94th Aero Squadron of Memphis, Inc. v. Memphis-Shelby County Airport Authority v. Specialy restaurant Corporation

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
July 20, 2004 Session
94TH AERO SQUADRON OF MEMPHIS, INC. v. MEMPHIS-SHELBY
COUNTY AIRPORT AUTHORITY v. SPECIALTY RESTAURANT
CORPORATION
Direct Appeal from the Chancery Court for Shelby County
No. 100988-2 Arnold B. Goldin, Chancellor
No. W2003-00227-COA-R3-CV - Filed November 2, 2004
This appeal involves the termination of a commercial real estate lease agreement. Among a
multitude of other claims, Plaintiff, Lessee, contends that Defendant, Lessor, breached the lease by
failing to provide lessee with notice of default, sufficient to satisfy the terms of the lease.
Additionally, Lessee argues that Lessor violated section 29-18-101, et seq. of the Tennessee Code
Annotated (Forcible Entry and Detainer) by re-entering the leased premises without first obtaining
a writ of possession. Lessee appeals from the trial court’s final judgment in favor of Lessor. We
affirm as modified.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed as
Modified and Remanded
DAVID R. FARMER , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and HOLLY M. KIRBY , J., joined.
Larry E. Parrish, Memphis, Tennessee, for the appellants, 94th Aero Squadron of Memphis, Inc. and
Specialty Restaurant Corporation.
R. Grattan Brown, Jr., William L. Hendricks, Jr., and Jeremy G. Alpert, Memphis, Tennessee, for
the appellee, Memphis-Shelby County Airport Authority.
OPINION
On January 4, 1978, Memphis-Shelby County Airport Authority (“Lessor”) and 94th Aero
Squadron of Memphis, Inc. (“Lessee”) entered into a long-term lease agreement for premises
located at the Memphis International Airport. Under the lease, Lessee agreed to construct, at its
own cost, a restaurant complex, including parking, landscaping, and an access road. The lease
also provided that, upon the termination of the lease, “any buildings and improvements
remaining on the demised premises . . . shall ipso facto . . . vest in and become the property of
Lessor, free and clear of all liens and encumbrances, subject only to Lessee’s rights of removal of
trade equipment . . . .” The lease had a base term of twenty years, with two options for renewal
periods of ten years each. Minimum rent was set at $2,000 per month.
From 1980 to March, 1988, Lessee built, operated, and maintained on the leased premises
a restaurant facility known as the “91st Bomb Group Restaurant.” Specialty Restaurants
Corporation (“Specialty”), Lessee’s parent company and third-party defendant, joined in the
execution of the lease for the purpose of guaranteeing the obligations of Lessee from the
inception of the lease and continuing for a two-year period following the date the restaurant
opened for business. Specialty is a corporation organized under the laws of California.
The 91st Bomb Group Restaurant is best characterized as an “airport theme restaurant,”
consisting of a free standing restaurant located on an airport adjacent to a runway. David
Tallichet (Mr. Tallichet) is the founder and president of Specialty and, since 1959, has either
operated or leased up to eighty-four restaurants throughout the United States. Arthur Longoria
(Mr. Longoria), a licensed, practicing attorney, was employed by Specialty from 1988 to 1995.
Mr. Longoria served as “manager of transactions,” and, in that role, was directly in charge of
handling the lease at issue in this case. Jerry McMichael (Mr. McMichael) began working for
Lessor in 1988 and was responsible for all matters pertinent to this appeal. He testified at trial on
behalf of Lessor.
Pursuant to the lease agreement, Lessee covenanted to, inter alia, maintain the premises
in good order and repair and keep the restaurant open for business. These specific covenants
were found in Articles 10 and 11of the lease. Article 24 of the lease contained a termination
clause and right of reentry clause. Under Article 24.(4) of the lease, Lessor had the “right to
terminate this agreement in its entirety immediately upon the happening of . . . [t]he
abandonment or discontinuance of the operation and services by the Lessee.” In addition, this
power of termination clause gave Lessor the right to terminate the lease upon the “failure by the
Lessee to perform, keep and observe any other of the terms, covenants and conditions in [the
lease] . . . after the expiration of thirty (30) days from the date written notice ha[d] been given to
the Lessee by the Lessor to correct such default or breach.” Lessor’s right of reentry under the
lease provided as follows:
In the event of the cancellation or termination of this Lease by the Lessor the
Lessor may immediately or at any time thereafter re-enter the demised premises or
any part thereof in the name of the whole and repossess and have the same as of
Lessor’s former estate and remove therefrom all goods and chattels not properly
belonging, and expel said Lessee and all other persons who may be in possession
of said demised premises, and that, too, without demand or notice.
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Under the lease, all notices were to be in writing and sent by registered mail to the addresses
specified in the lease or to such address as was designated thereafter by either party. Pursuant to
the lease, notice was effective on the date of dispatch.
The restaurant opened for business in 1980, but, due to a salmonella incident that
occurred in 1981, the restaurant never achieved continued success. According to Mr. Tallichet,
the salmonella incident “destroyed” the restaurant. In March 1988, due to a lack of profitability,
Lessee closed the restaurant. Lessee neither requested nor received authorization from Lessor
before discontinuing restaurant operations. Between March 1988 and June 27, 1991, the date the
lease was officially terminated, the restaurant remained closed and vacant. Despite continued
assurances from Lessee that it was progressing towards finding an assignee or sublessee, the
restaurant remained closed. During these three years, Lessee made no attempt to reopen and
operate the restaurant. From the time Lessee discontinued restaurant operations until June, 1991,
Lessee continued to make rental payments, albeit sometimes delinquent, and Lessor accepted
those rental payments. Meanwhile, Lessor cooperated with Lessee’s efforts in transferring the
lease, and on occasion Lessor itself sought potential subtenants for the premises.
