Dent Rd. Gen. P'ship v. Synovus Bank

DENT ROAD GENERAL PARTNERSHIP ET AL. v. SYNOVUS BANK ET AL.

No. W2017-01550-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT JACKSON

September 11, 2018 Session

November 26, 2018

Appeal from the Chancery Court for Shelby County

No. CH-12-1403

Jim Kyle, Chancellor

Appellants appeal the grant of summary judgment to defendants title company and legal professionals on claims related to a real estate transaction that occurred in 2004. We affirm the grant of summary judgment as to Appellants' legal malpractice claim based upon the expiration of the statute of limitations. Based upon agreement of the parties, we also affirm the dismissal of Counts I through VII against the title company. The grant of summary judgment in favor of the title company as to all remaining claims is vacated.

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

J. STEVEN STAFFORD, P.J., W.S., delivered the opinion of the court, in which THOMAS R. FRIERSON, II, and BRANDON O. GIBSON, JJ., joined.

Randall N. Songstad, Cordova, Tennessee, for the appellants, Dent Road General Partnership, and Tab Watters.

Mark J. Grai, Memphis, Tennessee, for the appellee, Chicago Title Insurance Company.

Richard Glassman and Jonathan Stokes, Memphis, Tennessee, for the appellees, Jason Scott Wexler, and Hanover, Walsh, Jalenak & Blair, PLLC.

OPINION

Background

This case centers around a real estate transaction in Shelby County, Tennessee. The property at issue consists of three tracts: the House Parcel, the Barn Parcel, and the Access Tract (together, "the Dent Road property" or "the subject property"). The House Parcel and the Barn Parcel were acquired by Defendant Trust One Bank ("Trust One") by virtue of a foreclosure. Trust One thereafter appointed Defendant Leonard C. Dunavant as Substitute Trustee ("Substitute Trustee") to conduct the foreclosure sale. On February 17, 2004, Trust One, Substitute Trustee, and the purported owner of the Access Tract, Grace W. Swaney, entered into an "Escrow Agreement" whereby Trust One acquired the rights to the Access Tract. This tract was necessary to maximize the value of the foreclosed property as the House Parcel did not have access to a road. The purchase price of $52,380.00 was placed in escrow, and Trust One received title to the Access Tract via quitclaim deed from Ms. Swaney. The Escrow Agreement expressly stated that the Access Tract was subject to pending lawsuits contesting Ms. Swaney's ownership interest in the Access Tract.

Plaintiffs/Appellants Joseph Higdon, Tab Watters, Robert L. Knight, and Michael R. Mayer formed Dent Road General Partnership ("Dent Road" and collectively, "Appellants") for the purpose of acquiring the Dent Road Property. Appellants purchased the subject property at a foreclosure sale on February 18, 2004. The contract specifically stated that title was to be conveyed by warranty deed and gave Appellants a reasonable amount of time to clear up any title defects. Dent Road retained Defendant/Appellee Jason Wexler ("Attorney Wexler") of Defendant/Appellee Hanover, Walsh, Jalenak & Blair, PLLC ("Hanover Walsh," and together with Attorney Wexler, "Appellees") to represent the Appellants in acquiring the subject property. Appellants and Appellees had previously worked together in forming the partnership. Appellees engaged Defendant/Appellee Chicago Title Insurance Company to provide title insurance for the subject property. There is no dispute that Dent Road knew they were purchasing title insurance at the time of the closing.

On March 23, 2004, Attorney Wexler emailed the substitute trustee concerning some "issues [that had] arisen" with the closing. In particular the email noted that Ms. Swaney and another purported owner, Randall P. Swaney, were "quitclaiming their interests" in the Access Tract and that other minor title issues not at issue in this appeal needed to be corrected. The email concludes that "[a]ssuming that we can get all of this foregoing worked out in time," the closing would take place as scheduled. It appears that Mr. Watters was included in this email and that he forwarded the email to Mr. Mayer and Mr. Knight. On March 28, 2004, Attorney Wexler emailed Mr. Watters to inform Dent Road that there were "a series of minor errors" with regard to ensuring good title to the subject property. Attorney Wexler asked if the partners wanted the "gory details" of the issues; otherwise, Attorney Wexler stated that he would let Dent Road know "either (a) when the title company has cleared us, or (b) when we hit a road block." Attorney Wexler and Mr. Watters undisputedly met on March 29, 2004, to go over the closing. Appellants, by and through Mr. Watters, closed on the subject property on March 31,2004. There is no dispute that at the closing Dent Road received a quitclaim deed concerning the Access Tract rather than a warranty deed as specified in the contract.¹ Despite the fact that only a quitclaim deed was conveyed concerning a portion of the subject property, Dent Road paid the full sales price contemplated by the contract.

