### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE JULY 10 , 2002 Ses sion

SUMNER COU NTY BOARD OF EDUCATION v. MANSKER FA RMS, LLC

Direct Appeal from the Chancery Court for Sumner C ounty No. 99C-274; The Honorable Tom E. Gray, Chancellor

No. M2001-01888-COA-R3-CV - Filed January 23, 2003

This is a dispute over an option contract. Mansker Farms, a land dev eloper, offered the Sumner County School Board an option on land in its development to build a school. A dispute arose over whether a conditi on precedent existe d in the co ntract a nd whethe

r the nonf

ulfillmen t of this condition prevented the School Board from exercising the option. The trial court found that no valid contract existed because there was no meeting of the minds between Mansker Farms, who ga ve the option, and the Sumner Cou nty Board o f Educa

tion, who a

ttempted t

o exercise the option. For the following reasons , we aff

irm the ruling of t

he trial c ourt.

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

A LAN E. H IGHERS , J., delivered the opinion of the cour t, in w hich W. F RANK C RAWFORD , P.J., W.S., and H OLLY K IRB Y L ILLARD , J., joined.

John R. Phillips, Jr., Gallatin, TN, for Appellant

Joe H. Thompson, Gallatin, TN, for Appellee

OPINION

Facts and Procedural History

In October , 1995, th e Appel lee, Mansker Farms, L LC (“Mansker Fa

rms”) purchased appro ximately

500 acres of land in Hendersonville, Tennessee for a residential develop ment

. Mansker Farms was approved by

the Hendersonville Regional Planning Commission (“the HRPC”) to proceed with development only on a portion of

the property known as Phase I. I n September, 1995, Mansker Farms’ chief manag er, Mack McClung (“Mr. McClung ”) conta cted the Appellan t, the Sumner Cou

nty Board of Education (“the Boa rd”). Mr. McClun g offe

red the B oard fou

r lots in the developm

ent upon w

hich to build an elementa

ry school in e

xchange for $186, 000.00-- the cost-2-

to increase the sewer capa city for the

development. Contract negotiations ensued between Mansker Farms and the Board, including the exchang e of several faxed copies of a proposed option contra ct between the parties. The negotiations proved fruitless when in late 1996, the B oard turne d d own Mansker Farms’ offer.

In 1997, Man sker Fa

rms attem pted to g ain appr

oval fro m the HRPC to b egin development of the remainder of the property

. At a me eting o f the HRPC where Mansker Farms had

unsucce ssfully

proposed a master development plan, Mansker Farms was told by the Ms. Baldwin, the Hendersonville city pla nning director, that the inclusion of a school in the d evelopme nt could help attain ap

proval f or the pla n. Manske

r Farms again contacted

the Board and offered land in the development

for an elementary

school. In April 1998, negotiations broke of f betwe en Mansker Farms and t he Board. In the summer of 1998, however, negotiations resumed whe n the Board expressed interest

in building

a middle school in the development. During these on- again- off-ag ain negotia tions, Mr. McClung and Leah Denne n, an attorney w orking for the Board, passed dr aft copies of an option c ontract

back an d forth

as the a greement between the par ties took shape. These draft copies contained various changes, including ha ndwritten chang es made t o the language of the agreement by

the parties.

On August 19, 1998, Mr. McClung forwarded an executed option contract to the Boa rd. On October 21, 1998, the Board returned an almost identical option contract to Mr. McClung. The option contract stated that, if exercised, the cost to the Board for

approximately 20 acre s of Mansker Farms would be $50,000.00 for the sewer line installation to the property. Manske r Farms made a rezoning request to the City of Hende rsonville (“the City”) whic h included the school and whi ch asked fo r highe r density zoning so t

hat Mansk

er Far ms could build town homes. In March, 1999, the Board sent two le

tters inf orming M ansker Farms that it wished t

o exercis e its option. Mansker Farms did not reply to the letters. On Apr il 13, 1999, the City rejected Mansker Farms’ rezoning request. Mansker Farms then refuse d to sell the property to the B oard.

On September 29, 1999, the Board filed a complaint for declar atory judgmen t and spec ific performance

against Mansker Farms in the Chancer y Court of Sumner County . The complaint requested that the trial court order Mansker Farms to sell the property to the Board under the option contract. On November

19, 1999, M ansker Farms file d an answ er alleg ing that its duty to perform under the option

contract nev er aros e becau se the co ndition pr eceden t of obtain

ing hig her dens ity zoning did not occur.

On May 21 and 22, 2001, a trial was held. On July 11, 2001, the trial court e ntered anorder dismissing the Board’s complaint. The trial court found that there was no meeting of the minds, and thus not a valid contract. The trial court found that each side of this dispute attributed a diff eren t meaning to Paragraph 5(d) of the co ntract. Mansker Farms r ead Para graph 5(d) tomean that having their property rezoned was a condition p recedent to conveying the land to the Board. The Board, however, read Paragraph 5(d) as applying only to the 20 acres in consideration for building the school and was not co ntin gent on anything. The tr ial co urt he ld th at beca use Pa ragr aph 5( d) was “capab le of being understood in two or more p ossible se nses,” it was ambiguous and that “[w]hen-3-

a contract term is am

biguous , there i s no meeting of the minds.” Th

e Boar d filed a timely notice of appeal and presents the following issues for our r eview:

I. Whether th e t ri al co ur t e rr ed by d etermining that the option con tract i s ambiguo us. 2. Whether, assuming that the option contract is ambiguous, the Boar d’s interpre tation should preva

il.

