Lasater v. Hawkins
| Decision Date | 10 October 2011 |
| Docket Number | No. M2010-01495-COA-R3-CV,M2010-01495-COA-R3-CV |
| Parties | MARCELINE LASATER v. KENNETH J. HAWKINS, et al. |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Wilson County
No. 2008-CV-933 Tom E. Gray, Chancellor
A contract for the sale of a sixty-four acre tract of land provided that a vacant house on the tract and the lot immediately surrounding it would automatically revert to the seller if the buyers did not install a water line across the property within a year of the contract's execution. The same condition was set out in the warranty deed. The buyers failed to install the water line, but the seller, a Texas resident, did not immediately attempt to retake possession of the house and lot. Five years after the contract was signed, the seller filed a "notice of automatic reverter of title," followed by a declaratory judgment suit to quiet title and to recover damages. The trial court granted partial summary judgment to the seller, ruling that the contract and the deed created a fee simple determinable and, therefore, that ownership of the disputed property reverted to her by operation of law one year after the contract of sale was executed. A hearing on damages resulted in an award to the seller of about $142,000 in compensatory damages, which included income that the buyers had collected from renting out the house prior to the filing of the notice of reverter. Buyers contend on appeal that the estate created by the contract of sale was not a fee simple determinable, but rather a fee simple subject to a condition subsequent, a form of future interest under which the property does not revert to the seller until the seller takes some action to retake possession of the property. Such an interest would result in a much smaller award of damages against the buyers under the circumstances of this case. We affirm the trial court's holding that the contract of sale created a fee simple determinable, but we modify its award of damages to correct an error.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed as Modified
James Haggard Kinnard, Lebanon, Tennessee; Shawn Joseph McBrien, Angelique P. Kane, Lebanon, Tennessee, for the appellants, Kenneth J. Hawkins, Ind. and as trustee for Kenneth J. Hawkins and Harold Gordon Bone and B & H Rentals, LLC.
Barbara Jones Perutelli, Nashville, Tennessee, for the appellee, Marceline Lasater.
In the Spring of 2003, Kenneth Hawkins and Harold Gordon Bone (collectively "Buyers") entered into negotiations with Marceline Lasater (hereinafter "Seller") for the sale of a portion of a 125 acre farm in Wilson County that Seller had inherited in 1989 from her grandfather Grant Dedman. On September 30, 2003, the parties entered into an "Agreement for Sale of Real Estate." Under the Agreement, Buyers paid $440,000 to obtain a 68.4 acre tract of land while Seller retained the remaining 57 acres of farm acreage. Buyers were developers who hoped to profit by subdividing the property they had bought. The tract they bought included a home that Grant Dedman had constructed in 1937 and occupied until his death, a structure referred to in the documents of sale as "the Rock House."
Several provisions of the sixteen-page contract of sale deal with the Rock House. One provision required the creation and recordation of a subdivision plat for the lot upon which the Rock House stands. (Further references to the Rock House in this opinion shall mean the house itself and the six acre lot surrounding it). Another provision, found in a section titled "Future Use and Sale of Property, Restrictions and Agreements," gave Seller the right of first refusal in the event that Sellers decided to sell the Rock House. Yet another provision in the same section required Buyers to install a municipal water line across the property they had purchased, to the western edge of Seller's adjoining property within one year of the closing date,1 and to grant easements to Seller to allow her access to the waterline for the use of her property, which she also hoped to see developed.
For the purposes of this opinion, the most important part of the contract is found in the subsection dealing with the installation of the water line. It states that "[i]n the event that Buyer does not comply with the provisions in this paragraph, title to the Rock House Lot shall automatically revert to Seller in fee simple." Also, "[i]f no plat has been recorded creating a subdivided lot for the Rock House lot at the time of the event triggering the automatic reverter, then title to the property described as Tract No. 10 on the survey of the Grant Dedman Estate dated January 9, 1979. . . shall automatically revert to Seller in feesimple." Conversely, "[u]pon completion of the installation of the said waterline within one year of closing, the Grantor shall execute a Quitclaim deed to Grantee conveying all her right, title and interest in and to this automatic reverter and said document shall be recorded in the Registrar's Office for Wilson County, Tennessee." (emphasis added).
