### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Assigned on Briefs S eptember 1, 1 999 DON STONECIPHER v. ESTATE OF M.E. GRAY, JR., ET AL 

### .

Appeal from the Chancery Court for Maury County No. 97-206 Robert L. Jones, Judge

No. M1998-00980-COA-R3-CV - Filed May 4, 2001

This is an appeal from a chancery court jury trial on a dispute arising from a con tractto b uy a wrecker and salvage yard business for 1.1 million dollars. The purchaser alleg ed that the seller fraudulently

induced him to contr

act to buy the b usiness because after the parties reached an agreement

on the purchase, the seller took items contemplated to be included in the contract without th e buyer’s k

nowledge. On the

other hand, the se

ller’s estate as serted a breac h of contract cla

im because the note’s balloon payment wa s overdue. After

a trial, the jury decided that the seller had concealed or withheld items that the parties contemplated to be part of the contract, that the seller made misrepresentations as to what wa s to be included in the contract, he knew the misrepresentations were false at the time made, and he intended the buyer to rely on the misrepresentati

ons. The jury decided that, had the buye r known the items were missing , he would nothave declined to

enter into the purchase at all but, instead, would have negotiated a lower price. Therefore, the court entered a verdict dismissingthe buyer’ s complaint for re scission, awarde

d him a set-off and entered

judgment agai

nst him for the bala

nce of the note plu

s interest minus the set-off. Costs were apportioned between t he parties an d each party was ordered to pay its own attorney’s fees. Both parties appeal. For the reasons below, we affirm the judgment of the trial court in part, vacate in part, and remand.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

is Affirmed in Part, Vacated in Part, and Remanded
P ATRICIA J. C OTTRELL , J., delivered the opinion of the c ourt, in which W ILLI

AM C. K OCH , J R ., and W ILLI AM B. C AIN , JJ., joined. John Colley, III

, Columbia, Tennessee, for the appellant, Don Stonecipher. Gary M. Howell, Columbia,

Tennessee, for

the appellees, E

state of M.E. Gray,

Jr. and Lillian A

dele Gray.1 Mr. Gray died after this laws uit was institut

ed, and the sui

t was continued against his estat e through his wife, Lillian Adele G ray, as Exec utrix. She was also added as an i ndividual def

endant because she wa

s liste d as an individual on the note signed by Mr. Stonecipher. -2- OPINION
This case involves a contract under which the appellant, Mr. Stonecipher, was to buy from the appellee, Mr. Gray, two ongoing and oper ating wrecker businesses and a salvage y ard. 1
In February

1996, Mr. Stoneciph

er began neg

otiating with Mr. G

ray to buy Gray's Wrecker Service and Salvage and

Logue's Wrecker Service. The parties drove around the property on several occasions and discussed which items were to remain with the businesses and what Mr. Gray wo

uld keep. At no time was a formal inventory list of the larger items presented by Mr. Gray nor made by Mr. Stonecipher. Also, there is no evidence that at any time was there a discussion as to what the outstanding accounts rece ivable were, an

d Mr. Stonecipher

admits that he did

notexamine the books with any det

ail. Despite all of this, the parties agree d on the dea l, which was that the sale was to include a fiftee n-acre pi ece of real property with a building and all of the equipment and inve ntory, except thos e items specifically included on a schedule in the agreement, and the accounts recei vabl e associated

with the businesses in consideration of 1.1 million dollars to be paid as follows: $200,000 at the time of signing

the contract,

then 12 monthly payments of just over $5,500 with a balloon payment of

$891,697.05 to be paid in March 1997. While the attorney was drafting the contract, Mr

. Sto necipher moved onto the premises in early March and beg an operating the business. Mr. Gray and his staff rema

ined for a short tim

e to “get his book work” straig htened out and han

dle matters related to his going out of business. They worked in a back off ice and did not leave until the contract was signed, the money exchanged and the de al finalized. The contract provisions relevant to this appeal include:
1.2 PERSONAL

PROPER TY All equipment, f urniture, fixtures , signs, vehicle s, invent oryand ot her articles of p ersonal propert

y owned by

Seller and used in connection with the real property and with Seller’s businesses known as Gray’s Wrecke r Service and Salva

ge and Log

ue’s Wrecker Ser

vice, unless spec

ifically excluded from this transaction by inclusion on the list s

et forth as Exhibit C hereto.

