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Adler v. Double Eagle Properties Holdings LLC

Court of Appeals of Tennessee, Memphis

April 2, 2015

MICHAEL ADLER
v.
DOUBLE EAGLE PROPERTIES HOLDINGS, LLC, ET AL.

Session February 24, 2015.

Appeal from the Chancery Court for Shelby County No. CH0809082 Arnold B. Goldin, Chancellor.

Roger A. Stone and Lisa N. Stanley, Memphis, Tennessee, for the appellant, Airways Commons, LLC.

Jeremy G. Alpert, Memphis, Tennessee, for the appellee, Double Eagle Properties Holdings, LLC.

J. Steven Stafford, P.J., W.S., delivered the opinion of the Court, in which Brandon O. Gibson, J., and Kenny Armstrong, J., joined.

OPINION

J. STEVEN STAFFORD, JUDGE.

Background

This is the second appeal in this case involving the interpretation of a commercial transaction involving an interest in real estate. Accordingly, we take many of the facts from our prior Opinion, Adler v. Double Eagle Properties Holdings, LLC, No. W2010-01412-COA-R3-CV, 2011 WL 862948 (Tenn. Ct. App. March 14, 2011) (“Adler I”). In Adler I, we stated:

Airways Commons, LLC (“Airways” or “Seller”) owned a commercial office building located at 3385 Airways Boulevard, Memphis, Tennessee. Fixed atop the building is a cellular tower [owned by BellSouth Mobility LLC d/b/a Cingular Wireless (“Cingular Wireless”). On November 30, 2005, Airways entered into an agreement styled “Rooftop Lease and Assignment Agreement” (“Rooftop Agreement”) with Unison Site Management, LLC (“Unison”). . . .

Adler I, 2011 WL 862948, at *1. The Rooftop Agreement was executed by Manouchehr Malekan, the President and sole member of Airways.

As we explained in Adler I: “The Rooftop Agreement purported to lease to Unison the rooftop portion of the building for the use and maintenance of the cellular tower. In exchange, Unison paid Airways $135, 000 as complete consideration upon the signing of the Rooftop Agreement.” Id. The Rooftop Agreement referred to the transaction as a lease and provided that the term of the lease was for thirty years. The consideration for the lease, however, was characterized as a “purchase price[.]” In addition, the Rooftop Agreement contained an exhibit providing that Airways “assign[ed] and [transfer[ed] to Unison . . . all of its right, title and interest in, to and under any lease agreements. . . .” The Cingular Wireless lease was specifically cited as being included in the assignment.

Contemporaneously with the signing of the Rooftop Agreement, Unison assigned its interest in the agreement to its wholly-owned subsidiary, Cell Tower Lease Acquisition, LLC (“Cell Tower”). This assignment was styled “Assignment of Easement” and was recorded with the Shelby County Register of Deeds. . . .

Id. Airways and Unison operated under the Rooftop Agreement for several years without dispute. However,

[o]n April 8, 2008, Double Eagle Properties Holdings, LLC (“Double Eagle” or “Buyer”) entered into an agreement with Airways for the purchase and sale of the entire building. This agreement was styled “Commercial Purchase and Sale Agreement” (“Purchase Contract”). The Purchase Contract contained an assignment of leases provision under which Airways assigned and conveyed its interest as landlord in all leases on the building to Double Eagle.

Id. The Purchase Contract further provided that for any assignments of leases required under the contract, any rents due would be prorated between Airways and Double Eagle based on their remaining term at the time of closing on the Purchase Contract. To effect this obligation:

Airways was required to submit to Double Eagle a complete and accurate rent roll describing the terms of all leases on the building. As a “Special Stipulation, ” Paragraph 17 of the Purchase Contract stated that “[p]urchaser understands that Cingular Wireless has a perpetual easement on the property relating to cell towers on the roof. No rent is provided to the owner. Cingular Wireless pays [its] own utilities of $500– $750.00/month.”

Id. The Purchase Contract also contained the following provision:

In the event that any party hereto shall file suit for breach or enforcement of this Agreement (including suits filed after closing which are based on or related to the Agreement), the prevailing party shall be entitled to recover all costs of such enforcement, including reasonable attorney's fees.

Subsequent to the execution of the Purchase Contract, Double Eagle performed a title search on the property, which revealed the Rooftop Agreement. A dispute soon arose as to whether payments under the Rooftop Agreement were rents subject to proration between Airways and Double Eagle:

After execution of the Purchase Contract, but before closing on the purchase and sale of the building, Double Eagle raised an issue with Airways as to whether the Rooftop Agreement between Airways and Unison was, in fact, a lease subject to the assignment of leases provision in the Purchase Contract. Double Eagle asserted that the Rooftop Agreement was, in fact, a lease and that the $135, 000 Unison paid to Airways was prepaid rent that should be prorated under the Purchase Contract and paid to Double Eagle. Airways contended that the Rooftop Agreement was, in fact, an easement and not subject to the assignment of leases, and that the $135, 000 was the purchase price paid by Unison for the easement.

Id.

The parties were unable to resolve the dispute prior to the closing of the property. As such,

[a]s a condition to closing, which occurred on April 18, 2008, the parties agreed to escrow the disputed funds “until such time as a court of competent jurisdiction shall determine what amount, if any, received by Seller from Unison should be paid to Buyer pursuant to the terms of the [Purchase] Contract.” On May 15, 2008, the escrow agent, attorney Michael Adler, filed a petition to interplead $135, 000 in escrowed funds in the Chancery Court for Shelby County, naming as defendants, Double Eagle and Airways. Double Eagle and Airways both filed answers and cross-claims against each other. Both cross-claims sought a declaratory judgment as to the proper allocation and distribution of the $135, 000 received by Airways from Unison. Double Eagle sought a construction of both the Purchase Contract and the Rooftop Agreement, while Airways maintained that the dispute should be resolved by exclusive reference to the Purchase Contract.

Id. at *2 (footnote omitted). Unison, however, was never made a party to the lawsuit. Airways and Double Eagle later agreed to allow the escrow agent to deduct his attorney's fees and expenses, leaving a total of $132, 425.00 in escrow.

Thereafter,

[o]n July 24, 2009, Double Eagle, as cross-complainant, filed a motion for summary judgment, memorandum of law, and statement of undisputed facts. On August 3, 2009, Airways likewise filed a motion for summary judgment, memorandum of law, and statement of undisputed facts. Both parties subsequently filed responses to these motions for summary judgment and statements of undisputed facts. Throughout these filings, much litigation focused on whether the Rooftop Agreement was a lease or an ...

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