# FILED
July 1, 1998 Cecil W. Crowson Appellate Cou rt Clerk 

## IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

BOILER SUPPLY COMPANY, INC. ) ) Plaintiff/Appell

ant, ) Davidson Chancery

) No. 93-2848-I VS. ) ) LUNN REAL ESTATE

INVESTMENTS, ) Appeal No. INC., ) 01A01-9605-CH-00246 ) Defendant/Appellee. )



### APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY AT NASHVILLE, TENNESSEE

THE HONORABLE IRVIN H. KILCREASE, JR., CHANCE LLOR

For Plaintiff/Ap

pellant : For Defendant/Appellee : Charles Patrick F

lynn Stephen H. Price Gerald D. Neenan FARRIS, WARFIELD & KANADAY FLYNN AND NEENAN Nashville, Tennessee Nashville, Tennessee John B. Link, III Nashville, Tennessee



## AFFIRMED AND REMANDED

WILLIAM C. KOCH, JR., JUDGE1 The lease specifically provided: Lessor leases to Lessee, to have and to hold the same subject to all terms and conditions set forth herein for a term of three (3) year

s, beginning on the 1st day of January, 1989, and ending on the 31st day of De cembe r, 1992, unless sooner terminated as provided herein (hereinafter referred to as the “Te rm”). -2- 

## O P I N I O N

This appeal involves a dispu te over the interpr

etation of a provision

allocating the responsibility

for paying legal expenses in the even t of a default or breach o f two leases. The lessee filed

suit aga inst the le ssor in the Chancery Court for Davidson County seeking a declaration that the leases had expired and request ing its attorney’s fees in accordance with the provisions of the lease agreements. The tri al cou rt granted the

lessee’s motion for summary judgment and declared that the leases had expired but denied the lessee ’s claim for leg al expenses. The lessee has appeale

d. We have determined that the tri al court correctly interp reted the lease ag

reements and, therefore,

affirm the summa

ry judgment.

I.

Wallace Edward Lunn, S r. esta bli shed two businesses during his lifetime - BoilerSupply Company, Inc. and Lunn Real Estate Investments, Inc. Boiler Supply operated out of two industrial buildings in Nashville a nd Knoxvil le on prop erty leased from Lunn Real Estate Inv estments. When Mr. L un n died in 1978, the interests in the two businesses w ere divided among var

ious f amily me mbers. On January 1, 1989, BoilerSupply and Lunn Real Estate Investments en tered into two
new leases containing an ambiguous provision regarding their duration that stated on one hand that the term of

the lease was for three years, but on the other provided that the lease would begin on J anuary 1, 1989 and

end on December 31 , 1992 (a period of four years). 1

D isputes among Mr. Lunn’s family eventually caused them to redistribute thei r interests in the two co rporations. In May 1990, the family agreed that Wallace EdwardLunn, Jr. would a cquire all the stock in Boiler Supply that had been previouslyheld by other family members a nd, in return, that he w

ould relinquish his interests in the other assets in his father’s estat

e, including Lunn Re

al Estate Investments. Part of this agreement included am endments to the 1989 leases2 The Nashville property was valued at $150,000; while t

he Knoxville

property was valued at $50,000.

3 The leases provided that the properties would be appraised by three appraisers, one chosen by Boiler Supply, one chosen by Lunn Rea l Estate Investmen

ts, and the third appointed by the other two appraisers. -3- providing (1) that the lease s could be extended fol lowing the end of

their initial terms atLunn Real Estate

Investments’ option,

(2) that Boiler Su

pply could purchase the properties if Lunn decided to extend the leases, (3) that the purchase price f o r the properties, if Boiler Suppl y electe d to purchase them, would be the greate

r of $200,000 2 or average appra ised value of the

properties, 3 and (4) that the lea ses would terminate in ninety d ays if Lunn Real Estate Investments rejected Boiler Supply’s proposed contract to purchase the proper ties.

