Nashville Business Litigation Lawyers Blog

In Nashville, as well as all other Tennessee cities and counties, there is plenty of land--- commercial, residential, rural, and urban--- that is owned by more than one person as tenants in common, also sometimes referred to as "co-tenants." There can be two tenants in common or more, to a single piece of real estate.

The fundamental distinction of tenants in common is that each has an undivided interest, equal to their ownership share, in the entire piece of real estate. So, if there are two tenants in common, each has an undivided one-half interest in the entire property. Thus, both have the right to use all of the property and to share in the profits made from it, if any. Joint ownership of this nature, not surprisingly, frequently results in conflicts and problems. And, frequently, those conflicts and problems cause one, or more, of the co-tenants to seek the help of a Tennessee court by filing a partition lawsuit.

In Tennessee, the right of a co-tenant to have real estate partitioned is absolute. Tennessee law follows the rule that, if you do not want to continue to have to own property with another co-tenant or co-tenants, you don't have to do so. If you file a partition action, a Tennessee court must partition the real estate. A Tennessee court cannot deny you your right to get out of your tenancy in common.

When a partition action is filed, although a Tennessee court cannot deny the right to partition, it can, and must, decide whether the partition will be by sale or, on the other hand, "in kind." If real estate is partitioned by sale, it is sold and the proceeds are divided between, or among as the case may be, the tenants in common--- the co-owners. If real estate is partitioned in kind, it is divided among the co-tenants by the court.

Tennessee law favors a partition in kind, and a party seeking a partition by sale bears the burden of proving that a partition by sale is warranted by law. In spite of that presumption, a review of Tennessee court decisions reveals that, in many cases, it is not too difficult for a party to prove that a partition by sale is warranted.

Under the Tennessee partition statutes, a person is entitled to a partition by sale if he or she can prove either: (1) That the real estate is so situated that it cannot be divided; or (2) that it would be "manifestly to the advantage" of the co-owners for the property to be sold instead of divided. Here is a rule of Tennessee law to remember about partition actions: Even if the property can be evenly divided, that does not necessarily mean that a partition by sale will not be ordered. Why? Because, in many cases, even though the property can be divided into equal shares, if so divided, each, or some, co-owner's land would be worth less than what he or she would receive if the real estate was sold, as a whole, before it was divided.

In each of the following Tennessee cases, the courts ruled that a partition by sale was appropriate in the face of an argument by one or more tenants in common that the real estate should be divided and not sold. They are worth a look if you are involved in a partition action. Here they are:

McKenzie Banking Company v. Couch (Tenn. Ct. App. 2010): A case involving commercial property with a building located in Humboldt County, Tennessee ordered sold.
Hale v. Hale (Tenn. Ct. App. 2011): A case from Van Buren County involving 74 acres of rural property ordered sold.
Potts v. Rogers (Tenn. Ct. App. 2004): A case from Hamilton County involving a 115 acre tract of land ordered sold.
Bevins v. George: (Tenn. Ct. App. 1952): 598 tract in Loudon County ordered sold.
Nicely v. Nicely (Tenn. Ct. App. 1956): 68 acres in Grainger County ordered sold.

The Supreme Court of Tennessee has issued an opinion clarifying which statutes of limitations are applicable to cases involving the breach of a contract to make mutual wills. If you are involved in a mutual will case, and are worried that your case might be barred by the statute of limitations which is applicable to claims against an estate, T.C.A. §30-2-307, your worries might be over.

In the case at hand, a married couple, both of whom were previously married, and both of whom had children by a previous marriage, signed a contract to make mutual wills. The same day that they signed the contract to make mutual wills, they executed wills. In the contract to make mutual wills, the husband and wife agreed that, when the first of them died, the survivor would not change his or her will.

The wills which the couple executed provided that each would receive a life estate in the real property they owned together or jointly and that, after both had passed away, the real property which they owned jointly or together, as of the time the wills were made, would pass in equal shares to the four children of both of them. (Husband had three children and wife had one, a son).

Husband died six days after the mutual wills were executed. Less than ten days after the husband died, the wife executed a new will in which she left her entire estate to her son ("Wife's Son"). After the wife died, Wife's Son filed a petition to probate his mother's will (the will that left everything to him, of course).

When husband's three children learned about the probate action filed by Wife's Son, they filed a complaint in Knox County Chancery Court. In their lawsuit, they alleged that Wife's Son had obtained the will of his mother by undue influence, they set forth a will contest claim, and they sought a declaratory judgment for specific enforcement of the contract to make mutual wills.

On appeal, Wife's Son argued that the Chancery Court case was barred by the statute of limitations. The Chancery Court case had been filed one year and nine days after the death of wife. The statute of limitations for filing claims against an estate, T.C.A. §30-2-307, required that claims against an estate be filed within twelve months of the date of the death of the deceased (if the claimants did not receive notice of the probate proceeding, which the children of husband did not). So, argued Wife's Son, the Chancery Court case was barred by the statute of limitations because it was filed nine days late.

The Supreme Court acknowledged that one way to challenge a will on the grounds that it breached a contract to make mutual wills is to file a claim against the estate. That way, however, is not the only way. The two other ways that a party may challenge a will in Tennessee on the grounds that it breached a mutual will contract, said the Supreme Court, are: (1) to file a will contest case; or (2) to file an action for specific performance (which is a variety of a breach of contract case).

The statute of limitations for filing a will contest case is two years after the entry of the order admitting the challenged will to probate. Since the children of husband had filed their Chancery Court action well before the two year statute of limitations for will contests had run, their case was not barred.

