# FILED Dec. 23, 1996 Cecil Crowson, Jr . Appellate Court Clerk IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON

________________________________________________ PERRY HART and wife REBA HART, Plaintiff s-Appell ants, Chester Chancery No. 8721 Vs. C.A. No. 02A01-9602-CH-0036 TOMMY CASEY, Defendant-Appellee, JO ALICE CA SEY, FIRST N ATIONAL BANK OF JAC KSON, EMC M ORTGAGE COMPANY AND WESTERN UNITED ASSURANCE COMPANY, Defend ants.

___________________________________________________________________________

FROM THE CH

ESTER COUN

TY CHANCE

RY COURT THE HONORABLE JOE C. MORRIS, CHANCELLOR

Ricky L. Wood of Parsons For Plaintif

fs-Appe llants J. Alan Rheney and Jonathan O. Steen Spragins, Barnett, Cobb & Butler of Jackson

For Defendant-Appellee

REVERSED AND REM ANDED Opinion fi led:

W. FRANK CRAWFORD, PRESIDING J

UDGE, W.S.

CONCUR: DAVID R.FARMER,

JUDGE HERSCHEL P. F RANKS, JU DGE This appeal involves a “land sal e - purchase agreement” betwee n Perry Hart and wife,1 The comp laint also names asdefenda

nts Tommy Ca sey’s wif

e, Jo Alic e Casey, First National Bank of Jackson, EMC Mortgage, and Western United Assura nce Company, but no relief was sought as to these defendants. The judgment disposes of all issues for w hich relief is sought, a

nd these a

dditional p arties a

re not inv olved in th

is appea l. 2 Reba Hart (Buyers) and Tommy Casey (Seller). 1 Buyers appeal from the judgment of the trial court finding that the “ land sale - purcha se agreement” between the parties ha d been terminated and ordering that Seller was the owner of the prope rty. Buyers’ complaint, filed October 12, 1994, alleges that by virtue of a “land s ale-pur

chase agreem ent” attached as an exhibit to the complaint, they purchased a tra ct of real estate as described from defendant, Tommy D. Casey. Buyers’ aver that theproperty was encumbered by a deed of trust exec uted by Se lle r to Jack son Nation al Bank a nd subseq uently as signed to EMC Mortgage

Corpora tio n a nd later assigned to Western United Life Insuranc e Company. The complaint avers th at Buyersspent app roximate ly $15,000 .00 for e

xtensiv e repairs and remod eling which we

re compl eted in 19 92. They a ver that on July 27, 1994, the

y recei v ed a letter from Seller that the 1993 property taxes had not b een paid and that the July rent owed under the contract was past due. At that time, Seller invoked a late cha rge of $84.00. Buyers allege that on July 21, 1994, they tendered to Seller three checks in the total amount of $602.00 to pay for t

he 1993 ta

xes, July rent, and the late charge, and further aver that when they received their bank statement on July 26, 1994, they discovered that the three checks had been returned for insuffic ient fund s. Buyers allege th at they a sked the Se ller, th roug h his secr

etary, t o redepos it the checks, and that they were told that the chec ks would be redeposited. Buyers heard nothing fr

om Seller u

ntil they r eceive d a letter

from Selle

r’s lawy er on or a

bout Augus t 11, 1994, informing themthat Selle r was tak ing posses sion of the

propert y becau se Buyers had failedto pay the 1993 property taxes and had defaulted in makingthe monthly rental p ayments.

The complain

t further avers th at Buyerstendere d their August rent check

to Seller which

was refuse d by lette

r of Augu st 17th fro m Seller’ s att orney. T hey alle ge that they made a ll monthlypayments required under their contract exc ept for the July and August 199 4 payment s which were tendered to Seller but were refused. Buyers allege that after their re ntal paym ents

were refused, they notified Seller that they wished to prepay the balance due under the c ontract2 The record does not indicate any further a ction concerning the temporary restraining order, nor any effort seeking a tempora ry injunction pending the hearing of the case. The proof in the record indicates that the property has re mained vacant, and apparently neither party has attempted to occupy or otherwise take possession of the prope rty. The restraining order expired fifteen days after its issuance on October 12, 1994. Tenn.R.Civ.P. 65.03 (5).

