### IN THE COURT OF APPEALS OF TE NNESSEE AT KNOX VILLE June 9, 200 4 S es sio n KATH RYN MORRIS BRO WN a nd SW ANN BROWN J AFFURS v. JUAN F. GUT IERR EZ , WILL IAM E. KESS LER , D ONA LD J. V ERN INE, each in di vid ua lly an d d/b/ a G KV LE A SI N G, A Te nn es se e Ge ne ra l P ar tn er sh ip

Direc t Appeal from the Chancer y Court for K nox Coun ty No. 126424-1 Hon. Daryl R. F ansler, Chancellor, by Interc hange

F iled Septem ber 20, 2004
No. E2003-02755-COA- R3-CV

I n th is D e c laratory

Judg me nt a c tio n, the Tria l Co urt e sta bli sh e d th e pu rc ha se pric e of pr op e rt y pursuant to a right of

first ref usal, awa rded interes t and denie d a re quest for attorney ’s fe es. On app e a l by Se lle r, we Af

fi rm
.

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 t he court, in which D. M I CH A EL S WI NEY , J ., and S HAR ON LEE , J ., joined.
Ke ith Mc Cor d, Kn oxvil le , T e nn e sse e , f or Ap pe lla nts

. L e wi s S. Ho wa

rd , Jr. , K no xvill e , T e nn e sse e , f or Ap pe lle e s.

OP IN ION

I n this declaratory

judgme nt action, the Chanc ellor dec lare d the plaintiffs we re obligated to pay S el l er $344,500.00, but re fused to aw ard da mag es and attorney ’s fe es. Seller ha s appea led. Plaintiffs, purchase r, broug ht this action in J une 1995, and a lleg ed t h at t h ey had exercised their

rig ht of first ref

usal, but that a dispute exis ted as to the amount of the pur chase price

.The issues on appe al arise from the tria l in Febr uary 2003. 1
-2- Th e y a lle g e d th a t de fe nd a nt s e lle r w ou ld h a ve “ on ly ne tte d $ 34 4, 50 0. 00 " and askedthe Cou rt to de c lare that a mou nt w a s the pu rc ha se pric e fo r the pr op e rt y un de r the plaint if

f’ s r ig ht o f f

ir st r e fu sa l. Def endants filed a

counter -complaint asking the Court to r equire purcha sers to spe cifica lly perf orm a ndpa y se lle r $ 36 7, 50 0. 00 , p ur su a nt t o a n o ff e r t o pur c ha se wh ic h tri g g e re d pla int if f’ s rig ht o f f

ir st re fu sa l.
I n Dec ember 1995, the Court enter ed an A g ree d Orde r whereby sellers would de ed the prope rty

to purcha sers a nd purcha sers would pay to the defe ndants $344,500.00 with all other iss ue s r e se rv e d, sp e c if

ic a lly , th e a mou nt o f p ur c ha se pric e re qu ir e d to be pa id b y pu rc ha se rs
. Following an evide ntiary hearing, the Chance llor filed a Me morandum Opinion and 1 we qu ote , in pe rt ine nt p art :

Th is d e c laratory

jud g me nt a c tio n w a s f

ile d o n Jun e 9, 19 95

. Pla int if fs in this cause wer e tena nts of t h e first floor of a building located at 5002 King ston Pi ke, Kn oxvil le , T e nn e sse e . T he pa rt ie s h a d e nte re d in to a

le a se da te d Ma

rc h 4 , 1 99 3, wi th defe ndants as lessor.
The lea se ag ree ment provided a rig ht of first re fusal to plaintiffs i n the eve nt that defe ndants eve r off

ere d the prope rty

for sa le. I n M ay1995 Remax P ref err ed Proper t i es , ac t ing a s the ag ent of the de fenda nt, procure d a contr act f or sale of the property in the amount of $3 6 7 , 5 00.00. . . . and re quired the se llers to pay Remax P re fe rr ed P ro p er t i es a c o m m i s s i o n eq u al t o t h e a m o u n to f $ 2 3 , 0 0 0

