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Brown v. Wright

Court of Appeals of Tennessee, Nashville

October 7, 2019

GERALD BROWN
v.
WADDELL WRIGHT et al.

          Session: June 4, 2019

          Appeal from the Chancery Court for Davidson County No. 17-805-III Ellen Hobbs Lyle, Chancellor

         This appeal arises from a dispute over an unorthodox, two-page contract pursuant to which the plaintiff sold his home to the defendant and continued to reside in the home, in accordance with a lease-back provision, for "up to five years" with rent "not to exceed $950 a month." The contract also included provisions for "equity participation," including the option for the plaintiff to buy the property back "at prevailing market value." The plaintiff filed a complaint asserting, inter alia, claims for violations of the Tennessee Consumer Protection Act, quiet title, and breach of contract. The defendant answered and asserted counterclaims, inter alia, for breach of contract and to remove the plaintiff from the property. Following a trial, the trial court dismissed the complaint upon the principal findings that the plaintiff lacked credibility and was the first to materially breach the contract. The trial court also ruled that the defendant owned the property and was entitled to immediate possession but denied the defendant's claim to recover his attorney's fees. Both parties appeal. We affirm the dismissal of all of the plaintiff's claims and the trial court's determination that the defendant owned the property and was entitled to immediate possession. As for the attorney's fees, we hold that the defendant was entitled to recover his reasonable attorney's fees based on Section 6 of the contract which provides that in the event suit is filed to enforce the contract, "the prevailing party shall be entitled to recover all cost of such enforcement including reasonable attorney's fees as approved by the Court."

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

          Joseph H. Johnston, Nashville, Tennessee, for the appellant, Gerald Brown.

          Christopher B. Fowler, and Thomas V. White, Nashville, Tennessee, for the appellee, Waddell Wright, individually and d/b/a W. Wright & Co., LLC.

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

          OPINION

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

         For 50 years Gerald Brown ("Plaintiff") owned and resided on real property located at 913 Lawrence Avenue in the 12th South/Waverly Belmont neighborhood in Nashville (the "Lawrence Avenue Property"). In 2013, Plaintiff got behind on his mortgage payments and, in August 2016, foreclosure proceedings began.

         Waddell Wright ("Defendant") is a real estate developer who buys, renovates, leases, and resells properties. After Defendant saw a local publication of pending foreclosure properties, including the Lawrence Avenue Property, he wrote a letter to Plaintiff offering to purchase the property. Defendant identified himself as a real estate professional in the business of assisting property owners during the foreclosure process and encouraged Plaintiff to waste no time before reaching out. In response, Plaintiff called Defendant and began to negotiate the sale of the property to halt foreclosure.

         On November 28, 2016, Plaintiff and Defendant signed a two-page sales contract selling the Lawrence Avenue Property to Defendant for $146, 000, which was to be paid to the mortgage company to release the lien on the property, plus a cash payment of $10, 000 to Plaintiff at closing, an "equity participation" in the future sale of the property, and additional payment of $50, 000 "on or before the end of the 5yr lease period" or earlier if the parties agreed. The most relevant contractual provisions are set forth in Sections 6 through 9 of the contract, which read:

6. Default. Should Purchaser default at any time in the performance of this Agreement, Seller shall retain any Earnest Money paid as total and complete liquidated damages and Purchaser shall have no further obligation to the Seller. Should Seller default at any time in the performance of this Agreement, any Earnest Money paid to Seller shall be returned to the Purchaser and Purchaser shall have the right to sue the Seller for specific performance and any other actions permitted by law, including reasonable attorney's fees, arising from said breach. In the event that either party hereto shall file a law suite [sic] to enforce this Agreement, the prevailing party shall be entitled to recover all cost of such enforcement including reasonable attorney's fees as approved by the Court.
7. Possession. On or before 60 months after day of deed.
8. Seller Lease Back. Seller to lease back the property for up to 5 years after settlement date. Seller and purchaser will agree to enter into a lease agreement not to exceed $950.00 per month.
9. Equity Participation. Gerald Brown Sr. will receive $10, 000 at closing and $50, 000 on or before the end of the 5yr lease period or if both parties agree to a sooner date. Or Gerald Brown Sr. can purchase the property back from purchaser at prevailing market value at the end of the 5-year term. Gerald Brown Sr. will have to pay back any and all funds purchaser advanced plus a return no less than 25%. After that purchaser and seller at 50/50 partners.

         The sale closed on December 12, 2016, at which time Defendant paid off the mortgage of approximately $146, 000 and remitted a cash payment to Plaintiff of an additional $10, 000 pursuant to Section 9 of the sales contract. Additionally, and as the "Equity Participation" provision required, Defendant placed $50, 000 in an escrow account.

         Plaintiff remained on the property as contemplated by the lease-back provision in the contract. Three days after the closing, Defendant delivered a proposed lease agreement to Plaintiff for the Lawrence Avenue Property but received no response. Defendant subsequently delivered two additional lease proposals, still without a response from Plaintiff. Nevertheless, Plaintiff has remitted a rent payment of $950 to Defendant each month since the closing, which Defendant accepted, but the parties never executed a written lease agreement.

         A few months following the closing, Plaintiff asked Defendant to remodel the Lawrence Avenue Property so that Plaintiff's daughter, Ms. Marion Bowers, could live there as well. Because the Lawrence Avenue Property was located in a design overlay district that mandated the preservation of the historical appearances of the structures, Defendant determined that an addition or remodel was not financially feasible.

