IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

April 18, 2018 Session

JOHNSON REAL ESTATE LIMITED PARTNERSHIP v.

VACATION DEVELOPMENT CORP., ET AL.

Appeal from the Chancery Court for Sevier County

No. 17-1-002 Telford E. Forgety, Jr., Chancellor

No. E2017-01774-COA-R3-CV

This action involves a long-term ground lease in which the defendant lessee paid for and 

maintained an insurance policy on the property for its benefit. The defendant surrendered 

the premises after the motel facility constructed on the land was destroyed by a wildfire 

before the expiration of the lease. The plaintiff lessor filed suit, seeking an equitable lien 

on the policy and its proceeds, a constructive trust against the insurance rights and 

recovery, a claim on the policy as a third-party beneficiary, and injunctive relief. The 

court granted summary judgment in favor of the defendant. We affirm. 

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

Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which D. MICHAEL 

SWINEY, C.J. and RICHARD H. DINKINS, J., joined.

R. Louis Crossley, Jr., Knoxville, Tennessee, for the appellant, Johnson Real Estate 

Limited Partnership.

Ronald T. Hill, Knoxville, Tennessee, for the appellees, Vacation Development Corp. 

and Hugh D. Faust, III.

OPINION

I. BACKGROUND

The long-term ground lease at issue was between Johnson Real Estate Limited 

Partnership (“Plaintiff”) and Vacation Development Corporation (“Defendant”) for four 

acres of land located on River Road in Gatlinburg, Tennessee. The lease provided a term 

of 50 years, beginning on October 15, 1969, and ending on October 15, 2019. As 

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pertinent to this appeal, the lease required Defendant to construct “modern motel 

facilities at a cost of not less than [$500,000]” within 18 months of the date of the 

agreement and to remit payment of $15,000 on the date of the execution of the lease and 

$20,000 per year, plus 7 percent of the gross receipts exceeding the sum of $20,000. The 

lease further provided that at the “termination or cancellation of [the agreement] all 

improvements thereon shall become the property of the Lessor.” The Parties were not 

required to carry property insurance; however, Defendant was required to carry public 

liability insurance and to pay all taxes, utilities, license fees, and expenses of “every kind 

and nature incident to the use of said premises.” Defendant constructed the motel 

facilities, which became known as the Riverhouse Motor Lodge (“the Motel”). Since that 

time, the original Lessors assigned their interests to Plaintiff. 

Defendant insured the Motel and another of its properties under a single 

commercial insurance policy obtained through Travelers Indemnity Company of America 

(“Insurance Company”). Defendant paid all premiums for the policy that covered both 

facilities with a policy limit of $8,122,974. 

The Motel was destroyed by the Gatlinburg wildfires in November 2016. 

Defendant advised Plaintiff that it would not rebuild the Motel unless Plaintiff entered 

into a new 50-year lease on the same terms as the current lease, with the exception that 

the new lease would include an insurance provision. Plaintiff filed suit against Defendant 

and Insurance Company for anticipatory breach of the agreement. Plaintiff sought an 

equitable lien on the insurance policy and its proceeds, a constructive trust against the 

insurance rights and recovery, a claim on the policy as a third-party beneficiary, and 

injunctive relief. Thereafter, Defendant notified Plaintiff of its surrender of the property 

and termination of the lease via letter, dated March 17, 2017, which provided as follows:

As you know, [the Motel] constructed by [Defendant] on the real property 

owned by [Plaintiff] on River Road in Gatlinburg, Tennessee was totally 

destroyed by fire on November 28, 2016. Accordingly, and pursuant to the 

provisions of [Tennessee Code Annotated section 66-7-102], [Defendant] 

hereby surrenders possession of the real property and terminates its Lease 

Agreement as above captioned effective as of the date of this letter.

Section 66-7-102 provides as follows: 

(a) Where any building which is leased or occupied is destroyed or so 

injured by the elements, or any other cause, as to be untenantable and unfit 

for occupancy, and no express agreement to the contrary has been made in 

writing, the lessee or occupant may, if the destruction or injury occurred 

without fault or neglect by the lessee, surrender possession of the premises, 
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without liability to the lessor or owner for rent for the time subsequent to 

the surrender.

