TWB ARCHITECTS, INC.
THE BRAXTON, LLC ET AL.
Session: February 6, 2019
by Permission from the Court of Appeals Chancery Court for
Cheatham County No. 14181 David D. Wolfe, Judge
granted review to determine whether summary judgment was
properly granted to an architect firm seeking to recover its
design fees from a development company. The architect firm
designed a condominium project for the development company.
The development company ran short of funds and was not able
to pay the architect firm under their design contract. As a
result, the architect firm's president agreed to accept a
condominium in the project instead of the fee. But the
development company did not fulfill that agreement because
the development company had pledged the condominium as
collateral for a construction loan. The architect firm filed
a mechanic's lien for its unpaid fee under the
parties' design contract, and then filed this suit to
enforce the lien. The trial court granted summary judgment to
the architect firm, holding that the firm was entitled to its
fee under the design contract, and there was insufficient
evidence that the parties intended a novation by substituting
the agreement to convey a condominium for the design
contract. The Court of Appeals affirmed. We find that
disputed questions of material fact exist about whether the
architect firm and the development company intended a
novation when they entered into the agreement for the
condominium. Thus, the trial court should not have granted
summary judgment to the architect firm. We reverse and remand
to the trial court.
R. App. P. 11 Appeal by Permission; Judgment of the Court of
Appeals Reversed; Judgment of the Trial Court Reversed;
Remanded to the Trial Court
William R. O'Bryan, Jr., and Kevin C. Baltz, Nashville,
Tennessee, for the appellants, The Braxton, LLC, and Fidelity
and Deposit Company of Maryland.
N. Capparella, Nashville, Tennessee, for the appellee, TWB
G. Lee, J., delivered the opinion of the Court, in which
Jeffrey S. Bivins, C.J., Cornelia A. Clark, Holly Kirby, and
Roger A. Page, JJ., joined.
G. LEE, JUSTICE
February 2005, TWB Architects, Inc., through its president
and sole owner, Timothy W. Burrow, signed an agreement
("Architect Agreement") with Progress Capital
Partners, LLC, through its sole member and chief manager,
John Rankin. Under the Architect Agreement, TWB Architects
agreed to provide design services for the construction of a
condominium complex, known as "The Braxton," in
Ashland City. Progress Capital Partners agreed to pay TWB
Architects a fee for its design services based on two percent
of the construction costs for the project, with progress
payments based on an hourly rate billed monthly before
Capital Partners failed to obtain sufficient financing for
the project. In early May 2005, Mr. Rankin advised Mr. Burrow
that the construction budget could not cover TWB
Architects' fee. Mr. Rankin proposed that Mr. Burrow
accept a condominium in the project as payment for the
architect firm's fee. Mr. Burrow, with the consent of TWB
Progress Capital Partners deeded the property on which the
project was located to The Braxton, LLC
("Braxton"), a company formed by Mr.
Rankin. On February 16, 2006, Braxton and Mr.
Burrow agreed in writing ("Condominium Agreement")
for Mr. Burrow to buy Penthouse P6 for "$0 in
consideration of design fees owed in contract for
architecture design" between Progress Capital Partners
and TWB Architects dated February 17, 2005. Mr. Burrow, with
TWB Architects' consent, signed as purchaser and Mr.
Rankin signed as seller for Braxton. Attached and incorporated
into the Condominium Agreement was a copy of the Architect
Agreement, showing that TWB Architects' fee supported the
zero dollar purchase price. Under the Condominium Agreement,
the closing of the sale would be on or before August 4, 2008,
with an option for Braxton to extend that date for up to
June 2005, TWB Architects stopped sending Braxton monthly
invoices for progress payments. By May 2006, TWB Architects
had substantially completed its design work. During
construction of the project, Mr. Rankin routinely submitted
Loan Advance Requisition forms and Sworn Owner's
Statements to the bank financing the project. Mr. Rankin
signed the Sworn Owner's Statements, verifying that there
were no unpaid architect fees because he understood there
were no fees owed to TWB Architects based on the Condominium
construction of the project, Mr. Burrow spent nearly $40, 000
for upgrades to Penthouse P6, which he referred to as
"my penthouse." He corresponded with the general
contractor and with Mr. Rankin about specific upgrades to
customize Penthouse P6, which included cabinets, granite,
tile, lighting, mantles, hearths, doors, wiring, and a unique
November 3, 2008, the day before the extended closing
deadline under the Condominium Agreement, Mr. Burrow wrote to
Mr. Rankin demanding to close the next day. In addition, Mr.
