Net Realty Holding Trust v. James D. Maggart and Dorothy Maggart

NET REALTY HOLDING TRUST, )
)
Plaintiff/Appellant, ) Appeal No.
) 01-A-01-9503-CH-00085
v. )
) Davidson Chancery
JAMES E. MAGGART and ) No. 93-1061-II
DOROTHY MAGGART, )
)
Defendants/Appellees. )
FILED
Nov. 1, 1995
COURT OF APPEALS OF TENNESSEE
Cecil Crowson, Jr.
Appellate Court Clerk
MIDDLE SECTION AT NASHVILLE
APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
THE HONORABLE C. ALLEN HIGH, CHANCELLOR
KENNETH R. JONES, JR.
ELIZABETH B. THOMPSON
Sherrard & Roe
Suite 2000, 424 Church Street
Nashville, Tennessee 37219
ATTORNEYS FOR PLAINTIFF/APPELLANT
ALLISON G. LUCAS
Crocker and DeSha
Suite 2909, Stouffer Tower
611 Commerce Street
Nashville, Tennessee 37203
ATTORNEY FOR DEFENDANTS/APPELLEES
REVERSED AND REMANDED
SAMUEL L. LEWIS, JUDGE
O P I N I O N
FACTS
Net Realty Holding Trust ("NET") the owners of commercial
property in Hermitage, Tennessee, brought an action to collect
rent after the tenants, James and Dorothy Maggart, (doing
business as "The Video Place") surrendered the premises. The
Davidson County Chancery Court held that NET was estopped from
collecting rent through the end of the lease term.
The Mitchell Company originally owned the subject
commercial property when the Maggart's signed the lease on March
16, 1988, selling the property to NET in June of 1989. At the
time the lease was signed the structure was not fully
constructed.
On the first page of the Mitchell Company's original
lease "TERM" is listed, followed by the words: "Five (5) years."
Underneath the word "TERM" is "DATE" listed as "March 16, 1988."
On the second page of the lease, the lease term is listed as five
years. At the bottom of the second page is a statement
identifying the page as "THIS FACE PAGE." Later in the lease
paragraph number eight provides:
The original term of this Lease shall be for a
period as defined on the FACE PAGE of this Lease
and from the "Commencement Date" hereafter
provided unless sooner terminated hereby. Said
term, and TENANT's obligation to pay rent shall
commence on the earlier of the following dates:
(a) the date which is sixty (60) days after TENANT
has been notified in writing that the demised
premises are ready for occupancy. . . .
A subsection (b), which followed (a) above, is crossed
out, apparently done by someone before the lease was signed. The
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provisions left intact leave the reader with the conclusion that
the term of the lease was five years, to begin after the Maggarts
had been notified in writing that the premises were ready for
occupancy.
The Maggart's brief indicates that they did receive a
"rent start letter," although there does not seem to be an
exhibit labeled as such. Regardless, the Maggarts admit that
they occupied the premises in November of 1988, first paying rent
in January of 1989. A five year or 60 month lease thus would
conclude in December of 1993 or at the latest January of 1994.
At trial NET stipulated that the lease expired on December 31,
1993, and that they would not seek recovery for rent past this
date. Additionally, the Maggarts signed an estoppel certificate
executed June 13, 1989, in which the Maggarts confirmed some of
the more relevant provisions of the lease, one of which was the
term. In paragraph (d) of the estoppel certificate the term of
the lease is listed as 5 years, commencing on January 6, 1989,
and ending January 31, 1994. Thus, it is not too difficult to
determine that the expiration of the lease would be in January of
1994 or perhaps December 31, 1993.
During the course of the tenancy, the Maggarts sometimes
had problems paying their rent as it came due, and on at least
three occasions NET filed detainer actions to recover monies due.
In the midst of discussions over a fourth suit to collect rent,
the most pivotal factual event of the case occurred. On January
23, 1993, NET attorney John Tishler held a phone conversation
with the Maggart's lawyer John Cheadle. During the conversation,
Mr. Tishler commented that he believed the Maggart's lease
expired on March 15, 1993. Mr. Tishler apparently only consulted
the first page of the lease, which stated the lease was for five
years and was signed on March 15, 1988. Mr. Tishler may have
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been ignorant of the fact that the Maggarts had not started
paying rent until January of 1989 when the building was finished.
After speaking to his clients the Maggarts, Mr. Cheadle
sent Mr. Tishler a letter dated January 22, 1993, the same day of
the phone conversation. The letter reportedly confirmed the
day's discussion regarding the termination of the lease in March.
Later in a letter dated February 10, 1993, Mr. Tishler confirmed
that it was his "understanding that the lease expired in mid-
March," and also designated an agent to inspect the premises upon
the termination of the lease date.
On March 15, 1993, the Maggarts vacated the premises and
NET's designated agent accepted the keys after an inspection. On
March 26, 1993, NET advised the Maggarts that the lease actually
did not expire until January of 1994 and demanded payment of the
rent for the remainder of the lease term.
At trial the parties stipulated that the monthly amount
of rent, common area, and maintenance, taxes, and insurance under
the lease was $4,650 for a total of $44,647.24 if due from March
16, 1993 through the end of the lease term in December of 1993.
