Ellis v. Pauline S. Sprouse Residuary Trust, No. E2006-01771-COA-R3-CV (Tenn. App. 10/26/2007)
| Decision Date | 26 October 2007 |
| Docket Number | No. E2006-01771-COA-R3-CV.,E2006-01771-COA-R3-CV. |
| Parties | MIKE ELLIS v. PAULINE S. SPROUSE RESIDUARY TRUST, ET AL. |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Knox County; No. 3-51-05; Wheeler A. Rosenbalm, Judge
Judgment of the Circuit Court Vacated in Part and Modified in Part; Case Remanded.
W. Tyler Chastain and Margo J. Maxwell, Knoxville, Tennessee, for the appellants, Pauline S. Sprouse Residuary Trust and Kerry M. Sprouse.
G. Wendell Thomas, Jr., Rob Quillin, and Kevin C. Stevens, Knoxville, Tennessee, for the appellee, Mike Ellis.
OPINION
Mike Ellis ("Farmer") claims he exercised a renewal option on a lease of real property for the years 2002 through 2006. The property was formerly owned by Mary Bagwell ("Prior Landlord") and is presently owned by Kerry M. Sprouse ("Landlord").1 Farmer argues that Landlord violated his five-year renewal lease when he forced Farmer to vacate the property at the end of 2004. Farmer sued Landlord, seeking compensatory and punitive damages. He claimed a trespass in 2004 and lost profits in 2005 and 2006. The case was tried to a jury, which returned a verdict awarding Farmer compensatory damages on both claims. In addition, the jury awarded punitive damages. Landlord concedes the compensatory damages for trespass, but appeals with respect to the damages for lost profits and the punitive damages, claiming the trial court misapplied the law regarding the timing of lease renewals. We agree and conclude that Farmer had no right to occupy and use the property in 2005 or 2006. Accordingly, we vacate the lost profits award. As a result, the total compensatory award is modified from $82,534 to the conceded damages for the 2004 trespass of $534. As a consequence of this reduction, the $30,000 punitive damages award is vacated as being disproportionate to the award of compensatory damages. As an additional basis for vacating the award of punitive damages, we note that it was arguably based upon not only the 2004 trespass but also Landlord's action in expelling Farmer from the property at the end of 2004. We remand for a new trial on punitive damages based solely upon the 2004 trespass.
In January 1997, Prior Landlord leased a portion of her property to Farmer for a five-year term, renewable for a second five-year term at Farmer's option. The lease agreement is short and informal. It provides as follows:
LEASE AGREMENT [sic]
THIS LEASE BETWEEN MARY BRUCE WILLIAMS AND MIKE ELLIS FOR HER PROPERTY AT THE END OF ARNOLD ROAD IN MASCOT, TENNESSEE. [EXCLUDING HOUSE]
PAYMENT WILL BE THREE THOULSAND [sic] DOLLARS PER YEAR DUE ON OR BEFORE JANUARY 31 OF EACH YEAR
(Capitalization and bracketed phrase, "EXCLUDING HOUSE," in original.)
Farmer farmed the land from 1997 through 2001, and, as provided for in the lease, paid each year's rent to Prior Landlord in the month of January. The parties dispute what happened at the end of the five-year term, but Farmer testified at trial that he contacted Prior Landlord, "probably" in January 2002, and informed her of his intent to renew the lease. In any event, it is undisputed that he paid a year's rent to Prior Landlord in 2002, and again in 2003 and 2004, always in January; that these payments were accepted; and that Farmer continued to farm the land during those years.
In May 2004, Prior Landlord sold the property to Landlord. The real estate sales contract includes handwritten language stating, "CURRENT LEASE NOT TO BE DISTURBED." (Capitalization in original.) However, the owner's affidavit and title policy indicated that there was no long-term lease on the property.
Landlord's brief on appeal states that he was "aware of [Farmer's] right to use the Leased Premises in 2004" — as, Landlord asserts, a "holdover tenant" — and that Landlord "agreed to this term in the Sales Contract." Nevertheless, Landlord entered onto the farm in June 2004 without Farmer's permission and drove through a portion of Farmer's corn crop in order to make a path from the house (which both parties agree Landlord had the right to occupy) to the river. Farmer testified at trial that Landlord, when confronted about this incident shortly after it occurred, stated that he did not recognize Farmer's lease and threatened to plow the rest of his crop under. Subsequently, however, Landlord offered to pay for Farmer's damages resulting from this incident — but apparently reconsidered the offer after Farmer sued him. In any event, Farmer sent Landlord a bill for the damage to his crop, but Landlord never paid it.
