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Whitfield v. Schroeder

Court of Appeals of Tennessee, Nashville

May 17, 2017


          Assigned on Briefs April 3, 2017

         Direct Appeal from the Circuit Court for Sumner County No. 83CC1-2015-CV-485 Joe Thompson, Judge.

         This appeal involves an option to purchase real estate. After a bench trial, the circuit court awarded the tenant a judgment for $12, 000. Because the trial court did not make sufficient findings of fact and conclusions of law to enable meaningful appellate review, we vacate the order and remand for further proceedings.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated and Remanded.

          Charles R. Bobbitt, Jr., Hendersonville, Tennessee, for the appellant, Holly Thrasher Schroeder. Joseph T. Zanger, White House, Tennessee, for the appellee, Debeora D. Whitfield.

          Brandon O. Gibson, J., delivered the opinion of the court, in which Richard H. Dinkins, and Thomas R. Frierson, II, JJ., joined.



         I. Facts & Procedural History

         Holly Thrasher Schroeder ("Landlord") owned approximately three acres of real property in Sumner County containing a residence, three outbuildings, and a pond. She rented the property to various tenants over the years, and in 2014, she advertised that it was available for rent with a lease-purchase agreement. Debeora Whitfield, Michael Whitfield, and Benjamin Martin (collectively, "Tenants")[1] inquired about the property. After visiting the property, Tenants met with Landlord and her husband at a restaurant and executed a two-year lease and an "Option to Purchase Real Estate." The lease occupancy term and the option period were both to commence on the date of signing, March 11, 2014, and end on March 31, 2016.[2]

         The Option to Purchase required a "Non-Refundable payment" of $15, 000 in exchange for the exclusive and irrevocable option to purchase the "real estate and other property located in Sumner County, Tennessee, which real estate is commonly known as 108 Brooks Lane, Portland, TN . . . and including all improvements thereto either permanently installed or which belong to or are used in connection with the real estate, wherever located[.]" An additional payment of $15, 000 was due one year into the option period, on April 1, 2015. In other words, $15, 000 was to be paid in "each and every year the option-to-purchase [was] in effect." At the date of closing, Landlord was to deliver a general warranty deed to the real estate and possession of it. The Option to Purchase provided that

If Purchaser does not exercise this option for any reason, including any default as described below, then the NON-Refundable Option Consideration shall be retained by Vendor as consideration for the granting of the option to purchase, it being understood by Purchaser that the Option Period, to purchase the Real Estate, and is, in all cases in which Purchaser does not exercise the option to purchase, no matter what the circumstances or causes[, ] NON-Refundable.

         The purchase price of the property was set at $199, 900. Tenants would receive "non-refundable credits" of $200 toward the purchase price for each monthly lease payment that was made on time, but the credits would be forfeited as "non-refundable Option Consideration" if not used for the purchase of the property. Tenants paid the $15, 000 option payment for the first year on the date the documents were signed.

         Ten months later, in January 2015, Tenants and Landlord met again to discuss the Option to Purchase. As we will explain in greater detail hereinafter, the parties dispute what took place at this meeting. Basically, Tenants claim that they learned for the first time during this meeting that Landlord did not intend to convey any of the three outbuildings on the property because they were added to the premises by prior tenants, and Landlord did not own them. Conversely, Landlord claims that Tenants simply wanted out of the contract because they could not afford it. In any event, that day, Tenants informed Landlord that they did not intend to exercise the Option to Purchase, and they sought a return of the $15, 000 option payment they made when they executed the documents in March 2014. Landlord refused to return the money, and Ms. Whitfield, one of the three tenants, sued Landlord in general sessions court for breach of the Option to Purchase.

         The general sessions court ruled in favor of Ms. Whitfield and entered a judgment against Landlord for $15, 000. Landlord appealed to circuit court, and a bench trial was held on February 5, 2016. The only witnesses to testify were Ms. Whitfield and Landlord. Ms. Whitfield testified that the three outbuildings on the property consisted of a "dock house" by the pond, a large oblong building near the house that looked like a one-car garage with an office area, and "a funky blue looking shed." She testified that the dock house was old and in horrible condition when they moved in but that Tenants "redid" the dock house with extensive repairs and improvements. Ms. Whitfield testified that Landlord and her husband saw the improvements and commented about how nice the dock house looked without objection or mention of the fact that she did not own the dock house. Ms. Whitfield testified that Tenants used the large oblong building for their lawnmowers and storage, but they did not use the third building because it was in such poor condition.

         Ms. Whitfield testified that Tenants intended to exercise the option to purchase the property and made efforts to secure a loan in order to buy it. However, she said they were not able to secure the loan because the bank disagreed with them about the value of the property. Again, the purchase price was roughly $200, 000. Ms. Whitfield testified that when the bank declined to loan them that amount, she had an appraisal performed, and the property appraised for only $150, 000. She testified that the bank refused to finance the loan based on the appraisal.

         Ms. Whitfield testified that Tenants met with Landlord and her husband in January 2015 (as referenced above) to discuss the Option to Purchase. According to Ms. Whitfield, the purpose of the meeting, in her mind, was to inform Landlord that the appraisal was only $150, 000 and to see if they could "work something out." Ms. Whitfield testified that during the course of their discussion, Landlord made a statement to the effect that "the buildings don't go with it. I don't own them. I can't sell you anything I don't own." Ms. Whitfield testified that she was very upset at this news because she had been maintaining and improving the buildings with the intent to purchase them. She was also upset because the property was not worth the price. As noted above, Ms. Whitfield informed Landlord that day that she did not intend to exercise the Option to Purchase and wanted the $15, 000 payment returned. Ms. Whitfield denied telling Landlord that she could not afford the property.

         Landlord's account of the events was vastly different. She claimed that Tenants informed her that they could no longer afford the property and that they wanted their option payment back in order to buy a smaller home. Landlord testified that the first time she heard any mention of Tenants' reason for not exercising the option being linked to the outbuildings was during Tenants' testimony in general sessions court.

         Landlord claimed that she told Ms. Whitfield when the documents were signed that the dock building was permanently attached to the property and therefore it would be included with the sale of the house. Landlord testified that the dock house was built by a prior tenant but that she considered it to be part of the real estate because it was attached to a pre-existing dock that "went with the property." She denied ever telling Tenants that the dock house would not be included in the sale.

         Landlord acknowledged, however, that the status of the other two outbuildings was unclear. She testified that the other two buildings had been on the property for seven to eight years and were placed there by former tenants. Landlord did not believe that Tenants utilized the other two outbuildings and thought they had remained locked since the prior tenants left them there. When asked who owned the outbuildings at the time of trial, Landlord replied, "Good question." She said "it's a gray area" and "honestly, I don't know." The day before trial, Landlord had been advised by her attorney that she probably owned the two buildings due to abandonment. However, Landlord testified that she had been involved in prior litigation with those former tenants around 2010 and obtained a judgment against them for unpaid rent. She testified that the trial judge in that proceeding had instructed the parties not to remove the buildings in case they were needed as an offset against the judgment.[3] Landlord testified that the case with her former tenants was not yet finished and that the matter remained unresolved at the time of trial.

         Although Landlord acknowledged the existence of this outstanding issue regarding ownership of the two outbuildings, Landlord testified that she was never told by Tenants that they were refusing to exercise the Option to Purchase because of the buildings. Landlord said she did not know that Tenants used those buildings or cared anything about them. She said if she had known that the buildings were an issue, she would have contacted an attorney long ago to try and determine their status. Landlord also claimed that she told Tenants when they originally executed the documents that those outbuildings were to remain locked because they belonged to ...

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