Hambrick et al v. Mashhoon et al

Filing 13

REPORT AND RECOMMENDATION: For the reasons stated above, the undersigned Magistrate Judge recommends that the motion to dismiss 9 filed on behalf of Defendants Kaelin and French be GRANTED for failure to state a claim upon which relief can be granted and that the complaint against these Defendants be DISMISSED. Signed by Magistrate Judge John S. Bryant on 1/30/15. (xc:Pro se party by regular and certified mail.)(DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(afs)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
JAMES HAMBRICK and
DENISE HAMBRICK,
Plaintiffs
v.
HAMID MASHHOON, et al.,
Defendants
TO:

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No. 3:14-1052
Judge Trauger/Bryant
Jury Demand

THE HONORABLE ALETA A. TRAUGER
REPORT AND RECOMMENDATION
Defendants Charles Kaelin and Marcus French have filed

their motion to dismiss based upon the statute of limitations and
Plaintiffs’ alleged failure to state a claim upon which relief can
be granted (Docket Entry No. 9). Plaintiffs, who are proceeding pro
se, have not responded in opposition.
For the reasons stated below, the undersigned Magistrate
Judge

recommends

that

Defendants’

motion

be

GRANTED

and

the

complaint DISMISSED against Defendants Kaelin and French.
STATEMENT OF THE CASE
This case arises out of an option contract to purchase
certain real property owned by Plaintiffs James and Denise Hambrick
on Posey Hill Road in Mount Juliet, Wilson County, Tennessee.
Plaintiffs assert claims against Defendants Kaelin and French under
theories of breach of contract, breach of fiduciary duties and good
faith, and promissory fraud (Counts I, II and VII).

SUMMARY OF PERTINENT FACTS
According to the complaint, in early 2006 Defendant CRK
Real Estate, LLC, then owned solely by Defendant Kaelin and
represented

by

its

agent,

Defendant

French,

approached

the

Hambricks and proposed an agreement regarding the Hambricks’ home
and land located on Posey Hill Road near Mount Juliet, Tennessee.
Following negotiations, the Hambricks entered into the Option to
Purchase Real Estate (“the Agreement”) with Defendant CRK on
February 18, 2006. A copy of this Agreement is included as an
exhibit to the complaint (Docket Entry No. 1-1 at 39-46).
Summarizing

the

pertinent

provisions,

the

Agreement

provides that, in consideration for a payment of $25,000, the
Hambricks granted to CRK the option – but not the obligation – to
purchase their Posey Hill Road property for a purchase price of
$660,000. The term of this option was two years from the date of
execution, February 18, 2006. The Agreement also provided: “In the
event [CRK] sells the Property for more than Six Hundred Sixty
Thousand Dollars ($660,000), [CRK] shall pay to the [Hambricks]
one-half (½) of the excess less expenses at the time of closing of
such sale.” (Id. at 39). The Agreement provided that CRK could
exercise its option to purchase the Hambrick property by providing
written notice of its election to do so to the Hambricks on or
before the expiration of the two year option period (Id. at 41).
The Agreement allowed the Hambricks to retain possession of the

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property for a period of one year after the closing so long as they
maintained insurance on the home and its contents (Id.). Finally,
the Agreement contained the following provision in paragraph 14:
“Assignment. This Agreement may be assigned by (CRK).” (Id. at 41).
It appears undisputed that CRK never exercised this
option to purchase the Hambrick property under the terms of the
Agreement, and that the option therefore expired two years after
its execution, on or about February 18, 2008.
The Hambricks allege that “on or around July or August of
2006,” or “sometime prior to October of 2006,” Defendant French
“represented to the [Hambricks] that [CRK] promised to exercise its
option to purchase the Hambrick property in October of 2007 but
then subsequently failed to do so despite having the financial
resources in hand . . . .” (Id. at 20). The Hambricks assert that
in reliance on this representation by Defendant French, they
located and purchased a new home. Later, after CRK declined to
exercise its option to purchase their Posey Hill Road property, the
Hambricks sold the property to Defendant RM Wilson County Investor,
LLC for the amount of $500,000, or $160,000 less than the option
price contained in their option Agreement with CRK.
The Hambricks maintain that they have recently met Mr.
Jay Wilfong, who owned property near the Hambricks’ Posey Hill Road
property. The Hambricks claim that in March 2014 they learned
through Wilfong of certain transactions that occurred in September

