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TWB Architects, Inc. v. The Braxton, LLC

Court of Appeals of Tennessee, Nashville

January 31, 2018

TWB ARCHITECTS, INC.
v.
THE BRAXTON, LLC, ET AL.

          Session November 8, 2017

         Appeal from the Chancery Court for Cheatham County No. 14181 David D. Wolfe, Chancellor No. M2017-00423-COA-R3-CV

         This is the second appeal in a dispute over enforcement of a mechanic's lien. An architect entered into an architect agreement with the developer to build a condominium project in Ashland City, Tennessee. The architect later entered into a purchase agreement with the successor developer to receive a penthouse as "consideration of design fees owed" on the first contract. The architect never received payment for its work and filed suit against the successor developer and its surety to enforce its mechanic's lien for the amount owed under the architect agreement. The trial court held that the purchase agreement was a novation, extinguishing the rights and obligations of the parties under the architect agreement. In the first appeal, this Court found a lack of intent for a novation and, therefore, reversed the decision of the trial court and remanded the case for further proceedings. On remand, after additional discovery, the architect moved for summary judgment on its claim. The trial court granted summary judgment in favor of the architect. In this appeal, the developer argues that the trial court erred in granting summary judgment on its defense of novation and multiple other defenses. We affirm the decision of the trial court.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

          William Randall O'Bryan, Jr., and Kevin Clayton Baltz, Nashville, Tennessee, for the appellants, Fidelity and Deposit Company of Maryland and The Braxton, LLC.

          Donald N. Capparella and Timothy W. Burrow, Nashville, Tennessee, for the appellee, TWB Architects, Inc.

          Andy D. Bennett, J., delivered the opinion of the Court, in which Frank G. Clement, Jr., P.J., M.S., and Richard H. Dinkins, J., joined.

          OPINION

          ANDY D. BENNETT, JUDGE

         Factual and Procedural Background

         The underlying facts in this case are summarized in our previous opinion:

