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Bowers v. Estate of Mounger

Court of Appeals of Tennessee, Knoxville

June 29, 2017


          Session February 27, 2017

         Appeal from the Circuit Court for Roane County No. 13-CV-76 Michael S. Pemberton, Judge

         The plaintiff initiated this action, claiming, inter alia, a breach of contract. The plaintiff alleged that he was bringing the action as the assignee of a limited liability company, which was an original party to the contract at issue. The trial court granted summary judgment in favor of the defendant estate, also an original party to the contract at issue, determining that the plaintiff lacked standing to file the action. The plaintiff timely appealed. Determining that the plaintiff possessed standing, we reverse the trial court's grant of summary judgment. We affirm the trial court's decision to allow the estate to amend its responses to the requests for admission propounded by the plaintiff.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in Part, Reversed in Part; Case Remanded.

          John P. Konvalinka and John R. Anderson, Chattanooga, Tennessee, for the appellant, Nelson E. Bowers, II.

          Daryl R. Fansler, Margo J. Maxwell, and Archie R. Carpenter, Knoxville, Tennessee, for the appellee, Estate of Katherine N. Mounger.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which Charles D. Susano, Jr., and W. Neal McBrayer, JJ., joined.



         I. Factual and Procedural Background

         This dispute involves an agreement for the purchase and sale of real property. The facts surrounding execution of the agreement are essentially undisputed. McKenzie Loudon Properties, LLC ("MLP"), was formed as a Tennessee limited liability company on April 27, 2007, by co-founders Steve A. McKenzie and Greg Steele. On May 9, 2007, MLP entered into a Purchase and Sale Agreement ("the Agreement") to pay a total purchase price of $15, 200, 000 for 1, 240 acres located in Roane County, Tennessee ("the Property"). The seller was the Estate of Katherine M. Mounger ("the Estate"). The Agreement was executed by MLP's Chief Member, Mr. McKenzie, and the Estate's co-executors, E. Jay Mounger and Katherine Mounger Lasater (collectively, "Co-Executors"). The plaintiff in this action, Nelson E. Bowers, II, did not own an interest in MLP until he obtained an assignment of interest from Mr. Steele on March 27, 2013. Mr. Bowers's original complaint, however, is based on a sequence of events related to the Agreement that occurred before he obtained his interest in MLP.

         The Agreement provides in pertinent part:

Buyer shall have all reasonable access necessary during the Due Diligence Period to conduct all reviews of the Property Buyer deems necessary. Buyer shall have the option prior to the expiration of the Due Diligence Period to terminate this Agreement and all obligations of Buyer hereunder. Whether Buyer exercises such right of termination or not, Buyer shall furnish Seller with copies of all Due Diligence materials without representation or warranty. Except as set forth below in this paragraph, the Earnest Money shall be non-refundable to Buyer. The Buyer shall proceed forthwith within thirty (30) days of the date hereof to cause the title to the Property to be examined by an attorney or title insurance company selected by Buyer and to obtain a title insurance commitment at Buyer's sole expense. In the event that such examination shall disclose any exception to the title to the Property other than the Permitted Exceptions, Buyer shall notify the Seller thereof in writing within ten (10) days of receipt of a title report or title commitment. The Seller shall have thirty (30) days after written notice within which to (a) make said title marketable or to cure or correct any defects in title or to remove any encumbrance that cannot be removed by payment of money out of the purchase price to be paid on Closing of this Agreement; or (b) Seller may advise Buyer that Seller does not intend to cure said defect, in which later event Buyer may cancel this Agreement only within 5 days of receipt of Seller's notice and receive an immediate return of the Earnest Money. Failure to terminate this Agreement as foresaid shall constitute acceptance by Buyer of such defect. Marketable title as used herein shall mean title which a title insurance company licensed in the State of Tennessee will insure at its regular rates, subject only to standard exceptions and matters specified herein. The failure of the Buyer to notify Seller of any title defect within ten (10) days of Buyer's receipt of a written title examination or title commitment showing such exception will constitute Buyer's acceptance of any such exception. Buyer shall furnish Seller with a copy of Buyer's title insurance commitment and any new survey promptly upon receipt of same. The Seller shall have the right to extend the date of Closing for a reasonable period of time not to exceed thirty (30) days to make the title marketable.

         (Emphasis in original.)

         In furtherance of the contract, MLP paid $100, 000 in earnest money to the Estate upon the Agreement's execution on May 9, 2007. MLP subsequently tendered a check for $50, 000 to the Estate on September 5, 2007, in order to extend the "Due Diligence Period" provided by the Agreement for an additional thirty days. The Estate negotiated both of these checks, which were deposited into the Estate's account. Although it is undisputed that a closing on the sale did not occur, the parties hereto disagree regarding the reason for this failure. Charles Mounger, Co-Executors' brother, recorded deeds to a portion of the Property on November 8, 2007. According to an affidavit executed by attorney Archie R. Carpenter, who had represented the Estate since 2007 (and is co-counsel on appeal), MLP negotiated directly with Charles Mounger and, through counsel, MLP "expressed a desire to close on the sale of the Property within ten (10) days after the title dispute with Charles Mounger was resolved." The dispute with Charles Mounger ultimately was resolved via litigation filed by the Co-Executors, see Mounger v. Mounger, No. E2010-02168-COA-R3-CV, 2012 WL 764913, at * 1 (Tenn. Ct. App. Mar. 12, 2012), and Mr. Carpenter asserted in his affidavit that he conveyed three offers to close on the property to MLP in July and August 2008, following entry of a final judgment in that litigation. Regardless, Mr. Bowers asserted via motion for summary judgment that the Estate did not provide clear title to the property within the terms of the Agreement.

