                  IN THE COURT OF APPEALS OF TENNESSEE
                             AT KNOXVILLE
                                    January 13, 2015 Session

    HERSHEL SANDERS, ET AL. v. FIRST TENNESSEE BANK, N.A., ET AL.

                   Appeal from the Circuit Court for Cumberland County
                         No. CV005540      Amy Hollars, Judge


                No. E2014-00812-COA-R3-CV-FILED-MARCH 26, 2015


This appeal concerns a dispute over which statute of limitations applies. Hershel and
Alma Sanders (“Plaintiffs”) filed suit against First Tennessee Bank, National Association
(“the Bank”) in the Circuit Court for Cumberland County (“the Trial Court”).1 Plaintiffs
alleged that the Bank breached its contractual obligations to them by failing to provide
long-term financing toward the building of their home as promised. The Bank denied it
made any such promise. The Bank filed a motion for summary judgment. After a
hearing, the Trial Court granted the Bank’s motion for summary judgment on the basis
that the three-year statute of limitations for injury to property or interest in property
barred Plaintiffs’ claims. Plaintiffs appeal. We hold that the financial damages alleged
by Plaintiffs are in the nature of breach of contract and, therefore, a six-year statute of
limitations governs. We reverse the judgment of the Trial Court.

    Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed;
                                    Case Remanded

D. MICHAEL SWINEY, J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.

Mark N. Foster, Rockwood, Tennessee, for the appellants, Hershel Sanders and Alma
Sanders.

Kristine L. Roberts and Kenny L. Saffles, Knoxville, Tennessee, for the appellee, First
Tennessee Bank, National Association.




1
 Plaintiffs sued a number of other individuals as well. These other defendants, however, were dismissed
as the case proceeded, and for purposes of this appeal we are concerned only with the Bank as a
defendant.
                                       OPINION

                                      Background

              In March 2007, Plaintiffs contracted with James Brannon (“Brannon”) to
build their “dream home” in Crossville, Tennessee. Plaintiffs entered into a loan
agreement with the Bank with the initial maximum principal amount of $120,000. The
purpose of the loan was to provide funds for Plaintiffs’ construction work on their home.

               Problems emerged with the construction. According to Plaintiffs, Brannon
failed to complete the work in a timely manner. The Bank advised Plaintiffs that they
should fire Brannon. By Plaintiffs’ account, they were assured by the Bank that they
would receive from the Bank a permanent loan notwithstanding the termination of
Brannon. Plaintiffs then fired Brannon. Brannon subsequently filed a mechanics’ lien
which apparently prevented Plaintiffs from obtaining financing from anyone other than
the Bank. The Bank, which denies having made any promise to provide permanent
financing to Plaintiffs, never did provide Plaintiffs with permanent financing. Plaintiffs’
loan went into default and the Bank initiated foreclosure proceedings. Eventually,
Plaintiffs’ property was sold at a foreclosure sale in August 2009. During this time,
Plaintiffs had filed for Chapter 7 bankruptcy. The Bank moved for relief from the
bankruptcy stay which was granted on April 3, 2009.

               In April 2012, Plaintiffs, pro se, filed a very threadbare complaint against
the Bank in the Trial Court. Plaintiffs subsequently asked for leave to amend their
complaint, which was granted by the Trial Court. In July 2012, Plaintiffs, now
represented by counsel, filed a more substantive amended complaint in the Trial Court.
Plaintiffs alleged a number of causes of action against the Bank. One count in Plaintiffs’
complaint against the Bank was breach of contract. Plaintiffs alleged:

      [The Bank] entered into an agreement with Plaintiffs that if Plaintiffs would
      terminate Brannon, [the Bank] would provide Plaintiffs with permanent
      financing . . . However, [the Bank] breached this agreement after Plaintiffs
      fulfilled their part of the bargain by terminating Brannon . . . As a result of
      the Defendant’s actions, Plaintiffs suffered injury and damages, including
      the loss of their home and life savings.

