Nathaniel Hicks v. Thomas Chears ( 2021 )

07/29/2021
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
November 9, 2020 Session
NATHANIEL HICKS ET AL. v. THOMAS CHEARS ET AL.
Appeal from the Circuit Court for Davidson County
No. 17C1453 Amanda Jane McClendon, Judge
___________________________________
No. M2019-01428-COA-R3-CV
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Property owners sued lessees for possession and back rent. Lessees counterclaimed,
alleging anticipatory breach, fraud, unjust enrichment, promissory estoppel, and breach of
the duty of good faith and fair dealing in conjunction with a purchase option. Property
owners moved for summary judgment on their claim for possession, arguing that lessees
never exercised their option to purchase. In response, lessees asserted anticipatory breach.
The trial court granted partial summary judgment to property owners. After a bench trial,
the court dismissed the remaining counterclaims. On appeal, lessees challenge both
decisions. Discerning no reversible error, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed
W. NEAL MCBRAYER, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
JR., P.J., M.S., and ANDY D. BENNETT, J., joined.
Nancy K. Corley and James W. Edwards, Hendersonville, Tennessee, for the appellants,
Thomas Chears and Geneva Chears.
James B. Johnson, Nashville, Tennessee, for the appellees, Nathaniel Hicks and Lynette
Hicks.
OPINION
I.
A.
Thomas and Geneva Chears wanted to buy a house. Nathaniel Hicks had a house
on Curdwood Boulevard he was willing to sell. After viewing the property, the Chearses
expressed interest in buying, but they lacked both the funds and sufficient credit. So
Mr. Hicks suggested a lease with a purchase option.
In October 2007, Mr. Chears gave Mr. Hicks $20,000 in cash as a down payment to
purchase the Curdwood property. The receipt, signed by both men, contained the words
“depending on paperwork” and “contingent on both parties agreeing.” The Chearses met
with both Mr. Hicks and his wife, Lynette Hicks, several times before signing a written
agreement that specified the purchase terms.
At their fourth meeting, Mr. Hicks gave the Chearses a copy of a form agreement
he had obtained at Office Depot. The form was captioned “Lease with Purchase Option.”
It contained a series of pre-printed terms including a purchase option. The Chearses took
the lease form with them at the conclusion of the meeting.
The Chearses and Mr. Hicks later signed two contracts. In one, Mr. Hicks agreed
to sell the Curdwood property to the Chearses for $190,000 “as a lease purchase with option
to buy.” The second contract was a lease with purchase option. Although Mrs. Hicks had
an ownership interest in the Curdwood property, she was not a party to either contract. She
was present, however, when the contracts were signed and filled in the blanks in the lease
form.
The signed lease had a stated term of two years—November 1, 2007, to October 31,
2009—with “the option to extend at lessor discretion.” The Chearses agreed to pay $1,600
per month “as rent . . . of which $1,600 shall be applied to [the] downpayment to purchase
the premises.” The Chearses were responsible for “all maintenance, repairs, and upkeep”
on the leased premises. The lease also granted the Chearses the following purchase option:
36. Purchase Option. It is agreed that L e shall have Oe option to purchase real estate known as:
106 nt :/141-;- 40 , iid9 MISfriri
L //e...!/7714272/4, for the purchase
price offi 1-2ard,--.ed You.s/vollars($ /90,006,64")with a down payment of
2:3 Low-7 haz-dr-vd Dotrars($ 140').,616 )payable upon exercise of said purchase option,
and with a closing date no later than. 36 days thereafter. This purchase option must be exer'cised
in writing no later than ..5e/0Vetnhte-- / ,20 6 q , but shall not be
effective should the Lessee be in default under any terms of this lease or upon any termination of this lease.
2
The Chearses made monthly payments during the lease term, but they never
exercised the purchase option. At the conclusion of the lease term, they continued to live
on the property and make monthly payments to Mr. Hicks. According to the lease, any
holdover by the lessee created “a new month-to-month tenancy” subject to “all the terms
and conditions” in the lease.
