Dog House Invs., LLC v. Teal Props., Inc.

• Decision Date: 07 February 2014
• Docket Number: No. M2013–00597–COA–R3–CV.,M2013–00597–COA–R3–CV.
• Citation: 448 S.W.3d 905
• Parties: DOG HOUSE INVESTMENTS, LLC v. TEAL PROPERTIES, INC., et al.
• Court: Tennessee Court of Appeals

448 S.W.3d 905

DOG HOUSE INVESTMENTS, LLC
v.
TEAL PROPERTIES, INC., et al.

No. M2013–00597–COA–R3–CV.

Court of Appeals of Tennessee, Western Section, at Nashville.

Nov. 20, 2013 Session.
Feb. 7, 2014.
July 11, 2014.

448 S.W.3d 909

David Lee Cooper, Nashville, Tennessee, for the appellants, Teal Properties, Inc. and Jerry Teal.

448 S.W.3d 910

Rebecca Blair and John Bradfield Scarbrough, Brentwood, Tennessee, for the appellee, Dog House Investments, LLC.

OPINION

DAVID R. FARMER, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S., and HOLLY M. KIRBY, J., joined.

DAVID R. FARMER, J.

The trial court entered judgment in favor of Plaintiff Lessee in this action for breach of contract and promissory fraud. It also awarded Plaintiff punitive damages and prejudgment interest at the rate of eight percent per annum. We affirm.

This dispute arises from damage to real property caused by the May 2010 floods throughout Nashville. Steve Lassiter (Mr. Lassiter) and Nancy Purvis (Ms. Purvis) are the sole members of Plaintiff Dog House Investments, LLC (“Dog House”). Dog House operates a dog “camp” facility on real property which it leases from Defendant Teal Properties, Inc. (“Teal Properties”). The five–year lease agreement (“the Agreement”) executed by the parties in June 2008 provides, in relevant part:

FIRE CLAUSE: In case the said premises shall be so damaged by fire or other cause as to be rendered untenantable, Lessor shall have thirty (30) days from the date of said casualty to determine the extent of repairs to be done and the time required to perform them. If the damage is such that repairs can be completed within ninety (90) days from commencement of said repairs, Lessor agrees to make such repairs promptly and to allow Lessee an abatement in rent for such time as the building remains untenantable. Lessor shall commence repairs within thirty (30) days from the date of said casualty. If necessary repairs cannot be made within ninety (90) days from the date of commencement of such repairs, this lease shall terminate as of the date the premises were rendered untenantable. In the event of partial loss, tenant shall have the right to terminate this lease with no recourse.

The Agreement also contains a clause entitled UPKEEP OF PREMISES which provides, in part,

Lessor shall, as its own cost and expense, maintain in good repair the roof, foundations and exterior walls (not including doors, windows and floors); however, Lessor shall not be obligated to make any repairs of those portions of the premises that it is obligated to maintain unless it shall be notified in writing by Lessee, and Lessor shall then have a reasonable period of time to make such repairs.

It additionally provides that the Agreement may not be altered or modified except in writing.

As amended in May 2012,¹ Dog House filed a complaint against Teal Properties and Jerry Teal, individually (Mr. Teal; hereinafter collectively “Teal”), alleging that the property was owned by Mr. Teal, individually; that it was substantially damaged and made untenantable by flooding in Nashville on May 1 and 2, 2010; and that it immediately notified Teal of the untenantable conditions. It asserted that Mr. Teal visited the property on May 2, 2010, notified Mr. Lassiter by email that the property was covered by flood insurance, but took no steps to repair or restore the property. Dog House alleged that “[d]ue to the exigency of the circumstances and the potential for development of additional problems as time passed,” it immediately began work to remove water from the

