St. George Holdings LLC v. James D. Hutcherson

12/22/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
October 14, 2020 Session
ST. GEORGE HOLDINGS LLC v. JAMES D HUTCHERSON
Appeal from the Circuit Court for Hamilton County
No. 19C185 Kyle E. Hedrick, Judge
No. E2020-00082-COA-R3-CV
This appeal concerns an option agreement. St. George Holdings, LLC (“SGH”), an entity
formed to purchase the old St. George Hotel (“the Hotel”) in Chattanooga, entered into an
agreement with James D. Hutcherson (“Hutcherson”) under which SGH would borrow
$700,000 from Hutcherson to develop the Hotel. An option agreement, one of four
documents executed in the transaction, provided that if SGH was unable to obtain a full
development loan in 18 months, Hutcherson could purchase the Hotel for the amount of
his loan. SGH never obtained a development loan. When Hutcherson attempted to
exercise his right to purchase, SGH refused to comply. Instead, SGH sued Hutcherson in
the Circuit Court for Hamilton County (“the Trial Court”). Hutcherson filed a
counterclaim. The Trial Court granted summary judgment to Hutcherson on SGH’s claims.
After trial on Hutcherson’s counterclaim, the Trial Court granted him specific performance.
SGH appeals, arguing among other things, that a jury waiver provision in the deed of trust
did not serve to waive its right to jury under the option agreement. We hold, inter alia,
that the deed of trust’s separately-initialed jury waiver, broad in its language as to its scope
across the transaction, was sufficient to waive the right to jury for actions arising out of the
option agreement. We affirm the judgment of the Trial Court in all respects.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.
William H. Horton, Chattanooga, Tennessee, and Garrett P. Swartwood, Knoxville,
Tennessee, for the appellant, St. George Holdings, LLC.
Gary R. Patrick and Susie Lodico, Chattanooga, Tennessee, for the appellee, James D.
Hutcherson.
OPINION
Background
Marta Alder (“Alder”), a former real estate agent from Florida and primary manager
for SGH, had a dream of restoring the Hotel, a derelict structure across the street from the
historic Chattanooga Choo-Choo train station. A 2004 fire had left the Hotel severely
damaged. In 2012, most of the Hotel was demolished because of its unsafe condition. The
original façade survived, albeit in very bad condition. In May 2013, SGH bought the Hotel
from its then-owner, Craig Driver (“Driver”), for $245,000, and then bought an adjacent
parcel for $10,000. These funds came from Alder and her family. Alder thereafter hired
engineers, architects, and a hotel management consultant. Alder’s efforts were expensive,
and money was an issue if the Hotel were ever to be restored.
SGH needed investors. The former owner, Driver, referred Alder to Hutcherson, a
local accountant. Alder presented her plans for the Hotel to Hutcherson. At this early
stage, Hutcherson was enthusiastic. However, Hutcherson conveyed that he was not
interested in being an investor, as such, but rather in making a bridge loan for the initial
startup costs. Negotiations ensued, and a deal was struck. On June 8, 2017, SGH and
Hutcherson executed four documents: a loan agreement, a promissory note, a deed of trust,
and an option agreement. As a result, Hutcherson loaned SGH $700,000 to be repaid over
18 months, for which he would receive accrued interest on the loan and a loan fee at the
end of the 18-month term. Under the option agreement, Hutcherson had the option to
purchase the property if one of four scenarios occurred: (1) SGH defaulted; (2) SGH failed
to close on a loan for the development of the project substantially compliant with the design
plans Alder had shown Hutcherson by the end of the 18-month term; (3) an offer from a
third party to buy the property; or (4) SGH were to propose a transfer of the property. The
option agreement provided, as pertinent:
WHEREAS, St. George is the owner of certain real property located
in the City of Chattanooga, Hamilton County, Tennessee, with all
improvements located thereon, being more particularly described in the
attached Exhibit A (the “Property”); and
WHEREAS, Hutcherson has loaned Seven Hundred Thousand
Dollars ($700,000.00) to St. George pursuant to the terms of a Loan
Agreement (the “Loan Agreement”) and a Promissory Note (the “Promissory
Note”) and secured by a Deed of Trust pledging the Property (the “Deed of
Trust”), all of even date herewith (the Loan Agreement, the Promissory Note
and the Deed of Trust are collectively referred to herein as the “Loan
Documents”); and
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WHEREAS, Hutcherson desires to secure a right of first refusal and
option to purchase the Property from St. George and St. George desires to
grant such right of first refusal and option to Hutcherson;
NOW, THEREFORE, in consideration of the foregoing, and the
mutual covenants and promises herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Right of First Refusal and Option to Purchase. In consideration
of One Hundred Dollars ($100.00) and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, St. George hereby
grants to Hutcherson the exclusive right of first refusal and option to
purchase the Property, together with all improvements, easements, and
appurtenances thereto, subject to the terms and conditions of this Agreement.
