Island Props. Assocs. v. Reaves Firm, Inc.

• Decision Date: 06 March 2013
• Docket Number: No. W2012–00202–COA–R3–CV.,W2012–00202–COA–R3–CV.
• Citation: 413 S.W.3d 392
• Parties: ISLAND PROPERTIES ASSOCIATES v. The REAVES FIRM, INC., d/b/a Reaves, Sweeney, and Marcum, et al.
• Court: Tennessee Court of Appeals

413 S.W.3d 392

ISLAND PROPERTIES ASSOCIATES

v.The REAVES FIRM, INC., d/b/a Reaves, Sweeney, and Marcum, et al.

No. W2012–00202–COA–R3–CV.

Court of Appeals of Tennessee,

Western Section, at Jackson.

Jan. 24, 2013 Session.

March 6, 2013.

Application for Permission to Appeal

Denied by Supreme Court

June 13, 2013.

William M. Jeter and Meredith A. Lucas, Memphis, Tennessee, for the appellant, The Reaves Firm.

Richard Glassman, and Lewis W. Lyons, Memphis, Tennessee, for the appellee, Island Properties Associates.

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S., and HOLLY M. KIRBY, J., joined.

OPINION

J. STEVEN STAFFORD, J.

This is a surveyor negligence case. Appellee developer filed suit against Appellant surveyor, claiming two distinct acts of negligence on surveyor's part. The first claim of negligence involved an error allegedly made by surveyor in a 1993 survey. The second claim of negligence involved Appellee's claim that, upon discovering the 1993 survey error in a subsequent survey that it performed in 2002, surveyor had a duty to inform Appellee of the error. We conclude that any negligence arising from the 1993 survey claim is barred by the statute of repose, Tennessee Code Annotated Section 28–3–114(a). Despite Appellant's numerous motions to exclude this cause of action as time barred, the trial court ultimately allowed the 1993 negligent survey claim to be tried to the jury. The jury was then instructed as to both claims of negligence and the jury returned a verdict, wherein it found Appellant surveyor to be forty percent at fault and awarded damages in favor of Appellee. Appellant surveyor appeals. Because the jury was improperly instructed and was allowed to consider the time-barred claim of negligence, we conclude that the jury was mislead by the instructions. Accordingly, we vacate the judgment on the jury verdict and remand for a new trial. Vacated and remanded.

Appellee Island Properties Associates (“IPA,” or “Appellee”) is a Tennessee General Partnership consisting of Henry Turley and Brooks Road Associates, an entity of Belz. IPA is engaged in the business of real estate development, management and ownership. Appellant The Reaves Firm, Inc. (“Reaves” or “Appellant”) is a Tennessee corporation engaged in the business of real estate surveying and engineering.

In 1988, IPA purchased 137 acres of undeveloped land on what is now known as Harbor Town on Mud Island in Memphis. IPA's development plan involved numerous phases, which spanned some thirty years to completion. IPA's Development Director on this project was Tony Bologna. At the time IPA was developing the phases at issue in this appeal, one of its attorneys was Keith Novick.

The development phases were not all started at the same time. Rather, IPA tackled phases gradually, allowing itself flexibility to modify the phases as the development grew. When IPA wanted to start or change a phase, Reaves would create a plat, which would then be recorded by IPA. IPA would then convey individual lots within the phase to purchasers, with IPA retaining ownership of the neutral areas within the various phases, in part so that it could adjust boundary lines of the phases at a later date if needed. In drafting plats, Reaves worked closely with Mr. Bologna. Often, Mr. Bologna would instruct Reaves to draft a phase initially, with the intention that the plat would be modified numerous times as plans developed.

The property that is disputed in this case concerns an area in the original Phase 11 (i.e., as evidenced by Reaves' initial survey) and the final Phase 11 (i.e., as represented on later modifications of the initial Phase 11 survey). The original Phase 11 was created in 1992 and involved a layout for a dockominium and marina on the west shore of Mud Island. A dockominium is a series of boat slips on a dock that can be sold individually. Under the Tennessee Horizontal Property Act, Tennessee Code Annotated Section 66–27–101, et seq. (which is not the subject of this appeal), dockominiums are governed by the same rules as condominiums.