***
4.1 POSSESSION Upon the execution of this agreement and Buyer’s p ayment to Seller of the Two HundredThousand Dollars ($200,000.00) mentioned above, Buyer ma ytake po ssession of the properties and operate the businesses outlined above. Buyer will be entitled to all incomes from said properties and businesses from that date forward, includ

ing all accounts

receivable. Se

ller agrees to

indemnify a

nd hold-3-

Buyer harmless from any liability arising from B uyer's occupancy

of the property or operation of the bus

inesses, e xc ept for those matters set forth in paragraph 7.2 [Environmental indemnification] below.
5.1 INSPECTION Buye

r has had ample opportunity to inspect the properties and the records of the businesses and accepts them in their current condition.
The contract was eventually signed by the parties and money exchanged on or about March 20, 1996. However, it is not disputed that Mr. Stonecipher moved into the premises in early March, about 2 weeks prior

to the signing of

the contract. Mr

. Gray drop

ped the business lic

ense on March 5, 1996 andMr. Stonecipher h ad it reinstated in

his name within a few days thereafter. The parties appear to agree that Mr. Stonecipher “took possession” prior to the formal signing of the agreeme

nt.
Mr. Stonecipher continu e d to run the business es and made the e

leven monthly

payments. He did not make the final balloon payment due in March 1997 and, instead, filed this lawsuit seeking to rescind t he contract or be relieved from further performance. At the time of trial, the ba lloo n payment was still unpaid. The business increased in revenues and value during the period Mr. Stonecipher was r

unning it.
The problems developed when Mr. Stonecipher learned that Mr. Gray had had various ite

ms removedfro m th e sal vage yard or fa iled to turn over to Mr. Stonecipher so

me items previously storedelsewhere. According to the testimony of one witness, Mr. Gray had approximately 15 to 20 vehicles, some vehicle parts, and some equipment removed from the salvage y ar d p remises. The items were moved to various pieces of property owned by Mr.

Gray, his f

amily or friends. After Mr. Gray became ill and a conservator

was appointed for him, the conservator had some items returned to Mr. Stonecipher. It is not entirely clear whether Mr. Stonecipher

first found out about

the missing i tems from the conserv

ator or other peo

ple, but Mr. Stonec

ipher himself test

ified that Mr. Gra y removeda truck and two g enerators short

ly after Mr

. Stonecipher took

over the business.

The items removedor kept by Mr

. Gray incl

uded cars, part

s , t ransm issi ons, m otors , and e quipm ent. In November

of 1996, Mr. Stonecipher also discovered from Mr. Gray’s bookkeeper that Mr. Gray had removed some of th

e accounts

receivable from the business’s accounts and had billed them out to his s eparate office prior to the signing of the contract. The bookkeeper testified that Mr. Gray collected approximately

$18,000 from these

accounts rece

ivable after Mr. Stonecipher took over the business in early March. However, t he bookkeepe r was unable to show proof in the accounting ledgers or back record

s of some of the dep

osits she claimed to

have made from

these accounts receivable. By the start of th

e trial herein, Mr. Stonecipher had voluntary nonsuited all claims except those based on br each of contract and misrepresentation and fraud. Mr. Gray cross-claimed for breach of contract. Essentially, Mr. Stonecipher wanted rescissio

n of the contract

for the purchase of the businesses, along with payment to him for any inc rease in the value of the businesses. He basedhis request for rescissionon the argument that he had been fraudu

lently induc

ed to enter into the contract due to Mr. Gray’s misrepresentations rega rding what assets wer

e to be transferred.-4-

Alt erna tiv ely, he sought to be relieved from further performance of the agr eement, which at that pointwas payment of t

he balloon pay

ment representin

g approximately

80% of the purchase price, because of Mr. Gray’s breach of

contract by

failing to transf

er all assets that

were to be includ

ed in the purchase price. Mr. Gray sought judgment f or the amount due under the note for purchase for the business.
These issues were tried before

