N. C. Edwards, II v. Carlock Nissan of Jackson, LLC

Citation: Not availableDocket: W2006-01316-COA-R3-CV

Court: Court of Appeals of Tennessee; April 9, 2007; Tennessee; State Appellate Court

Original Court Document: View Document

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Lessor N.C. Edwards, II initiated a breach of contract lawsuit against Lessee Carlock Nissan of Jackson, LLC, alleging failure to maintain the leased building as required by the lease agreement. The trial court ruled in favor of the Lessor, awarding damages for repairs, lost rent, and attorney fees. The Lessee appealed the decision. In addition, the Lessor requested attorney fees for the appeal process. The appellate court affirmed the trial court's judgment and remanded the case to determine appropriate appellate attorney fees. The lease agreement, which expired on April 30, 2003, included provisions for maintenance and repair responsibilities by the Lessee and stipulated that holding over would create a monthly tenancy under the same terms. The Lessee was required to return the property in its original condition, barring normal wear and tear. The Lessee had taken possession of the building on May 4, 1998, when it was operational as an auto dealership.

Carlock operated a Nissan dealership until August 2002, after which it relocated to Vann Drive in Jackson, Tennessee. Following the move, Carlock used the Building for its wholesale business until February 2003 and subsequently permitted Uniserve, a company partially owned by Mr. Carlock, Jr., to operate there. Mr. Edwards, under the Lease, put a sign in front of the Building for rent during this period. Mr. Carlock, Jr. stated that after the Lease expired on April 30, 2003, Carlock left old files, records, and spare parts in the Building and did not change the utilities' responsibility until June 2003, resulting in Carlock becoming a month-to-month tenant. 

A tornado struck Jackson on May 5, 2003, causing significant damage to the Building, which Mr. Edwards’ insurance covered only partially, totaling approximately $30,000. Mr. Edwards claimed an additional $17,000 in damages due to Carlock's failure to maintain the property as stipulated in the Lease. On April 4, 2004, Mr. Edwards demanded reimbursement from Carlock for repairs not covered by insurance, detailing the neglect and additional costs incurred due to Carlock’s delayed property removal and lack of maintenance. When no agreement was reached, Mr. Edwards filed a Complaint for breach of contract against Carlock on January 19, 2005, citing failure to remove property timely and neglect in maintaining the leased premises.

Surrendering the leased premises in poor condition constituted a breach of covenants in sections 8.1-8.4 of the Lease Agreement and violated Tenn. Code Ann. § 66-28-401. The Plaintiff claimed the Defendants had a duty to repair and maintain the premises but failed to do so, resulting in the Plaintiff incurring approximately $17,355.80 for third-party repairs. Additionally, the Plaintiff sought $11,000 for two months’ rent and $720.31 for two months of real estate taxes due to the Defendants' holdover. Carlock, the Defendant, filed an Answer denying the allegations and raising defenses including failure to state a claim, accord and satisfaction, failure to mitigate, and laches. 

The trial court ruled in favor of the Plaintiff, awarding a total of $30,285.27, which included repair costs for damages not caused by a tornado, rent for 25 days of holdover, and attorney fees. The court found that the Plaintiff took control of the building post-tornado and contracted all necessary repairs. The Plaintiff received insurance for tornado-related damages but sought recovery for pre-existing issues. The court dismissed the Defendants' defenses regarding accord and satisfaction and comparative fault. Final rulings awarded specific amounts for various repairs: $5,586.70 for the roof, $435 for sign removal, $5,073.08 for electrical repairs, $2,258.40 for HVAC and plumbing, and $3,328.94 for hand-rails and sheetrock repairs. The court determined that despite maintenance needs, the Plaintiff could have rented the building shortly after the lease expiration, resulting in a deprivation of access for 25 days due to the Defendants' failure to maintain the property.

