### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE Marc h 19 , 200 4 S es sio n
KOK OMO G RAIN CO., INC. v . RANDY COLL INS, ET AL 

### . Appeal f romthe Chancer y Court for F ranklin County No. 16,951 Walter

C. K urtz, Judge

No. M2003- 00376-COA-R 3-CV - F iled March 26, 2004

This is a dispute betwee n the fo rm er t enant of a g rain stora g e fa cility

and the ne w owner s of the premises who a cquire d the prope rty at a f orec losure sale . The issues in dispute are wh et h er the tenant wa s a bailor or

a holdover

tenant following fore closure and the fa ir marke t storag e or r ental value of the pre mises. The trial judg e ruled that the former tenant wa s a holdover te nant and that the pr e vio us re nta l r a te wa s th e fa ir mark e t r e nta l va lue fo r the ho ldo ve r p e ri od . 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

F RAN K G. C L EME NT , J R ., J ., delivere d the opinion of the c ourt, in which W I L L I AM C. K O CH , J R ., P.J ., M.S., and W I L L I AM B. C A IN , J ., joined.

J err e Michae l H ood, Winchester, Te nnessee , for the a ppellants Randy

Colli ns and Jerre M. Hood. Stephen M. Worsham, Tullahoma, Tenne ssee, f or the a ppellee, K okomo Grain Co., I nc.
OP IN ION

Th is i s a dis pu te bet ween Kok omo G rain C o. , Inc ., thete na nt o f a g rain s tor a g e fa c ili ty located in Fra nklin County , Tenne ssee, and the new owner s of the pre mises, Randy Colli ns and Jerre M. Hood, who purc hased the rea l estate at a fore closure sa le.

Kokomo enter ed into a written lease ag ree ment on September 1, 2000 with the then-owne rs of the pre mises. The lea se ag ree ment was for a six -month period, with an option to rene w for a n additional six -month period under the same te rms and conditions. The r ental pay ment was $1,500 per month, pay able in advance. T he use of the pre mises was to be for g rain stora g e by Kokomo and for no other

purpose. The landlord supplied only the fa cility . No s ervic es we re pr ovided. Particularly , the landlord wa s not operating a commer cial g rain fa cil i t y ; i t was simply leasing the premises to Kokomo and r endering no othe r ser vices. Kokomo was responsible for providing the equipment and pe rsonnel for loading and unloading its grain.-2-

A f t e r t h e i n i t i a l t e r m , t h e l e a s e w a s r e n e w e d o n t w o o c c a s i o n s f o r a d d i t i o n a l si x-mo nth periods, pursua nt to the ag ree ment b et we en Ko komo and the pre vious owners. During a rene wal term the then-owne rs experience d substantial financia l difficulties and de faulted on the mortg ag e. As a re sult, the property

was sold at for eclosure on Dec ember 10, 2001 to appellants, J err e M. Hood and Randy

Colli ns. Ko k o m o was informed of Hood a nd Colli ns’ purc hase of the prope rty

on the d ayo f f o re cl o s u re
. A f

ew d ay s l at erKo k o m o wa s i n fo rm ed v erb al l y t h at a d i ff

er en tre n t al ch ar ge would be re quired.

The d ee d fr om the trustee at forec losure wa s not recor ded until Dece mber 31, 2001. On J anuary 2, 2002, Hood and Collins submi tted a letter to Kokomo outlin i n g p ro p o s ed rental
c on dit ion s a ndc ha

rg e s whi c h pro vid e d f

or su bs ta nti a lly

inc re a se d p a y me nts fr om $ 1, 50 0 p e r m on th to $ 6 , 5 0 0 p e r mo n th w it

