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Harlan v. Cornerstone Church of Nashville, Inc.

Court of Appeals of Tennessee, Nashville

April 9, 2018

JERRY HARLAN, ET AL.
v.
CORNERSTONE CHURCH OF NASHVILLE, INC.

          Session February 6, 2018

          Appeal from the Chancery Court for Davidson County No. 16-370-II William E. Young, Chancellor

         This appeal involves a dispute over ownership of three easements and allegations of fraud stemming from the failure of Appellee to honor its alleged oral promise to purchase the disputed easements and an adjacent parcel of land owned by Appellants. The trial court, on Appellee's Motion to Dismiss, ruled that Appellants had no interest in the easements and that Appellants' claim arising from the alleged oral promise to purchase the easements and the adjacent parcel of land was barred by the Statute of Frauds. We affirm the trial court's judgment and remand.

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

          Larry L. Crain, Brentwood, Tennessee, for the appellants, Jerry C. Harlan, Wanda Harlan, David R. Pounders, and Chandra Pounders.

          Peter C. Sales and Christopher A. Bowles, Nashville, Tennessee, for the appellee, Cornerstone Church of Nashville, Inc.

          Kenny Armstrong, J., delivered the opinion of the court, in which Richard H. Dinkins and W. Neal McBrayer, JJ., joined.

          OPINION

          KENNY ARMSTRONG, JUDGE

         I. Background

         This case involves three adjacent parcels of property and the ownership of three easements appurtenant to two of the properties. The northernmost tract of land (the "Pounders Tract") is owned by two of the Appellants, David R. Pounders and Chandra Pounders (together, the "Pounders"). Cornerstone Church ("Appellee") is the owner of the southernmost tract (the "Original Cornerstone Tract"). In 1985, the tract of land between the Pounders Tract and the Original Cornerstone Tract (the "Middle Tract") was owned by Eugene Jackson. In April of 1985, Mr. Jackson and Appellee conveyed three easements across the Original Cornerstone Tract to Appellant Jerry Harlan to benefit the Middle Tract. These easements were recorded in the Register's Office for Davidson County, Tennessee. The first easement runs across a defined portion of the Original Cornerstone Tract for the purpose of constructing a road or highway. The second easement grants two separate permanent easements across the Original Cornerstone Tract for the purpose of constructing, operating, maintaining, repairing and inspecting sanitary sewers and/or improvements and a temporary construction easement across the Original Cornerstone Tract. On December 5, 1997, Appellants, Jerry and Wanda Harlan (together the "Harlans"), acquired an 80% interest in the Middle Tract. In August of 2009, the Harlans declared bankruptcy, and in December of 2009, the Bank of Nashville commenced foreclosure proceedings against the Harlans in connection with the Middle Tract. Cornerstone Church purchased the Middle Tract at foreclosure and received a Successor Trustee's Deed, which was recorded on February 4, 2010.

         Originally, the Pounders Tract and the Middle Tract were zoned together as a Planned Unit Development ("PUD"). The original PUD site plan ("Original PUD Plan") filed in 1999 was for single-family lots. In 2013, after Cornerstone Church purchased the Middle Tract, Cornerstone Church applied to rezone the Middle Tract and the Original Cornerstone Tract as a Specific Plan ("SP") to build an assisted living facility. Cornerstone's application amended the Original PUD Plan to remove the single-family lots envisioned for the Middle Tract but preserved the single-family lots on the tract owned by the Pounders.

         Appellants were opposed to Cornerstone Church's SP application and allege in their Complaint that Cornerstone Church acted fraudulently in pursuing its application to rezone the Middle and Original Cornerstone Tracts. Specifically, Appellants allege that they met with Appellee's attorney to discuss the SP and were told that Appellee agreed to purchase their property and the easements in exchange for Appellants not appearing and opposing the SP at the Planning Commission Meeting in January of 2014, and the Metro Council Meeting in March of 2014.

         In response to Appellee's failure to purchase their property after the SP was approved, on April 15, 2016, Appellants filed their Complaint in Davidson County Chancery Court (the "trial court") against Appellee for: (1) fraud, fraud in the inducement and promissory fraud; (2) interference with and trespass to easements; and (3) declaratory judgment and to quiet title to the three easements. Appellants' causes of action are based on the following averments in the Complaint:[1]

***
6. [Appellants] aver that they are owners and developers of certain real property and easements located within the original Planned Unit Development Hickory Hills Ridge/North Graycroft.
7. [Appellants], Jerry Harlan and Wanda Harlan, are the owners of three separate easements which are recorded at Book 6572, Page 329, which was entered into on April 23, 1985 and an easement of record in Book 6572, Page 324 which grants the right of ingress and egress across portions of the Cornerstone Tracts.
10. [Appellants], David Pounder[s] and Chandra Pounder[s], are the owners of certain real property located within the original Hickory Hills Ridge/North Graycroft PUD for which [Appellant], Harlan, is the developer for this property.
***
15. [Appellants] aver that [Appellee], Cornerstone, agreed to pay them for their property[, ] easements and improvements on or about January 9, 2014. [Appellants] aver that based upon these false representations which were false when made and known to be false by [Appellee], Cornerstone, and its representatives when made, they did not oppose [Appellee]'s plans at the Planning Commission meetings or at the Council meetings. [Appellant], Harlan, avers that he relied upon [Appellee], Cornerstone's, false representations which included suggestions that he did not need to oppose the planning commission vote on the issue and he did not appear or oppose the amendment and cancellation of his PUD.
***
20. [Appellants], Harlan, aver that their easement for ingress and egress has been violated, taken and interfered with because [Appellee], Cornerstone, has constructed a building which trespasses upon and destroys [Appellants], Harlans', easements. [Appellants] aver that this has materially and adversely affected the use of their other property as well. [Appellee], Cornerstone's, interference with [Appellants], Harlans', easements, as well as Pounders' property and PUD, makes it impossible for [Appellants] [sic] to use their properties [sic] and easements to sell, or convey, control the use of the Middle Tract, and to convey or cause an agreement between all concerned parties.
***

