Court Opinion

ID: 4117520
Source: CourtListenerOpinion
Date Created: 2017-01-20 22:12:28.148691+00
Date Added: 2024-06-11T13:10:54.401744
License: Public Domain

01/20/2017

               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                        Assigned on Briefs December 2, 2016

         MOORE & ASSOCIATES MEMPHIS LLC v. GREYSTONE
                HOMEOWNERS ASSOCIATION INC.

                Appeal from the Chancery Court for Shelby County
                    No. CH-14-0268 Jim Kyle, Chancellor
                    ___________________________________

                          No. W2016-00721-COA-R3-CV
                      ___________________________________

This appeal involves the interpretation of a declaration of covenants for a homeowners’
association. Appellant, the homeowners’ association, filed liens on lots owned by
Appellee for nonpayment of association fees. Appellee brought suit to quiet title and for
damages for slander of title. The trial court dismissed the slander of title claim and
interpreted the declaration of covenants to exempt Appellee from the payment of
association fees. The trial court removed the liens filed against Appellee’s lots, but
assessed no monetary damages against Appellant. Appellant appeals. Discerning no
error, we affirm.

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

KENNY ARMSTRONG, J., delivered the opinion of the court, in which ANDY D. BENNETT
and THOMAS R. FRIERSON, II, JJ., joined.

Peter Baskind, Robin H. Rasmussen, and Megan Black Ross, Memphis, Tennessee, for
the appellant, Greystone Homeowners Association, Inc.

Lewis Clayton Culpepper, III, Memphis, Tennessee, for the appellee, Moore &
Associates, Memphis, LLC.

                                       OPINION

                                    I. Background

       In December of 2010, Moore & Associates, Memphis, LLC (“Appellee” or
“Moore”) purchased from the developer, Greystone General Partnership, twenty-seven
lots in a gated, residential community near Memphis, Tennessee. Charles Moore is the
managing member of Moore. Greystone Homeowners Association, Inc. (“Appellant” or
“Greystone Association”) is the homeowners’ association for the Greystone residential
development. Moore received title to the lots by warranty deed in lieu of foreclosure
because the developer was facing bankruptcy and foreclosure by SunTrust Bank. Moore
purportedly purchased the lots with the intention of building homes on the lots to sell to
third parties.

       As a part of Greystone residential community, Moore’s lots are subject to the
“Declaration of Covenants, Conditions and Restrictions for Greystone, P.D.” (“CCR”),
which was drafted by one of the general partners and executed on July 16, 2001. The
CCR provides that each lot owner becomes a member of the Greystone Association, and,
as a member, each lot owner must pay assessments to Greystone Association, including
regular assessments, special assessments, and emergency assessments. Article IX,
section I of the CCR exempts two types of entities from paying the assessments:

       The Developer-Declarant shall not be required to pay assessments on any
       lot owned by it. Any third party purchasing a lot from Developer-Declarant
       for the purpose of constructing a single-family residence for sale to the
       general public shall not be required to pay assessments so long as said third
       party does not occupy the property.

Immediately following its purchase of the lots, Moore paid $25,000.00 to Greystone
Association. Charles Moore described this payment as a “goodwill gift,” but denied that
the $25,000.00 was paid as assessment fees.

        In furtherance of its plan to build homes on the lots before selling them, in July of
2013, Moore contracted with Cade Peeper, a licensed contractor, to build a single-family
residence on one of its lots. The home was completed by the builder. For reasons it
attributed to Greystone Association, Moore did not build additional homes in the
Greystone development. Moore did sell two unimproved lots in June 2012 and April
2013, respectively.

         On January 31, 2014, Appellant filed liens on the remaining lots owned by
Moore. The liens, which totaled $128,100.00, were for alleged assessment arrears. On
February 21, 2014, Moore filed an action in the Shelby County Chancery Court (“trial
court”), seeking a declaratory judgment to quiet title relative to the liens filed by
Appellant and seeking damages for slander of title. In its complaint, Moore averred that
it was exempt, under the CCR, from paying assessments. Specifically, Moore argued
that, pursuant to article IX, section 1 (supra), it was a third-party that had purchased lots
from the developer with the purpose of constructing single-family residences for sale to

                                            -2-
the general public.1

        On April 4, 2014, Appellant answered the complaint, alleging that Moore did not
qualify for an assessment exemption under the CCR and, therefore, Appellant was
entitled to collect the assessment arrearage. Appellant also filed a counterclaim against
Moore, asserting claims for breach of contract and unjust enrichment for Moore’s failure
to pay homeowners’ association fees. On April 11, 2014, Moore answered the
counterclaim, denying Appellant’s allegations.

