Gatlinburg Roadhouse Investors, LLC. v. Charlynn Maxwell Porter ( 2012 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
October 2, 2012 Session
GATLINBURG ROADHOUSE INVESTORS, LLC., v. CHARLYNN
MAXWELL PORTER, et al.
Appeal from the Chancery Court for Sevier County
No. 09-8-379 Hon. Telford E. Forgety, Jr., Chancellor
No. E2011-02743-COA-R3-CV-FILED-DECEMBER 20, 2012
In this action plaintiff charged defendant had breached the contract between them and sought
specific performance. The Trial Court held the contracts were ambiguous and construed
them in accordance with the actions the parties took in regard to the contracts. The Trial
Court ruled in favor of the defendant and dismissed the Complaint, but refused to award the
prevailing party attorney's fees as was required in the parties' contract. On appeal, we affirm
the Trial Court's Judgment, but modify and remand, with instructions to the Trial Court to
award the prevailing party her attorney's fees.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed,
as Modified.
H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY, J., and JOHN W. M CC LARTY, J., joined.
Howard B. Jackson, Knoxville, Tennessee, for the appellant, Gatlinburg Roadhouse
Investors, LLC.
Kevin C. Stevens and Briton S. Collins, Knoxville, Tennessee, for the appellee, Charlynn
Maxwell Porter.
OPINION
Background
This appeal requires this Court to construe a contract. Appellant, Gatlinburg
Roadhouse Investors, LLC (GRI), filed a Complaint against appellee, Charlynn Maxwell
Porter, alleging breach of contract and seeking specific performance. The contract at issue
is a commercial sublease on a parking lot that is associated with the Texas Roadhouse
restaurant in Gatlinburg, (Commercial Sublease or Parking Lot Sublease). Prior to the time
that the suit was filed, GRI owned and operated the Texas Roadhouse in Gatlinburg and Ms.
Porter held a substantial interest in GRI. Ms. Porter also holds a lease on a parking lot
adjacent to the Texas Roadhouse that she subleased to GRI for the use of the restaurant. The
current amount of rent was set in connection with a 2006 settlement of a lawsuit between the
current owner of GRI, Robert McManus, and Ms. Porter, wherein, among other things, Mr.
McManus bought Ms. Porter’s interest in GRI.
The parties first entered into the Parking Lot Sublease in January 2001. Section 1.06
of the sublease provided for an initial “annual base rent” and was set by the terms of the
sublease at $100.00. The sublease provided for adjustments to the rent every five years
through 2025. In March 2006, the parties entered into an Amendment of Commercial
Sublease that deleted section 1.06 from the original sublease and inserted a new section 1.06
that provided that as of March 31, 2006 the “annual base rent” would be $70,000 for the next
two years and then would be increased to $87,500 for the next three years. The Amendment
further provided for periodic adjustments to the rent through 2025. Both the original
Commercial Sublease and the Amendment of the Commercial Sublease state that the rent is
“[s]ubject to the condition subsequent set forth in Section 1.07 of the Commercial Sublease.
Section 1.07 of the Commercial Sublease Revisions to Rent on Condition Subsequent
provides:
The provisions of this Lease as to the rent payable are subject to revision as follows:
(a) In the event the ownership of Texas Roadhouse Restaurant to be operated
by Tenant [GRI] on the adjoining property under the Parkway Sublease
[Parking Lot Sublease] is subsequently sold or transferred to any third-party,
including, without limitation, the restaurant franchisor, or in the event the
Landlord [Porter], or her heirs, or legal representatives, cease to own a
membership interest in Texas Roadhouse of Gatlinburg, LLC, its successors
and/or assigns, then the revisions to the rent set forth in subsection (b) below
shall automatically and immediately become effective on the first day of the
sixth (6th ) month following the date of the sale or transfer of the restaurant or
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the date Landlord’s said membership interest ceases (herein the “Revision
Date”).
(b) The Annual Base Rent set forth in Section 1.06 (a) and (b)(1) shall be
revised to equal the annual fair market value of the Demised Premises as
determined by an independent commercial real estate appraiser licensed and
certified in the State of Tennessee who shall be selected by a panel of two (2)
appraisers meeting the same qualifications, one (1) appointed by the Landlord
and one (1) appointed by the Tenant, and whose decision as to the fair market
value of the Demised Premises shall be final and binding on the parties, and
with all appraiser’s fees paid by Tenant.