. 0 0 at cl o s i n g. The c ontrac t also acknow ledg ed that the main f loor of the pr emises was oc c up ie d by pla int if

fs a nd that the le a se a g re e me nt g rante d the te na nt a ri g ht o f f ir st ref usal. The r eal estate sales contra ct provided that if the tenant e x erc ised the rig ht of fi rs t r e fu sa l, the n the re a l est a te sa le s con tr a c t wou ld be c ome nu ll a ndvo id a nda ll earnest money

would be re turned to buy er. Additionally , defe ndants had enter ed into a commission agr eeme nt executed by Bill Kessler , on behalf

of the de fenda nts, and Mark Hawkins, on behalf of Remax Commercial Division. Per the terms of that agre em en t , defe ndants and Remax Commercial Division ag ree d that the “c ommissi on ag ree ment” did not prohibit seller from selling the prope rty to any party not first contac ted by

Remax P ref

err ed Properties. At the tria l of this cause, M r. Ha wki ns testified that it was Remax’s position pursuant to the terms of the commission agr eeme nt and the re al estate sales c on tr a c t th a t if the pla int if fs e xer c ise d the ir ri g ht o f f ir st r e fu sa l, the n Re ma x wou ld be e nti tle d to no fe e on the sa le fr om d e fe nd a nts to p la int if fs

.

. . .-3- [p] laintiffs did exercise their right of first ref usal and this was a cknowledg ed by counsel for

the def endants. The issue appea red to be one of law as to whe ther by exercising their rig ht of first re fusal plaintiffs be came obli g ated f or the purc hase price of $367,500.00 or we re only obligated for the net proc eeds of $344,500.00.

. . . The Trial Court then conclude d:

. . . The Court finds that the pric e is ea silydeterminable in thi s instance by determining whe ther de fenda nts were o b ligated to pay the $23,000.00 re altor fe e. Having determined that defe ndants wer e not oblig ated, then the Court f inds that the obligation of the plaintiffs was $344,500.00.
The Court then we nt on to hold that the plaintiffs failed to prove by a pre pondera nce of

the evidenc e that the def

endants c ontinued to occupy the sec ond floor of the building subsequent to J une 10, 1995, and that plaintiffs fa iled to establish a fa ir m arke t value of the premises a nd defe ndants wer e the re fo re no t ob lig a te d f

or pla int if fs ’ c la ims fo r r e nt, a ndde nie d a c la im f or a tto rn e y ’s fe e s. Def endants brie f s t at es twenty -one issues. B y way of summary , they

question the amount of the purc hase price a s determined by the Trial Court, the omission of ce rtain evide nce, the re fu sa l to a wa

rdpr e -j ud g me nt i nte re st, the ta xing of cos ts as w e ll a s th e Cha nc e llo r’ s r e fu sa l to a wa rda tto rn e y ’s fe e s.

Th e op e rativ e pr ov isi on of plaint if fs ’ l e a se state s: 3. FI RST R I GHT OF

REFUSAL

OPTI ON
I n the event L essor decides to sell the bui lding located at 5002 King ston Pi ke (the “Property ”), L essee shall have the first rig ht of ref usal of any

bona fide offe r at su c h ti me a s o ff

ic e (s ic ) i s r e c e ive d. L e sse e sh a ll ha ve 15 da y s in wh ic h to e xer c ise this right of f

irst refusa l option after bona fide off er is re ceive d by

L essor. (sic ) The prope rt y wa s put on the marke t in early 1995. Def

endants e ng ag ed ReMax Prefe rre d Properties and enter ed into a “ Co mmis s io nA g r e e me n t” u n d e r w h ic hReMax would rece ive a $23 , 0 0 0