For will contest lawyers in Tennessee, this opinion provides clarity about the statutes of limitations applicable in cases involving mutual wills. There can now be no doubt that we have at least two years from the date of the entry of the order admitting the will to probate to file the case. Will contest lawyers who proceed by filing not only a will contest, but also, a breach of contract action for specific performance, should have even longer than that two years. Why? The reason is because the statute of limitations for a breach of contract action in Tennessee is typically six years.

The Supreme Court of Tennessee has recently issued an opinion in an undue influence and will contest case which speaks to what type of evidence a party can use, at trial, to attempt to set aside a will based on undue influence. In will contest cases, undue influence cases, breach of contract cases, and just about every other kind of case, clients are often surprised about what type of evidence cannot be used at trial to help prove their cases. In analyzing any case, an experienced trial lawyer knows that he or she must consider, not only what facts help prove his or her client's case, but also, which of those facts might not be admissible at trial.

In trials, only relevant evidence is admissible. What makes evidence relevant? The test for determining relevance, in many instances, becomes very, very subjective. Here is the test under Tennessee law: Does the evidence have any tendency to make the existence of any fact that is of consequence to the determination of the case more probable or less probable than it would be without the evidence? If so, it is relevant.

In the case at hand, In Re Estate of Smallman, the Supreme Court of Tennessee reversed a jury verdict because it determined that the trial court had let the jury hear evidence which was not relevant. What was the offending evidence?
At the trial of the undue influence case, the sons of the deceased ("Sons"), who filed the will contest case, alleged that the will executed by their father was the result of the undue influence of his new wife ("Wife"), to whom he was married just a couple of weeks before he died.

At trial, the lawyers for the Sons presented evidence to the jury that Wife was previously involved with helping her deceased mother execute a will. The will which Wife's mother executed left everything to Wife, and left nothing to the children of Wife's deceased sister. The evidence presented was that Wife had driven her terminally ill mother to the office of the lawyer who prepared the will that Wife's mother signed and that left all of the mother's property to Wife. The lawyers for Sons argued that this evidence was relevant to show a common scheme on the part of Wife to exert undue influence to have ill persons leave property to her and not to other persons who, naturally, should have received something.

The Supreme Court determined that the evidence related to Wife's mother's will was irrelevant. While the Court acknowledged that evidence proving a common scheme or plan was relevant under some circumstances, the evidence was not relevant with respect to the undue influence case against Wife because there was no "substantial similarity" between the circumstances surrounding Wife's mother's will and surrounding the will challenged by Sons.

The Sons' lawyers, as part of their proof of undue influence, also presented evidence to the jury that Wife owned real estate for which she paid nearly two million dollars. Evidence regarding someone's financial condition is almost always irrelevant under Tennessee law, in my experience, to try to prove or to disprove most matters. In some limited circumstances, evidence of someone's financial condition can be relevant. For example, in Tennessee, evidence that an heir was very wealthy may be admitted to prove that the reason the heir was omitted from a will was not the result of undue influence.

In this case, ruled the Supreme Court, evidence of Wife's financial condition was not relevant because she would not benefit from a finding of undue influence. To reach that conclusion, the Court applied the rule that "evidence of the financial condition of persons who would not benefit from a finding of undue influence is properly excluded."

After concluding that the evidence discussed above was not relevant, the Supreme Court reversed the jury's verdict because it concluded that the evidentiary errors of the trial court were not harmless and more probably than not prejudiced the jury against Wife.

For salespeople, brokers, and agents who derive a substantial part, if not all, of their income from commissions, knowing something about Tennessee law on the subject of future commissions is worthwhile. By future commissions, I am referring, broadly, to commissions that become due after an account is established, but while the relationship between the organization that originally agreed to pay the commission and the salesperson, broker or agent is intact. I am also referring to commissions which accrue after the salesperson, broker or agent has terminated their relationship with the organization that agreed to pay commissions.

The best way for a salesperson, broker or agent in Tennessee to avoid the headaches, uncertainty and expense of a breach of contract lawsuit to recover future commissions is to make sure that there is a clear, written agreement which outlines specifically the circumstances under which future commissions are owed. In the absence of any written agreement which clearly sets forth the agreement of the parties as to future commissions, parties involved in cases about future commissions are likely to become embroiled in a legal slugfest about what was agreed to between the parties and who said what.

I have seen many employment agreements which make it crystal clear that, once the employer terminates the employee, or once the employment relationship is terminated for whatever reason, the employer will owe no future commissions even from accounts or business generated by the terminated employee. These types of provisions are enforceable. Agreements between organizations agreeing to pay commissions and independent contractors, or other non-employees, often contain similar provisions which restrict the right to future commissions once the relationship is terminated.

Employees and independent contractors, such as agents and brokers, should be very attentive to the provisions of written agreements dealing with future commissions. What happens if the agreement, whether it is written or oral, does not even address future commissions? In Tennessee, there is case law which supports the position that future commissions should be paid. For example, take a look at the case of Pinson & Associates v. Kreal, a decision of the Court of Appeals of Tennessee.

If the parties did not address future commissions, for how long might a Tennessee court determine that commissions should be paid? What if the business or account originated by the terminated employee or independent contractor, agent, or broker continues to generate revenue for many years in the future? The answer to this question is: It will depend on the unique circumstances of each case. There is no bright line rule for Tennessee courts to apply in such situations. Factors that might come into play include, but would not necessarily be limited to: Was it necessary to compensate a new person to deal with the account, or did the revenue just keep coming without much effort on the part of the party receiving it? Were the products or services ordered from the customer similar to the ones it ordered when the business was first generated? How crucial was the salesperson, broker, or agent to the account being acquired in the first place?

