Court Opinion

ID: 1045527
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:27:24.949814+00
Date Added: 2024-06-11T12:16:54.306051
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                               November 7, 2012 Session

    TELLICO VILLAGE PROPERTY OWNERS ASSOCIATION, INC.
               v. HEALTH SOLUTIONS, LLC, ET AL.

                 Appeal from the Chancery Court for Loudon County
                  No. 11360     Frank V. Williams, III, Chancellor

             No. E2012-00101-COA-R3-CV-FILED-JANUARY 30, 2013

Tellico Village Property Owners Association, Inc. (“TVPOA”) sued Health Solutions, LLC;
Tellico Senior Living, LLC; Citizens National Bancorp, Inc. d/b/a Citizens National Bank
of Tennessee; Home Federal Bank Corporation d/b/a Home Federal Bank; and NBN
Corporation d/b/a National Bank of Tennessee (“National Bank”) with regard to a failed
development project. TVPOA asked the Trial Court to declare that TVPOA’s option
agreement concerning real estate in the development project had priority over certain
recorded deeds of trust. National Bank appeals the Trial Court’s grant of partial summary
judgment to TVPOA raising issues about whether the Memorandum of Agreement and
Development Agreement between TVPOA and the Developer and the Developer Company
violated the statute of frauds, and the Trial Court’s grant of TVPOA’s motion in limine to
exclude evidence on National Bank’s claim of unjust enrichment. We find and hold that
National Bank was not a party to the Memorandum of Agreement or the Development
Agreement and, therefore, may not raise a statute of frauds defense. We further find and
hold that the Trial Court did not err in excluding evidence on National Bank’s claim of unjust
enrichment.

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

D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., P.J., and J OHN W. M CC LARTY, J., joined.

Kristi M. Davis, Knoxville, Tennessee, for the appellant, NBN Corporation d/b/a National
Bank of Tennessee.

C. Coulter Gilbert, Kevin C. Stevens, and Briton S. Collins, Knoxville, Tennessee, for the
appellee, Tellico Village Property Owners Association, Inc.
David L. Buuck, Knoxville, Tennessee, for the appellees, the Individual Residents of Tellico
Senior Living Neighborhood at Tellico Village 1 .

                                               OPINION

                                              Background

               In January of 2000, TVPOA, Health Solutions, LLC (“Developer”), and Tellico
Senior Living, LLC (“Developer Company”) executed a Development Agreement (“the
Development Agreement”) and Real Estate Purchase Agreement2 (“Purchase Agreement”)
for the purpose of developing an assisted living facility and condominium project in Loudon
County, Tennessee. Pursuant to these agreements, TVPOA agreed to sell approximately
thirty acres to the Developer Company.

                  The Development Agreement provided, in pertinent part:

              THIS DEVELOPMENT AGREEMENT (“Agreement”) is entered as
        of January 24, 2000, between Health Solutions, LLC (“Developer”), a
        Tennessee limited liability company, Tellico Senior Living, LLC (“Developer
        Company”), a Delaware limited liability company, and Tellico Village
        Property Owners Association, Inc. (“Association”), a Tennessee nonprofit
        corporation.

                                                  ***

        Developer Company may, at its option, elect on or after January 1, 2006 until
        December 31, 2007 to put to the Association the remaining unsold Real Estate
        on which Free-standing Condo Units and Building Condo Units were to have

        1
         During the pendency of this suit, TVPOA was granted leave to amend its complaint to add Gary and
Barbara Knight; Lou and Geri Sorell; Gus and Betty Cappadona; Cecilia Poulsen; Howard and Kirstin
Farrington; Ginny Nash; Jack and Wanda Stephens; Shirley Tracy; Mick and Mary Wendt; Mary Newman;
Isabel Drerup; Ray and Avis Oliver; Marie Kane; Dorothy Lubitz; Irene Fero; Willem and Henny Jochem;
Alyce Fleishman; Carl and Caroline Burke; Bob and Marry Lou Gates; and James Cox as additional
defendants to the suit. Mr. Buuck represents these individual residents with the exclusion of Gary and
Barbara Knight.