Two years later, the Hickses and the Chearses met and approved another agreement.
Instead of starting anew, they made a copy of the previously signed lease and altered the
dates. The new lease term began on November 1, 2011, and ended on October 31, 2013.
The deadline for exercising the purchase option was also changed to September 1, 2013.
No other alterations were made. No one re-signed the modified agreement. Neither did
anyone object.
Once again, the Chearses failed to exercise the purchase option by the deadline.
Rather, they continued to make monthly payments both during and after the term specified
in the second lease.
Fourteen months after the second lease term expired, the parties met and approved
a third lease. Following the same procedure as before, they made a copy of the previous
lease and changed the dates. The lease term became January 1, 2015, to December 31,
2019. And the deadline for exercising the purchase option became June 30, 2019. This
third, and final, lease also contained an additional provision requiring the Chearses to pay
both taxes and insurance on the property. Mr. Chears signed the third lease on January 8,
2015. His wife initialed it. As with the previous leases, the Chearses made monthly
payments to Mr. Hicks, but they did not exercise the purchase option.
Mr. Chears began asking Mr. Hicks for a “payoff balance” in 2016. According to
the Chearses, Mr. Hicks never gave them a number. More ominously, the Chearses
discovered that the Hickses were refinancing the existing mortgage. The refinance
increased the debt on the property to $218,500.
In February 2017, the Chearses suspended their monthly payments. Mr. Hicks
declared a default and terminated the lease.
B.
The Hickses filed a detainer warrant against the Chearses, seeking both possession
and unpaid rent. The Hickses won the first round, and the Chearses appealed for a de novo
hearing in circuit court. In a countercomplaint, the Chearses sought specific performance
or damages under a variety of theories, such as anticipatory breach, fraud, and unjust
enrichment.
3
The Hickses moved for summary judgment as to their right to possession of the
Curdwood property. According to the Hickses, the Chearses never exercised the purchase
option before the lease terminated. In response, the Chearses argued that their default
should be excused because Mr. Hicks had repudiated the purchase option.
The trial court granted partial summary judgment to the Hickses. The court ruled
that the parties had entered into three separate lease agreements, each containing a purchase
option. And the Chearses never exercised the purchase option as required in the written
agreements. The court also found that Mr. Hicks’s conduct did not rise to the level of
anticipatory breach.
After the grant of summary judgment, the focus of the litigation shifted to the
remaining counterclaims.1 The Chearses sought damages for fraud, unjust enrichment,
promissory estoppel, and breach of the duty of good faith and fair dealing.
At trial, the Chearses claimed that they intended to purchase, not rent, the Curdwood
property. They made a $20,000 down payment. And Mr. Hicks agreed to sell them the
Curdwood property for $190,000, payable over time. In Mr. Chears’s words, the written
agreements were “just paperwork.” He never fully read any of them or consulted an
attorney. Still, he admitted that he probably would have understood the written terms had
he bothered to read them.
In late 2016, believing he had paid the purchase price, Mr. Chears asked Mr. Hicks
for a payoff balance. Despite multiple requests, Mr. Hicks never gave him one. So
Mr. Chears told him he was not going to make any more monthly payments without a
payoff figure. He missed two monthly payments before Mr. Hicks declared a default.
Mr. Chears proposed to cure the default by offering Mr. Hicks a third-party check
for the amount owed. But the tender was conditioned on a new written agreement.
Mr. Chears wanted to replace the original lease agreement with a back-dated real estate
contract. Mr. Hicks declined.
Mr. Chears complained that Mr. Hicks had misled him, explaining “[f]rom day one
he told me [the house] was mine.” And “he had me to pay all the bills.” Mr. Chears and
his wife invested over $73,000 in permanent improvements to the leased property. They
added iron fencing, a concrete driveway, a deck, and a basketball court. They turned an
unfinished outbuilding into a game room. And they renovated the home’s interior.
