Estate of Darnell v. Fenn

• Decision Date: 27 February 2009
• Docket Number: No. E2007-02696-COA-R3-CV,E2007-02696-COA-R3-CV
• Citation: 303 S.W.3d 269
• Parties: ESTATE OF Benjamin F. DARNELL, Sr., et al. v. Charles FENN, et al.
• Court: Tennessee Court of Appeals

303 S.W.3d 269

ESTATE OF Benjamin F. DARNELL, Sr., et al. v. Charles FENN, et al.

No. E2007-02696-COA-R3-CV

Court of Appeals of Tennessee, Eastern Section, at Knoxville.

November 5, 2008 Session.

February 27, 2009.

Permission to Appeal Denied by Supreme Court September 28, 2009.

Jerry K. Galyon, Sevierville, Tennessee, for the appellants, Charles Fenn, Dott Fenn, and Teddy Jones, Trustee.

David H. Parton, Gatlinburg, Tennessee, for the appellees, Mary J. Darnell, individually and as personal representative of the Estate of Benjamin F. Darnell, Sr., and parent and next friend of Jonathan J. Darnell and Melissa Darnell, both minors, Benjamin F. Darnell, Jr., Susan A. Reagan, Dolly M. Darnell, Lilly M. Stoltz, Thomas E. Darnell, Marie E. Darnell, and William C. Darnell.

OPINION

CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, P.J., and D. MICHAEL SWINEY, J., joined.

Charles Fenn and Dott Fenn owned property in Sevier County. In August 1996, they entered into a contract to sell the property to Benjamin F. Darnell, Sr. The Fenns agreed to finance the sale over a ten-year period. According to the contract, Mr. Darnell was to make monthly payments of $999.11 for ten years, with one final balloon payment of $113,058.43. Mr. Darnell died in February 2004 and his wife, Mary Darnell, continued making the monthly payments. Unbeknownst to Ms. Darnell, on October 14, 2005, the Fenns sold the property to Teddy Jones. Four days later, Ms. Fenn, through her attorney, sent Ms. Darnell a letter terminating the contract based on various alleged breaches. Ms. Darnell filed suit seeking specific performance of the contract. Following a bench trial, the court found that the contract was enforceable; it ordered specific performance. The trial court rejected the claim of the defendant Teddy Jones that he was a bona fide purchaser without knowledge. The Fenns and Mr. Jones appeal. We affirm.

I.

This is an action for specific performance originally brought by Mary Darnell, individually and as personal representative of the estate of her late husband, Benjamin F. Darnell, Sr. ("the decedent"). The complaint was originally filed on December 22, 2005. Thereafter, it was amended to add various parties as additional plaintiffs (collectively referred to as "Plaintiffs"), all of whom are heirs to the decedent's estate. Plaintiffs claim that the decedent entered into a valid and enforceable contract with the Fenns for the sale of the land located in Sevier County. Plaintiffs sought to enforce the terms of that contract. According to the amended complaint:

[T]he Plaintiff Estate holds a contract for Sale and Purchase of real property located in Sevier County, Tennessee, between [the decedent] . . . and Defendants, Charles Fenn and wife, Dott Fenn, dated August 2, 1996, a copy of said contract being of record . . . in the Office of the Register of Deeds for Sevier County, Tennessee. . . .

That pursuant to the terms of the parties' contract, the decedent was purchasing from Defendants, Charles Fenn and wife, Dott Fenn, real property improved by commercial buildings. . . .

That pursuant to the parties' contract, the decedent, and subsequent to the decedent's death, the Plaintiff Estate paid all monthly payments owing pursuant to the amortization schedule . . . and Defendants, Charles Fenn and wife, Dott Fenn, have accepted all of said payments excepting the November 2005 payment which was returned to the Plaintiff.

That the decedent and the Plaintiff Estate made expensive improvements to the existing buildings on the property, maintained liability and casualty insurance on the property and have otherwise fully complied with the terms of the parties' agreement.

That the Defendants . . . waived any alleged default of the contract by their actions [of] continuing to accept the benefits of the contract, including all monthly payments with full knowledge of any alleged default.

That Defendant, Dott Fenn, contacted the Personal Representative of the Plaintiff Estate in 2005 and demanded that the Estate immediately make the balloon payment which is not due until August 15, 2006, pursuant to the parties' agreement.

That the Plaintiff asserted the right to continue making payments in accordance with the parties' agreement due to the fact that the administration of the Estate had not been concluded and that the Personal Representative intended to distribute subject property to herself upon conclusion of the Estate and finance the amount required to make the balloon payment in her own name.

