Cameron General Contractors, Inc. v. Kingston Pike, LLC ( 2011 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
September 20, 2011 Session
CAMERON GENERAL CONTRACTORS, INC. v. KINGSTON PIKE, LLC
Appeal from the Chancery Court for Knox County
No. 175471-3 Michael W. Moyers, Chancellor
No. E2010-02291-COA-R3-CV-FILED-DECEMBER 21, 2011
Cameron General Contractors, Inc., a Nebraska corporation (“Cameron”), sued Kingston
Pike, LLC, a Georgia limited liability company (“Kingston Pike”), for breach of a contract
concerning the sale of real property located in Knoxville, Tennessee. Prior to trial, Cameron
elected to exercise its contractual right to terminate the contract, and the case proceeded to
trial on the issue of damages. After a bench trial, the Trial Court entered its order finding and
holding, inter alia, that the contract did not limit Cameron to the return of its earnest money,
and granting Cameron a judgment against Kingston Pike for damages in the amount of
$872,418.22, plus attorney’s fees of $137,656.56. Kingston Pike appeals to this Court. We
find and hold that the contract at issue clearly and unambiguously provides that once
Cameron chose to terminate the contract, Cameron’s sole remedy for Kingston Pike’s breach
was a return of Cameron’s earnest money deposit. We, therefore, reverse the Trial Court’s
October 28, 2010 order.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed;
Case Remanded
D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which H ERSCHEL P. F RANKS,
P.J., and J OHN W. M CC LARTY, J., joined.
Arthur G. Seymour, Jr., and Matthew A. Grossman, Knoxville, Tennessee, and Ron L.
Quigley, and Matthew R. Thiry, Atlanta, Georgia for the appellant, Kingston Pike, LLC.
Lewis S. Howard, Jr., and Heather G. Anderson, Knoxville, Tennessee, for the appellee,
Cameron General Contractors, Inc.
OPINION
Background
In October of 2007, Cameron and Kingston Pike entered into a Real Estate
Purchase Agreement (“the Contract”) for Cameron to purchase real property in Knoxville,
Tennessee from Kingston Pike for development as a senior independent living facility.
Under the terms of the Contract, Kingston Pike was to satisfy certain obligations prior to
closing including, among other things, grading the site, creating a building pad, and
constructing a common roadway.
In pertinent part, the Contract provided:
5. Contingencies. The contingencies described in Section 3, 4, 8 and 9 are for
the benefit of [Cameron] and shall be satisfied (or waived) by [Cameron] in
writing prior to Closing. These contingencies shall be satisfied (or waived)
within ten (10) months from the Effective Date (subject to “Force Majeure
Matters” as defined below), except as may be extended by written agreement
between the parties, or [Cameron] shall be entitled to terminate this Agreement
and receive a prompt refund of the Earnest Money from the Title Company.
If and in the event the specific contingencies enumerated in the foregoing
subsections are not met to [Cameron’s] reasonable satisfaction, [Cameron]
may, at its option, terminate this Agreement without further obligation to
[Kingston Pike] (other than with regard to obligations under this Agreement
that expressly survive the termination of this Agreement) and the Title
Company shall promptly return the Earnest Money to [Cameron].…
***
12. Seller’s Default. Subject to the terms and provisions of Section 34 of this
Agreement, if the sale and purchase of the Property contemplated by this
agreement is not consummated on account of [Kingston Pike’s] default or
breach of any of the terms or conditions contained herein, [Cameron] may
either (a) terminate this Agreement by written notice to [Kingston Pike] and
to the Title Company whereupon [Cameron] shall receive a prompt refund of
the Earnest Money and the parties shall have no further rights or obligations
hereunder except for the obligations that expressly survive the termination of
this Agreement, or (b) if [Kingston Pike] then owns the Property, [Cameron]
shall have the right to file an action for specific performance.
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The Contract contemplated that Kingston Pike would complete its site
development obligations within a ten month deadline after the effective date of the Contract.
After approximately twenty months had passed from the effective date of the Contract,
Cameron filed this lawsuit alleging, among other things, that Kingston Pike had failed to
complete its site development obligations, and seeking, among other things, specific
performance.
The Trial Court bifurcated the trial and first heard evidence concerning whether
the delay penalty provided for in the Contract was enforceable. After the trial on this issue,
the Trial Court entered its order on September 10, 2009 finding and holding, inter alia, that
the delay penalty contained in the Contract constituted a penalty and was not enforceable
against Kingston Pike, that Kingston Pike was in breach of the Contract, and that Cameron
was entitled to specific performance.
The case proceeded to trial on the issue of damages suffered by Cameron as
a result of Kingston Pike’s breach of the Contract. Prior to the start of trial, Cameron elected
to exercise its contractual right to terminate the Contract. After the trial, the Trial Court
entered its order on October 28, 2010 finding and holding, inter alia, that the Contract does
not limit Cameron to either an award of specific performance or a return of its earnest money,
and that Cameron was entitled to an award of damages in the amount of $872,418.22, plus
attorney’s fees of $137,656.56. Kingston Pike appeals to this Court.