a jury. At the

close of the evidence, the trial court and counsel for both parties eng

aged in discussio

ns regarding

the appropriate

jury instruc

tions. In spite o

f th e trial c ourt’s misgiv

ings about whether this was properly a case for the r emedy of rescission, Mr. Stonecipher’s counsel insist ed it was. The parties and the court agreed that it was properly the province of the court to determinewhether the remedy of rescission should be granted and that the jury would consider the factual issues relevant to that decision. They also agr eed that the ca se of Atkins v. Kirkpatrick , 823 S.W.2d 547 (Tenn. Ct. App. 1991), was the appropriate authority on the elementsnecessary

to a claim for res

cission. They

didnot reach total agreement, however, on how the special interrogatories should be drafted.
The jury was instructed

and given the special verdict form, which was returned completed as follows:
1. Do you find th

at M.E. Gray

, Jr., withheld or co

ncealed certa

in accounts receivable, vehicles, or

other assets that were intended by both parties to be included in the contract? Yes X No
2. Do you find that any such withholding or conc ealing constituted a misrepresentation of an existing fact material to this contract and that M.E. Gray, Jr., knew the representation was false when made? Yes X No
3. Do you find th

at Don Stonecipher

relied upon the al

leged false

representation and the [sic] M.E. Gray Jr., intended that Don Stoneci ph er rely upon the truth of such representation? Yes X No 4. Do you find: (1 ) that the allege

d false represe

ntation about inclu

sion of those all

egedl y withheld or concealed a

ccounts receivable, vehicles, or other assets were so material andimportant to the transaction that Don Stonecipher would not have contracted to buy this business without those assets being included; or instead,-5- (2) that Don Stoneciphe

r would have neg

otiated the value

of those asse

t s setoff against the

purc hase pric e? (The plaintiff has the burden of proving No. (1) by a preponderance of the evidence; otherw ise No. (2) would be presumed.) The jury fin

ds: (1) that Don Stonecipher would not have contracted;

or X (2) that

Don Stonecipher

would have negotiated a setoff in the price. 5. If you find

No. (2) above, what amount of damages should be setoff against the balance of thepurchase price represented by the note on which Mrs. Gray filed her counterclaim? Damage amount f

or setoff: $178,000.00
The court th en entered j udgment dis missing Mr . Stonecip her’s compl aint and ent ering a judgment for Mr. Gray in the amount of the note plus interest, minus the set-off of $178,000. The parties were ordered to pay their own attorney’s fees, and costs were assess ed one-third to Mr. Stonecipher

and two-thirds to Mr. Gray. Mr. Stonecipher appealed, and Mr. Gray’ s estate

and Mrs. Gray also r

aised issues on app

eal.
I.
We begin with Mr. Stonecipher’s argument that thetrial court should have granted rescission of the contract bas

ed upon the jury ’s determin ation t hat Mr. Gray knowingly made misrepresentations of fact, by withholding or concealing certain assets intended to be included in the sale, intending that Mr

. Stonecipher re

ly on those mis

representation

s, and that Mr. Stone

cipher did so r ely.
With regard to the ju ry’s findin

gs o f fact, we arelimited to determini ng whether ther

e is material evidence to support the verdict, taking the strongest

legitimate view

of all the evidenc

e in favor of the verdict. Crabtree Masonry Co. v. C & R Constr., Inc. , 575 S.W.2d 4, 5 (Tenn. 1978); Tenn. R. App. P. 13(d). Even if we assume there is material evidence to suppo

rt the jury’ s findings, however, the real issue is whether, given those fac tual findings, the

trial court prope

rly denied the remedy of rescinding the c on tract. Our revie w of the conclusio

ns of law by t

he trial judge is

a question of law reviewed de novo with no presumption of correctnes s. Sul livan v. Baptist Mem. Hosp. , 995 S.W.2d 569, 571 (Tenn. 1999).2 “A ‘rescission’ amo unts to the unm aking of a co ntract, or an undoing o f it from the begin ning, and no t merely

a termination, . . . It is the an nulling, abr ogation of the cont ract and t

he placi ng of the parties to it i n stat us quo.” 22 T ENN
. J UR IS ., Rescissi

on, Cancellat

ion and Reformati

on § 1 at 34 (1999) (quoting B LACK ’ S L AW D ICTI ONARY 1306 (6 th ed. 199 0)). -6- Rescission 2 is an equitable remedy , it is not enforceable as of right, and the decision of whether to grant this extraordinary remedy rests in the sound discretion of the trial court. True v . Deeds & Son , 151 Tenn. 630, 634, 271 S.W. 41 (1924); Vakil v. Idnani , 748 S.W.2d 196, 199-200 (Tenn. Ct. App. 1987); Bowman v. Seymour , No. 03A0 1-9904-CH -00158, 19