        2
            TVPOA and Tellico Senior Living, LLC were the only parties to the Purchase Agreement.

                                                   -2-
       been built at a purchase price of $6,500 per acre (with any partial acre to be
       sold on a prorata basis). In the event Developer Company gives notice of its
       exercise of such put with respect to the such unsold acreage, the Association
       shall purchase and Developer Company shall convey such acreage to
       Association free and clear of all liens and encumbrances (except those existing
       while owned by the Association) within ninety (90) days of Developer
       Company’s election notice at a closing announced in the election notice.
       Provided Developer Company has not exercised its put as provided in this
       subsection and has not sold at least 90 Free-standing Condo Units on or before
       January 1, 2008, then Developer Company agrees that Association, at
       Association’s option, may elect on or before July 1, 2008 to purchase any of
       the unsold Real Estate on which Free-standing Condo Units were to have been
       built at a purchase price of $6,500 per acre (with any partial acre to be sold on
       a prorata basis). Provided further that if Developer Company has not exercised
       its put as provided in this subsection and has not constructed the Building
       Condo Units on or before January 1, 2008, then Developer Company agrees
       that Association, at its option, may elect on or before July 1, 2008 to purchase
       any of the unsold Real Estate on which the Building Condo Units were to have
       been built at a purchase price of $6,500 per acre (with any partial acre to be
       sold on a prorata basis). In the event Association gives notice of its exercise
       of such options with respect to any of the unsold acreage, Developer Company
       shall convey such acreage to Association free and clear of all liens and
       encumbrances (except those existing while owned by the Association) within
       ninety (90) days of Association’s election notice at a closing announced in the
       election notice.

              In October of 2000, TVPOA recorded the Memorandum of Agreement in the
Loudon County Register of Deeds Office which referenced the puts and rights of repurchase
(“Option”) contained in the Development Agreement and provided a meets and bounds
description of the property that TVPOA sold to the Developer Company.

               In November of 2002, National Bank recorded a Deed of Trust to secure a loan
it made to the Developer Company. National Bank admitted that it was aware of the
previously recorded Memorandum of Agreement. National Bank recorded a Second Deed
of Trust to secure a loan to the Developer Company in September of 2006. National Bank
admitted that TVPOA never executed any written agreement subordinating any rights to
National Bank’s Deed of Trust or Second Deed of Trust.

                                              -3-
              By letter dated February 8, 2008, TVPOA announced its election to exercise
the Option at a closing set in March of 2008. The Developer and the Developer Company
failed to appear at the closing, and this lawsuit was filed in December of 2008.

              TVPOA filed a motion for partial summary judgment against National Bank
on the issue of whether TVPOA’s Option has priority over National Bank’s Deed of Trust
and Second Deed of Trust. National Bank responded to TVPOA’s motion for partial
summary judgment raising a statute of frauds defense to the Memorandum Agreement and
Development Agreement. After a hearing, the Trial Court granted TVPOA partial summary
judgment against National Bank finding and holding that TVPOA’s Option has legal priority
over National Bank’s subsequently recorded Deed of Trust and Second Deed of Trust.

                During the hearing on the motions for summary judgment and after the Trial
Court announced its ruling on TVPOA’s motion for partial summary judgment against
National Bank, a discussion arose about the possibility of depositing the option funds into
court pending the final outcome of the case. National Bank’s attorney announced an intent
to raise an equitable argument and pursue a claim for unjust enrichment at trial. TVPOA
objected to “proof of an equitable argument,” and presentation of evidence on an unjust
enrichment claim due to the existence of the contract, i.e., the Option. The Trial Court
instructed TVPOA and National Bank to “come up with some authority on that where there
is a provision setting out a specific amount in the contract, can you then change that under
the rules of restitution or quasi contracts for improvements that are made.” National Bank’s
attorney responded by stating: “Okay. I’m sure Mr. Stevens and I will both be prepared for
that issue so we can argue it on the on [sic] 24th when we have the hearing date.”