h s u c h c h ar g e s to b e r e tr o a c ti v e to D e c e mb e r 1 0 , 2 0 0 1 , th e date of the fo re c los ur e sale. A secon d le tte r d a te d Jan ua ry 7, 20 02 wa s su bmi tte d b y Ho oda ndCol lin s to Ko ko mo. Th is le tte r a c kn ow le dg e d re c e ipt of the Janu ary re nta l pay me nt o f $ 1, 50 0 f ro m K ok omo bu t a dv ise d K ok omo that th e re nt p a y me nt w a s u na c c e pta ble . N e ith e r le tte r c on ta ine d a no tic e to vacate o r a n y n o ti c e o f te r mi n a ti o n o f th e le a s e
. N e g o ti a ti o n s to o k p la c e b u t d id n o t r e s u lt in an ag ree ment. Following rec eipt of t he second letter, Kokomo commence d eff orts to remove the gra in from the fa cility . Such eff

orts wer e thwarted when H ood and Collins, claiming a w are houseman’s lien,
cause d the Fr anklin County Sheriff’ s Depa rtment to bloc k Kokomo’s acc ess to the g rain fac ilityand prec luded Kokomo from r emoving the g rain. F ollowing f urther unsuc cessf

ul neg otiations and fu rthe r e ff orts by Ho od a nd Col lin s pre ve nti ng Ko ko mo fr om re mov ing the g rain, Ko ko mo f ile d th is action and pr ovided a $25,000 bond whe reupon K oko m o wa s allowed to re sume remova l of the g rain o n th e c on dit ion that th e bo ndre ma in i n e ff e c t a ndthat Co lli ns be pr e se nt at a ll t ime s th e g ra in was be ing r emoved. The last of the g rain wa s removed on Ma rch 27, 2002.

Hood and Collins state d fi ve issues; howeve r, their issues a re in-a rtfully fra med, ar e more arg umentative than informative and a re somew hat re dundant. Acc ording ly , we f ound it necessa

ry to r e-f rame the issues. Following a revie w of the rec ord, it appea rs that there are two issues worthy of di scussion: (1) f

ollowing the f

orec losure, wa s Kokomo a bailor of g rain or a holdover tena nt; and (2) if K okomo was a holdo v er t en ant, does the e vidence preponde rate ag ainst the trial judg e’s finding s as to the fa ir marke t rental va lue of the pr operty

. Th is m a tte r w a s tr ie d by the jud g e wi tho ut a jury . A c c or din g ly , o ur sta nd ardor

re vie w i s de
novo upon t h e re co rd o f t he trial c ourt, ac companied by a pre sumption of corre ctness unless the preponde ranc e of the evidenc e is otherwise . Tenn. R. App. P. 13(d). Conclusions of l aw by the trial judge car ry no presumption of cor

rec tness. We are to make our ow n determination concerning the leg al issues. Campbell v. Florida Steel Corp. , 919 S.W .2d 26, 35 (Tenn. 1996)

. For purposes of the issues on appea l, the pertinent lega l issue decide d by the t rial judg e wa s that Kokomo was a

holdover tena nt, not a bailor of g rain, and the pertinent findings of fac t by the tri al j u d ge, wh i ch ar e p ar ap h ra s ed fo r b re v i t y , i n cl u d e t h e f o l l o wi n g:-3-

1. The lea se was e ntere d into well after the mortg ag e. The deed of trust was re corde d in 1978.

3. Title to Hood and Collins did not pass until Dece mber 31, 2001. Hood a nd Colli ns had no rig ht to the rent prior to that da te.

5. Kokomo acte d appropriately in its efforts to remove the gra in, and given the a ctions of Hood
a ndCol lin s, the g ra in w a s r e mov e d in a re a so na ble tim e
. Ho od a ndCol lin s a re e nti tle d to rent a t the fair ma

rket va lue of the pr operty for January , Fe bruary

and Mar ch 2002.

7. The fair renta l value of the p ro p ertyin question is $1,500 per month. Kokomo presente d evidenc e that this amount was the f air mar ket value. H ood and Collins presented a g reat deal of evide nce rela ted to stora g e fee s for g rain stored at a fully operational g rain elevator that
w a s i n ap p l i c ab l e f

o r H o o d a n d C o l l i n s w e r e n o to p e r a t i n g a g r a i n s t o r a g e f

a c i l i t y.
8. Kokomo remove d the g rain within a re asonable time, but even if it did not, Hood and Coll ins
are not entitled to lost profits. Mr. Collins’ testim ony that he was prepa

red to make a major g rain purc hase in De cembe r 2001 is simplynot cre dible.