99 WL 1068691 at

*2 (Tenn. Ct. App. Nov. 24, 1999) (no Tenn. R. App. P. 11 application filed ). While a plaintiff

must prove the ele men ts o f on e of t he gr oun ds j ust ifyi ng re sci ssi on i n or der t o be eli gibl e for tha t re med y, such proof does not require the trial court to automatically grant it. Id.
The equitable remed

y of rescis sion is not enforce able as a matter o

f right but i s a matter resting in the sound discretion of the trial court and the court should

exercise the discretion sparingly. . . . Thus, the real question in the case before us is whether, under the proof, the trial court abused its discretion in failing to grant rescission.
Vakil , 748 S.W.2d at 200.
As the Vakil

court noted, because the

decision of whether to grant rescission is d isc ret ion ary, a determination of

whether resciss

ion is an appropria

te remedy d

epends largel

y upon the facts of the case. See also Deeds & Son , 151 Tenn. at 634 (in granting or refusing requested relief of rescission, a court acts on its ow

n notions of what is r

easonable and ju

st under all t

he surroundi ng circumstances). In Vakil , the court d etermined t hat, altho ugh the plaintiffs had established mutual mistak e which constituted a ground for res

cission, reforma

tion of the agre

ement, rather th

an its rescission, was appropriate because the reformation “ will accomplish what was intended by the parties without putting eithe r par ty at an unfair advantage.” 748 S.W.2d at 200. Thus, this court affirmed the trial court’s

exercise of its discretion in denying rescission and ordering reformation of the agreemen

ts.
Rescission can be an

appropriate remedy for

a fraudulent misrepresentation surrounding the formation of a contract, but the representation (1) must have been a representation as to an existing fact; (2) must have been false; (3) must have beenreliedupon; and (4) must have been so material that it determined the conduct of the parties seeking relief. Atkins v. Kirkpatrick , 823 S.W.2d at 552 (cit ing Dozier v. Hawthorne Dev. Co. , 262 S.W.2d 705, 709-10 (Tenn. Ct. App. 1953)).
The final requirement, that the misrepresentation was so material that it determined t h e conduct of the party, is another way of saying that the fraud or

misrepresentation must have induced3 However, we note that in Taylor this court found that no f raudulent mis

representati

on of existi

ng material fact had been made to induce the sal e, dist inguis hing th at opini on from this case. N onetheless, w e believe the principle teaching of the case is that a failure to transfer agree d upon a ssets pursuan t to contract d oes not justify rescissi on of that contract ab sent proo f those assets we re a material p art of the buyer ’s decision to purchase, es

pecially wh

ere the buyer received w hat was the esse nce of the co ntract.

-7- the party to enter into the contract. The representation must go to a “ba sic assumption on which that party is making a contract.” Silva v. Crossman , No. 95-2607 II , 1996 WL 631492 a

t *2 (Tenn. Ct. App. Nov. 1 , 1996 ) (no T enn. R . App. P. 11 appli catio n file d). In other words, the representation cannot be relied on as the

basis for rescis sion, unless the representation “afforded a material inducement

to the formation of such contract.” Cooley v. East & West Ins. Co. , 61 S.W.2d 656, 659 (Tenn. 1933); see also , U.S. for the use and benefit of Pickard v. Southe

rland Constr. Co. , 293 F.2d 493 (6th Ci r. 1961), rev’d in part on other grounds, 371 U.S. 57 (1962). Rescission may be appropriate

where the defect goes to the essence of the contract or makes it impossible for the contract to be carried out as intended. Cannon v. Chadwell , 25 Tenn. App. 42, 47, 150 S.W.2d 710, 712 (1940).
Two other principles of the law regarding rescission are relevant here. First, the purpose of rescission is to return the par ties to the position th

