                   IN THE COURT OF APPEALS OF TENNESSEE
                                AT KNOXVILLE
                       Submitted on briefs, February 14, 2006

           AHMED USSO and GENET AYELE v. BRYAN WINSTON

              Direct Appeal from the Chancery Court for Washington County
                    No. 36265    Hon. G. Richard Johnson, Chancellor



                 No. E2005-01746-COA-R3-CV - FILED MARCH 31, 2006


Plaintiffs sued to recover earnest money tendered with a contract to purchase realty. Defendant
counter-sued for breach of contract and damages. The Trial Court Ordered the return of the earnest
money to plaintiffs. We affirm.


Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.


HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the Court, in which CHARLES D. SUSANO ,
JR., J. joined, and D. MICHAEL SWINEY , J. dissented and filed a separate opinion.

Michael S. Lattier, Kingsport, Tennessee, for appellant.

James D. Culp, Johnson City, Tennessee, for appellees.



                                            OPINION

                 In this action plaintiffs sought to recover their earnest money paid at the time of
entering a contract to purchase a house in Gray, Tennessee from defendant, Bryan Winston. Winston
filed an Answer and Counter-Claim, alleging the plaintiffs had breached their contract and were not
entitled to the return of their earnest money.

               The Complaint alleged that plaintiffs had negotiated a contract with Winston for a
purchase price of $392,500.00 and then posted a $5,000.00 earnest money deposit. The contract
provided that plaintiffs would obtain a loan for 80% of the purchase price on a fifteen-year
repayment term. Plaintiffs averred that they had applied for a loan from two sources, but were
declined by the first source for lack of sufficient income, and declined for a fifteen-year loan from
the second source, and since they could not obtain a loan under the conditions of the contract, they
were entitled to a refund of the earnest money.

                 In the Answer, Winston stated that he was a contractor and built the house in
question, and based on the plaintiffs’ representations, he put in finishes specifically requested by
plaintiffs. He admitted that the contract was conditional upon plaintiffs’ ability to obtain a loan for
80% of the purchase price, for a term of fifteen years, but charged that plaintiffs were required to
pursue qualification for the loan diligently and in good faith. He concluded that plaintiffs breached
the contract and caused him to incur damages and under the terms of the contract plaintiffs had
forfeited their earnest money, and should be liable to him for damages and attorney’s fees.1

        The Court conducted an evidentiary hearing on November 18, 2004. At the conclusion of the
hearing the Court issued its Opinion from the bench. The Court found that the contract was
conditioned upon plaintiffs getting a loan for 80% of the purchase price, with a term of 15 years, and
that plaintiffs had to be “qualified to receive the loan described herein based upon lender’s customary
and standard underwriting criteria.”

       The Court found that plaintiffs did immediately try to obtain a loan, and they were turned
down by both Greene County Bank and First Bank and Trust, and that plaintiffs then went to
Elizabethton Federal, where there was a conflict in testimony because plaintiffs said they signed a
blank application, and Sam Crowder who is a loan officer at Elizabethton Federal, said the
application was filled in when they signed it. The Court found that plaintiffs signed the application
in blank, and that Crowder completed it, and submitted it to the board for a thirty year loan. The
Court found that the thirty year loan was not approved until the bank received income verification.
The Court said:

               Now, I guess you could say they approved it subject to or you could say they
               disapproved it subject to. I think that they approved the loan, but they did not
               approve the loan. They disapproved the loan. They didn’t approve it; they
               disapproved it. And they said, “We’re not going to approve it until we get income
               verification. This loan is not made. This loan is not approved. This loan – no
               money shall go out of this bank on this loan until we get income verification” of the
               Plaintiffs.

                The Court found that Crowder tried to call plaintiffs’ home twice and got no answer,
but never called their business phone, so “this banker doesn’t want to make this loan too badly.” The
Court further found that if Crowder had contacted the plaintiffs and gotten their income verification
the loan would have been approved and they would have accepted a loan, even if it was for thirty
years. The Court found the plaintiffs never knew their loan could have been approved by

       1
          Realty Executives paid the earnest money into court and were preliminarily dismissed from
the suit, as were Pardue and Blue Ridge.



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Elizabethton Federal, and that was not their fault, and thus awarded plaintiffs a refund of their
earnest money and dismissed the counterclaim.

              This appeal presents these issues:

              1.      Did the Court err in finding that plaintiffs acted diligently and in good faith
                      where the plaintiffs were approved for a loan subject only to providing a tax
                      return, but failed to provide the return and close the loan?

              2.      When the bank loan officer testified that the bank approved a loan subject
                      only to the plaintiffs providing a copy of their tax return, did the Trial Court
                      err in finding that the bank disapproved the loan?

              3.      Did the Trial Court err in finding that the plaintiffs applied for a fifteen year
                      loan, when the bank officer testified that the plaintiffs only applied for a thirty
                      year loan?

              4.      Did the Trial Court err in finding that the bank officer was required to
                      communicate with plaintiffs in the manner provided in the contract?