. 0 0 c o mm is s io n u p o n th e ir p r o d u c in g a

q u a li f ie d b u y e r
. T h e Co mm is s io n Ag ree ment state s:
I t is un de rs too d that thi s “ Com mis sio n Ag re e me nt” in n o w a y pr oh ibi ts m e [Sel le rs , GKV L easing ] fr o m S ell ing the property my self. I

reta in the rig ht to Sell t o any pa rt y no t f ir st c on ta c te d b y

Re /Ma x Pre fe rr e d Pr op e rt ie s. The seller s rec eived a nd acc epted an offe r from a qualified third party , and executedThe Sales Ag ree ment is rife with ambig uities, but the evidence establishes the c ommissi on 2 was to be pa id from the purc hase price.
-4- a Sales Ag ree ment on May 2, 1995. The Ag ree ment states in pertinent pa rt: “The pur chase price for the prope rty

is Three Hundre d and Six ty -Seven Thousa nd and F ive Hundre d ($367,500) Dollar s and is to be paid as follows:

. . . Cash at closing .” The Sales Ag ree ment was made conting ent upon and subject to Plaintiffs’ not exercising the right of first ref usal. A parag raph in the S ales Cont rac t which pr e c ipi ta te d th is l iti g a tio n s ta te s:

12) Seller( s) ag ree to pay

Remax P ref

err ed Properties, the Ag ent(s) who neg otiated this sale, a commission equal to the amount of $23,000 of t he sales price , in cash, at cl o s i n g. 2
Pla int if fs g a ve no tic e to s e lle rs of the ir int e nt to exe rc ise the ir ri g ht o f f ir st r e fu sa l in a do c ume nt d e liv e re d to De fe nd a nts ’ c ou ns e l w hic h r e a ds :

May 15, 1995
This is to notify

of our e x erc ise of our f

irst rig ht of ref

usal. We understand the ne t pr oc e e ds to the se lle r t o b e $3 43 ,5 00 . Pl e a se c on fi rm a s to thi s a mou nt. Al so we wi ll n e e d a n o r i g i n a l c o p y o f t h e o f f e r t h a t i s o u t s t a n d i n g
. N o t e t h i s o f fe r i s conting ent on there being an existi ng bona fide offe r. The e vidence does not establish that defen dants eve r ac cepte d this offer. Contra ct interpre tation involves questions of law that ar e subjec t to de novo revie w, with no presumption of the cor rec tness of the trial c ourt’s conc lusions. Ha mb le n Cou nty v . City of M or ris tow n , 656 S.W .2d 331, 335-36 (Te nn.1983). I ssues requiring the i nterpre tation of written contra cts involve leg al ra ther t h an factual issues, Brandt v. Bib Enters., Ltd. , 9 8 6 S. W. 2 d 5 8 6 , 5 9 2 ( T e n n
. Ct

. A p p
. 1 9 98). The meeting of the minds in mutual a ssent to the terms of a contra ct is e ssential to t h e c re at i o n o f an enfor cea ble contra ct; one party

must acce pt the other pa

rty ’s offe r. Sa

fe c o Ins . Co. v. City of W

hit e House, Tenne ssee , 3 6 F .3 d 54 0, 54 6 (S ixth Cir . 1 99 4) ; Roy Mc Amis Disposal Serv., Inc . v. Hiwassee Sys., Inc ., 61 3 S. W.2 d 2 26 , 2 29 (T e nn . .Ap p. 19 79 ). Th e princ ipl e of mutua lit y is re le va nt to this c a se b ec au s e t h e r e wa s n ev eran agr ee m en t , s t i p u l at i o n s o f t h e p ar t i es t o t h e c o n tra ryn o t wi t h s t an d i n g. I ndeed, “ [t ]here ca n be no co n t ra ct wi thout mutual assent.” Richmond v . Travelers' Ins. Co. , 130 S.W . 790, 791 (Tenn. 1910)

.