11. The re lationship between H ood and Collins and Kokomo was t hat of landlord and tenant, not war ehousema n and bailor. Hood and Collins arg ue that the f orec losure terminated t he lease, and the ref ore K okomo was a b ai l o r o f gra i n fo l l o wi n g fo re cl o s u re an d s h o u l d b e o b l i gat ed t o p ayt h e c u s t o m ar y fe e f o r s t o ra ge of g rain at an operating g rain storag e fac ility . I ndeed, the lease was terminated upon fore closure f or the mortg a g e wa s r e c or de d p ri or to the le a se a g re e me nt, a ndthe re fo re the le a se wa s su bo rd inate to the mortg age. Ho we v er, termination of the lea se does not nec essarily make Kokomo a

bailor of g rain nor liable for c ustomary storag e cha

rg es.
Th e arg ume nt tha t K ok omo be c a me a ba ilo r be c a us e the fo re c los ur e sa le te rm inate d th e le a se fails for two r easons. F irst, Hood and Collins we re not ope rating a g rain stora g e fa cility . There fore , evidenc e that the a

ppropri at e s t o rage fee char g ed by an oper ating g rain stora g e fa cility would be $6,500 was inapplica

ble. Second, while the fore closure te rminated th e l ea s e, i t did not make Ko ko mo a

ba ilo r, be c aus e the de e d o f t ru st p ro vid e d th a t in the e ve nt o f f or e c los ur e a ny

pe rs on in possession sha ll be come a tenant holding over and their rig hts to the premises shall be dete rmined in a c c or da nc e wi th l a w a

pp lic able to t e na nts ho ldi ng ov e r. Ho od a nd Col lin s obta ine d th e ir ri g hts to the property

pursuant to the dee d of trust which provide s that Kokomo will be deeme d a holdover tenant in t h e ev en t of for eclosure . Acc ording ly , Kokomo became a holdover tenant following fore closure and the re cording of the de ed on De cembe r 31, 2001.T wo cases were co nsol i d at ed whi ch i nvo l ved t wo p l ai nt i f f s. O ne p l ai nt i f

f s o ught t o rai se t he rent s i x- fo l d , t he 1

o t he r so ug ht t o raise t he ren t t w elve

- f o l d

. T he co urt rul ed ag ainst b o t h p l ainti f f s.

T he B r i nkl ey ru le p ro v id e s tha t t h e ten a n t b y ho ld ing o v e r b e yo n d the ter m , a ft e r h a v in g b e e n se a so n a b ly 2

n o tif ie d tha t t h e re w ill b e a sp e c ifi c inc re a se in re n t afte r th e ter m , t h e ten a n t b e c o m e s lia b le fo r th e inc re a se d re n t,
n o tw ithsta n d ing his d istinc t re fus a l t o a g re e the re to

. B rin k le y v . W a lc o tt , 5 7 T e n n . 2 2 (1 8 7 2 ).
-4- Having determined that Kokomo is a holdover tenant, we now e x amine the se cond issue, the consideration to be paid by the hol dover tenant. The lea se spec ified a monthly rent of $1,500. T o incre ase the rent on a

holdover tena nt in Tennessee , there must be rea sonable notice

. Ru sse lls Factory Stores, I

nc. v. F ielden Furniture Co. , 2 3 2 S

. W

. 2 d 592, 593 (Tenn. Ct. App. 1950). Re a so na ble no tic e of

a de fi nit e de ma ndis r e qu ir e d, a ndre a so na ble no tic e in a

mon th- to- mon th tenanc y is considere d one month. Mo rri so n v . S mi th , 757 S.W .2d 678, 681 (Tenn. Ct. App. 1988). Ho oda ndCol lin s did not g ive no tic e un til Janu ary 20 02 , w hic h n oti c e didno t r e qu ir e Ko ko mo t o va c a te the pr e mis e s. I t r e c omm e nd e d n e w t e rm s a ndc on di tions inc lud ing a dr a ma tic inc re a se in rent, or stora g e cha

rg es, of $6,500 pe r month.