(b) A covenant or promise by the lessee to leave or restore the premises 

in good repair shall not have the effect to bind the lessee to erect or pay for 

such buildings as may be so destroyed, unless in respect of the matter of 

loss or destruction there was neglect or fault on the lessee’s part, or unless 

the lessee has expressly stipulated in writing to be so bound.

The Parties filed cross-motions for summary judgment. The court granted summary 

judgment in favor of Defendant, finding that Defendant had properly terminated the lease 

and surrendered the property pursuant to Section 66-7-102 and that Defendant was not 

required to rebuild the motel facilities. 

II. ISSUES

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A. Whether Defendant properly terminated the lease pursuant to 

Section 66-7-102.

B. Whether Defendant is required to rebuild the motel facilities 

pursuant to the terms of the lease agreement and the implied covenants of 

good faith and fair dealing and continuous occupancy. 

III. STANDARD OF REVIEW

The appropriate summary judgment standard to be applied is as follows:

[W]hen the moving party does not bear the burden of proof at trial, the 

moving party may satisfy its burden of production either (1) by 

affirmatively negating an essential element of the nonmoving party’s claim 

or (2) by demonstrating that the nonmoving party’s evidence at the 

summary judgment stage is insufficient to establish the nonmoving party’s 

claim or defense.

Rye v. Women’s Care Center of Memphis, MPLLC, 477 S.W.3d 235, 264 (Tenn. 2015).

When a properly supported motion is made, “the nonmoving party ‘may not rest upon the 

mere allegations or denials of [its] pleading,’ but must respond, and by affidavits or one 

of the other means provided in [Rule 56 of the Tennessee Rules of Civil Procedure], ‘set 

forth specific facts’ at the summary judgment stage ‘showing that there is a genuine issue 

 

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Insurance Company was relieved from filing a responsive brief given the tangential nature of its 

involvement.
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for trial.’” Id. at 265 (quoting Tenn. R. Civ. P. 56.06). Summary judgment “shall be 

rendered forthwith if the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any, show that there is no genuine issue 

as to any material fact and that the moving party is entitled to a judgment as a matter of 

law.” Tenn. R. Civ. P. 56.04.

“We review a trial court’s ruling on a motion for summary judgment de novo, 

without a presumption of correctness.” Rye, 477 S.W.3d at 250 (citations omitted). “In 

doing so, we make a fresh determination of whether the requirements of [Rule 56] have 

been satisfied.” Id. (citations omitted). We must view all of the evidence in the light 

most favorable to the nonmoving party and resolve all factual inferences in the 

nonmoving party’s favor. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008).

This action also presents a matter of statutory interpretation, which is reviewable as a 

matter of law pursuant to the de novo standard without any presumption of correctness. 

In re Estate of Tanner, 295 S.W.3d 610, 613 (Tenn. 2009) (citing Gleaves v. Checker 

Cab Transit Corp., 15 S.W.3d 799, 802 (Tenn. 2000)); Myint v. Allstate Ins. Co., 970 

S.W.2d 920, 924 (Tenn. 1998)).

IV. DISCUSSION

A. & B.

Plaintiff urges this court to consider the legislative history of Section 66-7-102 and 

a case decided two years prior to its passage. See Zuccarello v. Clifton, 12 Tenn. App. 

286, 289 (Tenn. App. 1930) (holding that the destruction of the building by fire did not 

remove a covenant to repair contained in the lease). Plaintiff claims that Section 66-7-

102 does not address the precise issue raised in Zuccarello and now raised here, whether 

a ground tenant must rebuild a building it erected when said building was to transfer to

the landowner at the end of the term. Defendant responds that termination of the lease is 

appropriate when the statute is unambiguous and makes no distinction between a ground 

lease and a real property lease. Defendant notes that our Supreme Court recognized in 

EVCO Corp. v. Ross, 528 S.W.2d 20, 23 (Tenn. 1975), that the statute overruled the 

holding in Zuccarello. Further, the facts at issue here are distinguishable from the facts

in Zuccarello, namely the lease in this case does not include a covenant to repair. 