The damage to Farmer's corn crop from the June 2004 incident is the source of the $534 compensatory damages award for trespass. At trial, Landlord claimed that Farmer relied on hearsay evidence to arrive at this amount, but, on appeal, Landlord has apparently dropped this argument, as he now asks this court in his brief to award Farmer "damages . . . in the amount of $534.82 for [Landlord's] trespass and damage to the subject property in 2004."
At the heart of this case, therefore, is the award of lost profits in 2005 and 2006. The dispute turns on whether Farmer's lease extended into those years — in other words, whether he renewed the lease for the five-year period from 2002 through 2006, or whether he was merely a year-to-year holdover tenant in 2002, 2003 and 2004.2
Landlord demanded that Farmer vacate the property at the end of 2004, and Farmer did so under protest. He then filed suit in January 2005. At trial, he testified that he would have made $39,000 in 2005 and $49,000 in 2006 if he had been allowed to continue farming the property. The jury found that the five-year renewal lease existed, that Landlord had actual notice of it, that Landlord trespassed or interfered with Farmer's property rights, and that Farmer was entitled to $82,534 in compensatory damages: $534 for the 2004 trespass, $36,000 for lost profits in 2005 (subtracting out the $3,000 rent that Farmer would have paid) and $46,000 for lost profits in 2006 (again subtracting the rent from the lost profits total). The jury then awarded $30,000 in punitive damages.
Landlord appeals the 2005 and 2006 compensatory damages verdict on essentially three separate theories.3 He argues first that there was no competent material evidence that would allow the jury to reasonably conclude that Farmer renewed the 1997-2001 lease before it expired on December 31, 2001, and that therefore, as a matter of law, Farmer lost his right to renew the lease because his option expired when the lease expired. He also argues that the damages for lost profits were improperly submitted to the jury because they were based solely upon hearsay evidence, and that the purported five-year lease renewal violated the Statute of Frauds. We do not reach these latter two claims because we agree with Landlord's first argument. Judging the case solely on the theory of recovery actually pursued at trial by Farmer, and the evidence in support of that theory, it is clear that Farmer became a year-to-year holdover tenant starting in 2002, and had no right to remain on the land in 2005 and 2006. Therefore the damages for lost profits are improper and cannot be sustained.
Our review of the trial court's conclusions of law is de novo with no presumption of correctness. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn. 2005). The same standard applies to the trial court's application of law to the facts. State v. Thacker, 164 S.W.3d 208, 248 (Tenn. 2005).
With regard to the jury's verdict, our standard of review in a civil action is limited to determining whether there is material evidence to support the verdict. See Tenn. R.App. P. 13(d). Appellate courts do not determine the credibility of witnesses or weigh evidence on appeal from a jury verdict. See Pullen v. Textron, Inc., 845 S.W.2d 777, 780 (Tenn. Ct. App. 1992) (citing Crabtree Masonry Co. v. C & R Constr., Inc., 575 S.W.2d 4, 5 (Tenn. 1978)). With respect to factual issues, a judgment based on a jury verdict will not be disturbed on appeal where the record contains material evidence supporting that verdict. See Reynolds v. Ozark Motor Lines, Inc., 887 S.W.2d 822, 823 (Tenn. 1994).
The determination of whether jury instructions are proper is a question of law which this court reviews de novo with no presumption of correctness. See Solomon v. First Am. Nat'l Bank, 774 S.W.2d 935, 940 (Tenn. Ct. App. 1989). This determination is crucial because
the soundness of every jury verdict rests on the fairness and accuracy of the trial court's instructions. Since the instructions are the sole source of the legal principles needed to guide the jury's deliberations, trial courts must give substantially accurate instructions concerning the law applicable to the matters at issue.
Ladd v. Honda Motor Co., 939 S.W.2d 83, 94 (Tenn. Ct. App. 1996) (citations omitted). However, "[j]ury instructions need not be perfect in every detail." Id. We must consider the jury charge as a whole, and we will not invalidate it if it fairly defines the legal issues in the case and does not mislead the jury. See Hunter v. Burke, 958 S.W.2d 751, 756 (Tenn. Ct. App. 1997).
"Renewal options . . . are essentially unilateral contracts giving the lessee an irrevocable right [to] extend a lease during the option period." Abou-Sakher v. Humphreys County, 955 S.W.2d 65, 68 (Tenn. Ct. App. 1997). "Lessees must give timely notice according to the terms of the option, and lessees who fail to give the required notice lose their right to renew the lease." Id. The central question in the instant case is what constitutes timely notice.
Although Landlord...
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