       On October 24, 2014, Moore filed a motion for summary judgment, reiterating its
argument that it is exempt from paying association fees under the plain language of the
CCR. On February 27, 2015, Appellant filed its response to Moore’s motion for
summary judgment, contending that Moore does not qualify for an exemption under the
CCR. Specifically, Appellant argued that because Moore is not the developer or assignee
of the developer and did not purchase the lots for the purpose of constructing homes on
the lots for sale, Moore is not exempt from payment of association fees. As support for
its position, Appellant cited Mr. Moore’s deposition testimony, in which he stated that
Moore is not a contractor and may not itself legally construct homes on the lots for sale to
the public. Appellant also noted that Moore’s real estate advertisement for its lots listed
twenty-five unimproved lots for sale. The trial court denied Moore’s motion for
summary judgment by order dated April 24, 2015.2

      On March 8 and 9, 2016, the trial court heard the case. In its judgment, filed on
March 22, 2016, the trial court found, in relevant part:

             The Court finds that Moore is not the Developer-Declarant, and does
       not qualify as a successor or assign of the Developer-Declarant. Although
       Moore purchased all the remaining land held by the Developer-Declarant at
       Greystone, the great weight of the evidence at trial indicates that Moore
       was not, and did not, become the Developer-Declarant, and is not entitled
       to exemption from assessments as the Developer-Declarant.

             The Court finds that Moore is entitled to exemption from payment of
       assessments based upon the second exemption in Art. IX, Sec. 1. The

       1
           At trial, Moore also argued that it fulfilled the first exemption, because by purchasing
all of the remaining lots and the other land in the development, it had become a successor to the
Developer-Declarant’s rights. On appeal, the parties agreed that Moore did not fall within the
Developer-Declarant exemption.
         2
           After the denial of the motion for summary judgment and before the bench trial, on
November 16, 2015, Appellant filed a motion for recusal, with a supplemental memorandum of
law filed on December 8, 2015. On February 5, 2016, the trial court transferred the matter to a
different section of the Shelby County Chancery Court.
                                               -3-
       Court concludes, based upon Charles X. Moore’s testimony and expert
       testimony offered at trial, that Moore is a third party which purchased lots
       from the Developer-Declarant for the purpose of constructing single family
       residences for sale to the general public, and that Moore does not occupy
       such residences. Based upon the testimony of Charles X. Moore, the Court
       determines that Moore’s purpose in purchasing the Subject Lots was for
       constructing single family residences for sale to the general public. The
       Court concludes that common sense indicates that Moore purchased the
       Subject Lots for the purpose of constructing single family residences for
       sale to the general public. The Court considered the testimony of the
       Association’s expert, Michael Hewgley, who testified that if a consumer
       purchases a lot and hires a builder, that consumer would immediately be
       responsible for payment of assessments. Conversely, if a builder bought
       the lot, the lot would be exempt until the home built upon it is occupied.

              It is undisputed that Moore does not hold a contractor’s license. The
       Court finds, however, that the word “constructing” in Art. IX, Sec. I does
       not require Moore to hold a contractor’s license to qualify as a third party
       “constructing single family residences for sale to the general public.” The
       Court finds that Moore’s testimony indicates his purpose in purchasing the
       Subject Lots.

             Since The Court finds that Moore is entitled to an exemption from
       assessments on the Subject Lots, pursuant to Art. IX, Sec. 1, the
       Association’s claims for assessments should be dismissed.

                The Court finds that Moore’s claims for damages and [s]lander of
       [t]itle should be dismissed. Moore presented no proof of damages arising
       from the actions of the Association. Moore’s claim for damages should,
       therefore, be dismissed. Moore failed to present any evidence of malicious
       activity by the Association in filing of any notices of lien against the
       Subject Lots. Accordingly, Moore’s claim for Slander of Title should be
       dismissed. The Association is not required to return any monies to Moore
       including a $25,000.00 payment from Moore that the Court concludes was
       a gift.

Based on the foregoing findings, the trial court ordered that: (1) the titles for the lots were
cleared; (2) Moore was not entitled to any damages; and (3) Appellant was to pay costs.
Appellant appeals.

                                          II. Issue

       Appellant raises the following issue for review, as stated in its brief:
                                           -4-
       Whether the Trial Court erred in its interpretation of [a]rticle IX, [s]ection I
       of the Declaration of Covenants, Conditions, and Restrictions for Greystone
       P.D., when the Trial Court found that Moore & Associates, Memphis, LLC,
       a member of Greystone Homeowners Association, Inc., is exempt from
       paying homeowners association assessments under [a]rticle IX, [s]ection I,
       which requires every member of the association to pay assessments unless a
       member purchases a lot for the purpose of constructing a single family
       residence for sale to the general public, and Moore only purchased lots for
       the purpose of flipping the lots for a higher price and not to construct
       single-family residences.

