Culbreath Revocable Trust v. Sanders
| Docket Number: | 2006-CA-00291-COA Linked Case(s): 2006-CA-00291-COA ; 2006-CT-00291-SCT ; 2006-ct-00291-sct |
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| Court of Appeals: |
Opinion Link Opinion Date: 09-04-2007 Opinion Author: CARLTON, J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Contract - Validity of contract - Misrepresentation - Damages Judge(s) Concurring: KING, C.J., LEE AND MYERS, P.JJ., IRVING, CHANDLER, GRIFFIS, BARNES AND ISHEE, JJ. Non Participating Judge(s): ROBERTS, J. Procedural History: Bench Trial Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 01-25-2006 Appealed from: MARSHALL COUNTY CHANCERY COURT Judge: Edwin Hayes Roberts, Jr. Disposition: CHANCELLOR FOUND FOR DEFENDANTS/APPELLEES Case Number: 04-0279® |
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| Party Name: | Attorney Name: | |||
| Appellant: | CULBREATH REVOCABLE TRUST AND QUAD C. FARMS |
THOMAS HENRY FREELAND |
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| Appellee: | DICK S. SANDERS, CHARLIE V. SANDERS,DENNIS CHURCHWELL AND LYNLEY CHURCHWELL | WILLIAM F. SCHNELLER |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Validity of contract - Misrepresentation - Damages |
| Summary of the Facts: | Don Culbreath is the settlor of the Culbreath Revocable Trust. His son Elliot is the beneficiary of that trust. Both Don and Elliot are partners comprising the Tennessee general partnership, Quad C. Farms. Don and Elliot Culbreath were shown a 432 acre tract of land in Marshall County by Dennis Churchwell. The owners of the property were Dick Sanders, Charlie Sanders, and Lynley Churchwell. Culbreath inquired from Dennis whether the property flooded. Dennis communicated to Culbreath that approximately “twenty to thirty acres floods.” Don, acting on behalf of himself, his son, the trust, and partnership, signed a contract to purchase the property. Dick Sanders and Dennis signed the contract as the sellers. Charlie Sanders and Lynley Churchwell did not sign the contract. The agreed purchase price for the property was $850,000. The earnest money totaled $65,000 including $10,000 in cash, and used equipment, including a backhoe, and a bulldozer valued at $55,000. The initial closing date was set as August 15, 2003. Pursuant to the terms of the contract, Culbreath took possession of the property on the date the contract was signed. Culbreath was to pay an agreed amount of rent each month until the closing took place. Evidence was presented that, subsequent to the execution of the contract, Elliot Culbreath no longer wanted to purchase the property. Evidence was also presented that Don was still interested in completing the purchase on his own. By letter dated September 3, 2003, Dick Sanders extended the closing date to September 12, 2003. He also stated that the earnest money would be forfeited if closing did not take place by September 12. In a letter dated September 9, 2003, counsel retained by Culbreath informed Dick Sanders that Don and Elliot Culbreath would not be closing on the property because Dennis misrepresented the flood zone on the property. A demand was made for the return of the portion of the earnest money and equipment that had already been paid and that the contract be rescinded. Culbreath had only paid $10,000 in cash and given $20,000 in equipment toward the total earnest money set at $65,000. None of the earnest money was returned to Culbreath. Culbreath filed suit alleging fraud, intentional and negligent misrepresentation, and failure to make statutory disclosures. He sought rescission of the contract, actual and punitive damages, and attorney’s fees. The chancellor found no misrepresentations were made to Culbreath, and that Culbreath did not rely on statements Dennis made concerning how much of the property flooded. Pursuant to the terms of the contract, the chancellor awarded the sellers the balance of the earnest money owed with interest in the amount of $39,518.89, and attorney’s fees in the amount of $3,750. Culbreath appeals. |
| Summary of Opinion Analysis: | Issue 1: Validity of contract Culbreath argues that the chancellor erred in refusing to rescind the contract which was void by virtue of the statute of frauds. However, the parties conceded the validity of the contract. Based upon the arguments of the parties and the findings of the chancellor, the validity of the contract is not an issue relevant in this appeal. Any affirmative defense based upon the statute of frauds has been waived. Issue 2: Misrepresentation Culbreath argues that the chancellor erred in concluding that there was neither a fraudulent nor negligent material misrepresentation made to Culbreath. The evidence demonstrated that the term “flood” was not used interchangeably with “flood plain.” There was evidence that Dennis did not know the amount of acreage that was in the 100-year flood plain, but stated only that twenty to thirty acres of the property flooded. There was also evidence that Dennis relied upon the topography map showing twenty to thirty acres of swamp or wetlands within the property. In addition, there was evidence that Culbreath did not rely upon the statement of Dennis concerning the flooding of the property. Of importance is that Culbreath was given the topography map prior to signing the contract. The chancellor’s finding that Culbreath failed to meet the required burden of proof on the claims of fraudulent and negligent misrepresentation is supported by the evidence. Issue 3: Damages Culbreath argues that the chancellor erred in awarding any damages because the property was eventually sold for approximately $1,200,000. This amount was greater than the $850,000 Culbreath agreed to pay for the property. Dick Sanders testified that after Culbreath breached the contract, Sanders purchased seven additional acres adjacent to the property. Sanders also testified that the property was further developed including an additional road being built through the property. Sanders testified that the expanded and improved property was not sold as one tract of land, but was sold in seven or eight different tracts. The liquidated damages here were in the amount of $65,000 which included $10,000 cash and $55,000 in equipment. The earnest money here was approximately 7.6% of the purchase price. The need for liquidated damages is evident as it would be extremely difficult to estimate possible damages in the event of a breach. The language of the contract demonstrates that a preset amount of damages was the intention of the parties. It is implied in the chancellor’s award of earnest money as damages that he did not think the amount to be unreasonable. The subsequent expansion, improvement, and sale of the land should not render the liquidated damages provision in the contact meaningless. The contract involved a substantial sum for the purchase price. The exact damages that could result in the event of a breach would understandably be difficult to determine before hand, and could be substantial. The liquidated damages were well under ten percent of the purchase price, an amount that has been used in other contracts as a reasonable amount of earnest money. Being reasonable, it was within the discretion of the chancellor to enforce the liquidated damages provision of the contract. The chancellor was also authorized under the contract to award attorney’s fees to the prevailing party and properly followed the provisions of section 9-1-41 as to the reasonableness of the fees awarded. |
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