3

2006 by which Defendant Kaelin, on behalf of CRK, conveyed property
owned by CRK, including the option to purchase the Hambricks’ Posey
Hill Road property, to RM Wilson County Investor, LLC, of which
Defendants Hamid Mashhoon and Carol Perrin were members (Docket
Entry 1-1 at 12).
Plaintiffs have attached as an exhibit to their complaint
a

copy

of

a

document

entitled

“Option

Agreement

and

Escrow

Instructions” dated September 25, 2006, between CRK and RM Wilson
County Investor, LLC (Docket Entry No. 1-1 at 94-107). In summary,
CRK in this agreement grants to RM Wilson County Investor LLC an
option to purchase certain property of CRK, including both owned
land, land under sales contracts, and land under options to
purchase. This agreement grants to RM the option – but not the
obligation – to purchase some or all of the included property of
CRK. Paragraph 1.4 of this agreement provides in pertinent part:
“To the extent that all or any portion of the Optioned Land is
included among the Property that [RM] intends to purchase, [CRK]
agrees that it shall exercise its option with respect to such
Optioned Land and acquire fee title to such Optioned Land prior to
the close of the Escrow (as defined below).” (Docket Entry No. 1-1
at 95).
The Hambricks also have included as an exhibit to their
complaint the “Amended and Restated Operating Agreement of CRK Real
Estate LLC” also dated September 25, 2006 (Docket Entry No. 1-2 at

4

14-64). By this agreement, Defendant Kaelin admitted RM Wilson
County

Investor,

consideration

of

LLC
a

as

capital

an

additional

contribution

member
paid

by

of
RM

CRK
to

in
CRK.

Paragraph 3.8 of this agreement grants to RM the sole right to
determine whether CRK should exercise any or all of the options
that are exercisable by their terms on or after January 1, 2008,
and that will lapse if unexercised (Docket Entry No. 1-2 at 27).
The Hambricks allege that these transactions between CRK
and RM, which were not disclosed to them, amount to a breach of
their option Agreement with CRK and a breach of fiduciary duties
and good faith owed to them by CRK, Kaelin and French, as well as
promissory fraud.
STANDARD OF REVIEW
In deciding a Rule 12(b)(6) motion to dismiss for failure
to state a claim upon which relief can be granted, the court must
view the complaint in the light most favorable to the plaintiff,
accepting all well-pleaded factual allegations as true. Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949-50 (2009).

This requirement of

accepting the truth of the complaint’s factual allegations does not
apply to legal conclusions, however, even where such conclusions
are couched as factual allegations. Id.
Civil

Procedure

8(a)(2)

requires

Although Federal Rule of

merely

“a

short

and

plain

statement of the claim,” the plaintiff must allege enough facts to
make the claim plausible. Bell Atlantic Corp. v. Twombly, 550 U.S.
5

544, 556 (2007). He must plead well enough so that his complaint is
more than “a formulaic recitation of the elements of a cause of
action.” Id. at 555. “The factual allegations, assumed to be true,
must do more than create speculation or suspicion of a legally
cognizable cause of action; they must show entitlement to relief.”
League of United Latin American Citizens v. Bredesen, 500 F.3d 523,
527 (6th Cir. 2007).
While a pro se complaint is “to be liberally construed”
and “must be held to less stringent standards than formal pleadings
drafted by lawyers,” Erickson v. Pardus, 551 U.S. 89, 94 (2007)
(quoting Estelle v. Gamble, 429 U.S. 97, 106 (1976)), “basic
pleading essentials” still apply. See Wells v. Brown, 891 F.2d 591,
594 (6th Cir. 1990). Moreover, “[d]istrict courts are not required
to conjure up questions never squarely presented to them or to
construct full blown claims from sentence fragments.

To do so

would ‘require . . . [the courts] to explore exhaustively all
potential claims of a pro se plaintiff, . . . [and] would . . .
transform the district court from its legitimate advisory role to
the improper role of advocate seeking out the strongest arguments
and most successful strategies for a party.’” Dixie v. Ohio, 2008
WL 2185487, at *1 (N.D. Ohio May 23, 2008) (quoting Beaudett v.
City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985)).

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ANALYSIS
As stated above, Plaintiffs Hambrick have not filed a
response

in

opposition

to

Defendants’

motion

to

dismiss.

Nevertheless, a district court cannot grant a motion simply because
the adverse parties have not responded. The Court is required, at
a minimum, to examine the movants’ motion to dismiss to insure that
they have discharged their burden. Carver v. Bunch, 946 F.2d 451,
455 (6th Cir. 1991).
The Hambricks’ claim against Defendants Kaelin and French
derives from, and must be analyzed by reference to, the terms of
the Agreement dated February 18, 2006, between the Hambricks and
CRK Real Estate, LLC (Docket Entry No. 1-1 at 39-46). The operative
provisions

of

this

Agreement

are

contained

in

17

numbered

paragraphs occupying approximately 4½ pages of text.
According to the Agreement, in exchange for a payment to
Mr. and Mrs. Hambrick in the amount of $25,000, the Hambricks
granted to CRK an exclusive option to purchase the Hambricks’ Posey
Hill Road Property at a purchase price of $660,000 for a period of
two years from the date of the Agreement. Significantly, the
Agreement

contains

no

provision

requiring

CRK

to

market

the

property to any third party or to exercise the option at any time.
Paragraph 14 granted CRK the express right to assign the
option contract. Paragraph 16 of the Agreement contains a standard
“integration clause,” which states as follows: “This Agreement

