September 23, 2008

Owner who failed to notify State that land purchased for road construction was subject to a lease interest must indemnify State against suit by lessee

STATE OF TENNESSEE, ET AL. v. GOOD TIMES, LTD., ET AL. (Tenn.Ct.App. September 23, 2008).

The State of Tennessee ("State") sued Good Times, Ltd. ("Good Times") and others with regard to real property deeded to the State by Good Times after the State was sued for inverse condemnation by Good Times' lessee, Pun Wun Chan d/b/a #1 China Buffet ("China Buffet"). The State claimed that it was entitled to indemnity from Good Times in the inverse condemnation action under its warranty deed. The Trial Court consolidated the State's case against Good Times with the inverse condemnation action and then bifurcated the trial. The inverse condemnation case was tried before a jury and China Buffet was awarded a judgment against the State. The Trial Court then granted summary judgment to Good Times in the State's case against Good Times and dismissed the State's case. The State appeals to this Court. We vacate the grant of summary judgment to Good Times, grant the State summary judgment against Good Times, and remand this case to the Trial Court for a determination of the amount of damages, and for further proceedings as necessary with regard to all other parties and claims.

Opinion may be found at the TBA website:

"China Buffet had a leasehold interest in the entire property including the portion deeded to the State. China Buffet claimed, and was awarded, incidental damages to its interest in the entire property because the fair market value of the property has been affected by a significant and permanent loss of parking space, which has resulted in the loss of access to and utility of the restaurant." Id. (quotations omitted)

"Plus, the Agreement of Sale executed by Cazana on behalf of Good Times provided a space for Good Times to disclose the names of lessees or any other party who had any interest in the property being conveyed and that space was left blank. Cazana could have filled in this blank and taken this opportunity to inform the State that China Buffet had not been compensated by Good Times for its interest in the Property. He did not." Id.