I n AHCI, Inc

. v. Lamar Adve rtising of Tennessee , Inc. , 898 S.W .2d 1 9 1 (T en n
. 1995) the
c ou rt ru le d a g a ins t a ne w la nd lor d wh o a tte mpt e d to i nc re a se the re nt s ix-f oldov e r the pr e vio us le a se ag ree ment. L ike her e, the holdover tenant in AH CI did not ag ree to the proposed r ent incre ase, a nd 1 the parties neg otiated unsucc essfully for a period of time a nd never came to an ag ree ment. After two
a ndon e -h a lf

y e ars of ne g oti a tio ns faile d, the la nd lor d fi le d su it a ndde ma nd e d th a t th e un ilate ra lly incre ased r ent be pa id retroa ctively . The c ourt ruled in AH CI that an unequivoc al demand by the landlord, as disting uished from a neg otiable offe r, is ne cessa ry , and that the e x istence of neg otiations following the so-ca lled demand f or i ncre ased rent renders the status uncertain, which pre cludes the landlord fr om rec overing a unilater ally set rent r etro actively . “I f we wer e to hold otherwise, the l a n d l o r d c ou ld i n s i s t that it was neg otiating a new r ental rate in g ood faith, make an extravag ant demand, a nd then invoke the Brinkley ru le to secure that demand if subse quent neg otiations proved fruitless.” AH CI, 8 9 8 S. W. 2d at 195. AHCI held that when the re a

re f ailed neg otiations for an 2 incre ased r ent, as distinguishe d from an une quivocal dema nd for a specific incre ase, the holdover tenant is liable for

the fa ir mar k et rental value for the period in which the tenant oc cupies the premises in acc ordanc e with the equitable doc trines of qu an tum me ru it or unjust enrichme nt. Id . at 195, citing Paschall’s Inc. v . Dozier , 407 S.W .2d 150 (Tenn. 1966). Her e, the tria l court found that Ho oda ndCol lin s d id n ot m ake the re qu isi te un e qu ivo c a l de ma nd a nd that the pa rt ie s c on tin ue d to neg otiate af

ter Hood a nd Colli ns’ letters of J anuary 2 and January 7 , 2 0 02. The e vidence in the
rec ord does not pre ponderate ag ainst that finding. There fore the Brinkley rule doe s not apply and Kokomo is onlyli ab l e fo r t he fa ir marke t rental va lue of the pr emises. Moreove r, it would be ine qu ita ble to a llo w H oo d a ndCol lin s to pr e ve nt K ok omo fr om v a c a tin g the pr e mis e s, a s th e y did on three occa sions, continue neg otiations and then, when the neg otiations failed, dee m themselves
e n t i t l e d t o r e c e i v e th e e x tr a v a g a n td e m a n d r e tr o a c t i v e l y.
Acc ording ly , we c oncur with the trial judg e’s leg al conc lusion that Kokomo was a holdover tenant, not a ba ilor. Moreove r, we fi nd that the evidenc e does not pre ponderate ag ainst the trial judge ’s findin gs o f fa ct. To t he contr ary , the evidenc e substantially supports the trial judg e’s-5-

finding s, including the finding that the fa ir marke t rental va lue of the pr operty for January , Fe bruary a ndMa rc h, 20 02 wa s $1, 50 0 pe r mon th. Th e re fo re , w e a ff ir m th e jud g me nt o f the tr ia l c ou rt in a ll respe cts.
Th is m a tte r i s r e ma nd e d to the tr ia l c ou rt fo r s uc h p ro c e e din g s a s may be ne c e ssa

ry . Co sts of thi s a pp e a l are a sse sse d a g a ins t th e app e lla nts , Jer re M. Ho oda nd

Ra nd y Col lin s.

___________________________________ FRANK G. CLEMENT, JR ., J UDGE