Tenn. Traders Landing, LLC v. Jenkins & Stiles, LLC

TENNESSEE TRADERS LANDING, LLC v. JENKINS & STILES, LLC

No. E2017-00948-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT KNOXVILLE

April 17, 2018 Session

July 9, 2018

Appeal from the Chancery Court for Knox County

No. 191637-2

Clarence E. Pridemore, Jr., Chancellor

This case involves a dispute concerning the validity of an oral agreement to rescind a written commercial lease agreement. In May 2011, the plaintiff company entered into a written lease, agreeing to rent a commercial building to the defendant company for a set term of three years and nine months. The lease provided for the first nine months of tenancy without rental payments, setting rental payments at $2,250.00 per month for the remainder of the initial term. At some time during the latter part of 2011, the two companies' respective presidents purportedly met and mutually agreed to terminate and rescind the lease. The presidents' agreement was never memorialized in writing, however, and the lease contained a provision that prevented any oral modification to the contract. Neither company thereafter acted in accordance with the lease until November 24, 2015, when the plaintiff's new president contacted the defendant in writing, demanding thirty-six months of unpaid rent in addition to a five-percent late fee pursuant to the lease, for a total of $85,050.00. The defendant did not tender any payment to the plaintiff as requested. On May 17, 2016, the plaintiff filed a complaint in the Knox County Chancery Court ("trial court"), alleging unpaid rent and requesting an award of rent payments, late fees, and reasonable attorney's fees. The defendant filed an answer, asserting, inter alia, that the lease was invalid as a result of the oral rescission by mutual agreement in 2011. Upon cross-motions for summary judgment, the trial court granted summary judgment in favor of the plaintiff, awarding a monetary judgment in the amount of $92,208.75, representing an $81,000.00 balance of unpaid rent, $4,050.00 in late fees, and $7,158.75 in reasonable attorney's fees and expenses. The defendant filed a motion to alter or amend judgment, which the trial court denied. The defendant has appealed. Having determined that the lease did not prohibit an oral rescission by mutual agreement, we reverse the grant of summary judgment to TTL. Having also determined that a genuine issue of material fact remains as to whether TTL's former president possessed the authority to orally rescind the lease, we affirm the denial of summary judgment to J&S and remand for evidentiary proceedings consistent with this opinion.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in Part, Reversed in Part; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which RICHARD H. DINKINS, J., joined. CHARLES D. SUSANO, JR., J., not participating.

Kevin C. Stevens and Briton S. Collins, Knoxville, Tennessee, for the appellant, Jenkins & Stiles, LLC.

Lawrence P. Leibowitz and Brandon J. Tindell, Knoxville, Tennessee, for the appellee, Tennessee Traders Landing, LLC.

OPINION

I. Factual and Procedural Background

On May 10, 2011, the plaintiff, Tennessee Traders Landing, LLC ("TTL"), entered into a commercial lease agreement ("Lease") with the defendant, Jenkins & Stiles, LLC ("J&S"), for the occupation of unfinished office space and warehouse storage located on Byington Solway Road in Knoxville, Tennessee, for an initial period of three years and nine months. The parties acted through their respective presidents at the time, Christopher ("Chris") Gettelfinger, who was TTL's president, and Bart Jenkins, who was J&S's president.¹ The Lease sets forth a "base rent" schedule of "free rent" for the first nine months following the Lease's execution and $2,250.00 due each month thereafter for three years, comprising a "Basic Initial Term" of three years and nine months. The Lease then sets forth renewal option periods at incrementally higher rental rates provided certain conditions are met. Under the Lease, the initial three-year term during which rent payments would have been due spanned February 10, 2012, through January 10, 2015.

The Lease also includes the following pertinent provisions:

I. Premises.

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(D) Condition of Premises. The Premises is [sic] leased to Tenant in its present physical condition and state of title (including, withoutlimitation, matters of survey and zoning, building and other laws, regulations and restrictions now and hereafter in effect), and Landlord makes no representation or warranty with respect thereto.

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III. Improvements. Landlord shall not be required to make any improvements to the Premises. Unless otherwise allowed by this Lease, Tenant shall not make improvements to the Premises. Notwithstanding the foregoing, at any time during the Basic Initial Term (defined below), Tenant shall have the option to ask Landlord to covert [sic] the above referenced unfinished office space of [the Premises] into finished office space at Landlord's expense ("Option"). . . .