Burrow stated that if Braxton failed to meet the closing
deadline, then Mr. Burrow would treat the Condominium
Agreement "as continuing in full force and effect, and
require specific performance of [Braxton] to deliver a
deed." He mentioned neither the Architect Agreement nor
the design fee.
later, Mr. Burrow wrote to Mr. Rankin to clarify
"instead of TWB Architects, Inc. receiving cash for the
design fee of 2 percent of construction cost as set forth in
the . . . [Architect Agreement], I will be given Penthouse P6
and the boat slip." He asked Mr. Rankin to sign at the
bottom of the letter to confirm the terms stated in the
letter, but Mr. Rankin did not do so.
November 11, 2008, Mr. Burrow emailed Mr. Rankin, asking
whether he had told the bank that the proceeds from the
condominium sale to Mr. Burrow would be zero dollars. Mr.
Rankin replied that he had told the bank that Mr. Burrow
would need to be paid two percent or receive his condominium
unit, and that Mr. Burrow had invested tens of thousands of
dollars in the condominium. Mr. Rankin later admitted in a
2010 deposition that he told the bank something
different-that Mr. Burrow was "our design architect, and
he's getting this unit for his fees."
November 25, 2008, Mr. Burrow wrote to Robert Holland, an
attorney for Braxton, stating that Mr. Burrow had entered
into a Condominium Agreement for Penthouse P6 that was set to
close on December 8, 2008, and that he was concerned about
the incomplete swimming pool at the condominium complex. On
December 12, 2008, Mr. Burrow wrote again to Mr. Holland
explaining that he had rented his home to a tenant who
planned to move in on December 18, 2008. In that letter, Mr.
Burrow stated that in the Condominium Agreement, Braxton had
granted its rights to Penthouse P6 to Mr. Burrow and thus
Braxton had "no rights to the condominium to grant, as
security for a loan or otherwise, and any attempt to do so
would be voidable."
December 27, 2008, Mr. Burrow moved into Penthouse P6
although there had been no closing. He later advertised it
for rent "by owner" and leased it for a short time
before moving back in and using the condominium as his
personal residence. On January 2, 2009, Mr. Burrow wrote to
Mr. Holland stating that he had moved into his penthouse and
that "it [was] beautiful." He also expressed
concern that sales of other units had not closed, the
condominium complex looked like a "ghost town," and
potential buyers might back out. Mr. Burrow offered his
services as an attorney to assist with the situation, stating
he would "invest my time to protect my investment in my
January 6, 2009, Mr. Burrow emailed Mr. Rankin asking if
there was any reason why he should not send a letter to Mr.
Holland again requesting to close on the condominium and
stating that "[t]he condo is my payment for
architectural work done on The Braxton, and until closing
occurs, I have insufficient security for being paid."
Mr. Burrow did not send the proposed letter; instead, the
next day he wrote Mr. Holland asking when Braxton intended to
complete his condominium, emphasizing that he wanted to close
on it as soon as possible. Mr. Burrow gave Mr. Holland until
Friday, January 9, 2009, to provide a date for closing or to
provide a reason why closing could not occur by the end of
the following week, January 16, 2009.
January 13, 2009, Mr. Burrow, suspecting that Braxton would
not deed the condominium to him, notified Mr. Holland in
writing that TWB Architects had retained Mr. Burrow's
firm to represent it concerning services provided by TWB
Architects under the Architect Agreement. Mr. Burrow stated
that TWB Architects had a claim against the owner of the
project for $882, 526.14, which was two percent of the
construction cost. Mr. Burrow also stated that if the claim
was satisfied by January 19, 2009, or if Braxton provided
proper assurances it would be satisfied, then TWB Architects
would not file a mechanic's lien. Mr. Burrow further
noted that Braxton could satisfy the claim by transferring
ownership of Penthouse P6 to him. This letter, written on Mr.
Burrow's law firm letterhead, was the first time that Mr.
Burrow mentioned the Architect Agreement or the fee in his
communications with Mr. Holland.
January 22, 2009, Mr. Burrow wrote Mr. Rankin purporting to
state their understanding when they entered into the
Condominium Agreement. This letter differs significantly from
the letter Mr. Burrow had written on November 10, 2008, for
the same stated purpose. In the January 2009 letter, Mr.
