STATE EX REL. APPALOOSA BAY, LLC ET AL.
JOHNSON COUNTY, TENNESSEE, ET AL.
Session: January 25, 2017
from the Chancery Court for Johnson County Nos. 6948 &
7146 John C. Rambo, Chancellor.
owners of separate lots in a planned residential subdivision
of twenty lots brought this action against the Johnson County
Regional Planning Commission and several state entities after
the subdivision's developer went into bankruptcy and
development of the subdivision was halted. When the developer
had earlier posted a performance bond securing the completion
of the subdivision's infrastructure, the planning
commission had approved the subdivision plat, although
infrastructure, including roads and utilities, had not been
completed. After developer's bankruptcy, the State of
Tennessee bought the land comprising all of the subdivision
lots, except the two owned by the plaintiffs. All of the
remaining land in the intended subdivision, except for
several other lots purchased by individuals before the
bankruptcy, is now part of the Doe Mountain Recreation Area -
an entity subsequently created by the State. Plaintiffs
brought this action for breach of contract between developer
and the planning commission. Plaintiffs also asked the trial
court to issue a writ of mandamus compelling the county to
complete the proposed subdivision infrastructure. The trial
court granted the defendants summary judgment. The plaintiffs
appeal. We affirm.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed; Case Remanded
M. Fowler and Arthur M. Fowler, III, Johnson City, Tennessee,
for the appellants, Appaloosa Bay, LLC, David Castillo, and
Jeffrey M. Ward, Greeneville, Tennessee, for the appellees,
Johnson County, Tennessee, and Johnson County, Tennessee
Regional Planning Commission.
Butler Alderson, Mountain City, Tennessee, for the appellee,
Doe Mountain Recreation Authority.
Herbert H. Slatery III, Attorney General and Reporter,
Andrée S. Blumstein, Solicitor General, and Jay C.
Ballard, Deputy Attorney General, Nashville, Tennessee, for
the appellee, Tennessee Department of Finance and
Charles D. Susano, Jr., J., delivered the opinion of the
court, in which Frank G. Clement, Jr., P.J., M.S., and Thomas
R. Frierson, II, J., joined.
CHARLES D. SUSANO, JR. JUDGE.
2006, Doe Mountain Development Group, Inc. (developer) owned
about 8, 500 acres on Doe Mountain in Johnson County.
Developer intended to build a private residential subdivision
known as Charter Ridge Club. Following the creation of a
subdivision plan and plat with twenty numbered lots,
developer presented the plat for final approval to the
planning commission on August 14, 2006. According to
plaintiffs, at the time of the submission of the plat, the
subdivision "consisted of stakes along a rough-cut dirt
road identifying the 20 lots." There were no utilities.
The approximately three-mile road to the entrance of the
proposed subdivision was a gravel and dirt road,
appropriately identified as "gravel road" on the
plat. The lots varied in size, the smallest being 1.32 acres,
and the largest 2.96 acres. The total acreage of the twenty
lots was 35.95 acres.
minutes of the planning commission meeting on August 14, 2006
state the following:
An estimate to construct the roads for this subdivision, and
the 16, 000 foot access road to it, was done . . . for $451,
000. [Developer] proposed depositing $451, 000 in the
BB&T Bank in Johnson City to cover the cost of developing
the roads. Final approval was granted subject to the cash
deposit being executed, TDEC stamping the plat, and the other
required signatures with staff's recommendation.
The plat was recorded on September 13, 2006. The $451, 000
performance bond was deposited in escrow to secure the
completion of the subdivision's roads and utilities. On
January 17, 2007, plaintiff Appaloosa Bay, LLC purchased a
2.11 acre lot in the planned subdivision. On February 15,
2008, plaintiffs David Castillo and Deborah Castillo
purchased a 1.71 acre lot. On June 9, 2008, the planning
commission voted to release $150, 000 of the money held in
escrow, apparently for work on the roads. After this
expenditure, a second, revised escrow agreement in the amount
of $301, 000 was executed on June 12, 2008.
defaulted on its loan obligations and the mortgagee
foreclosed on the property. The foreclosure did not affect
plaintiffs' lots. The subdivision's infrastructure
was not completed. Developer filed for bankruptcy on August
24, 2011. On March 26, 2012, the bankruptcy court entered an
order approving the bankruptcy plan for liquidation of
developer's assets. As part of the plan, the property
owned by developer was sold to the Nature Conservancy, free
and clear of encumbrances or claims. Nature Conservancy then
sold 8, 000 acres on Doe Mountain to the State of Tennessee.
The State then transferred the property to the Doe Mountain
Recreation Authority by way of a quitclaim deed as part of
the creation of that latter entity, which opened to the
public in November 2013. See Tenn. Code Ann. §
11-25-101 et seq. (2012) (The Doe Mountain
Recreation Authority Act of 2012).
December 10, 2012, the planning commission voted to declare
developer and the subdivision development to be in default.
The commission further approved a motion to "release the
bond held in escrow to the State of Tennessee for the sole
purpose of infrastructure on Doe Mountain." The amount
held in escrow was $301, 722.88, which the planning
commission directed to be released to the State. The State
applied $300, 000 of the funds toward the purchase of the
property from the Nature Conservancy, and returned the
remainder to Johnson County.
brought this action,  the essence of which is a request for the
trial court to issue a writ of mandamus requiring Johnson
to provide electricity to the [s]ubdivision, to provide water
to the [s]ubdivision, and to complete the road within the
[s]ubdivision in accordance with Defendant Johnson
County's Subdivision Regulations; and that [the] County
accept the road from Harbin Hill Road located in Johnson
County, Tennessee, to the [s]ubdivision as a public road.
Plaintiffs also asserted a claim for breach of contract,
alleging that Johnson County breached its duty "under
the two Cash on Deposit Escrow Accounts . . . by failing to
apply money held in escrow to complete the construction of
the [s]ubdivision and all improvements thereto." Named
as defendants were Johnson County, the Doe Mountain
Recreation Authority, and the Tennessee Department of Finance
and Administration. The trial court later allowed plaintiffs
to add the Johnson County Regional Planning Commission as a
defendant. Following discovery, the trial court granted
defendants summary judgment, holding that Johnson County had
no obligation or duty that might be enforced by a writ of
mandamus. The trial court further held that plaintiffs were
neither parties nor third-party beneficiaries to
developer's performance bond agreement between it and the
planning commission. Plaintiffs timely filed a notice of
Plaintiffs raise the following issues:
1. Whether the trial court erred in holding that they do not
have standing to sue as third-party beneficiaries under the
subdivision performance bond agreement between the developer
and the planning commission.
2.Whether the trial court erred in denying plaintiffs'
request to issue a writ of mandamus requiring Johnson County
to complete the construction and installation of the
3. Whether the trial court erred in denying plaintiff's
request for a declaratory judgment that the gravel road from
Harbin Hill road to the plaintiffs' lots is a county road
that must be maintained by Johnson County.
review a grant of summary judgment in accordance with the
following standard, as established by the Supreme Court:
Summary judgment is appropriate when "the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of
law." Tenn. R. Civ. P. 56.04. We review a trial
court's ruling ...