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XIV. Default. If any one or more of the following events shall occur, an "Event of Default" shall have occurred under this Lease:

(A) Non-Payment. If Tenant shall fail to pay any installment of Rent (including Base Rent, Additional Rent or other sums due from Tenant to Landlord under this Lease);

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XV. Remedies.

(A) Right to Terminate Lease. If there shall occur an Event of Default, then Landlord may, in addition to any other remedy available to Landlord under this Lease or in law or at equity, at Landlord's option, declare this Lease terminated and Tenant shall quit and surrender possession of the Premises, but Tenant shall remain liable to Landlord as hereinafter provided.

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(D) Survival Covenant - Liability of Tenant after Re-Entry and Possession or Termination.

(1) Survival of Obligations. If any Event of Default occurs (whether or not this Lease shall be terminated as a result of anEvent of Default), Tenant shall remain liable to Landlord for all Base Rent, Additional Rent, and other sums herein reserved (including, but not limited to, the expenses to be paid by Tenant pursuant to the provisions of this Lease); less the net amount of rent, if any, that shall be collected and received by Landlord from the Premises, for and during the remainder of the Term of this Lease. In addition, Landlord may, from time to time, without terminating this Lease, as agent for Tenant, re-let the Premises or any part thereof for such term or terms, at such rental or rentals, and upon such other terms and conditions as Landlord may deem advisable, in accordance with the provisions of Section XV(C) above. The failure or refusal of Landlord to re-let the Premises or any part thereof shall not release Tenant or affect Tenant's liability for damages. . . .

(2) Rights on Termination. . . . Landlord shall not, by any re-entry or other act, be deemed to have terminated this Lease, unless Landlord shall notify Tenant in writing that Landlord has elected to terminate the same.

(E) Landlord's Right to Cure. Landlord may, but shall not be obligated to, cure any default by Tenant . . . .

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(H) Attorney's Fees. In the event it becomes necessary for the Landlord to employ attorneys or institute any legal proceedings for the enforcement or protection of its rights hereunder or as a result of an Event of Default, Tenant agrees to pay Landlord's reasonable attorney's fees and all court and other costs incurred by reason thereof.

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XXI. Limitations on Landlord's Liability.

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(B) Remedy. . . . No person who is an officer, director, shareholder, member (or principal or partner or other constituent person or entity of anynon-corporate Landlord), employee, agent, or legal representative of Landlord shall be personally liable for any obligations or liabilities of Landlord under this Lease.

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XXVI. Miscellaneous.

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(I) Waiver. No course of dealing on the part of Landlord, its members, agents, or representatives, and no failure or delay by Landlord with respect to the exercise of any right, power, or privilege by Landlord under this Lease shall operate as a waiver thereof, or any single or partial exercise of any such right, power, or privilege. No waiver of any Event of Default shall be effective unless in writing, signed by the Landlord. No waiver of any Event of Default shall preclude any later exercise thereof or any exercise of any right, power, or privilege hereunder. No waiver of any Event of Default or forbearance on the part of the Landlord in enforcing any of its rights under this Lease shall operate as a waiver of any other default or right or of the same default or right in future occasions.

(J) Entire Agreement; Modification. It is understood and agreed by and between the Parties hereto that this Lease contains the final and entire agreement between said Parties, and that they shall not be bound by any terms, statements, conditions or representations, oral or written, express or implied, not herein contained. This Lease may not be modified orally or in any manner other than by written agreement signed by the Parties hereto.

Although the Lease makes no mention of its purpose or the parties' intent, Chris Gettelfinger and Mr. Jenkins stated in their respective affidavits, attached to J&S's motion for summary judgment, that the parties entered into the Lease in order to assist TTL with securing financing for its business operations. According to Chris Gettelfinger and Mr. Jenkins, TTL was ultimately unable to secure financing. The affiants further stated that Chris Gettelfinger met with Mr. Jenkins at some time near the end of 2011 and mutually agreed to "terminate and rescind" the Lease. TTL claims that it had no knowledge of this meeting and that Chris Gettelfinger did not have the authority as president when meeting with Mr. Jenkins to terminate and rescind the Lease. It is undisputed that J&S never took possession of the office space under the Lease and that neither party took any action...