By April, 1991, the restaurant and surrounding area were in a state of disrepair. A section
of ceiling had collapsed as a result of flooding from a burst pipe. Overgrown grass, weeds,
shrubs and debris covered the grounds. The military aircraft relics located about the premises
had been neglected and were missing parts. Security fencing around the facility was not in
compliance with FAA and Airport Safety Regulations. The structure had been vandalized, and
there was evidence that homeless persons were using the building for shelter. In sum, the
premises appeared dilapidated and abandoned.
By early April, 1991, in addition to the unkempt condition of the premises and closure of
the business, Lessee’s rent was in arrears. Further, Lessee had failed to maintain a current
certificate of insurance coverage as required by the lease. On April 8, 1991, Lessor mailed a
letter to Lessee, via certified mail, giving notice of these defaults and demanding Lessee correct
the defaults within the time provided under the lease. In this letter, Lessor stated, in all capital
letters, “PLEASE CONSIDER THIS YOUR NOTICE TO CORRECT THE DEFAULTS
ENUMERATED ABOVE.”
Between April 23 and June 27, 1991, Lessor and Lessee corresponded by telephone and
letter. Lessee made repeated representations indicating it would cure all the breaches and
maintaining confidence in finding a successor to the lease. On May 17, 1991, thirty-nine days
after the April 8 default notice, Lessee mailed a current certificate of insurance to Lessor. In its
accompanying letter, Lessee represented that it had “commenced to make arrangements in order
to clean up the debris and make repairs to the security fencing.” Additionally, in the May 17
letter, Lessee stated that it hoped to have an executed sublease agreement ready for Lessor’s
approval during the week of May 20th. Lessee, however, never executed the sublease and never
completed any transaction for the transfer of the lease. On May 24, 1991, Lessor faxed to Lessee
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six pages of landscaping contractors copied from the Memphis area yellow pages. Despite this
assistance, the run-down condition of the premises was never remedied.
On June 27, 1991, eighty days after the notice of default, Lessor mailed to Lessee a notice
of termination of the lease, effective immediately. On or about that date, Lessor placed a padlock
on the gate to the facility. Despite notice of termination, Lessee mailed and Lessor inadvertently
deposited a rent check for the month of July. When Lessor became aware of this mistake, Lessor
returned a check in the same amount to Lessee. Lessee continued to make rental payments for
the months of August and September, each of which was returned by Lessor without depositing.
Procedural History
To describe the thirteen years of litigation preceding this appeal as “protracted” would be
an understatement. The record on appeal is congested with a myriad of pre-trial motions,
discovery motions, trial memoranda, post-trial motions, and the like. Lessee commenced this
case on January 24, 1992. In its complaint for declaratory judgment, filed in the Shelby County
Chancery Court, Lessee alleged that Lessor breached the termination provisions of the lease, and
Lessee sought specific performance of the lease. On April 28, 1992, Lessor answered and
counter-claimed, averring that Lessee in fact breached the lease through multiple defaults.
Lessor also included a third-party complaint against Specialty, asking the court to hold Specialty
responsible as successor to the duties and responsibilities of Lessee under the lease. On August
26, 1992, the trial court granted Lessor’s Motion to Require an Election of Remedies, estopping
Lessee from seeking specific performance because Lessee had told Lessor that it was seeking
money damages only, and, based on those representations, Lessor had entered into another lease.
Both parties subsequently filed motions for summary judgment. On June 23, 1993, the
trial court entered an order denying both parties’ summary judgment motions. After several
motions, responses and a hearing, on March 4, 1994, the trial court entered an order allowing
Lessor to demolish the building located on the demised premises. On August 31, 1993, Specialty
filed a voluntary petition in bankruptcy in a California bankruptcy court, seeking reorganization
under Chapter 11. Pursuant to 11 U.S.C. § 362(a), an automatic stay was placed on all
proceedings in the trial court until Specialty’s Chapter 11 affairs were concluded, and Lessee
gave notice to this effect on September 14, 1993. Except for the order permitting the demolition
of the restaurant, all action in this case ceased until after Specialty emerged from bankruptcy.
Trial was set for November 28, 2000. On November 3, 2000, Lessee filed its first
proposed amended complaint. In its proposed amended complaint, Lessee presented several
theories of recovery, including conversion, trespass, and inverse condemnation that were not
alleged in the original complaint filed over eight years before. On November 8, 2000, Lessor
filed and the court heard Lessor’s motion to strike the amended complaint. At this hearing, the
court gave Lessee the option to amend the complaint “anyway you feel like you want to” or
proceed on the original complaint. Because of the quickly approaching trial date and the new
claims presented in the amended complaint, the trial court made its permission to amend
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contingent on the granting of a trial continuance to Lessor. Lessee opted not to amend its
complaint.
