PNC Multifamily Capital Institutional Fund XXVI Ltd. v. Bluff City Cmty. Dev. Corp.

• Decision Date: 19 September 2012
• Docket Number: No. W2011–00325–COA–R3–CV.,W2011–00325–COA–R3–CV.
• Citation: 387 S.W.3d 525
• Parties: PNC MULTIFAMILY CAPITAL INSTITUTIONAL FUND XXVI LIMITED PARTNERSHIP, et al. v. BLUFF CITY COMMUNITY DEVELOPMENT CORPORATION, et al.
• Court: Tennessee Court of Appeals

387 S.W.3d 525

PNC MULTIFAMILY CAPITAL INSTITUTIONAL FUND XXVI LIMITED PARTNERSHIP, et al.

v.BLUFF CITY COMMUNITY DEVELOPMENT CORPORATION, et al.

No. W2011–00325–COA–R3–CV.

Court of Appeals of Tennessee, Western Section, at Jackson.

March 21, 2012 Session.

May 4, 2012.

Application for Permission to Appeal Denied by Supreme Court Sept. 19, 2012.

Robert L. Crawford, Joseph B. Reafsnyder, and Charles L. Perry, Memphis, Tennessee, for the appellants, PNC Multifamily Capital Institutional Fund XXVI Limited Partnership, PNC Multifamily Capital Institutional Fund XXX Limited Partnership, PNC Multifamily Capital Institutional Fund XXI Limited Partnership, Columbia Housing SLP Corporation, April Woods Apartments Limited Partnership, Eagles Landing Apartments Limited Partnership,and Harmony Woods Apartments Limited Partnership.

Lucian T. Pera, Memphis, Tennessee, for the appellees, Fearnley and Califf, PLLC.

Robert A. Cox and Ronna D. Kinsella, Memphis, Tennessee, for the appellees, Vanecia Kimbrow, Tate and Kimbrow PLLC, and Community Equity & Title, Inc.

Bryan Matthew Meredith, Memphis, Tennessee, for the appellees, April Mabry and Johnnie Briggs.

Robert L.J. Spence, Jr., Memphis, Tennessee, for the appellees, Jesse Briggs and Project Love Incorporated.

OPINION

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S., and DAVID R. FARMER, J., joined.

J. STEVEN STAFFORD, J.

This is an appeal from the grant of a Tennessee Rule of Civil Procedure 12.02(6) motion to dismiss in favor of Appellees, an attorney, her professional limited liability company (“PLLC”), a title company, and a law firm. As to the law firm, the trial court found that the causes of action, if any, sounded in legal malpractice and were barred by the applicable one-year statute of limitations found at Tennessee Code Annotated Section 28–3–104(a)(2). As to the attorney, the PLLC, and the title company, the trial court found that any causes of action alleged against these Appellees sounded in tort and were claims for unliquidated damages; thus the court held that it lacked jurisdiction under Tennessee Code Annotated Section 16–11–102. After reviewing the Complaint, we conclude that: (1) the trial court did not apply the discovery rule in reaching its conclusion that Appellants' claims that sound in legal malpractice are barred by the statute of limitations; (2) applying the discovery rule, there is nothing in the pleadings from which to infer that the Appellants' knowledge of breach or misappropriation on the part of the general partner also means that Appellants knew, or should have known, about any wrongdoing on the part of the law firm, the PLLC, and the attorney; (3) therefore, any claims sounding in legal malpractice, against the law firm, the attorney, and her PLLC, survive the motion to dismiss; however, because there was no attorney-client relationship between the Appellants and the title company, claims for legal malpractice cannot lie against the title company; (4) many of the claims against the law firm, the PLLC, and the title company that sound in tort are not sufficiently pled under Tennessee Rule of Civil Procedure 8.01 or, where they sound in fraud, are not pled with particularity as required by Tennessee Rule of Civil Procedure 9.02; these claims were properly dismissed with the following exceptions: (a) the Complaint does sufficiently plead a cause of action for aiding and abetting the breach of a fiduciary duty against the title company, the law firm, the attorney, and her PLLC; to the extent that the alleged aiding and abetting was the result of a plan or design by the Appellees, conspiracy may also lie for that tort; (b) the Complaint does sufficiently plead causes of action for misappropriation or conversion and conspiracy against the Appellee attorney, individually, but not against the law firm, the title company, or the PLLC (due to lack of particularity in the pleadings as to these Appellees); (5) because the amounts of the alleged misappropriations are known, the damages sought are not all unliquidated; therefore, the chancery court has jurisdiction. Reversed in part, affirmed in part, and remanded.