                                 III. Standard of Review

       This case was tried without a jury. Therefore, we review the trial court’s findings
of fact de novo with a presumption of correctness unless the evidence preponderates
otherwise. Tenn. R. App. P. 13(d). The trial court’s conclusions of law, however, are
reviewed de novo and “are accorded no presumption of correctness.” Brunswick
Acceptance Co., LLC v. MEJ, LLC, 292 S.W.3d 638, 642 (Tenn. 2008).

                                       IV. Analysis

      This appeal concerns the interpretation of the CCR, which was drafted by Terry
Dan, one of the general partners of Greystone General Partnership. Specifically, the
outcome of this case turns on the provision concerning the entities that are exempt from
paying assessments to Appellant. The provision at issue, article IX, section I, provides:

       The Developer-Declarant shall not be required to pay assessments on any
       lot owned by it. Any third party purchasing a lot from Developer-Declarant
       for the purpose of constructing a single-family residence for sale to the
       general public shall not be required to pay assessments so long as said third
       party does not occupy the property.

In its brief, Moore concedes that the first exemption, i.e., the Developer-Declarant
exemption, does not apply to Moore. The dispute concerns whether Moore falls under
the second exemption in the CCR: “[a]ny third party purchasing a lot from Developer-
Declarant for the purpose of constructing a single-family residence for sale to the general
public shall not be required to pay assessments so long as said third party does not
occupy the property.” Appellant argues that Moore is not “constructing” homes for third
parties if Moore does not, itself, construct the homes, i.e. obtain a contractor’s license and
build a structure on each lot. Appellant further argues that this exemption is intended to
protect only builders who purchase lots from the developer, and Moore is not a builder.
Therefore, Appellant argues that Moore is not exempt from paying assessments.
                                              -5-
        As this Court has determined, the construction and interpretation of covenants,
conditions, and restrictions pertaining to property are construed as contracts; accordingly,
we apply “the rules of construction generally applicable to the construction of other
contracts.” Maples Homeowners Ass’n, Inc. v. T & R Nashville Ltd. P’ship, 993
S.W.2d 36, 38-39 (Tenn. Ct. App. 1998) (stating, in relevant part, “[c]ovenants,
conditions, and restrictions… are property interests that run with the land. They arise,
however, from a series of overlapping contractual transactions. Accordingly, they should
be viewed as contracts….”) (citations omitted). In interpreting a contract, this Court must
first “ascertain and… give effect to the intent of the contracting parties.” Hughes v. New
Life Dev. Corp., 387 S.W.3d 453, 465 (Tenn. 2012); see also Roberts v. Bridges, No.
M2010-01356-COA-R3-CV, 2011 WL 1884614, at *6 (Tenn. Ct. App. May 17, 2011);
Cordova the Town Homeowners Ass’n v. Gill Dev. Co., Inc., No. W2007-01692-COA-
R3-CV, 2008 WL 4253414, at *3 (Tenn. Ct. App. Sept. 12, 2008); Maples Homeowners
Ass’n, 933 S.W.2d at 39. “[I]n reading the covenant we should give the words a fair and
reasonable meaning in order to effectuate its purpose.” McDonald v. Chaffin, 529
S.W.2d 54, 57 (Tenn. Ct. App. 1975). However, a court may not extend a contract “to
cover circumstances not plainly included within [its] terms.” Richards v. Abbottsford
Homeowners Ass’n, 809 S.W.2d 193, 195 (Tenn. Ct. App. 1990); e.g., Williams v. Fox,
219 S.W.3d 319, 324 (Tenn. 2007); Turnley v. Garfinkel, 362 S.W.2d 921, 923 (Tenn.
1962); Beacon Hill Homeowners Ass’n v. Palmer Props., 911 S.W.2d 736, 739 (Tenn.
Ct. App. 1995). This Court must “ascertain the intention of the parties as expressed by
the language of the document itself… [in its] usual and ordinary meaning.” Grand
Valley Lakes Prop. Owners Ass’n, Inc. v. Burrow, 376 S.W.3d 66, 78 (Tenn. Ct. App.
2011). “[T]he search for the contracting parties’ intent should focus on the four corners
of the contract.” Realty Shop, Inc. v. RR Westminister Holding, Inc., 7 S.W.3d 581,
597 (Tenn. Ct. App. 1999). “A contract must be enforced according to the ordinary
meaning of its words unless both parties understand and agree at the time of the contract
that its meaning is otherwise.” Moore v. Moore, 603 S.W.2d 736, 739 (Tenn. Ct. App.
1980). “All doubts concerning a covenant’s applicability should be resolved against the
covenant.” Richards v. Abbottsford Homeowners Ass’n, 809 S.W.2d 193, 195 (Tenn.
Ct. App. 1990).

