Town of Crossville Hous. Auth. v. Murphy, M2013-02576-COA-R3-CV

Citation465 S.W.3d 574
Decision Date25 July 2014
Docket NumberNo. M2013-02576-COA-R3-CV,M2013-02576-COA-R3-CV
PartiesTOWN OF CROSSVILLE HOUSING AUTHORITY v. John A. MURPHY, et al.
CourtCourt of Appeals of Tennessee

465 S.W.3d 574

TOWN OF CROSSVILLE HOUSING AUTHORITY
v.
John A. MURPHY, et al.

No. M2013-02576-COA-R3-CV

Court of Appeals of Tennessee.

May 21, 2014 Session.
July 25, 2014.
Application for Permission to Appeal Denied by Supreme Court Dec. 18, 2014.


465 S.W.3d 576

Brandon Layne Morrow and John E. Winters, Knoxville, Tennessee, for the appellant, Town of Crossville Housing Authority.

Christopher Dunn Heagerty and Lisa Jellison Hall, Knoxville, Tennessee, for the appellees, Adren Greene, John A. Murphy, Paul A. Murphy, III and Murphy Development, LLC.

OPINION

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

The buyers of an apartment complex brought this action against the sellers for breach of contract and intentional misrepresentation after discovering that several representations made by the sellers in the transactional documents were false. The buyers challenge the propriety of the trial court's grant of summary judgment to the defendants. After review, we conclude that the defendants are entitled to summary judgment on the plaintiff's breach of contract claims, and that Paul Murphy and John Murphy are entitled to summary judgment on the plaintiff's intentional misrepresentation claims. As to the remainder of the defendants, we conclude that summary judgment on the plaintiff's intentional misrepresentation claims was improper because they did not meet their initial burden of production on summary judgment. We affirm in part and reverse in part the trial court's judgment and remand for further proceedings.

I. Background and Procedural History

This case arises from the 2004 sale of the White Oak Apartments in Jamestown, Tennessee. The Defendants/Appellees, John A. Murphy, Paul A. Murphy III, and Adren Greene (the “individual defendants”) are members of Defendant/Appellee Murphy Development, LLC (“Murphy Development”), which originally developed the White Oak Apartments. Prior to October 1, 2004, the individual defendants were also members of Azalea Development, LLC (“Azalea Development”), a Tennessee limited liability company that owned the White Oak Apartments. On that date, the individual defendants transferred all right, title, and interest in and to Azalea Development to the Plaintiff/Appellant Town of Crossville Housing Authority (“CHA”) pursuant to a Transfer and Assignment of Membership Interest and Restructuring Agreement (the “Transfer Agreement”).

Pursuant to Section 7 of the Transfer Agreement, each of the individual defendants made a number of representations and warranties to CHA regarding Azalea Development and the White Oak Apartments. Particularly relevant to this case, Section 7(h) of the Transfer Agreement provided that “[a]ll of the representations and warranties made ... in the Original Operating Agreement [of Azalea Development] are true and correct as of [October 1, 2004].” Among the representations in

465 S.W.3d 577

the Original Operating Agreement of Azalea Development were statements that the White Oak Apartments qualified as a “Qualified Low–Income Housing Project” under Section 42(g) of the Internal Revenue Code and that they were in compliance with all applicable federal, state, and local laws and regulations.

With regard to the representations and warranties made by the individual defendants, the Transfer Agreement also contained the following provision (the “Survival Clause”):

Survival. The representations, warranties and indemnification and obligations set forth in this Agreement shall survive the execution of this Agreement for a period of three (3) years from the date hereof (the “Indemnity Termination Date ”); provided however, that there shall be no such release with respect to any fraud or intentional misrepresentation; provided further that if notice of any purported claim (an “Extended Claim ”) for a breach of a representation, warranty or indemnity is provided by a party (the “Claiming Party ”) hereto seeking damages, indemnification or other remedies with respect to the Extended Claim to the party hereto (the “Breaching Party ”) from whom such damage, indemnification or other remedy is sought, there shall be no release of the Extended Claim with respect to any action commenced with respect to the Extended Claim in federal, state or local court within three (3) years after the date hereof.