A s the end of 1991 approac hed, Boiler Supply w

rote Lunn Real Es

tate Investments to in quire whether it intended to extend the leases beyond their threeyear term. Lunn Real

Estate Investments responde

d that discussions conce

rning the extension of the leases wer

e premature beca

use the leases did not e xpire until December

31, 1992. On January 2, 1992, Boiler Supply formally notified Lunn Real Estate Investments that its three-year leases had expired and that it was holding over
on a month-to-month basi s under the leases’ holdover clauses. Lunn again responded that the initial te rms of the leases did n ot expire until Decemb er 31, 1992.

In May 1992, Boiler Supply offered to purchase the properties for $240,000. Lunn Real Estate Investments rejected the offer on the ground that it was premature. In December 1992, Boiler Supply again offered to purchase the properties, this time for $200,000. Lunn Real Estate Investments again declined Boiler Supply’s off er and informed Boiler Supply that it had decided to extend t he term of both leases. Thereafter, in March 1993, Boile r Supply aga

in offered to purchase the properties. Both parties designated a

ppraisers, but when Boiler Supp ly did not receive

the results of Lunn Real Estate

Investments’s appr

aisal, it submitted an offer to purcha se the properties for $221 ,500. Lunn Real Estate Investments rejec

ted this offer, as

it had the preceding two of

fers.4 The provision for legal expenses in the lease provided: If, on acc ount of any breach or default by Lessor or Lessee of thei r obligations to any of the parties hereto, under the terms, covenants and conditions of this Lease, it shall become necessary for any of the parties hereto to employ an attorney to enforce or defend any of their rights or remedies hereunder, and should such party prevail, it s

hall be entitled to a

ny reasonable a

ttorneys’ fe es incurred in such connection. -4- In Septe mber 1993, Boiler S upply sued Lunn Real E state Investments in

the Chancery Court for Davidson C ounty alleging that the leases had expired and that Lunn Real Estate Investments hadnot acted in good faith when it refused to turn over its appraisal information. Boiler Supply requested the trial court to construe the terms of the leases, to determine the rights of the parties, and to declarethatthe leases and their amendments were terminated. It al so req uested the trial court to award legal expens es pursuant to a provision i n the leases. 4 Lunn Real Estate Investments responded to the complaint by asserting that Boile

r Supply had failed t

o maintain

the propertyin good condition and that the parties had bee

n unableto agree whether the properties should be appraised “as is” or “as repaired.” It al so asserted that Boiler Supply’s offers to pu

rchase the propert

y had not been timely.

In June 1995 Boiler Supply moved for a sum mary judgment based o

n its claims that the le ases had expired because Lunn Real Es tate Investments ha

d failed to pr op erly exercise its option to continue the leases past their original terms and had refused to accept itsoffers to purchase the property. At t

he hearingon the summary judgment motion, Lunn Real Estate Investments conceded that the original leases expired o n December 31, 1991 and abandoned its claims that Boiler Supply had failed to maintain

the property. On August 18, 1995, the trial court granted Boiler Supply a summary judgment and declared that the leases had terminated. When BoilerSupply pressed for it s legal expenses, th

e tr ia l court held that it w as not entitled to its legal expenses because Lunn Real Estate Investments had not breached
or d efaulted during the o riginal term of the

leases. Boiler S upply filed this a ppea l after the trial courtdenied its motion to alter or amend its order granting the summary judgment.

II.-5- Under the “Ameri can Rule” followed in Tennessee’s courts, losing parties nee d not pay the legal expenses of prevailing parti es unless required e

i ther by statute, contract, or some oth er recognized equita ble ground. See Kultura, Inc. v. Southern Leasing Cor

p. , 923 S.W.2d 536,

540 (Tenn. 1996); Kimbrough v. Union P lanters Nat’l Bank, 764 S.W.2d 203, 205 (Tenn. 1989). This appeal involves a contractual fee-shifting provis

ion.
Contracting

parties remain free to agree to allocat e the responsibility to pay legal expenses caused by

a breach in their c

ontract. These

agreements are s

ubject to the normal canons of con tract construction

. Accordingly, courts must construe these agreementsas written, see Associated Press v. WGNS, Inc. , 48 Tenn. App. 407, 417, 348 S.W.2d 507, 511- 12 (1961), and must al so give effect to the parties’ intentions consistent