The bench trial began on November 28, 2000 and continued for five days. The court filed
written findings of fact and conclusions of law, ruling, among other things, that Lessee was in
default of the lease; that Lessor had properly given notice of those defaults and properly
terminated the lease; that pursuant to the lease, as the prevailing party, Lessor was entitled to
reasonable attorneys’ fees; and that Specialty, because of its complete dominion and control over
Lessee, was liable for the contractual obligations of Lessee. On November 14, 2002, the trial
court entered final judgment awarding Lessor $41,458.71 in discretionary litigation costs and
$381,689.75 in attorneys’ fees, for a total judgment of $423,148.46. Courts costs were assessed
against Lessee and Specialty. Lessee appealed.1
Although Lessee lists nineteen issues on appeal,2 we perceive the issues as follows:
(1) Whether the trial court erred in finding that Lessee defaulted on the
lease and that Lessor properly gave notice of those defaults and properly
terminated the lease.
(2) Whether the trial court erred in failing to find that by reentering the
premises without a writ of possession, Lessor was in violation of section 29-18-
101, et seq. of the Tennessee Code.
(3) Whether the trial court erred in allowing Lessee to amend its
complaint only if Lessee agreed to a trial continuance.
(4) Whether the trial court erred in excluding the proffered testimony of
Lessee’s expert, Philip Kolbe, Ph.D.
1
Under Rule 27(i) of the Tennessee Rules of Appellate Procedure, arguments in the appellant’s brief shall not
exceed fifty (50) pages, “[e]xcept by order of the appellate court or a judge thereof.” Tenn. R. App. P. 27(i)(2004).
Lessee’s initial brief contains a section entitled “Argument” consisting of slightly in excess of forty-one pages, which
incorporates by reference arguments raised in its trial court briefs and memoranda. [Trial briefs are excluded from the
record. Tenn. R. App. P. 24(a).]. In addition, a separate section entitled “Summary of Argument” contains eight pages.
Thus, in reality, Lessee’s argument exceeds the fifty-page limit by hundreds of pages.
Rule 27(a)(5) of the Tennessee Rules of Appellate Procedure requires an appellant brief to contain a “statement
of the case, indicating briefly the nature of the case, the course of proceedings, and its disposition in the court below.”
Tenn. R. App. P. 27(a)(5). The appellant brief in the instant case contains a section entitled “Statement of the Case” that
consists of some eighty pages, which includes the text of letters; verbatim cites from transcript, the text from “Tenant’s
Concise Statement of Undisputed Facts”(some five pages); Landlord’s response thereto; and the text of Tenant’s ninety-
eight proposed findings of fact and Landlord’s response thereto.
2
Lessee raises a number of issues on appeal that were neither pled in its complaint nor tried by consent in the
lower court. Unless an unpled claim has been tried by consent in the trial court, it cannot be raised for the first time on
appeal. Simpson v. Frontier Cmty. Credit Union, 810 S.W .2d 147, 153 (Tenn. 1991); Fidelity-Phenix Fire Ins. Co. v.
Jackson, 181 S.W .2d 625, 629 (Tenn. 1944).
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(5) Whether the trial court erred in denying Tenant’s motion to appoint a
Special Master for the calculation of compensatory damages.
(6) Whether the trial court erred in granting Lessor’s motions in limine
excluding deposition testimony, where deponents were California residents and no
advance notice was given that the depositions were intended to be used as
evidence.
Standard of Review
The standard of review of a trial court sitting without a jury is de novo upon the record of
the trial court. Wright v. City of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). The trial court’s
findings of fact are presumed correct, unless the preponderance of the evidence is otherwise.
Tenn. R. App. P. 13(d)(2003). On issues of witness credibility, the trial court is able to observe
witness testimony and evaluate a witness’s demeanor. Thus, the court’s assessment of a
witness’s credibility will not be disturbed without clear and convincing evidence to the contrary.
Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn. 1999). On questions purely of law, no
presumption of correctness attaches to the trial court’s conclusions, which are reviewed de novo.
Tenn. R. App. P. 13(d); Bowden v. Ward, 275 S.W.3d 913, 916 (Tenn. 2000).
Law and Analysis
(1) Breach of Lease
In its brief, Lessee presents an array of issues that all seem to drive towards one question -
- whether the Lessor breached the lease by failing to give proper notice of default and notice of
termination of the lease. Lessee also contends that Lessor waived any breach of the lease on the
part of Lessee by accepting rental payments during the months the restaurant was closed through
the date of termination, July 27, 2001.
(a) Sufficiency of Notice
The interpretation of lease terms is governed by traditional rules of contract construction.
Planters Gin Co. v. Federal Compress and Warehouse Co., 78 S.W.3d 885, 889 (Tenn. 2002)
When construing contracts, the words contained within the instrument should be given their
plain, ordinary meaning, and, “in the absence of fraud or mistake, a contract must be interpreted
and enforced as written, even though it contains terms which may be thought harsh or unjust.”
Heyer-Jordan & Assoc., Inc. v. Jordan, 801 S.W.2d 814, 821 (Tenn. Ct. App. 1990)(citing
Ballard v. North Am. Life & Cas. Co., 667 S.W.2d 79 (Tenn. Ct. App. 1983)). If the contract
language is unambiguous, the written terms control, not the “unexpressed intention of one of the
parties.” Sutton v. First Nat’l Bank of Crossville, 620 S.W.2d 526, 530 (Tenn. Ct. App. 1981).
The rights and obligations of parties to a contract are determined by the terms written in the
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agreement. Cookeville Gynecology & Obstetrics, P.C. v. Southeastern Data Sys., 884 S.W.2d
458, 461–62 (Tenn. Ct. App. 1994).
