Net Realty Holding Trust v. James D. Maggart and Dorothy Maggart

• Court: Court of Appeals of Tennessee
• Decided: November 1, 1995
• Docket: 01A01-9503-CH-00085
• Status: Published

Opinion

NET REALTY HOLDING TRUST, ) ) Plaintiff/Appellant, ) Appeal No. ) 01-A-01-9503-CH-00085 v. ) ) Davidson Chancery JAMES E. MAGGART and ) No. 93-1061-II DOROTHY MAGGART, ) ) Defendants/Appellees. ) FILED Nov. 1, 1995 COURT OF APPEALS OF TENNESSEE Cecil Crowson, Jr. Appellate Court Clerk MIDDLE SECTION AT NASHVILLE

APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE C. ALLEN HIGH, CHANCELLOR

KENNETH R. JONES, JR. ELIZABETH B. THOMPSON Sherrard & Roe Suite 2000, 424 Church Street Nashville, Tennessee 37219 ATTORNEYS FOR PLAINTIFF/APPELLANT

ALLISON G. LUCAS Crocker and DeSha Suite 2909, Stouffer Tower 611 Commerce Street Nashville, Tennessee 37203 ATTORNEY FOR DEFENDANTS/APPELLEES

REVERSED AND REMANDED

SAMUEL L. LEWIS, JUDGE O P I N I O N

FACTS

Net Realty Holding Trust ("NET") the owners of commercial

property in Hermitage, Tennessee, brought an action to collect

rent after the tenants, James and Dorothy Maggart, (doing

business as "The Video Place") surrendered the premises. The

Davidson County Chancery Court held that NET was estopped from

collecting rent through the end of the lease term.

The Mitchell Company originally owned the subject

commercial property when the Maggart's signed the lease on March

16, 1988, selling the property to NET in June of 1989. At the

time the lease was signed the structure was not fully

constructed.

On the first page of the Mitchell Company's original

lease "TERM" is listed, followed by the words: "Five (5) years."

Underneath the word "TERM" is "DATE" listed as "March 16, 1988."

On the second page of the lease, the lease term is listed as five

years. At the bottom of the second page is a statement

identifying the page as "THIS FACE PAGE." Later in the lease

paragraph number eight provides:

The original term of this Lease shall be for a period as defined on the FACE PAGE of this Lease and from the "Commencement Date" hereafter provided unless sooner terminated hereby. Said term, and TENANT's obligation to pay rent shall commence on the earlier of the following dates: (a) the date which is sixty (60) days after TENANT has been notified in writing that the demised premises are ready for occupancy. . . .

A subsection (b), which followed (a) above, is crossed

out, apparently done by someone before the lease was signed. The

2 provisions left intact leave the reader with the conclusion that

the term of the lease was five years, to begin after the Maggarts

had been notified in writing that the premises were ready for

occupancy.

The Maggart's brief indicates that they did receive a

"rent start letter," although there does not seem to be an

exhibit labeled as such. Regardless, the Maggarts admit that

they occupied the premises in November of 1988, first paying rent

in January of 1989. A five year or 60 month lease thus would

conclude in December of 1993 or at the latest January of 1994.

At trial NET stipulated that the lease expired on December 31,

1993, and that they would not seek recovery for rent past this

date. Additionally, the Maggarts signed an estoppel certificate

executed June 13, 1989, in which the Maggarts confirmed some of

the more relevant provisions of the lease, one of which was the

term. In paragraph (d) of the estoppel certificate the term of

the lease is listed as 5 years, commencing on January 6, 1989,

and ending January 31, 1994. Thus, it is not too difficult to

determine that the expiration of the lease would be in January of

1994 or perhaps December 31, 1993.

During the course of the tenancy, the Maggarts sometimes

had problems paying their rent as it came due, and on at least

three occasions NET filed detainer actions to recover monies due.

In the midst of discussions over a fourth suit to collect rent,

the most pivotal factual event of the case occurred. On January

23, 1993, NET attorney John Tishler held a phone conversation

with the Maggart's lawyer John Cheadle. During the conversation,

Mr. Tishler commented that he believed the Maggart's lease

expired on March 15, 1993. Mr. Tishler apparently only consulted

the first page of the lease, which stated the lease was for five

years and was signed on March 15, 1988. Mr. Tishler may have

3 been ignorant of the fact that the Maggarts had not started

paying rent until January of 1989 when the building was finished.

After speaking to his clients the Maggarts, Mr. Cheadle

sent Mr. Tishler a letter dated January 22, 1993, the same day of

the phone conversation. The letter reportedly confirmed the

day's discussion regarding the termination of the lease in March.

Later in a letter dated February 10, 1993, Mr. Tishler confirmed

that it was his "understanding that the lease expired in mid-

March," and also designated an agent to inspect the premises upon

the termination of the lease date.

On March 15, 1993, the Maggarts vacated the premises and

NET's designated agent accepted the keys after an inspection. On

March 26, 1993, NET advised the Maggarts that the lease actually

did not expire until January of 1994 and demanded payment of the

rent for the remainder of the lease term.

At trial the parties stipulated that the monthly amount

of rent, common area, and maintenance, taxes, and insurance under

the lease was $4,650 for a total of $44,647.24 if due from March

16, 1993 through the end of the lease term in December of 1993.