***
(b) Development Option. In the event St. George (i) does not receive
and close on a Development Loan on or before December 8, 2018, or (ii)
receives and closes on a Development Loan on or before December 8, 2018
with Marta Alder (“Alder”) failing to maintain a Majority Interest (defined
herein) in St. George upon closing of the Development Loan, then St. George
shall give written notice thereof to Hutcherson and Hutcherson shall have the
option (the “Development Option”) to purchase the Property. Hutcherson
shall have the right to exercise the Development Option from December 9,
2018 through June 9, 2019 (the “Option Expiration Date”), pursuant to the
terms and conditions of this Agreement. In the event Hutcherson exercises
the Development Option, the purchase price of the Property shall be the
Purchase Price. The Development Option shall be null and void and of no
further legal force and effect on the earlier of (i) the Option Expiration Date,
or (ii) the date St. George receives and closes on a Development Loan with
Alder maintaining a Majority Interest in St. George upon closing of the
Development Loan (if such closing occurs on or before December 8, 2018),
unless Hutcherson has previously exercised the Development Option
pursuant to the terms and conditions of this Agreement. The Development
Option shall survive payment in full of the Promissory Note and satisfaction
of all other obligations under the Loan Documents. For purposes of this
Agreement, “Development Loan” shall mean development debt, tax credits
or grant, and/or equity financing from a bank or banks (allowing for
syndication of financing), other lending institutions or private parties in an
amount sufficient to develop the Property into a hotel substantially following
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the plans set forth in Exhibit B attached to the Loan Agreement, which
financing, in the aggregate, shall close simultaneously….
In 2018, Alder determined that preserving the original façade was unfeasible and
that it would need to be demolished. Hutcherson learned of this, and in May 2018, his
attorney sent Alder a letter warning her that demolition of the façade without Hutcherson’s
consent would violate the deed of trust. The letter read as follows:
It has come to our attention that you have been exploring the possible
demolition of the St. George Hotel structure located on the Property. We
would like to remind you that any such action would be a violation of the
Deed of Trust and Security Agreement between St. George Holdings, LLC
and James D. Hutcherson dated June 3, 2017, and recorded June 21, 2017 in
Book 11081, Page 292 in the Register’s Office of Hamilton County,
Tennessee (the “Deed of Trust”), including but not limited to Paragraph 5 of
the Deed of Trust.
We suggest that a meeting be scheduled between you, Donnie Hutcherson
and your respective attorneys to discuss the terms of the Deed of Trust and
related loan documents and the expectations thereunder.
Please let us know when you and your attorney are available to meet
regarding the above.
Paragraph 5 of the deed of trust, referenced in Hutcherson’s letter as the provision
forbidding demolition without his consent, states:
Grantor shall maintain the Property and any improvements now
existing or which may be added in a good state of repair, and shall not permit
or commit waste. Grantor shall make such repairs and replacements
necessary to maintain the Property and the value thereof. Grantor shall not
cause or allow demolition, removal or alteration of the Property or any
improvements located thereon without prior written approval of Lender.
Grantor will complete in a workmanlike manner any building or
improvement which may constructed, altered or repaired and will pay when
due all claims for labor and material and will not permit any lien of
mechanics, materialmen or others to extend to the Property. Upon Grantor’s
breach or this covenant, Lender, may, at sole option, take possession of the
Property and take such steps and expend such sums as may be required to
complete any construction or repair on the Property, to maintain the Property,
or to discharge any liens. Any such expenditures shall he added to and
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included in the outstanding principal debt secured hereby. Such action by
Lender shall not constitute a waiver of any other right, remedy or option
hereunder.
Meanwhile, time passed, and SGH never obtained a development loan for any
version of the Hotel’s restoration. December 8, 2018 finally arrived. Despite Alder’s
efforts, SGH still had not obtained a development loan. Alder proposed an extension,
which Hutcherson refused. Alder also proposed that Hutcherson allow SGH to pay off the
loan and for Hutcherson to release his option rights. Hutcherson refused this, as well.
Hutcherson thereafter attempted to exercise his option to purchase the property. In January
2019, SGH sued Hutcherson in the Trial Court seeking declaratory judgment that he was
not entitled to exercise his option and instead was required to accept payment on the loan.
Hutcherson filed a counterclaim for breach of contract. The parties later cross-filed
motions for summary judgment. SGH raised a number of contractual defenses.
Among the evidence cited by SGH at the summary judgment stage in support of its
contention that it could not obtain a development loan was the affidavit of Alina V.
Mardesich, Senior VP of George Smith Partners in Los Angeles, California, a financing
company. Mardesich stated, in part, as follows:
3. Ms. Alder approached George Smith Partners about obtaining
financing and provided copies of all of documents regarding the existing loan
with James Hutcherson. I reviewed all of these documents.
4. I am aware that Mr. Hutcherson took the position that any attempt
to demolish the façade of the existing building would constitute a default
under the loan documents.