448 S.W.3d 911

premises, and that Mr. Teal was aware of and relied on its efforts. It alleged that Teal agreed to submit a claim for insurance benefits at Dog House's urging, and that Teal “expressly understood” that Dog House was asking Teal to submit the claim to help recover the cleanup costs. Dog House asserted that, in reliance on Teal's promise to file an insurance claim to reimburse Dog House for repair costs, and because Teal did not take any measures to make repairs, Dog House continued efforts to remediate the property by engaging the assistance of third parties to remove water and make repairs. It asserted that these steps were undertaken with Teal's knowledge. Dog House alleged that it incurred expenses in excess of $39,000 to repair the property; that it submitted invoices and supporting documentation to Teal in June 2010; that Teal recovered more than $40,000 from its insurance carrier after submitting documentation of expenses incurred by Dog House; and that, despite direct inquires by Dog House, Mr. Teal concealed that Teal had received the insurance proceeds. Dog House alleged that Teal never intended to reimburse it for expenses incurred in repairing the property.² Dog House asserted claims for unjust enrichment, promissory fraud, breach of contract, and piercing the corporate veil. It prayed for compensatory damages in the amount of $39,000.00, punitive damages, prejudgment interests, and costs. It also prayed for judgment against Teal Properties and Mr. Teal jointly and severally, and for “further and other general relief.”

Teal answered Dog House's amended complaint in June 2012. In its answer, Teal admitted the terms of the Agreement; that the property was damaged by floods in May 2010; that Mr. Teal visited the property and sent the referenced email on May 2, 2010; and that it submitted an insurance claim and recovered payments from its flood insurance carrier. Teal denied that Dog House was entitled to any proceeds of the insurance recovery based on the terms of the parties' Agreement, however, and generally denied liability.

Following a hearing in November 2012, the trial court entered judgment in favor of Dog House on the basis of breach of contract, breach of implied contract, and promissory fraud in the amount of $35,191.28. It also found, by clear and convincing evidence, that Teal's conduct was fraudulent and intentional and that punitive damages accordingly were warranted. It awarded Dog House punitive damages in the amount of $10,000. The trial court found that Mr. Teal is the owner of Teal Properties and that Teal Properties “is merely a sham or dummy corporation and is the alter ego of Jerry Teal.” It held Mr. Teal personally liable for the judgment, and awarded Dog House prejudgment interest in the amount of eight percent, totaling $6,143.03. The trial court denied Dog House's motion to alter or amend the judgment to increase the amount of punitive damages. The trial court entered judgment against Teal in the amount of $53,736.05 by final order entered January 25, 2013. Teal filed a timely notice of appeal to this Court and the matter was heard by the Western Section sitting in Nashville in November 2013.

Issues Presented

Teal presents the following issues for our review, as stated by Teal:

(1) Did the trial court erroneously hold that Teal Properties, Inc. breached the written lease?

448 S.W.3d 912

(2) Did the trial court erroneously hold that the Defendants breached an implied contract, when this theory of recovery was not raised by the pleadings?

(3) Did the trial court err by ruling that Defendants were liable for promissory fraud?

(4) In the alternative, if Defendants are liable for breach of a written or implied contract or for promissory fraud, should the trial court have reduced the judgment by $10,000, the amount of the deductible?

(5) Did the trial court err by awarding the Plaintiff punitive damages?

(6) Did the trial court erroneously pierce Teal Properties' corporate veil to hold Jerry Teal personally liable?

(7) Did the trial court abuse its discretion by setting the rate of prejudgment interest at 8% per annum?

Standard of Review

We review the trial court's findings of fact de novo on the record, with a presumption of correctness, and will not reverse those findings unless the evidence preponderates against them. Tenn. R.App. P. 13(d) ; Berryhill v. Rhodes, 21 S.W.3d 188, 190 (Tenn.2000). Insofar as the trial court's determinations are based on its assessment of witness credibility, we will not reevaluate that assessment absent clear and convincing evidence to the contrary. Jones v. Garrett, 92 S.W.3d 835, 838 (Tenn.2002). Our review of the trial court's conclusions on matters of law, however, is de novo with no presumption of correctness. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn.2005). We likewise review the trial court's application of law to the facts de novo, with no presumption of correctness. State v. Thacker, 164 S.W.3d 208, 248 (Tenn.2005).

Discussion

We begin our discussion of the issues presented by observing that the trial court made extensive and detailed findings at...