Mr. Chears claimed he never would have made such improvements had he known that he
1
The court initially dismissed all counterclaims on summary judgment. Later, the court amended
its decision. The court clarified that it had granted summary judgment on the Hickses’ complaint and the
defense of anticipatory breach. And it reserved ruling on the remaining counterclaims until after an
evidentiary hearing.
4
was only leasing the property. He never asked for written consent to make the
improvements. Still, he claimed that the Hickses were fully aware of the alterations, and
they never objected.
Mrs. Chears echoed much of her husband’s testimony. She claimed they had been
purchasing the Curdwood property since November 2007. Unlike her husband, she had
looked over the lease before signing it. But she did not understand it. Yet, she asked no
questions. And she admitted no one stopped her from seeking legal advice.
For his part, Mr. Hicks agreed that the Chearses had initially hoped to purchase the
Curdwood property. He suggested the lease with purchase option because they lacked
sufficient resources to purchase the property in 2007. He gave them an opportunity to look
over the proposed lease several days before they finalized the deal. And they both signed
it. When they failed to exercise the purchase option during the initial lease term, he gave
them two more opportunities in the subsequent leases. But they never exercised the option.
He also agreed that Mr. Chears asked him for a payoff balance. He thought he gave
him one.
As for the refinancing, Mr. Hicks explained that the Curdwood property had always
been subject to a mortgage. He and his wife first refinanced in late 2007 to avoid a looming
balloon payment. And he remembered talking to Mr. Chears about it. Mr. Hicks used
payments from the Chearses to make the mortgage payments. But, according to Mr. Hicks,
their payments were often late, and Mr. Hicks’s lender was threatening foreclosure. So he
was forced to refinance with another lender. Although the new mortgage balance exceeded
the purchase option amount, Mr. Hicks maintained that he was always willing to honor the
purchase option had it been timely exercised.
At the conclusion of the bench trial, the court dismissed the remaining
counterclaims. The court found Mr. Hicks to be a credible witness. But Mr. Chears, while
“likeable,” was “not completely believable.”
The court found no proof of fraud. The Chearses were competent adults. They
signed the lease with purchase option. They could not now complain that they did not
understand it. As Mr. Hicks was not a fiduciary, he had no responsibility to explain the
lease terms. And, because Mr. Hicks was acting as his wife’s agent, the lack of
Mrs. Hicks’s signature did not taint the agreement.
For much the same reason, the court determined that the Chearses had not proven a
breach of the implied covenant of good faith and fair dealing. And promissory estoppel
did not apply on these facts.
5
The court also ruled that the improvements to the property did not constitute unjust
enrichment to the Hickses. The court reasoned that the Chearses could have avoided this
forfeiture by simply exercising the purchase option. Still, the court determined that it
would be unfair to allow the Hickses to retain the $20,000 down payment under the
circumstances. So the court awarded the Chearses a credit against the judgment for unpaid
rent.
II.
On appeal, the Chearses challenge both the grant of partial summary judgment and
the dismissal of their counterclaims after trial. Their issues implicate different standards
of appellate review.
A trial court’s decision on a motion for summary judgment enjoys no presumption
of correctness on appeal. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008);
Blair v. W. Town Mall, 130 S.W.3d 761, 763 (Tenn. 2004). We review the summary
judgment decision as a question of law. Martin, 271 S.W.3d at 84; Blair, 130 S.W.3d at
763. So we review the record and make a fresh determination of whether the requirements
of Rule 56 of the Tennessee Rules of Civil Procedure have been met. Eadie v. Complete
Co., 142 S.W.3d 288, 291 (Tenn. 2004); Blair, 130 S.W.3d at 763.