The Case
The Complaint states that in the summer of 2008 the restaurant was sold by GRI to
the national franchisor but that “no land or building lease was sold.” Robert McManus, the
Chief Manager of GRI, sent Ms. Porter a letter on September 8, 2008 in which he invoked
the rent modification procedures set out in Section 1.07 of the Parking Lot Sublease. Ms.
Porter responded to this letter with a refusal to engage in the appraisal procedure set out in
Section 1.07. The Complaint alleged that by refusing to comply with Section 1.07, Ms.
Porter was in breach of the Parking Lot Sublease and that GRI was entitled to specific
performance with respect to the modification of lease set out in Section 1.07.
On February 19, 2010, Ms. Porter filed an Answer and Counterclaim. The Answer
denied the allegation that the rent due under the Parking Lot Sublease was subject to further
modification pursuant to Section 1.07. She asserted that Section 1.07 was intended for her
benefit and that she did not consent to its invocation under the circumstances. Ms. Porter
further denied the allegation that the restaurant was sold to the national franchisor and stated
that no lease was sold or transferred. In response to this allegation Ms. Porter averred:
It is affirmatively averred that in 2008, GRI presented Porter with a Confidentiality
Agreement regarding approval of a future sublease by Porter. Bruce Maples
(“Maples”) was the original lessor of the subject property to Porter. Discussion then
ensued regarding the transaction proposed by GRI. During these discussion,
representatives of Texas Roadhouse and McManus a/k/a GRI represented that no
assignment or transfer would take place and that Maples’ approval of the sublease
was therefore not required and representatives of GRI represented that there would
be no change in relationship between GRI and Porter and that payments would
continue to be made from GRI to Porter as they had since the modification in March
of 2006. GRI and Texas Roadhouse presented to and obtained Porter’s execution of
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an agreement stating that rent on the parking lot was $87,500.00.
The Answer further denied that the sale of the restaurant was a “condition subsequent”
referenced in Section 1.07 and that she was in breach of the lease. She raised the affirmative
defenses of failure to state a claim upon which relief can be granted and that specific
performance is not available to GRI under the facts alleged. She further pled the affirmative
defenses of unclean hands, waiver, estoppel, laches, failure of consideration, fraud,
misrepresentation and mistake.
Ms. Porter also filed a Counterclaim against GRI for declaratory judgment, damages
and equitable relief. The Counterclaim alleged that Ms Porter and Mr. McManus formed
GRI in 2000 after Mr. McManus approached Ms. Porter about becoming a significant owner
in a Texas Roadhouse franchise restaurant located in Gatlinburg. Mr. McManus was
interested in bringing Ms. Porter into the business as she held a lease on a prime piece of
property in downtown Gatlinburg that would be an ideal location for the restaurant. Porter
also held a lease on an adjoining parcel that could function as the restaurant’s parking lot.
According to the Counterclaim, Ms. Porter was a substantial, but minority, owner of GRI
with a 46.5% Financial Interest and a 49% Governance Interest in the LLC. Mr. McManus
was the Chief Manager of GRI and Road Ho Management, LLC, an entity owned and
controlled by him, was the controlling member of GRI with a 48.5% Financial Interest and
a 51% Governance Interest. Ms. Porter claimed that she agreed to lease the parcel of land
on which the restaurant is located to GRI for rent substantially lower than market value based
on the promises and assurances of Mr. McManus that she would earn generous profits and
distributions as a co-owner of GRI. Likewise, she leased the parking lot adjacent to the
restaurant to GRI for a token annual rent of $100.00. The sublease of the parking lot
provided her with the right to revise the rent if (a) the ownership of the restaurant was
subsequently sold or transferred by GRI or (b) Ms. Porter ceased to own a membership
interest in GRI. Ms. Porter alleged that the conditions triggering revision of the rent due to
her by GRI were included in the sublease of the parking lot for her sole protection and
benefit in the event she disassociated from GRI and was thereby deriving no further benefit
from GRI. She stated that in such an event, she and Mr. McManus agreed that it would be
fair and appropriate for her to receive a fair market value rental rather than the token rent of
$100.00 a year.