Finally, a section titled "Remedies," affirmed the right of each party to bring a suit for damages under Tennessee law in the event of breach of the contract by the other party, and declared that "[t]he prevailing party in any action proving substantial breach shall be entitled to recover its costs, expenses and attorney's fees incurred in the enforcement of this Agreement." The restrictions found in the contract of sale, including those concerning the Rock House, the waterline, and the possible reversion were all incorporated into the warranty deed.
Before the contract of sale was finalized, buyers planned to divide the property into a subdivision of 22 lots with septic tanks. A survey of the property revealed, however, that it was located within one mile of the city limits of the City of Lebanon, meaning that it was subject to possible annexation by the city, and therefore that its development fell within the jurisdiction of the Lebanon Planning Commission. In November of 2003, Buyers were informed that the Commission insisted that they would have to install sanitary sewers if they wished to develop the property. This requirement made their original plan economically unfeasible, so Buyers began making plans for a 96 lot subdivision on the property. This, however, raised additional permitting and financial problems.
Buyers had acted as partners in the development of Grant Dedman Estates (as their subdivision was to be named), but when their plans unraveled, they came to a parting of the ways. They filed suit in Chancery Court to dissolve B & H Rentals, a limited liability corporation that they used for lease transactions on the Rock House. They also moved the court for permission to sell at auction the land they had purchased from Seller. The promised water line was never installed, but Seller did not take any steps to retake possession of the Rock House until after Buyers asked her to execute a quitclaim deed so they could sell the property.
On August 7, 2008, Ms. Lasater filed a "Notice of Automatic Reverter of Title" in the Circuit Court of Wilson County. She followed that up on November 20, 2008, with a Complaint for Declaratory Judgment. The complaint named Kenneth Hawkins, Harold Bone and B & H Rentals as defendants. Seller asked the court to declare that she has been the owner of the Rock House in fee simple as a matter of law since September 30, 2004, and that she was entitled to damages from that date "for possession, waste, damages, trespass, rentsfrom September 30, 2004, and costs plus reasonable attorney's fees pursuant to the Agreement for Sale of Real Estate."
Buyers answered the complaint, raising several affirmative defenses: impossibility of performance, because they could not obtain the necessary permits before the waterline could be installed; and laches and waiver, because of Seller's failure to assert her right to reverter in a timely way.
On August 19, 2009, Seller filed a motion for summary judgment. She asserted that there were no material facts in dispute and that a proper construction of the contract of sale and the deed in this case showed that she was entitled to judgment as a matter of law. See Tenn. R. Civ. P. 56.04. Buyers' memorandum in opposition to the motion for summary judgment asserted the same defenses that they had raised in their answer. The trial court heard the motion on October 5, 2009, and granted Seller a partial summary judgment, holding that the reversionary clause in the contract created a fee simple determinable, which provided that ownership of the Rock House would automatically revert to her by operation of law if Buyers failed to install the agreed-upon water line within one year after the execution of the contract.
On October 14, 2009 the court conducted an evidentiary hearing on Buyers' defenses to the enforcement of the reversionary clause. Ms. Lasater testified that her parents and grandparents were born in Tennessee, but that she grew up in Texas, went to school there, and became an attorney. She has three children and operates a civil litigation practice in Austin. She travels to Tennessee on occasion. In recent years, this has usually been for the funerals of her older relatives. She hopes to develop the Tennessee property she still owns, perhaps as a bed and breakfast, sometime in the future after her children are grown and she is able to retire.
Seller was asked about the discussions that led the parties to include the waterline requirement in the contract of sale and her reason for drafting the provision that called for the automatic reversion of the Rock House in the event that Buyers did not install the waterline as promised. She explained that because sh...
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