After the trial, the court held that the statements, letters, and

actions of the parties had "set up an estoppel." Specifically

the court held that NET's attorney stated the expiration date of

the lease was March 15, 1993, and that in reliance upon the

statement the tenant's wrote a letter stating they would move out

and wanted the landlord to provide a representative to receive

the premises.

Issues

The issue presented in NET's appeal is limited to one

4 legal question: whether or not NET should be estopped from

collecting rent from the Maggarts through the end of their five

year commercial lease after NET's attorney told the Maggart's

attorney that the lease would expire in March of 1993. To answer

this question this Court must review the doctrine of equitable

estoppel in Tennessee.

Equitable Estoppel

In Ryan v. Lumberman's Mut. Cas. Co., the court stated

"[i]t is probably impossible to frame a rigid definition of the

doctrine of equitable estoppel because it is constantly growing,

and is applied to new conditions as they arise. It rests upon

the necessity of requiring men to deal honestly and fairly with

their fellow men." 485 S.W.2d 548, 550 (Tenn. 1972).

Estoppel "requires as a minimum (1) reliance upon the

statement or actions of another without opportunity to know the

truth and (2) action based on that reliance which results in

detriment to the one acting." Campbell v. Precision Rubber

Products Corp., 737 S.W.2d 283 (Tenn. App. 1987).

As the Tennessee Supreme Court stated in Rambeau v.

Farris, "It is essential to estoppel that the person claiming it

was himself not only destitute of the knowledge of the facts, but

without available means of obtaining such knowledge; for there

can be no estoppel where both parties have the same means of

ascertaining the truth." 212 S.W.2d 359, 361 (Tenn. 1948) citing

Hankins v. Waddell et al., 167 S.W.2d 694, 696. Similarly

stated, "[f]or estoppel to arise, the act must have been done

with the knowledge that it would be relied upon and the other

party has acted in reliance without either knowledge or the true

5 state of affairs or the means of learning the true state of

affairs." City of Lebanon v. Baird, 756 S.W.2d 236 (Tenn. 1988).

Usually, "one having the ability and opportunity to

inform himself of the contents of a writing before he executes it

will not be allowed to avoid it by showing that he was ignorant

of its contents or that he failed to read it." Soloman v. First

American Nat. Bank of Nashville, 774 S.W.2d 935 (Tenn. App.

1989).

Application

The Maggart's signed a five year lease in March of 1988.

They first paid rent in January of 1989. The term of the lease

could have been determined in an number of ways, including

consulting the lease, or the estoppel certificate. When Mr.

Tishler informed Mr. Cheadle of a March 1993 expiration, the

Maggarts were not "destitute of the knowledge of the facts, or

without available means of obtaining such knowledge." Rambeau v.

Farris, 212 S.W.2d 359, 361 (Tenn. 1948). They had in their own

possession the lease, were represented by counsel, and testified

at trial that they did indeed know that a March 1993 termination

would have been premature. Generally, a party dealing on equal

terms with another is not justified in relying upon

representations where the means of knowledge are readily within

his reach. Soloman v. First American Nat'l Bank of Nashville,

774 S.W.2d 935, 943 (Tenn. App. 1989). Thus, the Maggarts

cannot rely on the equitable theory of estoppel.

A party desiring to benefit from the estoppel doctrine

must have relied reasonably or justifiably. Fourth Nat'l Bank v.

6 Nashville C. & St. L. Ry. Co., 161 S.W. 1144, 1146 (Tenn. 1913).

The Maggarts claim that Mr. Tishler's mistaken statement as to a

March termination provides sufficient justification to allow them

to surrender the premises. The Maggarts also assert that the

litigious history of NET induced their abandonment of the space,

and that they were not in a strong enough bargaining position to

question NET's authority for removing them before the lease term

ran. We disagree. Had the Maggarts been fearful of NET's

reaction if they had remained on the premises beyond March they

could have contacted NET and agreed to the March termination

while informing NET that they believed a March termination to be

contrary to the lease terms. At no time did the Maggarts

communicate to NET that it would comply, while protesting NET's

construction of the lease. Had the Maggarts done so and NET

maintained its position, the Maggarts then would have been in

better position to assert a valid reliance argument.

Estoppel is not favored and it is the burden of the party

seeking to invoke estoppel to prove each and every element.

Bokor v. Bokor, 722 S.W.2d 676, (Tenn. App. 1986). The Maggart's

knowledge of the terms of the lease preclude them from validly

asserting estoppel.

The Maggarts argue that they should not be held to a

higher standard of recall or understanding of the lease than NET.

However, it is the Maggarts, not NET who are asserting the

estoppel argument, and it is the knowledge or access to means of

knowledge on behalf of the party asserting estoppel that is

relevant to equitable estoppel in Tennessee.

Conclusion

It therefore results that the judgment of the trial court

7 is reversed and the case is remanded to the trial court for

further necessary proceedings. Costs on appeal are taxed to the

appellees, James and Dorothy Maggart.

________________________________ SAMUEL L. LEWIS, JUDGE

CONCUR:

_________________________________ HENRY F. TODD, P.J., M.S.

_________________________________ BEN H. CANTRELL, JUDGE