The Counterclaim goes on to state that a dispute arose over the management of GRI
between Ms. Porter and Mr. McManus and that Ms. Porter filed a lawsuit against McManus
and several entities over which he had control. The parties settled the lawsuit in February,
2006 by executing a Purchase of Interest Agreement whereby Porter agreed to sell her
interest in GRI to McManus. Ms. Porter contended that the Purchase of Interest Agreement
was effective on February 8, 2006, at which time the rent revision provision in the Parking
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Lot Sublease was triggered. Pursuant to the rent revision provision, the parties agreed to
replace the $100.00 token annual rent for the parking lot with an agreed upon fair market
value of $70,000 per year from April 1, 2006 through March 31, 2008 and $87,500 per year
for the next three years after March 31, 2008. The Purchase of Interest Agreement also
stated that after March 31, 2011 rent for subsequent years “shall be adjusted upward as
provided in Section 1.06(b) of the Lease.” Pursuant to the Purchase of Interest Agreement,
Mr. McManus did purchase Ms. Porter’s interest in GRI on March 10, 2006 and the rent was
paid as per the modification.
The Counterclaim further states that in early 2008 Texas Roadhouse Holding (TRH)
and GRI presented Ms. Porter and Bruce Maples, the original lessor of the property to Ms.
Porter, with a Confidentiality Agreement seeking their approval of a sub-sublease. Ms.
Porter claims that during the discussion about the approval of the sub-sublease, TRH
representatives and McManus, for GRI, made several representations to her. They stated that
as no assignment of transfer would take place, the land owner, Maples’ approval of the sub-
sublease was not required. Ms. Porter also claimed that “representatives of GRI represented
that there would be no change in relationship between GRI and Porter and that payments
would continue to be made from GRI to Porter as they had since the rent modification in
March of 2006.” Ms. Porter stated that GRI and TRH presented to her and she executed an
agreement stating that the rent on the parking lot was $87,500.00 annually. Ms. Porter avers
that in reliance of the statements and assurance made to her by TRH and GRI, she approved
the sub-sublease from GRI to TRH. In July 2008, TRH subleased the Restaurant Lease and
the Parking Lot Lease from GRI and all parties stipulated to the rentals due to Ms. Porter.
Based upon the foregoing representations and assurances that no transfer of the restaurant
from GRI was occurring, Ms. Porter contends that GRI remained an active entity that is liable
to Ms. Porter under the Restaurant Lease and the Parking Lease and has continued to make
rent payments to her. According to the Counterclaim, however, contrary to Ms. Porter’s
contentions, Mr. McManus and GRI now claim that the sub-sublease to Texas Roadhouse
was a sale or transfer such that the rent revision provision in the original Parking Lease was
triggered again.
Ms. Porter alleged that if GRI contemplated that it was entitled to modification of the
rent as a result of obtaining her consent to a sub-sublease between GRI and TRH, then
material information about the transaction was tortiously withheld from her. Further, Ms.
Porter stated that had GRI not given the assurances and made the representations to her, she
would not have approved or consented to the GRI/TRH sub-sublease documents. Based on
this failure to provide her with material information, Porter contended that she is entitled to
rescind her approval of the July 2008 sublease to Texas Roadhouse.
Ms. Porter stated that the rent revision provision in the Original Parking Lot Sublease
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could only be triggered once and the triggering event occurred when the Purchase of Interest
Agreement was executed by herself and McManus on February 8, 2006. Thus, she is entitled
to a decree of specific performance requiring Mr. McManus to “take steps to execute any and
all but [sic] agreements or papers necessary to effectuate the terms of the Purchase of Interest
Agreement. She further avered that McManus/GRI is estopped from attempting to obtain
a revision of the fair market value rental already agreed upon by the parties. Further, she
avered that McManus/GRI cannot now, over two years after she left GRI, force her to
involuntarily invoke a provision in the original Parking Lot Sublease that was created solely
for her benefit. She asked the Court to interpret the Amended Parking Lot Sublease in
accordance with the actions of the parties in establishing the rent at the time she sold her
interest in GRI. Alternatively, in the event GRI is found to be entitled to compel some
adjustment of the rental for the parking lot lease to fair market value, the fair market value
for the rental of the parking lot was established by the GRI rental to TRH current and future.
Thus, Ms. Porter claimed she is entitled to have the rent for the parking lot established at the
same amount TRH pays GRI. Alternatively, Ms. Porter asked for a reformation of
documentation to conform to the Purchase of Interest Agreement, or alternatively rescission
of her approval of the 2008 sublease from GRI to TRH.
GRI filed an Answer to the Counterclaim and Mr. McManus filed his Answer to the
Third Party Counterclaim.