When negotiating commission agreements, a workable compromise is often to agree that, once the relationship is terminated, commissions will be paid from accounts originated by the employee, broker or agent for a certain period of time. Depending on the leverage of the parties, that time could be anywhere from a few months to many years.

If the agreement with which you are involved lacks certainty as to the obligation to pay future commissions, you should consult with an experienced Tennessee commercial litigator before deciding to walk away from future commissions, or deciding to pay them.

What are the differences between litigating a breach of contract case, personal injury case, or any other type of case in a Tennessee federal district court as opposed to a Tennessee state trial court? Which court is better for your case? When can your case be filed in federal court as opposed to state court?

The first thing to consider is whether or not your case can be filed in federal court. The federal trial courts in Tennessee, which are referred to as federal district courts, are courts of "limited jurisdiction," as we lawyers say. By "limited jurisdiction" what we mean, in a very general sense, is that, of all of the cases that can be filed in a Tennessee state court, only a limited number of those could also be filed in a Tennessee federal district court.

A federal district court has jurisdiction over two broad categories of cases: (1) Diversity jurisdiction cases; and (2) federal subject matter jurisdiction cases. A federal court in Tennessee can hear a case (because it has jurisdiction to do so) where the case involves citizens of different states and where the amount in controversy exceeds $75,000.00. A Tennessee federal court also has jurisdiction over cases brought under federal laws and statutes which specifically provide for federal court jurisdiction like overtime pay cases under the FLSA, or age discrimination cases under the ADEA.

Sometimes, a party can choose whether to bring a case in a Tennessee federal court or in a Tennessee state court because both courts have jurisdiction. In the same vein, sometimes a defendant sued in a Tennessee state court can, as we lawyers say, "remove" the case (have it transferred) to a Tennessee federal court. The following general observations about the difference between having a case in a Tennessee federal court as opposed to a Tennessee state court are not universal truths, and other lawyers might have had different observations, although I think most lawyers would agree with them. (Only a lawyer who is familiar with the facts of your case can give you sound advice about where to file or where to defend your case).

The federal district judges in Tennessee, on the whole, tend to require more scheduling, and planning (case management) and briefing than do state court judges. The downside of this fact is that it makes cases in federal district court take more attorney time (and, if you are paying by the hour, more fees). The upside is that it results in the faster resolution of cases in many instances.

I know a lawyer who believes that it is better to try a plaintiff's case in federal court because the federal courtrooms are larger and more impressive than a whole lot of courtrooms in Tennessee state courthouses. He believes that a more impressive courtroom has a tendency to make a jury take the case more seriously, and consequently, to be inclined to award more money to a plaintiff. Juries being what they are, I don't know if there is a correlation between the impressiveness of the courtroom and larger jury verdicts in every case, but I am convinced it could make a difference with some juries.

If you are sued in state court in Tennessee, it might be in your best interest to remove the case against you to federal court. You might want to do this because the state court judge in your case is not particularly good, fair or competent, or because the county where you were sued is populated by people that might not like you or your company. A defendant only has a limited amount of time to remove a case to a Tennessee federal court once he or she is served. So, if you are served with a complaint filed in a Tennessee state court, another good reason to contact a Tennessee trial lawyer right away is to make sure you don't miss the deadline for removal if removal to federal court is in your best interest.

In a breach of contract case recently decided by the Supreme Court of Tennessee, Dick Broadcasting v. Oak Ridge FM, Inc., the Court held that the implied duty of good faith and fair dealing applied to a contract provision which allowed a party to assign it rights under the contract at issue to another party. The plaintiff ("Plaintiff") and defendant ("Defendant") entered into an agreement giving the Plaintiff a right of first refusal to purchase certain assets of the Defendant.

The Right-of-First Refusal Agreement ("Agreement") provided that the Plaintiff could assign it rights under the Agreement, but that it had to have the prior written consent of the Defendant to do so. Unlike many other contracts that are entered into in Tennessee and in other jurisdictions, the Agreement did not provide any explanation of the conditions under which the Defendant could withhold consent. For example, many agreements with assignment clauses provide that the contract cannot be assigned without the written consent of the non-assigning party, but provide that the non-assigning party's consent "shall not be unreasonably withheld."

The Defendant refused to give Plaintiff permission to assign the Agreement. The Plaintiff filed suit in a Tennessee Chancery Court for breach of contract. The Plaintiff's theory was that the implied duty of good faith and fair dealing, which has been consistently held by Tennessee courts to apply to all contracts governed by Tennessee law, applied to the assignment clause in that case. The Defendant argued that the consent clause, which was silent as to the conditions under which it could withhold consent, allowed it unfettered discretion in deciding whether to give consent.

The trial court held in favor of the Defendant. The Court of Appeals of Tennessee disagreed with the trial court, and held that the implied duty of good faith and fair dealing applied to the assignment clause. The Court of Appeals held that whether or not the Defendant was liable for breach of contract was a question of fact for the jury. The exact question of fact to be put to the jury was: Did the Defendant breach its implied duty of good faith and fair dealing in refusing to consent to the assignment?

The Supreme Court of Tennessee upheld the decision of the Court of Appeals. Specifically, it held: "When the agreement does not specify the standard of conduct for withholding consent, a party's decision to refuse consent must be made in good faith and in a commercially reasonable manner." In reaching its decision, the Supreme Court noted that the implied duty of good faith and fair dealing was firmly imbedded in Tennessee law, and that, therefore, it would be incongruent with existing Tennessee law to hold that it applied generally to contracts, but not to an assignment clause within a contract.