with legal principl es. S ee Bob Pearsall Motors, I nc. v. Regal Chr

yslerPlymouth, Inc. , 521 S.W.2d 578, 580 (Tenn . 1975 ). We must also co nstrue the agreement

objectively without favoring either party, see Taylor v. White Stores, Inc. , 707 S.W.2d 514, 516 (Tenn. Ct. App . 1985), and we should ordinarily const rue the language according to its tec

hnical legal meanin

g unless the parties ha

ve established
some other meaning o

r unle ss the context in whic h the terms are use

d sensibly indicates so me n on-technical meanin g. See Empress Health & Beauty Spa, Inc. v. Turner , 503 S.W.2d 188, 191 (Tenn. 1973); Fariss v. Bry-Block Co. , 208 Tenn. 482, 487-89, 346 S.W.2d 705, 708 (1961).

Where a contract contains aprovision allocating t

he responsibility for

paying legal expenses, the obliga tion to pay legal expenses is limited to only those instances provided for in the contract. Se e Chicago Sou thshore & S. Bend R .R. v. Itel R

ail Corp. , 658 N.E.2d 624, 6 34 (Ind. Ct. App. 1995)

. Legal expenses ca nnot be recovered if the subject matte r of the lawsuit is beyond the t erms of the provision

. See Romero v. H

ariri , 911 P.2d 85, 94 (Haw. Ct. App. 1996).

The expense-shifting pr

ovision at iss u e on this appeal applies only to the necessary legal expenses incur red “on account of

any breach or default

by Lessor or Lessee of their obligations . . . und er th e terms, covenant s and conditions of this Lease.” Accordingly, in order to recover its legal expenses,

Boiler Supply must not only be the prevailing par ty, but it must also demonst rate that it prevailed with regard to claims involving Lunn Real Estate Inves tme nts’s breach or def ault of its-6-

obligations under the leases. See Houston v. Booher , 647 N.E.2d 16, 22 (Ind . Ct. App. 1995); Shull v. First Inte rstate Bank , 887 P.2d 193, 196-97 (Mont. 1994).
Paragraph

twenty-two of the

leases d efin es the six events that constitute a default underthese leases. Since each of these events involves conduct of the lessee, t he contract contains no

provision for defaul

t by the lessor. Ac

cordin gly, Boiler Supply will be entitled to r ecover its legal expe nses from Lunn Rea l Estate In vestments only if it was requir ed to hire a lawyer

to enforce or defe

nd i ts right s under the leases beca use of Lunn Real Estate In vestments’ breach of the leases.

BoilerSupply argues that Lunn Real Estate Investments breached the leases in two ways: first,

by not agreeing with i

ts interpretation of

the provision

defining the termof the leases and second, by refu sing to provide its appr aiser’s report co

ncerning the value of the propert

ies in Knoxvill e and Nas hville. A good fait h disagreement
overthe meaning

of an ambiguous contractual provision does not constitute a breach of contract. Acco

rdingly, Lunn Real

Estate Investment

s was not contractua

lly obligated to agree with Boiler Sup ply’s interpretati on of paragraph two of the leases and did not breach the le

ases by taking the plaus

ible position

that they did not expire until Decemb er 31 , 1992, rather than on December 31, 1991 as insisted by Boiler Supply.

Under the 1990 amendment to t he leases, Boiler S upply had the right to offer to purchase the

properties only if L

unn Real Estate In

vestments effectively extended the le ases indefinitely beyond their original terms. Since Lunn Real Estat e Investments failed to extend the lea ses befo re their initial terms expired, Boiler Supply became a month-to- month tenant under the

hold over provisions

in the leases. As a hold over tenant, Boiler Supp ly did not have a contra ctual right to purcha

se either or bothproperties for the greater of $200,000 or the ave

raged appraised va

lue of the two properties . Thus, the parti es’ nego tiatio ns concerning the prop erty beginning i n 1992 we re not governed by the leases, and the par ties were free

to negotiate in any way they wishe

d. Accordingly, L

unn Reality Investme

nts had no contractual obligation to h ire an ap praiser or to furnish Boiler Supply an appraisal report during the neg

otiation process.

