PROPERTIES v. RAVENWOOD CLUB INC.
| Decision Date | 05 April 2011 |
| Docket Number | No. M2010-01814-COA-R3-CV,M2010-01814-COA-R3-CV |
| Parties | CUMBERLAND PROPERTIES, LLC v. RAVENWOOD CLUB, INC., et al. |
| Court | Tennessee Court of Appeals |
OPINION TEXT STARTS HERE
Direct Appeal from the Chancery Court for Davidson County
No. 09-18-I Claudia Bonnyman, Chancellor
This is a contract case. Appellant, a Nashville Country Club, hired Appellee, a real estate development and consulting firm, to help the Club procure the best price available for the sale of its real property. Appellee claimed that it was due fees under the parties' written agreement. Following a hearing, the trial court entered judgment in favor of Appellee. Appellant appeals, arguing that: (1) the parties' contract was not supported by adequate consideration; (2) the parties' contract was void as against public policy based upon Appellants' allegation that Appellee was acting as a broker; (3) the trial court erred in allowing parol evidence and in its interpretation of the terms of the parties' agreement; and (4) the trial court erred in calculating Appellee's damages. Discerning no error, we affirm and remand for determination of Appellee's reasonable attorney's fees and costs in defending this appeal. Affirmed and remanded.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Affirmed
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.
Samuel T. Bowman and William A. Lewis, Nashville, Tennessee, for the appellants, Ravenwood Club, Inc. and Ravenwood Country Club, LLC.
Kemper Harlan Dodson, III, Donald N. Capparella, Kristen B. Amonette, and Candi Renee Henry, Nashville, Tennessee, for the appellee, Cumberland Properties, LLC.
Ravenwood Country Club (the "Club") is located in the Hermitage area of Nashville. The Club is run by a volunteer board of directors that is comprised of members of the Club who are elected by the membership of the Club. The Club has operated, under one owner or another, for approximately fifty years. In recent years, it has operated under the ownership of Ravenwood Club, Inc., a non-profit corporation. Ravenwood Country Club, L.L.C., is a member-managed L.L.C. that owns all of the assets and liabilities of Ravenwood Club, Inc. (together with Ravenwood Country Club, L.L.C., "Ravenwood," or "Appellants").
Cumberland Properties, L.L.C. ("Cumberland," or "Appellee") is a real estate development, consulting, and brokerage firm. Glenn Dukes is acquisition manager for Cumberland, and he holds a Tennessee real estate broker license. Mr. Dukes has been in the real estate business for approximately thirty years. At all times relevant to this litigation, Mr. Dukes acted on behalf of Cumberland in negotiations with Ravenwood.
In 2002 and 2003, prior to the time that Ravenwood and Cumberland entered into the business agreement(s) that are the subject of the instant appeal, Ravenwood fell into a difficult financial condition. Ravenwood began to sell its property, including timber, in order to meet its financial obligations. One of Ravenwood's assets was a tract of real property that was comprised of approximately 91.62 acres of unzoned, undeveloped land to the north and northeast of the country club property.1 Ravenwood's then-president, Lee Jennings, entered into negotiations with Freeman Webb Investments ("Freeman") to sell this undeveloped land. At that time, Ravenwood's property was essentially landlocked. There was no access for commercial developments, and it would not have been approved for residential access and development. Consequently, the development of the land would require access and re-zoning. Freeman owned property adjacent to the Club, which property could serve as access to Ravenwood's property with approval of the city. In addition, Freeman was attempting to secure another parcel of property-not owned by Ravenwood-by which it hoped to secure access to the Ravenwood property.
On July 15, 2003, Ravenwood and Freeman reached a tentative agreement, which was memorialized in a "Letter of Intent for the Purchase of [91.62] acres" sent from Freeman to Ravenwood's board of directors. Under the terms of this letter, Freeman proposed to pay $1,000,000 to Ravenwood for the 85 acres (which was later discovered to be 91.62 acres), and two hundred sixty-five memberships to the Club. The payment of the $1,000,000 was to be made according to the terms of the "payment of consideration" section of the letter, which required $470,000 of the total amount to be paid at the closing, with one-half of the membership dues ($265,000) also due at closing. As an incentive for retaining members, the letter further contemplated that, if the full membership dues were paid within four years of the closing, then the purchase price of $1,000,000 would be discounted to $10,000 per acre. Thus, the deal between Ravenwood and Freeman was essentially $850,000 for 85 acres of property and two hundred sixty-five Club memberships.