         As to the procedure set forth in the Agreement for MLP to recover its earnest money, the Estate claims that MLP did not notify the Estate of any claimed defect regarding title to the Property until October 31, 2007. The Estate also maintains that MLP did not provide the Estate with a copy of a title insurance commitment or a copy of the survey required by the Agreement. For its part, MLP was administratively dissolved and became inactive on August 22, 2008, as demonstrated by a copy of MLP's Certificate of Existence from the Tennessee Secretary of State, dated March 6, 2015. In the March 27, 2013 assignment of interest, however, Mr. Steele "transfer[red] and assign[ed] his entire Membership Interest and any and all interest he [had] in [MLP], its assets, rights and otherwise to [Mr.] Bowers." In the assignment of interest, Mr. Steele noted that Mr. McKenzie had filed for bankruptcy on or about December 20, 2008.[1] The record does not reflect what ultimately became of Mr. McKenzie's interest in MLP, but there is no dispute that Mr. Bowers became the sole member of MLP.

         On May 3, 2013, Mr. Bowers filed a complaint, solely in his own name, against the Estate and Co-Executors (collectively, "Defendants"), alleging breach of contract for failure to perform under the Agreement while also asserting theories of unjust enrichment and quantum meruit. Mr. Bowers sought actual damages of $150, 000 for the earnest money paid by MLP, as well as interest, costs, expenses, and attorney's fees. Defendants filed an answer on May 24, 2013, admitting the existence of the Agreement but denying any liability to Mr. Bowers and disputing the trial court's jurisdiction. Mr. Bowers subsequently filed a motion for summary judgment, attaching, inter alia, his assignment of interest in MLP from Mr. Steele.

         On December 28, 2014, Defendants filed a "Motion to Amend Defendants' Responses to Plaintiff's First Set of Admissions, " requesting that the trial court allow Defendants to correct a "clerical error" in which they had admitted to statement number ten in Mr. Bowers's first set of admissions, namely that on October 8, 2007, the Estate could not convey marketable title to the Property to MLP. Defendants requested to change their response to reflect that "the first date the Estate could not have conveyed marketable title to the property to MLP was after November 8, 2007, " the date that Charles Mounger recorded deeds to the Property. Following a hearing conducted on January 5, 2015, the trial court entered an order on January 30, 2015, allowing Defendants to amend their response. The court stated in its order in relevant part:

The proposed amendments to the requests for admission, although brief, are not minor. The change in the wording of the answers to the requests for admission is material and goes to the heart of the plaintiff's summary judgment motion. The defendants assert that the amendment is necessary to correct a typographical or clerical error. The plaintiff argues, among other things that the defendants have had eight (8) months to seek to amend their answers but did not do so until shortly before the date scheduled for the summary judgment hearing. Although the time period before discovery of the typographical error was quite long regardless of which time period is used, the court does note that it had been four (4) months since the summary judgment motion was filed and the answers to the request for admissions were raised as a basis for the motion.
Tenn. R. Civ. P. 36.02 clearly provides the trial court discretion to allow amendment of previously filed, and admitted, requests to admit. Meyer Laminates (SE), Inc. v. Primavera Distributing, Inc., 293 S.W.3d 162 (Tenn. [Ct. App.] 2008). In the exercise of that discretion, the court will permit the defendants to amend their answers.

         Mr. Bowers filed a supplement to his motion for summary judgment on February 23, 2015. Defendants subsequently filed a competing motion for summary judgment on March 11, 2015, asserting that (1) Mr. Bowers was not a real party in interest and did not have standing to pursue the action because only MLP was a party to the Agreement, (2) Co-Executors were parties to the action only in their representative capacity and should be dismissed in their respective individual capacities, (3) the gravamen of the complaint sounded in conversion and should be barred pursuant to the three-year statute of limitations provided in Tennessee Code Annotated § 28-3-105 (2000), and (4) MLP did not validly terminate the Agreement so as to entitle it to recover the earnest money.

         On August 31, 2015, Mr. Bowers filed an amended complaint, naming only the Estate as the defendant and not Co-Executors. Mr. Bowers did not seek to add MLP as a plaintiff. Rather, Mr. Bowers stated: "MLP, by and through its member, has assigned all of its corporate assets and interests to the Plaintiff." On October 16, 2015, Mr. Bowers filed a "Second Supplement to the Motion for Summary Judgment." Mr. Bowers attached to this supplement an assignment executed by him on April 27, 2015, stating in full:

The undersigned, as the owner of and successor to one hundred percent (100%) of all of the membership interest in McKenzie Loudon Properties, LLC ("MLP"), a Tennessee limited liability company, hereby transfers and assigns to Nelson E. Bowers, II any and all of MLP's right and interest to receive any and all monies and assets recovered and/or collected on of MLP of any rights that MLP may have.

         The trial court conducted a hearing on the competing motions for summary judgment on May 31, 2016. The court directed the parties to present arguments on the threshold issues of standing and subject matter jurisdiction. Following the hearing, the trial court found that Mr. Bowers did not have standing to maintain this action and that the court therefore did not possess subject matter jurisdiction. The court entered a final judgment dismissing Mr. Bowers's complaint with prejudice and incorporating its memorandum opinion on July 8, 2016. Mr. Bowers timely appealed.

         II. Issues Presented

         Mr. Bowers presents five issues, the first four of which are all related to the overarching issue of standing:

1. Whether the trial court erred by granting summary judgment in favor of the Estate upon finding that Mr. ...

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