ey would have been in had the contract not existed. If the parties cannot be returned to status quo , or, if due to the passa ge of time or other changed circumstances,

equity cannot

be done, resciss

ion is not appropriate. Lindsey-Davis Co. v. Siskin , 210 Tenn. 339, 342-43, 358 S.W.2d 331 (1962); Lamons v. Chamberla in , 909 S.W.2d 795, 801 (Tenn. Ct. App. 1993). Seco n d, where an ade quate remedy

at law, such as an

award of damag

es, exists, rescission is not an appropria te remedy. Chastain v. Billings , 570 S.W.2d 866, 868 (Tenn. Ct. App. 1987) (finding, however, damages or repair of the house were not a dequate under the facts). Particularly

persuasive to us is the reasoning applied to a purchaser’s request for rescission of a completed sale of an ongoing business in Taylor v. Rainey , No. 86-5-I I, 1986 W L 5546 (Tenn. Ct. App. May 14, 1986) (no Tenn. R. App. P. 11 application filed). I n Tayl or , the plaintiff complainedthat defendants f ail ed to deliv er certain equipment and realty intended to be included in the sale of a funeral home and that the misrepresentations induced plaintiff to enter the contract of sale. Id . at *4. This court s tated in pertinen

t part:
From this record it appea

rs that plaintiffs' real complaint is not that they were fraudulently

induced to enter i

nto the contract of sale by any false representation but that the defendant did n ot fu lly perform the contract of sale by conveying and delivering to plaintiffs all that the contract required to b e c onveyed and delivered.
Id. at *7. The court r

easoned that the a

cts of defendan

t to evade performing the obligations of the contract,by attempting to remove the equipment and convey other portions of the realproperty, d id notmislead or

induce the plaintiffs to enter the contract to buy a funeral home, what they bargained for from the start. Id

. 3-8-

The jury herein determined that Mr. Gray withhel d or conc ealed certain assets the parties intended to be included in the contract, that th is constituted a misr

epresentation of

a material fact

, andthat Mr. Gray intended Mr. Stonecipher to rely on the misrepresentation. Mr. Stonecipher argues that these findi ngs au tomatically entitle him to resc

ission. We respect

fully disag

ree with this assertion because (1) the jury did not find in his favor regarding the inducement element and (2) even if he successfully

proved all eleme

nts, the remedy

of rescission is no

t as a matter of ri

ght, but is within the court's disc

retion, and should

be applied sparin

gly a nd only wher

e equity re

quires it. James Cable Partne

rs v. City of Jamest

own , 818 S.W.2d 338, 343 (Tenn. Ct. App. 1991). Implicit in the jury’s verdict

is a finding that the misrepresentation did not go to the essence or heart of the contract, and did not affect Mr. Stonecipher’s behavior, that is, his decisionto make the purchase. The evidence supports th e conclusion that t he statements made

by Mr. Gray

, as to what was included with

the business did notinduce Mr. Stonec ipher to enter the

contract. Ther

e is no evidence in the record that Mr. Stonecipher was ever given any figure as to what the outstanding accounts receivable

were, nor was he given any list of the inventory of the salvage yard. In fa ct, Mr. Stonecipher

testified he did no

t know the amount of

accounts rece

ivable he was go

ing to get, nor d

id he know the extent of the inventory of the sal vage yard. He n

ever took additional steps to verify th ese assets prio

r to signing the agreement or taking over the business. Further, in the time he operated the business, he did

not discover that t

hese assets that s

hould have been in

cluded in the sale were not, in fact, transferred to him. He learned this information only from other persons. The testimonyindi cates that approximately fifteen to twenty vehicles, a pickup truc k which Mr. Stonecipher

valued at $2500, a

nd two generato

rs valu ed at $80 0 were removed. Mr. Stonecipher never noticed their

absence in view o

f the number of oth

er such items left

in the salvage y

ard. Thus, they were not, apparently , items which made operating the business impossible or even difficult. Therefore, we conclude that the re was evidence to support the jury’s conclusion that the misrepresentation was not so material that Mr. Stonecipher would not have purchased the businesses hadhe known of