Burrow said that the Condominium Agreement was intended to
provide an additional means to pay for the services of TWB
Architects. He further claimed that if for any reason Braxton
did not comply with the Condominium Agreement, Mr. Burrow
could unilaterally decide whether to seek specific
performance under the Condominium Agreement or payment of the
design fee under the Architect Agreement. Mr. Burrow asked
Mr. Rankin to sign at the bottom of the letter confirming its
accuracy, and this time Mr. Rankin did so. But Mr. Rankin
later denied his ratification of this letter, explaining that
since he was no longer a member of Braxton in January 2009,
he was not in a position to bind Braxton to the contract, and
that the contract documents said nothing about Mr. Burrow
unilaterally deciding between two alternate forms of payment.
January 23, 2009, Mr. Burrow wrote Mr. Holland about a
telephone conversation on January 15, 2009, in which Mr.
Holland had explained that the closing on the condominium was
delayed because the bank had an assignment on the sales
contracts, and there was no challenge to TWB Architects or
Mr. Burrow's position about having the condominium deeded
to him. Mr. Burrow stated that he would be filing
a mechanic's lien against the property on February 3,
2009, unless he received written assurance that Braxton would
deed the condominium to him.
February 23, 2009, Mr. Burrow emailed Mr. Holland to advise
him that Mr. Burrow was ready to close that week on the
condominium even though certain items, such as appliances,
carpet, and shelving were unfinished. He also stated that in
two days TWB Architects would be filing a lien, which it
could release at closing and that TWB Architects reserved its
right to take cash for the $882, 526.14 fee rather than have
the condominium deeded to Mr. Burrow. Finally, he stated that
"taking cash becomes a more attractive option, if not
the only viable option, as time passes on."
February 25, 2009, Mr. Burrow learned from an attorney for
the bank that Braxton had pledged his condominium as part of
the collateral for the construction loan. The next day, TWB
Architects filed a mechanic's lien for its two percent
design fee in the amount of $882, 526.14 (later revised to
$888, 258.18) as provided for in the Architect Agreement. Mr.
Burrow lived in Penthouse P6 until moving out in late 2009
after the Chancery Court for Davidson County in May 2009 gave
a receiver the right of possession to every condominium in
the project, including Penthouse P6.
- TWB I
March 2009, while Mr. Burrow was still living in Penthouse
P6, TWB Architects sued Braxton to enforce its
lien. Fidelity and Deposit Company of Maryland,
the obligor on the surety bond Braxton filed to discharge the
lien, was added as a defendant in April 2009. We refer to the
defendants collectively as "Braxton."
January 2013, Braxton moved for summary judgment based, in
part, on the affirmative defense of novation, arguing that
the Condominium Agreement substituted for the Architect
Agreement and thus extinguished TWB Architects' right to
its fee under the Architect Agreement. Braxton supported the
motion for summary judgment with several exhibits, including
Mr. Rankin's June 11, 2009 affidavit and excerpts from
his March 23, 2010 deposition.
affidavit signed on June 11, 2009, Mr. Rankin stated that the
parties intended for the obligations under the Condominium
Agreement to substitute for the obligations under the
Architect Agreement. He also stated that all parties
understood that the Condominium Agreement would discharge all
obligations owed under the Architect Agreement and would
extinguish all rights of the parties under the Architect
Rankin's March 23, 2010 deposition tracked his June 2009
affidavit. He testified that the purpose of his affidavit had
been to state that the parties intended for the Condominium
Agreement to create a novation and to clear up any confusion
caused by his correspondence with Mr. Burrow. Mr. Rankin
wanted to make clear that Mr. Rankin intended to pay TWB
Architects' fee by conveying the condominium to Mr.
Burrow instead of paying the architect fee because of
insufficient funding. Mr. Rankin testified that the Architect
Agreement was no longer the agreement between the parties,
and that the Condominium Agreement replaced the obligations
under the Architect Agreement, causing a novation.
Rankin claimed that even though he had signed the bottom of
Mr. Burrow's letter dated January 22, 2009, as requested,
the contract documents did not say anything about Mr. Burrow
unilaterally choosing which payment method to accept. Mr.
Rankin also testified that he thought Mr. Burrow decided he
needed to set forth a different intent than the one he had
expressed in his letter dated November 10, 2008, because by
January 2009, it looked like he would have trouble getting
his condominium. Mr. Rankin explained that Braxton had
pledged Penthouse P6 along with other condominium units to
the bank as collateral, but he and Mr. Burrow thought the
condominium would be available to Mr. Burrow after Braxton