                    IN THE COURT OF APPEALS OF TENNESSEE
                         WESTERN SECTION AT JACKSON
                ________________________________________________

PERRY HART and wife REBA HART,

       Plaintiffs-Appellants,
                                                    Chester Chancery No. 8721
Vs.                                                 C.A. No. 02A01-9602-CH-0036

TOMMY CASEY,

       Defendant-Appellee,

JO ALICE CASEY, FIRST NATIONAL
                                                                      FILED
BANK OF JACKSON, EMC MORTGAGE                                          Dec. 23, 1996
COMPANY AND WESTERN UNITED
ASSURANCE COMPANY,                                                    Cecil Crowson, Jr.
                                                                       Appellate Court Clerk
      Defendants.
___________________________________________________________________________

                 FROM THE CHESTER COUNTY CHANCERY COURT
                  THE HONORABLE JOE C. MORRIS, CHANCELLOR



                                  Ricky L. Wood of Parsons
                                  For Plaintiffs-Appellants

                           J. Alan Rheney and Jonathan O. Steen
                        Spragins, Barnett, Cobb & Butler of Jackson
                                  For Defendant-Appellee



                                REVERSED AND REMANDED

                                       Opinion filed:




                                                    W. FRANK CRAWFORD,
                                                    PRESIDING JUDGE, W.S.


CONCUR:

DAVID R. FARMER, JUDGE

HERSCHEL P. FRANKS, JUDGE
    This appeal involves a “land sale - purchase agreement” between Perry Hart and wife,
Reba Hart (Buyers) and Tommy Casey (Seller).1 Buyers appeal from the judgment of the trial

court finding that the “land sale - purchase agreement” between the parties had been terminated

and ordering that Seller was the owner of the property.

       Buyers’ complaint, filed October 12, 1994, alleges that by virtue of a “land sale-purchase

agreement” attached as an exhibit to the complaint, they purchased a tract of real estate as

described from defendant, Tommy D. Casey. Buyers’ aver that the property was encumbered

by a deed of trust executed by Seller to Jackson National Bank and subsequently assigned to

EMC Mortgage Corporation and later assigned to Western United Life Insurance Company. The

complaint avers that Buyers spent approximately $15,000.00 for extensive repairs and

remodeling which were completed in 1992. They aver that on July 27,1994, they received a

letter from Seller that the 1993 property taxes had not been paid and that the July rent owed

under the contract was past due. At that time, Seller invoked a late charge of $84.00. Buyers

allege that on July 21, 1994, they tendered to Seller three checks in the total amount of $602.00

to pay for the 1993 taxes, July rent, and the late charge, and further aver that when they received

their bank statement on July 26, 1994, they discovered that the three checks had been returned

for insufficient funds. Buyers allege that they asked the Seller, through his secretary, to

redeposit the checks, and that they were told that the checks would be redeposited. Buyers

heard nothing from Seller until they received a letter from Seller’s lawyer on or about August

11, 1994, informing them that Seller was taking possession of the property because Buyers had

failed to pay the 1993 property taxes and had defaulted in making the monthly rental payments.



       The complaint further avers that Buyers tendered their August rent check to Seller which

was refused by letter of August 17th from Seller’s attorney. They allege that they made all

monthly payments required under their contract except for the July and August 1994 payments

which were tendered to Seller but were refused. Buyers allege that after their rental payments

were refused, they notified Seller that they wished to prepay the balance due under the contract


       1
        The complaint also names as defendants Tommy Casey’s wife, Jo Alice Casey, First
National Bank of Jackson, EMC Mortgage, and Western United Assurance Company, but no
relief was sought as to these defendants. The judgment disposes of all issues for which relief
is sought, and these additional parties are not involved in this appeal.

                                                2
as provided therein, but that Seller refused this request and advised Buyers that he had taken

possession of the property pursuant to the terms of the contract, and that the contract was

terminated.