the missing assets. In fact, although he testified that he would not have entered into the contract if

he had known how Mr. Gray wo uld subsequently

deal with him, Mr. Sto

necipher also stated he attempted to work out an agreement under which he would keep the businesses but for a lower cost.
We further conclud

e that the trial co

urt properly

denied rescissi

on because, in view of the facts of this case, rescission would not have been appropriate. Mr. Stonecipher had been operating the businesses for

over a year; they ha

d increased i n value duri ng that tim e. Operatio n of a salvage yard necessarily

involves selling v

ehicles and part

s, so the inventory

is constantly changing. There was no inventory

of th e assets when Mr. Stonecipher took over the businesses, so it would be impossible

to return the busin

ess to its pre-sale condition. In Lamons v. Chamberla in , 909 S.W.2d at 800-01, this

court determined that rescission of a contract for purchase of an ongoing business was notappropriate because making a return t o the status quo was impossible since the purchaser had operated, received revenues from and reinvested funds into the business since the purchase.4 In addition, Mr. Stonecipher takes issue with t he fact that although t

he jury was properl

y inst ructed on

fraud
as a defense to excuse further perfo rmance of the contract as to the cro ss-claim, this iss ue was not addresse d on the verdict form. Thus, the jury did not det ermine whether Mr. Gray’s fraud exc used Mr. Stonecipher’ s further performance. When presented with that objec tion after the jury re turned its verdict, the trial co urt had two re sponses: (1 ) that in this case, the is sue of

whether or n ot to excuse furt her performance was a

question of l

aw which the cour

t would determin

e, and (2) in an

y event, the jur y answer ed the ques

tion by de

termini ng a set- off, t herebyonly excusing performa nce as to the amoun t of the set-off. W e agree that w as the effect of the j ury’s verdict. -9- Further, Mr. Stonecipher

clearly received what he intended to purchase, a n ongoing wrecker andsalvage busin

ess, whi ch he was able to operate successfully. Allowing him to rescind the contract right before eighty percent of the p urchase price w as due, on the basis he did not receive someassets that were

included in the con

tract, when the a

bsence of those a

ssets d id not interfere with his ability

to operate the bus

iness successful

ly, would not a

chieve equitable

goals.
R escission of a contract is not looked upon lightly. It is available only under th e most demanding circumstances and depends on the individual facts and circumstances of each case.
Lamo ns , 909 S.W.2d at 801. Resc ission will be permit

ted only for

those breaches

t hat are s o substantial and fundamental as to defeat the object of the parties in making the agreement. Loveday v. Cate , 854 S.W.2d 877, 879 (Tenn. Ct. App. 1992).
Fin all y, we agree with the Taylor court in that we believe that Mr. Stonecipher’s complaint is really more

akin to a breach of con

tract case for failure to de

liver goods desc

ribed in the contr

act, rather than misrepresentation which was inducement to enter the contract. The order dismissing Mr. Stonecipher’s rescission claim is hereby affirmed.
II. Next, Mr. Stonecipher a

rgues th at the fraudulent misrepresentations excused any further performance

by him under the contract and he should be allowed to terminate t he contrac t. 4 He argues that fraud is

always a viable defense to a claim to compel payment under a breach of contract claim and that the frau

d excuses further

performance. I

n this case, the onl

y performa

nce still due was Mr. Stonecipher’s payment of the remaining eighty percent of the purchase price.
The remedy Mr. Stonecipher see ks is not d ifferent in practical effect from the rescission remedy he requested. The factors justifying excuse from perfor mance are essentially the same as those justifying rescission.
Gen eral ly, such nonperfomance [as will suspend or discharge the other party ’s duty to perform] will atta

in this level of mate

riality only

when it goes to the root, heart, or essence of the contract or is of such a nature as to defeat the object of

the parties in making the contract, or, as has sometimes been said, when t he covena nt not5 Because the “misrepr esentation”

here was a fai

lure to tra

n sfe r all the items cov ered by the c ontract, this measure of damages i s appropriate. -10- performed

is of such importance that the contract would not have been made without it.
14 W ILLI