Discussion
While Kingston Pike raises multiple issues on appeal, we find three issues to
be dispositive. We restate the issues as: 1) whether the Trial Court erred in finding Kingston
Pike in breach of the Contract; 2) whether the Trial Court erred in awarding Cameron
damages for breach of Contract; and, 3) whether the Trial Court erred in awarding Cameron
attorney’s fees. Kingston Pike also requests an award of attorney’s fees on appeal. Cameron
raises an issue on appeal regarding whether the Trial Court erred in holding that the delay
penalty in the Contract was unenforceable, and also requests attorney’s fees on appeal.
Our review is de novo upon the record, accompanied by a presumption of
correctness of the findings of fact of the trial court, unless the preponderance of the evidence
is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001).
A trial court's conclusions of law are subject to a de novo review with no presumption of
correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.
2001).
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As our Supreme Court has instructed:
“The 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.” Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521
S.W.2d 578, 580 (Tenn. 1975); see also Christenberry, 160 S.W.3d at 494. If
the language of the contract is clear and unambiguous, the literal meaning
controls the outcome of the dispute. Planters Gin Co. v. Fed. Compress &
Warehouse Co., 78 S.W.3d 885, 890 (Tenn. 2002). In such a case, the contract
is interpreted according to its plain terms as written, and the language used is
taken in its “plain, ordinary, and popular sense.” Bob Pearsall Motors, Inc.,
521 S.W.2d at 580; Planters Gin Co., 78 S.W.3d at 890. The interpretation
should be one that gives reasonable meaning to all of the provisions of the
agreement, without rendering portions of it neutralized or without effect. See
Davidson v. Davidson, 916 S.W.2d 918 922-23 (Tenn. Ct. App. 1995). The
entire written agreement must be considered. D. & E. Const. Co. v. Robert J.
Denley Co., 38 S.W.3d 513, 518-19 (Tenn. 2001).
In construing a contract, the entire contract should be considered
in determining the meaning of any or all of its parts. It is the
universal rule that a contract must be viewed from beginning to
end and all its terms must pass in review, for one clause may
modify, limit or illuminate another.
Cocke County Bd. of Highway Comm'rs v. Newport Utils. Bd., 690 S.W.2d
231, 237 (Tenn. 1985) (internal citations omitted).
However, on occasion, a contractual provision may be susceptible to
more than one reasonable interpretation, rendering the terms of the contract
ambiguous. Planters Gin. Co., 78 S.W.3d at 890. “Ambiguity, however, does
not arise in a contract merely because the parties may differ as to
interpretations of certain of its provisions. A contract is ambiguous only when
it is of uncertain meaning and may fairly be understood in more ways than
one.” Johnson v. Johnson, 37 S.W.3d 892, 896 (Tenn. 2001) (internal
quotation marks and citations omitted). The court will not use a strained
construction of the language to find an ambiguity where none exists.
Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn. 1975).
Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 703-04 (Tenn. 2008).
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We first consider whether the Trial Court erred in finding Kingston Pike in
breach of the Contract. The Contract clearly and unambiguously provides in section 5 that
the contingencies described in sections 3, 4, 8, and 9 shall be satisfied or waived within ten
months of the effective date of the Contract. These specific contingencies included Kingston
Pike’s site development obligations. The record reveals that there is no question that
Kingston Pike failed to complete the required site development obligations within ten
months. The record also reveals that Cameron did not waive the ten month provision. In
fact, the record reveals that even after Cameron filed this lawsuit, Kingston Pike continued
to make representations about the work and continued to fail to do the work required under
the Contract. As such, Kingston Pike clearly was in default of section 5 of the Contract, and
the evidence does not preponderate against the Trial Court’s findings as to this issue.
Although Kingston Pike argues that it was not required by the Contract to
complete its site development obligations within a time certain but rather was required only
to complete them prior to an unspecified closing date, our holding is further supported by
section 22 of the Contract, which states that “Time is of the essence of this Agreement …,”
and section 13 of the Contract, which also speaks of giving Cameron the option to terminate
the Contract if Kingston Pike failed to complete the site development obligations within the
ten month deadline. Furthermore, if we were to accept Kingston Pike’s argument that its
failure to complete the site development obligations by a time certain could not trigger a
breach because these obligations were required only to be completed prior to some
unspecified indefinite future closing date, then in essence Kingston Pike would have an
unlimited time in which to complete its obligations under the Contract. Following this
argument to its logical conclusion, Kingston Pike could take the next 100 years, or more, to
complete its obligations and still not be in breach. Such a result would be ludicrous. Given
all this, we find no error in the Trial Court finding Kingston Pike in breach of the Contract.