The implied duty of good faith and fair dealing, as the above case demonstrates, is a powerful tool for a breach of contract lawyer. There is a lengthy discussion of the parameters of that implied duty in the Court's opinion.
Parties and lawyers must remember that the implied duty of good faith and fair dealing cannot be used to contradict or to circumvent specific contract terms, or to create new contractual rights. This is a critical point often not understood and overlooked by commercial litigators. If, for example, a contract requires that "time is of the essence," a party generally cannot avoid that term by arguing that, under the circumstances, the duty of good faith and fair dealing obligates the other party to give it more time than agreed upon to complete its performance.

In the above case, the Defendant argued that, by implying a contractual obligation that it could not withhold consent unless, in doing so, it acted in good faith and in a commercially reasonable manner, the Court was creating a new contractual right for the Plaintiff. The Court explained that it was not creating a new contractual right because all that was being asked by the parties was for the Court "to infer a standard of conduct anticipated by the parties.."

Homeowners' insurance policies abound in Tennessee (and in other states), and are frequently the source of insurance litigation. Such insurance policies provide liability coverage to homeowners for bodily injuries and a source of monetary recovery for injured persons, provided that the policy in question (1) covers the bodily injury, and (2) does not exclude coverage in some other provision.

Homeowners' insurance policies typically contain provisions which specifically exclude coverage for residents of the household of the owner if the resident was also a relative of the owner. Homeowner's insurance policies also typically exclude from coverage, by defining as "residents," persons under the age of twenty-one and in the care of a relative of the owner , if that relative is also a resident of the household.

When a relative is staying with a homeowner temporarily, or on less than a permanent basis, can that relative be considered a "resident" of the household? Keep in mind that, if the answer to that question is "yes," then, the relative will not be able to look to an insurance company standing behind a homeowner's insurance policy to pay a judgment entered against the owner of the home. A recent Tennessee case lays out a good road map to use in evaluating how a Tennessee court might determine whether or not an injured relative was a resident under a homeowner's insurance policy.

The facts of the case are as follows:
• A Mother and Father had two children
• Mother and Father moved out of their apartment in Alabama because their lease was about to expire and their rent-to-own home was not yet available
• Mother and Father moved in with relatives in Elora, Tennessee
• A short while later, Mother and Father separated, and Mother filed for divorce
• In March, Mother and the two children moved to the home of another relative named Candy, who lived in Tennessee
• In June, Candy took the children to a swimming pool at Candy's parents' home
• While at the home of Candy's parents, tragically, one of the children drowned in the pool

On behalf of her deceased child, Mother filed a wrongful death action against Candy. Candy sought a defense and coverage from the insurance company which issued her homeowner's insurance policy. Candy's homeowner's insurance policy excluded coverage for bodily injuries to "residents" of Candy's household. The exclusion in Candy's homeowner's insurance policy was identical to the typical exclusion discussed above in the second paragraph of this blog.

The evidence at trial was that, in the months prior to the accident, Mother had spent a "significant amount" of time away from Candy's home because she also stayed at other places. The evidence also established that Mother's furniture and belongings, except some clothes, remained in storage during the time she stayed at Candy's. Mother testified that she intended to stay at Candy's indefinitely, but that she intended to move when she could find a place of her own. The proof at trial also established that Mother, in fact, moved out of Candy's home and into her own home about eight months after her child drowned.

The trial court, the Chancery Court for Lincoln County, Tennessee, found that Mother was not a resident of Candy's at the time of the death of her child. The trial court found that being a "resident" required a degree of permanence that was not present in Mother's situation based on the facts set forth above. (Since Mother was found not to be a resident of Candy's household, any damages awarded in the case would be paid by the insurance company to the extent of coverage under the homeowner's insurance policy issued to Candy).

The insurance company appealed to the Court of Appeals of Tennessee. The appeals court affirmed the trial judge in all respects.

In insurance litigation and personal injury litigation, it is very often absolutely crucial to a plaintiff's ability to recover money that the plaintiff's lawyer establish that any damages awarded to the plaintiff are covered by a homeowner's insurance policy. Where the claim for bodily injury is held by a relative that is not clearly a permanent resident of the household in question under the policy in question, the case discussed in this blog might well prove helpful.

Often in Tennessee, a husband and wife will sign a will in which both leave their property to the surviving spouse. Sometimes, particularly it seems, when the husband and/or wife have children from a previous marriage, will contest cases are brought to determine whether the surviving spouse is bound by terms allegedly agreed to between the surviving spouse and the deceased spouse in a will signed while both were alive.

If you are a beneficiary or relative trying to figure out your rights and/or the rights of other beneficiaries in a joint or mutual will case, a good starting point is to understand some basic Tennessee will terminology. The first determination which should be made to analyze your legal rights and the strength of your case is whether your situation involves joint wills or a joint and mutual will. If the husband and wife signed two separate wills with reciprocal provisions, they would typically be considered joint wills. If the husband and wife executed one will with reciprocal provisions, the will would typically be considered a joint and mutual will.

Where a husband and wife have executed a joint and mutual will wherein they express that the bequests that they have both made are made in consideration for each other, the odds are that the chances of the surviving spouse's ability to avoid his or her bequest made in that will, by trying to revoke the will after the death of the other spouse or by executing a new will after the death of the other spouse, are not very good. On the other hand, as evidenced by several Tennessee cases, where joint wills (two separate wills with reciprocal provisions) are involved, it is quite possible, depending on the circumstances, that a Tennessee court might well find that the surviving spouse is not bound by will terms to which he or she previously agreed.