Our review of the trial court’s factual findings after a bench trial is de novo upon
the record, accompanied by a presumption of the correctness of the findings, unless the
preponderance of the evidence is otherwise. See Tenn. R. App. P. 13 (d). We give great
deference to the trial court’s credibility assessments. See Watson v. Watson, 309 S.W.3d
483, 490 (Tenn. Ct. App. 2009). We do not disturb “factual findings based on witness
credibility unless clear and convincing evidence supports a different finding.” Coleman
Mgmt., Inc. v. Meyer, 304 S.W.3d 340, 348 (Tenn. Ct. App. 2009). We review questions
of law de novo, with no presumption of correctness. Armbrister v. Armbrister, 414 S.W.3d
685, 692 (Tenn. 2013).
A.
The grant of partial summary judgment turned on interpretation of the parties’
written agreements. Contract interpretation is a question of law which we review de novo
with no presumption of correctness. Allstate Ins. Co. v. Watson, 195 S.W.3d 609, 611
(Tenn. 2006). The “cardinal rule of contract interpretation is to ascertain and give effect
to the intent of the parties” as expressed in the plain language of the contract. Id.; see Dick
Broad. Co. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 659 (Tenn. 2013). All the content of
the contract must be examined. D & E Const. Co., v. Robert J. Denley Co., 38 S.W.3d 513,
518-19 (Tenn. 2001). This is required “for one clause may modify, limit or illuminate
another.” Cocke Cty. Bd. of Highway Comm’rs v. Newport Utils. Bd., 690 S.W.2d 231,
237 (Tenn. 1985). And where possible, the language “should be construed harmoniously
6
to give effect to all provisions and to avoid creating internal conflicts.” Wilson v. Moore,
929 S.W.2d 367, 373 (Tenn. Ct. App. 1996). If the language used is unambiguous, we
enforce the contract as written. Dick Broad. Co., 395 S.W.3d at 659; Allstate Ins. Co., 195
S.W.3d at 611.
The parties executed two contracts. The first outlined their agreement in general
terms. Mr. Hicks agreed to sell the Curdwood property for $190,000 “as a lease purchase
with option to buy.” This first contract also specified that the monthly rent would be
$1,600. The second contract was a lease with a purchase option.
A purchase option “is a continuing offer to sell irrevocable during the option
period.” Jones v. Horner, 260 S.W.2d 198, 199 (Tenn. Ct. App. 1953). Unlike a contract
to purchase real estate, “[a]n option cannot be enforced as a contract until exercised by
acceptance.” Pinney v. Tarpley, 686 S.W.2d 574, 580 (Tenn. Ct. App. 1984). And it is
undisputed that the Chearses never exercised the purchase option.
The lease terms defined the parties’ rights and responsibilities. The lease had a rent
requirement. Contrary to the Chearses’ position throughout this litigation, their monthly
payments to Mr. Hicks were rent, not down payments toward a purchase. Two lease
provisions—the rent requirement and the purchase option—are relevant here. Other than
the dates, these provisions remained the same in all three leases. As provided in the third
lease,
Rent. Lessee agrees to pay, without demand, to Lessor as rent for the
demised premises the sum of [$1,600] per month in advance on the 1st day
of each calendar month [during the lease term] of which [$1,600] shall be
applied to Lessee’s downpayment to purchase the premises.
Purchase Option. It is agreed that Lessee shall have the option to purchase
real estate known as [the Curdwood property] for the purchase price of
[$190,000] with a down payment of [$1,600] payable upon exercise of said
purchase option with a closing date no later than 30 days thereafter. This
purchase option must be exercised in writing no later than June 30, 2019, but
shall not be effective should the Lessee be in default under any terms of this
lease or upon any termination of this lease.
The purchase option provision illuminates the meaning of the language used in the
rent provision. See Cocke Cty. Bd. of Highway Comm’rs, 690 S.W.2d at 237. The Chearses
had an option to purchase the property for a specified price. Until they exercised the option,
they were obligated to pay $1,600 per month as rent. If they had chosen to exercise the
purchase option, one $1,600 payment would have become the down payment. But because
they never exercised the option, their monthly payments were rent. See Wilson, 929
S.W.2d at 373.