Appellants remained in possession of the subject property until 2011, when they sought to sell the subject property. The Barn Parcel sold in March 2011 for $300,000.00, with Dent Road retaining a small portion of the Barn Parcel for access purposes. Later in 2011, a prospective buyer approached Dent Road about purchasing the House Parcel, the Access Tract, and the small remaining portion of the Barn Parcel. The buyer also wished to purchase a small triangular tract from Ms. Swaney and Mr. Swaney. Dent Road was willing to obtain this tract to consummate the purchase. Dent Road thereafter hired a title company to perform a title search related to the triangular tract, which search revealed title issues. On September 7, 2011, the title company informed Dent Road that these title issues likely also affected the Access Tract. Specifically, the search revealed four pending lawsuits seeking to set aside a fraudulent conveyance of the Access Tract by Ms. Swaney and Mr. Swaney, several judgment liens, and liens lis pendens. When the Appellants asked Chicago Title to reinsure the new purchaser, Chicago Title refused.²

On September 6, 2012, Appellants filed an action against Trust One, Substitute Trustee, Attorney Wexler, Hanover Walsh, and Chicago Title,³ seeking a declaratory judgment, money damages, and rescission of the 2004 closing. Appellants alleged that, among other things, Appellees failed to disclose title defects regarding the Dent Road property and conspired to deliver Appellants inferior title to the subject property. Additionally, Appellants alleged that Chicago Title failed to act in a diligent and reasonable manner to correct the alleged title defects affecting the subject properties. An amended complaint was filed on November 6, 2012.

Appellees moved for summary judgment for the first time on March 3, 2015, arguing that Appellants' claims were barred by the one-year legal malpractice statute of limitations. In support, Appellees filed the affidavit of Attorney Wexler, who testified that the title issues were disclosed to Mr. Watters prior to the closing. In addition, both Attorney Wexler and his staff testified that all closing documents, including the Access Tract quitclaim deed, were mailed to Dent Road. The defendant bank and Chicago Title also filed motions for summary judgment. Appellants filed a response in opposition to Appellees' motion, supported by the affidavit of Mr. Watters, who testified that he was unaware of the title issues prior to 2011. The trial court entered an order denying themotions on December 2, 2016, concluding that disputes of material fact made summary judgment inappropriate.

The parties conducted additional discovery, including the deposition of Mr. Watters. In his deposition, Mr. Watters denied that he ever personally received the closing documents following the closing but (1) admitted that he could not definitively state that the documents were not received by Dent Road; (2) indicated they he saw the quitclaim deed so long as it was part and parcel of the closing documents; (3) stated that he made no effort to investigate the closing documents after allegedly not receiving them; and (4) could not recall the March 29, 2004 meeting with Attorney Wexler. Appellees filed a renewed motion for summary judgment on May 9, 2017, again arguing that Appellants' injury arose at the time of closing, March 31, 2004, and that the Appellants' claims were time-barred. After receiving supplemental briefing on the discovery rule, discussed infra, the trial court entered an order granting the renewed motion for summary judgment on July 7, 2017. Adopting the argument of Appellees, the trial court determined the injury for purposes of the discovery rule occurred on the date of closing, March 31, 2004, and that Appellants were alerted to the injury when they received the quitclaim deed at the closing. The trial court certified its judgment as final pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure. Appellants filed a timely notice of appeal August 3, 2017.⁴

Issues Presented

Appellants raise three issues, which are taken from their appellate brief:

1. Whether the trial court erred by improperly applying the "discovery rule" in a legal malpractice setting when it found the Appellant suffered an injury at the real estate closing in 2004 instead of when Appellant was unable to sell the real property in 2011.

2. Whether the trial court erred in applying the "knowledge" element of the discovery rule when it found the Appellant should have known at closing that it received real property with significant title defects.

3. Whether the trial court erred in dismissing all of the Appellants' claims against Chicago Title based on the statute of limitations for legal malpractice and when a motion as to all claims was not before the court.

Standard of Review

This case was decided on a motion for...