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When real estate is sold at auction in Tennessee, what rights do the seller and highest bidder have after the hammer falls? Can the seller back out of the sale?  What are the chances that the highest bidder can win a case for specific performance if the seller tries to back out of the sale?

An excellent case to read to gain a basic understanding of real estate auction law in Tennessee is Cunningham v. Lester (Tenn. Ct. App. 2003). Here are the basic facts of that case:

  • The Lester’s were a husband and wife who owned some real estate jointly
  • the Lester’s signed a contract with an auction company to sell their property at auction
  • the brochures prepared by the auction company to advertise the auction sale did not state that the sale was being made with reserve
  • prior to the commencement of the auction sale, the auctioneer announced that the land offered was “with reserve” and that the Lester’s had to confirm any bids
  • Mr. Cunningham was the highest bidder for tracts 4 and 5
  • Mr. Neal was the highest bidder for tract 3
  • After the fall of the hammer, a written contract for the sale of tracts 4 and 5 to Mr. Cunningham was signed by Mr. Lester, the auctioneer, and Mr. Cunningham, but not by Mrs. Lester
  • Mr. Cunningham agreed to take over Mr. Neal’s bid for tract 3
  • a contract for the sale of tract 3 was signed by Mr. Cunningham, and Mr. Lester, but not by Mrs. Lester or the auctioneer
  • Mr. Cunningham paid the required earnest money for all three tracts
  • Prior to the closing, the auctioneer told Mr. Cunningham that the Lester’s would not close on any of the tracts
  • Mr. Cunningham filed a lawsuit for specific performance requesting that the court order the Lester’s to convey all three tracts under the terms in the written contracts

The trial court, which was affirmed in all respects by the Court of Appeals of Tennessee, held that the Lester’s were required to convey tracts 4 and 5 to Mr. Cunningham, but that they were not required to convey tract 3.

The first point of law to know in order to understand the court’s decision in the case is that an auctioneer with whom a seller has signed a contract basically becomes an agent of the seller. The court in the Cunningham case held that the Lester’s did have the right, which they had reserved, to refuse a bid.   However, when the auctioneer signed the contract for tracts 4 and 5, since he was the agent of the Lester’s, the Lester’s were bound by his signature.  It did not matter that Mrs. Lester never signed that contract.

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Any Tennessee boundary line case will most likely turn into a classic “battle of the experts” where both parties use a surveyor as their expert witness.  In cases where both parties have reputable surveyors, how does the court pick the winner?

A boundary line case which recently reached the Court of Appeals of Tennessee provides some solid insight into how a Tennessee court will approach and decide a boundary line dispute where two surveyors come to different conclusions.  The case, Haddad Family Partnership v. Pouncey, involved the following facts:

  • The Pouncey property, about 430 acres of farmland, lay directly to the north of the Haddad property, about 208 acres of farmland
  • A field road was located on the north part of the Haddad property, and the Haddad family always considered the field road and everything south of it to be their property
  • According to Pouncey, the field road, over the years, had been moved north and was located on his property
  • A dispute arose and both parties hired surveyors
  • The Haddad family used a surveyor named Erwin
  • Pouncey used a surveyor named Van Boals
  • Erwin concluded that the field road was on the Haddad property
  • Van Boals determined that the field road was on the Pouncey property
  • The discrepancy between the surveys of Erwin and Van Boals was significant – – – almost 50 feet

To determine the correct boundary line, Erwin did the following:

  • He examined the deeds of the Haddad property and adjoining properties and created a computer generated title map based on the legal descriptions of the properties in the deeds
  • He discovered that the latest Haddad deed was incomplete because it included a specific bearing and distance for only three sides of the Haddad property
  • He determined that, because of that, the Haddad deed contained an error of closure of 622 feet
  • Even though there was an error of closure, Erwin determined that each of the deeds from 1910 forward called for the north line of the Haddad property to be common with the south line of the Dunlap Estate which was the predecessor to the Pouncey property
  • Erwin went to the Haddad property to find any markers, and he found several iron stakes
  • Erwin found two iron stakes which marked the northwest corner of the Haddad property and the southwest corner of the Pouncey property
  • Erwin decided to survey the Pouncey property (in addition to the Haddad property) because the latest Haddad deed was incomplete
  • The Pouncey deed called for an iron stake in a lake, and Erwin located it with a metal detector in three feet of water

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