5. I am also aware that Ms. Alder had undertaken plans for the hotel
utilizing a duplicated façade. She had taken substantial steps necessary for
the development of the property, which created value in the property. I
understand that Mr. Hutcherson was unwilling to grant any extension for any
financing opportunities
6. Mr. Hutcherson’s assertion of an undefined right to approve or
reject development plans for the property and assertion that demolition of the
façade would constitute a default, along with the recorded rights against the
property, precluded St. George from obtaining the necessary financing to
repay the existing loan due to Hutchinson and obtain development financing
for the property.
7. Based on my extensive experience in commercial real estate
lending, 1 can state that no banking institution or private financing firm
would loan funds to St. George Holdings, unless the property was delivered
free and clear to the new lender and that such condition would not be
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possible, regardless of a timely loan application, with the existing
encumbrances in place as represented by the options of Mr. Hutcherson and
his assertion of a default. No clear lender’s title policy could have been
issued due to the encumbrances, and no lender would have closed a loan
secondary or subject to such options or rights by Mr. Hutcherson.
In September 2019, the Trial Court entered an order granting Hutcherson’s motion
for summary judgment. SGH’s motion for summary judgment was denied. In granting
Hutcherson’s motion, the Trial Court stated, in part:
It is important to note that, during the entire term of the loan, no loan
application was ever filed by Ms. Adler or St. George for development of the
project. In fact, Ms. Adler testified concerning what had transpired by
December 8, 2018 (the maturity date of the Development Option) at page
241 in her deposition taken May 9, 2019.
Q. Okay. As of December 2018, had you applied to
obtain a franchise with any other leading hotels or obtain a
flag?
A. No.
Q. As of December 2018, had you hired anyone with
motel experience to manage the hotel?
A. No.
Q. Okay. As of December 2018, had you submitted a
formal loan application with any financial institution to get a
loan for the development of the property?
A. No. We weren’t ready. We were still under the new
-- under the new project.
***
There is no question that the parties understood that the development option
was an important part of the consideration for the loan. Nevertheless, and as
the pointed out [sic] in the new affidavit at paragraph 11, St. George did not
secure final pricing to submit for purposes of a development loan until
October of 2018. Ms. Adler further states at paragraph 11 that “... I could
not get investors on board because of their concerns with the recorded
options held by Defendant.” Clearly, the options to which she refers included
the Development Option. While paragraph 11 goes on to state her personal
concern over a contention in a May 2018 letter (“I was concerned about the
contention in the May 2018 letter...”) there is no evidence before this Court
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that the May 2018 letter was anything more than a restatement of the rights
already existing pursuant to the contract documents, or in any way affected
Plaintiff’s ability to obtain a development loan. In fact, a part of Plaintiff’s
supplemental filing included an email from its legal counsel, Scott Maucere,
which contradicts Ms. Adler’s worry.1 Exhibit B to the Supplemental
Affidavit of Marta Adler contains an October 25, 2018 email from Scott
Maucere of Maucere Law Group. In this email, attorney Maucere lays out
his plan to “... a clear path to a fee simple acquisition.” The plan at paragraph
3 provides that “Prior to 12/8 RHP closes and delivers to STG a letter of
credit or other agreement (a) representing an obligation to finance hotel (b)
funds dispersal contingent upon criteria being met (plans approved,
drawings, permits, etc...” Then at paragraph 5 of the email, Maucere writes
that “Upon presentations to Hutcherson prior to the closing on the financial
commitment in 3 above, Hutcherson will be compelled to release the ROFR
and Option to purchase...”. In other words, the May letter in no way altered
the contract documents or the position of the Plaintiff in obtaining financing.
So long as the development funds were secured and Marta was 51% owner,
Hutcherson would “be compelled to release” the Development Option.
***
Plaintiff has advanced several defenses to the contract documents.
Plaintiff argues anticipatory breach, equitable estoppel, unconscionability,
failure of consideration/lack of mutuality, and lack of mutual assent. The
facts necessary for any of these defenses is simply not present. A contract
was negotiated between sophisticated parties. Moreover, these parties were
represented by attorneys as well as other advisers in negotiating the deal.
Specifically, the development option and its significance in this loan
transaction was discussed numerous times. Plaintiff, with full knowledge of
the provision and its pitfalls, entered the agreement. The contract is not
unconscionable. There was no repudiation or anticipatory breach attributable
to the Defendant. There were no false representations or concealment of
material facts calculated to convey the impression to Plaintiff by Defendant
that the facts are otherwise than those which Defendant attempts to assert. In
short, there are no disputed issues of material fact necessary to resolve the
motion for summary judgment. The development option was valid, entered
knowingly, and supported by adequate considerations. Summary Judgment
is therefore appropriate.
1
A worry about the impact a letter may possibly have in this instance is no evidence that the letter was an
anticipatory breach, a repudiation, a proclamation of a loan default, or any other factual hindrance to a loan.
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(Footnote in original).
Hutcherson filed a motion to alter or amend seeking clarification that all of SGH’s
claims were dismissed with prejudice and his counterclaim was not dismissed, while SGH
filed a motion for interlocutory appeal. In October 2019, the Trial Court entered an order
disposing of these motions. Hutcherson’s motion was granted and SGH’s was denied.