7
As long as the Chearses complied with the lease terms, they were entitled to
possession. But, as the lease also provided,
If any default is made in the payment of rent, or any part thereof, at the times
hereinbefore specified, or if any default is made in the performance of or
compliance with any other term or condition hereof, the lease, at the option
of Lessor, shall terminate and be forfeited, and Lessor may re-enter the
premises and remove all persons therefrom.
The Chearses did not pay rent for February or March 2017. So Mr. Hicks declared a
default. And when the Chearses failed to cure the default, he terminated the lease.2
With the terms of the agreement in mind, we consider the grant of partial summary
judgment. The Chearses argue that the trial court erred in finding that Mr. Hicks’s conduct
did not rise to the level of anticipatory breach. And they question the court’s ruling that
the parties entered into three separate lease agreements.
1. Anticipatory Breach
Anticipatory breach is a recognized defense to a breach of contract action. See Mid-
S. Indus., Inc. v. Martin Mach. & Tool, Inc., 342 S.W.3d 19, 25-26 (Tenn. Ct. App. 2010).
Our courts will find repudiation when one party to the contract has done or said something
that “amount[s] to a total and unqualified refusal to perform.” UT Med. Grp., Inc. v. Vogt,
235 S.W.3d 110, 120 (Tenn. 2007) (quoting Wright v. Wright, 832 S.W.2d 542, 545 (Tenn.
Ct. App. 1991)). Repudiation can also be established with proof that a contracting party
has performed a “voluntary act which renders the party unable or apparently unable to
perform the contract.” Id. (quoting Wright, 832 S.W.2d at 545). In either case, the non-
breaching party may choose to “treat the repudiation as an immediate breach by bringing
suit or changing position in some way.” Id.As proof of repudiation, the Chearses point to Mr. Hicks’s failure to provide them
with a payoff balance and the December 2016 refinance of the existing mortgage. We
agree with the trial court that this conduct does not rise to the level of anticipatory breach.
The purchase option included a specified purchase price. Mr. Hicks’s failure to provide an
unnecessary number does not “amount to a total and unqualified refusal to perform the
contract.” Wright, 832 S.W.2d at 545. And he maintained that he was willing to honor the
purchase option.
2
Mr. Chears’s subsequent tender did not cure the default because it was contingent on renegotiation
of the deal.
8
We reach the same conclusion as to the December 2016 refinance. The Curdwood
property had been subject to a mortgage since the Hickses purchased the property in 2005.
The Hickses refinanced twice. The initial refinance was in late 2007, and resulted in a
mortgage totaling $193,000. The second refinance increased the mortgage debt to
$218,500. The Chearses asserted, without proof, that the increased debt on the property
rendered the Hickses unable to convey good title. But the only evidence in the record is
Mr. Hicks’s deposition testimony that he would have paid off the mortgage with other
funds had the Chearses exercised the purchase option.
2. Lease Renewal
The Chearses also argue that the parties only entered one agreement—the original
lease with purchase option. They claim that the other two leases were renewals of the
original lease.
When a new lease between the same parties “contains the same terms and conditions
as the old lease” and “does not confer any greater obligations or rights than those in the old
lease,” the new lease may be deemed a renewal of the old lease. Edwin B. Raskin Co. v.
Doric Bldg. Co., 821 S.W.2d 948, 951 (Tenn. Ct. App. 1991). Under this test, the 2011
lease could be a renewal. The parties only changed the applicable dates. All other terms
remained the same. But the 2015 lease added a new obligation—payment of taxes and
insurance—not present in either of the first two lease documents. This added obligation
undercuts their argument. See BSG, LLC v. Check Velocity, Inc., 395 S.W.3d 90, 94 (Tenn.
