FIRST AMERICAN TRUST COMPANY, )
Executor of the Estate of )
Frances A. Oman, Deceased, )
) Appeal No.
Plaintiff/Appellee, ) 01-A-01-9507-CH-00324
)
VS. ) Williamson Chancery
) No. 22922
FRANKLIN-MURRAY DEVELOPMENT )
COMPANY, L.P.,
Defendant/Appellant.
)
)
)
FILED
February 28, 1996
COURT OF APPEALS OF TENNESSEE
Cecil W. Crowson
MIDDLE SECTION AT NASHVILLE
Appellate Court Clerk
APPEALED FROM THE CHANCERY COURT OF WILLIAMSON COUNTY
AT FRANKLIN, TENNESSEE
THE HONORABLE HENRY DENMARK BELL, JUDGE
CHARLES A. TROST
JOSEPH A. WOODRUFF
511 Union Street, Suite 2100
Nashville, Tennessee 37219-1760
THOMAS V. WHITE
315 Deaderick Street, 21st Floor
Nashville, Tennessee 37238
Attorneys for Plaintiff/Appellee
JOHN A. DAY
DONALD CAPPARELLA
150 Fourth Avenue North
Nashville, Tennessee 37219
GUY C. NICHOLSON
2049 Century Park East, Suite 755
Los Angeles, CA 90067
Attorneys for Defendant/Appellant
AFFIRMED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
LEWIS, J.
OPINION
The Chancery Court of Williamson County awarded the earnest money
in a real estate transaction to the seller, finding that the purchaser had breached the
contract. On appeal the purchaser contends that the seller failed to deliver a
marketable title and that there are factual disputes that preclude granting summary
judgment to the seller. We affirm the trial court’s decision.
I.
First American Trust Company (FATC) is the duly appointed executor
under the will of Frances A. Oman, who died on May 29, 1992. Ms. Oman died
owning several large tracts of valuable real property, some of which had to be sold to
pay estate taxes.
On April 14, 1994 Franklin-Murray Development, L.P. (FMD) entered into
an agreement to purchase a 224 acre tract in Brentwood for $1,000,000 down and a
$4,750,000 note secured by a deed of trust. The agreement called for the payment
of earnest money to an escrow agent and a closing date within sixty days. FATC was
obligated to furnish good and marketable title to the property. If certain contingencies
had not been met by the original closing date the closing could be extended up to sixty
additional days. Otherwise, time was made of the essence with respect to each
party’s obligations.
The transaction did not close within the time provided in the agreement.
Although the parties negotiated a modification of the amount of the down payment,
they remained at odds over FATC’s proposal to satisfy the estate tax lien. On
October 3, 1994 FATC filed an action in the Chancery Court of Williamson County
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seeking a declaration that it was entitled to the earnest money because FMD had
breached the agreement by failing to close. On November 9, 1994 FMD filed an
answer and counterclaim seeking damages from FATC for breaching the contract by
failing to furnish good and marketable title. FMD also recorded a lis pendens lien to
secure the payment of its anticipated judgment.
FATC moved to have the court remove the lis pendens lien because
FMD was seeking only damages and was not asserting an interest in the property.
After a hearing, the chancellor declined to remove the lien and recited in a December
14, 1994 order that “counsel for both sides asserted during oral argument that they
were still willing to close the contract if the other side was ready to perform all its
obligations.”
On January 19, 1995 FATC moved the court for an order of specific
performance. The motion asserted that FATC was ready and willing to transfer
unrestricted and unencumbered title to FMD. In support of the motion FATC filed
documents showing that the IRS and the Tennessee Department of Revenue had
agreed to waive their tax liens because FATC had provided security for the payment
of any tax due. The security provided for the IRS was a $4,000,000 surety bond and
a promise to pay the IRS the entire $1,000,000 down payment. After giving FMD
additional time to respond to FATC’s motion, the court entered an order on March 6,
1995 granting specific performance to FATC and ordering that the sale be closed on
March 28, 1995. The court further ordered that if FMD could not close on the date
specified it must release its lis pendens lien.
FMD did not close on the appointed date. FATC then filed a motion for
summary judgment on the merits of the case and the court entered a final judgment
dismissing FMD’s counterclaim and awarding the earnest money to FATC.
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II.
Boiled down to its fundamentals, this case turns on the answer to two
questions: (1) Did the chancery court commit reversible error in its March 1995 order
ordering the parties to perform the contract? and (2) Was FATC entitled to summary
judgment holding that FMD breached the contract? We think the uncontradicted facts
show that the court properly decided both issues.
FMD defended the original action and based its counterclaim on the fact
that the tax lien rendered the title unmarketable. Whether FMD could have prevailed
on that theory has now passed into history and we take no position with respect to that
question.1 When FMD represented to the court that it was still ready and willing to
close the transaction if FATC could fulfill all its obligations, it waived any prior
objections based on the failure to furnish marketable title in a timely fashion. Waiver
is the voluntary surrender of a known right. Felts v. Tennessee Consolidated
Retirement System, 650 S.W.2d 371 (1983). Although FMD now quibbles with the
chancellor’s “finding” that FMD took a position in favor of closing the transaction, the
chancellor’s order reciting that fact went unchallenged until FATC took the steps
necessary to remove the tax lien. The uncontradicted facts show that FMD waived
any right it had to rely on the “time is of the essence” provision in the contract.
When time is no longer of the essence the parties have a reasonable
time in which to close. Miller v. Resha, 820 S.W.2d 357 (Tenn. 1991). FATC moved
for an order of specific performance within thirty-six days of the December 14, 1994
order. With the agreement of the IRS and the Tennessee Department of Revenue to
waive their claims for taxes, FMD’s only objection to closing had been resolved.
1
W hether an incipient estate tax lien renders title to prop erty unm ark etab le where th e lien is to
be discharged by the sale proceeds is an interesting question, but one we will not address now.
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Therefore, the chancellor was justified in ordering performance in accordance with the
parties’ earlier representations that they were willing to perform.
III.
It is important to note that ultimately the chancellor did not order specific
performance. The final disposition of the case came when FATC moved for summary
judgment on the merits of its contention that FMD breached the contract. So, in
actuality the March 6, 1995 order merely set a date certain for the closure.
When that date passed and FMD was unable or unwilling to close, FATC
moved for summary judgment. We think the uncontroverted facts show that FMD
breached the contract. As we have pointed out, the only defense raised to FATC’s
action was the fact that the tax lien clouded the title to the property. FATC was
prepared to deliver title on March 28, 1995 free and clear of all tax liens. Thus, FATC
was entitled to summary judgment on the breach of contract issue.
IV.
FMD argues that the order of March 6, 1995 was in the alternative; that
it gave FMD the option of closing or releasing its lis pendens lien. Even if FMD is
correct on that point there is nothing in the papers supporting the motion indicating
that FATC had elected to accept a release of the lien in lieu of all other remedies.
Similarly, there is nothing in the court’s order restricting FATC’s remedies to a release
of the lien. The court’s order of March 6, 1995 specifically reserved “all other matters”
after ordering a closing on March 28, 1995 or a release of the lien.
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The judgment of the lower court is affirmed and the cause is remanded
to the Chancery Court of Williamson County for any further proceedings necessary.
Tax the costs on appeal to the appellant.
_______________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
SAMUEL L. LEWIS, JUDGE
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Thomas v. White
Combined Opinion