SGH filed a motion to stay in the Trial Court and an application for extraordinary appeal
with this Court, both of which were denied. In its October 2019 order, the Trial Court also
determined that a jury waiver contained in the deed of trust applied to the entire transaction.
A bench trial was held on Hutcherson’s counterclaim. In December 2019, the Trial
Court entered its detailed memorandum opinion finding in favor of Hutcherson and
granting specific performance. As relevant, the Trial Court concluded as follows:
The Court has already analyzed the parties’ transaction and found it
to be free from unconscionability and every other potential defect that St.
George has asserted. The contracts that the parties signed are also “clear”
and “definite” in their terms, being the product of extensive negotiations
among the parties, several advisors, and the attorneys for each of the parties.
And, of course, the parties’ contract also involves unique, one-of-a-kind real
estate—the remaining structure of a historic hotel and the land upon which it
sits.
Likewise, St. George’s breach of the parties’ contracts—the loan, the
promissory note, and the option agreement—is indisputable. St. George did
not procure a development loan for its project in the 18 months it had to do
so.
The 18 months deadline is critical. With multiple advisors as well as
the representation of an attorney — it was St. George who ultimately set the
time needed to procure the development. While it is true that the initial time
deadline to trigger the option was set at 12 months by Mr. Hutcherson, it was
the St. George team who only asked for an additional six months noting that
“12 months is potentially cutting it really close. I suggest 18 months”
followed by the reply “good points Scott, especially no. 2. I would like to
think we don’t need 18 months but the time to ask for it is now and not then.”
(emphasis added) It is worthy to note that, Hutcherson did not “counter” the
request for additional time.
The Option Agreement gave Hutcherson the right to purchase the
property if that closing on the development loan did not occur, and it is
undisputed that St. George did not close on a development loan. Hutcherson
indeed tried to exercise that right. St. George has refused to convey the hotel
and is therefore in breach.
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***
The Tennessee Court of Appeals has instructed that “equity will decree
specific performance of a contract for sale of land, as a matter of course,” in
cases like this.” But St. George argues that it will experience undue hardship
if the Court awards specific performance and that damages are an adequate
remedy for Hutcherson. The Court does not question that a hardship arises
with an award of specific performance. Contracts may often produce harsh
results — and the Court does not relish issuing an opinion that crushes the
dreams of a kind and quite likable Marta Alder. But the question before the
Court is not whether the result is harsh, but whether specific performance is
the proper remedy under all of the facts of the case. And while the Court
may have discretion in matters of specific performance, its discretion does
not operate in a vacuum outside of general legal guidelines.
James D. Hutcherson had no interest in being an investor in the St.
George project. He had no interest in granting a loan for the sole purpose of
earning interest. To the contrary: his only interest in making the loan was to
“...allow [him] the opportunity to develop the property...” in the event St.
George did not. He negotiated for that option. He paid counsel to represent
him in that option. He granted 50% again the term of the loan for that option.
Finally, he risked a $700,000 loan for that option. The property is unique. It
is an almost 100 year old structure. It is the site of the historic St. George
Hotel. It is set almost directly across from the historic Chattanooga Choo
Choo. While the result will certainly be harsh for Ms. Alder, it is simply a
failed business venture for the plaintiff/counter-defendant, St. George
Holdings, LLC. While the Court, if it could exercise discretion outside of
general legal guidelines, may well prefer the beauty of the proposed hotel to
a historically accurate restoration project resulting in beautiful office space,
that is not a remedy available to the Court — and the Court is constrained to
follow the law.
***
When granting Hutcherson’s Motion for Summary Judgment, the
Court acknowledged the parties’ equal bargaining positions and full, mutual
knowledge of the terms of their transaction:
[This] contract was negotiated between sophisticated parties.
Moreover, these parties were represented by attorneys as well
as other advisers in negotiating the deal. Specifically, the
development option and its significance in this loan transaction
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was discussed numerous times. [St. George], with full
knowledge of the provision and its pitfalls, entered the
agreement.
The award of specific performance is consistent with this holding and
the evidence presented at the trial on Hutcherson’s Counterclaim. To deny
Hutcherson this remedy would deprive him of the benefit of his bargain,
particularly since the payment of interest and fees was not sufficient
consideration for him to make this loan. St. George was not able to obtain a
development loan but now seeks to avoid the very consequences and pitfalls
it agreed to on the front end.
The Court hereby grants the remedy of specific performance and
Orders St. George to execute a deed transferring the property at issue to
Hutcherson.
(Footnotes omitted). SGH timely appealed to this Court.
Discussion
Although not stated exactly as such, SGH raises the following issues on appeal: 1)
whether the Trial Court erred in granting summary judgment to Hutcherson with respect to
SGH’s claims of lack of meeting of the minds and consideration, unconscionability,
anticipatory breach, equitable estoppel, and impossibility of performance or frustration of
purpose; 2) whether the Trial Court erred in determining that SGH waived its right to a
jury trial concerning the option agreement because of a jury waiver contained in the deed
of trust; and, 3) whether the Trial Court erred in granting Hutcherson, without the benefit
of a jury, specific performance for breach of the option agreement rather than awarding
him damages.
