FILED

December20, 1995

Cecil Crowson, Jr.

Appellate Court Clerk

IN THE COURT OF APPEALS OF TENNESSEE

WESTERN SECTION AT JACKSON

 

DONALD L. MOTT, )

MURL KENNAMORE, and )

K & M PETROLEUM CORP., )

)

Plaintiffs/Appellees, ) Fayette Chancery No. 10018

)

VS. ) Appeal No. 02A01-9410-CH-00244

)

D. DEAN GRAVES and SECURITY )

TITLE INSURANCE CO., INC., )

)

Defendants/Appellant )

APPEAL FROM THE CHANCERY COURT OF FAYETTE COUNTY

AT SOMERVILLE, TENNESSEE

THE HONORABLE JOHN HILL CHISOLM, CHANCELLOR

ROBERT B. C. HALE

WARING COX

Memphis, Tennessee

Attorney for Defendant/Appellant Graves

H. MORRIS DENTON

DENTON & CARY

Bolivar, Tennessee

Attorney for Plaintiffs/Appellees

AFFIRMED

ALAN E. HIGHERS, JUDGE

CONCUR:

W. FRANK CRAWFORD, P.J., W.S.

DAVID R. FARMER, JUDGE

Appellant D. Dean Graves ("Graves") appeals the chancellor's decision requiring
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Graves to specifically perform a contract by purchasing an $85,000 parcel of real estate

offered for sale by the Appellees, Donald L. Mott ("Mott") and Murl Kennamore

("Kennamore"). 

The facts of this case are largely undisputed. On September 11, 1991, Graves

entered into a contract with Mott and Kennamore to purchase 10.7 acres of unimproved

real property located in Fayette County, Tennessee. The property was originally owned

by K & M Petroleum, Inc., a now defunct corporation of which Mott and Kennamore were

sole shareholders. As originally executed, the contract gave Graves the option to purchase

the entire 10.7 acre parcel for $85,000. The contract provided that closing would take

place nine months after Graves deposited $1,000 earnest money in escrow. 

On March 24, 1992, the parties agreed to execute an amendment to the original

contract. Under the terms of the amended agreement, Graves had the option to sell one

acre of the 10.7 acre parcel prior to closing on the entire parcel. The language of the

contract amendment provided in pertinent part:

(b) Section 2. Place and Time of Closing. Shall be amended as follows:

The current paragraphs (a) and (b) shall be deleted, and the following

inserted.

(a) Subject to the conditions herein having been met or waived, the Closing

will take place on or before January 1, 1993, or the first working day

thereafter, at the offices of the closing attorney. At Purchaser's sole option,

Purchaser may close and/or assign his interest (as defined by this

agreement), in a one acre parcel located at the intersection of Highway 57

and Highway 18 prior to the scheduled closing of the whole property as

noted above. In the event Purchaser does close and/or assign his interest

in the one acre parcel, the total sum of Twenty Thousand Dollars ($20,000)

shall be entered into escrow from the sale and/or assignment as the total

proceeds of Purchaser's resale of the parcel (and/or assignment of his

interest in the parcel), and be applied to Purchaser's account at closing of

the balance of the property.

(b) In the event Purchaser closes the one acre and escrows the additional

money, Purchaser shall automatically waive the conditions of Purchaser's

obligations on the balance of the property, in Section 7, paragraphs (a)

Utilities, (b) Inspections, (c) Zoning/Use, (g) Permits, and (k) Financing, and

closing of the one acre parcel shall serve as Purchaser's notice to close the

balance of the property as required in paragraph (a) above of this section.

All other terms and conditions of the agreement shall remain in full force and

effect.

In a letter dated October 16, 1991, Graves contacted Thomas Sasser, owner of

Sasser Oil Company and a distributor for Exxon, in an effort to sell the single acre. It is
3

evident from Graves' correspondence to Sasser, as well as from Graves' testimony at trial,

that Graves' original intention was to purchase all and develop most of the 10.7 acre site.

Graves sold the one acre parcel to Sasser on April 24, 1992, for $60,000. According to the

terms of the amended agreement, Graves placed $18,169.81 from the sale of the single

acre in escrow. That sum was to be applied to Graves' account upon the sale of the

balance of the property. 

It is at this juncture in the parties' transaction that a dispute arose. There is no

question that on January 1, 1993, the date established for closing the balance of the

property, Graves failed to close. Graves admits that he breached the parties' contract, but

argues that the Appellees' sole remedy is set forth in the contract's liquidated damages

clause. That clause states:

Section 9. Non-performance.

(b) If Purchaser defaults, Seller and Purchaser agree that it will be extremely

difficult or impractical to fix Seller's actual damages. Therefore, the Earnest

Money shall be delivered to Seller as liquidated damages for loss of a

bargain and not as a penalty. Purchaser will then be released from all

liability to Seller related to this Agreement, such liquidated damages being

Seller's sole remedy. 

Mott and Kennamore argue that, pursuant to the terms of the amended contract,

Graves became bound to close on the balance of the 10.7 acre parcel after he exercised

his option to sell the single acre. The Appellees further contend, and the lower court so

found, that Graves' failure to close on the balance of the property entitles Appellees to the

remedy of specific performance. In support of their argument, Mott and Kennamore cite

the language of the contract amendment: "Subject to the conditions herein having been

met or waived, the Closing will take place on or before January 1, 1993. . . . In the event

Purchaser does close . . . his interest in this one acre parcel, the total sum of . . .$20,000

shall be entered into escrow from the sale . . . and be applied to Purchaser's account at

closing of the balance of the property." The amendment also states: "closing of the one

acre parcel shall serve as Purchaser's notice to close the balance of the property as

required in paragraph (a) above of this section." 