GRI filed a Motion to Amend and an Amended Complaint. The Amended Complaint
did not state a new cause of action but did amend plaintiff’s prayer for relief. It asked for an
order that requires specific performance of the contract by Ms. Porter retroactive to the date
of her alleged breach of contract, September 8, 2008. Alternatively, in the event specific
performance is not awarded, plaintiff asked for an award of damages sufficient to place it
in the position it would have been if Ms. Porter had not breached the contract. Ms. Porter
likewise filed a Motion to Amend Answer and Counterclaim and for Leave to Add
Appropriate Third Parties on May 17, 2011. The Motion to Amend was based on the recent
discovery of new facts about the agreement between GRI and TRH. TRH and Robert
McManus were eventually made Third Party Defendants. The Trial Court granted both
Motions to Amend.
The matter was tried before the Chancellor, and a Final Judgment was entered on
November 30, 2011. The Trial Court held that GRI was not entitled to seek a revision to the
rent and dismissed all claims made by GRI. Based on the dismissal of GRI’s Complaint, the
Trial Court dismissed Ms. Porter’s Counterclaim against GRI and the Third-Party Complaints
against TRH and Robert McManus. The costs were assessed to GRI and all parties’ requests
for attorney’s fees were denied. A Memorandum Opinion was attached to the Final
Judgment.
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GRI filed a Notice of Appeal, and raised these issues on appeal:
A. Whether the Trial Court erred by not enforcing the rent revision provision of
Section 1.07 of the Parking Lot Sublease based on its finding that Section 1.07
was ambiguous.
B. If Section 1.07 is ambiguous, did the Trial Court err when it did not construe
the ambiguity against the drafter?
C. Whether the Trial Court erred when it held that GRI was estopped from
enforcing Section 1.07 of the Parking Lot Sublease?
D. Whether the Trial Court erred when it ignored Section 7.01 of the Parking Lot
Sublease?
E. Whether the Trial Court erred by denying Ms. Porter’s request for attorneys’
fees? (Issue raised by Appellee)
A trial court’s findings of fact in a non-jury trial are reviewed de novo upon the
record. The trial court is afforded a presumption of correctness unless the preponderance of
the evidence is otherwise. Tenn. R. App. P. 13 (d); Wright v. City of Knoxville, 898 S.W.2d
177, 181 (Tenn. 1995). This Court reviews credibility determinations made by the trial court
with great deference. Keaton v. Hancock County Bd. of Educ., 119 S.W.3d 218, 223 (Tenn.
Ct. App. 2003). Thus, the trial court is in the best position to resolve factual issues that hinge
on credibility and the appellate court will not re-evaluate a trial court’s assessment of a
witness’s credibility absent clear and convincing evidence to the contrary.
The trial court’s conclusions of law are reviewed under a purely de novo standard with
no presumption of correctness. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn. 2005), Union
Carbide Corp. v. Huddleston 854 S.W.2d 87, 91 (Tenn. 1993).
In this appeal, the Court is tasked with interpreting the terms of a contract, the Parking
Lot Sublease and the Amended Parking Lot Sublease, entered into by appellant, GRI and
appellee, Ms. Porter. This Court set out the well settled rules of contract interpretation in
Kafozi v. Windward Cove, LLC, 184 S.W.3d 693 (Tenn. Ct. App. 2005)(appeal denied Jan.
30, 2006) as follows:
In resolving a dispute concerning contract interpretation, our task is to ascertain the
intention of the parties based upon the usual, natural, and ordinary meaning of the
contract language. Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78
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S.W.3d 885, 889–90 (Tenn.2002)(citing Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95
(Tenn.1999)). A determination of the intention of the parties “is generally treated as
a question of law because the words of the contract are definite and undisputed, and
in deciding the legal effect of the words, there is no genuine factual issue left for a
jury to decide.” Planters Gin Co., 78 S.W.3d at 890 (citing 5 Joseph M. Perillo,
Corbin on Contracts, § 24.30 (rev. ed.1998); Doe v. HCA Health Servs. of Tenn., Inc.,
46 S.W.3d 191, 196 (Tenn.2001)). The central tenet of contract construction is that
the intent of the contracting parties at the time of executing the agreement should
govern. Planters Gin Co., 78 S.W.3d at 890. The parties' intent is presumed to be that
specifically expressed in the body of the contract. “In other words, the object to be
attained in construing a contract is to ascertain the meaning and intent of the parties
as expressed in the language used and to give effect to such intent if it does not
conflict with any rule of law, good morals, or public policy.” Id. (quoting 17
Am.Jur.2d, Contracts, § 245).