The lease at issue in this case clearly and unambiguously obligated Lessee to perform
certain covenants. Under the lease, Lessee agreed to, among other things, continuously operate a
restaurant and maintain the premises in good order and repair. There is no serious dispute that
Lessee failed to perform these covenants. Restaurant operations were shut down beginning
March, 1988, and the condition of the premises deteriorated steadily thereafter. The lease, by its
terms, granted Lessor the right to terminate the lease for these defaults. The chancellor found
that Lessee “made numerous representations . . . that [it would] . . . assign or sublease the
premises to a third party that would re-open the restaurant or use the property for another valid
business purpose.” The trial court further found that, relying on these representations, Lessor
was induced to permit Lessee to continue under the lease. Lessor attempted to assist Lessee in its
purported efforts to find a subtenant and procure landscaping services to restore the premises to
an acceptable condition. Pursuant to the lease, Lessee was given affirmative notice to correct
these defaults within thirty days of the notice, dated April 8, 1991. Lessee did not cure these
defaults, and on June 27, 1991, some two and one-half months after the notice of default, Lessor
mailed a letter of termination of the lease effective immediately. These findings by the
chancellor are amply supported by the record.
Lessee first contends that the April 8, 1991 notice of default was unreasonable because it
was insufficient to put Lessee on notice that, if Lessee failed to cure the defaults, Lessor would
terminate the lease. The record, on the other hand, paints a much different picture. Besides
indicating to Lessee that rent was outstanding and that Lessee’s certificate of insurance had
expired, the April 8th letter recited, in relevant part, the following: “Article 24 of the lease
provides for immediate termination of the lease upon ‘the abandonment or discontinuance of the
operation and service by Lessee.’ We feel that this situation has occurred.” The letter continued
by restating Article 24 of the lease which provides for termination of the lease for failure to
perform the covenants within the lease, “after the expiration of thirty (30) days from the date
written notice has been given to the Lessee by the Lessor to correct such default or breach.” At
the close of this paragraph in the letter, Lessor included the following statement in all capital
letters, “PLEASE CONSIDER THIS YOUR NOTICE TO CORRECT THE DEFAULTS
ENUMERATED ABOVE.” Moreover, when asked to review this letter at the trial, CEO and
President of Lessee, David Tallichet, testified that “[the letter] does look like a notice of default.”
It is clear from the record that the notice of default was unmistakable, and Lessee clearly
understood the purpose of the letter.
Lessee also contends that Lessor improperly terminated the lease by regaining possession
of the premises without seeking a writ of possession. As stated previously, the record reflects
that Lessee was in breach of numerous provisions of the lease. After putting Lessee on notice of
certain defaults and failing to cure those problems, Lessor was well within its rights under the
lease to terminate. Lessee’s primary contention, however, deals with the manner in which Lessor
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proceeded after the June 27, 1991 letter of termination. We will separately address the issue of
whether a writ of possession was necessary in this case.
(b) Waiver
Lessee also asserts waiver on the part of Lessor. The fact that Lessor assisted Lessee in
its efforts to find a subtenant, while accepting rental payments for the months3 of April, May, and
June 1991 does not, as Lessee suggests, serve as a waiver of Lessor’s rights under the lease.
Waiver is commonly defined as the “voluntary relinquishment of a known right[,] established by
express declarations or acts manifesting an intent not to claim the right.” Tenn. Asphalt Co. v.
Purcell Enter., Inc., 631 S.W.2d 439, 444 (Tenn. Ct. App. 1982). In general, by accepting
benefits under a contract with knowledge of a breach, the non-breaching party waives the breach.
17 Am. Jur. 2d Contracts § 447 (1964). The analysis, however, does not stop there, as
Tennessee law also holds:
[M]ere efforts on the part of an innocent party to persuade the promisor, who
repudiates his agreement, to reject that repudiation and proceed honorably in the
performance of his agreement have been held not to involve a waiver of the
innocent party’s right to avail himself of the breach after the efforts finally prove
unsuccessful.
Id.; W.F. Holt Co. v. A&E Elec. Co., Inc., 665 S.W.2d 722, 733 (Tenn. Ct. App. 1983).
Negotiating with another party in the face of a breach by that party will not constitute a waiver,
where such action was the result of misrepresentation by the breaching party. W.F. Holt Co., 665
S.W.2d at 733–34. Waiver may also be shown by “express declaration; or by acts and
declarations manifesting an intent and purpose not to claim the supposed advantage; or by course
of acts and conduct, or by so neglecting and failing to act, as to induce a belief that it was [the
party’s] intention and purpose to waive.” Jenkins Subway, Inc. v. Jones, 990 S.W.2d 713, 722
(Tenn. Ct. App. 1998)(quoting Baird v. Fidelity-Phenix Fire Ins. Co., 162 S.W.2d 384, 389
(Tenn. 1942)).
In this case, Lessor never indicated that it was releasing or waiving its rights under the
lease by cooperating with Lessee’s attempts to cure the defaults. In fact, there is nothing in the
record to indicate Lessee ever asserted a waiver on the part of Lessor. On repeated occasions,
Lessee represented that it was close to finding a subtenant and was arranging to have the
premises repaired. In reliance on Lessee’s repeated assurances, Lessor cooperated with Lessee in
working towards an amicable resolution. While attempting to cure the numerous defaults, Lessee
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The trial court also found that Lessor received and deposited a rental payment for July 1991, after the lease
was terminated, June 27, 1991. The trial court found that this payment was deposited in error and was immediately
returned. Because of failure to cite to any authority to support its contention that this mistaken “acceptance” was an
irrevocable waiver, Lessee’s argument is without merit. “The law will not presume a waiver, and the party claiming the
waiver has the burden of proving it by a preponderance of the evidence.” Jenkins Subway, Inc. v. Jones, 990 S.W .2d
713, 722 (Tenn. Ct. App. 1998)(citing Koontz v. Fleming, 65 S.W .2d 821, 825 ( Tenn. Ct. App. 1933)).