On April 15, 2009, the United States Department of Justice filed a complaint against Azalea Development in United States District Court for the Middle District of Tennessee alleging that the White Oak Apartments did not comply with the Fair Housing Act (the “FHA”) and the Americans with Disabilities Act (the “ADA”). On March 30, 2010, the court entered a Consent Order requiring Azalea Development to make certain retrofits to the White Oak Apartments to increase the property's compliance with federal regulations.

On September 3, 2010, CHA filed a complaint for breach of contract and intentional misrepresentation against each of the individual defendants and Murphy Development. CHA alleged that Murphy Development was liable for the actions of the individual defendants through the doctrine of respondeat superior. CHA alleged that the individual defendants breached the Transfer Agreement because the White Oak Apartments were not in compliance with the FHA and ADA on October 1, 2004 and therefore failed to comply with applicable federal law or qualify as a “Qualified Low–Income Housing Project” under Section 42(g) of the Internal Revenue Code. Additionally, CHA alleged that the individual defendants misrepresented the condition of the White Oak Apartments by making representations in the transactional documents that the property was in compliance with federal, state, and local laws when it was not. The defendants answered, denying any liability for breach of contract or intentional misrepresentation.

The defendants filed a motion for summary judgment and a statement of undisputed facts, which they supported with affidavits of Paul and John Murphy. In the motion, the defendants asserted that CHA's breach of contract claims were barred by the three-year limitations period contained in the Survival Clause of the Transfer Agreement. Regarding CHA's claim of intentional misrepresentation, the defendants asserted that any representations made by Paul or John Murphy in the transactional documents were based on representations made to them by the architects and engineers who designed the

465 S.W.3d 578

White Oak Apartments and were therefore made without the intent to mislead or otherwise confuse CHA. Paul and John Murphy provided sworn affidavits, which were attached as support for the defendants' assertions. CHA filed a response, contending that the Survival Clause of the Transfer Agreement lacked requisite specificity to operate as a contractual limitation on the time to file a lawsuit. With regard to its intentional misrepresentation claim, CHA contended that the affidavit statements of Paul and John Murphy were conclusory and therefore insufficient to shift the burden of production on summary judgment.

The trial court entered an order on October 21, 2013, granting summary judgment in favor of the defendants on all of CHA's claims. First, the trial court found that the statements in Paul and John Murphy's affidavits were sufficient to shift the burden of production on intentional misrepresentation to CHA. Because CHA failed to provide evidence of a genuine issue of material fact with regard to the intentional misrepresentation claim, the trial court granted summary judgment to the defendants on that issue. Second, the trial court granted summary judgment to the defendants on CHA's breach of contract claim, finding that the claim was time-barred by the Survival Clause, which operated as a contractual limitation reducing the filing period to three years. CHA appealed the trial court's ruling.

II. Discussion

Summary Judgment Standard

Summary judgment is appropriate when the moving party can demonstrate that the case does not present any genuine issues of material fact and that it is entitled to judgment as a matter of law. Tenn. R. Civ. P. 56.04 ; Hannan v. Alltel Publ'g Co., 270 S.W.3d 1, 5 (Tenn.2008) ; Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn.1993). The moving party has the ultimate burden of persuading the court that the there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Byrd, 847 S.W.2d at 215. If the moving party makes a properly supported motion for summary judgment, the burden of production shifts to the nonmoving party to demonstrate the existence of a genuine issue of material fact requiring trial. Id.

The moving party can make the required showing and shift the burden of production either by affirmatively negating an essential element of the nonmoving party's claim or showing that the nonmoving party cannot prove an essential element of the claim at trial.1 Hannan, 270 S.W.3d at 5. Both of the burden shifting methods require more than a conclusory assertion that the nonmoving party has no evidence. Byrd, 847 S.W.2d at 215. The...

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