# FILED July 25, 1997 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF APPEALS OF TENNESS EE

EAST ERN S ECTI ON

NA TIO NA L B OO K W AR EH OU SE , ) C/A NO. 03A01-9702-CH-00057 IN C., ) ) KNOX CHANCERY Plaintif f-A ppella nt, ) ) HON. FREDE RIC K D. McDONALD, v. ) CH ANCELL OR ) BO OK -M AR T O F F LO RID A, I NC ., ) AFFI RMED ) AND Defendant-Appell ee. ) REMANDED

F. DULIN K ELLY and CLINTO N L. KEL LY, Hendersonvill e, for Pl ainti ffAp pellan t. JOHN B. WAT ERS, III, LON G, RAG SDAL E & W ATER S, P.C., Knoxville, for Defendant-Appell ee.

O P I N I O N

Franks. J.

In thi s declar atoryjudgment action, t he plai ntiff

sought a decl arati on of the res pecti ve right s of the parties under an agre ement entered between plai ntiff and def end ant, b oth of w hom are e nga ged in th e reta il sale of b ook s an d re lated pro duc ts.

This action focuses on a provision in their agreement as follows: Book Warehouse grants to Book-Mart a thi rtyday right of f irst refusal with res pect t o any new loc ation i n Flori da chosen for a “ Book Wa reho use.” T hat is, sh ould Bo ok W areho use e lect to es tablish, a s is contemplated, other “Book Warehouse” ret ail f acil iti es thr oughout the State of Flori da, Book-Mart wil l be, and is her eby, granted e xclusi ve right to assume oper ation of such “Book Warehouse” ret ail f acil iti es by notifying Book Warehouse of it s elect ion to do s o within t

hirty day s of recei pt of written noti ce by Bookmart from Book Warehouse of the intent to est ablis h such a faci lit y. No such notice s hall be provided with out inc luding in said n otice a spec ific pro posa l with re spec t to2 locatio n and other p ertinen t aspec ts of th e pro pose d op eration in ques tion. Sh ould Bo ok-M art elect to oper ate an y such f acility offe red to it by Book W arehouse, Book-M art shall , in additi on to all other ri ghts, be en titl ed to us e th e n am e “ B oo k W ar eh ou se ” in op er ati ng sa id fa cil ity. The Chancellor , in de clari ng the ri ghts of the parti es, s aid in pe rti nent part: [i]n al l but one c ase, Nati onal Book Warehouse had executed a leas e on

a book stor e location, whic h was given to or shown to Book-Mart of Florid a so th at notic e cou ld be g iven o f exe rcise o f right o f first ref usal, that wil l conti nue. In order to est ablis h within t

he meaning of the agreement t hat Na tional B ook Wa reho use h as elec ted to e stablish a retail fa cility in Flori da under the agreement i t must enter int o an agreement wit h the landlord. And that

agreement, that l ease, must be sent t o Book-Mart of Florida, an accurate and complete copy of it containing all terms, includi ng signat

ures, togethe r with anyand all other document s and information avai lable to Nationa l Book Warehouse with r espect to that lease. It shoul d be a covered l ette r of some form of communication that indicates t

hat thi s complete information is being give n to Book-Mart of Flori da. When that

is done, that wil l constitute notic e and the trans missi on should i ndicat e that that i s int ended to be notice under the agreement. And from that communication, wit h all of that i nformati on, Book-M art of Florida shallhave 30 days within which to exercise its’ right of first refu sal. Essenti ally , the Chancellor requir ed the parties to operate under the term s of the a gre em ent a s the y had unt il disp utes and litiga tion eru pted betw een them
.

The evidence es tabli shed that plaint iff would, in fact , negotiate and execute a lease before it could require the defendant to exercise it s right of firs t refusalunder the a greement, and would then furnish al l of the information, i ncluding “economic inf

ormation ne cessary t o make a decisi on” to defendant . The Chancell or reli ed heavil y upon this evi dence in decl aring t he right s of the parties , but pl ainti ff insi sts t hat the agreement i s not ambiguous , and the Chancellor , in e ffect, applie d rules of c ons truc tion wh en n o co nstru ction of th e ag reem ent w as n ece ssar y.