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remained obligated under the lease to pay rent. By accepting those rental payments, Lessor was
not waiving any breach on the part of Lessee because Lessee understood that it remained
obligated under the lease to operate a restaurant or find a suitable replacement and restore the
premises to a good state of repair and condition. When it became apparent that Lessee was either
unwilling or unable to fulfill these promises, Lessor terminated the lease. We hold the trial court
did not err in finding that Lessor did not waive the covenants under the lease by accepting rental
payments after the notice of default.
(2) Reentry Without Writ of Possession
Soon after Lessor’s July 27, 1991, letter of termination, Lessor went onto the premises
and placed a padlock on the outside gate. Lessor proceeded in this fashion based upon the right-
of-reentry provision in the lease, which states as follows: “In the event of the cancellation or
termination of this Lease by the Lessor the Lessor may immediately or at any time thereafter re-
enter the demised premises or any part thereof in the name of the whole and repossess and have
the same as of Lessor’s former estate. . . .” Lessor contends, and Lessee vehemently disputes,
that under the facts of this case Lessor was not required to resort to the courts to reenter and
repossess the premises. Lessor bases its argument on the existence of the bargained-for right-of-
reentry provision in the lease and the fact that the premises had been vacant for three years.
Lessee argues that despite the unoccupied appearance of the building, Lessee was still in
“possession” of the premises, thus Lessor was required to seek a writ of possession under section
29-18-101, et seq. of the Tennessee Code (Forcible Entry and Detainer).
Since 1821, Tennessee has had a statute that “creates a right to bring a cause of action for
a writ of possession when a lessee remains on the leased property after the lease has been
terminated.” Cain P’ship Ltd. v. Pioneer Inv. Servs. Co., 914 S.W.2d 452, 456 (Tenn. 1996).
Section 29-18-101 of the Tennessee Code provides that “[n]o person shall enter upon any lands,
tenements, or other possessions, and detain or hold the same, but where entry is given by law,
and then only in a peaceable manner.” Tenn. Code Ann. § 29-18-101 (1999 Supp.). The
legislative intent behind the creation of Forcible Entry and Detainer (FED) actions was to provide
a streamlined summary procedure to determine the rights to possession of land, in contrast to the
old formal common law ejectment action. Newport Hous. Auth. v. Ballard, 839 S.W.2d 86(Tenn. 1992). FED proceedings also serve the function of preventing violence and breaches of
the peace that result from the inherent friction caused by repossessing property through self-help.
Childress v. Black, 17 Tenn. 317, 320 (1836); 35A Am. Jur. 2d Forcible Entry and Detainer § 6
(2001). To avoid these conflicts, the party seeking to repossess the land must do so with the aid
of a writ of possession issued by the court. Hayes v. Schweikarts Upholstering Co., 402 S.W.2d
472, 484 (Tenn. Ct. App. 1965).
The cases construing Tennessee FED law hold that, absent abandonment or surrender of
the premises by the tenant, the landlord is required to seek a writ of possession before reentering
the land. Cain P’ship, 914 S.W.2d at 456–57; Matthews v. Crofford, 167 S.W. 695, 698 (Tenn.
1914); Hayes, 402 S.W.2d at 484; Cutshaw v. Campbell, 3 Tenn. App. 666, 688–89 (1925);
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William B. Tanner Co. v. United States, No. C-75-337, 1976 WL 1065, at *4 (W.D. Tenn. June
16, 1976). Although other states allow a commercial tenant to waive its statutory protection from
self-help repossession through a right-of-reentry clause, in Tennessee, “the action of unlawful
detainer is the legal substitute for personal entry.” Matthews, 167 S.W. at 698. In Cutshaw v.
Campbell, this Court stated, “the jurisdiction of the courts to determine these questions of
disputed sovereignty cannot be delegated to individuals.” Cutshaw, 3 Tenn. App. at 688. The
court further stated that even if the right-of-reentry provision undertook to allow for self-help, “it
was right in the teeth of the law, subversive of its peaceful process, and void.” Id.
In its brief to this Court, Lessor cites Nashville Record Productions, Inc. v. Mr.
Transmission, Inc., 623 S.W.2d 281 (Tenn. Ct. App. 1981), for the proposition that, pursuant to a
right-of-reentry clause, a commercial landlord may repossess leased premises without a writ of
possession. The primary issue in Nashville Record was whether a lease provision could waive
the common law requirement that rent be demanded before a forfeiture could be declared. Id. at
282. In Nashville Record, the tenant was in default for failure to pay rent, and after several
notices to cure, the landlord declared the lease forfeited. Id. The landlord then brought an action
to recover possession in March 1980, which was ultimately granted by the trial court in October
1980. Id. at 283. In May 1980, subsequent to the initiation of the possession action, the tenant
vacated, whereupon the landlord locked the premises. The appeal by the landlord centered
around whether it was entitled to rents from the time the tenant vacated in May through the time
the writ of possession was issued in October. Id. This Court denied the landlord rent for those
months during which the premises were vacant but no order of possession had yet been issued
because we found that the landlord had possession and use of the premises from the time of
actual repossession forward. Id. at 284. The lease’s right-of-reentry clause had no bearing on the
holding in Nashville Records, as the landlord gained possession by initiating the FED action. Id.
at 283. Nashville Records is not determinative to the case at bar because the landlord there did,
in fact, seek and obtain a writ of possession pursuant to section 29-18-127 of the Tennessee
Code.