The interpretation of a written agreement is a matter of law and not of fact. APACTennessee, Inc. v. J.M. Humphries Const. Co., 732 S.W.2d 601 (Tenn. App. 1986). Thus,
4

this Court's scope of review is de novo upon the record with no presumption of correctness

of the trial court's conclusions of law. Adams v. Dean Roofing Co., 715 S.W.2d 341 (Tenn.

App. 1986). 

It is well established that the cardinal rule for interpretation of contracts is to

ascertain the intention of the parties and to give effect to that intention consistent with legal

principles. Rob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578

(Tenn. 1975). A primary objective in the construction of a contract is to discover the

intention of the parties from a consideration of the whole contract. McKay v. Louisville &

N. R.R. Co., 133 Tenn. 590, 182 S.W. 874 (1916). In construing contracts, the words

expressing the parties' intentions should be given their usual, natural and ordinary

meaning. Taylor v. White Stores, Inc., 707 S.W.2d 514 (Tenn. App. 1985). In Hamblen

County v. City of Morristown, 656 S.W.2d 331, 334 (Tenn. 1983), the Tennessee Supreme

Court stated: 

'The court in interpreting words or other acts of the parties puts

itself in the position which they occupied at the time the

contract was made. In applying the appropriate standard of

interpretation even to an agreement that on its face is free

from ambiguity it is permissible to consider the situation of the

parties and the accompanying circumstances at the time it was

entered into--not for the purpose of modifying or enlarging or

curtailing its terms, but to aid in determining the meaning to be

given to the agreement.' Restatement of Contracts, § 235(d)

and Comment.

' . . . Intention or meaning in a contract may be manifested or

conveyed either expressly or impliedly, and it is fundamental

that which is plainly or necessarily implied in the language of

a contract is as much a part of it as that which is expressed.

If it can be plainly seen from all the provisions of the instrument

taken together that the obligation in question was within the

contemplation of the parties when making their contract or is

necessary to carry their intention into effect, the law will imply

the obligation and enforce it.' 17 Am. Jur. 2d Contracts § 255

(1964). 

In the present case, this Court is presented with a single contract, the provisions of

which cannot be harmonized. The amendment to the contract neither refers to nor deletes

the contract's liquidated damages clause, yet the rights contained in the amendment

necessarily negate the possibility of exercising the contract's liquidated damages

provisions. We cannot ascertain the parties' intentions from the words of the contract

alone. Thus, we look to the circumstances which existed at the time the agreements were
5

executed in order to determine the parties' intentions. Hamblen County, 656 S.W.2d at

334.

When the parties executed the original contract, Graves placed $1,000 earnest

money in escrow. By doing so, he retained the right to buy 10.7 acres of property for a

period of nine months. The parties' original agreement was essentially an option contract.

See generally Pinney v. Tarpley, 686 S.W.2d 574, 580 (Tenn. App. 1984). As is typical of

real estate option contracts, Graves agreed to forfeit the escrow money, as liquidated

damages to the sellers (Appellees), in the event that he failed to purchase the property at

the expiration of the option term. 

When the amendment to the original contract was executed in March of 1992, the

nature of the contract changed. The amendment required Graves to place $20,000 from

the sale of the one acre parcel into escrow. It further provided that the $20,000 sum "shall"

be applied to Graves' account at closing of the balance of the property. The amendment

states that closing of the one acre parcel "shall" serve as Graves' notice to close the

balance of the property. Finally, Graves' actions were consistent with a complete

understanding of the amendment's terms. If, after amending the contract, Graves had

failed to close on either the single acre or the balance of the property, the Appellees'

remedy would have been limited to $1,000 in liquidated damages. However, having

exercised his option to sell the one acre parcel, we find that Graves was bound to close on

the balance of the property. 

The chancellor awarded Appellees the remedy of specific performance. Graves

argues that the Appellees failed to prove that they suffered damages and are thus not

entitled to specific performance. Specific performance is an equitable remedy. GRW

Enters., Inc. v. Davis, 797 S.W.2d 606, 614 (Tenn. App. 1990) (citing T.J. Moss Tie Co. v.

Hill, 191 Tenn. 582, 586, 235 S.W.2d 587, 588 (1951)). It is available to either the buyer

or the seller, subject to the trial court's discretion, where an award of damages cannot

make the aggrieved party whole. Shuptrine v. Quinn, 597 S.W.2d 728, 730 (Tenn. 1979).

An award of specific performance is particularly appropriate when dealing with contracts

for the sale of real property, because of the unique nature of land. GRW Enters., 797
6

S.W.2d at 614. In Lane v. Associated Housing Developers, 767 S.W.2d 640, 642 (Tenn.

App. 1988) the court, quoting Gibson's Suits in Chancery, stated:

If a contract has all the essentials of validity . . . and if compensation in

damages for its breach is impracticable, or would be inadequate, a complaint

will be maintained for specific performance. The broad ground of jurisdiction

in such cases is the inadequacy, or impracticability, of damages to do

complete justice to the injured party. If the contract relates to real estate and

is in writing, and the foregoing requirements are satisfied, specific

performance will be decreed, for damages cannot adequately represent real

property. 

An award of damages is neither adequate nor practical in the present case. The

Appellees contracted to sell the entire 10.7 acre parcel to Graves for $85,000. Graves sold

one acre, comprising the corner lot of the parcel, for $60,000. Not only is the tract no

longer intact, the most valuable portion of the 10.7 acre parcel is owned by a third party.

We agree with the trial court's determination that specific performance was an appropriate

remedy under the facts of the case at bar. 

Accordingly, we affirm the chancellor's ruling in all respects. Costs on appeal are

taxed to the Appellant.

 

HIGHERS, J.

CONCUR:

 

CRAWFORD, P.J., W.S.

 

FARMER, J.