       The complaint alleges that a course of dealings had been established between the parties

for late payments, and that Buyers were allowed to cure defects on previous occasions, and that

they relied upon this course of conduct. Buyers aver that they had spent a great deal of money

on the property, that the property is worth approximately $60,000.00 to $65,000.00, and that a

forfeiture would be a gross injustice and would cause them immediate and irreparable harm. The

complaint prays for a temporary restraining order to restrain Seller from taking possession of

Buyers’ property pending a hearing on the merits, and that Buyers be awarded possession and

Seller be found in breach of the contract. Buyers also seek damages, both compensatory and

punitive.

       The trial court issued a temporary restraining order restraining Seller from taking

possession of the property, or from in any manner disposing of or encumbering the property, or

from interfering in any manner with the possession of Buyers.2

       Seller’s answer to the complaint admits that Buyers were in default under the contract

and admits that Seller terminated the contract. Seller alleges that he operated under the terms

of the contract, and he denies that Buyers are entitled to any of the relief sought. By way of

counter-claim, Seller alleges that Buyers were habitually late in their payments and other

obligations and allowed the insurance on the property to lapse, and that they were warned

concerning breaches on numerous occasions. Seller avers that when the three checks given in

payment of the delinquent sums heretofore set out were returned for insufficient funds, he

declared the contract in default, and that Buyers had no further rights under the contract. The

counter-complaint seeks a declaration that Buyers were in default under the agreement and that

their rights and interest in the real estate be declared null and void. Seller also seeks damages



       2
        The record does not indicate any further action concerning the temporary restraining
order, nor any effort seeking a temporary injunction pending the hearing of the case. The
proof in the record indicates that the property has remained vacant, and apparently neither
party has attempted to occupy or otherwise take possession of the property. The restraining
order expired fifteen days after its issuance on October 12, 1994. Tenn.R.Civ.P. 65.03 (5).

                                               3
occasioned by Buyers’ breach of the agreement.

       The land sale-purchase agreement provides that Buyers purchased the property for

$31,000.00, with the sum of $6,000.00 paid at the time of execution of the contract. The balance

of the purchase price of $25,000.00 was to be paid in 225 equal monthly installments at a rate

of interest that could be changed by the Seller as provided in the agreement. The contract

provides that when the entire indebtedness is paid, Seller is to prepare and deliver a warranty

deed conveying fee simple title to the Buyers free and clear of all encumbrances except for

current taxes. The provisions of the contract pertinent to the issues before us are as follows:

               1. As above recited, the purchase price for the above-described
               real estate is the sum of Thirty-One Thousand Dollars
               ($31,000.00). The sum of Six Thousand Dollars ($6,000.00), is
               paid on said purchase price at the time of the execution of this
               contract. The balance of said purchase price in the sum of
               Twenty-Five Thousand Dollars ($25,000.00), will bear interest
               from and after date at the rate of 12% per annum, to be amortized
               and paid by 225 equal, monthly installments of $280.00 each,
               these installments being due and payable successively on the 1st
               day of each consecutive month, beginning November 1, 1989.
               Anything above to the contrary notwithstanding, it is understood
               and agreed by and between the Buyers and the Seller that the rate
               of interest of 12% to be charged and paid as aforesaid on said
               future advances shall be for a period of six (6) months from this
               date and at the end of such six month period, the Seller shall
               review the rate of interest charged and shall increase the rate of
               interest, decrease the rate of interest, or allow the same to remain
               as it is, and shall continue such semi-annual review until the
               entire amount of principal and interest due hereunder shall be
               paid in full. Buyers are granted the right to prepay the entire
               unpaid balance or any part thereof prior to maturity, in which
               event the amount thus paid will first be applied to the payment of
               accrued interest and the remainder thereof will be applied to and
               in reduction of the principal.

               2. In the event of a default in the payment of any of the above-
               mentioned installments as the same mature from time to time,
               then the entire unpaid balance may, thereupon, be declared due
               and payable forthwith, at the option of the Seller. A failure to
               exercise such option from time to time will not constitute a
               waiver of the right to exercise the same in the event of future and
               additional defaults.

               3. In the event any installment payment remains unpaid for as
               long as fifteen (15) days after its due date, and the Seller does not
               declare the entire indebtedness due and payable forthwith as
               provided in paragraph 2, then there shall be a late charge of five
               per cent (5%) of such payment in default.