This Court's initial task in construing the Contract at issue is to determine whether the
language of the contract is ambiguous. Planters Gin Co., 78 S.W.3d at 890. If the
language is clear and unambiguous, the literal meaning of the language controls the
outcome of the dispute. Id. A contract is ambiguous only when its meaning is
uncertain and may fairly be understood in more than one way. Id. (emphasis added).
If the contract is found to be ambiguous, we then apply established rules of
construction to determine the intent of the parties. Id. Only if ambiguity remains after
applying the pertinent rules of construction does the legal meaning of the contract
become a question of fact. Id.
Kafozi, at 698-99.
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)(citing Hanover
Ins. Co. v. Haney, 221 Tenn. 148, 425 S.W.2d 590, 592 (1968); Vargo v. Lincoln Brass
Works, Inc., 115 S.W.3d 487, 492 (Tenn. Ct. App.2003)).
The parol evidence rule provides that parol evidence “is inadmissible to contradict,
vary, or alter a written contract where the written instrument is valid, complete, and
unambiguous, absent fraud or mistake or any claim or allegation thereof.” Bradford v. Sell,
240 S.W.3d 834, 838 (Tenn. Ct. App. 2007)(citing Airline Const. Inc. v. Barr, 807 S.W.2d
247, 259 (Tenn. Ct. App.1990); 32A C.J.S. Evidence § 851 at 213 (1974); Tenn. Code Ann.
§ 47–2–202. However, when a contractual provision is ambiguous, a court is permitted to
use parol evidence, including the contracting parties' conduct and statements regarding the
disputed provision, to guide the court in construing and enforcing the contract. Watson at
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612 (citing Memphis Housing Auth. v. Thompson, 38 S.W.3d 504, 512 (Tenn.2001);
Fidelity–Phenix Fire Ins. Co. of New York v. Jackson, 181 Tenn. 453, 181 S.W.2d 625, 631
(1944); Vargo, 115 S.W.3d at 494). To aid the court's discernment of the parties' intention,
however, the parol evidence rule does not prohibit the court from considering the
circumstances surrounding the formation of the contract, the business to which the contract
relates, and the construction placed upon the contract by the parties in carrying it out. Adkins
v. Bluegrass Estates, Inc., 360 S.W.3d 404, 412 (Tenn. Ct. App. 2011), appeal denied (Dec.
14, 2011)(citing Healthmart USA, LLC v. Directory Assistants, Inc., No. M2010–00880-
COA- R3- CV, 2011 WL 1314662 at *2 (Tenn. Ct. App. April 6, 2011)).
Appellant contends that the Trial Court was in error when it did not enforce the rent
revision provision of Section 1.07 of the Parking Lot Sublease based on its finding that
Section 1.07 was ambiguous. The Trial Court found that an ambiguity existed as to whether
the rent revision procedure in Section 1.07 of the Parking Lot Sublease could be triggered
only once, as Ms. Porter contended, or whether it could be triggered multiple times, which
was the position supported by GRI. The Trial Court determined that both interpretations of
Section 1.07 were reasonable, thus the provision was ambiguous. The Trial Court also had
a problem with the exact meaning of the second occurrence that could trigger a rent revision
in 1.07 - the “sale” of the Texas Road House restaurant. Section 1.07 provides:
(a) In the event the ownership of the Texas Roadhouse Restaurant to be
operated by the Tenant [GRI] on the adjoining property under the Parkway Sublease
[Restaurant Lease] is subsequently sold or transferred to any third-party,
including, without limitation, the restaurant franchisor, or in the event the
Landlord [Porter], or her heirs or legal representatives, cease to own a membership
interest in Texas Roadhouse of Gatlinburg, LLC [later GRI], its successors and/or
assigns, then the revisions to the rent set forth in subsection (b) below shall
automatically and immediately become effective on the first day of the sixth (6 th )
month following the date of the sale or transfer of the restaurant or the date
Landlord’s [Porter’s] said membership interest ceases (herein the “Revision Date”).
(emphasis added).
The Trial Court was concerned by what was meant by the sale of the restaurant. The
Court stated in its Memorandum Opinion that there is no definition in the document for
“sold”, “transferred” or “sale of the restaurant.” The Court noted that GRI’s interpretation
of the provision was that “a sale means a sale of assets such as furniture, fixtures, goods,
equipment . . . along with the sublease” and “the right to operate the business.” On the
other hand, the Court noted that Ms. Porter’s position was that an actual “sale” had not
occurred as GRI was still deriving profits from the business by way of rent under the sub-
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sublease to TRH and GRI still owned the building the restaurant was housed in. Thus, GRI
was paying taxes and insurance premiums and deriving profits from the business after the
transaction between GRI and TRH that was a purported “sale”. The Trial Court found that
both parties’ interpretation was a “possible reasonable construction” and, thus, concluded
that the “sale” trigger of the rent revision in Section 1.07 was ambiguous.
