Evco Corp. v. Ross

Citation528 S.W.2d 20
PartiesEVCO CORPORATION, Petitioner, v. Richard ROSS and Beryl Ross, Respondents.
Decision Date15 September 1975
CourtSupreme Court of Tennessee

Robert H. Crawford, Chattanooga, for petitioner.

Charles W. Lusk, Jr., Hall, Haynes, Lusk & Foster, Chattanooga, for respondents.


HARBISON, Justice.

This case involves the construction and interpretation of a lease agreement entered into on April 15, 1972 between the respondents as lessors, and petitioner as lessee.

Although the property rented is valuable commercial property, the lease agreement is very brief. The term of the lease is from April 15, 1972 through April 14, 1977, and the premises covered are located at 5621 Brainerd Road, in Chattanooga, on which there was situated a restaurant building, or lounge, known as 'The Light Fantastic'.

The lessee agreed to pay rental of $1300 per month, beginning on April 15, 1972, and the lessor was authorized to take possession of the premises without legal action in the event there was a default for as much as 30 days in the rental payments. The lease provided that the lessee should have full use of the furniture and fixtures on the premises, and should return the same at expiration of the lease in as good condition as when first accepted, with the exception of wear and tear.

The lease then contained the following provisions:

'It is understood and agreed that the lessee shall be responsible for the minor repairs that may become necessary to the building structure during the term of the lease, and if said lessee desires to make any addition to the said building structure or to otherwise alter, modify or change same, consent of the lessee (sic) shall first be obtained.

'Lessee shall carry liability insurance upon the premises sufficient to save the lessor harmless for any liability that might arise in the use of the said premises.

'The lessor shall be responsible for all major repairs that may become necessary to the building structure during the term of the lease and should same occur lessor shall make necessary repairs within a reasonable period of time following the occurrance (sic).

'The lessor shall carry fire insurance upon the building structure for any damage thereto by fire.

'The lessee shall pay any increase in property taxes being assessed during the term of the lease.

'It is understood and agreed that the lessee shall return the premises back to the lessor at the expiration of the lease, in as good condition as when premises first occupied, wear and tear excepted from ordinary use.'

On April 19, 1973, a fire occurred on the premises, the origin of the fire not being disclosed in the record. The building and contents were very substantially damaged, but the only issue before us concerns the building structure, and not its contents. Both the Chancellor and the Court of Appeals in the present litigation have concurred in finding that the damage to the building was so severe as to amount to total destruction, from a practical standpoint. There being substantial evidence to support this finding, this Court is bound by the same and that question is not open to further review here. T.C.A. § 27--113.

This suit was instituted by the lessee to enforce the covenants of the lease, it being alleged that portions of the building could still be used, particularly the outside walls, and that Mr. Ross, one of the lessors, had requested the lessee to procure plans for the rebuilding, stating that thereupon the lessors would rebuild. The complaint alleges, however, that thereafter the lessors stated that they had received proposals for other and more profitable uses of the property, and that they had declined to restore the building which had burned. The suit sought, in effect, specific performance of an alleged duty on the part of the lessors to rebuild, together with damages for delay and abatement of the monthly rental during the period of repairs. There were also prayers for attorneys fees and for general relief.

The lessors admitted the terms of the lease, but alleged in their answer that the building had been totally destroyed by fire. They alleged that there was no duty on their part to rebuild under the terms and provisions of the lease, but the lessors took the position that the lessee continued to be liable for payment of rent and fulfillment of the lease terms unless or until the lease was cancelled or terminated.

Both parties moved for summary judgment. The Chancellor concluded that there were disputed factual issues, but instead of overruling both motions as required under Rule 56 of the Tennessee Rules of Civil Procedure, he ordered a reference to the Clerk and Master for determination of certain issues of fact. This was done without objection by either party insofar as the record discloses. On the reference, the Clerk and Master was directed to determine the nature and extent of the damage to the building, cost of repairs, etc., and the parties took extensive proof on these issues before the Master. The Master thereupon returned a report to the Chancellor, finding in effect that the building was totally destroyed by fire, and that the cost to rebuild would be essentially the same whether the existing structural walls were used or demolished in the rebuilding. Exceptions to this report were filed, and these were overruled by the Chancellor. The Chancellor then filed a memorandum opinion, to the effect that there was no duty on the part of the lessors, under the terms of the lease in question, to rebuild the building when there was a total loss, as distinguished from a partial loss. He accordingly denied relief to the lessee, but further found that it was the intention of the parties that the lease would terminate upon total destruction of the building. He excused the lessee from paying rent from and after the date of the filing of this suit, whih was some two months after the date of the fire, and directed a refund of all rentals paid subsequent to the filing date.

The Court of Appeals affirmed the holding of the Chancellor in part, finding that the covenant of the lessors in this case to make major repairs and to insure against any damage to the building by fire was only a limited or special covenant, and not a general one, and that there was no duty to rebuild in the event of total destruction. The Court of Appeals held, however, that since the lessee had not availed itself of its statutory right to terminate the lease pursuant to T.C.A. §§ 64--702, 703, the lease was still in force and effect, and the lessee was obligated to continue making the prescribed rental payments.

The lessee filed a petition for certiorari with this Court, which was granted. We have examined the authorities cited by the Court of Appeals, and we are in agreement with the general principles of law stated therein, to the effect that a special or limited covenant to make repairs on the part of the lessor does not obligate the lessor to rebuild the structure in the event of a total loss or destruction. A general covenant to repair usually is deemed to include cases of total as well as partial destruction. See Annot., 38 A.L.R.2d 682, 703 et seq. (1954).

In the present case, however, we are not satisfied with the conclusions of either of the courts below to the effect that the covenant in this case was special or limited. It was an unconditional covenant to make all major repairs to the premises during the term of the lease coupled with an agreement on the part of the lessors to procure fire insurance upon the building 'for any damage thereto by fire.'

We need not consider in this case whether the lessors would be obligated to rebuild the structure had it been totally destroyed by flood, collision or some cause other than fire. The covenant to make 'all major repairs that may become necessary to the building structure during the term of the lease' is, to say the least, not expressed in narrow or restricted language. Most of the cases in which covenants have been deemed to be special or limited have been cases where the lessor agreed to repair or maintain the roof, outside walls, or some other specific portion of the building. 1 In the present case, however, there is not only the broad agreement to...

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