                               *               *               *


                                                4
              5. The Buyers agree to keep this property insured in both the
              names of the Buyers and Seller, as their interests may appear, and
              agree to pay the taxes assessed against said real estate for 1990
              and thereafter, and will not suffer any of such taxes to become
              delinquent at any time.

                              *               *                *

              7. In the event the Buyers should fail to keep the property
              insured, the taxes paid as aforesaid, such may be deemed an event
              of default, and if not corrected by the Buyers, within a period of
              thirty days after notice by the Seller, the Seller, in addition to any
              other rights and remedies which he might have at law or equity,
              shall have the right to declare this contract terminated and of no
              further force, effect or virtue, in which event the Buyers agree to
              surrender up the premises to the Seller without any resort to legal
              processes and the Seller will have the right to reoccupy the above
              described premises as the lawful owner thereof, as any equity
              which Buyers may have in such property will terminate at the
              time Seller exercises such rights.

                              *               *                *

              9. No major alterations may be made to the house or lot without
              the express written consent of the Seller.

              10. In the event the Buyers should fail to comply with the terms
              of this agreement, or in the event the premises are vacated prior
              to the expiration of the term of this contract, or should fail to pay
              the entire unpaid balance of the purchase price when the same is
              required to be paid hereunder, such amounts as Buyers have paid
              Seller theretofore may be retained by the Seller as liquidated
              damages, and no part thereof shall be refundable to the Buyers.

       There are very few factual disputes. By letter dated July 21, 1994, Seller advised Buyers

as follows:

              Dear Mrs. Hart:

              In reference to your Land Sale-Purchase Agreement dated 10-11-
              89 on property located at 244 E. Main St., Henderson, Tn., I’m
              hereby enforcing interest review in item No. 1 and also #3
              concerning a 5% late charge as of Feb. 1, 1994 due date. The
              new interest rate will be 14% with a payment of $309.69
              beginning August 1, 1994.

              On item no. 3 concerning 15 days past due, which you have been
              conscientiously past due since the beginning, I’m only enforcing
              past due status for 1994 in the amount of $84.00, which should be
              paid immediately. You are currently due for 7-1-94, as of this
              date you are 21 days past due and this has been conscientiously
              from the beginning. Plus the 1993 taxes also haven’t been paid,
              the amount due on this is $238.08. Unless this is caught up to
              date and agreement to be enforced I’ll consider the contract Null
              and Void and take the property back.


                                                5
               I need to hear from you by 8-1-94 as to your decision.

               Sincerely,

               Tommy D. Casey

       In response to this letter, Buyers sent three checks totaling $602.08 as requested in the

letter. They were returned for insufficient funds by Buyers’ bank. Plaintiff, Reba Hart, testified

that when she learned of the returned check, she called Seller’s office and requested that the

checks be redeposited. It was her understanding from her conversation with Seller’s secretary

that the checks would be redeposited. On the other hand, Seller’s secretary, Ms. Webster,

testified that although she talked by telephone to Ms. Hart, she did not tell her that the checks

would be redeposited. Ms. Webster stated that she merely told Ms. Hart that she would relay the

request for redeposit to Seller, Tommy Casey.

       Ms. Hart took no further action to cure the default. She testified that she received no

further notice from Seller until she received a letter dated August 11, 1994, which states:

               Re: Property located at 244 East Main Street, Henderson, Chester
               County, Tennessee

               Dear Mrs. Hart:

               This letter will serve as notice to you that Mr. Tommy D. Casey
               is exercising his right to retake possession of the above referenced
               premises which is the subject of a certain Land Sale-Purchase
               Contract executed by you and Mr. Casey on October 11, 1989.
               Mr. Casey is retaking the property as a result of your default in
               the monthly payments and payment of the taxes, as required by
               the terms of the contract, evidenced in part by the return for
               insufficient funds of your three checks, nos. 1774, 1775 and 1776,
               in the aggregate sum of $602.08, copies of which are attached
               hereto.