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constitutes the sole and entire agreement between the parties, and
no modification hereof shall be binding unless attached hereto and
signed by each party to this Agreement.”
Courts are required to enforce a contract as written
according to its plain terms, and are precluded from making a new
contract for the parties by adding or deleting provisions. Captain
D’s Realty, LLC v. EP-D, Ltd., 2013 WL 1803741 at *7-8 (Tenn. Ct.
App., Apr. 30, 2013). It is widely held that courts may not imply
additional terms in a contract or agreement where none clearly
exists. Werner v. Progressive Preferred Ins. Co., 310 Fed. Appx.
766, 769 (6th Cir. 2009). Moreover, in Tennessee, the parol evidence
rule does not permit contracting parties to use extraneous evidence
to alter, vary or qualify the plain meaning of an unambiguous
written contract. Dick Broad Co., Inc. of Tenn. v. Oak Ridge FM,
Inc., 395 S.W.3d 653, 672 (Tenn. 2013).
In Count I of their complaint, the Hambricks allege that
Defendants Kaelin and French “knowingly breached the provisions of
CRK’s contract with the Plaintiffs to utilize good faith efforts to
resell Plaintiffs’ subject property for a full two year period of
time . . . .” (Docket Entry No. 1-1 at 15). Contrary to this claim,
the undersigned Magistrate Judge finds that the terms of the
parties’ Agreement failed to contain any provisions requiring these
Defendants

or

CRK

“to

utilize

good

faith

efforts

to

resell

Plaintiffs’ subject property.” This count further alleges that

8

these Defendants breached their Agreement with the Hambricks by
seeking to transfer ownership and control of CRK land holdings to
another. However, the terms of the Agreement do not prohibit such
a transfer and, in fact, explicitly authorize CRK to assign the
Agreement. In summary, the undersigned finds that the explicit
terms of the Agreement do not impose upon Defendants Kaelin or
French the alleged duties that the Hambricks claim were breached in
Counts I and II.
In Count VII, the Hambricks allege promissory fraud
against Defendants Kaelin and French. According to the complaint,
Plaintiffs

allege

that

“sometime

prior

to

October

of

2006,”

Defendant French “represented to the Plaintiffs that [CRK] promised
to exercise its option to purchase the Hambrick property in October
of 2007 but then subsequently failed to do so despite having the
financial resources at hand . . . .” (Docket Entry No. 1-1 at 20).
The Hambricks assert that in reliance upon this “promise” by
Defendant French they purchased a new home, requiring them to pay
two mortgage notes.1
The undersigned Magistrate Judge finds that this claim
fails to state a claim for promissory fraud for at least two
reasons. First, the complaint contains no allegation that Defendant

1

The urgency and reasonableness of purchasing a second home appears
questionable in light of paragraph 7 of the Agreement, which grants the
Hambricks the right to retain possession of the property for a year after
closing of a sale, provided they maintained insurance on it.

9

French, when he allegedly represented “some time prior to October
of 2006" that CRK would exercise its option to purchase the
Hambricks’ property over a year later in October 2007, knew that
CRK had no intention to do so. This is an essential element of a
claim of promissory fraud. Stacks v. Saunders, 812 S.W.2d 587, 59293 (Tenn. Ct. App. 1990).
In addition, the undersigned finds that this claim by
Plaintiffs conflicts with the integration clause found in paragraph
16 of the Agreement. The first sentence of paragraph 16 states:
“This Agreement constitutes the sole and entire agreement between
the parties, and no modification hereof shall be binding unless
attached hereto and signed by each party to this Agreement.” The
Hambricks’ argument in Count VII, in effect, seeks to modify or
alter the terms of the Agreement by substituting an alleged oral
“promise” by Defendant French in place of the procedure for
exercise of the option stated in paragraph 5 of the Agreement. This
paragraph provides that CRK may exercise its option to purchase the
Hambricks’ property “by giving written notice of [its] election to
do so to [the Hambricks] at the address hereinafter designated.”
The effect of Plaintiffs’ argument in Count VII is to substitute
Defendant French’s representation in the place of the contractual
requirement that exercise of the option be accomplished by a
written notice to the Hambricks.

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For the foregoing reasons, the undersigned Magistrate
Judge finds that the complaint fails to state a claim against
Defendant Kaelin and French for which relief can be granted.
RECOMMENDATION
For the reasons stated above, the undersigned Magistrate
Judge recommends that the motion to dismiss filed on behalf of
Defendants Kaelin and French be GRANTED for failure to state a
claim upon which relief can be granted and that the complaint
against these Defendants be DISMISSED.
Under Rule 72(b) of the Federal Rules of Civil Procedure,
any

party

has

14

days

from

receipt

of

this

Report

and

Recommendation in which to file any written objections to this
Recommendation with the District Court. Any party opposing said
objections shall have 14 days from receipt of any objections filed
in this Report in which to file any responses to said objections.
Failure to file specific objections within 14 days of receipt of
this Report and Recommendation can constitute a waiver of further
appeal of this Recommendation. Thomas v. Arn, 474 U.S. 140 106 S.
Ct. 466, 88 L.Ed.2d 435 (1985), Reh’g denied, 474 U.S. 1111 (1986).
ENTER this 30th day of January, 2015.
/s/ John S. Bryant
JOHN S. BRYANT
United States Magistrate Judge

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