Opinion
No. M2004-02154-COA-R3-CV.
November 15, 2005 Session.
Filed April 18, 2006.
Direct Appeal from the Chancery Court for Marion County; No. 6781; Jeffrey F. Stewart, Chancellor.
Judgment of the Chancery Court Affirmed; and Remanded.
K. Stephen Powers, Chattanooga, Tennessee, for the appellant, Lofty Construction Company.
Edwin Z. Kelly, Jr., Jasper, Tennessee, for the appellees, Thomas A. Dobson, Louise Dobson, and Fil Thach.
H. Graham Swafford, Jr., Jasper, Tennessee, for the appellee, Marion County, Tennessee.
David R. Farmer, J., delivered the opinion of the court, in which W. Frank Crawford, P.J., W.S., and Holly M. Kirby, J., joined.
OPINION
Lofty Construction Company("Lofty") sought rescission of a 1969 Right-of-Way Deed issued by Lofty's predecessor in title, Tennessee Metallurgical Corporation ("TMC") to Marion County, Tennessee. At trial, Lofty argued that TMC executed the Right-of-Way Deed in exchange for Marion County's agreement to enter into an agreement with the State of Tennessee to fund and construct an industrial access highway to an alloy plant operated by TMC. Lofty asserted that the access highway was never constructed and, thus, the deed should be rescinded due to a failure of consideration. The trial court held that Lofty was not entitled to rescind the deed. Lofty appeals. We affirm.
Factual Background and Procedural History
This case arises from a dispute concerning a roadway located in Kimball, Tennessee. On April 20, 1968, the Tennessee Metallurgical Corporation ("TMC") purchased, from Byron and Martha Boyd ("the Boyds"), a tract of land in Marion County, Tennessee, on which to construct an alloy plant. In the deed to TMC, the Boyds reserved a twenty-five foot easement for ingress and egress on the western border of the property in order to grant access to approximately twenty-three acres of land retained by the Boyds adjacent to the TMC property.
On January 13, 1969, the Marion County Quarterly Court voted to adopt a resolution pertaining to the building of paved access highway to TMC's alloy plant. As a result, an agreement entitled "Industrial Access Road Agreement" was prepared for execution by the Commissioner and State Highway Engineer of the State of Tennessee Department of Highways and by the County Judge of Marion County. The agreement stated that Marion County would acquire the right-of-way and easements necessary for the construction of the access road and that Marion County would accept full responsibility for the maintenance of such road after its completion. The parties dispute whether this agreement was ever executed. While the agreement on its face states that "the parties hereto have caused this agreement to be executed on this the 13 day of Jan., 1969," no executed copy of the agreement was presented at trial or otherwise included in the record.
Despite the uncertain status of the Industrial Access Road Agreement, the record shows that on March 24, 1969, TMC executed a "Right-of-Way Deed," to Marion County, Tennessee, for the purpose of constructing the proposed access highway leading to the TMC plant. Although titled as a "Right-of-Way Deed," the deed purported to convey a 100 foot by 2700 foot strip of land to Marion County in fee simple for road purposes. As consideration for the Right-of-Way Deed, Marion County agreed to enter into a contract with the State of Tennessee whereby the State would construct, or fund the construction of, an access road within the said right-of-way. Officials for Marion County properly recorded the Right-of-Way Deed in the Register's Office of Marion County, Tennessee. By 1969, an access road (hereinafter referred to as "TAC Alloy Road" or "Lofty Drive") leading to the TMC alloy plant had been constructed on the property conveyed to Marion County in the Right-of-Way Deed.
All parties in this case appear to agree that the disputed roadway lies within the bounds of the property conveyed by TMC to Marion County in the Right-of-Way Deed.
The parties disagree concerning the construction date of the road. Lofty asserts that TMC built the road in 1968, prior to the execution of the Right-of-Way Deed. However, the Plaintiff's argue that the tarring and chipping of the road occurred sometime after the Right-of-Way deed in 1969. Regardless, it is clear that the road was constructed by 1969.
