IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

October 7, 2004 Session

STAUBACH RETAIL SERVICES-SOUTHEAST, LLC v. H. G. HILL

REALTY CO.

Appeal by Permission from the Court of Appeals

Chancery Court for Davidson County

No. 01-3292-II Irvin H. Kilcrease, Jr., Chancellor

No. M2002-02661-SC-R11-CV - Filed March 22, 2005

We granted this appeal to determine whether an unexecuted brokerage agreement incorporated into

an executed lease constitutes an enforceable contract, thereby requiring payment of a brokerage fee

to one of the real estate brokers who provided services pursuant to the unexecuted agreement. We

conclude that all parties to the brokerage agreement assented to its terms and that the brokerage

agreement’s “occupancy” requirement was satisfied. Accordingly, we hold that the agreement is

enforceable, and we affirm the Court of Appeals’ award of the unpaid commission to the real estate

broker.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed;

Remanded to the Trial Court

JANICE M. HOLDER, J., delivered the opinion of the court, in which FRANK F. DROWOTA, III, C.J.,

and E. RILEY ANDERSON and WILLIAM M. BARKER, JJ., and ALLEN W. WALLACE, SP.J., joined.

Barbara Hawley Smith and Eugene N. Bulso, Jr., Nashville, Tennessee, for the Defendant-Appellant,

H. G. Hill Realty Co.

Brigid M. Carpenter and Glenn D. Tackett, Jr., Nashville, Tennessee, for the Plaintiff-Appellee,

Staubach Retail Services-Southeast, LLC.

OPINION

H. G. Hill Realty Company (“H. G. Hill”) owned a tract of real property in Nashville,

Tennessee. H. G. Hill retained a broker, Southeast Venture, LLC (“Southeast Venture”), to locate

a long-term tenant for the property. Staubach Retail Services-Southeast, LLC (“Staubach”)

contacted Southeast Venture and expressed an interest in the property on behalf of its client, dekor,

Inc. (“dekor”), a home improvement retailer based in Georgia.
The parties have neither briefed nor argued the effect of this settlement upon the rights of the parties.

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Accordingly, we express no opinion as to the effect of this settlement.

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On February 23, 2000, H. G. Hill and dekor entered into a “Build-to-Suit Retail Lease”

(“lease”) in which H. G. Hill agreed to construct an 80,000 square-foot building for dekor’s use as

a retail store. Article 44 of the lease provided that:

Landlord covenants and agrees to pay Broker’s commission in

accordance with a separate agreement executed by and between

Landlord and Broker, and further agrees to indemnify Tenant for all

claims and demands made by Broker. . . .The terms and provisions of

that certain Brokerage Agreement, an unexecuted photocopy of which

is attached hereto as Exhibit “N” and incorporated herein by

reference, are incorporated into this Lease and made a part hereof.

(emphasis supplied.)

Exhibit “N” of the lease provides that H. G. Hill, Southeast Venture, and Staubach entered

into a “Brokerage Agreement” in anticipation of the lease. According to the brokerage agreement,

[t]he Owner agrees to pay a leasing commission of Five Hundred

Thousand Dollars ($500,000.00) to the Broker and Co-Broker, for the

development of an 80,000 square foot retail building[.] . . . The

leasing commission shall be payable one-half upon execution of the

lease and one-half upon occupancy of the Property by the Tenant.

Consistent with Article 44, the signatures of the parties’ representatives do not appear on Exhibit

“N.”

H. G. Hill satisfied the first installment of the leasing commission by paying $125,000 to

Southeast Venture and $125,000 to Staubach. Pursuant to the lease agreement, dekor readied the

building for retail use, accepting delivery of store fixtures, hiring employees, and installing locks.