After the trial, the court held that the statements, letters, and
actions of the parties had "set up an estoppel." Specifically
the court held that NET's attorney stated the expiration date of
the lease was March 15, 1993, and that in reliance upon the
statement the tenant's wrote a letter stating they would move out
and wanted the landlord to provide a representative to receive
the premises.
Issues
The issue presented in NET's appeal is limited to one
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legal question: whether or not NET should be estopped from
collecting rent from the Maggarts through the end of their five
year commercial lease after NET's attorney told the Maggart's
attorney that the lease would expire in March of 1993. To answer
this question this Court must review the doctrine of equitable
estoppel in Tennessee.
Equitable Estoppel
In Ryan v. Lumberman's Mut. Cas. Co., the court stated
"[i]t is probably impossible to frame a rigid definition of the
doctrine of equitable estoppel because it is constantly growing,
and is applied to new conditions as they arise. It rests upon
the necessity of requiring men to deal honestly and fairly with
their fellow men." 485 S.W.2d 548, 550 (Tenn. 1972).
Estoppel "requires as a minimum (1) reliance upon the
statement or actions of another without opportunity to know the
truth and (2) action based on that reliance which results in
detriment to the one acting." Campbell v. Precision Rubber
Products Corp., 737 S.W.2d 283 (Tenn. App. 1987).
As the Tennessee Supreme Court stated in Rambeau v.
Farris, "It is essential to estoppel that the person claiming it
was himself not only destitute of the knowledge of the facts, but
without available means of obtaining such knowledge; for there
can be no estoppel where both parties have the same means of
ascertaining the truth." 212 S.W.2d 359, 361 (Tenn. 1948) citing
Hankins v. Waddell et al., 167 S.W.2d 694, 696. Similarly
stated, "[f]or estoppel to arise, the act must have been done
with the knowledge that it would be relied upon and the other
party has acted in reliance without either knowledge or the true
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state of affairs or the means of learning the true state of
affairs." City of Lebanon v. Baird, 756 S.W.2d 236 (Tenn. 1988).
Usually, "one having the ability and opportunity to
inform himself of the contents of a writing before he executes it
will not be allowed to avoid it by showing that he was ignorant
of its contents or that he failed to read it." Soloman v. First
American Nat. Bank of Nashville, 774 S.W.2d 935 (Tenn. App.
1989).
Application
The Maggart's signed a five year lease in March of 1988.
They first paid rent in January of 1989. The term of the lease
could have been determined in an number of ways, including
consulting the lease, or the estoppel certificate. When Mr.
Tishler informed Mr. Cheadle of a March 1993 expiration, the
Maggarts were not "destitute of the knowledge of the facts, or
without available means of obtaining such knowledge." Rambeau v.
Farris, 212 S.W.2d 359, 361 (Tenn. 1948). They had in their own
possession the lease, were represented by counsel, and testified
at trial that they did indeed know that a March 1993 termination
would have been premature. 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. Soloman v. First American Nat'l Bank of Nashville,
774 S.W.2d 935, 943 (Tenn. App. 1989). Thus, the Maggarts
cannot rely on the equitable theory of estoppel.
A party desiring to benefit from the estoppel doctrine
must have relied reasonably or justifiably. Fourth Nat'l Bank v.
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Nashville C. & St. L. Ry. Co., 161 S.W. 1144, 1146 (Tenn. 1913).
The Maggarts claim that Mr. Tishler's mistaken statement as to a
March termination provides sufficient justification to allow them
to surrender the premises. The Maggarts also assert that the
litigious history of NET induced their abandonment of the space,
and that they were not in a strong enough bargaining position to
question NET's authority for removing them before the lease term
ran. We disagree. Had the Maggarts been fearful of NET's
reaction if they had remained on the premises beyond March they
could have contacted NET and agreed to the March termination
while informing NET that they believed a March termination to be
contrary to the lease terms. At no time did the Maggarts
communicate to NET that it would comply, while protesting NET's
construction of the lease. Had the Maggarts done so and NET
maintained its position, the Maggarts then would have been in
better position to assert a valid reliance argument.
Estoppel is not favored and it is the burden of the party
seeking to invoke estoppel to prove each and every element.
Bokor v. Bokor, 722 S.W.2d 676, (Tenn. App. 1986). The Maggart's
knowledge of the terms of the lease preclude them from validly
asserting estoppel.
The Maggarts argue that they should not be held to a
higher standard of recall or understanding of the lease than NET.
However, it is the Maggarts, not NET who are asserting the
estoppel argument, and it is the knowledge or access to means of
knowledge on behalf of the party asserting estoppel that is
relevant to equitable estoppel in Tennessee.
Conclusion
It therefore results that the judgment of the trial court
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is reversed and the case is remanded to the trial court for
further necessary proceedings. Costs on appeal are taxed to the
appellees, James and Dorothy Maggart.
________________________________
SAMUEL L. LEWIS, JUDGE
CONCUR:
_________________________________
HENRY F. TODD, P.J., M.S.
_________________________________
BEN H. CANTRELL, JUDGE
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