In will contest cases involving joint wills or joint and mutual wills, T.C.A. section 32-3-107 comes into play. That statute has been described by the Supreme Court of Tennessee as the Tennessee legislature's effort to set forth "rather rigid" requirements for proving that someone made a contract to make a will or made a contract not to revoke a will. Among other things, that statute makes it crystal clear that the mere fact that two people have executed joint wills, or even a mutual will, does not create any presumption that either contracted to make a will or agreed to refrain from revoking a will.

A good case to review to understand how a Tennessee court might approach and decide a case involving joint wills is the decision of the Supreme Court of Tennessee in Junot v. Estate of Gilliam. In that case, the husband and wife (who were both in a second marriage) both executed separate wills on the same date at their attorney's office. The Supreme Court described the wills as "reciprocal" because both contained the same provision directing that all property be distributed to the surviving spouse (except in a certain limited circumstance which had not occurred and which is not relevant to the discussion in this blog). Both wills also contained the same language which provided that, if the other spouse pre-deceased (and, therefore, could not take) all the property of the surviving spouse was to be divided equally between the five children of the parties (husband's three children by another marriage and wife's two children by another marriage) upon the death of the surviving spouse.

The husband in the Junot case died before the wife. After the husband died, the wife executed a new will in which she left all of her property to her two children only. The Supreme Court held that the wife's second will was valid, and that she was not bound not to revoke her previous will.

The court noted that, under Tennessee law, a contract to make a will or not to revoke a will must be proven by clear and convincing evidence. The fact that the husband and wife had executed reciprocal wills on the same date at their lawyer's office was not enough, without other evidence, to prove to the Supreme Court that the husband and wife had a contract pursuant to which neither could revoke their joint wills.

The Court of Appeals of Tennessee, in the case of Rocky Top Realty, Inc. v. Young, issued an opinion that is a good reminder that, under Tennessee law, you don't necessarily have to prove a breach of a contract to recover money you are owed for services (or goods). The case was a real estate commission case. Here are the facts of the case:

• The plaintiff ("Plaintiff") acted as a "facilitator" in a real estate transaction
• It was undisputed that the Plaintiff introduced to the sellers ("Sellers") the buyer ("Buyer") who purchased Sellers' property for 2.7 million dollars
• Plaintiff claimed that the Sellers promised a real estate commission of 10% of the sale price
• Sellers denied that Plaintiff had ever been promised any commission or compensation

The Plaintiff filed suit for breach of contract. The Plaintiff alleged, in the alternative, that, if it was not entitled to a real estate commission under its breach of contract claim, it was entitled to that commission based on the Tennessee law of quasi-contract, which is also referred to by the Latin phrase, quantum meruit.

The trial court, the Chancery Court for Knox County, found that there was no contract between the Plaintiff and the Sellers, either oral or written. Although the Plaintiff testified that there was such an oral contract, because the Sellers outright denied that fact, and because the Plaintiff had no corroborating evidence, the trial court held that the Plaintiff could not prove a contract. (In Tennessee, an oral contract for a brokerage commission must be proven by clear, cogent and convincing evidence).

In spite of the fact that the Plaintiff was unable to prove the existence of a contract, and could therefore never win a breach of contract case, the trial court found that the Sellers were liable to the Plaintiff for a real estate commission. How did the trial court reach this result? By applying the law of quasi-contract or quantum meruit.

In order to recover under Tennessee law for quasi-contract or quantum meruit, a plaintiff must prove the following elements: (1) There is no existing contract which is enforceable; (2) the plaintiff provided "valuable goods or services"; (3) the defendant received the goods or services; (4) the circumstances indicate that the plaintiff and defendant reasonably expected the defendant to pay for the goods or services; and (5) it would be unjust for the defendant not to have to pay.

The trial court awarded the Plaintiff a judgment of $135,000.00. How did it get to that number? The Plaintiff offered the testimony of two realtors at trial. They testified that the customary commission for the sale of raw land in Knox County was 10% of the sales price. The trial court found that Plaintiff was not entitled to the full 10%, or $270,000.00, but only to $135,000.00 because the Plaintiff only worked on the sale for three days.

On appeal, the Court of Appeals of Tennessee upheld the trial court's holding that the Sellers were liable to the Plaintiff under the theory of quasi-contract or quantum meruit. It reversed the trial court's holding that the Plaintiff's damages were $135,000.00, and remanded the case back to the trial court so that the trial court could determine the proper amount of damages.

The appeals court reversed the trial court because it found that the award of $135,000.00 was too speculative. Why? It gave a couple of reasons. First, the assumption that Plaintiff's commission would have been 10% was too speculative because the Plaintiff was not acting as a real estate agent for the Seller, but as a facilitator. Second, under quantum meruit, damages are to be awarded for the reasonable value of the goods or services and the customary commission for the Plaintiff's services did not necessarily reflect the value of the Plaintiff's services.

The theories of quantum meruit and quasi-contract are not limited to cases involving real estate commissions or brokers' commissions. For a plaintiff seeking a recovery, those theories can "save the day."

The Supreme Court of Tennessee, in a recent case, reversed a decision of the Court of Appeals of Tennessee in which the appeals court had relaxed one of the requirements for a valid will and had upheld the validity of a will which did not strictly comply with a rule laid down by the Tennessee legislature for creating a legally valid Tennessee will. This will contest case resulted in an important decision for Tennessee lawyers who handle will contest cases.

A little historical background about Tennessee will law is helpful. In 1941, the Tennessee General Assembly enacted, in Tennessee, the provisions of the "Execution of Wills Act." The purpose of the Act was to provide uniform standards for the execution of wills. One of the requirements of the Act, which is codified at T.C.A. §32-1-104, is that a will, other than a holographic will (handwritten) or nuncupative will (unique and very rare), must be signed by the testator (the person making the will).

