Homes v. Welch
| Decision Date | 12 August 2022 |
| Docket Number | M2021-01383-COA-R3-CV |
| Parties | TENNESSEE HOMES v. DALTON L. WELCH, ET AL. |
| Court | Tennessee Court of Appeals |
TENNESSEE HOMES
v.
DALTON L. WELCH, ET AL.
No. M2021-01383-COA-R3-CV
Court of Appeals of Tennessee, Nashville
August 12, 2022
Assigned on Briefs July 1, 2022
Appeal from the Circuit Court for Coffee County No. 2020-CV-47049 William A. Lockhart, Judge
This appeal is a landlord-tenant dispute involving issues of liquidated damages and material breach of contract. The landlord filed a civil warrant in general sessions court to recover an early termination fee and other related fees pursuant to the parties' lease agreement. The general sessions court entered a judgment in favor of the landlord finding that the early termination fee was reasonable and was not a penalty. The tenants appealed the judgment to the circuit court. The circuit court also entered a judgment in favor of the landlord finding that the early termination fee was reasonable and was not a penalty and that the landlord did not breach the lease agreement. The tenants appeal. We affirm as modified and remand to the circuit court for calculation of damages.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and Remanded
Drew Justice, Murfreesboro, Tennessee, for the appellants, Dalton L. Welch and Alexis S. Clark.
James D. Lane, II, Tullahoma, Tennessee, for the appellee, Tennessee Homes.
Carma Dennis McGee, J., delivered the opinion of the court, in which W. Neal McBrayer and Kristi M. Davis, JJ., joined.
OPINION
CARMA DENNIS MCGEE, JUDGE
I. Facts &Procedural History
In March 2020, Dalton L. Welch and Alexis S. Clark (collectively, "Tenants") entered into a "Tennessee Residential Lease Agreement" with Tennessee Homes
("Landlord").[1] The lease agreement consisted of 33 paragraphs and included six addenda regarding the following: insurance; pest control; wi-fi end user acceptance agreement; zero tolerance for criminal activity; pets; and a statement of facts. The lease agreement was for a 12-month term and required monthly rent in the amount of $865.00. Additionally, the lease agreement contained the following relevant provisions:
3. DAMAGE DEPOSIT: Upon the due execution of this Agreement, Tenant shall deposit with Landlord the sum of [$500.00] receipt of which is hereby acknowledged by Landlord, as security for any damage caused to the Premises during the term hereof. Such deposit shall be returned to Tenant, without interest, and less any set off for damages to the Premises upon the termination of this Agreement
5. CONDITION OF PREMISES: Tenant stipulates represents and warrants that Tenant has examined the Premises, and that they are at the time of this Lease in good order, repair, and in safe, clean and tenantable condition. Any damaged or non-working items on the Premises will be noted on the attached and signed 'Check-in Sheet'.
. . .
7. ALTERATIONS AND IMPROVEMENT: Tenant shall make no alterations to the buildings or improvements on the Premises or construct any building or make any other improvements on the Premises without the prior written consent of Landlord. Any and all alterations, changes, and/or improvements built, constructed or placed on the Premises by Tenant shall, unless otherwise provided by written agreement between Landlord and Tenant, be and become the property of Landlord and remain on the Premises at the expiration or earlier termination of this Agreement.
. . .
13. INSPECTION OF PREMISES: Landlord and Landlord's agents shall have the right at all reasonable times during the term of this Agreement and any renewal thereof to enter the Premises for the purpose of inspecting the Premises and all buildings and improvements thereon. And for the purposes of making any repairs, additions, or alterations as may be deemed appropriate by Landlord for the preservation of the Premises of the building .....
. . .
21. EARLY TERMINATION FEES: If this agreement terminates for nonpayment or other listed defaults, other than a Landlord approved written termination from Tenant, Tenant agrees to pay [$1,000.00], in addition to all other fees, charges, and damages allowed, as an Early Termination Fee (hereinafter referred to as 'Early Termination Fee'). The Early Termination Fee is not a penalty, but rather a charge to compensate Landlord for Tenant's failure to satisfy the terms of the agreement.