Other states have adapted their FED law, either by statute or case law, to allow for reentry
without judicial process in the commercial lease context. See, e.g., Rucker v. Wynn, 441 S.E.2d
417, 419 (Ga. Ct. App. 1994); Clark v. Service Auto Co., 108 So. 704, 707 (Miss. 1926). In
those states, a commercial landlord may reenter under a right-of-reentry provision to effect a self-
help repossession without judicial process if the repossession can be achieved without a breach
of the peace. Rucker, 441 S.E.2d at 420; Craig Wrecking Co. v. S.G. Loewendick & Sons, Inc.,
526 N.E.2d 321, 326 (Ohio Ct. App. 1987); Liberty Indus. Park Corp. v. Protective Packaging
Corp., 335 N.Y.S.2d 333, 336–37 (N.Y. Sup. Ct. 1972). By statute in Georgia, in any residential
lease, a landlord or tenant may not waive any rights or obligations contained in the sections
covering dispossession proceedings. Ga. Code. Ann § 44-7-2 (2003). Therefore, Georgia courts
have held that, by implication, commercial lessors may avoid FED proceedings through the
inclusion of default and right-of-reentry provisions. Colonial Self-Storage of South East, Inc. v.
Concord Props., Inc., 249 S.E.2d 310, 311 (Ga. Ct. App. 1978). Tennessee’s FED statute,
however, does not distinguish between residential and non-residential property.
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Under the facts of this case, despite the lease provision for reentry, Lessor was required to
seek a writ of possession before reentering the premises. In this case, however, Lessor would
have been entitled to possession had it proceeded according to the unlawful detainer statute, and
Lessee has failed to show any actual damages suffered from Lessor’s failure to seek and obtain a
writ of possession before repossessing the property. Thus, Lessee is entitled to nominal damages
only. Cutshaw v. Campbell, 3 Tenn. App. 666, 689 (1925)(holding that tenant who was
unlawfully dispossessed but had no rights in the property after the date of termination entitled to
nominal damages only).
(3) Permission to Amend Complaint Made Contingent on Continuance of Trial
Under Rule 15.01 of the Tennessee Rules of Civil Procedure, once a responsive pleading
is served or the time allowed for amendment has expired, a party may amend the party’s
pleadings “only by written consent of the adverse party or by leave of court; and leave shall freely
be given when justice so requires.” Tenn. R. Civ. P. 15.01 (2004). The rule’s provision that
“leave shall be freely given” has been liberally construed to “lessen[] the exercise of pre-trial
discretion on the part of the trial judge.” Branch v. Warren, 527 S.W.2d 89, 91–92 (Tenn. 1975).
Therefore, the court should freely grant the amendment, so long as prejudice to the opposing
party can be avoided. Harden v. Danek Med., Inc., 985 S.W.2d 449, 454 (Tenn. Ct. App. 1998);
Campbell County Bd. of Educ. v. Brownlee-Kesterson, Inc., 677 S.W.2d 457 (Tenn. Ct. App.
1984). The court, however, retains discretion to condition the amendment in order to minimize
prejudice to the opposing party in maintaining his or her action or defense. For example, the
court may condition the amendment on the granting of a continuance or the posting of a bond.
Gardiner v. Word, 731 S.W.2d 889, 892–93 (Tenn. 1987). The trial judge’s decision “will not be
reversed unless [an] abuse of discretion is shown.” Harden, 985 S.W.2d at 454 (quoting Welch
v. Thuan, 882 S.W.2d 792, 793 (Tenn. Ct. App. 1994)).
Here, Lessee filed its original complaint on January 24, 1992. The case finally went to
trial on November 28, 2000. According to Appellant’s brief, the case was first set for trial on
February 12, 1999 but was postponed by the trial judge until October 1999. The October trial
date was further postponed until November 28, 2000. Lessee argues that both of these
continuances were on the trial court’s own motion.4
During a pre-trial hearing on August 16, 2000, the trial judge set a deadline of November
1, 2000 for the filing of any additional court documents. The court stated to counsel for both
parties that it wanted to maintain a “drop-dead” trial date and have “no more surprise motions.”
Counsel for both parties agreed that nothing further would be filed past that date. In fact,
Lessee’s counsel made repeated statements that he did not want to file anything else. On August
29, 2000, the trial court issued a scheduling order instituting a November 1, 2000 deadline for the
filing of any additional court documents.
4
Lessee does not cite to the record in support of its assertion that the two previous trial dates were postponed
“sua sponte.”
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On November 3, 2000, Lessee filed a motion to amend its complaint. This motion was
filed two days after the agreed upon deadline, almost nine years after the original complaint, and
three weeks before trial. The proposed amended complaint included claims for relief that were
not pled in the original complaint, including claims for trespass, conversion, and inverse
condemnation. Lessee argued in the trial court that the amended complaint would do nothing
more than memorialize the theories of recovery Lessee had been claiming throughout the pre-trial
stages of this case, and that Lessor was on notice that Lessee was pursuing these claims. On
November 8, 2000, Lessor filed a motion to strike Lessee’s proposed amended complaint. At the
November 8, 2000 hearing on this matter, the chancellor stated to Lessee’s counsel that he would
allow Lessee to “amend this lawsuit anyway you feel like you want to,” but that he was not going
to require the Lessor to go to trial on November 28th. Therefore, Lessee had the option to amend
its complaint and have the trial postponed or go to trial as scheduled on the original complaint.