However, dekor did not open the store for business and defaulted on the lease before paying the first

month’s rent. On September 21, 2001, H. G. Hill and dekor entered into an agreement providing for

termination of the lease in return for a payment of $1,275,000 by dekor.1

Staubach filed an action against H. G. Hill seeking to enforce the terms of the brokerage

agreement either as a party to the agreement or as a third-party beneficiary of the lease. Staubach

filed a motion for summary judgment, claiming that it was entitled to its portion of the second

installment of the commission because dekor had occupied the building prior to default on the lease.

The trial court granted Staubach’s motion and ordered H. G. Hill to pay Staubach its portion of the

second installment of the brokerage commission.
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On appeal, the Court of Appeals affirmed the trial court’s judgment. The intermediate

appellate court concluded that H. G. Hill assented to the terms of the brokerage agreement attached

to the lease by executing the lease agreement. The Court of Appeals further concluded that Staubach

was entitled to its portion of the second installment of the leasing commission because dekor

occupied the building prior to defaulting on the lease. We granted review.

ANALYSIS

A contract “must result from a meeting of the minds of the parties in mutual assent to the

terms, must be based upon a sufficient consideration,free from fraud or undue influence, not against

public policy and sufficiently definite to be enforced.” Doe v. HCA Health Servs. of Tenn., Inc., 46

S.W.3d 191, 196 (Tenn. 2001) (citations omitted). In determining mutuality of assent, courts must

apply an objective standard based upon the parties’ manifestations. T.R. Mills Contractors, Inc. v.

WRH Enters., LLC, 93 S.W.3d 861, 866 (Tenn. Ct. App. 2002).

A determination of the parties’ intentions generally involves a question of law appropriate

for summary judgment provided that the moving party has established the absence of a genuine issue

as to any material fact. See Tenn. R. Civ. P. 56.04; Planters Gin Co. v. Fed.Compress & Warehouse

Co., 78 S.W.3d 885, 890 (Tenn. 2002). In reviewing the trial court’s grant of summary judgment,

this Court must review the record de novo without a presumption of correctness. See Mooney v.

Sneed, 30 S.W.3d 304, 306 (Tenn. 2000).

Although the lease refers to a “separate agreement executed by and between Landlord and

Broker,” the parties never executed a separate agreement. The only evidence of an agreement

between H. G. Hill, Staubach, and Southeast Venture is the unexecuted agreement attached to the

lease. However, a written contract is not required to be signed to be binding on the parties. T.R.

Mills Contractors, Inc., 93 S.W.3d at 865. Moreover, H. G. Hill signed a lease agreement expressly

incorporating the terms of the unexecuted brokerage agreement. This Court has previously held that

a writing may be incorporated by reference into a written contract, thereby requiring both writings

to be construed together. See McCall v. Towne Square, Inc., 503 S.W.2d 180, 183 (Tenn. 1973).

Because the terms of the lease expressly incorporated the unexecuted brokerage agreement into the

lease, the language of the brokerage agreement (Exhibit “N”) became a part of the lease. By signing

the lease, H. G. Hill accepted the terms of the brokerage agreement.

In an attempt to create a genuine issue of material fact, H. G. Hill submitted to the trial court

affidavits of James W. Granberry (“Granberry”), its Executive Vice President of Development, and

Celeste Patterson (“Patterson”), its Chief Financial Officer, in which they maintained that they did

not assent to the unexecuted brokerage agreement attached to the lease. These affidavits further state

that H. G. Hill agreed that the second installment of the commission would be due when dekor began

paying rent, an event that did not occur. The parol evidence rule does not permit contracting parties

to “use extraneous evidence to alter, vary, or qualify the plain meaning of an unambiguous written

contract.” GRW Enters. v. Davis, 797 S.W.2d 606, 610 (Tenn. Ct. App. 1990). Furthermore, to

allow a party to a contract to admit that the party signed the contract but to deny that the terms of the
 Staubach further maintained it could recover its portion of the second installment of commission under the 2

lease as a third-party beneficiary. Because we have determined that Staubach may recover as a party to the brokerage

agreement, we need not address this issue.