        The dispute between the parties rests on the interpretation of the word
“constructing” in article IX, section I, of the CCR. Webster’s II New College Dictionary
defines “construct” as “to put together by assembling parts; build.” Webster’s II New
College Dictionary 242 (1995). Appellant argues that the term “constructing” should be
narrowly construed, because Moore itself is not a contractor, and, as such, it is not
“constructing” homes on the lots. Moore, on the other hand, argues for a broader
definition, contending that it is “causing homes to be constructed” by contracting with
Mr. Peeper, a licensed contractor, for that purpose. Thus, Moore argues that it falls
within the assessment exemption.

                                           -6-
       Although the trial court’s order does not specifically state that it finds ambiguity in
the disputed contract language, we may infer from the trial court’s reliance on proof
outside the four corners of the CCR that the trial court found the document to be
ambiguous. Before a court may consider evidence outside the four corners of a contract,
it must first determine whether the contract contains any ambiguity, and, if so, whether
the ambiguity is patent or latent. In other words,

       [p]arol evidence is not admissible to remove a patent ambiguity but is
       admissible to remove a latent ambiguity. White v. Kaminsky, 196 Tenn.
180, 264 S.W.2d 813 (1954)….

               A patent ambiguity is one produced by the uncertainty,
       contradictoriness or deficiency of the language of an instrument, so that no
       discovery of facts or proof of declarations can restore the doubtful sense
       without adding ideas which the words do not sustain. A latent ambiguity is
       one where the equivocality of expression or obscurity of intention does not
       arise from the words themselves, but from the ambiguous state of extrinsic
       circumstances to which the words of the instrument refer, and which is
       susceptible of explanation by the mere development of extraneous facts
       without altering or adding to the written language or requiring more to be
       understood thereby than will fairly comport with the ordinary or legal sense
       of the words and phrases used. Teague v. Sowder, 121 Tenn. 132, 114
S.W. 484 (1908).

Ward v. Berry & Assoc., 614 S.W.2d 372, 374 (Tenn. Ct. App. 1981). Furthermore, any
ambiguity should be construed in favor of the non-drafting party, i.e., Appellee. See, e.g.,
Crye-Leike v. Carver, 415 S.W.3d 808, 816 (Tenn. Ct. App. 2011) (“Tennessee courts
adhere to the general rule that ambiguities in a contract are construed against the
drafter”); German v. Ford, 300 S.W.3d 692, 704 (Tenn. Ct. App. 2009) (“doubtful
language is construed against the party who drafted the contract”); Ralph v. Pipkin, 183
S.W.3d 362, 367 (Tenn. Ct. App. 2005) (“[w]e generally will construe ambiguous terms
against the drafter”). Here, the word “constructing” is not so uncertain, contradictory, or
deficient as to prevent an interpretation of the meaning of the contract. Id. Accordingly,
we conclude that the trial court did not err in considering parol evidence in this case.
“When a contract is determined to be ambiguous after application of the rules of
construction, then the interpretation of the contract becomes a question of fact for the
finder of fact.” Dog House Inv., LLC v. Teal Props., Inc., 448 S.W.3d 905, 913 (Tenn.
Ct. App. 2014).

       Turning to the evidence, Mr. Moore testified that he formed Moore & Associates
to make a profit “from the building and selling” of “[h]omes to the public, as well as
selling lots to those public [sic] who will promise to build a home.” Mr. Moore’s
testimony regarding his intent to build multiple homes in the Greystone development was
                                           -7-
corroborated by Cade Peeper, the licensed contractor, who constructed a home for Moore
on lot #71. This proof contradicts Appellant’s contention that Moore intended to only
sell its lots unimproved.

       Both parties proffered expert testimony from real-estate attorneys. Moore elicited
testimony from attorney William Miller, who testified, in relevant part:

      A. [I]n the second phrase, they’re clearly setting out an exemption, as well,
      for someone who is purchasing a lot, who is not using it for their own
      purposes… It’s distinguishing someone who buys a lot not for their own
      use as opposed to somebody, a potential home buyer, buy[s] a lot, build[s] a
      house and live[s] in the neighborhood.