We observed at t

he outset that pl ainti ff’s action was based on a l ette r writt en to defendant

on June 15, 1995, atta ching sever al “notice of i ntent to establ ish a Flori da facil ity ”. Essentiall y, these notices cont ained an addr ess, a leasi ng agent, and3

the approx imate size of th e facility. Defendan t, in response, asked for mo re information which was not furnished. Plaintiff’s witness c onceded in hi s test imony that whil e theyhad an int erest in opening s tores in thes e locations, with the one excepti on no-one had actually visi ted the premises nor had they “elected” to open t

he facil iti es. The Chancel lor hel d that t hese noti ces were not s uffici ent to t rigger the running of t

he time for

exerci sing a right of f

irst refusalunder the terms of the agreem ent. We a gree. The se notices and the failure to respo nd to def endan t’s inquiry were not made in good fa ith on t he part of

plaint iff, and the Chancel lor coul d have properl y r efused to e ntert ain thi s acti on. However, under the broad di scretion
acc ord ed th e tria l jud ge, it w as w ithin his d iscre tion to d ecla re th e rig hts o f the par ties. See Southern Fi re & Casualt y Company v. Cooper , 200 Tenn. 283, 292 S.W.2d 177 (19 56)
. We cann ot agre e w ith plain tiff that th e Ch ance llor cou ld no t take in to account the surroundi ng circumst ances of the parti es and their previ ous int erpret ations of the agreement in arriving at hi s judgment. The relationship with the parties at best
wa s com plex a nd n ow acrim onio us. W e belie ve the rule of practic al con struction is app licab le he re.

The Supreme Court in Hambl en Co unt y v. Cit y of Morr is to wn , 656 S.W.2d 331 (Tenn. 1983) , in di scussi ng the rul e said:

That rul e, l ong recogniz ed and appli ed in thi s juri sdiction, i s that the inter pretat ion plac ed upon a contr act bythe part ies t hereto, as shown by their acts, will be a dopted bythe court and that to thi s end not onl y t

he acts but the decl arati ons of the parties may be consi dered. ( Citations omitted). The rule is sta ted in S ection 235 of the Res tatem ent of Co ntracts as follows: “If the conduct of the parti es subsequent to a manifes tati on of intent ion indi cates t

hat al l of the parti es place d a parti cular interpre tation u pon it, that me aning is ado pted if a reaso nable per son cou ld att ach it to th e m anif esta tion .”4 Id. at 335. Also applicable here is a pri nciple which the Supreme C ourt aptlystated, as fol lows:

“Th e cou rt in interp reting w ords o r other acts of the pa rties pu ts itself in the position w hich they occup ied at the time the co ntract was m ade. In apply ing the appropri ate st andard of i nterpr etation even t o an agreement that on i ts face is fr ee from ambiguit y, it i s permiss ible to consider the si tu at io n of

th e partie s a nd the a cco mpan y in g ci rc ums ta nce s a t t he time it was entered into - not for the purpos e of modify ing or enl arging or curtailin g its term s, but to a id in de termin ing the mea ning to be g iven to the agre ement.” Re state me nt o f Co ntra cts, §23 5(d ) an d C om me nt.” Parti cularl y pertinent

here is the fol lowing pri nciple : “Intent ion or meani ng in a contract maybe manifest ed or convey ed either e xpre ssly or imp liedly, and it is f und ame ntal tha t that w hich is plainl y or

necessarily

impli ed in the language of a cont ract i s as much a part of i t as t

hat which i s express ed. If i t can be pl ainly seen from al l the prov isions o f the in strum ent tak en tog ether th at the o bligatio n in ques tion w as w ithin the conte mp lation o f the p arties w hen m aking their contra ct or is n ecess ary to carry the ir intentio n into e ffec t, the law will implythe obli gation and enforce i t.” 17 Am.Jur.2d Co ntrac ts §255 (1964) at 649. Id. at 334. Th e C han cello r pro per ly imp lied t he o blig ation s ne ces sary to carr y out th e ag reem ent. We affirm the Chancel lor’ s decis ion.

Ne xt, plain tiff insists that it w as inap prop riate fo r the C hanc ellor to award att orney ’s fees to defendant on the basi s that

the defendant

did not fi nd a breach of the agree men t by the pla intiff, an d on ly declarato ry relief w as sou ght.

The contract

ual agre ement between the parti es provi des, i n perti nent part: in any litigatio n arisin g ou t of the breac h of this agr eem ent, or se eking to

enfo rce it, the p revailin g par ty shall, in add ition to a ll other le gal, equitable and i njuncti ve remedies , be entitl ed to al l reas onable l iti gation expenses, including reasonable att orney’s fees. We note that de fendant throughout obj ected t o the maint enance of thi s acti on and was requir ed to defend i ts ri ghts under the contract. The notices sent byplaint iff di d not comply wit

h the requirements of t

he agreement, and the Tri al Court he ld the not ices5

we re inad equa te to trigg er the rig ht of f irst refu sal. U nder the term s of th e agre eme nt, the T rial Co urt pro perly aw arded attorne y’s fees to defe ndan t.

We affirm the jud gmen t of the Trial C ourt and rem and at app ellant’s cost.

________________________ Herschel P. Franks, J.
CONCUR:

___________________________ Houston M . Goddard, P.J.

___________________________ Cha rle s D. Susa

no, Jr., J.