STON ON C ONTRACTS § 43:6 at 579-80 (2000).
In Tennessee, in order for a buyer to be discharg ed from obligations under a contrac t, th e misrepresentation by the sel lermust be of “some substantial particular which goes to its [the contract’s] essence and re

nders the defau

lting party incapable of pe

rformance or ma

kes it impossible for the defaulting party to ca rry it out as intended.” Cannon v. Chadwell , 150 S.W.2d at 712-13 (citations omitted) (contrac t rescinded where unpaid accounts, represented by seller to have been paid, diminished the goodwill of the business and forced plaintiff to sell the business).
We have alrea dy affirm

ed the implicit findings by the jury and the trial court that a ny misrepresentations by Mr. Gray were not so substantial as to defeat the p urpose of the contract for purpos es of Mr. Stoneci pher’s rescission claim. The same reasoning and same conclusion apply here. Mr. Stonecipher was capable of performing the terms of the contract, as the business was mor e profitable than ever and up and running at all times. F urther, the jury determined that the misrepresentation as to the items to be transferred in the sale was not so material that Mr. Stonecipher

would not h av e entered the co ntract at all. Thu

s, Mr. Gray ’s failure to deli ver items contemplatedto be transferred was not “of such importance that the contract would not have been made without it.”
III.
Mr. Gray appeals the sufficiency of t he evidence supporting the amount of the setoff as determined by the jury. He asserts that the damages were not ascertainable based on the evidence presented. We review the award of damages by the jury unde r Rule 13(d) as stated above and find that there is no mat

erial evidence

to support the verd

ict.
In a fraudulent misr

epresentation c

ase, the appropr

iate measure of

damages is

the benefit

of the bargain rule. Haynes v. Cumberland Builders, Inc. , 546 S.W.2d 228, 233 (Tenn. Ct. App. 1976). This means the plaintiff is entitled to the difference between the actual value

of the property received andthe value of the pr

operty had the representations been true. 5 Id . The plaintiff has the burden of prov ing t he damages sustained. United Brake Sys., Inc. v. American Envtl. Protection, Inc. , 963 S.W.2d 749, 760 (Tenn. Ct. App. 1997). While damages do not have to be proved exactly, they

must be proved with a reasonable degree of certainty to allow the trier of fact to make a fair assessment without speculation. Pinson & Ass oc. Ins. Agency, Inc. v. Kreal , 800 S.W.2d 486, 488 (Tenn. Ct. App. 1990).6 We believe that the jury ma y have engag ed in specu lation based on inadm issible testimony to reach this

figure. During the tr

ial, Mr. Stoneci

pher was asked to conf irm that he h

ad offered to keep t

he business i

f the sal e price
was reduced, and he did. He st ated he had been willin g to keep t he busine ss if

the pri ce were low

ered by $200,000. After objection, the jury was told to disregar d the information concerning the amount, but not the fact there were discussions aimed at resolving the sit uation, because it related to set tlement negotiati

ons and was inadmis sible. Based
on the evidence presented, it appears that t he jury may

have eas ily determined that the accounts receivable totaling $22,000 were not to g o to Mr . Stoneciph er becaus e they were co llected, in part, b efore th e con tract was signed, and subtracted this a

mount fr om the amoun t of contract p rice reductio n he stated he would hav e been willing to accept, arrivi ng at $178,000.

-11- The evidence showed that disputed ac counts receivable totaled $18,000-22,000. Other relevant testimony related

to items removed from the premises after Mr. Stonecipher inspected it but prior to his taking over and prior to the execution of the contract. For example, there was testimony that 15-20 cars were moved off of the property af ter negotiations but

prior to Mr. Stonecipher taking over. There was also te

stimony that Mr

. Stonecipher did n

ot receive a pic

k-up truck valued at $4,000-$5,000 and

two generator

s valued at $400-$

500 each, all

represented to be included in the sale.
The jury, taking all things into consideration, found that $178,000 was an appropriate value for all of the items proved to have been taken from the premises or mon ey collected that was contemplatedto be included in the contract. The te

stim ony only pr

oved approximately $30,000 worth of items intended to be included, but not actual l y received in the sale. We believe the e vidence preponderates against a finding that the 15-20 other cars, including scrap c ars, a nd th e miscellaneous p arts and equi pment were worth the remaining $150,000. There is simply no evidence about the value of the sc