On June 29, 1972, the Town of Kimball, Tennessee, passed an ordinance annexing certain land including the TMC plant and TAC Alloy Road, which had been conveyed to Marion County, Tennessee, by virtue of the 1969 Right-of-Way Deed. On November 22, 1995, Lofty acquired the TMC plant and property by quitclaim deed, subject to the 1969 Right-of-Way Deed to Marion County. On April 4, 1996, the Board of Mayor and Aldermen for the Town of Kimball, pursuant to the request of Lofty representatives, voted to change the name of TAC Alloy Road to "Lofty Drive," and caused a street sign designating the name change to be placed at the said location. Subsequently, representatives from Lofty appeared before the Marion County Commission and requested that the Commission convey title to the right-of-way of Lofty Drive to Lofty. Marion County acquiesced and, on November 26, 2002, conveyed all interests acquired by Marion County pursuant to the 1969 Right-of-Way Deed to Lofty.
In August 2002, the Boyd's sold Plaintiffs Thomas and Louise Dobson ("the Dobsons") the remaining twenty-three acres adjoining Lofty Drive. The easement reserved by the Boyds in their Deed to TMC on April 20, 1968, was also transferred to the Dobsons, thus granting the Dobsons a twenty-five foot wide easement for pedestrian and vehicular ingress and egress to their property. The Dobsons sought to develop the twenty-three acres into a residential subdivision; however, the twenty-five foot easement granted to the Dobsons was not sufficient for this purpose. As a result, on December 17, 2002, the Dobsons and Fil Thatch (hereinafter referred to as "Mr. Thatch" or in conjunction with the Dobsons as "the Plaintiffs"), another party owning land adjacent to Lofty Drive, filed suit against both Lofty and Marion County, Tennessee, seeking to set aside the quitclaim deed from Marion County to Lofty.
In their complaint, the Plaintiffs argued that Lofty Drive was constructed as an industrial access road under section 54-5-401 et seq. of the Tennessee Code, and thus the conveyance from Marion County to Lofty should be set aside because the county failed to comply with applicable statutory provisions concerning the closing of public roadways. In response, Lofty denied that Lofty Drive was a public road and further denied that Lofty Drive was constructed as an industrial access road as defined under the Tennessee Code. Lofty subsequently filed a Cross-Claim for Declaratory Judgment against Marion County seeking a declaration of the respective rights, title, and interests of Marion County and Lofty in and to the disputed property. Lofty also filed a Third-Party Complaint for Declaratory Judgment and Quieting Title against the Town of Kimball after discovering that the Town of Kimball had annexed the property upon which Lofty Drive is located. In this complaint, Lofty sought rescission of the 1969 Right-of-Way deed from TMC to Marion County and further requested that the Town of Kimball be divested of any interest in might have purportedly obtained through annexation. In support of its requested relief, Lofty argued that inadequate consideration existed for the 1969 Right-of-Way deed because Marion County failed to execute an agreement with the State of Tennessee for the funding and construction of the proposed access road, and that no such access road was ever funded or constructed by either Marion County or the State of Tennessee. As a result of Lofty's pleadings, the Plaintiffs subsequently filed an Amended Complaint naming the Town of Kimball as an additional defendant.
This case went to trial on July 13-14, 2004, in the Chancery Court for Marion County. At the onset of the trial, Lofty stipulated that, under applicable Tennessee law, the quitclaim deed from Marion County to Lofty should be set aside. In light of Lofty's stipulation, the court determined, and the parties to this action agreed, that the only remaining issue consisted of whether the Right-of-Way Deed should be rescinded. In support of its argument for rescission, Lofty presented evidence showing that Marion County and the State of Tennessee failed to reach an agreement concerning the funding or construction of an access highway to the TMC plant and no such highway was ever constructed. Furthermore, Lofty presented evidence showing that neither Marion County nor the Town of Kimball had expended funds to maintain TAC Alloy Road/Lofty Drive. In opposition to Lofty, the Plaintiffs presented evidence showing that both Marion County and the Town of Kimball had performed maintenance on Lofty Drive and that Lofty Drive had been considered a public road.