That on October [18], 2005, Attorney Jerry K. Galyon sent Mary Darnell . . . a letter stating that the parties' agreement was terminated. This letter asserted as grounds for termination that no action had been taken by the Estate, that the buildings on the property had not been maintained in their current condition or better, that the real property taxes had not been paid, that late charges were owing, and that insurance on the buildings had not been maintained. The Estate paid the 2004 real estate taxes immediately upon receipt of said notice and there is no basis for other allegations of default. . . .

That the Plaintiff estate decided to honor the demand of Defendants . . . that the balloon payment be made immediately, within two weeks of receipt of the notice of default. The Plaintiff Estate made arrangements to distribute the Estate's interest in the purchase agreement to the decedent's spouse, Mary Darnell, and Mary Darnell obtained a loan commitment in order to complete the purchase immediately.

The Defendant's [sic] attorney failed to respond to calls from the Plaintiff's attorney and the bank's attorney for the purpose of making arrangements for the closing of the transaction. On November 16, 2005, and again on November 18, 2005, the Plaintiff's attorney forwarded written notice to the Defendant's [sic] attorney that the Plaintiff was exercising its right to prepayment of the outstanding balance remaining on the contract . . . and requesting that the parties proceed with closing immediately. . . .

(Paragraph numbering in original omitted.) Plaintiffs further alleged that, even though Mary Darnell had notified the Fenns of her intent to prepay the outstanding balance of the loan, the Fenns nevertheless sold the property to Teddy Jones, a trustee for an undisclosed principal. Plaintiffs sought specific performance of the contract and damages for breach of that contract.

The contract ("the Contract") was entered into on August 2, 1996. The title of the document is "Deposit Receipt and Contract for Sale and Purchase." The Contract refers to the Fenns as "SELLER" and identifies Mr. Darnell d/b/a Walden Creek Stables as "BUYER." (Capitalization in original.) The Contract also contains an amortization schedule. The amortization schedule reveals a purchase price of $132,000, less a $5,000 deposit. Of the remaining $127,000 owed, the decedent was to make monthly payment of $999.11 for ten years. After ten years, the balance of $113,058.43 was to be made in one balloon payment. Financing was provided by the Fenns. The Contract states:

CLOSING AND POSSESSION: This contract shall be closed and the deed delivered on or before August 1, 2006, unless extended by other provisions of this contract. . . . Possession of the property shall be delivered to BUYER at closing. . . .

(Capitalization in the original.)

Attached to the Contract is an Addendum. The Addendum again refers to the parties as "BUYER" and "SELLER" and then lists several additional provisions. These provisions are:

The tenant agrees to lease the above described property under the following terms for a period of 10 years (120 months)[:]

The lease payment shall be $999.10¹ per month for 120 months with a Balloon payment of $113,058.43.

The tenant agrees to maintain the existing buildings in their current condition or better.

No buildings shall be removed from the property without written approval of the landlord.

The tenant shall be responsible for the property taxes and insurance on the building as they become due. The landlord will provide tenant with copies of these expenses. Property taxes and insurance will be pro-rated to the date of closing.

The tenant shall carry liability insurance with the landlord as co-insured for all claims arising during the term of this lease and any extensions.

A late charge of 5% will be charged for any payment received 10 days after the due date.

The tenant shall have the right to pre-pay this lease in whole or in part at his option at any time during the lease.

Earnest money in the amount of $5,000 will be considered prepaid lease payments. . . .²

(Paragraph numbering in original omitted; footnote added.)

Approximately one month after the complaint was filed, the new purchaser, Teddy Jones, went to the subject property. As best we can tell from the record, the decedent's son, Benjamin F. Darnell, Jr., and several other individuals were living on the property and/or working at the stables. When the decedent's son and the others refused to leave, Mr. Jones filed criminal trespass warrants and the people on the property were forcibly removed.

Plaintiffs sued the Fenns and Mr. Jones (collectively referred to as "Defendants"). Defendants answered the complaint and generally denied any liability to Plaintiffs. The Fenns then filed a counterclaim seeking a declaratory judgment that Plaintiffs had materially breached the terms of the contract and that the Fenns were acting legally when they terminated the contract.

Following a trial, the court entered a judgment finding that the Contract was enforceable. The trial court ordered Ms. Darnell to pay the remaining balance on the Contract and divested Mr. Jones of title to the property. Prior to entering its judgment, the trial court made several findings from the bench. Initially, the trial court determined that the Contract was a ten-year lease "with purchase at the end of ten...