rap cars o r other items remo ved from the prem

ises. 6 The amount of damages, or set-off determined by the jury cannot be sustained. Therefore, the amount of set-off is vacated and remanded for further proof on the amount of damages incurred as a result of the misrepresentations or of the failure to transf

er items included in the sale.
IV.
On the issue of attorney’s fees, Mr. Gray argues that the court erred in not awarding attorney’s fees according to a provision in the note. The trial c ourt reasoned:
The court is goi ng to co nclude that because of the damages the jury has f ound, the actual amount owed by Mr. Stonecipher to Mrs. Gray a nd the e state was not at the d ue date capable of calc

ulation and was in e

ffect an unliquid

ated amount; that th

is litiga tion was necessary; and that each party should be responsible for the ir ow n respective attorney’s fees without any recovery by one a

gainst the other.-12-

We agree. While the note did provide for attorney’s fees in the event of default and the need to proceed with collection actions against Mr. Stonecipher, the jury determined that

Mr. Stonecipher properly brought this action and reduced the final balloon payment, the only payment due, acco rdi ngly. Mr. Stonecipher brought an action that disputed the amount left due under the note and, in fact, asked for r

escission of t he entire contract. The jury verdict in his favor supports the conclusion that the note was disputed a nd not, therefore

, in default. Therefore, the clause providing for attorney’s fees was not

triggered for the

purposes of colle

ction of the note in

the event of defa

ult.
For these reasons, th

e court was corr

ect in ordering

each party

to bear his

own attorney’ s fees, and that order is affirmed.
V.
Last ly, Mr. Gray asserts that the court erre d in as sessing court costs one-third to Mr. Stonecipher

and two-thirds to Mr

. Gray bec ause the rescission cla

imwas dismissed. Tenn. R. Civ. P. 54.04 grants tria

l courts wide discretion in awarding costs. Sanders v. Gray , 989 S.W.2d 343, 345 (Tenn. Ct. App. 199 8). The rule prov ides in pertinent p

art:
Costs included i n the bill of costs prepared by the clerk shall be allowed to the prevailing part y u nless the court oth erwise directs,

but costs against

the state, its officers, or its agencies shall be imposed only to the extent permitted by law.
Tenn. R. Civ. P. 54.04.
We review the court’s ruling on an abuse of discretion standard. This standard requires us to consider (1) whether the decision has a sufficient evidentiary f oundation, (2) whet

her the trial court correctly identified and pr

operly app

lied the appropri

atelegal principle

s, and (3) whether the decision is within the range of acceptable alternatives. State ex rel. Vaughn v. Kaatrude , 21 S.W.3d 244, 248 (Tenn. Ct. App.

2000). While we will

set aside a discr

etionary de

cision if it does not r

est on an adequate evi

dentiary f oundation or if it

is contrary

to the governing

law, we will not subs

titute our judgment for

that of the trial court

merely because we might have chosen another alternative. Costs of litigation may be split between the litigan ts a s the court deems equitable. Sanders , 989 S.W.2d at 3 45. “Acc ord ingl y, if any equit able basis appea

rs in the record w

hich will support the trial court’s apportionment of costs, this court must affirm.” Id

. The trial court’s app

ortionment of costs

was a reasonabl

e exercise of its discretion. The jury found in favor of Mr. Stonecipher on the issue of fraud and reduced his

obligation on the note. The court then determined t

hat rescission wa

s not appropria

te, th at the note was valid, and ordered payment in accordance with the set-off. The refore, i n essence, both pa rties prevailed o

n some claims. The assessment of costs is affirmed.-13- VI. For the reasons stated herein, the judgment of the trial court is affirmed with respect to the denial of rescission in this case and the award of a set-off to the note accompanying the contract of sale. However, we vacate and remand this cause for a hearing on the damag es sustained as a re

sult of the misrepresentations, and, therefore, the amount of set-off. The trial court’s award of fees and costs is also affir

med. The costs of th

is appeal are ta

xed equally be

tween the partie

s.

___________________________________ PATRICIA J. COTTRELL, JUDGE