Lessee chose the latter. In light of the looming trial date and the assertion of new claims in the
proposed amended complaint, we cannot say the chancellor abused his discretion by conditioning
leave to amend on Lessee’s agreement to a continuance of the trial.
(4) Proffered Expert Testimony of Philip Kolbe, Ph. D.5
In this case, Lessee sought to recover damages for the cost of reconstruction, lost profits,
and the value of the leasehold interest. Proceeding to trial, Lessee’s primary expert witness on
the issue of damages was Philip Kolbe, Ph.D. (“Dr. Kolbe”), a professor of finance and real
estate at the University of Memphis. Both parties and the chancellor conducted a lengthy voir
dire of Dr. Kolbe. During the questioning, Dr. Kolbe responded that he never saw the actual
premises or any of the building plans. His opinion as to construction costs was based on general
knowledge rather than any specific factual basis pertaining to the premises at issue. He did not
come prepared to testify to the value of comparable real estate and could not remember the
names of people he spoke with regarding comparable real estate values. Dr. Kolbe’s valuation of
the leasehold interest was based on comparables to which he could not identify and two offers for
the leased premises that, according to Mr. Tallichet, “never materialized.”
Under Rule 702 of the Tennessee Rules of Evidence, a witness may testify in the form of
opinion on scientific, technical, or other specialized matters. Tenn. R. Evid. 702 (2004). Before
a court will allow such expert testimony, the proponent must first show that (1) the witness is
“qualified as an expert by knowledge, skill, experience, training, or education[,]” and (2) the
testimony will “substantially assist the trier of fact to understand the evidence or to determine a
fact in issue.” Id. If the underlying facts or data upon which the witness bases his/her opinion
“indicate lack of trustworthiness,” the court must disallow the so-called expert testimony. Tenn.
R. Evid. 703 (2004); McDaniel v. CSX Transp., Inc., 955 S.W.2d. 257, 265 (Tenn. 1997). The
5
In its brief to this Court, Lessee has characterized the trial court’s exclusion of D r. Kolbe’s testimony as
premised solely upon the fact that Dr. Kolbe was not a licensed real estate appraiser. Nothing in the record indicates,
as Lessee argues, that the chancellor made “licensure the sine qua non of whether Dr. Kolbe had sufficient intellectual
capacity and experience to serve as an expert.”
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qualification of a witness as an expert is a preliminary question for the trial judge. Tenn. R.
Evid. 104(a)(2004); McDaniel, 955 S.W.2d. at 263. The trial court’s ruling on the admissibility
of “expert” testimony may only be reversed upon a showing that the court’s decision was
arbitrary or an abuse of discretion. McDaniel, 955 S.W.2d at 263–64 (citing State v. Ballard,
855 S.W.2d 557, 562 (Tenn. 1992)); Lindgren v. City of Johnson City, 88 S.W.3d 581, 585
(Tenn. Ct. App. 2002)(citing White v. Vanderbilt University, 21 S.W.3d 215, 231 (Tenn. Ct. App.
1999)).
The chancellor noted that he was predisposed to admit the testimony of Dr. Kolbe and
remarked that Dr. Kolbe’s resume and background was impressive. Yet, in this case, the
chancellor found that Lessee had failed to carry its burden in qualifying Dr. Kolbe as an expert in
the proposed areas of testimony because the factual bases for the proffered testimony lacked
reliability and trustworthiness. After reviewing the record, there was ample evidence to support
the trial court’s decision to exclude Dr. Kolbe’s proffered expert testimony.
(5) Failure to Appoint Special Master
After the trial on the merits, Lessee filed a motion to appoint a special master to report on
the amount of damages suffered by Lessee. The trial court took no action on this motion,
presumably because the court found that Lessee was in breach and consequently was not entitled
to damages.
In general, the decision whether to appoint a special master is within the discretion of the
trial court. Tenn. R. Civ. P. 53.01 (2004)(“The court in which any action is pending may appoint
a Special Master therein.”). Lessee argues that the trial court has no discretion in whether to
appoint a special master to make a recommendation on the amount of damages. In support of
this argument, Lessee cites Provident Life & Accident Insurance Co. v. Globe Indemnity Co., 3
S.W.2d 1057 (Tenn. 1928). In Provident Life, the Tennessee Supreme Court held that, in cases
involving complicated accountings, the matter should be referred to a special master after the
basis for the accounting has been determined by the trial judge. Provident Life, 3 S.W.2d at
1058. Assuming, arguendo, that a trial judge is required to appoint a special master to assess
damages, here, the chancellor found that Lessee had breached the lease and was not entitled to
damages. Therefore, this issue is moot, as the appointment of a special master would have
served no purpose.
(6) Trial Court’s Exclusion of Deposition Testimony of California Deponents
On April 1, 1998, Lessor’s counsel gave notice to Lessee that it would be traveling to
California and taking a number of depositions of Specialty employees, namely Mr. Longoria and
Gloria Madsen. The depositions were taken during the week of April 14, 1998, and Lessee’s
counsel was present. After Lessor finished his direct examination of the first deponent, Mr.