The contract between the parties provides:

              This Agreement is made conditioned upon Buyer’s ability to obtain a loan in the
              principal amount of 80% of the purchase price listed above, to be secured by a deed
              of trust on the Property; the loan to be paid in consecutive monthly installments of
              principal and interest over a term of 15 years. “Ability to obtain” as used herein
              means that Buyer is qualified to receive the loan described herein based upon
              lender’s customary and standard underwriting criteria.

                                                ***

              The Buyer agrees to (a) make application for the loan within five business days from
              the Binding Agreement Date, (b) immediately notify Seller’s representative of having
              applied for the loan and the name of the lender, (c) pursue qualification for and
              approval of the loan diligently and in good faith, (d) pay any fees necessary to
              complete full loan processing and approval, and require lender to order credit report
              and appraisal within two days of application, (e) continually and immediately provide
              requested documentation to lender. . . . Buyer may also apply for a loan with different
              terms and conditions and also close the transaction provided all other terms and
              conditions of this Agreement are fulfilled, and the new loan does not increase any
              costs charged to the Seller. Buyer shall be obligated to close this transaction if Buyer
              has the ability to obtain a loan with terms as described herein and/or any other loan
              for which Buyer has applied and been approved.


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                 The contract further states that if the plaintiffs default, “the Earnest Money shall be
forfeited as partial liquidated damages, and Seller may sue, in contract or tort, for additional damages
or specific performance of the Agreement, or both. . . . In the event that any party hereto shall file
suit for breach of enforcement of this Agreement (including suits filed after closing which are based
on or related to the Agreement), the prevailing party shall be entitled to recover all costs of such
enforcement, including reasonable attorney’s fees.”

In Henderson v. Quest Expeditions, Inc., 174 S.W.3d 730 (Tenn. Ct. App. 2005) we said:

               The cardinal rule in the construction of contracts is to ascertain the intent of the
               parties. If the contract is plain and unambiguous, the meaning thereof is a question
               of law, and it is the Court's function to interpret the contract as written according to
               its plain terms. The language used in a contract must be taken and understood in its
               plain, ordinary, and popular sense. In construing contracts, the words expressing the
               parties' intentions should be given the usual, natural, and ordinary meaning. If the
               language of a written instrument is unambiguous, the Court must interpret it as
               written rather than according to the unexpressed intention of one of the parties.
               Courts cannot make contracts for parties but can only enforce the contract which the
               parties themselves have made.

The language in the parties’ contract is clear, plaintiffs had to close on the house if they had the
“ability to obtain a loan with terms as described herein and/or any other loan for which Buyer has
applied and been approved”, and the “ability to obtain” was defined as being “qualified to receive
the loan described herein based upon lender’s customary and standard underwriting criteria.”
Moreover, plaintiffs had to “pursue qualification for and approval of the loan diligently and in good
faith.”

                 The Court found that Elizabethton Federal did not approve a loan for plaintiffs, nor
did it communicate to plaintiffs that the loan would be approved subject to income verification, and
that plaintiffs never knew their loan could have been approved and concluded that plaintiffs had
acted diligently and in good faith.

               Findings of fact are reviewed de novo with a presumption of correctness, unless the
evidence preponderates otherwise. Tenn. R. App. P. 13(d). No such presumption attaches to the
Trial Court’s conclusions of law. Id.

                The evidence at trial preponderates that Elizabethton Federal did approve a 30 year
loan for plaintiffs, subject only to getting a copy of another year’s income tax return (they already
had one). Crowder testified that plaintiffs were approved for the thirty year loan at 6 ½ % interest
on August 15, 2003. Crowder’s testimony on this point is unrefuted, and is supported by the
exhibits. Crowder’s testimony is also corroborated by plaintiffs’ Answer, wherein they stated that
“a representative of Elizabethton Federal told the Plaintiffs that they were approved for a 30 year
loan, but not a 15 year loan.”


                                                  -4-
                Plaintiff testified in Court, however, that he did not hear anything from the bank for
“days” and that he told his realtor he was ready to move on, even after she told him she thought the
loan might be approved, and offered to call and check on it for him. Significantly, the Complaint
states that Elizabethton Federal tried to qualify them for a thirty-year loan, but they did not want it.
Usso’s testimony at trial was he did not want a thirty year loan, because he thought he would have
to pay too much interest.

                 The Court tended to fault Crowder and Elizabethton Federal for not notifying
plaintiffs their loan was approved pending receipt of a tax return. Plaintiffs had certain obligations
under the contract, including the obligation to pursue a loan on the home and try to close on it with
diligence and good faith.

                Plaintiffs applied for loans from three different lending institutions and their
applications were rejected by two. An official of the third testified that that institution would have
made a 30 year loan to plaintiffs, provided they got additional financial information from plaintiffs.
However, that institution never requested additional information from the plaintiffs. We conclude,
as the Trial Court did, that the plaintiffs acted in good faith and diligence, and are entitled to a refund
of their earnest money.

               The Judgment of the Trial Court is affirmed and the cause remanded. The cost of the
appeal is assessed to Bryan Winston.




                                                         ______________________________
                                                         HERSCHEL PICKENS FRANKS, P.J.




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