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Simmons Bank v. Vastland Development Partnership

Court of Appeals of Tennessee, Nashville

June 27, 2019

SIMMONS BANK
v.
VASTLAND DEVELOPMENT PARTNERSHIP

          Session April 2, 2019

          Appeal from the Chancery Court for Davidson County No. 16-0864-IV Russell T. Perkins, Chancellor

         This appeal arises from a commercial lease dispute. The trial court summarily ruled that Simmons Bank, which acquired the tenant originally named in the lease in a merger, had the right to exercise a renewal option. The appellant landlord contends this was error because "(1) the plain language of the lease expressly indicated the option could only be exercised by the tenant originally named in the lease and (2) two events of default occurred [as a result of the merger] which precluded the exercise of the option under the plain terms of the lease." The alleged events of default were that (1) the original tenant failed to "maintain its legal existence," and (2) the original tenant transferred its interest to Simmons Bank by operation of law. We have determined that regardless of whether the lease was transferred to Simmons Bank by merger pursuant to Tenn. Code Ann. § 48-21-108(a)(2) "without reversion or impairment," the parties agreed to restrict any transfer of the right to renew the lease to one entity, First State Bank, "the Tenant originally named" in the lease. Accordingly, and relying on the legal principle that a statute shall not be applied to construe a contract when the parties to the contract express a contrary intention, the agreed-upon renewal restriction in the lease controls. As a consequence, Simmons Bank does not have the right to exercise the renewal option. Therefore, we reverse the grant of summary judgment to Simmons Bank and remand this case to the trial court with instructions to enter summary judgment in favor of the landlord.

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

          Jeffrey H. Gibson and Hannah E. Webber, Nashville, Tennessee, for the appellant, Vastland Development Partnership.

          Samuel T. Bowman and Sarah D. Murray, Nashville, Tennessee, for the appellee, Simmons Bank.

          Frank G. Clement Jr., P.J., M.S., delivered the opinion of the Court, in which D. Michael Swiney, C.J. and Andy D. Bennett, J., joined.

          OPINION

          FRANK G. CLEMENT JR., P.J., M.S.

         In 2003, First State Bank entered into an agreement to lease space within a building owned by Vastland Development Partnership ("Vastland") at 1720 West End Avenue in Nashville (the "Lease"). The Lease specifically defined "Tenant" as "First State Bank." Addendum Two of the Lease granted First State Bank a renewal option under the following conditions:

Provided that as of the time of the giving of the First Extension Notice and the Commencement Date of the First Extension Term, (x) Tenant is the Tenant originally named herein, (y) Tenant actually occupies all of the Premises initially demised under this Lease and any space added to the Premises, and (z) no Event of Default exists or would exist but for the passage of time or the giving of notice, or both; then Tenant shall have the right to extend the Lease Term for an additional term of five (5) years (such additional term is hereinafter called the "First Extension Term") . . . . Adhering to same above, the Tenant shall have the right to extend the Lease term for an additional term of two (2) five (5) year options, hereinafter called the "Second Extension Term" and the "Third Extension Term."

(Emphasis added). The Lease also provided that First State Bank would be in default if it was "dissolved or otherwise fail[ed] to maintain its legal existence," or upon "any assignment, subleasing or other transfer of Tenant's interest . . . except as otherwise permitted in [the] Lease."[1]

         In May 2011, First State Bank exercised its first option to renew the Lease, and the Lease was extended to August 17, 2016. In September 2015, before the end of the first extension term, First State Bank merged into Simmons Bank. As a consequence of the merger, Simmons Bank was the surviving entity, and First State Bank no longer existed separately. See Tenn. Code Ann. § 48-21-108(a)(1).

         After the merger, Simmons Bank continued to occupy the property pursuant to the Lease. On January 19, 2016, Simmons Bank sent notice to Vastland that it intended to exercise the second option to renew the Lease. Vastland responded:

[T]he Landlord disagrees that Simmons Bank has a valid contractual option to renew the Lease. Per Addendum Two of the original Lease . . . the tenant option to renew is subject to among other factors "Tenant is the Tenant originally named herein." The original Tenant was First State Bank which is no longer the current ...

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