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contract express the party’s agreement would destroy the value of contracts. See Giles v. Allstate

Ins. Co., 871 S.W.2d 154, 157 (Tenn. Ct. App. 1993). H. G. Hill could have refused to sign the lease

if it disagreed with the terms of the brokerage agreement attached to the lease. Instead, H. G. Hill

paid the first installment of the commission in accordance with the terms of the brokerage agreement,

thus expressing its assent to its terms.

Similarly, Staubach and Southeast Venture demonstrated their assent to the brokerage

agreement. Although Staubach did not sign the brokerage agreement, its assent to the agreement is

demonstrated by its action to enforce the agreement. See Hillard v. Franklin, 41 S.W.3d 106, 112

(Tenn. Ct. App. 2000). Southeast Venture’s acceptance of its share of the first installment of the

commission demonstrates Southeast Venture’s acceptance of itsterms. See T.R. Mills Contractors,

Inc., 93 S.W.3d at 866 (noting that assent may be established by the parties’ course of dealings).

When a party who has not signed a contract demonstrates its assent by performing pursuant to the

contract and making payments conforming to the contract’s terms, that party is estopped from

denying the binding effect of the contract. Id. at 866; see Hoyt v. Hoyt, 372 S.W.2d 300, 305 (Tenn.

1963); R.J. Betterton Mgt. Servs., Inc. v. Whittemore, 769 S.W.2d 214, 216 (Tenn. Ct. App. 1988).

The evidence establishes that all three parties to the unexecuted brokerage agreement

assented to its terms. Thus, we conclude that the brokerage agreement is a binding contract under

which Staubach may recover its portion of the second installment of the commission if the contract’s

conditions were satisfied.2

Although the brokerage agreement requires payment of the second installment of the

commission “upon occupancy,” the term “occupancy” is not defined in either the brokerage

agreement or the lease. However, we are unable to conclude that the term is ambiguous. A contract

term is not ambiguous merely because the parties to the contract may interpret the term in different

ways. See Johnson v. Johnson, 37 S.W.3d 892, 896 (Tenn. 2001).

We are required to ascertain the intention of the parties by using the usual, natural, and

ordinary meaning of the language contained in the contract. Guiliano v. Cleo, Inc., 995 S.W.2d 88,

95 (Tenn. 1999). Black’s Law Dictionary 1108 (8 ed. 2004) defines “occupancy” in part as “the th

act, state or condition of holding, possessing, or residing in or on something; actual possession,

residence, or tenancy, esp[ecially] of a dwelling or land.” Furthermore, “the term denotes whatever

acts are done on the land to manifest a claim of exclusive control and to indicate to the public that

the actor has appropriated the land.” Id.

In the months prior to its breach, dekor arranged for the installation of fixtures, an energy

management system, lighting, an audio system, and a security system. During the spring of 2001,

the construction company’s locks were removed, and dekor’s locks were installed. The company
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accepted delivery of store fixtures and shelving valued at more than $100,000 as well as kitchen

equipment for display purposes. The company hired a general manager, who conducted interviews

at the store and hired nine employees to serve as the store’s managerial staff. In addition, during late

May and early June of 2001, the general manager went to the building on a daily basis. We conclude

these facts are sufficient to establish dekor’s “occupancy” of the premises prior to termination of the

lease, thus satisfying the terms of the brokerage agreement.

CONCLUSION

We hold that the unexecuted brokerage agreement is a valid contract to which H. G. Hill,

Staubach, and Southeast Venture demonstrated their assent and that dekor occupied the premises

prior to the termination of the lease. Accordingly, Staubach is entitled to one-half of the second

installment of the commission from H. G. Hill. We affirm the judgment of the Court of Appeals,

which affirmed the trial court’s granting of summary judgment, and remand the case to the trial court

for further proceedings consistent with this opinion.

The costs of appeal are assessed to the appellant, H. G. Hill Realty Co., and its sureties for

which execution may issue if necessary.

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JANICE M. HOLDER, JUSTICE