The facts of the case are pretty simple. The Decedent's daughter offered a will (the "Will") for probate. The Will was two pages. The Decedent had initialed the first page of the Will, but had not signed it. Attached to the Will was a separate one page document which was titled "Self-Proved Will Affidavit." The Decedent and the witnesses all signed the Affidavit. Some nieces and nephews of the Decedent filed a will contest case wherein they alleged that the Will was not valid because the Decedent had not signed the Will.

The Court of Appeals of Tennessee found that the fact that the Decedent had not signed the Will did not make the Will invalid because the Decedent had signed the Affidavit attached to the Will, and had intended for his signature on the Affidavit to be on the Will. The Supreme Court of Tennessee reversed the appeals court. It held that the failure of the Decedent to sign the Will was fatal to the validity of the Will.

The Supreme Court pointed out, in the opinion, that Tennessee courts, since 1941, had consistently required strict compliance with the provisions of T.C.A. §32-1-104. It cited and referred to several cases where strict compliance had resulted in the invalidity of wills, including:
• A will contest case where the attesting witnesses to a will failed to sign in each others' presence
• A will contest case where the testatrix had failed to sign the will at the same time and in the presence of the witnesses
• A will contest case where the witnesses only initialed the will

The Supreme Court, in reaching its decision, rejected the assertion that the affidavit attached to the Will was part of the Will or anything other than a completely separate instrument from the Will.

The Supreme Court of Tennessee made a couple of collateral points worth noting. It expressly stated that its decision should not be interpreted as requiring a testator to sign each page of a will that is written on several pieces of paper. It also expressly stated that its holding should not be construed as requiring a testator to sign in a particular location on the will. For those lawyers and law firms who handle will contest cases, the opinion discussed in this blog should highlight the importance of scrupulously reviewing a will for compliance with the applicable Tennessee statute, T.C.A. §32-1-104.

In a case involving a breach of a construction contract for a development in Gallatin, Tennessee, a contractor was allowed to recover money for work done, which work substantially exceeded the monetary limit of the contractor's license. This decision is very significant, and favorable for Tennessee contractors and subcontractors.

The contractor ("Contractor") submitted a bid to the owner ("Owner") for over three million dollars. The bid was accepted. Contractor was licensed, but its license had a monetary limit of $750,000.00. At the point Contractor ceased work on the project, it had been paid in excess of $650,000.00. Contractor filed a lien in excess of $625,000.00 for work which it had done, but for which it had not been paid.

Contractor filed suit to enforce its lien and for breach of contract, and violations of the Tennessee Prompt Pay Act. The Contractor's dispute was not with the Owner, but with a bank ("Bank") that claimed its deed of trust had priority over Contractor's lien. The trial court, the Circuit Court for Sumner County, Tennessee, dealt a blow to Contractor by dismissing its lawsuit against the Bank on a summary judgment motion. The trial court held that, since the Contractor had done work exceeding the monetary limit of its contractor's license, it was "not licensed for the project from its inception."

Fortunately for Contractor, the Court of Appeals of Tennessee saw things much differently than did the trial judge. It held that the fact that the Contractor had exceeded the monetary limit on its contractor's license did not result in it being unlicensed nor did it result in Contractor losing its right to a mechanics and materialmens lien.

Keep in mind that the dispute about the Contractor's lien was not between the Owner and the Contractor, but was between a bank and the Contractor. This is very significant because the court of appeals, in reaching it decision, found it important that the regulations related to contractors licensing, including the regulations regarding monetary limits, were enacted to protect those who contract with contractors. As the court of appeals put it: "the rule restricting an unlicensed contractor's access to courts does not apply to disputes between contractors and other licensed professionals in the construction industry."

Any prudent contractor should never bid to do work exceeding its license limit or do work exceeding its license limit. Moreover, a prudent contractor would bear in mind that the decision in this case might not have been the same had the dispute about the Contractor's lien rights been between the Contractor and the Owner. In such a case, a court might not excuse a contractor from exceeding its license limit.

The case also discusses and analyzes some fundamental breach of contract law which was implicated by the Bank's argument that the Contractor had agreed to subordinate its lien to the Bank's deed of trust. The Bank attempted to rely on some emails which Contractor had sent for the position that Contractor had agreed to subordinate its lien. The court of appeals found the language of the emails to amount to nothing more than an agreement to try and agree sometime in the future. Under Tennessee law, and under generally accepted contract law, agreements to agree are not definite enough to make valid contracts.

In a recent Tennessee case, the beneficiary of a life insurance policy prevailed over the insurance company which denied coverage under the policy at issue based on alleged misrepresentations by the insured in the application for the policy. The case discusses some basic law that is applicable in Tennessee when an insurance company denies coverage because of an alleged misrepresentation on an insurance policy application. Although the case involved a term life insurance policy, many of the rules discussed by the Court of Appeals of Tennessee in the opinion are applicable to other types of insurance policies, e.g., whole life insurance policies, disability insurance policies, health insurance policies, and even liability policies.

The case involved a woman (the "Insured") who purchased a twenty-year term life insurance policy from Tennessee Farmers. The life insurance policy was issued, but only after the Insured had completed and signed an application. In her application, the Insured identified a number of health and medical problems including a nervous disorder, sleep disorder, arthritis, and a partial disability resulting from a car accident. The Insured disclosed that she smoked half a pack a day of cigarettes, and that she was taking Percocet for pain and Xanax for sleep assistance. As part of the application process, Tennessee Farmers did a drug screen of the Insured which was negative.

