Cracker Barrel Old Country v. Epperson

• Decision Date: 01 May 2009
• Docket Number: No. M2006-02424-SC-R11-CV.,M2006-02424-SC-R11-CV.
• Citation: 284 S.W.3d 303
• Parties: CRACKER BARREL OLD COUNTRY STORE, INC. et al. v. Richard EPPERSON et al.
• Court: Tennessee Supreme Court

284 S.W.3d 303

CRACKER BARREL OLD COUNTRY STORE, INC. et al. v. Richard EPPERSON et al.

No. M2006-02424-SC-R11-CV.

Supreme Court of Tennessee, at Columbia.¹

February 6, 2009 Session.

May 1, 2009.

Nancy S. Jones and Kristin J. Hazelwood (at trial), Nashville, Tennessee, and C. Dewees Berry (on appeal), Nashville, Tennessee, for the appellants, Cracker Barrel Old Country Store, Inc., and Cracker Barrel Associates, LLC.

Richard M. Smith (at trial), Nashville, Tennessee, and William T. Ramsey and Jonathan H. Wardle (on appeal), Nashville, Tennessee, for the appellees, Richard Epperson and Timothy Causey.

OPINION

CORNELIA A. CLARK, J., delivered the opinion of the court, in which JANICE M. HOLDER, C.J., and GARY R. WADE, WILLIAM C. KOCH, JR., and SHARON G. LEE, JJ., joined.

We accepted Cracker Barrel's application for permission to appeal to determine whether the contractual language—"[a]ll costs and expenses of any suit or proceeding shall be assessed against the defaulting party"—creates a contractual right to attorney fees for the successful party in a lawsuit. We determine that neither this contractual language nor the doctrine of judicial estoppel creates a right to recover such fees. Accordingly, the Court of Appeals' judgment denying an award for attorney fees is affirmed.

Factual & Procedural History

Cracker Barrel Old Country Store, Inc., and Cracker Barrel Associates, LLC, (collectively "Plaintiffs") own certain real property on Sidco Drive in Davidson County.² Mr. Richard Epperson and Mr. Timothy Causey (collectively "Defendants") own real property that adjoins Plaintiffs' property. Both parcels have, since October 31, 1980, been subject to a Declaration of Reciprocal Rights and Easements and Restrictive Covenants ("Declaration"), created by the original developer³ of these two parcels and several others in the same development.

In April 2005, Defendants submitted to the Nashville/Davidson County Metropolitan Council a proposal to expand the building on their property. Defendants' property is adjacent to Plaintiffs' property. Upon learning of the plan, Plaintiffs notified Defendants that they believed the new construction would violate covenants 1(a), 2, and 3 of the Declaration, granting mutual vehicular easements to the adjoining owners and prohibiting obstruction to traffic flow.⁴ Defendants disagreed and persisted in seeking approval for their plan.

On August 29, 2005, Plaintiffs filed suit against Defendants alleging that Defendants' intent to expand a building located on Defendants' property violated the Declaration's express terms. In their complaint, Plaintiffs sought injunctive relief and requested an award of attorney fees "pursuant to Paragraph 9 of the Declaration."

The course of the litigation was hard-fought. By order entered October 24, 2005, after an October 12 hearing, the trial court granted Plaintiffs' motion for temporary injunctive relief. On October 21, 2005, Plaintiffs filed a Motion for Costs and Expenses, seeking costs and expenses incurred in seeking the temporary injunction, including almost $62,000 in attorney fees to that point. Plaintiffs' request for reimbursement was premised on Paragraph 9 of the Declaration, which provides as follows:

The easements, restrictions, benefits, and obligations herein set forth shall create mutual benefits and servitude of the Property running with the land and shall inure to the benefit of and be binding upon the respective Lot Owners, their successors and assigns. In the event of any violation or threatened violation of any of the provisions of this Declaration, any person having an interest of record in any part of the Property shall be entitled forthwith to full and adequate relief by injunction and/or all such other available legal and equitable remedies from the consequences of any such violation. All costs and expenses of any suit or proceeding shall be assessed against the defaulting party.

(Emphasis added). It is undisputed that the parties' properties are subject to the Declaration and that both parties are "Lot Owners" under the terms of the agreement.

Oral argument on the motion was conducted November 18, 2005, but the Court did not rule immediately. On January 20, 2006, Defendants filed a Motion to File [Counterclaim]⁵ with the counterclaim attached. In the pleading, Defendants claimed that Plaintiffs had denied them proper access when Plaintiffs made improvements to their property. The counterclaim asserted that Defendants "may have an interest in the legal expenses associated with this proceeding." Plaintiffs opposed Defendants' counterclaim.