The Trial Court noted a seeming conflict between the Parking Lot Sublease and the
Interest Purchase Agreement in which Ms. Porter sold her interest in GRI to Mr. McManus
as part if the settlement of the lawsuit. The Court noted that under the terms of the Interest
Purchase Agreement, the rent Ms. Porter received from GRI under the Parking Lot Sublease
could be adjusted from time to time “upwardly”. However, the Amended Sublease of March
10, 2006, also a part of the settlement, which revised the rent from $100.00 a year under the
original sublease to a much larger yearly rent, did not limit a future revision of the rent to
upward. The Court stated that the documents, both part of the same transaction, . . . “are in
conflict, because the one says that the rent can be revised upwardly, the other one says it can
be revised but does not limit it to a revision upwardly. . . . [T]hey are internally in conflict.
One says rent can only go up, the other one, at least by implication, says rent can go down
if the appraisal indicates that it should.” Based on these findings of ambiguity, the Trial
Court looked to the actions of the parties to resolve the ambiguity.
We agree with the Trial Court when it held that Section 1.07 of the Parking Lot
Sublease was ambiguous as it could reasonably be construed in two opposite ways. The plain
language of Section 1.07, supports Ms. Porter’s position that the provision for rent revision
is a one time only event that would occur if the restaurant was sold or if Ms. Porter was no
longer an interest holder in GRI. The use of the word or indicates that the rent revision
provision is triggered once if either Ms. Porter no longer has an interest in GRI or the
restaurant is sold. See Black’s Law Dictionary, 5th Ed., p. 987, (“Or - a disjunctive particle
used to express an alternative or to give a choice of one among two or more things.” )
However, despite the plain language of Section 1.07, GRI’s interpretation of the
Section is likewise reasonable. Ms. Porter and GRI agreed to part ways as part of the
settlement of the lawsuit Ms. Porter had brought against GRI. Thus, Ms. Porter sold her
interest in GRI to Mr. McManus and, as provided by Section 1.07, the rent under the Parking
Lot Sublease was revised. The parties decided not to avail themselves of an appraisal to
determine fair market rent, but rather they negotiated the rent revision among themselves.
An Amended Parking Lot Sublease states the new negotiated rent under the Parking Lot
Sublease, and expressly makes reference to Section 1.07 of the original Parking Lot Sublease
and states at the new Section 1.06 that “ [s]ubject to the condition subsequent set forth in
Section 1.07 . . . .” Thus, even though Section 1.07 had been triggered by Ms. Parker’s sale
of her share of GRI, as part of that same transaction, the parties seem to have agreed that
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Section 1.07 could be triggered again. Accordingly, GRI argues that Section 1.07 was still
in place in July 2008 when GRI sold the restaurant to TRH and a revision of the rent agreed
to under the Amended Parking Lot Sublease was possible. Both parties’ interpretation of
Section 1.07 is reasonable and, as they are in conflict, Section 1.07 is ambiguous.
Accordingly, the Trial Court correctly held that, based on the ambiguity, it would look to the
conduct of the parties to resolve the ambiguity.
The Trial Court found that based on the action of the parties following the rent
revision made in the 2006 Amended Parking Lot Sublease, “the parties . . . treated this rent
revision appraisal procedure duty as no longer being applicable, as being something that
simply no longer applied.” After reviewing the testimony presented at trial and the
documents presented as exhibits, we agree with the Trial Court’s assessment. The Trial
Court found it compelling that GRI’s attorney, James Parris, told Ms. Porter’s attorney, Jack
Tallent, that nothing was going to change as a result of the transaction between GRI and
TRH - that all that was going to happen was that TRH was going to pay rent to GRI and GRI
would continue to pay rent to Ms. Porter. Further, we note that Ms. Porter testified that Mr.