We review herein both a trial’s results (as to Hutcherson’s claims) and a grant of
summary judgment (as to SGH’s claims). With respect to the former, 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).
Regarding the standard of review on motions for summary judgment, our Supreme
Court has instructed:
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Summary judgment is appropriate when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.” Tenn.
R. Civ. P. 56.04. We review a trial court’s ruling on a motion for summary
judgment de novo, without a presumption of correctness. Bain v. Wells, 936
S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist Healthcare–
Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing so, we make a
fresh determination of whether the requirements of Rule 56 of the Tennessee
Rules of Civil Procedure have been satisfied. Estate of Brown, 402 S.W.3d
193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev. Corp., 387 S.W.3d
453, 471 (Tenn. 2012)).
***
[I]n Tennessee, as in the federal system, when the moving party does not bear
the burden of proof at trial, the moving party may satisfy its burden of
production either (1) by affirmatively negating an essential element of the
nonmoving party’s claim or (2) by demonstrating that the nonmoving party’s
evidence at the summary judgment stage is insufficient to establish the
nonmoving party’s claim or defense. We reiterate that a moving party
seeking summary judgment by attacking the nonmoving party’s evidence
must do more than make a conclusory assertion that summary judgment is
appropriate on this basis. Rather, Tennessee Rule 56.03 requires the moving
party to support its motion with “a separate concise statement of material
facts as to which the moving party contends there is no genuine issue for
trial.” Tenn. R. Civ. P. 56.03. “Each fact is to be set forth in a separate,
numbered paragraph and supported by a specific citation to the record.” Id.When such a motion is made, any party opposing summary judgment must
file a response to each fact set forth by the movant in the manner provided in
Tennessee Rule 56.03. “[W]hen a motion for summary judgment is made
[and] . . . supported as provided in [Tennessee Rule 56],” to survive summary
judgment, the nonmoving party “may not rest upon the mere allegations or
denials of [its] pleading,” but must respond, and by affidavits or one of the
other means provided in Tennessee Rule 56, “set forth specific facts” at the
summary judgment stage “showing that there is a genuine issue for trial.”
Tenn. R. Civ. P. 56.06. The nonmoving party “must do more than simply
show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. 1348. The
nonmoving party must demonstrate the existence of specific facts in the
record which could lead a rational trier of fact to find in favor of the
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nonmoving party. If a summary judgment motion is filed before adequate
time for discovery has been provided, the nonmoving party may seek a
continuance to engage in additional discovery as provided in Tennessee Rule
56.07. However, after adequate time for discovery has been provided,
summary judgment should be granted if the nonmoving party’s evidence at
the summary judgment stage is insufficient to establish the existence of a
genuine issue of material fact for trial. Tenn. R. Civ. P. 56.04, 56.06. The
focus is on the evidence the nonmoving party comes forward with at the
summary judgment stage, not on hypothetical evidence that theoretically
could be adduced, despite the passage of discovery deadlines, at a future trial.
Rye v. Women’s Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.
2015).
We first address whether the Trial Court erred in granting summary judgment to
Hutcherson with respect to SGH’s claims of lack of meeting of the minds and
consideration, unconscionability, anticipatory breach, equitable estoppel, and impossibility
of performance or frustration of purpose. SGH argues, among other things, that
Hutcherson’s May 2018 letter asserting that any demolition of the façade would constitute
a default despite an independent evaluation reflecting that the project could not proceed
using the original façade thwarted its effort to obtain a development loan. Our Supreme
Court has instructed as follows on how courts are to interpret contracts:
When we interpret a contract, our role is to ascertain the intention of
the parties. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). The
intention of the parties is based on the ordinary meaning of the language
contained within the four corners of the contract. Kiser v. Wolfe, 353 S.W.3d
741, 747 (Tenn. 2011); see Planters Gin Co. v. Fed. Compress & Warehouse
Co., 78 S.W.3d 885, 889-90 (Tenn. 2002). The interpretation of a contract
is a matter of law, which we review de novo with no presumption of
correctness. Barnes v. Barnes, 193 S.W.3d 495, 498 (Tenn. 2006).
***
It is a bedrock principle of contract law that an individual who signs
a contract is presumed to have read the contract and is bound by its contents.
See Giles v. Allstate Ins. Co., 871 S.W.2d 154, 157 (Tenn. Ct. App. 1993);
see also Beasley v. Metro. Life Ins. Co., 190 Tenn. 227, 229 S.W.2d 146, 148
(1950). To hold otherwise would make contracts not “ ‘worth the paper on
which they are written.’ ” Beasley, 229 S.W.2d at 148 (quoting Upton v.
Tribilcock, 91 U.S. 45, 50, 23 L.Ed. 203 (1875)).