3 as provided the re in, but that Seller refused this request and advised Buyers that he had taken possession of the property pursuant to the terms of the contract, and that the c ontract was terminated. The complain

t allegesthat a course

of dealings had been established between the parties for late payments, and that Buyers were allowed to cure defects onprevious occasions, and that they relied upon this course of conduct. Buyers aver that they had spent a great deal of money

on the prope

rty, that t he prope rty is wor th approx imately $60,000.00 to $65,000 .00, and t hat a forfeiture would be a

gross inju stice an d would ca use themimmediate and irreparable harm. The complai nt prays fo r a temporary restraining order to restra in Seller from taking possession of Buyers’ propert

y pending a hearing on the merits, and that Buyers be awarded possession and Seller be found in breach of the contract. Buyer s also seek da mages, both compensatory and punitive. The trial court issued a temporary restraining order re straining Seller from taking possession of the property, or from in any manner disposing of or encumbering the pr operty, or from inte rfering in any man

ner with t he posses sion of Buy ers. 2 Seller’s answer to the complaint admits that Buyers were in default under the co ntract and admits that Seller terminated the contract. Seller alleges that he op erated under the

terms of the contract, and he denies that Buyers are e ntitled to any of the relief s ought. By way of counter -claim, Seller a

lleges tha t Buyers w ere hab itually la te in their

payme nts an d other obligations and allowed the insurance on the proper ty to lapse, and that they were warned concerning breaches on numerous occ asions. Seller avers that when the three checks giv en in payment of the de

linquent s ums here

tofore s et out wer

e retu rned fo r insufficient funds, he declared the contract in default, a

nd t hat Buyers had no further rights under the contract. The counter-complaint

seeks a d eclara tion that Bu

yers we re in default under the agreement and that their rights an d intere st in the real estate be declared null and void. Seller also seeks damages4

occasio ned by Buye

rs’ bre ach of th

e agree ment. The land sale -purcha se agre ement pr ovides tha

t Bu yers purc hased the property for $31,000.00, with the su

m of $6,000 .00 paid

at the time of execution of the contract. The balanc e of the purchase price of

$25,000.0 0 was to be

paid in 225 equal mon

thly installme

nts at a ra te of interes t that could be changed by the Seller as provided in the agreement. The contract provides that when the en tire indebt edness ispaid, Sell er is to pr epare a nd delive r a warr anty deedconveying fee simple title to the Buyers free and clear of all encumbranc es except for

curren t taxes. T he provis ions of the

contract pertine

nt to the iss ues befo

re us ar e as follo ws: 1. As above recited, the purchase price for the above- desc ribed real estate isthe sum of Thirty -One T housand Dollars ($31,000.00). The sum of Six Thousand Dollars ($6,000. 00), is paid on said purchase price at the time of the execution of this c ontract . The balance of said purchase pric e in the sumo f Twenty-Five Tho usand Dollars ($2 5,000.00) , will bea r intere st from and after date at the rate of 12% pe r annum, to be amortized and paid by 225 equal, mon thly installments of $280.00 each, these installments being due and p ayable s uccessi vely on the 1st day of each

consecu tive mo nth, beginning November 1, 1989. Anything above to the contrary notwithstanding, it is understood and agreed

by and be tween the Buyers a nd the Sell er that th

e rate of in terest of 1 2% to be charged a nd paid asafores aid on sai d future a dvance s shall be

for a pe riod of six

(6) months fro m this date and at the end of such six month period, the Sel ler sha ll review the rate of interest charged and shall incr ease t he rate of interest , decrease the

rate of interest , or allow

the same to remain as it is, and shall continue suc h se mi-annual review until the entire amount of principa l and i nterest due hereunder shall be pai d in full. Buy ers are

granted the right t

o prepay the enti r e unpaid bala nc e or any part thereof prior to maturity, in which event the amount thus paid will first be applied to the payment of accrued interest andthe remainder thereof will be applied to and in reduc tion of the

principa l. 2. In the event of a default in the payment of any of the abo ve mentioned installments as the same m ature from time to time, then the entire unpaid b alanc e may, thereupon, be declared due and payable forthwith, at the option o f th e Seller . A failur e to exerci se such option from time to time will not constitute a waiver of the right to exercise the same in the event of future and additiona l defaul ts. 3. In the event any installment payment remains unpaid for as long as fifteen (15) days after its due date, and the Seller does not de c lare the entire indebtedness due and payable forthwith as provided in paragraph 2, then there shall be a late charge of five per cen t (5%) of such pay ment in default.