Because of the numerous health issues of the Insured, Tennessee Farmers charged a premium which was 50% more than the basic policy premium. Following the issuance of the life insurance policy, the Insured died from acute methadone intoxication. Her death occurred before the contestability period in the policy, which was two years, expired. (Many life insurance and disability policies have non-contestability provisions which, generally, prevent an insurance company from denying coverage for any statement made in the application after a certain period of time---typically around two years after the issuance of the policy).

In denying coverage, Tennessee Farmer's relied on the Insured's answer of "no" to a question in the application as to whether the Insured had ever been treated for a drug problem. Because the Insured had taken methadone, argued Tennessee Farmers, she must have been treated for drug related problems. Therefore, its argument continued, she must have made a misrepresentation when she stated, in the application, that she had never received treatment for a drug problem.

The trial court, the Chancery Court for Giles County, Tennessee, found that there was evidence that the methadone had been prescribed to the Insured for pain management, a common use for methadone, and that there was no evidence that the Insured was taking methadone for treatment for addiction to narcotics, another common use for methadone. The Court of Appeals of Tennessee affirmed the trial court in all respects.

In reaching its decisions, both the trial court and the court of appeals looked to T.C.A. §56-7-103 which sets forth the law in Tennessee regarding misrepresentations in insurance policy applications. Under that statute, an insurance company cannot deny coverage under a life insurance policy, disability policy or any other type of policy for a misrepresentation in an insurance policy application unless the misrepresentation was "made with actual intent to deceive" or "increased the risk of loss" to the insurance company.

Of importance to the Court of Appeals of Tennessee was the fact that, although Tennessee Farmers argued that it would never have issued the life insurance policy if it had known that the Insured used methadone because of the increased risk of loss, it never asked in the application if the Insured had ever used methadone. The court of appeals also dismissed the numerous "nit picky" arguments Tennessee Farmers made about information not disclosed in the policy.

This case shows that you should not give up just because an insurance company denies coverage. For many insurance companies, selling policies and then denying coverage is reflexive. An insurance policy is a contract, and, if you believe that an insurance company's denial of payment to you is not justified, you should contact a skilled breach of contract lawyer who has experience with insurance litigation.

Tennessee has a statute, which, provided certain conditions are met, allows an insured to recover "bad faith" damages against the insured's insurance company. The United States Court of Appeals for the Sixth Circuit, which is the federal appeals court with jurisdiction over federal cases tried in Tennessee (and several other states), in the case of Heil v. Evanston Insurance Company, reversed a jury verdict for two million dollars in punitive damages in a bad faith case. The court's explanation and application of the Tennessee bad faith failure to pay statute in that case is informative for anyone with a bad faith claim against an insurance company.

Before discussing the case, a couple of common misconceptions about the Tennessee bad faith failure to pay law should be discussed. First, the bad faith statute only allows an insured to recover up to 25% of the loss of the insured. For that reason, the Tennessee bad faith statute has been rightly criticized as being pretty toothless. Second, the bad faith penalty allowed in Tennessee can only be recovered by someone who was insured by the insurance company which acted in bad faith. In other words, if you have a claim against someone else for damages, and that person's insurance company acts in bad faith in failing to pay you, you cannot make a claim under the Tennessee bad faith statute against that "third party" insurance company.

In the Heil case, the plaintiff was a company which manufactured dump truck bodies. One of its dump truck bodies lowered onto someone and killed him. Heil was sued for wrongful death. Heil was insured by Evanston Insurance Company ("Insurance Company") under a commercial general liability policy (the "Policy").

The Policy required Heil to pay its own legal fees to defend the wrongful death case, but allowed the Insurance Company to assume charge of the defense and settlement of the case. Under the Policy, the Insurance Company agreed to pay the first one million dollars in loss suffered by Heil in excess of the self-insured retention ("SIR") of $500,000.00.

After a couple of years of litigation in a Tennessee federal district court, the Insurance Company decided to hire its own lawyer to defend the wrongful death case. It agreed that the lawyer hired by Heil could continue to defend Heil also. It also agreed that Heil's lawyer's fees could count toward exhaustion of the SIR, and that it would pay any of Heil's lawyer's fees in excess of the SIR.

The wrongful death case against Heil was settled for in excess of five million dollars. The Insurance Company pitched in one million dollars, but refused to pay Heil for $63,000 of attorneys' fees Heil had paid to its lawyer.

Heil sued the Insurance Company in a federal district court in East Tennessee. Heil sued on three separate grounds: (1) breach of contract for failure to pay the $63,000 in attorneys' fees; (2) violation of Tennessee Code Annotated section 56-7-105 (the Tennessee bad faith statute); and (3) bad faith failure to settle the wrongful death claim. The jury found that the Insurance Company had not failed to settle the wrongful death claim in bad faith, but that it was liable for breach of contract for failure to pay the $63,000 in attorneys' fees, and was liable for $16,000 in bad faith damages. It also awarded Heil two million dollars in punitive damages.

The Sixth Circuit reversed the jury verdict, and remanded the case for a new trial. Why? Because, under Tennessee law, a plaintiff cannot recover both punitive damages and bad faith failure to pay damages on a bad faith claim. In Tennessee, the bad faith failure to pay statute is the exclusive remedy for an insurance company's bad faith failure to pay. (Which makes it more unfortunate that the Tennessee bad faith statute doesn't have more teeth.)