The primary objective of statutory interpretation is to carry out the legislative 

intent without broadening or restricting a statute beyond its intended scope. Houghton v. 

Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative 

enactments, we presume that every word in a statute has meaning and purpose and should 

be given full effect if the obvious intention of the General Assembly is not violated by so 

doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When a statute is clear, we 
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apply the plain meaning without complicating the task. Eastman Chem. Co. v. Johnson, 

151 S.W.3d 503, 507 (Tenn. 2004). We also presume that the General Assembly was 

aware of the state of the law when the statutes were enacted and that it did not intend to 

enact a useless statute. Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 527 (Tenn. 2010).

Plaintiff presents a thorough legislative history of Section 66-7-102 in support of 

its argument that we should rely upon the court’s decision in Zuccarello. This case is 

distinguishable from the holding in Zuccarello, which imposed an obligation to rebuild 

based upon a covenant to repair, a covenant not included here. Moreover, the statute at 

issue here is unambiguous. We need not consider the legislative history or whether the 

statute was enacted in response to Zuccarello when the plain language clearly overrules 

the holding in Zuccarello. See EVCO Corp., 528 S.W.2d at 23-24 (providing that the 

lessors of a building destroyed by fire would have had the statutory right to terminate the 

lease pursuant to Section 66-7-102, absent provisions in the lease providing otherwise). 

The legislature specifically exempted those lessees or occupants who included such a 

covenant to repair from an obligation to rebuild. Indeed, the statute provides as follows:

(a) Where any building which is leased or occupied is destroyed or so 

injured by the elements, or any other cause, as to be untenantable and unfit 

for occupancy, and no express agreement to the contrary has been made in 

writing, the lessee or occupant may, if the destruction or injury occurred 

without fault or neglect by the lessee, surrender possession of the premises, 

without liability to the lessor or owner for rent for the time subsequent to 

the surrender.

(b) A covenant or promise by the lessee to leave or restore the premises 

in good repair shall not have the effect to bind the lessee to erect or pay for 

such buildings as may be so destroyed, unless in respect of the matter of 

loss or destruction there was neglect or fault on the lessee’s part, or unless 

the lessee has expressly stipulated in writing to be so bound.

Tenn. Code Ann. § 66-7-102 (emphasis added). Our plain reading of the statute leads us 

to conclude that the statute controls when the Parties did not contract to rebuild or insure 

the Motel in the case of destruction by the elements. We believe this interpretation is 

within the legislature’s intent as evidenced by the use of the words “leased or occupied” 

in 66-7-102(a). 

Plaintiff next argues that the court erred in finding that the lease did not require 

Defendant to rebuild when the lease anticipated that a building would pass at the end of 

the term. Plaintiff claims that Defendant has received a windfall of insurance proceeds 

without an obligation to rebuild. Plaintiff asserts that the court in Zuccarello held 
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otherwise and that the covenants of good faith and fair dealing and continuous occupancy 

require Defendant to rebuild. Defendant responds that the lease did not include an 

obligation to repair or rebuild as found in Zuccarello and that the covenants of good faith 

and fair dealing and continuous occupancy cannot create a contractual right to rebuild 

where one does not exist in the agreement. Plaintiff issues a reply brief in which it

argues, inter alia, that the court and Defendant failed to recognize the distinction between 

a real property lease and a ground lease requiring the tenant to construct the building. 

Plaintiff claims that the plain language of Section 66-7-102 does not apply to such leases 

and that the implied covenant of good faith and fair dealing found in all contracts would 

necessarily include the transfer of a building at the end of the lease term that anticipated 

the construction of the same by the tenant.

Again, the plain language of the statute belies Plaintiff’s assertion and 

unambiguously removes any obligation to rebuild, unless the Parties contracted 

otherwise. The Parties did not contract otherwise, and this court cannot impose such a 

provision. Accordingly, we hold that the Defendant was within its rights to terminate the 

lease agreement and surrender the leased premises following the destruction of the Motel. 

V. CONCLUSION

We affirm the decision of the trial court and remand for such further proceedings 

as may be necessary. Costs of the appeal are taxed to the appellant, Johnson Real Estate 

Limited Partnership.

_________________________________ 

JOHN W. McCLARTY, JUDGE