         Nevertheless, Defendant offered another property, a duplex located on Kings Lane in Nashville (the "Kings Lane Property") as an alternative so that Plaintiff and his daughter could live next door to one another. Plaintiff and his daughter expressed interest in moving to the properties on Kings Lane and met Defendant at the properties to view them. Believing they had an agreement, Defendant remodeled the Kings Lane duplex. Although Ms. Bowers moved to the Kings Lane Property, Plaintiff did not.

         In the interim, on March 9, 2017, in reliance on Plaintiff's assurances that he intended to move to the Kings Lane Property, Defendant signed a contract to sell the Lawrence Avenue Property for $450, 000 to Province Builders, LLC, and the parties closed on April 14, 2017. The sales contract expressly stated that "title shall be marketable, free and clear of all leasehold interest," and that Province Builders would be entitled to possession three months after the date of closing.

         Shortly after the closing, Defendant informed Plaintiff of the sale and that he would have to relocate by the end of July 2017.[1] Plaintiff refused to move from the property on Lawrence Avenue and repeatedly refused to sign any of the lease agreements Defendant presented for either the Kings Lane or Lawrence Avenue Properties. Between the original sale of the Lawrence Avenue Property on December 12, 2016, until the end of July 2017, Defendant delivered several different lease proposals, some for the Lawrence Avenue Property and some for the Kings Lane Property, and without any substantive reason from Plaintiff as to why, none were returned signed.[2]

         On July 26, 2017, Plaintiff asked Province Builders to honor the five-year lease provided in the sales contract between Plaintiff and Defendant; Province Builders did not respond. Defendant then offered the $50, 000 to Plaintiff if he would relocate, but Plaintiff refused the money as he desired to remain in possession of the Lawrence Avenue Property.

         On August 1, 2017, Plaintiff filed the complaint against Defendant and Province Builders, asserting claims for violation of the Tennessee Consumer Protection Act (the "TCPA"), commercial fraud, quiet title, and breach of contract. Plaintiff alleged that Defendant violated the TCPA by "misrepresenting to Plaintiff that he had an enforceable five (5) year leasehold interest in the Lawrence Property." He claimed Defendant perpetrated an unfair or deceptive business act on a consumer over the age of 60 by drafting an illusory contract, knowing Plaintiff did not understand his rights and remedies under the contract. Plaintiff also alleged that Defendant breached the contract because he "did not execute a separate five (5) year lease buy back agreement with Plaintiff as part of the consideration required by the contract."

         Plaintiff later amended his complaint to add a claim for specific performance to enforce the five-year lease agreement he had for the Lawrence Avenue Property and requested the court direct Defendant to interplead the $50, 000 being held in escrow as "a buyout of Plaintiff's five (5) year leasehold interest in 913 Lawrence Avenue" pending the final disposition of the case.[3]

         On September 22, 2017, Defendant filed an answer and counter-complaint against Plaintiff asserting claims for (1) breach of contract; (2) promissory estoppel; and (3) declaratory judgment. Defendant later amended the counter-complaint to include a claim for (4) forcible entry and detainer to remove Plaintiff from the Lawrence Avenue Property. Defendant alleged that Plaintiff breached the contract by refusing to sign any lease agreement with Defendant. Defendant claimed he reasonably relied upon representations that Plaintiff would move to the Kings Lane Property. Additionally, Defendant prayed for a declaratory judgment to determine the meaning, validity, and enforceability of the terms within the contract, that the $50, 000 in escrow be returned to Defendant, and that Plaintiff specifically perform the contract. The counter-complaint asked the court to declare that Defendant was the legal owner and entitled to possession of the property. Defendant also sought damages for the loss he suffered after repurchasing the home from Province Builders as well as his attorney's fees pursuant to Section 6 of the sales contract.

         In the interim, on September 18, 2017, Defendant repurchased the Lawrence Avenue Property from Province Builders for $460, 200, and the parties subsequently entered into an agreed order dismissing Province Builders as a co-defendant.

         A two-day bench trial was held May 22-23, 2018. In its final order entered on July 13, 2019, the trial court found that Plaintiff's testimony lacked credibility because Plaintiff was evasive in his answers and was repeatedly impeached.

The proof established that the Plaintiff is nearly 80 years old with medical issues of a pacemaker and diabetes. Nevertheless, he is mentally alert and sharp and demonstrated keen understanding and intelligence. The proof established that the Plaintiff was not misled or deceived, nor was he a victim.
The Court finds that the Defendant performed the Contract by: paying the mortgage, paying judgments recorded against the Lawrence Property, paying the Plaintiff $10, 000, and delivering a lease to the Plaintiff three days after the closing.
The Court finds that the Plaintiff was the first to breach by not responding to the lease that was delivered either by executing it or providing modifications.
The facts and the evidence did establish . . . that the Plaintiff led the Defendant along that the Plaintiff was interested in the Kings Lane property when the Plaintiff knew he was not. This deception combined with the Plaintiff's first and continuing breach of refusal to execute a lease on the Lawrence Property deprive and preclude the Plaintiff from recovery of the $50, 000 on deposit in the registry of the Court, and the Clerk and Master shall disburse the $50, 000 to the Defendant.

         The trial court also held that Plaintiff's possessory interest and Plaintiff's entitlement to the $50, 000 were conditioned on the ...


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