2012) (concluding that new agreement was not a renewal because it contained additional
terms).
Even so, the number of leases is immaterial. Whether the parties entered one lease
or two or three, the Chearses’ monthly payments were rent because they never exercised
the purchase option.
B.
The Chearses also contend that the court erred in dismissing their remaining
counterclaims following the trial. They sought recovery under a variety of theories,
including fraud, unjust enrichment, promissory estoppel, and breach of the duty of good
faith and fair dealing. The trial court concluded that the Chearses did not meet their burden
of proof on any of their remaining claims.
1. Fraud
The Chearses argue that the evidence at trial supported an award of damages for
fraudulent inducement. A successful fraudulent inducement claim requires proof “that the
defendant (1) made a false statement concerning a fact material to the transaction (2) with
9
knowledge of the statement’s falsity or utter disregard for its truth (3) with the intent of
inducing reliance on the statement, (4) the statement was reasonably relied upon, and (5)
an injury resulted from this reliance.” Baugh v. Novak, 340 S.W.3d 372, 388 (Tenn. 2011).
According to the Chearses, Mr. Hicks promised to sell them the Curdwood property.
And he told them it was their house. These statements led them to believe “they had entered
into an agreement to purchase the property and that their monthly payments were payments
going towards the purchase of the property.” So they paid over $197,000 in monthly
installments and invested an additional $73,000 in permanent improvements.
We conclude that the Chearses’ reliance was not reasonable. See Davis v.
McGuigan, 325 S.W.3d 149, 158 (Tenn. 2010) (listing relevant factors). “Generally, a
party dealing on equal terms with another is not justified in relying upon representations
where the means of knowledge are readily within his reach.” Solomon v. First Am. Nat.
Bank of Nashville, 774 S.W.2d 935, 943 (Tenn. Ct. App. 1989). The Chearses could have
uncovered the alleged fraud by simply reading what they signed. See Moody Realty Co. v.
Huestis, 237 S.W.3d 666, 676 (Tenn. Ct. App. 2007) (“One who signs a contract cannot
later plead ignorance of its contents if there was an opportunity to read it before signing.”).
Mr. Chears admitted that he would have understood the lease terms had he read them. As
the court noted, this was an arm’s length transaction between competent adults. And there
is no evidence that the Hickses engaged in any sort of trickery that precluded the Chearses
from discovering the lease terms. See Teague Bros., Inc. v. Martin & Bayley, Inc., 750
S.W.2d 152, 158 (Tenn. Ct. App. 1987) (excusing the failure to read a contract when the
failure was induced by trickery).
2. Unjust Enrichment
The Chearses also sought compensation under an unjust enrichment theory. This
theory requires proof of three elements: (1) the plaintiff conferred a benefit on the
defendant; (2) the defendant was aware of the benefit; and (3) the defendant accepted the
benefit “under such circumstances that it would be inequitable for him to retain the benefit
without payment of the value thereof.” Freeman Indus., LLC v. Eastman Chem. Co., 172
S.W.3d 512, 525 (Tenn. 2005) (quoting Paschall’s, Inc. v. Dozier, 407 S.W.2d 150, 155
(Tenn. 1966)). The most important element is “that the benefit to the defendant be unjust.”
Id.The Chearses contend that they significantly improved the Curdwood property
believing that they were buying it. And it would be unfair to allow the Hickses to retain
the benefit of these permanent improvements. But the lease directly addressed alterations
to the property:
Alterations and Improvements. Lessee shall make no alterations to the
buildings on the demised premises or construct any buildings or make
10
improvements on the demised premises without the prior written consent of
Lessor. All alterations, changes, and improvements built, constructed, or
placed on the demised premises by Lessee, with the exception of fixtures
removable without damage to the premises and moveable personal property,
shall, unless otherwise provided by written agreement between Lessor and
Lessee, be the property of Lessor and remain on the demised premises at the
expiration or sooner termination of this lease.