* * *5 5. The Buyer s agree

to keep th

is p roper ty insured in both the names of the Buyers and Seller, as their interests may appear, and agr ee to pay the taxes assessed against said real estate for 199 0 and thereaf

ter, an d will not suffer a

ny of such

taxes to b ecome delinquent at any time.

* * * 7. In the event t

he Buyer s should fa

il to keep

the prope

rty insured, the taxe s paid

as aforesaid, such

may be deemed an event of default, and if not corrected by the Buyers, within a period of thirtydays after

notice by the Seller, the Seller, in addition to any other rights and remedies which he might have at law or equity, shall have the right

to declare this contract terminated and of no further force, effect or

virtue, in which event the Buyers a gree to surrender up the pre

mises to the Seller without any resort to legal processes and the Seller will have the right to reoccupy the above described premises as the lawfu l own er ther eof, as a ny equity which Buyers may have in such property wi ll term inate at the time Selle

r exerc ises such

rights.

* * * 9. No major alt

eration s may be ma

de to the houseor lot without the express written consent of the Seller. 10. In the ev ent the Buy ers shoul d fail to c omply with t he terms of this agre ement, or

in the eve

nt the pre mises are vacate d prio r to the expir

ation of th

e term of this contract, or shoul d fail to pay the entire unpaid balance

of the pur

chase pr ice whe n the same

is required to be paid hereunder, such amounts a s Buyers h ave paid Seller thereto fore ma

y be reta ined by the

Sell er a s liquidated damages , and no pa

rt there of shall b e refundable to t he Buyer s. There are ver

y few fa ctual disp utes. By letter dated July 21, 1994, Seller advised Buyers as follow s: Dear Mr s. Hart:

In reference

to your Land Sale-Purchase Agreement dated 10-11- 89 on property located at 244 E. Main S t., Henderson, Tn., I’m hereby enforcing interest review in item No . 1 and also #3 concerning a 5% late ch arge as of F eb. 1, 1994 due date. The new interest rate will be 14% with a payment of $309. 6 9 beginning August 1, 1994. On item no. 3 concerning 15 days past due, which you have been conscie ntiously past due s ince the

beginning , I’m only

enforcing past due status for 1994 in the amount of $84.00, which shoul d be paid immediately. You are cu rrently due for 7 -1-94, a s of this date you are 21 days past d ue and thi s has bee n conscie ntiously from the beginning. Plus the 1993 taxes also haven’t been paid, th e am ount due o n this is $23 8.08. Unle ss this is ca ught up to date and agre ement to be enforced I’ll consider the contra ct Null and Void and take the property back.6 I need to hear from you by 8-1-94 as to your dec ision. Sincerely, Tommy D. Casey In response to this letter, Buyers sent three checks totaling $602.08 as requested in the letter. They were returned for insufficie nt funds by Buyers’ bank. Plaintiff, Reba Hart, testified that when she learned of the returned c heck, she called S eller’s office and requested that the checks be redeposited. It was her understanding from her conversa tion with Seller’s secretary that the checks would b e redep osited. On the other hand, Seller’s secretary, Ms. We bster, testified that although she talked by telephone to Ms. Hart, she did not tell her that the checks would be redeposited. Ms. Webster stated that she me

rely told Ms. Hart that she would relay the request for redeposit to Seller, Tommy Casey. Ms. Hart took no further action to cure the defa ult. She testified t hat she r eceiv ed no further notice f rom Seller

until she r

eceive d a letter

dated Au gust 11, 19 94, which states: Re: Property located at 244 East Main Street, Henderson, Chester County, Tennessee Dear Mr s. Hart: This lette r willserve as notice to you that Mr. Tommy D. Casey is exercising his right

to retake possession of the above referenced premises whi ch is the subje ct of a c ertain L and Sale- Purchase Contract executed by you and Mr. Casey on Octobe r 11, 1989. Mr. Casey is retaking the property a s a resul t of your d

efault in t he monthly payments and payment of the taxes, as required b y the te rms of the contract, evidenced in part by the re turn for insufficient

funds of your three checks, nos. 1774, 1775 and 1776, in the aggregate sum of $602.08, copies of which ar e attached hereto. Before the August 11, 1994, letter was received, Buyers had sent the August re ntal check which apparently crossed in the mail with Seller’s August 11, 1994 l etter. Se ll er ref used to accept this check and returned the check to Buyers by letter dated August 17, 1994, from Seller’s attorney. Subsequently, Buyers’ attorney, by let ter o f August 31, 1994, notified Seller of Buyers’ wish to prepay the entire ind ebtedne ss as provided in the contract. Seller’s attorney notified Buyers’ attorney that this could not be done since they had