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84 Lumber Co. v. Smith, 356 S.W.3d 380, 383 (Tenn. 2011). It is not the role of courts 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)).
SGH argues that it is not merely dissatisfied, but rather has shown a number of valid
contractual defenses, which we now review. Regarding the necessity of a “meeting of the
minds” and sufficient consideration in the formation of a contract, our Supreme Court has
stated:
A contract “must result from a meeting of the minds of the parties in
mutual assent to the terms, must be based upon a sufficient consideration,
free from fraud or undue influence, not against public policy and sufficiently
definite to be enforced.” Doe v. HCA Health Servs. of Tenn., Inc., 46 S.W.3d
191, 196 (Tenn. 2001) (citations omitted). In determining mutuality of
assent, courts must apply an objective standard based upon the parties’
manifestations. T.R. Mills Contractors, Inc. v. WRH Enters., LLC, 93
S.W.3d 861, 866 (Tenn. Ct. App. 2002).
Staubach Retail Servs.-Se., LLC v. H.G. Hill Realty Co., 160 S.W.3d 521, 524 (Tenn.
2005). With regard to unconscionability, this Court has stated:
A contract will be found to be unconscionable only when the inequality of
the bargain is so manifest as to shock the judgment of a person of common
sense, and where the terms are so oppressive that no reasonable person would
make them on one hand, and no honest and fair person would accept them
on the other.
Philpot v. Tenn. Health Mgmt., Inc., 279 S.W.3d 573, 579 (Tenn. Ct. App. 2007) (citations
and quotation marks omitted). SGH also invokes anticipatory breach. “In order to serve
as an anticipatory breach of contract or repudiation, the words and conduct of the
contracting party must amount to a total and unqualified refusal to perform the contract.”
Wright v. Wright, 832 S.W.2d 542, 545 (Tenn. Ct. App. 1991) (citing Ky. Home Mut. Life
Ins. Co. v. Rogers, 196 Tenn. 641, 270 S.W.2d 188 (1954); Brady v. Oliver, 125 Tenn. 595,
147 S.W. 1135 (1911)). Continuing with its defenses, SGH raises the doctrine of equitable
estoppel. The elements of equitable estoppel were set out by this Court in Consumer Credit
Union v. Hite, 801 S.W.2d 822 (Tenn. Ct. App. 1990):
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The essential elements of an equitable estoppel as related to the party
estopped are said to be (1) Conduct which amounts to a false representation
or concealment of material facts, or, at least, which is calculated to convey
the impression that the facts are otherwise than, and inconsistent with, those
which the party subsequently attempts to assert; (2) Intention, or at least
expectation that such conduct shall be acted upon by the other party; (3)
Knowledge, actual or constructive of the real facts. As related to the party
claiming the estoppel they are (1) Lack of knowledge and of the means of
knowledge of the truth as to the facts in question; (2) Reliance upon the
conduct of the party estopped; and (3) Action based thereon of such a
character as to change his position prejudicially, 19 Am.Jur.Estoppel Sec. 42,
pp. 642-643.
Id. at 825 (quoting Callahan v. Town of Middleton, 292 S.W.2d 501, 508 (Tenn. Ct. App.
1954)). Finally, SGH invokes impossibility. “[F]ailure to perform a contract is excused if
performance becomes impossible due to a cause not attributable to the non-performing
party and the impossibility is ‘not among the probable contingencies which a [person] of
ordinary prudence should have foreseen and provided for.’” Groner v. On-Site Grading,
Inc., No. E1999-00219-COA-R3-CV, 2000 WL 502843, at *4 (Tenn. Ct. App. Apr. 28,
2000), no appl. perm. appeal filed (quoting Wilson v. Page, 325 S.W.2d 294, 298 (Tenn.
Ct. App. 1958) (italics omitted)).
SGH’s contention that the option agreement lacked the necessary meeting of the
minds or consideration is unsupported by the record. The parties’ transaction consisted of
four documents all executed on the same day toward the same end, pursuant to which
Hutcherson was required to lend SGH $700,000 and SGH was required to grant Hutcherson
an option agreement and repay him with interest after 18 months. There is no suggestion
let alone any genuine dispute that SGH, a sophisticated party that was represented by
counsel, was misled or ignorant of the terms of any provision in their various signed
documents. Together, these facts reflect mutual assent, consideration, and a meeting of the
minds. In other words, this was an agreement entered into voluntarily that obligated both
sides. We do not find the option agreement unconscionable, either, as its terms do not
shock the judgment of a person of common sense or contain terms so oppressive that no
reasonable person would make them on one hand and no honest and fair person would
accept them on the other. Rather, the development option at issue reflects the product of
negotiations by sophisticated, represented parties. There is nothing inherently shocking or
oppressive about tying an option to purchase to the other party obtaining a development
loan. With respect to anticipatory breach, the record contains no evidence that Hutcherson
ever signaled an unqualified refusal to perform. Hutcherson’s May 2018 letter to Alder
correctly pointed out that a provision in the deed of trust forbade demolition of the property
without his consent. The letter was not an unqualified manifestation of an intent to breach
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the parties’ contract; it was an admonition to adhere to it. SGH’s invocation of the doctrine
of equitable estoppel is similarly misplaced, as SGH fails to identify a misrepresentation
made by Hutcherson upon which it relied. Lastly, SGH’s assertion of impossibility or
frustration of purpose is undermined by the fact that failure to obtain a development loan
was envisioned as a possible outcome by the very terms of the option agreement itself; it
was an entirely foreseen contingency that came to pass. We find no genuine issue as to
any material fact that would necessitate a trial on these claims. We affirm the Trial Court
in its granting summary judgment to Hutcherson with respect to SGH’s claims.