In an effort to better its position under the letter of intent with Freeman, Ravenwood hired Cumberland to consult. Ravenwood and Cumberland began a business relationship on October 21, 2003, when they entered into a letter agreement. The October 21 , 2003 letter was superseded by a second letter dated November 18, 2003. The November 18, 2003 letter (the "Letter") sets out the scope of Cumberland's services as follows:
The scope of services would include but not be limited to the following:
1. To represent Ravenwood Club's interest in the design and planning of any proposed development.
2. To inform the Board of Directors of the status of the project on an as needed basis.
3. To use its best efforts to negotiate more favorable terms for Ravenwood Club in the Definitive Agreement.
4. To use its best efforts to increase the amount of revenue to be received by Ravenwood Club from the sale of Property and Membership Interest ("Proceeds").
In consideration for these services, the Letter states that Cumberland's fee would be based on the following schedule:
1. Ten (10) percent of the amount of increase of Proceeds from One Million Dollars ($ 1,000,000) to One Million Two Hundred Thousand Dollars ($1,200,000).
2. Fifteen (15) percent of the amount of increase of Proceeds from One Million Two Hundred Thousand Dollars ($1,200,000)
to One Million Four Hundred Thousand Dollars ($1,400,000).
3. Twenty (20) percent of any amount of increase of Proceeds in excess of One Million Four Hundred Thousand Dollars ($1,400,000).
In addition to the foregoing, the Letter further states that:
[S]hould Cumberland Properties be successful in negotiating the deletion of Section 1 (f) from the Letter of Intent between Ravenwood Club and Freeman...dated July 15, 2003 and the purchase price for both the real property and the membership interest are paid in full at closing, Cumberland Properties shall receive three (3) percent of the Proceeds received by Ravenwood Club from the initial closing, said fee to be paid at closing.2
There shall be Twelve Thousand Five Hundred Dollars and No Cents ($12,500.00) of Earnest Money released from the Escrow Account to Ravenwood Club when the Purchase Contract is approved by the Board of Directors of [the Club]. The amount of such earnest money shall be divided equally between Ravenwood...and Cumberland....
This Letter is signed by Glenn Dukes on behalf of Cumberland, and by Richard Daugherty, as President of the Club.
Pursuant to the terms of the Letter, Cumberland, acting on behalf of Ravenwood, helped to negotiate the final terms of the sale of a portion of the 91.62 acres to Freeman. On December 10, 2003, Ravenwood and Freeman executed a Real Estate Purchase Contract (the "Freeman-Ravenwood Agreement"). Under the Freeman-Ravenwood Agreement, Freeman purchased approximately 61.12 acres of the total 91.62 acres and one-hundred ninety family memberships. The purchase price was set at $867,957.53. Under Paragraph 6.4 of the Freeman-Ravenwood Agreement, both Ravenwood and Freeman warranted "to the other [,] that no broker or agent has been engaged by it in connection with the negotiation and/or consummation of this Agreement."
On December 11 , 20 03 (the day after the Freeman-Ravenwood Agreement was executed), Ravenwood and Cumberland entered into a "Real Property Services Agreement" (the "Ravenwood-Cumberland Agreement"). The Ravenwood-Cumberland Agreement is signed by Mr. Dukes, on behalf of Cumberland, and by Mr. Daugherty, on behalf of Ravenwood. The Ravenwood-Cumberland Agreement, which was prepared by Cumberland's attorney, provides, in relevant part, as follows:
1. Recital. This Agreement supplements the letter agreement dated November 18, 2003 between Ravenwood Club and Cumberland Properties, L.L.C. regarding certain Property and Membership Interests (the "Letter Agreement").... The Letter Agreement remains in full force and effect, as supplemented by this Agreement. This Agreement is not necessary in order to form the agreement between the parties, but does provide additional details for their convenience.
The Ravenwood-Cumberland Agreement states that "[t]he parties agree that Cumberland has already performed valuable services and will continue to perform such services in relation to" the sale between Ravenwood and Freeman. To that end, the services expected from Cumberland, under the Ravenwood-Cumberland Agreement, were substantially the same as those outlined in the Letter, supra. While the amount of fees due Cumberland for its services remained the same in the Ravenwood-Cumberland Agreement as it was in the Letter, supra, the parties added a clause in the Ravenwood-Cumberland Agreement that was not set out in the Letter, namely Paragraph 6(d), which provides:
The parties contemplate that Ravenwood Club will sell the Property, and Membership Interests, expeditiously, and, in any event, on or before March 1, 2005, so that the Fee...would be paid within that period. However, should Ravenwood Club...
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