       Before the August 11, 1994, letter was received, Buyers had sent the August rental check

which apparently crossed in the mail with Seller’s August 11, 1994 letter. Seller refused to

accept this check and returned the check to Buyers by letter dated August 17, 1994, from Seller’s

attorney. Subsequently, Buyers’ attorney, by letter of August 31, 1994, notified Seller of

Buyers’ wish to prepay the entire indebtedness as provided in the contract. Seller’s attorney

notified Buyers’ attorney that this could not be done since they had no right to prepay because

the contract had been previously terminated. Buyers’ proof established that they were financially

able to pay the indebtedness in full at the time they requested the payoff statement.

                                                6
       Ms. Hart testified that at the time suit was filed, the principal balance due Seller was

$22,710.00, and the fair market value of the property was $60,000.00 to $65,000.00. Mr. Casey

testified that the fair market value of the property was $31,000.00.

       At the conclusion of the evidentiary hearing on October 11, 1995, the chancellor took the

case under advisement, and on November 15, 1995, entered judgment, which provides:

               This cause came on to be heard upon the 11th day of October,
               1995, before the Honorable Joe C. Morris, sitting without the
               intervention of a jury, and the Court after hearing all of the
               evidence in the case, stipulations of counsel, and after due
               consideration thereof, is of the opinion that the evidence does not
               preponderate in the favor of the contentions of the Plaintiffs;

               The Court is further of the opinion that the land contract entered
               into between the parties on October 23, 1989, has been terminated
               due to late payments, improvements made without the permission
               of the owner, and failure to properly insure; it is therefore

               ORDERED that the land contract entered into between the parties
               on October 23, 1989, is terminated along with all the Plaintiffs’
               rights to the property, legal or equitable, and that the Plaintiffs
               take nothing, and this cause be dismissed with prejudice.

               IT IS FURTHER ORDERED that the Temporary Restraining
               Order entered in this cause on the 12th day of October, 1994 is
               hereby dissolved and shall have no further force and effect.

               IT IS FURTHER ORDERED that the Defendant Tommy Casey
               is now the owner of the property, which was the subject of the
               land contact, free and clear from any claims of the Plaintiffs Perry
               Hart and wife, Reba Hart, and that the Counter-Complaint be
               dismissed with prejudice.

       Buyers have appealed and present two issues for review which, as stated in their brief,

are:

               1. Whether the Chancellor erred in finding that the Land Contract
               entered into between the parties was terminated due to late
               payments, improvements made without permission of the owner,
               and failure to properly insure.

               2. Whether the Appellants had the right to pre-pay the Contract
               at any time, even after default.

       We will consider these two issues together. The principle issue to decide is whether

under the terms of the contract, Buyers had a right as of August 31, 1994, to pay off the

indebtedness owed Seller.

       The cardinal rule in construing contracts is to ascertain the intent of the parties. West v.


                                                7
Laminite Plastics Mfg. Co., 674 S.W.2d 310 (Tenn. App. 1984). In construing contracts the

words expressing the parties’ intentions should be given the usual, natural, and ordinary

meaning, and in the absence of fraud or mistake a contract must be interpreted and enforced as

written, even though it contains terms which may be thought harsh and unjust. Heyer-Jordan

& Assocs. v. Jordan, 801 S.W.2d 814, 821 (Tenn. App. 1990). A duty devolves upon a court

to enforce a contract in accordance with its plain terms and to consider the entire contract in

determining the meaning of any or all of its parts. Cocke County Bd. of Highway Comm’rs v.

Newport Utilities Bd., 690 S.W.2d 231 (Tenn. 1985).

       In their first issue, Buyers assert that the trial court erred in finding that the contract was

terminated due to late payments, improvements made without permission of Seller and failure

to properly insure. Since the trial court heard this case sitting without a jury, we review the case

de novo upon the record with a presumption of correctness of the findings of fact by the trial

court. Unless the evidence preponderates against the findings, we must affirm, absent error of

law. T.R.A.P. 13 (d).

        As to the improvements to the property, the contract provision prohibits “major

alterations” without Seller’s permission. The proof is that Buyers made repairs, but there is no

detailed proof in the record as to major alterations. Moreover, the record establishes that Buyers

made the repairs over a period of time in excess of a year, that Seller and his employees had full

knowledge of the repairs and never objected or raised any question concerning same. It also

seems quite clear that repairs to the property worked only to the benefit of Seller. We also note

that Seller did not specify this provision of the contract as a ground for termination. The

evidence preponderates against the chancellor’s finding that a reason for the contract termination

was improvements made to the property.