The re cord e stablishes that the parties disag ree d from the beg inning on the te rms of the purc hase. A t all times sellers maintained that the pur chas e p ri ce was $367,500.00, and ne ver wave red f rom that position. P urcha sers, on the othe r hand, “assumed” or “be lieved” the price to be $343,500.00 and insist that their position was cl ea r t o sellers “ from day one” and they

never entertained “a cc ep t i n g” a higher fig ure. A s a matter of

law ther e wa s no eff

ective e x erc ise of the rig ht of first ref

usal. Howeve r, t he parties took the position at trial that the exercise wa s valid, andThe Trial Court, in its Memorandum Opinion, obser ved: 3

B a se d u p o n t h e o p e n i n g s t a t e m e n t s o f c o u n s e l , i t ap p e ar e d t h a t t h e r e w e r e fe w, if any , disputes of fac t reg arding the cor e issue in this case. The tra nsition of an option into a contrac t to purchase ca n b e effecte d “only by an 4 unqualified unc onditional acce ptance in ac co rdance with the terms and time specifie d.” Jones v

. Horner, 260 S.W .2d 198, 199 ( Tenn. Ct. App. 1953). “ The uniform rule is that an off er to make a bilater al contract m ust be acce pted precisely acc ording to the terms of the of fer .” Id .; see, Rayv. Thomas , 232 S.W .2d 32 (Tenn. 1950)

.

Pur c ha se rs po sse sse d o nly the ri g ht t o a c c e pt s e lle r’ s o ff e r andha d n o auth ority

to n e g oti a te 5
or mod if y its te rm s. -5- essentially

asked the Court to settle the dispute betwee n them as to the amount of the purc hase price. 3
I n this case ther e wa s an interim closing in D ece mber of 1995 w here the purc haser s tender ed what the y b el i eved to be the purc hase price a nd the sellers c onvey ed the pr operty . The parties arg ue about whether the s o-ca lled mirror imag e rule is recog nized in Tennessee

. See: Canton Cotton Mill s v. Bowman Ov erall Co. , 257 S.W

. 398 (Tenn. 1924), but since the se ller neve r ac cepte d the terms o f t h e p u rp o rted e x erc ise of the right of first ref usal, the mirror imag e rule has no application to the fa cts of this case

. 4

The pa rties throug h their stipulation a nd conduct foist on the Trial Court the issue of determining the pur chase price to be paid for the prope rty , and it was within the Tria l Court’s

5 discretion to have re fu s ed to rule on the issue as a subjec t matter for a dec lara tory

judgme nt. The Trial J udg e conclude d that the broker ’s commission wa s not ow ing in this case an d t h e e vidence does not preponde rate ag ainst that finding. T enn. R. App. P. 13(d). He t h en d ec lare d that the pu rc ha se pr ic e sh ou ld b e the a mount off ereda ndult imate ly

pa id b y the pu rc ha se r. Ta

kin g int o a c c ou nt a ll the c ir c ums ta nc e s a nda c tio ns of the pa rt ie s, we a g re e wi th the Tria l Judg e . A s w e sa id in H a th a wa y v . H a th a way , 98 S.W. 3d67 5, (T e nn . Ct . A pp . 2 00 2) : “ [a] r e a so na ble a nde qu ita

ble construction is g iven to all contra cts by the courts.” The Chanc ellor’s de termination, in our view, is fair a n d e q u it a

b le , a n d w e a f

f irm th e Ch a n c e ll o r o n th is is s u e
. We d o n o t a d d r e s s the issue of whether broker s’ commissions are to be include d in an offe r of a cce ptance in rig ht of first re fusal c a se s. Plaintiffs claim that they are entitled to loss of rental income f or t he upstairs portion of the bu il di ng for the six- mon th p e ri odfr om 6 /10 /95 thr ou g h Jan ua ry 19 96 be c a us e De fe nd a nts continued to occ upy

it. How ever , the Trial Court he ld that the y failed to c arry their burden of proof

. We affirm the Trial Court on this issue. Tenn. R. App. P. 13(d).