Since there was no basis for the jury to award bad faith damages and punitive damages, and considering the jury instructions and verdict form given to the jury, the Sixth Circuit concluded that the jury may have been confused. It may have intended, surmised the Sixth Circuit, to award compensatory damages on Heil's claim that the Insurance Company had failed to settle the wrongful death case in bad faith.

Always remember, at least until Tennessee law changes that, if you fail to make the proper type of written demand prior to filing a bad faith lawsuit, your bad faith claims may be completely barred. The question of whether Heil had given proper notice of its bad faith claim before filing its breach of contract and bad faith lawsuit came up in the case, and is discussed in the opinion.

In a recent lost profits case decided by the Court of Appeals of Tennessee, DBK Trucking Co., LLC v. JNJ Express, Inc., that court held that the owner of a 1998 Kenworth tractor could recover the profits it was not able to earn because of the damage to the tractor caused by the defendant in that case. The Kenworth tractor which was damaged was a "wet line" tractor which was able to haul hazardous waste.

At trial, the owner of the Kenworth testified that it took three months to obtain all of the necessary government permits and licenses to put a wet line tractor, like the Kenworth which was damaged, into service. He also testified that the "average revenue" earned by the Kenworth had been approximately $3,700.00 per week. The jury in the case awarded the owner of the Kenworth $44,000.00 in lost profits.

The trial judge in the case set aside the verdict of the jury on the grounds that the owner of the Kenworth was only permitted to recover the fair market value of the tractor at the time it was damaged. The Court of Appeals of Tennessee reversed the decision of the trial judge, and reinstated the jury verdict for lost profits.

The court of appeals stated that Tennessee law allows a plaintiff to recover lost profits for damage to personal property when the property cannot be replaced within a reasonable period of time. The court reasoned that, while it was true that the owner of the Kenworth tractor could have obtained a replacement tractor fairly quickly after the accident occurred, the owner would still have had to wait for the government to issue the proper licenses and permits before it could put a replacement tractor into service. Since the testimony of the owner of the tractor that the amount of time needed to obtain the proper licenses and permits was about three months, and since that testimony was unrebutted, the court of appeals held that the jury verdict should not have been set aside.

The key to winning cases where a client has lost profits because of damage to personal property is to obtain, and to use at trial if the case proceeds to trial, credible testimony as to why the plaintiff could not just go out and replace the damaged or destroyed personal property overnight. We had a case fairly similar to the case above many years ago where our client's chipper truck was damaged. The insurance company did not want to pay for the profits which our client lost as a result of the fact that the damaged chipper truck was out of service for repairs for many weeks. Only after we obtained the testimony of a dealer who sold and rented chipper trucks that, during the period that our client's truck was out of service, there were no chipper trucks that could have been leased, did the insurance company agree to pay our client's significant lost profits.

It is interesting that the opinion in the above case states that the trial testimony from the owner of the Kenworth was based on the "average revenue" earned by the tractor. In Tennessee, gross revenues, or gross profits, are never recoverable as lost profits damages: In Tennessee, a party is only allowed to recover lost net profits.

In Tennessee, there are two types of statutes that might bar an otherwise meritorious claim: (1) statutes of limitation; and (2) statutes of repose. A construction defect case may be filed within the statute of limitation, but, nevertheless, be barred by the statute of repose which establishes an outer limit for the filing of construction defect cases.

In a recent Tennessee construction defect and warranty case, The Counts Company v. Praters, Inc., which was decided by the Court of Appeals of Tennessee, a contractor's lawsuit against a subcontractor, which installed the wood flooring on the project, was dismissed based on the statute of repose.

The Tennessee statute of repose which applies to claims arising from the construction of an improvement bars any lawsuit to recover damages for a construction defect which is not brought within four years of substantial completion of the improvement. If a defendant purposefully engages in conduct intended to conceal the plaintiff's injury, often referred to as "fraudulent concealment," then the statute of repose is tolled (meaning its length is extended).

In the case at hand, the plaintiff contractor hired the defendant subcontractor to install hardwood flooring in the Chattanooga Yacht Club. The subcontractor finished its work on May 28, 2006. Not long after the flooring was installed, it began to cup and warp. The subcontractor told the contractor that it should wait a year for the floors to complete a heating and cooling cycle, and, that, if the problem was not corrected, it would resurface the floors. After a year, the subcontractor resurfaced the floors, but the floors warped and cupped again.

The Yacht Club brought a breach of warranty case against the contractor. The jury awarded the Yacht Club $35,000. After the jury found for the Yacht Club, and over four years after the subcontractor finished its work, the contractor brought a breach of warranty and breach of contract case against the subcontractor on March 21, 2011. The trial court dismissed the contractor's case based on the Tennessee four year statute of repose.

The contractor appealed to the Court of Appeals of Tennessee, which affirmed the trial court. On appeal, the contractor argued that the date of substantial completion, which triggers the running of the four year statute of repose, was not when the subcontractor initially finished its work on May 28, 2006. The contractor argued that the subcontractor's work was not substantially completed until after the subcontractor resurfaced the floors.

The Court of Appeals rejected the argument that the subcontractor's work was not substantially completed on May 28, 2006 because that was the date that the floor was installed and ready to be used by the Yacht Club. Under Tennessee law, substantial completion occurs when an improvement can be used for its intended purpose even if it has some defects.

In Tennessee, it is often risky for a party to delay the filing of a lawsuit whether it is a breach of contract case for construction defects, or any other kind of case. This case is a good example of how what well might otherwise have been a valuable breach of warranty and breach of contract claim was stillborn because of a delay in filing a lawsuit. It is always prudent to consult with an experienced and knowledgeable breach of contract lawyer or construction lawyer as soon as you suspect that you may have a claim because of construction defects.