              On the day before trial, National Bank provided TVPOA with the report of
National Bank’s expert appraiser, whom National Bank intended to produce at trial in
support of its unjust enrichment claim. National Bank had not previously disclosed this
expert appraiser or this report. TVPOA filed a motion in limine to exclude the testimony of
this previously undisclosed expert and, further, to preclude any evidence on National Bank’s
claim of unjust enrichment.

              The Trial Court heard argument on the motion in limine on the morning of trial
and held that National Bank had failed to properly disclose its expert appraiser and would
not be allowed to present this expert at trial3 . The Trial Court further held that National Bank
could not produce evidence on its unjust enrichment claim. National Bank’s attorney made
an offer of proof by stating that National Bank intended to produce evidence on its unjust
enrichment claim in the form of testimony of a Senior Vice President of National Bank who

       3
           National Bank concedes in its brief on appeal that it does not appeal this ruling.

                                                      -4-
would testify about the amount of the loan from National Bank to the Developer Company
and the fact that “those loan proceeds were specifically used for construction of
infrastructure, utilities, roads, grading on the project.”

             After trial, the Trial Court entered its judgment on December 19, 2011.
National Bank appeals to this Court raising issues regarding the grant of partial summary
judgment to TVPOA and the exclusion of evidence on National Bank’s unjust enrichment
claim.

                                         Discussion

              Although not stated exactly as such, National Bank raises two issues on appeal:
1) whether the Trial Court erred in granting partial summary judgment to TVPOA after
finding that National Bank could not raise a statute of frauds defense as to the Memorandum
Agreement and Development Agreement; and, 2) whether the Trial Court erred in granting
TVPOA’s motion in limine with respect to National Bank’s claim for unjust enrichment.
TVPOA raises an issue about whether National Bank properly raised an additional issue on
appeal regarding an alleged deficiency in the Order for Deposit in Court.

               We will address TVPOA’s issue first. In its brief on appeal, TVPOA correctly
notes that National Bank did not raise an issue regarding the Order for Deposit in Court in
its Statement of the Issues presented for review. We do not agree with TVPOA that National
Bank was attempting to raise this as a separate issue. Rather, in its brief on appeal, National
Bank mentions this subject as a fact which National Bank argues supports National Bank’s
statute of frauds argument.

                We note, however, that if we are incorrect and National Bank was attempting
to raise this as a separate issue, this issue has been waived. As this Court has stated many
times:

               In order for an issue to be considered on appeal, a party must, in his
       brief, develop the theories or contain authority to support the averred position
       as required by Tennessee Rules of Appellate Procedure 27(a). “Where a party
       makes no legal argument and cites no authority in support of a position, such
       issue is deemed to be waived and will not be considered on appeal.” Branum
       v. Akins, 978 S.W.2d 554, 557 n.2 (Tenn. Ct. App. 1998); see also Morris v.
       Snodgrass, 886 S.W.2d 761 (Tenn. Ct. App. 1994); Maryville Housing
       Authority v. Ramsey, 484 S.W.2d 73 (Tenn. Ct. App. 1972). Courts have
       consistently held that issues must be included in the Statement of Issues

                                              -5-
      Presented for Review required by Tennessee Rules of Appellate Procedure
      27(a)(4). An issue not included is not properly before the Court of Appeals.

Hawkins v. Hart, 86 S.W.3d 522, 531 (Tenn. Ct. App. 2001).

