Dog House Investments, LLC v. Teal Properties, Inc.
448 S.W.3d 905
Tenn. Ct. App.2014Background
- Floods in May 2010 damaged Dog House’s leased property in Nashville; Dog House sued Teal Properties and Jerry Teal alleging breach of contract, promissory fraud, unjust enrichment, and veil-piercing.
- Lease between Dog House and Teal in June 2008 contained a Fire Clause requiring repair or termination timelines and rent abatement; Upkeep of Premises clause placed repair duties on Lessor.
- Amendment in May 2012; Dog House incurred over $35,000 in repair costs; Teal obtained >$40,000 in flood insurance proceeds but did not reimburse Dog House.
- Trial court found breach of contract and implied contract, plus promissory fraud; awarded Dog House $35,191.28 in compensatory damages, $10,000 punitive damages, and eight percent prejudgment interest against Teal; Teal was held personally liable as alter ego.
- On appeal Teal challenges lease interpretation, implied contract theory, promissory fraud, deductible offset, punitive damages, veil-piercing, and prejudgment interest; Court affirms in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fire clause scope and flood damage applicability | Dog House argues Fire Clause covers flood damage. | Teal argues ‘other cause’ excludes flood damage or exists only for fire. | Fire Clause includes flood damage; Teal breached by not reimbursing. |
| Promissory fraud sufficiency for punitive damages | Dog House relied on Teal’s promise to reimburse from insurance proceeds. | Teal contends no fraud or no punitive-damage basis. | Promissory fraud proven by clear and convincing evidence; punitive damages affirmed. |
| Piercing Teal Properties’ corporate veil | Teal Properties is alter ego; liability should extend to Teal personally. | Teal contends Teal Properties is a separate entity. | veil pierced; Teal personally liable. |
| Deductible reduction issue preservation | N/A | Issue not raised below; cannot be raised on appeal. | Issue not preserved; no reduction for deductible. |
| Prejudgment interest rate | Eight percent justified to compensate for use of funds. | Rate should align with post-judgment rate or be lower. | Eight percent prejudgment interest affirmed within discretion. |
Key Cases Cited
- Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885 (Tenn. 2002) (ambiguous contracts; construction rules; reasonableness standard)
- Hodges v. S.C. Toof & Co., 833 S.W.2d 896 (Tenn. 1992) (trial court factors for punitive damages; appellate review deferential)
- Rogers v. Louisville Land Co., 367 S.W.3d 196 (Tenn. 2012) (veil-piercing factors and substantial equities standard)
- Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9 S.W.3d 79 (Tenn. 1999) (contract interpretation; ambiguity; parol evidence allowed in ambiguous contracts)
- Jones v. Garrett, 92 S.W.3d 835 (Tenn. 2002) (standard for factual findings and credibility)