The chancellor ruled that the 1969 Right-of-Way Deed from TMC to Marion County was a valid and enforceable deed conveying the subject property upon which Lofty Drive is situated to Marion County in fee simple for road purposes. The chancellor also ruled that Lofty Drive was a public roadway within the Town of Kimball and that, pursuant to Tenn. Code Ann. § 7-31-101, the Town of Kimball had an obligation to maintain the said roadway. Lofty appeals.
Issues Presented
We find the issues raised by Appellant Lofty to be as follows: 1) whether the 1969 Right-of-Way Deed executed by TMC to Marion County, Tennessee, in exchange for Marion County's procurement of the construction of an industrial access road by the State of Tennessee should be cancelled or rescinded due to the failure of consideration; and 2) if this Court should find that the Right-of-Way Deed should not be rescinded, whether such deed conveyed an easement "for road purposes" or a fee simple interest. For the reasons stated herein, we affirm the trial court.
Standard of Review
Our standard of review of a trial court sitting without a jury is de novo upon the record. Cross v. City of Memphis, 20 S.W.3d 642, 644 (Tenn. 2000). There is a presumption of correctness as to the trial court's findings of fact, unless the preponderance of evidence is otherwise. Tenn. R. App. P. 13(d)(2005). However, no presumption of correctness attaches to a trial court's conclusions on issues of law. Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000).
Law and Analysis Rescission of the Right-of-Way Deed
Lofty argues on appeal that the trial court erred in not rescinding the 1969 Right-of-Way Deed due to the failure of consideration. Specifically, Lofty states that TMC, Lofty's predecessor in interest, and Marion County reached an agreement whereby TMC conveyed the disputed property to Marion County in exchange for Marion County's "procurement of an `Industrial Access Road' to be built (or funded) by the State Highway Department improving TMC's existing plant access road (TAC Alloy Road n/k/a Lofty Drive) by bringing it up to State highway standards." Lofty further asserts that Marion County failed to procure either the construction or funding of an industrial access road by the State of Tennessee and, therefore, Lofty is entitled to rescind the 1969 Right-of-Way deed due to a complete failure of consideration. We disagree.
Rescission involves the avoidance or setting aside of a transaction. It is an equitable remedy available where the contract was induced by fraud or duress or where one party unequivocally renounces the contract or is legally unable to perform. It is intended to return the parties to the positions they were in before the transaction took place.
Fry v. Emmanuel Churches of Christ, Inc., 839 S.W.2d 406, 409 (Tenn.Ct.App. 1992) (quoting Williamson v. Upchurch, 768 S.W.2d 265, 271 (Tenn.Ct.App. 1988)). While the failure of consideration may serve as a basis for rescission, an action for rescission must be filed within the applicable statute of limitation period. In this case, the Plaintiffs assert that this case falls under the ten-year statute of limitations set forth in Tenn. Code Ann. § 28-3-110, which provides as follows:
The following actions shall be commenced within ten (10) years after the cause of action accrued:
. . . .
(3) All other cases not expressly provided for.
Tenn. Code Ann. § 28-3-110 (2006). However, in Aschbacher v. Woods, No M2003-02616-COA-R3-CV, 2005 WL 473468 (Tenn.Ct.App. March 1, 2005), perm. app. denied (Tenn. Oct. 24, 2005), the Middle Section of this Court held that an action for rescission of a deed due to failure of consideration fell under the limitations period set forth in section 28-3-109 of the Tennessee Code, which provides as follows:
The following actions shall be commenced within six (6) years after the cause of action accrued:
. . . .
(3) Actions on contracts not otherwise expressly provided for.
Tenn. Code Ann. § 28-3-109(a)(3) (2006). "The test to determine when a cause of action arises or accrues is when the plaintiff has suffered a legal injury, that is, when he or she has the right to maintain an action or first may maintain an action to a successful conclusion." 51 Am. Jur. 2d Limitation of Actions § 148 (2005). Thus, when the terms of a contract have been breached, "the statute of limitations begins to run when a contracting party first knows or should know that the contract will not be performed." Wilkins v. Third Nat'l Bank in Nashville, 884 S.W.2d 758, 762 (Tenn.Ct.App. 1994).