                                          ***

      A. But at the end of the day, Mr. Moore is not going to build a home in that
      neighborhood to live in. He’s not going to occupy the property. He’s
      simply going to be about the business of seeing that neighborhood gets built
      out, those lots get sold, that homes get built.

                                          ***

      A. [S]pecifically, we’re focusing on the language of the last clause of this
      paragraph, dues do not attach until the third party occupies the property,
      whether that’s the builder who gives up on selling it and moves in or
      whether that’s the person they were building it for in the first place. The
      house is finished, you get your certificate of authenticity and the ultimate
      homeowner moves in. That’s when dues attach.

        Appellant provided expert testimony from attorney Michael Hewgley, who stated
that the covenant exempts only builders and contractors. Specifically, Mr. Hewgley
testified:

      A. [Mr. Moore] was -- he is not the intended class of builder that these
      documents intended to protect from payment of fees. He was not in the
      original builder group.

                                          ***

      Q. Okay. Let’s talk about the exemption, specifically. What class of
      people is that exemption, the builder’s exemption, for lack of a better term,
      what class of people is that intended to protect?

                                          -8-
       A. Builders who normally build in Shelby County, Tennessee, for the sale
       to a third party that have a general contractor’s license and have experience
       in building the subdivisions of this type.

                                           ***

       Q. Okay. What class of buyer would you say that Mr. Moore is?

       A. He’s a land – he’s a lot speculator. He bought distressed lots in a
       distressed period for the purpose of selling them to the general public to
       make a profit.

Mr. Hewgley opined that, if a builder purchased a lot and constructed a house at the
direction of a third-party, the builder would be “exempt for the period of time that he
owned the lot,” but if a future homeowner purchased the unimproved lot, and then the
homeowner hired a builder to build a house on the lot, the homeowner would be required
to pay assessments upon the purchase of the lot. However, Mr. Hewgley agreed that
article IX, section I, does not use the term “builder.” Further, Moore is not required to
have a contractor’s license to enter into an agreement with a licensed contractor to build
homes on its lots, which homes Moore could then market for sale to the general public.

        In regard to the intent of the CCR provision, it is undisputed that neither Mr.
Miller nor Mr. Hewgley drafted the CCR. Accordingly, we question what, if any,
probative value Messrs. Miller and Hewgley’s respective testimony has concerning the
intent of the CCR provisions in question here. Regardless, from the trial court’s order, it
is clear that the trial court found Mr. Moore’s testimony credible regarding the purpose in
buying the lots. In its order, the trial court states, “[b]ased upon the testimony of Charles
X. Moore, the Court determines that Moore’s purpose in purchasing the Subject Lots was
for constructing single family residences for sale to the general public.” “Where the trial
judge has seen and heard the witnesses, especially if issues of credibility and weight to be
given oral testimony are involved, considerable deference must be accorded those
circumstances on review.” McCaleb v. Saturn Corp., 910 S.W.2d 412, 415 (Tenn. 1995)
(citing Townsend v. State, 826 S.W.2d 434, 437 (Tenn.1992)); see, e.g., Interstate Mech.
Contractors, Inc. v. McIntosh, 229 S.W. 674, 682 (Tenn. 2007) (finding that where
“[t]he trial court had the opportunity to observe the demeanor and gauge the credibility”
of the witness, “we may infer that the trial court found” that the witness’ testimony was
credible). By adopting Mr. Moore’s testimony, the trial court found Mr. Moore’s
testimony to be probative as to Moore’s intent in purchasing the lots. Further, from the
plain language of the CCR, purchasing the lots from the developers for the purpose of
constructing single-family homes for sale to the public is the only requirement to qualify
for the assessment exemption in question. To interpret the CCR to require the third party
to be a builder or hold a contractor’s license to qualify for the exemption would be an
extension of the terms of the CCR. We decline to adopt such interpretation. As noted by
                                              -9-
Appellant’s expert, Mr. Hewgley, the exemption provision in the CCR in this case is not
a standard CCR provision, and this Court cannot interpret the provision to make it
comply with standard provisions that protect only builders. Accordingly, we conclude
that the trial court did not err in its determination that Moore is exempt, under article IX,
section I, from paying the assessments.

                                      V. Conclusion

      For the foregoing reasons, we affirm the trial court’s judgment. The case is
remanded for such further proceedings as may be necessary and are consistent with this
opinion. Costs of the appeal are assessed against the Appellant, Greystone Homeowners
Association, Inc., and its surety, for all of which execution may issue if necessary.

                                                    _________________________________
                                                    KENNY ARMSTRONG, JUDGE

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