We next address whether the Trial Court erred in determining that SGH waived its
right to a jury trial concerning the option agreement because of a jury waiver contained in
the deed of trust. The separately-initialed provision at issue in the deed of trust reads as
follows:
34. WAIVER OF JURY TRIAL
EACH AND EVERY PARTY HERETO EXPRESSLY WAIVES
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
AGAINST THE OTHER ON ANY MATTER WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
TRANSACTION, OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY
BE DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH,
OR ARISING FROM ANY LENDERING RELATIONSHIP
BETWEEN THE PARTIES HERETO.
(All capital letters and bold text in original). However, to show that this provision does
not apply to the option agreement, SGH points to Section 10(h) of the option agreement,
which states: “Loan Documents. The rights and obligations of the parties under this
Agreement are independent of the rights and obligations of the parties under the Loan
Documents, and the provisions of this Agreement do not affect the rights and obligations
of the parties under the Loan Documents.” SGH also points to a mandatory arbitration
clause in the option agreement, which neither party used. SGH argues that there is no
reason to have a jury waiver in the deed of trust applicable to the option agreement if
disputes under the option agreement are to be resolved by means of arbitration.
Courts have held that, to be enforceable, a jury waiver must be “knowing, voluntary,
and intelligent.” Poole v. Union Planters Bank, N.A., 337 S.W.3d 771, 783 (Tenn. Ct. App.
2010). In Poole, the court found a valid jury waiver where three separate contracts
contained jury waiver provisions and two of the contracts were only two pages long. Id. at
785. The Poole court stated: “Mr. Poole had a duty under the law and the contracts to read
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and understand their provisions, which included three separate jury-waivers. Under the
circumstances, we find sufficient reason to impute knowledge of the jury-waiver provisions
at issue to Mr. Poole, which he has not disputed.” Id. However, in another case, this Court
declined to find that an arbitration provision extended across a transaction where the
arbitration provision was not contained in or incorporated into the document at issue:
There is no dispute that the Unit Purchase Agreements are themselves
devoid of any specific arbitration provisions. Yet, the trial court concluded
that an agreement to arbitrate had been incorporated into those agreements
by virtue of a provision that provided as follows: “By purchasing the herein
contemplated Units, Purchaser agrees to be subject to and bound by the
terms, conditions, provisions and limitations of this Agreement, as well as
the Operating Agreement of D1 Sports Training of Baltimore, LLC.”…
[H]owever, we are of the opinion that there is insufficient language to
incorporate the arbitration provision of the Operating Agreement into the
Unit Purchase Agreements. Again, the purchase agreements do not provide
that the terms of the Operating Agreement are incorporated into them, nor do
the purchase agreements specify that the purchasers are bound by additional
terms as if set forth therein. The purchase agreements simply include the
obligation to be bound by a separate agreement, and there is insufficient
language included to reach the conclusion that the Operating Agreement is
to be considered a part of the purchase agreements. In other words, although
the signatory purchaser is deemed to be “subject to” and “bound by” the
Operating Agreement by dint of the purchaser’s decision and agreement to
buy membership interests in D1 Baltimore, the purchase agreements do not
say that they, the purchase agreements, are actually subject to such additional
terms.
Melo Enterprises, LLC v. D1 Sports Holdings, LLC, No. M2017-02294-COA-R3-CV,
2019 WL 338941, at *4-5 (Tenn. Ct. App. Jan. 25, 2019), no appl. perm. appeal filed
(footnotes omitted, emphasis in original).
SGH contends that the option agreement represented a separate, independent
transaction from the other documents, and that the jury waiver in the deed of trust had no
effect on the option agreement. According to SGH, the deed of trust related only to the
separate loan of money secured by interests in property. However, the language in the jury
waiver is quite broad and covers “any matter whatsoever arising out of or in any way
connected with this transaction, or under any amendment, instrument, document or
agreement delivered (or which may be delivered in the future) in connection herewith, or
arising from any lendering relationship between the parties hereto.” While “transaction”
is not defined, Hutcherson and SGH executed four documents between them on the same
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date, June 8, 2017. Each document in this quartet constitutes part of the same overall
transaction: Hutcherson’s loan to SGH of $700,000. The option agreement component of
this transaction was like the other three documents—a product of negotiations between
sophisticated parties represented by counsel. The jury waiver language contained in the
deed of trust is extremely broad and includes any documents “in connection herewith.”