Standard of Review

The st an da rd of

re vi ew fo r a no n- ju ry case is de novo upon the record. See Kendrick v. Shoemake
, No

. E2000-01318-SC-R11-CV, 2002 Tenn. Lexis 489, at * 6-7 (Tenn. 2002). The findi ngs of fact

made by a trial c ourt are

given a presumpt

ion of cor

rectne ss that will not be overturned

unless the

evidenc e preponderate s again st those findings. See Tenn. R. App. P. 13(d);

see also Bank/First Citizens v. Citizens and Assoc. , 82 S .W.3 d 259, 262 (T enn. 2 002) ( citi ng Bogan

v. Bogan , 60 S.W.3d 72 1, 727 (Te nn. 2001) ). A tria

l court’sruling o n a matter of law, h owever , will be reviewed “’under a pure de novo standard . . . acco rding no defere nce to the conclusions of law made by the

lower court[].’” Bank/First Citizens , 82 S.W.3d at 727 (quoting Southern C onstructo rs, Inc. v. Loudon County Bd. of Educ. , 58 S.W.3d 706, 710 (Tenn. 2001)). The interpretation of a written agreement is a question of law, and, therefore, will be reviewe d de novo with no presumption of correctness given to the trial court’s finding s of law. Union Planters Nat’l Bank v. American Home Assurance Co. , 865 S.W.2d 907, 912 (Tenn. Ct. App. 1993).

Law and Analysis

There is no dispute between the parties as to whether or not they properly e

xecuted an option contract. The dispu

te arise s in the inte

rpreta tion of the

ir agr eement, and spec ifically

as to whether Paragraph

5 Section ( d) crea

ted a condition pre cedent w hich the n onfulfill

ment o f prev ents the Board from exe rcis ing the option. The option contract begins by naming the parties, stating the consideration, describing the land on which the option is being given (“parcel I V-4 of the Mansker Farms Development Plan”), and giving a five y ear time frame in which the option must be exercised. The contract continues with a sentence that reads “ [s]ubject to the following terms and cond

itions” followed by eig

ht num bered pa

ragraphs. Paragr

aph 5, and more specifically Section (d) of Paragraph 5, is the c rux of the p

resent d ispute. I t reads in pertine nt part:

It is furthe r unders tood betw een the p arties th at the exe rcise of the option

is subj ect to the fo llow ing: (d) Approval of zoning and changes nec essary f ro m the City of Hen dersonvi l le or other

gover nmental a uthority for the c onstruct

ion of the public school and related facilities including the proposed site plan and r ezoning as hereinabove recited. School sy stem ag rees to s upport an d/or assis t Seller w ith said change.-4-

Before we look at the specifics of the clause, we must determine its eff ect. If it is a condition preced ent, it will aff

ect the B oard’s a

bility to exercise

the option, but if it is not, any discussion about Paragraph

5(d)’s me aning is pointless. The cre ation of a condition

preced ent as we ll as its effect has been summed up a s follows:

A contrac tual duty

subject to

a conditi on precedent is not required to be performed until the condition occurs or its nonoccurrence is excused. Covington v. Robinson
, 723 S.W.2d 643, 645 (Tenn. Ct. App. 1986); St rickland v. City of Lawrence burg
, 611 S.W.2d 832, 837 (Tenn. Ct. App. 1980); Restatement (Second) of Contracts § 225(1) (1981). The existence of a condition precedent depends upon the parties' intention, which courts may disce rn from the contractual language and the circumstances surrounding the contra ct's execution. Miller v. Re sha , 820 S.W.2d 357, 360 (Tenn. 1 991); Harlan v. Hardaway , 796 S .W. 2d 953, 957-58 (Tenn. Ct. App. 1990)

. . . . No speci al language isneeded to create a condition prece dent. The nature of the agr eement a nd its surr

ounding circumst a nces may

sufficiently manife st the parties' intention to make a

contractual obligation conditional. Harlan v. Hardaway
, 796 S.W.2d at 957-58; Restatement (Second) of Contracts § 226 cmt. a (1981). However, the presence of a condition is usu ally signale d by a conditional word or phrase such as "if," "provided that," "when," "after ," "as soon as," "on condition that," and "subject

to." Harlan v. Hardaway , 796 S.W.2d at 958; Restatement (Second) of Contracts § 226 cmt. a; 3A Corbin on Con tracts§ 639.

Holland v. Holland, No. M1999-02791-COA-R3-CV, 2001 Tenn. App. LEXI S 409 , at *10 -12 (Tenn. Ct. App. June 1, 2001).