no right to

prepay b ecause the contract had bee

n previou sly termin ated. Buy ers’ pr oof esta blished th at th ey were financ ially able to pa y the inde btednessin full at t

he time the

y reques ted the pa

yoff sta tement.7 Ms. Hart testified that at the time suit was fi led, the principal balance due Seller was $22,710.00, and the fair market value of the proper ty was $60,000.00 to $65,000.00. Mr. Casey testified that the fair market value of the property wa s $31,000.00. At the conclusion of the evidentiary hearing on October 11, 1995, the chancellor took the case und er advis ement, a

nd on Nove

mber 15, 1 995, ente

red judgm

ent, which provide s: This cau se came on to be heard upon the 11th day of October , 199 5, before the Honorable Joe C. Morris, sitting without the intervention of a jury , and the C ourt afte r heari ng all of the ev idence in the case, stipulations of counsel, and after du e consideration thereof, is of the opinion that the evidence does not prepond erate in the favo r of the c ontention s of the Pla intiffs; The Courtis further of the opinion that the land contract entered into betweenthe parties on October 23, 1989, has been terminated due to late payments, improvements made withoutthe permission of the owner, and failure to properly insure; it is therefor e ORDERED that the land contract entered into between the pa rties on October

23, 1989, i s termina

ted along with all t he Plaintiff

s’ rights to the prop erty, legal or equitable, and that the Plaintiffs take nothing, and this cause be dismissed with prejudice. IT IS FURT HER ORDERED that the Temporary Restraining Order entered in this cause on the 12t h day of Octob er, 1994

is hereby d issolved a nd shall ha

ve no fur ther for ce and e ffect. IT IS FURTHER ORDERED that the Defendant Tommy Casey is now the owner of the property, which wa s the subject of the land contact, free and clear f rom any claims of the Plaintiffs Perry Hart and wife, Reba Hart, and that the Cou nter-Com plaint be dismissed with prejudice. Buyers have appealed

and present two issues for reviewwhich, as stated in their brief,

are: 1. Whether the Chancellor erred in finding that the Land Contract entered into between the pa

rties w a s termina

ted due to

late payments , improveme

nts made without permission of the owner, and failure to properly insure. 2. Whether the Appellants had the rightto pre-pay the Contract at any time , even a

fter default. We will consi der thes e two issue s togethe r. The pr inciple is su e to decide is whether under the terms of the contrac t , Buyers had a right as of August 31, 1994, to pay off the indebtedness owed Seller. The cardinal rule in construing contracts is to ascertain the intent of the parties. West v.8

Lamin ite Plastics Mfg. Co. , 674 S.W.2d 310 (Tenn. App. 1984). In construing contracts the word s expressing the parties’ intentions should be given the usual, natural, and o rdinar y meaning, and in the absence of fraud or mistake a

contract must

be interpreted and enforced a s written, even though it contains terms which may be thought harsh and unjust. Heyer-Jordan & Assocs. v. Jordan , 801 S.W.2d 814, 821 (Tenn. App. 1990). A duty devolves upon a court to enforce a contract in a ccorda nce with i

ts plain te rms and to

consider the entir e contra ct in determining the meaning of any or all of its parts. Cocke County Bd. of Highway Comm’rs v. Newport Utilities Bd. , 690 S.W.2d 231 (Tenn. 1985). In their first issue, Buyers assert that the trial court erred in finding that the contract was terminat ed due to l ate paym

ents, impr

ovementsmade without permission of Seller and failure to properly insure. Since the trial cou rt hear d this case sitt

ing without

a jury, w e review the ca se de novo upon the record with a presumption of corre ctn ess of the findings of fact by the trial court. Unless the

evidenc e preponderate s against the findings, we mus taffirm, absent error of law. T.R.A.P. 13 (d). As to the improvements to the property, the contract provision prohibits “major alterat ions” without Seller’s permission. The proof is that Buyers made repairs, but there is no detailedproof in the record as to major alterations. Moreover , the record establishes that Buyers made the repairs over a period of time in excess of a year , that Selle r and his e

mployeeshad full knowledge of the repairs and never objected or ra ised any q uestion c oncerning same. I t also