              We next consider whether the Trial Court erred in granting partial summary
judgment to TVPOA after finding and holding that National Bank could not raise a statute
of frauds defense as to the Memorandum Agreement and Development Agreement. Our
Supreme Court reiterated the standard of review in summary judgment cases as follows:

             The scope of review of a grant of summary judgment is well
      established. Because our inquiry involves a question of law, no presumption
      of correctness attaches to the judgment, and our task is to review the record to
      determine whether the requirements of Rule 56 of the Tennessee Rules of Civil
      Procedure have been satisfied. Hunter v. Brown, 955 S.W.2d 49, 50-51 (Tenn.
      1997); Cowden v. Sovran Bank/Cent. S., 816 S.W.2d 741, 744 (Tenn. 1991).

              A summary judgment may be granted only when there is no genuine
      issue of material fact and the moving party is entitled to judgment as a matter
      of law. Tenn. R. Civ. P. 56.04; Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn.
      1993). The party seeking the summary judgment has the ultimate burden of
      persuasion “that there are no disputed, material facts creating a genuine issue
      for trial . . . and that he is entitled to judgment as a matter of law.” Id. at 215.
      If that motion is properly supported, the burden to establish a genuine issue of
      material fact shifts to the non-moving party. In order to shift the burden, the
      movant must either affirmatively negate an essential element of the
      nonmovant’s claim or demonstrate that the nonmoving party cannot establish
      an essential element of his case. Id. at 215 n.5; Hannan v. Alltel Publ’g Co.,
      270 S.W.3d 1, 8-9 (Tenn. 2008). “[C]onclusory assertion[s]” are not sufficient
      to shift the burden to the non-moving party. Byrd, 847 S.W.2d at 215; see also
      Blanchard v. Kellum, 975 S.W.2d 522, 525 (Tenn. 1998). Our state does not
      apply the federal standard for summary judgment. The standard established
      in McCarley v. West Quality Food Service, 960 S.W.2d 585, 588 (Tenn. 1998),
      sets out, in the words of one authority, “a reasonable, predictable summary
      judgment jurisprudence for our state.” Judy M. Cornett, The Legacy of Byrd
      v. Hall: Gossiping About Summary Judgment in Tennessee, 69 Tenn. L. Rev.
      175, 220 (2001).

              Courts must view the evidence and all reasonable inferences therefrom
      in the light most favorable to the non-moving party. Robinson v. Omer, 952

                                              -6-
       S.W.2d 423, 426 (Tenn. 1997). A grant of summary judgment is appropriate
       only when the facts and the reasonable inferences from those facts would
       permit a reasonable person to reach only one conclusion. Staples v. CBL &
       Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000). In making that assessment, this
       Court must discard all countervailing evidence. Byrd, 847 S.W.2d at 210-11.
       Recently, this Court confirmed these principles in Hannan.

Giggers v. Memphis Housing Authority, 277 S.W.3d 359, 363-64 (Tenn. 2009).

              TVPOA sought partial summary judgment on the issue of whether its Option
had legal priority over National Bank’s subsequently recorded Deed of Trust and Second
Deed of Trust. In opposition to TVPOA’s motion for partial summary judgment, National
Bank argued that the statute of frauds precluded enforcement of the Option as memorialized
in the recorded Memorandum of Agreement and the Development Agreement.

                National Bank was not a party to the Memorandum of Agreement or the
Development Agreement between TVPOA and the Developer and the Developer Company.
The law is well settled that “a third party cannot object to enforcement of the contract by
raising the statute of frauds.” Anderson v. Hacks Crossing Partners, 3 S.W.3d 482, 486
(Tenn. Ct. App. 1999). See also, e.g., Culwell v. Culwell, 133 S.W.2d 1009, 1012 (Tenn. Ct.
App. 1939); 2850 Parkway Gen. P’ship v. Scott, No. E2010-02413-COA-R3-CV, 2012 Tenn.
App. LEXIS 4, at *15 (Tenn. Ct. App. Jan. 5, 2012), no appl. perm. appeal filed. Thus, the
Trial Court did not err in finding and holding that National Bank did not have standing to
raise a statute of frauds defense to TVPOA’s Option.