. . .
24. FEES: Should it become necessary for Landlord to employ an attorney to enforce any of the conditions or covenants hereof, including the collection of rent or gaining possession of the Premises, Tenant agrees to pay all expenses incurred, including a reasonable attorney's fee .....
. . .
27. SEVERABILITY: If any provision of this Agreement or the application thereof shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entitles, or circumstances shall be affected thereby, but instead shall be enforced to the maximum extent permitted by Law.
After entering into the lease agreement, Tenants moved in to the apartment. Pursuant to paragraph 5 of the lease agreement, Tenants completed a check-in sheet and determined that, non-figuratively, everything but the kitchen sink was in acceptable condition at the time. They submitted a work order requesting that maintenance inspect the leaky sink. Both the check-in form and the work order contained notations that the sink was checked and/or repaired. However, according to Mr. Welch, he eventually had to fix the sink himself after waiting for help to no avail. Shortly after they moved in, Tenants also discovered that the refrigerator was not working properly, but this issue was not noted on the check-in form.
In June 2020, Mr. Welch drafted a letter expressing his and Ms. Clark's dissatisfaction with the apartment and their desire to terminate the lease. He described other issues such as the defective wi-fi and having to replace the refrigerator, and complained about the lack of response they received in regard to these issues. He also suggested that they should not have to pay anything further due to their trouble and that they would be out of the apartment by the end of June. In response to this letter, Landlord agreed to let them out of their lease, but he informed them that, per paragraph 21 of the
lease agreement, they would have to pay the early termination fee of $1,000. In a text message, Mr. Welch acknowledged that he would pay the early termination fee but disagreed to pay any other fees beyond that. At the end of June, Tenants moved out of the apartment as agreed but did not pay the early termination fee. Landlord was able to relet the apartment to another individual on July 9, 2020.
As a result of Tenants' failure to pay the early termination fee, Landlord filed a civil warrant in general sessions court pursuant to paragraph 24 of the lease agreement. Landlord sought to recover the "early termination fee of $1,000.00," as well as the "remaining monthly rent until property is relet at $865.00 (8 months) per month; damages of $250.00; courts costs of $145.50; service fees of $75.00; [and] attorney's fees of $600.00 for a total of $8,490.50."[2] Tenants disputed whether they caused any physical damage to the apartment, but an affidavit was filed by Landlord claiming otherwise. They also argued that the early termination fee was unenforceable because it was a penalty, which was against public policy. The general sessions court held a trial on the matter in September 2020. The court entered judgment in favor of Landlord finding that the early termination fee was reasonable and was not a penalty. The court held that Landlord was entitled to a total of $1,870.50, less the $500.00 security deposit. The judgment for $1,870.50 included the following fees: $1,000.00 for the early termination fee; $600.00 for attorney's fees; $145.50 for court costs; $75.00 for service fees; and $50.00 for damages. Thereafter, Tenants timely appealed the judgment to the circuit court.
The circuit court ultimately held a de novo trial on the matter in October 2021. Tenants raised an allegation not previously tried regarding a material breach by Landlord. After closing arguments, the court made an oral ruling in favor of Landlord and stated that Landlord could submit an affidavit for attorney's fees. Counsel for Landlord subsequently submitted an affidavit. On October 22, 2021, the circuit court then entered a judgment detailing its findings. Like the general sessions court, the court found that the early termination fee was reasonable and was not a penalty. Furthermore, the court found that Landlord did not breach the lease agreement. Therefore, the court held that Landlord was entitled to judgment and calculated the judgment amount as follows:
-
Rent:
$252.00
Damages:
$50.00
Early Termination Fee:
$1,000.00
Subtotal:
$1,302.00
Afterward, Tenants timely filed an appeal with this Court.
Tenants filed a statement of the proceedings, to which Landlord filed an objection. After a hearing on the matter, the circuit court entered an order finding that all aspects of the statement of proceedings were consistent with what had transpired, with the exception of two clarifications concerning the lease...
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