Houser, a minor partner in GRI and manager of the restaurant, talked to her about her consent
to GRI sub-subleasing the parking lot to TRH. Ms. Porter stated that during that
conversation, Mr. Houser assured her “nothing was going to change.” She likewise was
assured by Mr. Hart, CEO of TRH, that “nothing else was changing, everything would
remain the same”. Ms. Porter stated that based on the assurances of Mr. Houser and Mr. Hart
that nothing was going to change with regard to her sublease and the fact that the sub-
sublease (between GRI and TRH) showed rent schedules that were the same as the amended
sublease, she believed that the rent would stay the same as it had been under the amended
sub-lease. Based on these representations she consented to the sub-sublease.
The Trial Court also found it compelling that GRI’s financial statements, including
the 2008 financial statement issued the day before the closing with TRH, projected and
recognized what GRI’s rentals to Ms. Porter would be in the future, and that the numbers
were the exact numbers contained within the rent schedule of the Amended Parking Lot
Sublease. This Court notes that GRI’s 2008 financial statement continues to reflect rent
payments and receipts through 2025 in accordance with the agreed upon rent scheduled of
the Amended Parking Lot Lease, with no indication that a change in those scheduled rents
was expected because of the 2008 transaction between GRI and TRH.
The Trial Court observed GRI’s actions when it went back to TRH and sought to
revise the rent payments due under the Sub-Sublease as a result of an error or discrepancy
in the numbers when the document was originally drafted. The Trial Court noted that the
rent under the Sub-Sublease did not take into account that there were escalators in the rent
that GRI would pay to Ms. Porter. Thus, GRI would eventually be receiving less rent under
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the Sub-Sublease than it was obligated to pay Ms. Porter. The Court stated that it was never
the intent of any of the parties that GRI would pay more to Ms. Porter than TRH paid to it.
TRH agreed to an adjustment to the rent in the Sub-Sublease so that it mirrored the rent in
the Parking Lot Sublease. The corrections were made and GRI projected what the rent would
be under the Sub-Sublease out to 2025. The Trial Court found that GRI’s and TRH’s actions
were indicative of the parties intent that the rents under the Sublease and Sub-Sublease were
to mirror each other and that the rent under the Sublease could not be revised pursuant to
Section 1.07.
Under these factual findings, the Trial Court concluded:
[I]t appears that the parties treated this rent revision appraisal procedure duty [in
Section 1.07] as no longer applicable, as being something that simply no longer
applied and that the rent . . . could be calculated and was calculated, not once but
multiple . . . times . . . all the way out to the year 2025, which the only way you can
do that . . . Is to assume that it’s not going to change. And there was no notation, for
example in the financial statements . . . that . . . these are subject to revision. Rather,
they were just straightforwardly projected all the way out to the end of the lease terms.
So it seems to the Court that both sides treated this - - rent revision procedure,
appraisal procedure as no longer being applicable.
We agree with the Trial Court’s factual findings that the parties actions support Ms.
Porter’s contention that the parties no longer considered Section 1.07 of the Sublease
applicable in 2008. Mr. McManus did testify that it was always his intent to revise the rent
once GRI sold the restaurant, however, this Court gives great deference to a trial court’s
determination of the credibility of the witnesses. In this case, we defer to the Trial Court’s
finding that Mr. McManus’ testimony on this issue was not credible. See Keaton v. Hancock
County Bd. of Educ., 119 S.W.3d 218, 223 (Tenn. Ct. App. 2003); Hopper v. Moling, No.
W2004-02410-COA-R3-CV, 2005 WL 2077650 at *7, (Tenn. Ct. App. Aug. 26, 2005)(citing
State v. Pruett, 788 S.W.2d 559, 561 (Tenn. 1990).
We hold the Trial Court did not err when it did not enforce Section 1.07 of the Parking
Lot Sublease.
Appellant contends that if there was any ambiguity as to whether the 2008 transaction
between GRI and TRH was a sale, the ambiguity should be construed against Ms. Porter, as
the drafter of Sections 1.06 and 1.07. See German v. Ford, 300 S.W.3d 692, 704 (Tenn.
Ct. App. 2009)(doubtful language in a contract is construed against the party who drafted the
contract, especially where the drafting party seeks to use the language to defeat its operation).
However, we do not rely on the Trial Court’s finding that Section 1.07's reference to the sale
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of the restaurant is ambiguous because “sale” is not defined in the lease. Rather, we affirmed
the Trial Court’s holding that the parties actions confirm that they did not mean for Section
1.07 to be in effect in 2008. In doing so, we agreed with the Trial Court’s finding that
Section 1.07 reasonably could be construed to mean that the sale of the business or Ms.