On February 17, 2005, Progress Capital Partners, LLC (“Progress Capital") and TWB Architects, Inc. (ATWB") entered into a contract entitled AAIA[1]Document B151-1997, Abbreviated Standard Form of Agreement Between Owner and Architect" (hereinafter “Architect Agreement") for TWB to provide architectural and design services for a mid-rise condominium project in Ashland City known as “The Braxton." The Architect Agreement was signed by John Rankin, Chief Manager of Progress Capital, and by Timothy Burrow, President of TWB. The fifteen-page Architect Agreement outlined, inter alia, the architect's responsibilities, the scope of the services, the owner's responsibilities, and the terms of compensation. Pursuant to the Architect Agreement, TWB would be paid a fee of two percent of construction costs or, if the project was not constructed, TWB would be paid by the hour, plus expenses.
On February 9, 2006, The Braxton, LLC was formed with Mr. Rankin as its Chief Manager. On February 16, 2006, Mr. Burrow and The Braxton, LLC entered into a contract entitled “Agreement for Sale of Residence the Braxton Condominiums at Harpeth Shoals" (hereinafter “Purchase Agreement"). In the Purchase Agreement, The Braxton, LLC agreed to sell Mr. Burrow Penthouse P6 in the Braxton Condominiums for A$0 in consideration of design fees owed in the Contract for architectural design between Progress Capital Partners, LLC and TWB Architects, Inc. dated 2/17/05."[2] The Purchase Agreement was signed by Mr. Burrow individually and by Mr. Rankin on behalf of The Braxton, LLC. Construction began on the project in the summer of 2006, and the condominiums were built according to the architectural plans drawn by TWB. As construction progressed, Mr. Burrow invested $39, 343.84 of his own money in upgrades to Penthouse P6.[3]
On January 8, 2007, Charles Elcan became a member of The Braxton, LLC. On September 26, 2008, Mr. Rankin surrendered his membership interest in The Braxton, LLC leaving Mr. Elcan as the only member. On October 28, 2008, Mr. Rankin filed a voluntary petition for Chapter 7 bankruptcy. Thereafter, Mr. Burrow requested that The Braxton, LLC convey Penthouse P6 to him. The Braxton, LLC filed a Notice of Completion of the project on December 5, 2008 stating that the A[d]ate of completion of the improvement" was “October 21, 2008." In December 2008, Mr. Burrow moved into the penthouse.
In early 2009, TWB learned that the penthouse was encumbered by a security interest held by Bank of America and that The Braxton, LLC was unable to transfer it to Mr. Burrow free and clear of the encumbrance. On May 8, 2009, the Chancery Court of Davidson County gave a receiver the right of possession to every condominium at the Braxton. Mr. Burrow moved out of the penthouse in late 2009.
It is undisputed that The Braxton, LLC never deeded the penthouse condominium to Mr. Burrow or paid anything to TWB for its architectural services. On February 26, 2009, TWB filed a mechanic's lien in the Register of Deeds Office for Cheatham County. The Notice of Lien Claim stated:
Timothy W. Burrow, being first duly sworn, says that TWB Architects, Inc., the Lien Claimant, performed certain work or labor in furtherance of improvements to the real property herein described, in pursuance of certain contract with Owners, which owes Lien Claimant $882, 526.14 (which is over and above all legal setoffs), for which amount Lien Claimant claims a lien under T.C.A. '' 66-11-101, et seq. on the real property.
On March 11, 2009, TWB filed a Complaint for Foreclosure of Mechanic's Lien against The Braxton, LLC.[4] The complaint alleged a single cause of action to enforce its mechanic's lien and sought to Abe awarded a judgment for the amount stated in its Notice of Lien Claim . . . ." On May 6, 2009, The Braxton, LLC filed a counterclaim and argued that the Purchase Agreement served as a novation of the Architect Agreement, extinguishing TWB's right to assert any claims or remedies arising under the Architect Agreement.
The Braxton, LLC filed a motion for summary judgment on January 4, 2013, asserting that the Purchase Agreement replaced or extinguished the Architect Agreement. On April 19, 2013, TWB filed its own motion for summary judgment. TWB argued that it earned the two percent fee contemplated in the Architect Agreement because The Braxton, LLC used the architectural plans designed by TWB and failed to pay TWB as required under the contract.
On July 11, 2013, the trial court held a hearing on the motion, and by order entered November 18, 2014, the trial court granted The Braxton, LLC's motion for summary judgment. The court made the following pertinent findings:
(3) At the time of the Architect Agreement and the Purchase Agreement, [Progress Capital], The Braxton and John Rankin were in privity with and alter-egos of one another. Similarly, TWB and Mr. Burrow were in privity with and alter-egos of one another; . . .
(5) When interpreting the Purchase Agreement, the Court must determine the intentions of the parties from the four corners of the agreement, interpreting and enforcing it as written;
(6) The parol evidence rule restricts the Court from considering prior oral agreement and/or communications that contradict the unambiguous language of the Purchase Agreement;
(7) If the language is unambiguous, the contract must be interpreted as written, and the words expressing the parties= intentions should be given the usual, natural, and ordinary meaning;
(8) The Purchase Agreement is clear and unambiguous;
(9) The Purchase Agreement expressly referenced the Architect Agreement;
(10) The undisputed facts show that the Architect Agreement had become unworkable and a substitute agreement was necessary for the project to continue;
(11) The Purchase Agreement was entered into by the parties to salvage a contract that was soon to be breached;
(12)At the time the Purchase Agreement was executed, the parties were aware that [Progress Capital] could not pay the architect fees owed under the Architect Agreement in cash;
(13) Accordingly, the Purchase Agreement was unquestionably a novation, which was substituted for the Architect Agreement and, under Tennessee law, extinguished all rights, responsibilities and obligations of the parties under the Architect Agreement.
. . . .
Accordingly, as a result of these undisputed, material facts, TWB has no rights under the Architect Agreement, and therefore its Complaint, as amended, to Enforce a Mechanic's Lien must be dismissed with prejudice. Furthermore, in light of the foregoing findings, TWB's motion for summary judgment seeking relief under the Architect Agreement must be denied.