In the case at bar, we find it unnecessary to determine which limitation period applies because the facts show that Lofty's rescission claim would be barred under both. Specifically, the record shows that TMC executed the Right-of-Way deed to Marion County on March 24, 1969. However, as previously noted, Lofty asserts that Marion County failed to enter into an agreement with the State of Tennessee concerning the funding and construction of an industrial access highway. Assuming Lofty's assertion to be true, any cause of action against Marion County for rescission of the 1969 Right-of-Way Deed accrued when TMC knew or should have known of Marion County's alleged failure to procure the funding and construction of the industrial access highway. However, TMC continued to operate its alloy plant until 1987 and, during this eighteen-year period, never once sought to rescind the Right-of-Way Deed or otherwise enforce its agreement with Marion County. As a result, we find that any claim for rescission resulting from Marion County's alleged failure to procure the funding and construction of the access highway would be barred both under the six-year statute of limitations set forth in section 28-3-109 and under the ten-year statute of limitations set forth in section 28-3-110.
Despite TMC's failure to timely prosecute an action based upon the failure of consideration, Lofty nonetheless argues the claim for rescission is not barred by the statute of limitations because the agreement between TMC and Marion County constituted a continuing contract. Specifically, in their rely brief to this Court, Lofty states as follows:
This Honorable Court recently considered an action to rescind a deed for failure of consideration approximately 15 years after the deed was conveyed. In [ Aschbacher v. Woods, 2005 WL 473468 (Tenn.Ct.App. March 1, 2005)], . . . the plaintiff filed suit to rescind a deed conveying the remainder interest in her residence to her niece in exchange for her promise to take care of the plaintiff for life. The trial court held that the action was barred by the six-year statute of limitations of Tenn. Code Ann. § 28-3-109 and the plaintiff appealed to this Court.
. . . . This Court held that the plaintiff's action to rescind the 15-year old deed was not barred because the consideration for the deed was the defendant's promise to take care of the plaintiff during her lifetime. Id. The Court held that the agreement gave rise to a continuing contract and that each time the niece failed to provide care for her aunt, a new cause of action arose governed by the six-year statute of limitations. Id., p. 3. The complaint had been filed within six years of the last refusal of the niece to provide care for her aunt.
. . . .
Similarly in the case at bar, the Industrial Access Road Agreement . . . recited that Marion County would "accept full responsibility for the maintenance of said section of road and will at all times keep it in a state of repair satisfactory to the State." Maintenance of the road, therefore, by the County was a continuing obligation, and by operation of law the duty to maintain and repair the road would have passed to the Town of Kimball pursuant to the annexation statutes and Tenn. Code Ann. § 7-31-101(a), as stated by Plaintiffs. Plaintiffs themselves argue [in their brief] that road maintenance was additional consideration flowing from Marion County and Kimball. (citation omitted). Thus, this Court's analysis of the timeliness of the rescission claim in [ Aschbacher], supra, is equally applicable here. Lofty's action to rescind the 1969 Right-of-Way Deed for a failure of consideration is not barred by the 10-year statute of limitations. . . .
(Emphasis added.)
We find Lofty's argument in this regard without merit due to Lofty's own admission that "road maintenance provision" contained in the Industrial Access Road Agreement between Marion County and the State of Tennessee did not serve as consideration for the execution of the 1969 Right-of-Way deed from TMC to Marion County. Specifically, on page twenty-one of its initial brief to this Court, Lofty states as follows:
As discussed above, the actual consideration for the Right-of-Way Deed was the building of an Industrial Access Road to the Alloy Plant by the improvement of the existing road to State specifications. Maintenance of the road is not mentioned as consideration for the right-of-way in the deed itself or in any other document associated with the transaction. No parole [sic] evidence was introduced that would suggest that maintenance of the road was the consideration or even part of the consideration for the Right-of-Way Deed. Since maintenance of the road was not the consideration for the deed, the Chancellor's findings regarding maintenance by the County are irrelevant, in addition to being clearly erroneous. . . .