Porter’s loss of interest in GRI could trigger the rent revision provision either on a one time
basis or that the rent revision provision could be triggered more than once, as GRI contended.
Since we agreed with the finding of ambiguity, we also agreed with the Trial Court’s
decision to exam the actions of the parties to determine their intent. We have not based our
affirmation of the Trial Court’s judgment on whether Section 1.07's reference to the sale of
the restaurant is ambiguous. This issue is moot on appeal.
Appellant contends the Trial Court erred when it held that GRI was estopped from
enforcing Section 1.07 of the Parking Lot Sublease. The Trial Court held that GRI should
be estopped from invoking the rent revision provision in Section 1.07 of the Parking Lot
Sublease because GRI made misrepresentations to both TRH and Ms. Porter. Again, we
affirmed the Trial Court’s holding that, based on the actions of the parties, they did not intend
the rent revision provisions of Section 1.07 to be applicable and in force in 2008.
Accordingly, we do not consider the Estoppel issue raised on appeal.
Appellant contends the Trial Court erred when it ignored Section 1.07 of the Parking
Lot Sublease. This issue is moot, as we have affirmed the Trial Court's holding that based
upon the action of the parties they did not intend the rent revision provision of Section 1.07
to be applicable and in force in 2008.
Appellee contends the Trial Court was in error when it denied her request for an
award of attorneys’ fees despite a provision in the Parking Lot Sublease that entitled her to
such an award. Section 15. 10 of the Parking Lot Sublease provides:
The non-prevailing party shall pay all reasonable costs and expenses, including
attorneys’ fees and court costs, that shall be made or incurred by the prevailing party
in enforcing the terms and conditions of this Lease.
Ms. Porter is the prevailing party in this matter as all claims to enforce the lease and
for specific performance made by GRI against her were dismissed and she requested
attorneys’ fees in her Counterclaim. However, the Trial Court denied her request for
attorneys’ fees. The Trial Court stated:
I will not award attorney fees rightly or wrongly from a legal perspective. I will not
award attorney’s fees. The problem here is you had all sort of ambiguity, and the
ambiguity in the Interest Purchase Agreement and the amendment to the sublease, you
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had the original ambiguity about the sale of the restaurant which I held is an
ambiguity. That’s what I think, so you are going to enforce the terms of a document,
you are going to award attorney fees for enforcement in terms of a document that’s
so ambiguous that each side in my opinion had a reasonable basis for their argument
of what the terms of the lease was. So I don’t think it’s appropriate to award attorneys
fees, and therefore I do not.
Tennessee law allows for parties to contract for the recovery of attorney's fees as an
element of damages. Am. Bonding Co. v. Vaughn, M2010-02464-COA-R3CV, 2011 WL
3903316 at * 6 (Tenn. Ct. App. Sept. 2, 2011)(citing Cracker Barrel Old Country Store, Inc.
v. Epperson, 284 S.W.3d 303 (Tenn.2009)). A trial court does not have discretion to refuse
to consider the provision of a contract awarding reasonable attorney's fees. Am. Bonding Co.
at * 6 (citing Hosier v. Crye–Leike Commercial, Inc., No. M2000–01182–COA–R3–CV,
2001 WL 799740, at *6 (Tenn. Ct. App. July 17, 2001))(finding that the trial court did not
have discretion to determine whether to award attorney's fees when the contract provided that
the prevailing party was entitle to recover its reasonable attorney's fees). However, the
determination of the amount of reasonable attorney's fees is within the trial court's discretion.
Am. Bonding Co. at * 6 (citing Albright v. Mercer, 945 S.W .2d 749 (Tenn. Ct. App.1996).
Here, the lease provided for the non-prevailing party to pay the attorney's fees
incurred by the prevailing party in enforcing the terms and conditions of this lease. Although
the Trial Court’s reasoning in denying Ms. Porter’s request for attorneys’ fees is appealing,
and was an attempt at fairness, the law is otherwise. As a consequence, this Court remands
to the Trial Court with instructions to set reasonable attorney's fees for Ms. Porter.
The Final Judgment of the Trial Court dismissing GRI’s claims against Ms. Porter is
affirmed. The Trial Court’s denial of Ms. Porter’s request for attorney’s fees is modified
and remanded with instructions to the Trial Court to determine a reasonable amount of
attorneys’s fees against the appellant.
The cost of the appeal is assessed to Gatlinburg Roadhouse Investors, LLC.
_________________________________
HERSCHEL PICKENS FRANKS, P.J.
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