        As to the failure to properly insure, we do not find from the record that there is proof that

Buyers allowed any insurance on the property to lapse. Moreover, Seller did not assign this as

an event of default which must be corrected within thirty days. The evidence preponderates

against the finding of the chancellor in this regard.

        Concerning the termination for late payment, Seller concedes that as to the delinquent

installment requirement of the contract, Seller is required to either accelerate the balance due

                                                 8
under the contract, or to collect a late charge on the past due installment. Seller, by his letter of

July 21, 1994, specifically called for the late charge and thus was not relying on the delinquent

installment as a event of default. If we should consider Seller’s August 11, 1994 letter as a

notice of acceleration, we must also consider it deficient in that it did not inform Buyers of the

amount due for payment of the balance of principal and interest and any other charges.

         The contract before us is clear that Buyers are granted the right to prepay in whole or in

part the balance of the indebtedness. It is also clear that in the event Buyers default in the

payment of an installment, Seller has the option to accelerate and declare the entire balance due,

which terminates the contract, or to continue the contract and collect a late charge for the

installments.

         Paragraph 7 of the contract provides that the failure of Buyers to keep the property

insured or to pay the taxes due may be deemed events of default. This paragraph specifically

provides additional rights and remedies for these particular events of default. Seller is authorized

to terminate the contract if they notify Buyers of their intent to do so if the defaults set out in

Paragraph 7 are not corrected within a period of thirty days after notice by Seller. The contract

terms give Seller the “right to declare this contract terminated,” if there has been no correction

of the default by Buyers. In the instant case, Seller’s July 21, 1994 letter gave notice to Buyers

that unless taxes were paid along with the past-due installments, Seller was terminating the

contract. Subsequently, by letter of August 11, 1994, Seller, through his lawyer, declared the

contract terminated. The termination notice was issued before thirty days had expired from the

July 21, 1994 letter, and specifies as a ground for termination the delinquent installment

payment. The letters of July 21 and August 11 are somewhat confusing, and in view of the

contract terms, Buyers could reasonably believe that they could pay off the balance of the

indebtedness which they promptly tried to do. The record is clear that Buyers attempted to pay

off the entire indebtedness after learning that Seller had declared the contract in default. In the

absence of a specific time in the contract for paying off the accelerated balance, a reasonable

time should be allowed by implication. See Moore v. Moore, 603 S.W.2d 736 (Tenn. App.

1980).

         The proof indicates that the property has a value in excess of the balance due on the

contract, and Buyers have invested considerable sums in the property. While forfeitures are not



                                                 9
illegal, they are not favored in the law and are to be strictly construed. Simmons v. Hitt, 546

S.W.2d 587 (Tenn. App. 1976).

       Every contract contains an implied duty of good faith and fair dealing in performance and

enforcement. TSC Industries, Inc. v. Tomlin, 743 S.W.2d 169 (Tenn. App. 1987). When Seller

determined that the contract should be terminated for nonpayment of installment payments,

Buyers had the right to pay off the balance of the indebtedness and obtain title to the property.

This they were not allowed to do.

       Accordingly, the judgment of the trial court is reversed, and the case is remanded to the

trial court. The trial court should require Seller to promptly furnish Buyers a pay-off statement

with the balance due of both principal and interest. Since Buyers did not tender a pay-off

amount into court at the time of institution of the suit, Seller should be entitled to all accrued

interest to the date of payment. The trial court should allow Buyers a reasonable time to make

the payment and upon payment require Seller to comply with the terms of the contract

concerning the warranty deed. Costs of the appeal are assessed to the Seller.

                                                      _________________________________
                                                      W. FRANK CRAWFORD,
                                                      PRESIDING JUDGE, W.S.

CONCUR:

_________________________________
DAVID R. FARMER, JUDGE

_________________________________
HERSCHEL P. FRANKS, JUDGE




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