Carlock appeals the trial court's judgment, asserting four key errors: 1) the court incorrectly determined that the Plaintiff proved the Defendants' liability for alleged damages to the building; 2) the court held Defendants liable for all damages despite the Plaintiff's failure to mitigate those damages; 3) the court erroneously awarded the Plaintiff 25 days of rent post-lease expiration; and 4) the court incorrectly granted attorney’s fees to the Plaintiff. Mr. Edwards seeks $6,965.00 in attorney fees for this appeal. The case is reviewed de novo, with a presumption of correctness for the trial court's factual findings, unless contradicted by preponderating evidence. The credibility of witnesses is paramount, and the trial judge's assessment holds significant weight on appeal. Damages for lease breaches are governed by general contract principles, requiring that they reflect a reasonable compensation for the injured party, factoring in the duty to mitigate. Damages must also be foreseeable, proximately caused by the breach, and ascertainable without speculation. Carlock argues the evidence does not support the existence of damages prior to a tornado; however, Mr. Carlock, Jr. acknowledged responsibility for a missing air conditioning unit, damaged railings, and removal of signs. The only contentious damages relate to the roof, ceiling, and plumbing repairs.

In February 2003, Sharon Fisher, an employee at Carlock's wholesale division, described the Building as extremely dirty and cluttered, with trash, rotting wood, and multiple leaks. She noted the bathrooms were in poor condition, with constantly running toilets that often overflowed. Fisher observed no maintenance efforts by Mr. Carlock or his staff during that time. Specific leaks were reported in the bookkeeping office, the showroom area, and near the fireplace, all causing visible damage. Don Neal, a former service manager, corroborated the lack of maintenance under Carlock, stating that significant issues were only addressed when they became critical, and he confirmed the existence of plumbing issues, particularly in the women's bathroom. Neal also mentioned observing rotting wood that had developed after Carlock took over. Robert Boren, a master electrician, indicated that light bulbs had not been timely replaced, suggesting long-term neglect. In August 2003, Jim Webb, a repair technician, attributed damage to air-conditioning and plumbing fixtures to a lack of maintenance. However, Rick Neely, a Carlock sales representative, contested these claims, asserting that Carlock attempted repairs despite the issues, though he lacked information on maintenance after relocating to Vann Drive. Kevin Slater, a partner in Uniserve, also defended Carlock's maintenance efforts. Ultimately, the credibility of witness testimony is determined by the trier of fact, with appellate courts giving significant weight to this assessment.

The trial court's finding of Carlock's liability for damage to the Building is supported by evidence. Carlock argues Mr. Edwards did not mitigate his damages, but under Tennessee law, an injured party is required to act reasonably to minimize losses. Despite this duty, mitigation is not necessary if it imposes an undue burden. Mr. Edwards promptly took action after the tornado, securing the building and initiating repairs, demonstrating he did not fail to mitigate damages.

Carlock's contention regarding the trial court's decision to award Mr. Edwards twenty-five days' rent after the Lease expired is based on the fact that Carlock left property in the Building and maintained utilities until early June 2003, indicating he was a holdover tenant. Mr. Edwards' actions of advertising the Building and storing his property do not negate this status.

Lastly, the trial court's award of attorney fees to Mr. Edwards is justified under Section 7.4 of the Lease, which allows for recovery of fees in the event of a breach. Since the court found that Carlock breached the Lease by failing to maintain the Building, the award of attorney fees is supported by the Lease terms.

Mr. Edwards seeks $6,965.00 in attorney fees and expenses related to defending his appeal, supported by attorney William H. Shackelford, Jr.'s affidavit. He cites the case Killingsworth v. Ted Russell Ford, Inc., which allowed for attorney fees under the Tennessee Consumer Protection Act (TCPA) when a court finds a violation. The Supreme Court in Killingsworth noted that appellate fees must be awarded to protect a plaintiff's monetary judgment from being diminished by costs incurred during appeal. However, the current case involves a breach of contract rather than a statutory violation, leading the court to distinguish it from Killingsworth. Despite this, the court recognizes that Section 7.2 of the Lease allows for recovery of attorney fees without limitation to the trial level, affirming that Mr. Edwards can recover his appellate fees. The trial court's judgment is affirmed, and the case is remanded for a determination of the appropriate fees. Costs of the appeal are assigned to the Appellant, Carlock Nissan of Jackson, L.L.C. and associated parties.