That includes the option agreement, which clearly is connected as a document “arising
from any lendering relationship between” Hutcherson and SGH. That the option agreement
contains an arbitration provision does not negate this sweeping, unequivocal language of
the jury waiver, which was initialed separately. SGH’s waiver of a right to jury was made
knowingly, voluntarily, and intelligently. We affirm the Trial Court in its determination
that SGH waived its right to a jury trial.
The third and final issue we address is whether the Trial Court erred in granting
Hutcherson, without the benefit of a jury, specific performance for breach of the option
agreement rather than awarding him damages. Regarding our standard of review
concerning a trial court’s grant of specific performance and the preference under Tennessee
law toward application of that remedy to matters of real property generally, this Court has
stated:
The question of whether a contract should be specifically performed depends
upon the facts of each case, and is a matter addressed to the sound discretion
of the trial court. Hillard v. Franklin, 41 S.W.3d 106, 111 (Tenn. Ct. App.
2000). Specific performance is only appropriate where the contract is clear,
definite, and free from any suspicion of fraud or unfairness. Shuptrine v.
Quinn, 597 S.W.2d 728, 730 (Tenn. 1979).
However, our courts have long recognized the preference for specific
performance when dealing with contracts for the conveyance of real
property, “because real property is unique, and more often than not, an award
of damages is simply not an adequate remedy.” GRW Enterprises, Inc., 797
S.W.2d at 614; see also Shuptrine, 597 S.W.2d at 730; McGaugh v.
Galbreath, 996 S.W.2d 186, 191 (Tenn. Ct. App. 1998). Because of the
unique nature of real property, this court has given its approval to the
proposition that “equity will decree specific performance of a contract for
sale of land, as a matter of course, in the absence of any valid objection,
where the contract is valid.” Brister v. Brubaker’s Estate, 336 S.W.2d 326,
332 (Tenn. Ct. App. 1960).
Smith v. Smith, No. M2004-00257-COA-R3-CV, 2005 WL 3132370, at *10 (Tenn. Ct.
App. Nov. 22, 2005), no appl. perm. appeal filed. [R]eviewing courts will set aside a
discretionary decision only when the court that made the decision applied incorrect legal
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standards, reached an illogical conclusion, based its decision on a clearly erroneous
assessment of the evidence, or employs reasoning that causes an injustice to the
complaining party.” Konvalinka v. Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d
346, 358 (Tenn. 2008) (citations omitted). The applicable standard is thus quite deferential.
SGH contends that the Trial Court’s grant of specific performance to Hutcherson
was unjust and unduly harsh because of the significant time and funds it put into its effort
to restore the Hotel. SGH states that Hutcherson stands to reap a windfall from specific
performance, giving him the benefit of SGH and Alder’s acquisition of development plans
and designs, environmental surveys, rezoning, investments, and other fruits of their efforts.
SGH argues further that the Hotel is not “unique” to Hutcherson, as he has mentioned
possibly converting it into an office building. SGH states that in contrast, the Hotel was
Alder’s dream project. SGH also states that the option agreement itself did not contemplate
specific performance.
The Trial Court, in its discretion, determined that granting specific performance to
Hutcherson was an appropriate remedy given that failure to do so would “deprive him of
the benefit of his bargain.” The Trial Court reasoned further that “St. George was not able
to obtain a development loan but now seeks to avoid the very consequences and pitfalls it
agreed to on the front end.” The Trial Court correctly applied Tennessee law reflecting
that specific performance is favored in cases involving real property. The Trial Court
further correctly stated that the contract “was negotiated between sophisticated parties,”
parties that were “represented by attorneys as well as other advisers in negotiating the
deal.” In its findings regarding specific performance, the Trial Court did not apply an
incorrect legal standard; did not reach an illogical conclusion; and did not base its decision
on a clearly erroneous assessment of the evidence. Notwithstanding SGH’s arguments,
we do not find that the Trial Court employed reasoning that caused an injustice to SGH
either. SGH, represented by counsel, was a sophisticated party to a business transaction
and knew the risks it was undertaking. One such risk was that it might fail to obtain a
development loan, which would result in Hutcherson having the option to purchase the
Hotel. That risk, which was envisioned by and built into the contract itself, became reality.
With all due respect to the significant efforts of SGH, and Alder, in particular, specific
performance is not unduly harsh; this was simply a business deal gone badly for SGH, and
now Hutcherson is entitled to the benefit of his bargain—namely, ownership of the Hotel,
SGH having failed to obtain a development loan by December 8, 2018. Money damages
would be an inferior substitute for what Hutcherson actually bargained for. We find no
abuse of discretion in the Trial Court’s decision to grant specific performance to
Hutcherson. We affirm the judgment of the Trial Court in its entirety.
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Conclusion
The judgment of the Trial Court is affirmed, and this cause is remanded to the Trial
Court for collection of the costs below. The costs on appeal are assessed against the
Appellant, St. George Holdings, LLC, and its surety, of any.
______________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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