relief, Homeowner testified at trial that the assessments were invalid because he was
not provided sufficient information to determine the proper calculation of the
assessments. Homeowner’s claim that the lien should be rescinded therefore rested on his
claim that assessments upon which the lien was based were invalid. Moreover, the trial
- 15 -
court made an express finding, based upon Homeowner’s own testimony, that the
gravamen of Homeowner’s lawsuit has always been to avoid payment of the
assessments.5 This finding, coupled with Homeowner’s decision to file this lawsuit
shortly after receiving the debt collection letter, supports our conclusion that
Homeowner’s lawsuit was an effort “to frustrate the enforcement of the [CCRs].”
Daniels, 763 F.2d at 294.
Here, it was necessary for the Association to respond to Homeowner’s claim in
order to obtain relief on its counterclaim to collect on the assessments; stated differently,
had Homeowner succeeded in showing that the assessments were in some way invalid,
the Association would likely not have prevailed on its claim to collect the unpaid
assessments. The same is true regardless of which party actually filed suit first. To hold
otherwise would be to exalt form over function and reward parties for winning the race to
the courthouse in violation of Tennessee’s long-settled public policy. See Word v. Metro
Air Serv’s, Inc., 377 S.W.3d 671, 675 (Tenn. 2012) (citing West v. Vought Aircraft
Indus., Inc., 256 S.W.3d 618, 622 (Tenn. 2008)) (noting that a race to the courthouse
protocol “engages attorneys in the undignified spectacle of literally racing to secure
perceived procedural advantages.”); Watson v. Watson, 658 S.W.2d 132, 134 (Tenn. Ct.
App. 1983) (rejecting the argument that plaintiff had priority in boundary dispute “simply
because [plaintiff] ‘won the race to the courthouse’ irrespective of the actual intent of
any of the parties to either conveyance.”).
Based on the foregoing, we conclude that the trial court did not err in holding that
the CCRs provided for an award of attorney’s fees that arose not only out of prosecution
of the Association’s counterclaim, but also with regard to defending against the claims
contained in Homeowner’s complaint. Nothing in Homeowner’s brief on appeal can be
construed as arguing that the fees awarded by the trial court were unreasonable under the
circumstances. As such, the decision of the trial court to award the Association
$28,372.06 in attorney’s fees is affirmed.
CONCLUSION
The order of the Shelby County Chancery Court awarding Brunswick Forest
Homeowners Association its attorney’s fees and costs is affirmed. Costs of this appeal are
taxed against the Appellant, Steven H. Parker, for which execution may issue if
necessary.
5
Arguably, such a finding, rendered by the trial court following a trial on the merits, is entitled to
a presumption of correctness and will not be overturned unless the evidence preponderates otherwise.
Turner v. Turner, 473 S.W.3d 257, 269 (Tenn. 2015) (citing Tenn. R. App. P. 13(d). The evidence does
not preponderate against the trial court’s characterization of Homeowner’s claims.
- 16 -
_________________________________
J. STEVEN STAFFORD, JUDGE
- 17 -