We next consider whether the Trial Court erred in awarding Cameron damages
for breach of Contract. Section 12 of the Contract provides that in the event that Kingston
Pike is in default of any of the terms or conditions of the Contract, Cameron has only two
options. Cameron either may terminate the Contract, receive a prompt refund of its earnest
money, and have no further rights or obligations under the Contract; or Cameron may, if
Kingston Pike owns the subject property, file an action for specific performance.
Initially, Cameron filed suit for specific performance. Prior to the second
phase of the bifurcated trial, however, Cameron announced that it was exercising its
contractual right to terminate the Contract. Under the plain, clear, and unambiguous terms
of the Contract, once Cameron elected to terminate the Contract, Cameron had the right to
receive its earnest money back but would have no further rights or obligations except for
those that expressly survived the termination. The right to sue for damages was not one of
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the rights that expressly survived termination of the Contract. As such, it was error to award
Cameron damages.
The record before us on appeal reveals that the Trial Court attempted to do
equity. During the second phase of the bifurcated trial, the Trial Court specifically noted that
Kingston Pike’s “arguments make a lot of sense looking at the contractual language …. But
I can’t help but remember that this is a court of equity.” We agree that Kingston Pike’s
“arguments make a lot of sense looking at the contractual language ….”
It is not the role of the courts, even courts of equity, to rewrite contracts for
dissatisfied parties. “[I]t is an often-cited principle in this jurisdiction that ‘[i]n the absence
of mistake or fraud, the courts will not create or rewrite a contract simply because its terms
are harsh or because one of the parties was unwise in agreeing to them.’” Towe Iron Works,
Inc. v. Towe, 243 S.W.3d 562, 569 (Tenn. Ct. App. 2007) (quoting Dobbs v. Guenther, 846
S.W.2d 270, 276 (Tenn. Ct. App. 1992)). The record now before us reveals no mistake or
fraud. We, therefore, must interpret and enforce the Contract pursuant to its clear and
unambiguous terms. The Trial Court’s attempt to do equity, in essence, rewrote the Contract
for the parties. Once Cameron exercised its contractual right to terminate the Contract, the
clear and unambiguous language of the Contract limited Cameron’s remedy to a return of its
earnest money. While this result may be harsh, it is what the parties agreed to in the
Contract. We reverse the award of damages to Cameron.
Next, we consider whether the Trial Court erred in awarding Cameron
attorney’s fees. With respect to attorney’s fees, the Contract provides:
32. Attorney’s Fees. In the event of litigation to enforce the rights and
obligations under this Agreement, the prevailing party shall be entitled to
recover against the other party its expenses of litigation (including, without
limitation, attorney’s fees, expenses, disbursements and court costs) actually
incurred by the prevailing party in connection with such litigation.
Cameron filed suit to enforce its rights under the Contract. Unfortunately, Cameron cannot
be considered a prevailing party in this lawsuit given our resolution of the first issue.
Cameron elected to exercise its contractual right to terminate the Contract. As such,
Cameron was entitled to receive a refund of its earnest money, which it did. This lawsuit,
however, was not a suit seeking a refund of the earnest money but rather was a suit for
specific performance and damages. As Cameron cannot be considered a prevailing party,
Cameron is not entitled to an award of attorney’s fees under the Contract. We, therefore,
reverse the award of attorney’s fees and costs to Cameron.
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Finally, we consider the issue raised by Cameron regarding whether the Trial
Court erred in holding that the delay penalty in the Contract was unenforceable. The delay
penalty is contained within section 13 of the Contract under the title “Closing.” Specifically,
the Contract provides:
[Cameron] shall have the option to terminate this Agreement in the event
[Kingston Pike] does not complete the Site Development Obligations within
the ten (10) month deadline (identified in Section 5) after the Effective Date;
or [Cameron] may elect to wait until [Kingston Pike] completes the Site
Development Obligations. If [Cameron], at its sole option, elects to wait until
completion, the Purchase Price shall be decreased by Five (5) Per Cent for
every full 30 day period of delay beyond the ten (10) month deadline (the
“Delay Penalty”).…
Under the clear and unambiguous terms of the Contract, in the event that
Kingston Pike did not complete its site development obligations pursuant to the Contract,
Cameron had the option either to terminate the Contract or wait. If Cameron chose to wait
until Kingston Pike completed the site development obligations, then the delay penalty,
assuming it was enforceable, would come into play. Cameron, however, chose to exercise
its contractual right to terminate the Contract. As such, even if the delay penalty was
enforceable, and we make no assertion with regard to whether it was or was not enforceable,
it does not come into play. Because Cameron chose to exercise its option to terminate the
Contract, this issue is moot.
In the exercise of our discretion, we decline to award either party attorney’s
fees on appeal as we have some difficulty in seeing how either party truly is a prevailing
party in this lawsuit given its procedural history and the record before us.
Conclusion
The judgment of the Trial Court is reversed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
appellee, Cameron General Contractors, Inc.
_________________________________
D. MICHAEL SWINEY, JUDGE
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