              The Trial Court found and held that TVPOA’s Option had legal priority over
National Bank’s subsequently recorded Deed of Trust and Second Deed of Trust. There is
no genuine dispute of material fact, and as TVPOA was entitled to summary judgment on the
issue of whether its Option had legal priority over National Bank’s subsequently recorded
Deed of Trust and Second Deed of Trust, the Trial Court did not err in granting TVPOA
partial summary judgment on this issue.

              Finally, we consider whether the Trial Court erred in granting TVPOA’s
motion in limine with respect to National Bank’s claim for unjust enrichment. National Bank
argues in its brief on appeal that the Trial Court’s granting TVPOA’s motion in limine
amounted to a grant of summary judgment. We disagree. The manner in which this issue
came to be before the Trial Court, as discussed more fully above, shows that the issue was
properly before the Trial Court on a motion in limine. We review a trial court’s decision to
admit or exclude evidence under an abuse of discretion standard. Sanford v. Waugh &
Company, Inc., 328 S.W.3d 836, 847 (Tenn. 2010).

                                            -7-
                When ruling on the motion in limine, the Trial Court noted that National Bank,
in essence, was attempting to seek equitable relief to allow them to do what they could not
do directly, i.e., compel TVPOA to pay more than required under the Option. We agree with
this assessment. “It is a well settled principle of law that one cannot do indirectly what
cannot be done directly.” Bennett v. Visa U.S.A., Inc., 198 S.W.3d 747, 752 (Tenn. Ct. App.
2006) (quoting Haynes v. City of Pigeon Forge, 883 S.W.2d 619, 622 (Tenn. Ct. App.
1994)).

                Additionally, after a careful and thorough review of the record, we find no
abuse of discretion in the Trial Court’s decision to exclude evidence of National Bank’s
unjust enrichment claim. National Bank’s offer of proof showed that National Bank could
not satisfy the elements of an unjust enrichment claim. As our Supreme Court has instructed:

               The elements of an unjust enrichment claim are: 1) “[a] benefit
        conferred upon the defendant by the plaintiff”; 2) “appreciation by the
        defendant of such benefit”; and 3) “acceptance of such benefit under such
        circumstances that it would be inequitable for him to retain the benefit without
        payment of the value thereof.”

Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 525 (Tenn. 2005) (quoting
Paschall’s, Inc. v. Dozier, 407 S.W.2d 150, 155 (Tenn. 1966)).

                National Bank made an offer of proof by stating that it intended to produce
evidence in the form of testimony of a Senior Vice President of National Bank who would
testify about the amount of the loan from National Bank to the Developer Company and the
fact that “those loan proceeds were specifically used for construction of infrastructure,
utilities, roads, grading on the project.”4 Even if the Trial Court had allowed National Bank
to produce this proffered evidence, such evidence fails to show that National Bank conferred
any benefit upon TVPOA. The fact that National Bank loaned money to the Developer
Company does not show that National Bank conferred any benefit whatsoever upon TVPOA.
The benefit conferred by National Bank was to the Developer Company and not to TVPOA 5 .
As such, National Bank could not prove unjust enrichment. Pursuant to Tenn. R. Evid. 403,
“evidence may be excluded if its probative value is substantially outweighed by …

        4
        National Bank also stated that it would produce proof in the form of testimony of its expert appraiser
who would testify about the value of the property. As already noted in this Opinion, the Trial Court
excluded the testimony of this previously undisclosed expert, and National Bank did not appeal this ruling.
        5
         As this is dispositive of the unjust enrichment issue, we need not discuss other possible barriers to
National Bank’s unjust enrichment claim.

                                                     -8-
considerations of undue delay, waste of time, or needless presentation of cumulative
evidence.” Tenn. R. Evid. 403. Given all this, we find that the Trial Court did not abuse its
discretion in excluding evidence of National Bank’s unjust enrichment claim.

                                        Conclusion

              The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
appellant, NBN Corporation d/b/a National Bank of Tennessee, and its surety.

                                                   _________________________________
                                                   D. MICHAEL SWINEY, JUDGE

                                             -9-