### IN THE COURT OF APPEALS OF TE NNESSEE AT KNOX VILLE Su bmitt ed on b ri ef

s, F eb ru ar y 14, 200 6

AHM ED US SO and GEN ET A YEL E v. B RY AN WINST ON

Direc t Appeal from the Chancer y Court for Washin gton County No. 36265 Hon. G. Richard Johnson , Chancellor

No. E2005-01746-COA- R3-CV - F ILED MARCH 31, 2006

Plaintiffs sued to rec over e arne st money tender ed with a c ontrac t t o purcha se re alty . Def endant
c ou nte r- su e d f

or br e a c h o f c on tr a c t a nd da ma g e s. Th e Tr ia l Co urt O rd e re d th e re turn o f the e arn e st
mon e y to p la int if

fs . We a ff

ir m.

Te nn. R . A pp. P .3 App e al a s o f Rig ht ; J udgm e nt of t he Cha nc e r y C our t A ffirm e d.

H ER SCH EL P I CKE N S F RAN KS , P.J ., delivere d the opi nion of the Court, in which C H A RLES D. S US ANO , J R ., J . joined, and D. M I CH A EL S WI NEY , J . dissented and f iled a sepa

rate opinion.

Mic ha e l S. L a tti e r, Ki ng sp ort, T e nn e sse e , f or app e lla nt.

Jame s D . Cu lp, John so n Ci ty , T e nn e sse e , f or app e lle e s.

OP IN ION

I n this action plaintiffs soug ht to recove r their e ar n est money paid at the time of enter ing a contra ct to purcha se a house in Gray , Tenne ssee from defe ndant, Bry an W inston. W inston filed an Answer and Counter-Claim, alleg ing the plaintiffs had brea ched their contra ct and we re not
e n t i t l e d t o t h e r e t u r n o f

t h e i r e ar n e s tm o n e y. The Complaint alleg ed that plaintiffs ha d neg otia t ed a co n trac t with W inston for a purcha se price of $392,500.00 and the n posted a $5,000.00 e arne st m o n ey d ep o sit. The contra ct provided that plaintiffs would obtai n a l o an for 80% of the purc hase price on a fiftee n-y ear repa y ment term. Plaintiffs aver red tha t they

had a p plied for a

loan from two sourc es, but wer e declined by

the first sourc e for

lack of sufficie nt inc ome, and declined for a fiftee n-y ear loan from the second source , and since they could not obta in a loan under the conditions of the contr act, theyRealty Ex ecutives pa id the earnest money into court and we re pr eliminarily dismiss ed fr om 1 the suit, as wer e Pardue and B lue Ridge

.

-2- wer e entitled to a r efund of the ea rnest money

.
I n th e An sw e r, Wins ton state d th a t he wa s a c on tr a c tor

a ndbu ilt

the ho us e in question, and base d on the plaintiffs’ r epre sentat i o n s , h e put in finishes specif ically reque sted by plaintiffs. He a dmitted that the contrac t w as conditional upon plaintiffs’ ability to obta in a loan for 80 % o f the pu rc ha se pr ic e , f or a te rm of fi ft e e n y e ars , b ut c ha

rg e d th a t pl a int if

fs wer e re qu ir e d to pursue qua lification for the loan dilige ntly and in g ood faith. He conclude d that plaintiffs brea ched the contra ct and c aused him to i n cu r d am age s and under the terms of the contra ct plaintiffs had fo rf e ite d th e ir e arn e st m on e y , a ndsh ou ld b e lia ble to h im f

or da ma g e s a nda tto rn e y ’s fe e s. 1

The Court conduc ted an e videntiary hearing on N ovember

18, 2004. At the conc lusion of the hearing the Court issued its Opini on from the b en ch

. T h e Court found that the c ontrac t was conditioned upon plaintiffs g etting a loan for 80% of the purchase pr ice, with a te rm of 15 y ear s, and that plaintiffs had to be “ qualified to re ceive th e loan de scribed he rein ba sed upon lende r’s c ustomary and standa

rd under writing criteria.”
The Court found that plaintiffs di d i mmediately try to obtain a loan, and the y wer e turne d do wn by bo th G re e ne Cou nty

B a nk a ndF ir st B a nk

a ndTr us t, a nd th at pla int if

fs the n w e nt t o Eliz abethton F eder al, wher e there was a conflict in testimonybeca use plaintiffs said they

signe d a blank applica tion, and Sam C ro wder who is a loan off

icer at Elizabethton Fede ral, said the application wa s filled in when they signe d it. The Court found that plaintiffs sig ned the a pplication in blank, an d t h at Crowder completed it, and submitted it to the board for a thirty y ear loan. The Court found that the thirty y ear loan was not appr oved until the bank re ceive d income verification. The Court said:

Now, I g uess y ou could say

they approve d it subject to or y ou coul d s ay they disapproved it subjec t to. I think that they

approve d the loan, but they did not approve the loan. The y disapproved the loan. They didn ’t ap p ro v e it; they dis app ro ve d it . A ndthe y sa id, “ We’ re no t g oin g to a pp ro ve it u nti l w e g e t in c ome verific ation. This loan is not made. This loan is n o t ap p ro ved. This loan – no money shall g o out of this bank on this loan until we g et income ve rifica tion” of the Pla int if fs

. The Court found that Crowde r t ried to call plainti ffs’ home twice a nd g ot no answer , but never called the ir business phone, so “this banke r doesn’ t want to make this loan too ba dly .” The Court further

found that i f C rowde r had contacte d the plaintiffs and g otten their income ve rifica tion the loa n w ou ld h a ve be e n a pp ro ve d a ndthe y

wo uldha ve a c c e pte d a

loa n, even if it wa s f

or thi rt y y ear s. The Court found the pl ai n t iffs neve r knew their loan c ould have be en appr oved by-3-

El iza be tht on F e de ra l, a ndthat w a s no t th eir fault, a ndthu s a wa rd e d p la int if

fs a re fu ndof

the ir
earnest money

and dismissed the counter claim.

Th is a pp e a l pr e se nts the se iss ue s:
1. Di d th e Cou rt

e rr in f ind ing that pla int if

fs a c te d dili g e ntl y a nd in g oo d f a ith wher e the plaintiffs were approve d for a loan subject only

to providing a

tax return, but f

ailed to provide the return a nd close the loan?

2. When the bank loan of fice r testified that the ba nk approve d a lo an subjec t only to the plaintiffs providing a copy of their tax return, did the Trial Court
e rr i n f i n d i n g t h a tt h e b a n k

d i s ap p r o v e d t h e l o a n ?

3. Did the Trial Court e rr in f inding that the plaintiffs applied f or a f ifteen y ear loa n, wh e n th e ba nk

of fi c e r t e sti fi e d th a t th e pla int if fs on ly app lie d f or a thi rt y y ear loan?

4. Di d th e Tr ia l Co urt e rr in f ind ing that th e ba nk

of fi c e r w a s re qu ir e d to
c omm un ic a te wi th p la int if fs in the ma nn e r p ro vid e d in the c on tr a c t?

Th e c on tr a c t be tw e e n th e pa rt ie s p ro vid e s: This Ag ree ment is made conditioned upon B uy er’ s abilityto obtain a loan in the principal a mount of 80% of the purcha se price listed a bove, to be secur ed by

a dee d of trust on the Property ; the loan to be paid in conse cutive monthly installments of pr inc ipa l a ndint e re st o ve r a ter m of 15 y e a

rs . “ Ab ili ty

to o bta in” a s u se d h e re in means that B uy er is qualifie d to rec eive the loa n described her ein base d upon lender ’s customary

and standa

rd under writing criteria.

* * *

The B uy er a g ree s to (a) make application for the loan wit hin five business day s from the B inding Ag ree ment Date, ( b) immediately n o ti f y Se ll e r ’ s repr esenta tive of having applied for

the loan and the name of t h e lender , (c) pursue qua lification for a nd
ap p r o v a l o f t h e l o a n d i l i g e n t l y a n d i n g o o d f a i t h , ( d ) p a y a n y f

e e s n e c e ssa ry

to complete full loan proce ssing a nd approva l, and re quire lende r to order cre dit report and appr aisal within tw o d ay s o f a p plication, (e) continually and immediately

provide reque sted documenta tion to lender. . . . B uy er ma y also apply

for a loan with differ ent terms and c onditions and also close the tra nsaction provided all other terms a nd conditions of this Agr ee m en t are fulfilled, and the new loan doe s not increa se any costs char g ed to t he S eller. Buy er shall be obli g ated to close thi s transac tion if Buy er has the a bilityto obtain a loan with terms as de scribed he rein and/or any other loan for whic h Buy er ha s applied and be en appr oved.-4- The c ontrac t further

states that if the plaintiffs default, “ the Earne st Mone y shall be forf eited as pa

rtial liquidated damag es, and Seller may sue, in c ontrac t or tort, for a dditional damag es or sp e c if ic pe rf or ma nc e of

the Ag re e me nt, or bo th.

. . . I n th e e ve nt tha t a ny pa rt y he re to s ha ll f

ile suit for brea ch of e nforc ement of this Ag ree ment (including suits filed after closing which are based
on or re lated to the Ag ree ment), the pre vailing pa rty shall be entitled to rec over a ll costs of such enfor ceme nt, including r easona ble attorne y ’s fe es.”