Longoria, Lessee began questioning Mr. Longoria. At that point, Lessor’s counsel objected to
any evidentiary use at trial by Lessee of the deposition testimony of Mr. Longoria. Lessor’s
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counsel stated that he had given notice that the deposition was for discovery only and not for
evidentiary use. Lessee’s counsel stated his understanding that the law made no distinction
between a “discovery” deposition and an “evidentiary” deposition. Both parties made a
statement for the record, and Lessee’s counsel continued questioning. Upon the close of Lessee’s
questioning of Mr. Longoria, which concluded the following morning, Lessor’s counsel did not
conduct a redirect examination.
Before the trial, Lessor filed a motion in limine to exclude the use by Lessee in its case-
in-chief of the deposition testimony of Mr. Longoria and Ms. Madsen . In support of this motion,
Lessor argued, inter alia, that (1) Lessee failed to give notice of intention to take the deposition
of Mr. Longoria as required by Rule 30.02 of the Tennessee Rules of Civil Procedure, (2) Lessor
was not given “reasonable notice”of Lessee’s intention to use the deposition testimony pursuant
to Rule 32.01(3)(B), and (3) Lessor would be denied its right of cross-examination if Lessee were
allowed to use the deposition testimony as evidence at trial. Oral argument was held on the
matter, and the trial court granted Lessor’s motion in limine, thus excluding the use of the
deposition testimony at trial. Lessee filed a motion to reconsider and memorandum in support
thereof, arguing that Tennessee law makes no distinction, with respect to use at trial, between
“evidentiary” and “discovery” depositions.
Rule 32.01 of the Tennessee Rules of Civil Procedure governs the use of depositions in
court proceedings. Rule 32.01(3)(B) provides in relevant part:
At the trial . . . any part or all of a deposition, so far as admissible under the rules
of evidence applied as though the witness were then present and testifying, may be
used against any party who was present or represented at the taking of the
deposition or who had reasonable notice thereof, in accordance with the following
provisions:
....
(3) The deposition of a witness, whether or not a party, may be used by any party
for any purpose if the court finds: . . . (B) that the witness is at a greater distance
than 100 miles from the place of trial or hearing or is out the state[.]
Tenn. R. Civ. P 32.01(3)(B).
Rule 32.01(3) is the counterpart to the former testimony hearsay exception, Rule
804(b)(1) of the Tennessee Rules of Evidence. See Tenn. R. Civ. P. 32.01, Advisory
Commission Comment to 1990 Amendment; see also Robert Banks, Jr. & June F. Entman,
Tennessee Civil Procedure § 8-7(e) (2d ed. 2004). The Advisory Commission Comment to Rule
32.01 further provides that “[e]xcept with respect to some experts, a deposition is admissible as
substantive evidence at trial if the deponent is unavailable to give live testimony.” Tenn. R. Civ.
P., Advisory Commission Comment to 2001 Amendment.
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Here, the deponents would clearly meet the standard of “unavailability” for both Rule
32.01(3)(B) of the Tennessee Rules of Civil Procedure and Rule 804(a)(6) of the Tennessee
Rules of Evidence, as both deponents resided in California. With regards to Mr. Longoria,
however, he appeared and testified at trial. Therefore, the exclusion of his deposition testimony
is rendered moot, and if the trial court erred by excluding the use of his deposition, that error, if
any, would be harmless error. With regards to the exclusion of Ms. Madsen’s testimony, Lessee
has not shown the relevance of her testimony, either in its brief, at oral argument or in the court
below. Thus, we are unable to determine how Lessee was prejudiced, if at all, by the trial court’s
exclusion of Ms. Madsen’s deposition testimony. Tompkin v. PhilipMorris USA, Inc., 362 F.3d
882 (6th Cir. 2004).
Conclusion
For the foregoing reasons, we affirm the findings of the court below that Lessee breached
the lease by failing to cure a number of defaults, of which Lessee was put on adequate notice.
We further hold that the trial court did not err in conditioning leave to amend Lessee’s complaint
upon a trial continuance. In addition, we hold the trial court did not err in excluding Lessee’s
proffered expert witness’s testimony or in excluding the deposition testimony of two California
deponents. The trial court’s failure to appoint a Special Master was also not error. We do,
however, hold that the trial court erred in failing to find that Lessor was required to seek a writ of
possession before repossessing the leased premises. However, having further determined that
Lessee suffered no damages as a result thereof, the judgment of the trial court is modified to
award Lessee nominal damages in the amount of $100.00.
The pivotal issue in this protracted litigation is breach of the lease agreement. The
chancellor found Lessee to be in breach, and we concur. While Lessor has not appealed the
award of attorney’s fees and costs, we will nonetheless address the award since we have
determined that the court below was in error in ruling that Lessor could enter the premises
without first obtaining a writ of possession.
The lease provides that “in the event of any legal action or suit resulting from any default
of this Lease, the prevailing party shall be entitled to receive reasonable attorney’s fees.” In view
of the fact Lessor prevailed on the pivotal issue of breach, we consider Lessor to be the
prevailing party, notwithstanding the Lessee’s entitlement to nominal damages. Therefore, the
award of attorney’s fees and costs is affirmed.
Costs of this appeal are taxed to the appellant, 94th Aero Squadron of Memphis, Inc. and
Specialty Restaurant Corporation, and their surety.
___________________________________
DAVID R. FARMER, JUDGE
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