The Court of Appeals of Tennessee reversed and remanded a judgment from the Shelby County Chancery Court awarding Loyal Featherstone Construction, Inc. $30,067.18 in a breach of contract case against defendants Robert and Janice Coleman. The court found insufficient evidence to support the trial court's conclusion that the Colemans breached the contract regarding the sale of a newly constructed residence. The construction company filed the breach of contract action in June 1996, claiming the Colemans failed to close on the property by the scheduled date of January 31, 1996. The original contract required the seller to obtain a clear final inspection and stipulated that the purchaser would close the sale within three working days after completion and loan approval. A punch list of twelve items needing correction was created on January 2 or 3, 1996, but a disagreement arose when Featherstone refused to reframe an upstairs bathroom ceiling. The Colemans' recorded contract with the Shelby County Register’s Office on April 9, 1996, was also cited as creating a cloud on the property's title. The Colemans counterclaimed for specific performance of the contract. The appellate court's decision indicates that the circumstances surrounding the failure to meet the closing date did not constitute a breach by the Colemans.
Featherstone indicated that reframing the bathroom ceiling would be too expensive and suggested relocating the shower head as an alternative solution. On January 26, 1996, an appraiser conducted a final inspection at the bank's request, confirming that construction was complete. The bank had conditionally approved the Colemans’ mortgage on December 18, 1995, pending this appraisal. The construction company demanded that the Colemans close the sale by January 31, 1996, asserting all conditions were met. However, the Colemans did not attend the closing, believing the home was incomplete, particularly citing an unresolved issue with the upstairs bathroom ceiling's height. Janice Coleman stated they would have proceeded with the closing had the ceiling been corrected.
On February 8, 1996, a building inspector confirmed the house was substantially complete and code-compliant. At the Colemans’ request, the inspector returned on March 7 or 8 and found that the ceiling height did not meet code. Featherstone agreed to make the necessary corrections. By April 1, 1996, the inspector verified that the ceiling had been fixed, noting that he typically does not overlook such violations but acknowledged that mistakes can happen. He would have withdrawn the final inspection report if the issue had not been resolved.
There is no record of any attempts to reschedule the closing after January 31, 1996, despite the completion of the ceiling correction. The construction company provided no evidence that Featherstone sought a new closing date following the failed January closing, the February inspection, or after the ceiling correction. Additionally, Robert Coleman testified that Featherstone denied the Colemans access to the property during the inspector’s visit, threatening to call the police.
Featherstone acknowledged at the damages hearing that he would not sell the property to the Colemans due to their breach of contract for not attending the January 1996 closing. The trial court ruled that the Colemans breached the contract by failing to close the sale. The court awarded the construction company $30,067.18 in damages, terminated the contract, and ordered its expungement from the Shelby County records. The Colemans then appealed, abandoning their claim for specific performance and focusing on whether they were in breach and whether damages were warranted.
The appeal required determining if the conditions precedent for closing were met by the January 31, 1996 deadline. Evidence showed the mortgage loan was approved on December 18, 1995, and the final appraisal occurred on January 26, 1996, but the final inspection by the building inspector did not happen until February 8, 1996. The appellate court concluded that since the final inspection had not occurred by the closing date, the Colemans had no obligation to close and thus did not breach the contract.
The construction company argued that the bank appraiser's inspection satisfied the final inspection requirement, but the court found no evidence supporting this claim. Additionally, it noted that the bank appraiser's inspection could not be judicially recognized as fulfilling the contract's requirements. The court ultimately determined that the construction company failed to prove the Colemans breached the contract, as the seller must demonstrate readiness and ability to perform his contractual obligations.
The seller must perform or offer to perform their contractual obligations before seeking to enforce the contract against the purchaser, unless the purchaser has repudiated the contract before the performance date. In this case, the construction company did not provide evidence of its readiness or willingness to perform the contract after the Colemans failed to close by the January 31 deadline. There was no proof that the company offered to perform the contract after critical dates, including after a building inspection on February 8 or after it rectified a ceiling code violation by April 1. Evidence indicated that Loyal Featherstone, representing the construction company, no longer wished to sell to the Colemans after January 31, and the company did not justify its failure to offer performance. The Colemans were not obligated to close on January 31, and there was no evidence they repudiated the contract at any time. Consequently, the construction company could not recover damages for breach of contract by the Colemans. The appellate court reversed the trial court's finding of breach against the Colemans and remanded for further proceedings; it upheld the trial court's termination of the contract and its expungement from public records. The costs of the appeal were assigned to the construction company. The prior extension of the closing date indicated that time was not considered essential by the parties, and the court noted that it need not address the implications of the building inspector’s findings on the Colemans' obligation to close, as the construction company did not offer to perform after the inspection.