As to the issues of pre

judgme nt interest, such a war ds are within the sound discretion-6-

of the Trial Court, an d t h e decision will not be disturbed by an appe llate court unless the rec ord reve als a manifest and palpable abuse of discretion. Spence r v. A-1 Crane Se rvice , Inc ., 880 S.W .2d 93 8, 94 4 ( Te nn .1 99 4) ; Otis v. Cambridge Mut. Fire Ins. Co. , 850 S.W .2d 439, 446 (Tenn.1992)

.

Def endants a lso seek pre-

judgme nt inter est. Their a rg ument that the matter w as not ad d r e s s e d in th e Co u r t’ s ru li n g o r M e mo r a n d u m O p in io n is u n c le ar , s in c e a Su p p lemental Memorandum Opinion wa s entere d which does a ddress the matter, and de fenda nts were awa rded $17,266.05 interest in the F inal J udg ment enter ed on Aug ust 20, 2003. The p ar t i cu l ars of the calc ulations are not rea dily revie wable from the Supplemental Opinion, which is simplya tra nscript of the he aring with counsel and the Court. The discussion therein a bout how the fig ures we re calc ulated does not tra ck we ll in transcript form. There being no patent er ror in the r

uling, we find that the amount established wa s in the sound discretion of the Trial Court.

F ina lly , Se lle rs arg ue that th e Tria l Co urt e rr e d in re fu sin g to a wa rda tto rn e y ’s fe e s, a ndba se the ir

c la im f or su c h f e e s u po n a

pr ov isi on in the L e a se Ag re e me nt w hic h s ta te s:
I n addition to any

other re medies L essor may h av e at l aw or equity and/or u n d er this L ease , L essee shall pay upon demand a ll L essor’s c osts, charg es and e xpe ns e s, inc lud ing fe e of c ou ns e l, ag e nt, a nd oth e r re ta ine d by L e sso r, inc ur re d in connec tion with the recove ry of sums due under this L ease , or beca use of the br eac h of any covenant under this L ease or for any other re lie f against L essee irrespe ctive of wh e the r s uit

is b e g un . F urthe r, in th e e ve nt L e sse e sh a ll b ri ng a n a c tio n a g a ins t L essor for relief here under and L essor shall preva il, L essee shall p ay L essor’s re a so na ble a tto rn e y

fe e s a nda ll c ou rt

c os ts.
I t w a s p la in ti f

f s ’ p o s it io n a t tria l th a t w h e n th e o p ti o n w a s e xe r c is e d th e le a se wa s t er m i n at ed an d t h e r el at i o n s h i p b et we en t h e p ar t i es b ec am e t h at o f ve n d o r a n d v en d ee
. As s u m i n g, arg uendo, that the right of first ref usal was pr operly

invoked (whic h is the position of the parties), the re lat i o nship of the parties beca me vendor /vendee

. See Chapman v . Chapman Drug Co., 341 S.W .2d 392 (Tenn. 1960) , (“w hen the making of t he contract pursuant to the lease for e x erc ising the option is complete by

g iving notice,

. . . the l and is clea rly reg arde d in equity

as the prope rty

of the vendee under the option t o p u rc h as e subj ect to the rights of the vendor unde r the c ontrac t of purcha se.”) We affirm the Trial Court’s denia l of attorney ’s fe es in this c ase, and further find that the costs assesse d to the parties in the Trial Court was a p ro per e x erc ise of the Trial Court’s discretion.
For

the fore g oing r eason s , we aff irm the J udg ment of the Trial Court and re mand, wi th the c os t of

the app e a l a sse sse d to app e lla nts

.-7- ______________________________ H ER SCH EL P I CKE N S F RAN KS , P

. J.