September 17, 2008

Contractual provision requiring approval from an architectural review committee prior to construction of a new home requires a good faith effort

JAMES B. JOHNSON , ET AL v. CHARLIE B. MITCHELL, JR., ET AL. (Tenn.Ct.App. September 17, 2008).

Plaintiffs appeal the Chancery Court's grant of summary judgment in this breach of contract action. Finding no error, we affirm the Chancery Court's judgment.

Opinion may be found at the TBA website:

"Plaintiffs ... entered into a contract with defendant ... for the purchase of an unimproved lot ... on November 11, 2004. The contract price was $150,000.00, to be paid upon approval of the Johnsons’ building plans and their securing a construction loan; they tendered $1,000.00 as an earnest money deposit. The Johnsons were given a copy of design criteria for the subdivision, including architectural guidelines and design review procedures, when they signed the contract; they were also given a copy of the Declaration of Protective Covenants, Conditions and Restrictions for Phase II of Magnolia Vale. The design criteria required the Johnsons to receive approval of their plans from the architectural review committee prior to commencing construction." Id.

"The Johnsons filed suit against CBM and Charlie B. Mitchell, Jr., (“Mitchell”) for breach of contract, asserting that CBM’s action in voiding the contract constituted a breach of the contract
and requesting specific performance." Id.

"[T]he Johnsons were obligated to submit plans to the architectural review committee for approval, with such approval being a precondition of closing on the sale. Approval of the plans was in the sole discretion of the committee and that approval was never obtained. The affidavit of Mr. Lowry established that, as early as August 3, 2005, Mr. Johnson had indicated dissatisfaction with the decisions of the committee rejecting the two sets of plans submitted as of that date and had stated his unwillingness to cooperate further with CBM, thereby supporting CBM’s contention that the Johnsons did not deal in good faith. Inasmuch as a party who has materially breached a contract cannot recover on it [], a finding that the Johnsons breached the contract would negate an essential element of their claim and entitle CBM to judgment as a matter of law. ... The actions and inactions of the Johnsons support a finding that they breached the contract with CBM by repudiating it and in failing and refusing to perform their responsibilities." Id. (citations omitted).