The Plaintiffs/Appellants in this case are: PNC Multifamily Capital Institutional Fund XXVI Limited Partnership (“Fund XXVI”), PNC Multifamily Capital Institutional Fund XXX Limited Partnership (“Fund XXX”), both Delaware limited partnerships; PNC Multifamily Capital Institutional Fund XXI Limited Partnership (“Fund XXI”), a Massachusetts limited partnership, Columbia Housing SLP Corporation (“Columbia Housing”), an Oregon corporation; and three Tennessee limited partnerships: Eagles Landing Apartments, LP (“Eagles Landing”), April Woods Apartments, L.P. (“April Woods”), and Harmony Woods Apartments, L.P. (“Harmony Woods”).¹

On November 1, 2004, Fund XXI, Columbia Housing and Bluff City Community Development Corporation, Inc. (“Bluff City”) entered into a partnership agreement to create Harmony Woods Apartments, L.P. The partnership agreement was intended to take advantage of the low income housing tax credit created by Congress, and was for the purpose of building and running certain low-to-moderate-income level apartment complexes in Memphis.

A year after the initial agreement, on November 1, 2005, Fund XXVI, Columbia Housing, Bluff City, and another non-profit entity, Project Love, by and through its owners, Jesse and Johnnie Briggs, entered into a second partnership agreement to create an entity known as April Woods Apartments, L.P.² One month after that, a third and final partnership agreement was created by Fund XXX, Columbia Housing, Bluff City, and Orson Sykes for the purpose of creating an entity known as Eagles Landing Apartments, L.P.³

Tate & Kimbrow, P.L.L.C. and Fearnley & Califf, P.L.L.C. are Shelby County law firms both doing business as Fearnley, Califf, Martin, McDonald Tate & Kimbrow (“Fearnley & Califf”).⁴ At all material time, Vanecia Kimbrow was an attorney with and member of Fearnley & Califf. Through Ms. Kimbrow, Fearnley & Califf represented April Woods, Harmony Woods, and Eagles Landing. At the same time, Fearnley & Califf, again through Ms. Kimbrow, also represented Bluff City and its primary executive, Carl Mabry. As part of the transactions outlined in the foregoing paragraph, Ms. Kimbrow, Fearnley & Califf, and Community Equity & Title, Inc. (“Community Title,” and together with Ms. Kimbrow and Tate & Kimbrow, PLLC, d/b/a Fearnley & Califf, “Appellees”) provided closing documents and opinion letters relating to the validity and execution of the partnership agreements.⁵

On August 12, 2008, Appellants removed Bluff City from its position as general partner of the partnerships. This decision was brought about by three categories of alleged wrongdoing on the part of Bluff City: (1) defaults under loan agreements and payment obligations; (2) transfer of interests in real property belonging to the limited partnerships without the limited partners' consent and misappropriation of funds of the limited partnerships; and (3) failure to meet various reporting obligations. The instant appeal involves the second category of alleged wrongdoing—i.e., improper transfers of interest in real property and alleged misappropriation of funds, and specifically Appellees' alleged role therein. In the second amended complaint, which is the subject of this appeal, Appellants identify the following instances of alleged misappropriation or diversion of partnership funds by Bluff City and/or Mr. Mabry:

• May 25, 2007 withdrawal of $3,462.81 from April Woods' account.

• November 20, 2007 withdrawal of $347,265.67 from April Woods' account.

• December 6, 2007 withdrawal of $100 from April Woods' account.

• December 6, 2007 withdrawal of $14,029.79 from April Woods' account.

• December 6, 2007 $240.82 check written from April Woods' account.

• December 6, 2007 $445.95 check written from April Woods' account.

• December 10, 2007 withdrawal of $36,615.37 from April Woods' account.

• December 10, 2007 withdrawal of $5,370 from April Woods' account.

• December 2007 four checks written from April Woods' account in amounts of $220, $17, $190, and $3,260.

• February 2, 2008 check written from April Woods' account in an unspecified amount.

• March 3, 2008 check written from April Woods' account in the amount of $10,746.58.

• June 18, 2008 check written from April Woods' account in the amount of $21,941.42.

• July 16, 2008 check written from April Woods' account in the amount of $445.95.

• July 17, 2008 check written from April Woods' account in the amount of $240.82.

• August 25, 2008 check written from April Woods' account in the amount of $240.82.

• August 25, 2008 check written from April Woods' account in the amount of $490.54.

In addition to the foregoing, Appellants further allege that some thirty-seven cash withdrawals were made by Mr. Mabry between May 2006 and November 2008 from two different April Woods' accounts in the total amount of approximately $165,000.00, and that these funds were used by Mabry or Bluff City for unauthorized purposes. The Appellants also allege that seven different cash withdrawals were made by Mabrybetween January 2007 and August 2008 from an Eagles Landing account in the sum total of approximately $92,000.00, and that these funds were used by Mabry or Bluff City for unauthorized purposes. Appellants further allege that Mabry improperly authorized Eagles Landing to accept funds as loans in the alleged amount of $13,000.00 from the Horizon Financial Group. Finally, Appellants make an allegation that there were other unspecified occasions on which Mabry, Bluff City, “or other defendants” made cash withdrawals from April Woods, Eagles Landing, or Harmony Woods accounts, or caused checks to be written on said accounts, or otherwise misappropriated funds or property belonging to those entities.

On August 13, 2008, Appellants filed the original complaint and ...