And the Chearses never obtained written consent.
Unjust enrichment cannot be used to circumvent the express terms of the lease. See
Jaffe v. Bolton, 817 S.W.2d 19, 26 (Tenn. Ct. App. 1991) (rejecting similar argument). We
will not imply a contractual obligation under an unjust enrichment theory when “a valid
contract exists on the same subject matter.” Id.; see Smith v. Hi-Speed, Inc., 536 S.W.3d
458, 480-81 (Tenn. Ct. App. 2016) (dismissing unjust enrichment claim because the written
lease agreement addressed the same subject matter).
3. Promissory Estoppel
Promissory estoppel is another quasi-contractual theory of recovery. Rampy v. ICI
Acrylics, Inc., 898 S.W.2d 196, 211 (Tenn. Ct. App. 1994). To establish promissory
estoppel, the Chearses must show an unambiguous promise that is not unenforceably
vague, reasonable reliance on the promise, and substantial economic detriment. See Alden
v. Presley, 637 S.W.2d 862, 864 (Tenn. 1982); Chavez v. Broadway Elec. Serv. Corp., 245
S.W.3d 398, 404 (Tenn. Ct. App. 2007).
Again, the Chearses sing a familiar refrain. Mr. Hicks promised to sell them the
Curdwood property. In reliance on his promise, they made monthly payments for ten years
and invested in substantial permanent improvements.
As a general rule, promissory estoppel cannot be used to vary the terms of a valid
contract. See Jones v. BAC Home Loans Servicing, LP, No. W2016-00717-COA-R3-CV,
2017 WL 2972218, at *10 (Tenn. Ct. App. July 12, 2017); Thomas Energy Corp. v.
Caterpillar Fin. Servs. Corp., No. E2014-00226-COA-R3-CV, 2014 WL 7366676, at *7
(Tenn. Ct. App. Dec. 26, 2014). The lease gave the Chearses a purchase option, which
they never exercised. They cannot use promissory estoppel to override the express terms
of the agreement. Cf. Barnes & Robinson Co. v. OneSource Facility Servs., Inc., 195
S.W.3d 637, 646 (Tenn. Ct. App. 2006) (“To allow Barnes & Robinson to prevail on its
claim of promissory estoppel would denigrate the expressly bargained terms it and
OneSource agreed upon in the letters of intent.”).
11
4. Breach of the Covenant of Good Faith and Fair Dealing
Tennessee imposes a duty of good faith in the performance of all contracts. Dick
Broad. Co., 395 S.W.3d at 660. The duty exists to protect the parties’ reasonable
contractual expectations and their right to receive the benefits of their bargain. Cadence
Bank, N.A. v. The Alpha Tr., 473 S.W.3d 756, 769 (Tenn. Ct. App. 2015). The scope of
the duty depends on the individual contract. Wallace v. Nat’l Bank of Commerce, 938
S.W.2d 684, 686 (Tenn. 1996).
The Chearses complain that the Hickses deprived them of the benefit of the
agreement by refinancing the existing mortgage, treating their monthly payments as rent,
and enforcing the written consent requirement in the lease. Like the trial court, we find no
evidence of bad faith here. Refinancing the mortgage did not prevent the Chearses from
exercising their purchase option. And the other allegedly bad faith conduct was authorized
by the lease. “Performance of a contract according to its terms cannot be characterized as
bad faith.” Id. at 687.
III.
The evidence on summary judgment did not support a finding of anticipatory
breach. Upon termination of the lease, the Hickses were entitled to a judgment of
possession as a matter of law. See Tenn. R. Civ. P. 56.04. And, because the Chearses
failed to prove a right to relief under any of their theories, the court did not err in dismissing
their counterclaims after trial. So we affirm.
s/ W. Neal McBrayer
W. NEAL MCBRAYER, JUDGE
12