Even if Boiler Supply had a right to purchase t he pro perty under the 1990 amendment

to the leases, Lunn Re al Estate Investment’s failu re to turn over its-7-

appraiser’s report is still not a breach of contra ct. The amendment to the leases required the parties to ascertain the av erage assessed val

ue of the properties based on three appraisals - one appraisal performed by appraisers chosen by the parties and the third appraisal by an appra iser appo inted by the parties’ two appraisers. While the parties apparently retaine d their own appraise

rs, their appr

aisers did not, at least insofaras this record shows, designate a third appraiser. The average appraised value of the properties could not be determined without this third appr aisal, and without t

he third appraisal, Boile

r Supply could not purchase the properties. Sinc

e Boiler Supply did not make

an appropriate off

er to purchase the pr

operties, it

cannot insist that Lun

n Real Estate In vest ments breached the leases by failure to turn over its appraiser’s report.

III.

B oiler Supply’s complaint a gainst Lunn Real E

state Investments a

lso undermines its claim for lega l expenses. Tenn. R. Civ. P. 8.01 requires complaints to contain a short,plain statement showing that the plaintiff is entitled to relie

f and
ademand for judgment for the par

ticular relief sou

ght. While courts ha

ve a duty to give effect

to pleadings according to their substance rather than to their form, Fann
v. City of Fairview , 905 S.W.2d 167, 175 n.1 4 (Tenn Ct. App. 1994), t hey cannot create claims that have not been p led. See Donaldson v. Donaldson , 557 S.W.2d 60, 62 (Tenn. 1977); Rampy v. ICI A crylics, Inc. , 898 S.W.2d 196, 198 ( Tenn. Ct. App. 1994).

BoilerSupply’s complaint si mply requested a declaration that its leases expired
on December 31, 199 1. It cannot now tr ansmogrif

y its declaratory judg

ment complaint

into one for breach of th e l eases. In a simila r case, the Flor

ida Court of Appeals held that a

seller of property

who filed a declar

atory judgment

action arising from an appraisal dispute with the buyer could not recover its legal expenses because ithad not filed suit to en

force the contrac

t against the buyer. See Dade Sav. & Loan Ass ’n v. Broks Ctr. Lt

d. , 529 So.2d 775, 776-77 (Fla. Dist. Ct. App. 1988). Boiler Supply’s suit

seeking a declaration that the leases had terminated was not an action to enforce its rights against breach or d efault by Lunn Real Estate Investments. Accordingly, the trial court prop erly refused to awa rd Boiler Supply its legal expenses under the le

ases’ expense-shif

ting provisions.-8- Bo iler Supply’s declarato ry judgment complaint

must be distinguished fr om Lunn Real Estate

Investments’ later detainer action filed to recover possession of the properties. Lunn Real Estate Investments filed t

his action when Bo iler Supply b reach ed the leases by failing to vacate the premises. This court affirmed the trial court’s decision to award L unn Real Estate In

vestments its lega

l ex penses because the “lease contract provides for an award of attorney’s fees in the event of a breach, if succes sfully litigated.” Lunn Real Estate I nvestments, Inc. v. Boiler Supply C o. , No. 01A01-9704-CV-00191, 1998 WL 221112, at *__ (Tenn. Ct. App . May 6, 1998) (No Tenn. R. App.P. 11 application filed). Since B oiler Supply’s actio n in this case did not arise out of a breach of the leases, our decisi on in Lunn Real Esta

te Investments’ appeal does not control the outcome of this case.

IV.

We affirm the judgme

nt and remand the ca

se to the trial c ourt for wh atever further proceedin

gs may be required.We also tax the costs of this appeal to Boiler Supply Company, Inc. and its surety for which execution, if necessary, may issue.

______________________________ WILLIAM C. KOCH, JR., JUDGE

CONCUR:

__________________________________ ___ HENRY F. TODD, PRESIDING JUDGE MIDDLE SECTION

__________________________________ ___ SAMUEL L. LEWIS, JUDGE