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Hometown Folks, LLC v. S&B Wilson

April 3, 2008

HOMETOWN FOLKS, LLC, PLAINTIFF,
v.
S&B WILSON, INC., WILLIAM L. WILSON, AND SALLY B. WILSON, DEFENDANTS.



The opinion of the court was delivered by: Judge Mattice

MEMORANDUM AND ORDER

Plaintiff Hometown Folks, LLC asserted claims against Defendants S&B Wilson, Inc., William L. Wilson, and Sally B. Wilson for breach of contract, breach of the duty of good faith and fair dealing, specific performance, and indemnification. (Court Doc. 97.) The Court determined that the breach of contract, the breach of the duty of good faith and fair dealing, and the indemnification claims, except for those portions related to attorney's fees and expenses associated with the instant litigation, would be tried to a jury. The issues of specific performance, attorney's fees incurred during the underlying transaction, and expenses incurred by Plaintiff related to the instant litigation were reserved for the Court's determination after the conclusion of the jury trial.

On December 11, 2007, the jury returned a verdict. After the verdict, Plaintiff renewed its request for specific performance, attorney's fees, and expenses. The Court will now address these issues.

I. STANDARDS OF REVIEW

A. Specific Performance

Specific performance is an equitable remedy. Whether specific performance should be awarded is a determination that lies within the discretion of the trial court and depends on the facts of each individual case. Shruptrine v. Quinn, 597 S.W.2d 728, 730 (Tenn. 1979). No plaintiff is entitled to specific performance as a matter of right. Leathers v. Deloach, 204 S.W. 633, 635 (Tenn. 1918).

Generally, a court will not award specific performance unless an award of damages would be an inadequate remedy. Shruptrine, 597 S.W.2d at 730. Where damages are practicable and would be adequate, the Court should not compel specific performance but should leave the plaintiff to its legal remedies. Lane v. Associated Housing Developers, LLP, 767 S.W.2d 640, 642 (Tenn. Ct. App. 1988) (citing H. Gibson, Gibson's Suits in Chancery § 402 (W. Inman 6th ed. 1982)). Because real property and franchises are both unique, damages are usually inadequate and such contracts are generally eligible for specific performance. See, e.g., McGaugh v. Galbreath, 996 S.W.2d 186, 191 (Tenn. Ct. App. 1998).

B. Attorney's Fees

"Tennessee follows the 'American Rule' that, in the absence of contract, statute or recognized ground of equity, attorney's fees are not recoverable from the unsuccessful party in a lawsuit." State ex rel. Orr v. Thomas, 585 S.W.2d 606, 607 (Tenn. 1979). However, when a provision in the contract provides for attorney's fees in the event litigation arises, the prevailing party is entitled to enforcement of the contract pursuant to its terms.

Wilson Mgmt. Co. v. Star Distrib. Co., 745 S.W.2d 336, 338 (Tenn. 1985). "When the contract provides that a prevailing party is entitled to recover its attorney's fees for enforcing the contract, the trial court has no discretion regarding whether to award attorney's fees or not." Seals v. Life Investors Ins. Co. of America, 2003 WL 23093844, *4 (Tenn. Ct. App. Dec. 30, 2003) (internal quote omitted). However, the trial court does have discretion with regard to the amount of the attorney's fees award. Id.

II. FACTS

On October 4, 2005, the parties entered into a Purchase and Sale Agreement ("Agreement") whereby Plaintiff would purchase Defendants' eleven Burger King restaurants. (Court Doc. No. 127-6.) On March 21, 2006, Defendants terminated the Agreement pursuant to Sections 9.1(d) and 9.1(g) of the Agreement.*fn1 (Court Doc. No. 127-19.) Section 9.1 states: This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: ...

(d) By Seller if the Closing shall not have occurred on or before the Outside Date; provided that Seller shall not be entitled to terminate this Agreement pursuant to this clause if the failure of Seller to fulfill any of its obligations under this Agreement shall have been the reason that the Closing shall not have occurred on or before said date . . . (Court Doc. No. 127-6.) ...

(g) By Seller if Burger King requires in excess of $100,000 of remodeling and repair expenditures in order to provide the Burger King Consent.

(Court Doc. 127-6 at 33.)

Following Defendants' termination of the Agreement, Plaintiff brought the instant lawsuit alleging breach of contract, breach of the duty of good faith and fair dealing, and requesting specific performance and indemnification. (Court Doc. 1.) On summary judgment, the Court ruled that portions of the Agreement were ambiguous and that a jury would need to determine the parties' intent with regard to the meaning of the disputed provisions. (Court Doc. 171.)

The Court held a twelve day jury trial. Much of the evidence at trial related to the parties' intent with regard to the meaning of the disputed contract terms, particularly Sections 9.1(d) and 9.1(g). In support of its claim that Defendants breached their duty of good faith and fair dealing, Plaintiff also presented evidence showing that Defendants were less than diligent in carrying out their responsibilities pursuant to the Agreement.

The jury returned a verdict on a special verdict form provided by the Court. (Court Doc. 241.) As to Section 9.1(d), the jury found, as Defendants had advocated, that the "Outside Date" had passed when Defendants terminated the Agreement. (Court Doc. 241 at 1.) It also found that the reason that the transaction had not closed by the Outside Date was not due to Defendants' failure to fulfill any of their obligations under the Agreement. (Id. at 2.) The jury further found, however, that Defendants should be estopped from terminating the Agreement pursuant to Section 9.1(d). (Id. at 3.)

As to Section 9.1(g), the jury found, as Defendants had advocated, that Burger King required more than $100,000 in repair and maintenance expenditures in order to grant its consent to the transaction. (Id. at 4.) The jury also found that Defendants should not be estopped from terminating the contract pursuant to Section 9.1(g). (Id. at 5.) By operation of the terms of the Agreement, the jury's findings as to Section 9.1(g) necessarily mean that Defendants properly exercised their right to terminate the Agreement.

As to the duty of good faith and fair dealing, the verdict form instructed the jury that: Because you have found that Defendants could properly terminate the contract under one of the termination provisions, by law, Defendants' termination of the Agreement on March 21, 2006 was not a breach of the duty of good faith and fair dealing. However, actions leading up to the termination of the Agreement or course of conduct in carrying out the terms of the Agreement could be a breach of the duty of good faith and fair dealing. (Id.) The jury found that Defendants had violated the duty of good faith and fair dealing such that it was a breach of contract. (Id. at 6.) Thus, the jury explicitly found that some action, or pattern of actions, by the Defendants prior to their termination of the Agreement violated their duty of good faith and fair dealing.

The jury awarded Plaintiff $190,907.27 for Defendants' breach of the duty of good faith and fair dealing. During trial, Plaintiff submitted an exhibit entitled "Summary of Fees and Expenses in Connection with the Transaction (other than expenses of counsel)" which stated that Plaintiff had incurred $190,907.27 in connection with the transaction. (Pl's. Trial Ex. 39.) The jury, therefore, effectively restored the Plaintiff to the same ...


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