The Board contended at trial and at oral argument that Section 5 was its “political clause” meant to allow it to g

racef ully exit deals t

hat fell t hrough and, thus, was not int

ended to b enefit Mansker Farms. Mansker Farms, on the other hand, contends that becaus e the “s ubjec t to” l anguage is contained at both the beginning of the sec tion of numbered paragraphs and a t the be gi nning of Paragraph

5, a condition precedent exists whichmust be fu lfilled be fore the Board c an exerc ise its option. In light of the above state ment of law, and our review of the record, w e agree with Mansker Farms that the numbered paragraphs c reated condition pre cede nts to the exercise of the option by the Board.

Having determined that the ability of the B oard to e

xercise the option contract depended on the conditions outlined in the numbered paragraphs, we turn to the Board’s co ntention that the disputed provision, Section (d) of Paragraph 5, is not ambig uous. The

trial cou rt deter mined tha t this section was ambiguous because it could be reasonably

interpreted in two different way s. The trial court found no valid contract existed because the required meeting of the minds did not take place. After a de novo review of the entire record in this case, we rea ch the same conclusion that the trial court reached.-5-

The formation of

a contract “‘must result from a meeting of the minds of the parties in mutual

assen tto the terms . . . .’” Doe v. H CA Health S

ervice s of Tennes

see, Inc., d/b/a

HCA Donel

so n Hospital
, 46 S.W.3d 191 , 19 6 (T enn . 20 01) (ci tat io ns o mi tt ed) . In the construction of a contract, the intention of the parties a

t th e time the agreement is executed gove rns. Planters Gin Company v. Federa l Comp ress & W

arehouse Company, Inc., et al , 78 S.W.3d 885, 890 (Tenn. 2002). The parties are presumed to have expressed their intentions in the langua ge of the agree

ment. Id. When this expression of intent is “clear and unambiguous, the literal meaning of the language controls the outcome.” Id. Terms of the contr

act that “may

be susce ptible to mo

re than o ne reas onable interpretation . . . rend

er[] the te rms of the contract ambiguous.” Id. This court has similarly defined ambiguity as it relates to a cont

ra ct provis ion as “do

ubt or unc ertainty

arising from the p ossibility of the sa me lan gu age bei ng fairly understood in more way s than one.” Inscoe v. Kemper , No. M1999-00741-COA-R3-CV, 2000 Tenn. App. LEX IS 736, a t *8 (Tenn. Ct. App. Nov. 6, 2000) (citing Hillis v. P

owers , 875 S.W.2d 273, 276 (Tenn. Ct. App. 1993)). There is no “meeting of the minds” when a contract term is ambiguous, and thus no enforc eable contract. Id. (citi ng Jamestowne On Signal, Inc. v. First Federal Savings &

Loan Ass’n , 807 S.W.2d 559, 564 (Tenn. Ct. App. 1990) (further citations omitted)).

The testimony at trial detailed a ser ies of n egotiations b etween Mansker Farms and the B oard. These negotiations took

place over

a period of sever al y ears an d involved

severa l differ ent propo sals for a sc hool loca

tion on the

Mansker Farms de velopmen t. Witnesses for Mansker Farms testified that the neg otiations t

hat led to the agr eement in dispute were brought about because of its need for zoning approva

l, and tha t th eymade clear that it was essentially a school-for-zoning deal. The Board’s witnesses testified they were not aware of this condition. During the course of ne gotiations between the parties, Mr. McClung added the langua ge in dispute to the end

of Parag raph 5 (d ) in his handwriting on a contr

act prop osal sent

to him by Ms. Denne

n. This language was re

viewedby the Board and was incorporated into the signed option contract. The Board’s witnesses testified that they

were unaware of Mr. McClung’s interpre tation of that

language while witnesses for Mansker Farms testified that the B oard wa s aware of the co ndition it w as putting on the exer

ciseof the option . This lack of a “mee ting of the minds” on this provision where both sides were revising a nd addi n g langua ge to the contract prov ision, each with their own interpretation, created an a mbiguous provision.

We find that t

he lang uage o f section

5(d), specificall y the

parts reading “including the proposed site plan and r ezoning as hereinabove recited” a nd “[s]chool system agree s to support and/or assist Seller with said change,” to be capable of two differe

nt but rea sonable i nterpre tations. On the one ha

nd, the B oard’s p osit ion th at the zoning referred to was only that for the school and notfor the entire Mansker Farms deve lopmentis a reasonable interpretation. On the other hand, the word “rezoning” and the phrase “[s]chool sy stem agrees to support and/or assist Seller with sai d change” can be r

easonab ly interpreted as referring

to the entire Mansker Farms property and the idea that Mansker Farms was conditioning its gift to the School on the “said change.” Thus, as evidenced by the ambiguity of this provision, there was no “meeting of the minds” between Mansker Farms and the Board. As stated above, when there is no “ meeting of the minds” the

re can b e no enfo

rceabl e contract. Thus, we affirm the judgment of the tr ial court.-6- Conclusion

Becau se there is n ot a valid contrac t, all other issues are moot. We affirm the judgment of the trial court. Costs are taxed to the Appellant, Sumner County B oard of Educatio n, and its su re ty, for which execution may issue, if necessary

.

___________________________________ ALAN E. HI

GHERS, JUDGE