(Emphasis added.)
For the foregoing reasons, we hold that the trial court did not err in denying Lofty's motion to rescind the 1969 Right-of-Way Deed.
Construction of the Deed
Having determined that Lofty is barred from pursuing rescission based upon failure of consideration, we now address whether the 1969 Right-of-Way Deed conveyed an easement "for road purposes" or a fee simple interest. Interpretation of terms contained in a deed constitutes a question of law. Rodgers v. Burnett, 65 S.W. 408, 411 (Tenn. 1901). As recently discussed by this Court in Mitchell v. Chance,
[t]he rules governing the interpretation of deeds are well-settled and are designed to enable the courts to ascertain the intention of the parties to the deed. Collins v. Smithson, 585 S.W.2d 598, 603 (Tenn. 1979); Barber v. Westmoreland, 601 S.W.2d 712, 714 (Tenn.Ct.App. 1980). The courts should first seek the parties' intention by examining the words in the deed, Hutchison v. Board, 194 Tenn. 223, 227-28, 250 S.W.2d 82, 84 (1952), and by considering these words in the context of the deed as a whole. Collins v. Smithson, 585 S.W.2d at 603; Barber v. Westmoreland, 601 S.W.2d at 714; Quarles v. Arthur, 33 Tenn. App. 291, 295, 231 S.W.2d 589, 590 (1950).
The courts customarily decline to consider parol evidence that adds to, varies, or otherwise contradicts the language of the deed. Stickley v. Carmichael, 850 S.W.2d 127, 132 (Tenn. 1992). However, parol evidence may be admissible to remove a latent ambiguity in the deed. Stickley v. Carmichael, 850 S.W.2d at 132; Estate of Burchfiel v. First United Methodist Church, 933 S.W.2d 481, 482 (Tenn.Ct.App. 1996). . . .
. . . .
On the other hand, parol evidence is inadmissible to explain a patent ambiguity contained within the deed. Estate of Burchfiel v. First United Methodist Church, 933 S.W.2d at 482.
Mitchell v. Chance, 149 S.W.3d 40, 44 (Tenn.Ct.App. 2004).
In the case at bar, the Right-of-Way Deed provides as follows:
Right of Way Deed
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) cash in hand paid and other good and valuable considerations, the receipt and legal sufficiency of all of which are hereby acknowledged, TENNESSEE METALLURGICAL CORPORATION, a Tennessee corporation, has this day bargained, sold, transferred and conveyed and by these presents does bargain, sell, transfer and convey unto THE COUNTY OF MARION, State of Tennessee, for road purposes, the following described real estate situated in the First Civil District of Marion County, Tennessee, and being more particularly described as follows, to wit:
. . . . [ legal description of property omitted]
TO HAVE AND HOLD the aforesaid real estate unto the County of Marion, its successors and assigns, in fee simple forever.
Tennessee Metallurgical Corporation covenants that it is lawfully seized and possessed of said real estate, has a good and lawful right to sell and transfer the same, that the title thereto is free, clear and unencumbered, except as hereinabove provided and that it will forever warrant and defend the title thereto against the lawful claims of all persons whomsoever.
(Emphasis added.)
At trial, the Chancellor found that the 1969 Right-of-Way Deed was "a valid and enforceable deed, conveying the property therein described to Marion County, Tennessee, in fee simple for road purposes." After reviewing the plain language of the deed, we agree. While titled as a "Right-of-Way Deed," the terms contained within the deed explicitly state that TMC intended to "sell, transfer, and convey" a fee simple interest in the property to Marion County in exchange for "Ten Dollars ($10.00) cash in hand paid and other good and valuable considerations." As a result, we affirm the trial court.
Conclusion
Based upon the foregoing, we affirm the trial court on all issues brought before this Court. Costs of this appeal are awarded against the Appellant, Lofty Construction Company, and its surety, for which execution may issue if necessary.