              In September 2013, the Bank filed a motion for summary judgment. The
Bank argued that Plaintiffs’ sole remaining claim, by this point that for breach of
contract, was barred by the statute of frauds as well as by the three-year statute of
limitations for injuries to property. The Bank’s motion was heard by the Trial Court in
February 2014. In March 2014, the Trial Court entered an order granting the Bank’s
motion for summary judgment. The Trial Court stated, in part:


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       Plaintiffs’ claims are barred by the three-year statute of limitations set forth
       in Tennessee Code Annotated §28-3-105 because (1) Plaintiffs allege
       injuries to their property and their interests in property; and (2) Plaintiffs
       knew or should have known that First Tennessee Bank was not going to
       provide them with permanent financing by April 3, 2009, at the very latest.

             There are no genuine issue[s] of material fact, and First Tennessee
       Bank is entitled to judgment as a matter of law.

The Trial Court did not rule on the statute of frauds issue. Plaintiffs filed a timely appeal
to this Court.

                                         Discussion

              Plaintiffs raise one issue on appeal: whether the Trial Court erred in
applying a three-year rather than six-year statute of limitations to Plaintiffs’ claim.

               This case was disposed of by means of summary judgment. The standard
for summary judgment is codified at Tenn. Code Ann. § 20-16-101. In point of fact, this
appeal presents a pure question of law, which we review de novo with no presumption of
correctness to the trial court. Whaley v. Perkins, 197 S.W.3d 665, 670 (Tenn. 2006). Our
Supreme Court recently has articulated the analysis to be used in choosing the applicable
statute of limitations in scenarios like that of the case before us on appeal. Our Supreme
Court stated:


              Today we clarify that the two-step approach articulated in Vance and
       applied in Alexander and Harvest Corp. is the correct framework for courts
       to employ when ascertaining the gravamen of a claim for the purpose of
       choosing the applicable statute of limitations. When utilizing this
       approach, a court must first consider the legal basis of the claim and then
       consider the type of injuries for which damages are sought. This analysis is
       necessarily fact-intensive and requires a careful examination of the
       allegations of the complaint as to each claim for the types of injuries
       asserted and damages sought. Contract Law and Practice § 12:78, at 595
       (2006).

                                             ***


              In determining that the gravamen of Ms. Elliott’s claim was for
       injury to real property, the Court of Appeals, like the early decisions of this
       Court, focused almost exclusively upon the type of damages she had

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       requested. Employing the two-step Vance approach, we conclude that the
       basis of Ms. Elliott’s claim is breach of contract. Ms. Elliott alleged, and
       the trial court found, that the contract had been breached because she had
       not received the sixty-foot wide strip of property contemplated by the
       contract. The trial court dismissed Ms. Elliott’s claims of intentional and
       negligent misrepresentation. The sole legal basis of Ms. Elliott’s prevailing
       claim against the defendants is breach of contract.

              Moreover, the type of injuries for which Ms. Elliott sought to
       recover resulted from the breach of contract. Cf. Vance, 547 S.W.2d at 933
       (concluding that the gravamen was injury to property where the plaintiff
       elected not to seek the contract remedy of rescission).              Specific
       performance, which Ms. Elliott sought, is available solely for breach of
       contract claims. The trial court refused to order it here because BE had
       constructed detention ponds in the area where the sixty-foot strip of
       property would need to be located. The trial court instead awarded Ms.
       Elliott money damages for the diminution in value to her remaining
       property resulting from the lack of the contractually guaranteed access road.
       This injury is financial only, involving no injury to the real property itself.
       Although diminution in value damages may be recovered for both tort and
       contract claims, the diminution in value damages Ms. Elliott sought to
       recover flowed directly from her breach of contract claim. Thus, because
       the legal basis of the claim is breach of contract and the damages sought
       and awarded are for breach of contract, we conclude that Ms. Elliott’s
       breach of contract claim is governed by the six-year statute of limitations
       applicable to “[a]ctions on contracts not otherwise expressly provided for.”
       Tenn. Code Ann. § 28-3-109(a)(3).

Benz-Elliott v. Barrett Enterprises, LP, --- S.W.3d ----, 2015 WL 294635, at **10-11
(Tenn. 2015) (footnotes omitted).

               The Bank argues that Plaintiffs are seeking to recover damages for lost
interest in property and thus their claim is barred by the three-year statute of limitations
found at Tenn. Code Ann. § 28-3-105 (1) (Supp. 2014) (“Actions for injuries to personal
or real property”). Plaintiffs, on the other hand, argue that their claim is not that the Bank
actually damaged the property, but rather that the Bank breached the contract by refusing
to provide the promised permanent financing resulting in financial injury to Plaintiffs.
Therefore, according to Plaintiffs, the proper statute of limitations in this matter is six
years for breach of contract as found at Tenn. Code Ann. § 28-3-109(a)(3) (2000)
(“Actions on contracts not otherwise expressly provided for”).




