Bourland, Heflin, Alvarez, Minor & Matthews, PLC v. Rodney Heaton and Margaret Heaton and Loeb Properties
393 S.W.3d 671
Tenn. Ct. App.2012Background
- Loeb Properties purchased 4.18 acres in Kentucky under a contract dated Oct. 3, 2008, with Loeb depositing $50,000 earnest money.
- Loeb Properties terminated the contract March 2, 2009, claiming inability to secure retail tenants due to the economy.
- The Heatons disputed that termination was not authorized by the contract; interpleader was filed to hold the earnest money.
- The trial court granted summary judgment for Loeb on Section 8(a) grounds, ordering the Heatons to pay the remaining escrow and Loeb’s costs.
- On appeal, the court reversed, holding that the downturn did not authorize termination under Section 7 or Section 8(a), and awarded the Heatons the earnest money plus fees.
- The court applied Kentucky law to contract interpretation while applying Tennessee procedural rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 7 permits termination for economic downturn | Loeb contends downturn falls within Section 7's 'all and any such inquiry' grounds. | Heatons contend downturn is not an enumerated termination ground | Section 7 does not unambiguously authorize termination for economic decline |
| Whether Section 8(a) allows termination for economic downturn | Loeb asserts downturn qualifies as an adverse change 'between end of Inspection Period and Closing'. | Heatons argue downturn occurred pre-execution or outside the time window | Section 8(a) does not permit termination for economic downturn under the factual timeline |
| What governing law applies to contract interpretation | Choice-of-law provision to Kentucky should be applied; contract interpreted under KY law. | Not stated, but Heatons did not object to KY law; issue is whether KY law applies | Kentucky law applies to substantive interpretation; Tennessee rules govern procedure |
Key Cases Cited
- Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381 (Ky. App. 2002) (contract ambiguity; ordinary meaning governs; extrinsic evidence limited)
- Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99 (Ky. 2003) (ambiguity and interpretation; enforce terms as written when unambiguous)
- Mounts v. Roberts, 388 S.W.2d 117 (Ky. 1965) (strict enforcement of written instruments in absence of ambiguity)
- Cantrell Supply, Inc. v. Liberty Mut. Ins. Co. (alternative cite if needed), 94 S.W.3d 381 (Ky. App. 2002) (see above)
- Transport Ins. Co. v. Ford, 886 S.W.2d 901 (Ky. App. 1994) (ambiguity standard in contract interpretation)
- McMullin v. McMullin, 338 S.W.3d 315 (Ky. App. 2011) (ambiguities construed against the drafter)