IPA built the dockominium on the water next to the shore of Phase 11, but opted (at that time) not to proceed with other planned amenities such as a marina, boat store, and restaurant. As Mr. Turley states in his testimony, IPA intended to convey each of the boat slips to individual buyers and to create only the dock as a common area. Mr. Novick was charged with preparing the deeds. On October 26, 1992, Mr. Novick sent a letter to Mr. Turley, outlining his intentions to prepare a master deed. Mr. Novick then requested that Reaves prepare an exhibit showing all of the boat slip numbers on the plat. In a second letter, dated January 4, 1993, Mr. Novick suggested that Reaves use the same plat drawing that it had prepared to establish the original Phase 11, and to merely insert the numbers on the individual dock slips. It is important to note that the Reaves firm was not directly involved with the preparation of the master deed; rather, it was only involved in rendering the exhibits to that deed, including a property description and survey (the “1993 Survey”). On March 16, 1993, Mr. Novick recorded the master deed on behalf of IPA, establishing the dockominium as a Tennessee Horizontal Property Regime.

Although IPA's intention was to transfer only the boat slips, the testimony at trial reveals that, in contravention of that intention, the master deed converted the entire Original Phase 11 into a Tennessee Horizontal Property Regime, such that the purchaser of each boat slip was granted not only the intended boat slip and interest in the dock, but was also granted an undivided two percent (2%) interest in the land on the hillside above the shore (the “disputed property”) as a common element. Both Messrs. Turley and Bologna testified that it was never IPA's intention to convey the hillside property to the boat slip purchasers. This lawsuit involves, inter alia, IPA's assertion that the disputed property was erroneously transferred to the boat slip purchasers because IPA relied upon the 1993 Survey prepared by Reaves, which allegedly included the disputed property in error.

Shortly after recording the master deed in 1993, IPA began selling marina condominium boat slips to various private individuals, who are not parties to this appeal. As is relevant to this lawsuit, the warranty deeds executed by IPA in favor of these individuals included an undivided interest in the disputed property. In all, thirty-eight of the fifty slips were sold to third party owners.

Around 2001, as the project development continued, Mr. Bologna began to focus on Phase 21 of the project, which would be located southwest of the original Phase 11. Phase 21 involved the development of residential properties, including two condominium buildings, The Regatta and The Beacon, and twelve cottages. IPA again hired Reaves to prepare a survey of the property to be included in the Regatta and Beacon developments. Reaves prepared a second survey (the “2002 Survey”). The 2002 Survey was incorporated into the Final Plat for Phase 21. At some point during the process, it became apparent that the 2002 Survey for Phase 21 overlapped with the original Phase 11, i.e., the 1993 Survey. Mr. Bologna realized that the original Phase 11 would need to be modified in order for Phase 21 to be completed as planned. As noted above, it was IPA's intention to retain the right to make those modifications. Reaves prepared and amended final Phase 11 and Phase 21 as it was instructed to do by Mr. Bologna.

The 2002 Survey was submitted to Lawyer's Title Insurance Company (“Lawyer's Title”) for the purpose of preparing a title search setting forth the chain of title on the property to be included in the Beacon and Regatta developments. Lawyer's Title allegedly searched the title of the property only back to the issuance of the mortgagee's title insurance policy as part of the development in 1999. Therefore, the October 3, 2002 title policy that Lawyer's Title issued only covered property south of Phase 11 and, therefore, the search did not include the title history of Phase 11. Consequently, the master deed, setting forth the common elements of the marina condominium was not included in the title search. Allegedly, neither Reaves, nor Lawyer's Title, informed IPA of the problem with the disputed property and IPA began construction on the Beacon and Regatta developments.

On or about February 3, 2003, Mike Williams, one of IPA's lawyers, became aware of the language in the 1993 master deed for the dockominium that was created by Mr. Novick. The discovery revealed that the master deed had conveyed the land to the west, above the shoreline in the original Phase 11, i.e., the disputed property, to the boat slip purchasers as a common element. Part of the Beacon and four of the cottages were located on this portion of property. IPA had already begun construction of these buildings, which had been contracted through Patton & Taylor. On or about May 30, 2003, IPA ordered Patton & Taylor to cease all work on the Beacon and the cottages until the disputed property could be settled. IPA subsequently negotiated settlement with all of the marina slip owners, whereby IPA essentially repurchased the disputed property that was unintentionally conveyed and the slip owners re-deeded the portions of the disputed property back to IPA.

On October 13, 2003, IPA filed suit against Reaves and Lawyer's Title. ¹ ConcerningReaves, the original complaint states:

Defendant The Reaves Firm ... negligently conducted a survey of the property at issue and negligently failed to detect that a portion of the property had been previously deeded to the Marina at Harbortown condominium owners association in 1993. The actions of Defendant the Reaves Firm, Inc. in performing this negligent survey deviated from the acceptable standard of care expected of a similarly...