Adler v. Double Eagle Properties Holdings LLC, W2010-01412-COA-R3-CV
| Decision Date | 14 March 2011 |
| Docket Number | No. W2010-01412-COA-R3-CV,W2010-01412-COA-R3-CV |
| Parties | MICHAEL ADLER v. DOUBLE EAGLE PROPERTIES HOLDINGS, LLC v. AIRWAYS COMMONS, LLC |
| Court | Tennessee Court of Appeals |
Direct Appeal from the Chancery Court for Shelby County
No. CH-08-0908-2 Arnold B. Goldin, Chancellor
In this declaratory judgment action, the parties sought interpretation of a real estate purchase contract. The contract between the buyer and the seller provided for the assignment of all leases on the property and proration of rents to the buyer. The parties disputed whether these provisions contemplated a separate agreement between the seller and a third party. At the behest of the parties, the trial court construed both agreements and granted summary judgment to the buyer. On appeal, we raise, sua sponte, the question of whether all necessary parties were before the trial court pursuant to Tenn. Code Ann. § 29-14-107(a) and Tenn. R. Civ. P. 19. After concluding that all necessary parties were not included in this action, we vacate the judgment of the trial court and remand for further proceedings consistent with this opinion.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Vacated
and Remanded.
Roger A. Stone and Lisa N. Stanley, Memphis, Tennessee, for the appellant, Airways Commons, LLC.
Oscar C. Carr, III and R. Mathew Brinner, Memphis, Tennessee, for the appellee, Double Eagle Properties Holdings, LLC.
Airways Commons, LLC ("Airways" or "Seller") owned a commercial office building located at 3385 Airways Boulevard, Memphis, Tennessee. Fixed atop the building is a cellular tower. On November 30, 2005, Airways entered into an agreement styled "Rooftop Lease and Assignment Agreement" ("Rooftop Agreement") with Unison Site Management, LLC ("Unison"). Unison was not made a party to this action; however, the Rooftop Agreement is the subject of much disagreement between the parties.
The Rooftop Agreement purported to lease to Unison the rooftop portion of the building for the use and maintenance of the cellular tower. In exchange, Unison paid Airways $135,000 as complete consideration upon the signing of the Rooftop Agreement. Contemporaneously with the signing of the Rooftop Agreement, Unison assigned its interest in the agreement to its wholly-owned subsidiary, Cell Tower Lease Acquisition, LLC ("Cell Tower"). This assignment was styled "Assignment of Easement" and was recorded with the Shelby County Register of Deeds. Cell Tower was also not made a party to this action.
On April 8, 2008, Double Eagle Properties Holdings, LLC ("Double Eagle" or "Buyer") entered into an agreement with Airways for the purchase and sale of the entire building. This agreement was styled "Commercial Purchase and Sale Agreement" ("Purchase Contract"). The Purchase Contract contained an assignment of leases provision under which Airways assigned and conveyed its interest as landlord in all leases on the building to Double Eagle. Under the terms of the Purchase Contract, Airways was required to submit to Double Eagle a complete and accurate rent roll describing the terms of all leases on the building. As a "Special Stipulation," Paragraph 17 of the Purchase Contract stated that
After execution of the Purchase Contract, but before closing on the purchase and sale of the building, Double Eagle raised an issue with Airways as to whether the Rooftop Agreement between Airways and Unison was, in fact, a lease subject to the assignment of leases provision in the Purchase Contract. Double Eagle asserted that the Rooftop Agreement was, in fact, a lease and that the $135,000 Unison paid to Airways was prepaid rent that should be prorated under the Purchase Contract and paid to Double Eagle. Airways contended that the Rooftop Agreement was, in fact, an easement and not subject to the assignment of leases, and that the $135,000 was the purchase price paid by Unison for the easement.
As a condition to closing, which occurred on April 18, 2008, the parties agreed to escrow the disputed funds "until such time as a court of competent jurisdiction shall determine what amount, if any, received by Seller from Unison should be paid to Buyer pursuant to the terms of the [Purchase] Contract." On May 15, 2008, the escrow agent, attorney Michael Adler, filed a petition to interplead $135,000 in escrowed funds in the Chancery Court for Shelby County, naming as defendants, Double Eagle and Airways.1 Double Eagle and Airways both filed answers and cross-claims against each other. Both cross-claims sought a declaratory judgment as to the proper allocation and distribution of the $135,000 received by Airways from Unison. Double Eagle sought a construction of both the Purchase Contract and the Rooftop Agreement, while Airways maintained that the dispute should be resolved by exclusive reference to the Purchase Contract.
On July 24, 2009, Double Eagle, as cross-complainant, filed a motion for summary judgment, memorandum of law, and statement of undisputed facts. On August 3, 2009, Airways likewise filed a motion for summary judgment, memorandum of law, and statement of undisputed facts. Both parties subsequently filed responses to these motions for summary judgment and statements of undisputed facts. Throughout these filings, much litigation focused on whether the Rooftop Agreement was a lease or an easement, as the parties apparently agreed that a determination of this issue would be dispositive of the declaratory judgment action.
The trial court held a summary judgment hearing on November 20, 2009. By order of March 3, 2010, the trial court granted summary judgment in favor of Double Eagle in the amount of $124,312.50 plus attorneys fees and expenses. In doing so, the trial court construed both the Purchase Contract and the Rooftop Agreement. The trial court determined, inter alia, that: (1) Paragraph 17 of the Purchase Contract was an incorrect statement upon which Double Eagle should have been able to rely; (2) the Rooftop Agreement was, in fact, a lease and not an easement; and (3) because the Rooftop Agreement was a lease and the Purchase Contract provided for the proration of rents, the $135,000 in dispute must be prorated as rent and paid to Double Eagle.
After entry of a final judgment, Airways filed a timely notice of appeal raising three issues for review, as stated in its brief:
Additionally, Double Eagle has requested an award of attorneys fees and costs on appeal pursuant to the Purchase Contract.
Without reaching the issues raised by the parties, we must, sua sponte, question whether all necessary parties were included in this action for declaratory judgment. Tenn. R. App. P. 13(b) permits this Court discretion to consider issues not presented for review in order: "(1) to prevent needless litigation, (2) to prevent injury to the interests of the public, and (3) to prevent prejudice to the judicial process." Id. We believe, for reasons more fully developed below, that review under Tenn. R. App. P. 13(b) is appropriate in this case.
Double Eagle and Airways seek declaratory relief pursuant to the Declaratory Judgments Act contained at Tenn. Code Ann. § 29-14-101 et seq. Specifically, Tenn. Code Ann. § 29-14-103 provides:
"Because of the nature of declaratory relief, the Declaratory Judgments Act makes it incumbent that every person having an affected interest be given notice and an opportunity to be heard before declaratory relief may be granted." Huntsville Util. Dist. of Scott County v. Gen. Trust Co., 839 S.W.2d 397, 403 (Tenn. Ct. App. 1992). Declaratory judgments are not available unless all the proper parties are before the court.2 Byrn v. Metro. Bd. of Pub. Educ., No. 01-A-019003CV00124, 1991 WL 7806, at *5 (Tenn. Ct. App. Jan. 30, 1991) (citations omitted). "Proper parties include all those who must be bound by the decree in order to make it effective and to avoid the recurrence of additional litigation on the same subject." Id.
Tennessee Code Annotated § 29-14-107(a) mandates that "[w]hen declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceedings."
"Identifying the necessary parties in a declaratory judgment...
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