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IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE

FOR PUBLICATION

FILED

CONCRETE SPACES, INC., FAUX FUR, INC., PAULETTE DALTON, STUART DALTON, Plaintiffs/Appellants, v. HENRY SENDER, Individually, DARREN LIFF, ZACKARY LIFF, HENRY SENDER, EUGENE SACKS and wife, RUTH SACKS, d/b/a LIFF, SENDER & SACKS, Tenants in Common, NATIONAL BUILDING CORP., Defendants/Appellees.

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Filed: August 30, 1999 August 30, 1999 DAVIDSON COUNTY Hon. Whitney Stegall Chancellor Cecil Crowson, Jr. Appellate Court Clerk

Supreme Court No. 01S01-9812-CH-00224

FOR PLAINTIFFS/ APPELLANTS Steve North & Mark North Madison, TN Abby Rubenfeld Nashville, TN

FOR DEFENDANTS/ APPELLEES Charles Hampton White Richard L. Colbert David A. King Cornelius & Collins Nashville, TN

OPINION

REMANDED FOR NEW TRIAL.

DROWOTA, J.

We granted this appeal to address the application of the election of remedies doctrine in Tennessee and to clarify the proper procedure to be implemented when a plaintiff is entitled to both punitive damages in conjunction with a common law claim and to multiple damages pursuant to a statutory remedy. We have determined that a plaintiff is entitled to a calculation of the amount of punitive damages and multiple damages that are warranted under each theory of liability. Only after these assessments are made is the plaintiff required to make an election of remedies. Because this procedure was not implemented in this case, we remand the cause to the trial court for a new trial.

BACKGROUND This action arose from a dispute over a lease involving space in Cummins Station, a piece of commercial property in Davidson County. Henry Sender, along with four other investors, purchased Cummins Station, a five-story building in downtown Nashville, in March 1993, with plans to renovate the eighty-six-yearold structure and to attract commercial tenants. Paulette Dalton, who owned a clothing boutique and an art gallery in downtown Nashville, learned in July 1993 that commercial space was available for lease in Cummins Station and became interested in relocating her businesses to the renovated building. Ms. Dalton had already begun negotiations with Gavin Gaskins, who managed several area nightclubs, to relocate her boutique and gallery to a location where they could be combined with a nightclub. Ms. Dalton and Mr. Gaskins thought the newly renovated Cummins Station would provide adequate space and a prime location for their project. They formed two corporations through which to conduct their various businesses; Ms. Dalton and her husband incorporated Concrete Spaces, -2-

Inc. to manage the clothing boutique and art gallery, and Ms. Dalton and Mr. Gaskins incorporated Faux Fur, Inc. to manage the nightclub.

After inspecting the available space in Cummins Station and becoming satisfied that the property was suitable for their venture, Ms. Dalton and Mr. Gaskins began negotiations to enter into a lease with Henry Sender and his sonin-law, Michael Cooper, president of National Building Corporation ("NBC"), the company managing the Cummins Station renovation project. Ms. Dalton asserted her intent to open the businesses in October, and the leasing agents assured her that she would be able to occupy the proposed space by October 1, 1993.

After considerable negotiations, the parties executed two leases on August 26, 1993. The Daltons entered into one lease on behalf of Concrete Spaces, Inc. for the space to be used for the boutique and gallery, and Ms. Dalton and Mr. Gaskins entered into the other on behalf of Faux Fur, Inc. for the space to be used as a nightclub. Each lease was for a term of five years and provided for monthly rent of $1,222.50. The leases also stipulated that additional improvements would be made to the property and included an exhibit illustrating the areas to be refurbished.

In the months following the execution of the leases, several disputes arose between the parties over allocation of responsibility for the continued improvements on the rented space. One of the most significant disagreements concerned the obligation to pay for electrical work during renovation. Not surprisingly, construction was delayed. Nevertheless, Ms. Dalton was able to -3-

conduct a grand opening of her clothing boutique and art gallery on October 22,1993.

Ms. Dalton successfully acquired insurance coverage for the inventory in her shops because she obtained assurances from NBC that the building was secure and that the fire sprinkler system was sufficient. Despite these representations, Ms. Dalton's boutique and art gallery were burglarized on two occasions in October 1993. All of her inventory was stolen, along with a safe containing $2,350 in cash, business documents, a stereo system and a cash register. Ms. Dalton contended that Henry Sender and NBC should incur responsibility for her extensive loss because she relied upon their assurances that the building was secure. The lessors refused to reimburse Ms. Dalton, insisting that her lease stipulated that she was responsible for the security of the space.

Ms. Dalton was unable to reopen the boutique and gallery and concentrated instead on preparing for the grand opening of the nightclub she was to operate with Mr. Gaskins. Because of construction delays, the club's opening was rescheduled from October 1993 until January 28, 1994. In the meantime, Ms. Dalton and Mr. Gaskins continued to disagree with their lessors about responsibility for the electrical work that had been completed in the leased space. Moreover, in early January 1994, Ms. Dalton was unable to obtain beer and dance permits because the lessors failed to provide her with a use and occupancy permit and a certificate from the fire marshal. Relations between the parties steadily worsened, culminating with Mr. Sender's refusal to meet with Ms. Dalton. In early November 1994, Mr. Gaskins informed Henry Sender that Faux Fur, Inc. was -4-

terminating its lease due to continual breaches by the lessors. Mr. Sender asserted that he and NBC intended to hold Faux Fur, Inc. fully responsible for its obligations under the lease.

Through an attorney, Ms. Dalton informed the lessors on April 6, 1994, that they had breached the leases with Concrete Spaces, Inc. and Faux, Fur, Inc. by delaying construction and by failing to obtain a use and occupancy permit from the fire marshal. The attorney asserted that Ms. Dalton and Mr. Gaskins intended to vacate the leased premises on April 11, 1994.