seems quite cle ar that r

epairs to the property worked only to the benefit of Seller. W

e also not e that Seller did not specify this provision of the contract as a ground for termination. The evidence preponderates against the chancellor’s finding that a reason for the contract termination was improvements made to the property. As to the fa

ilure to pr operly insure, we do not find

from the record that there is proof that Buyers allowed any insurance on the pro

perty to lapse. Moreover, Seller did not assign this as

an event o f defaul t which must be corrected within thirty days. The evidence pre ponderates against the finding of the chancellor in this regard. Concerning the termination for late payment , Selle r concedes that as to the delinquent ins tallmentrequirement of the contract, Seller is required to e ither accelerate the balanc e du e9

under the contract, or to collect a late charge on the past due installment. Seller, by his letter of July 21, 1994, specifically called for the late charge and thus was not relying on the delinquent installment as a eve

nt of def ault . If we sho uld consid er Selle r’s Augu st 11, 1994

letter a s a notice of acce

leration , we must a

lso consider

it defici ent in tha

t it did not inform Buyers of the amount due

for paym ent of the balance of princ ipal and i nterest a nd any other char

ges. The contract before us is clear that Buyers ar e granted the right to prepayin whole or in pa rt the bala nce of th e indebte dness. It

is also cle ar that in

the even t Buyers de

fault in th

e payment of an installment, Seller has the option toaccelerate and declar e the entire balance due, which te rminates the contract, or to continue the contract and c ollect a late charge for the installme nts. Parag raph 7 of th e contra ct provid es that the

failure of Buyer s to keep t

he prope rty insured or to pay t

h e taxes due may be de emed eve nts of def ault. Thisparagr

aph spec ifically provides additional

rights and remedies for these particular eve nts of default. Seller is authorized to terminate the contract if the y notif y Buyers o f their in

tent to do s o if the de

faults se t out in Paragraph

7 are not corrected within a period of thirty days after noticeby Seller. The contract terms give Selle

r the “r ight to declare this contract terminated,” if there has been no correction of the defa ult by Buyers

. In the instant case, Seller’s July 21, 1994 letter gave notice to Buyers that un less taxe s were p aid along with the pa st-due in stallment s, Seller was term

inatin g th e contract. Subsequently, by letter of August 11, 199 4, Selle r, through his lawyer, declared the contract terminated. The termination notice was issued before thirty days had expired from the July 21, 1994 letter, and specifies as a ground for termination the delinquent installment payment. The letters of July 21 and Aug ust 11 are somewhat confusing, and in view of the contract terms, Buy ers coul d reasonably believe that they could pay off the bala nce of the indebted ness which they promptly tried to do. The record is clear that Buyers attempted to pay off the entire indebtedness after learning that Seller had declared the contract in default. In the absence of a specific time in the contract for paying off the accelerated b alance, a reaso nable time should be allowed by implication. See Moo re v. M oore , 603 S.W.2d 736 (Tenn. App. 1980). The pro of indicates that the property has a value in excess of the bala nce due on the contract, and Buyers have invested considerable sums in the property. While forf eitures are not10

illegal, they are not favored in the law and are to be stri c tly construed. Simmons v. Hit t , 546 S.W.2d 587 (Tenn. App. 1976). Every contract contains an implied duty of good faith and fair dealing in performance and enforc ement. TSC

Industries, Inc. v. Tomlin , 743 S.W.2d 169 (Tenn. App. 1987). When Seller determinedthat the c ontract should be t

erminated for nonp ayment of installme

nt paymen

ts, Buyers had the right to pay off the b alance of the ind

ebtedne ss and obtain title to the property. This they were not allowed to do. Accordingly, the judgment of the trial court is reversed, and the case is remanded to the trial court. The trial court should requireSeller to promptly furnish Buyers a pay-off statement withthe balance due of both principal and interest. Since Buyers did not tender a pay-off amount into cou rt at the t

i me of institution of the suit, Seller should be entitled to all accrued interest to the date of

payment. The trial court should allow Buyers a reasonable time to make the payment a

nd upon pa

yment re quir e Seller

to comply with the terms of the contract concerning the warranty deed. Costs of the appe al are assessed to the Seller.

_________________________________ W. FRANK CRAWFORD, PRESIDING J

UDGE, W.S. CONCUR:

_________________________________ DAVID R.FARMER,

JUDGE

_________________________________ HERSCHEL P. F RANKS, JU DGE