                                              4
               As cited above, our Supreme Court has provided guidance on this issue.
We are obliged to undergo a two-part analysis. We must consider the legal basis of
Plaintiffs’ claim and also the type of injuries for which damages are sought.

              Regarding the legal basis for Plaintiffs’ claim, this portion of the analysis is
relatively straightforward. Plaintiffs explicitly alleged breach of contract in their
amended complaint. Although Plaintiffs asserted other claims such as tort claims against
the Bank in their complaint, only the breach of contract claim remained by the time the
Trial Court ruled on the Bank’s motion for summary judgment. As for this breach of
contract claim, quoted above, Plaintiffs alleged that they suffered the loss of their home
and savings as a result of the Bank’s failure to honor their contractual agreement. Based
upon the facts in the record before us, we conclude that the legal basis of Plaintiffs’ claim
is breach of contract.

               The next step in the analysis requires us to consider the type of injuries for
which damages are sought by Plaintiffs. Here we again rely on Benz-Elliott for guidance.
In that case, our Supreme Court specifically made note that the injuries alleged therein
were financial only, rather than constituting damage to the property itself. Our Supreme
Court, in eventually determining that a six-year statute of limitations applied, also noted
that the damages alleged flowed directly from the breach of contract claim. Our Supreme
Court described this analysis overall as fact-intensive. While Benz-Elliott is not identical
to the present case, it is instructive.

              In the present case, Plaintiffs emphasize that they do not allege that the
Bank physically damaged the property. Indeed, it appears from the record that the
damages alleged are best characterized as financial—that is, the Bank’s failure to provide
permanent financing as allegedly promised led to the loss of Plaintiffs’ savings and a
foreclosure on their property. This does not implicate any damage or injury to the
property, per se. The Bank argues in opposition that Plaintiffs’ alleged damages, even if
claimed to stem from breach of contract, resulted ultimately in a loss of savings and their
home which must be characterized as damage to property or interest in property. We
disagree.

               This case stems from a dispute over financing. More specifically, this case
is about an alleged agreement whereby the Bank promised to provide Plaintiffs with
permanent financing and failed to do so. Plaintiffs eventually lost their savings and their
property was foreclosed. We, however, do not believe that the resulting consequences of
the alleged breach of contract—the loss of Plaintiffs’ savings and property—is
dispositive to the question of the type of damages asserted, and therefore which statute of
limitations applies. While Plaintiffs eventually suffered loss in the form of property,
thereby perhaps suggesting an injury to property, the original locus of the damage was in
an alleged failure to provide financing resulting in a financial injury and not an injury to
the subject property or any interest therein. The Bank asks us to characterize these

                                              5
damages as injury to property or interest in property because of the fallout that occurred
as a result of the alleged breach of contract. In our view, this analysis is too reductive
and is at odds with what our Supreme Court has called a fact-intensive analysis. We hold
that the damages alleged by Plaintiffs are best characterized as financial damages for
breach of contract, and that the six-year rather than the three-year statute of limitations
applies in this case.

              In summary, we have applied the two-part test as required by our Supreme
Court in Benz-Elliott. First, we conclude that the legal basis of Plaintiffs’ claim was
breach of contract. In the second part of the analysis, we conclude that the damages
sought by Plaintiffs originate in the alleged breach of an agreement to provide permanent
financing, which, although ultimately resulting in loss of property, does not represent
inherently an injury to property or interest in property but instead are financial only. We
hold that the six-year statute of limitations for breach of contract governs in this case.2
We reverse the Trial Court and remand for further proceedings consistent with this
Opinion.

                                             Conclusion

              The judgment of the Trial Court is reversed, and this cause is remanded to
the Trial Court for collection of the costs below and for further proceedings consistent
with this Opinion. The costs on appeal are assessed against the Appellee, First Tennessee
Bank, National Association.


                                                        _________________________________
                                                        D. MICHAEL SWINEY, JUDGE




2
 We make no determinations regarding the statute of frauds issue as raised by the Bank below since the
Trial Court did not rule on that issue and the issue was not raised on appeal except in passing.

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