TWB Architects, Inc. v. The Braxton, LLC, No. M2013-02740-COA-R3-CV, 2014 WL 5502401, at *1-3 (Tenn. Ct. App. Oct. 30, 2014) (some footnotes omitted).

         TWB appealed from the trial court's grant of The Braxton's[5] motion for summary judgment. As will be discussed more fully below, this Court found a lack of intent for a novation, reversed the trial court's decision, and remanded for further proceedings. Id. at *6.

         On remand, in April 2015, The Braxton filed amended answers asserting additional affirmative defenses, including waiver, merger, the parole evidence rule, substitution, fraud, failure to perform, estoppel, detrimental reliance, unclean hands, willful and gross exaggeration of the lien claim amount, payment on the claim, and failure to join an indispensable party. On March 1, 2016, after the parties had engaged in additional discovery, TWB filed a motion for summary judgment asserting that it was entitled to the dismissal of The Braxton's affirmative defenses as a matter of law. In support of this motion, TWB submitted a statement of undisputed material facts and numerous exhibits, including the following:

• Affidavit of Timothy Burrow dated April 19, 2013, with related documents
• Excerpt of deposition of Charles Elcan dated August 27, 2015
• Affidavit of Timothy Burrow dated July 3, 2013, with related documents
• Affidavit of John Rankin dated June 11, 2009, with related documents
• Excerpts of deposition of John Rankin dated November 12, 2015
• Affidavit of Timothy Burrow dated February 22, 2016
• Affidavit of Timothy Burrow dated July 8, 2013
• Excerpt of deposition of Timothy Burrow dated November 11, 2015

         The Braxton opposed TWB's motion for summary judgment asserting that there were material issues of fact in dispute. According to The Braxton, novation was a question for the jury because it was dependent upon the parties' intent. It made a similar argument regarding the defenses of substituted performance, waiver, estoppel, unclean hands, exaggeration of the lien claim, and failure to join an indispensable party. The

         Braxton denied many of TWB's statements of material fact and submitted voluminous exhibits, including the following:

• Deposition transcript of John Rankin dated March 23, 2010
• Affidavit of Charles Elcan dated February 9, 2010
• Deposition transcript of Timothy Burrow dated November 13, 2009
• Deposition transcript of Timothy Burrow (as Tenn. R. Civ. P. 30.02(6) corporate representative) dated October 19, 2015
• Deposition transcript of John Rankin dated November 12, 2015
• Deposition transcript of Timothy Burrow dated November 11, 2015
• Affidavit Number 3 of Timothy Burrow dated October 2, 2009
• Affidavit Number 2 of Timothy Burrow dated September 30, 2009

         TWB submitted a reply to The Braxton's response to its motion for summary judgment reasserting its argument that The Braxton could not meet its burden to establish the affirmative defense of novation or any of the other affirmative defenses claimed. In conjunction with its reply, TWB submitted the July 3, 2016 affidavit of Mr. Burrow.

         The trial court held a hearing on TWB's motion for summary judgment on July 8, 2016, and entered a memorandum opinion including findings of fact and conclusions of law on September 13, 2016. (We will summarize the trial court's findings and conclusions as relevant to our discussion below.) In its memorandum opinion, the trial court found that there were no genuine issues of material fact as to any of the defenses raised and that TWB's motion for summary judgment should be granted. In an order entered on October 20, 2016, the trial court granted summary judgment in favor of TWB and entered judgment "for the lien claimed in the amount of $882, 526.14 against The Braxton, LLC and against Fidelity and Deposit ...


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