I n Hende rson v. Quest Ex peditions, Inc. , 1 74 S.W. 3d73 0 ( Te nn . Ct . A pp . 2 00 5) we sa id:

The cardinal rule in the construc tion of contrac ts is to ascertain the intent of the parties. I f the c ontrac t is plain and unambig uous, the m eaning there of i s a question of la w, a ndit i s th e Cou rt ' s f un c tio n to int e rp re t th e c on tr a c t as w ri tte n a c c or din g to its pla in t e rm s. Th e la ng ua g e us e d in a con tr a c t must be take n a ndun de rs too d in its plain, ordinary , and popular sense. I n construing contra cts, the words e x pressing the parties' intentions should be given the usual, natura l, and ord i n ar y m eaning . I f the lang uag e of a

written instrument i s u n ambig uous, the Court must int erpr et it as
writt e n r a the r tha n a c c or din g to the un e xpre sse d in te nti on of on e of the pa rt ie s. Courts c annot make contra cts for parties but c an only enfor ce the contra ct which the parties themse lves have made.
The lang uag e in the parties’ contra ct is clea r, plainti ff s had to close on the house if they had the “ability to obtain a loan with terms as de scribed he rein a nd/or any other loan for which B uy er ha s applied and be en appr oved”, a nd the “ability to obtain” was de fined a s being “qualifie d to rec eive the loan desc ribed he rein ba sed upon lende r’s c ustoma ry and standa rd under writing criter ia.” Moreove r, plaintiffs had to “ pursue qua lification for a nd approva l of the loan dilig ently and in g ood faith.”

The Court found that Elizabethton Fe dera l did not approve a loan f or plaintiffs, nor did it communicate to plaintiffs that the loan would be approve d subject to income ver ification, and that plaintif

fs n ev er k n ew their loan could have been a pproved a nd conclude d that plaintiffs had acte d diligently

and in g ood faith.
Finding s of fa ct ar e re viewed de novo with a pre sumption of corre ctness, unless the evidenc e pre pondera tes otherwise . Tenn. R. App. P. 13(d). No such pre sumption attaches to the Trial Court’s conc lusions of law. Id

.

The e vidence at t rial preponderates that Eliz abethton Feder al di d approve a 30 y ear loan for pla intiffs, subject only to ge tting a copy of another y ear ’s income tax return (the y alre ady ha d on e ). Cr ow de r te sti fi e d that pla int if fs we re app ro ve d f

or the thi rt y y e ar l oa n a t 6 1⁄2

% i nte re st on Aug ust 1 5 , 2 0 03. Crowder ’s testimony on this point is unrefute d, and is supported by the exhibi ts. Crowder’ s testimonyis also corrobor ated by plaintiffs’ Answe r, whe rein they stated that

“ a r e p r e s e n tati v e o f E li za b e th to n F e d e r a l to ld th e Pl a in ti f f s th a t th e y w e r e ap p r o v e d f o r a 3 0 y ear loan, but not a 15 y ear

loan.”-5- Plaintiff testified in Court, however , that he did not hear anything f

rom the bank f

or “day s” and tha t he told his realtor he was ready to move on, even afte r she told him she thoug ht the loan m ight be approve d, and offere d to call and chec k on it for him. Significa ntly , the Complaint state s th a t E liza

be tht on F e de ra l tr ie d to qu a lif y the m for a thi rt y -y e ar loa n, bu t the y did no t wa nt i t. Usso’s testimony

at trial was he did not want a thirty y ear loan, beca use he thought he would have to pay too much interest.

The Court tende d to fault Crowder and Elizabethton Fe dera l for not not ify ing plaintiffs their loan wa s approve d pending rec eipt of a ta x return. Plaintiffs ha d certain obliga tions
un de r the c on tr a c t, inc lud ing the ob lig a tio n to pu rs ue a loa n o n th e ho me a ndtr y to c los e on it w ith diligenc e and g ood faith.

Pla int if fs app lie d f

or loa ns fr om thr e e dif

fe re nt l e nd ing ins tituti on s an d the ir applications we re r ejec ted by two. An offic ial of the third testified that that instit ution would have
ma de a 30 y e ar loa n to pla int if

fs , p ro vid e d th e y

g ot a dd iti on a l f

ina nc ia l in fo rm a tio n f

ro m pl a int if

fs

. Howeve r, that instituti on never reque sted additional information fr om the plaintiffs. We conclude , as the Tr ial Court did, that the plaintiffs acte d in g ood faith and diligenc e, and are entitled to a re fund
o f t h e i r e ar n e s tm o n e y. The Judgment of the Trial C ourt is aff irmed and the cause remanded. The cost of the appea l is assessed to Bry an Winston.

______________________________ H ER SCH EL P I CKE N S F RAN KS , P

. J.