The Daltons and the two corporations filed suit on April 7, 1994, in the Chancery Court for Davidson County against Henry Sender, NBC and the partnership that owned Cummins Station. The plaintiffs sought compensatory, punitive and treble damages under claims for breach of contract, negligent misrepresentation, fraudulent misrepresentation and violation of the Tennessee Consumer Protection Act. The essence of the Daltons' claim was that Mr. Sender and his business associates had deceived them about the quality and availability of the space in Cummins Station and that Mr. Sender had "intentionally carried on a systematic plan of harassment and lack of cooperation" to force them to abandon their leases in order to enable him to lease the space to others on more favorable terms. The lessors filed a counterclaim asserting that the plaintiffs had breached the leases.

Following a nine-day trial, the trial court properly instructed the jury on the elements of the plaintiffs' common law claims, including breach of contract, -5-

intentional misrepresentation1 and negligent misrepresentation and on the defendant's counterclaim for breach of contract. The court also properly instructed the jury that the plaintiffs were seeking punitive damages and that such damages could be awarded only if the jury made an underlying award of compensatory damages. However the trial court provided no initial instruction on the Tennessee Consumer Protection Act. After deliberations had begun, the jury requested a copy of the Consumer Protection Act. In response to this inquiry, the trial court merely gave a cursory explanation of the Act's purpose and informed the jury that it was required to determine whether the plaintiffs had proven, by a preponderance of the evidence, that the defendant engaged in an unfair and deceptive business practice.

Compounding the confusion surrounding the jury instructions, the special verdict form did not clarify the pivotal issues to be decided by the jury. Due to poor drafting, both grammatical and substantive, the jury was not given an opportunity to convey its findings under each theory of liability presented by the plaintiffs. The special verdict form, reviewed by the parties and submitted to the jury by the trial court, appears below with the jury's responses.

The record in dicates th at the terms "intentional misrepresentation," "fraudulent misrepresentation" and "fraud" were used interchangeably by the court and partie s in re ferrin g to th is cause of action. Because these terms are synonymous, we will refer to this claim as intentional misre presen tation.

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W e, the jury, in the cause of Con crete Spa ces , Inc., e t al. v. H enry Sen der, e t al. find as follows: 1. We find for the plaintiff against the defendant and fix the com pensa tory dam ages a t _$75,000 plus accru ed attorneys fees through case closure .2 OR 2. We find for the defendant against the plaintiff and fix the compensatory damages at __________.

3.

We find that there was no meeting of the minds and, therefore, no contrac t.3 YES _____ OR NO __X___

4.

If com pen sato ry dam age s for the p laintiff were fixed by the jury, then the jury will answer this question. Are the plaintiffs due punitive damages. YES __X___ OR NO _____

5.

If you find that the plaintiffs are entitled to compensatory damages, did such damages arise from an unfair or deceptive act or practice by the defe ndants under th e Ten nesse e Con sum er Act [sic]? YES __X___ OR NO _____

Since the jury awarded the plaintiffs $75,000 in compensatory damages and indicated that punitive damages were warranted, all parties consented to a hearing on punitive damages pursuant to Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901-902 (Tenn. 1992). At the conclusion of the hearing, the jury awarded the plaintiffs $1,100,000 in punitive damages. The trial court subsequently remitted that award to $500,000, the amount prayed for in the complaint.

The jury later clarified that it intended to include the $26,000 the p laintiff s had incur red in attor neys fees up until trial in its award of $75,000, leaving a pure com pensa tory award of $49,0 00. The special verdict form did not provide the jury with an opportunity to communicate whether the contract had been breached.
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The defendants appealed the judgment, primarily taking issue with the punitive damages award. The Court of Appeals first recognized that punitive damages are not available in conjunction with a claim under the Tennessee Consumer Protection Act. See Lorentz v. Deardan, 834 S.W.2d 316, 320 (Tenn. App. 1992); Paty v. Herb Adcox Chevrolet Co., 756 S.W.2d 697, 699 (Tenn. App. 1988). Because the jury awarded the plaintiffs punitive damages and also indicated, in response to Question Five, that the award of compensatory damages arose under the Tennessee Consumer Protection Act, the Court of Appeals deemed the verdicts inconsistent.

The intermediate court stated that an inconsistent verdict "resolves no conflicts and is no verdict at all," see McInturff v. White, 565 S.W.2d 478, 481 (Tenn. 1976), and emphasized that no effect can be given "to a jury's verdict based on irreconcilably inconsistent answers to special interrogatories." See Hock v. New York Life Ins. Co., 876 P.2d 1242, 1259 (Colo. 1994); Carr v. Strode, 904 P.2d 489, 503 (Haw. 1995); Shamrock, Inc. v. FDIC, 679 N.E.2d 344, 349 (Mass. Ct. App. 1994). Recognizing that verdicts have both a liability and a damages component,4 the court concluded that the jury's inconsistent findings related only to damages and did not invalidate the verdict with respect to liability and compensatory damages. Because punitive damages and treble damages may not be recovered in the same action, see Lorentz, 834 S.W.2d at 320; Paty, 756 S.W.2d at 699, the Court of Appeals then vacated the award of punitive damages as incompatible with the finding that compensatory damages arose from a

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See All v. John Gerber Co., 36 Tenn. App. 134, 138, 252 S .W.2d 13 8, 139 (1952).

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violation of the Consumer Protection Act and remanded the case for a determination of whether the compensatory damage award should be trebled in accordance with the Consumer Protection Act pursuant to Tenn. Code Ann.

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