         On May 20, 2016, Appellee filed its Motion to Dismiss the entire case. Appellants opposed this motion. The trial court heard Appellee's motion on August 5, 2016, and granted the motion by order of August 19, 2016. Appellants then filed a Motion to Alter or Amend Order on September 19, 2016, and a Reply Memorandum in Support of Motion to Alter or Amend Order on February 22, 2017, where Appellants raised the issue of the trial court converting a Rule 12.02 motion to dismiss into a Rule 56 motion for summary judgment. The trial court heard Appellants' motion on February 24, 2017, and denied it by order of March 3, 2017.

         Concerning the Motion to Dismiss, the trial court found that Appellants' cause of action for fraud, promissory fraud or fraud in the inducement failed as a matter of law because: (1) Appellants' claims are barred by the Statute of Frauds; (2) Appellants could not have reasonably relied on Cornerstone Church's alleged representation of an agreement to purchase real estate; and (3) Appellants could not have been damaged by Cornerstone Church's alleged representations. The trial court also found that Appellants failed to state a claim upon which relief could be granted regarding their cause of action for interference and trespass to easements and their cause of action for declaratory judgment and to quiet title because Appellants "do not own any rights to or in the easements at issue." The trial court also found that the easements were appurtenant to the land and the right to use the easements passed to Cornerstone Church when it acquired the Middle Tract. The trial court made the further finding that the easements were extinguished by the doctrine of merger upon Cornerstone's purchase of the Middle Tract. This appeal followed.

         II. Issues

         Appellants raise five issues in their brief which we restate as follows:

1. Whether the trial court properly treated Appellee's motion as a Motion to Dismiss instead of converting the motion to a Motion for Summary Judgment.
2. Whether the trial court properly applied Tennessee Rule of Civil Procedure 12.02(6) and took the Appellants' allegations as true and in the light most favorable to Appellants.
3. Whether the trial court properly found that the easements in question are easements appurtenant that run with the land that Appellee acquired through foreclosure sale and which were subsequently extinguished by the doctrine of merger.
4. Whether the trial court properly found that Appellants' alleged claims for fraud are in fact claims for breach of an oral agreement regarding the disposition of real property interests and, therefore, barred by the Statute of Frauds.

         III. Standard of Review

         The resolution of a 12.02(6) motion to dismiss is determined by an examination of the pleadings alone. Leggett v. Duke Energy Corp., 308 S.W.3d 843, 851 (Tenn. 2010); Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696 (Tenn. 2002). A defendant who files a motion to dismiss "'admits the truth of all of the relevant and material allegations contained in the complaint, but . . . asserts that the allegations fail to establish a cause of action.'" Brown v. Tenn. Title Loans, Inc., 328 S.W.3d 850, 854 (Tenn. 2010) (quoting Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 516 (Tenn. 2005)).

         In considering a motion to dismiss, courts "must construe the complaint liberally, presuming all factual allegations to be true and giving the plaintiff the benefit of all reasonable inferences." Tigg v. Pirelli Tire Corp., 232 S.W.3d 28, 31-32 (Tenn. 2007) (citing Trau-Med., 71 S.W.3d at 696). A trial court should grant a motion to dismiss "only when it appears that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief." Crews v. Buckman Labs Int'l, Inc., 78 S.W.3d 852, 857 (Tenn. 2002); see also Lanier v. Rains, 229 S.W.3d 656, 660 (Tenn. 2007). We review the trial court's legal conclusions regarding the adequacy of the complaint de novo with no presumption that the trial court's decision was correct. Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 429 (Tenn. 2011).

         IV. Analysis

         A. Motion to Dismiss

         At the outset, we address Appellants' argument that the trial court converted Appellee's Motion to Dismiss into a motion for summary judgment by considering matters other than the Complaint, and that Appellants should have been given the opportunity to conduct discovery before their claims were summarily dismissed.[2]Generally, on a motion to dismiss, when "matters outside the pleading are presented to and not excluded by the [trial] court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Tenn. R. Civ. P. 12.02. Appellants argue that, in making its decision, the trial court considered twelve exhibits that were attached to Appellee's Motion to Dismiss and that the motion was, therefore, converted into a motion for summary judgment. "Whether the trial court should have treated a motion to dismiss as a motion for summary judgment is a question of law subject to de novo review on appeal." Stephens v. Home Depot U.S.A., Inc., 529 S.W.3d 63, 71-72 (Tenn. Ct. App. 2016) (appeal denied Apr. 13, 2017) (quoting Belton v. City of Memphis, No. W2015-01785-COA-R3-CV, 2016 WL 2754407, at *3 (Tenn. Ct. App. May 10, 2016).

         The crux of the issues in this case is: 1) who owned and who currently owns the Middle Tract and the Original Cornerstone Tract; 2) what kind of easements were granted to the Harlans and whether, in light of the foreclosure, Appellants still have a property interest in the easements; and (3) whether the parties had an oral agreement for the purchase of real property. From our review, it was not necessary for the trial court to look ...


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