The parties ultimately resolved the substantive issues of the lawsuit and on January 30, 2006, the trial court entered an Agreed Judgment and Permanent Injunction, which permanently enjoined Defendants from expanding the building on their property.⁶ As to Plaintiffs' attorney fees claim, the parties agreed as follows:

IT IS FURTHER ORDERED that should the Parties be unable to resolve through informal, non-binding mediation that portion of the dispute dealing with the interpretation of Paragraph Nine (9) of the Declaration, as it relates to the payment of Plaintiffs' attorneys' fees, costs and expenses incurred in connection with obtaining this Permanent Injunction, Plaintiffs may renew their motion for an award of such fees, costs and expenses.

After the parties failed to reach an agreement, on August 22, 2006, Plaintiffs renewed their motion for costs and expenses, requesting $3,913.75 in costs and expenses and a total of $117,334.50 in attorney fees. In their response to Plaintiffs' motion, Defendants again asserted that Plaintiffs were not entitled to recover attorney fees because the Declaration did not expressly provide for their recovery. Following a hearing on October 6, the trial court, by order entered on October 23, 2006, denied Plaintiffs' request for attorney fees, explaining that no authority presented supported a finding that the contractual language of Paragraph 9 created a right to recover attorney fees.

On appeal, the Court of Appeals affirmed the trial court's denial of attorney fees.⁷ We granted Plaintiffs' application for permission to appeal to clarify the application of the American rule regarding attorney fees to the language in the Declaration.

Analysis

On appeal, Plaintiffs raise two related issues: (1) whether the contractual language "all costs and expenses of any suit or proceeding" creates a right to recover attorney fees; and (2) whether Defendants are judicially estopped from arguing that the contractual language does not include an award of attorney fees when one of Defendants' pleadings requested an award of attorney fees.

Standard of Review

The interpretation of a written agreement is a question of law and not of fact. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.1999). Accordingly, our review is de novo with no presumption of correctness accorded to the decisions of the courts below. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn.2005). Regarding factual findings, our review is also de novo upon the record of the trial court, but with a presumption of correctness. Tenn. R.App. P. 13(d); Cross v. City of Memphis, 20 S.W.3d 642, 643-45 (Tenn.2000).

"American Rule"

Tennessee, like most jurisdictions,⁸ adheres to the "American rule" for award of attorney fees. John Kohl & Co. v. Dearborn & Ewing, 977 S.W.2d 528, 534 (Tenn.1998); Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 338 (Tenn. 1985). Under the American rule, a party in a civil action may recover attorney fees only if: (1) a contractual or statutory provision creates a right to recover attorney fees; or (2) some other recognized exception to the American rule applies, allowing for recovery of such fees in a particular case. Taylor, 158 S.W.3d at 359; John Kohl, 977 S.W.2d at 534. Tennessee's adherence to the American rule is based on several public policy considerations.

First, since litigation is inherently uncertain, a party should not be penalized for merely bringing or defending a lawsuit. Second, the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included paying the fees of their opponent's lawyer. Third, requiring each party to be responsible for their own legal fees promotes settlement. Fourth, the time, expense, and difficulty inherent in litigating the appropriate amount of attorney's fees to award would add another layer to the litigation and burden the courts and the parties with ancillary proceedings. Thus, as a general principle, the American rule reflects the idea that public policy is best served by litigants bearing their own legal fees regardless of the outcome of the case.

House v. Estate of Edmondson, 245 S.W.3d 372, 377 (Tenn.2008) (citations omitted).

In the context of contract interpretation, Tennessee allows an exception to the American rule only when a contract specifically or expressly provides for the recovery of attorney fees. Id. ("The American rule provides that a party in a civil action may not recover attorney's fees absent a specific contractual or statutory provision providing for attorney's fees . . . .") (emphasis added); Pullman Standard, 693 S.W.2d at 338 ("We continue to adhere to the rule in Tennessee that attorneys' fees are not recoverable in the absence of a statute or contract specifically providing for such recovery. . . .") (emphasis added); Pinney v. Tarpley, 686 S.W.2d 574, 581 (Tenn.Ct.App.1984) ("In the absence of an express agreement to pay attorney's fees for enforcement of a contract, such are not recoverable in Tennessee.") (emphasis added). If a contract does not specifically or expressly provide for attorney fees, the recovery of fees is not authorized. See, e.g., Kultura, Inc. v. Southern Leasing Corp., 923 S.W.2d 536, 540 (Tenn.1996) (holding that the term "any loss" does not include an award for attorney fees).

"All Costs and Expenses"

Plaintif...