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Tennessee Real Estate Case Law Update Joshua R. Denton Gullett Sanford Robinson & Martin PLLC [email protected]

Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

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Page 1: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

Tennessee Real Estate Case Law Update

Joshua R. DentonGullett Sanford Robinson & Martin PLLC

[email protected]

Page 2: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

1. When can a municipality sue its own Board of Zoning Appeals?

n CBS Outdoor, Inc. applied for two permits with the Codes Department in Metro Davidson County regarding its billboard displays.

n The Zoning Administrator denied the permits. CBS Outdoor appealed to the BZA. On a four to two vote, the BZA reversed the Zoning Administrator’s decision and granted the permits to CBS Outdoor.

n Metro filed a petition for writ of certiorari seeking review of the BZA order.

Metro. Gov't of Nashville & Davidson Cnty. v. Bd. of Zoning Appeals of Nashville & Davidson Cnty.477 S.W.3d 750 (Tenn. 2015)

Page 3: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

1. When can a municipality sue its own Board of Zoning Appeals? (continued)

n CBS moved to dismiss, arguing Metro did not have standing to seek review of a final order of its own Board.

n Metro argued it did have standing to bring the action.

Metro. Gov't of Nashville & Davidson Cnty. v. Bd. of Zoning Appeals of Nashville & Davidson Cnty.477 S.W.3d 750 (Tenn. 2015)

Page 4: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

n In November 2006, Towering Oaks bought 13 acres in Farragut, TN. The next month, Towering Oaks executed a deed of trust in favor of TNBANK.

n The Jugans owned property next door to the property that Towering Oaks bought.

n Towering Oaks was to develop a neighborhood known as Ridgeland Park Subdivision on its land.

2. When are covenants and restrictions immune from foreclosure?Helmboldt v. Jugan2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

Page 5: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

n Years later, Towering Oaks negotiated with TNBANK to release several acres from the deed of trust, in order for Towering Oaks to sell that acreage to the Jugans.

n Without telling the bank, Towering Oaks also negotiated covenants and restrictions with the Jugans to create a “buffer easement” across a portion of Towering Oak’s property adjoining the Jugans.

2. When are covenants and restrictions immune from foreclosure? (continued)Helmboldt v. Jugan2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

Page 6: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

n The buffer was designed to screen the Jugans from Ridgeland Park.

n The Restrictions provided that the buffer area would remain free from any improvements and would not be utilized for drainage purposes, that vegetation would not be cleared or trimmed and that a landscaping fence would be erected and maintained.

n The Restrictions were binding upon Towering Oaks and “its successors and assigns,” running with the land for fifty (50) years.

2. When are covenants and restrictions immune from foreclosure? (continued)Helmboldt v. Jugan2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

Page 7: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

n On April 23, 2010, two events occurred:• TNBANK executed the partial release of the deed of

trust, allowing Towering Oaks to sell the released acreage to the Jugans; and

• The covenants and restrictions were executed and recorded between Towering Oaks and the Jugans, and applied to part of the acreage still subject to TNBANK’s deed of trust.

2. When are covenants and restrictions immune from foreclosure? (continued)Helmboldt v. Jugan2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

Page 8: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

n Towering Oaks later defaulted, and TNBANK foreclosed on the deed of trust.

n TNBANK acquired the property via trustee's deed at the foreclosure, but did not release its deed of trust prior to the foreclosure.

n TNBANK later sold the property to the Helmboldts, who promptly filed suit against the Jugans seeking a declaration as to the validity of the Restrictions.

2. When are covenants and restrictions immune from foreclosure? (continued)Helmboldt v. Jugan2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

Page 9: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind?

n Richard and Kathryn Gibbs reviewed a Property Disclosure Statement when considering purchasing property from the Gillelands in Rutherford County.

n The Gillelands marked "Yes" in response to the following question: "Are you aware of any past or present drainage or flooding problems [on the property]?"

n Follow up revealed the box was marked because the property had flooded during the massive storm of May 2010.

Gibbs v. Gilleland2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

Page 10: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind? (continued)

n The Gibbs hired a general contractor to assess any flooding or drainage problems. He determined that there were none that would hinder the ability to build a house on the lot.

n The parties then executed a purchase agreement containing provisions regarding inspections of the property. One provision gave the buyers the option to take the property “as is.” They did not select this option. The provision related to final inspections provided:

Gibbs v. Gilleland2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

Page 11: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind? (continued)

7. Final Inspection. Buyer and/or his inspectors/representatives shall have the right to conduct a final inspection of the Property . . . prior to Closing Date only to confirm Property is in the same or better condition as it was on the Binding Agreement Date, normal wear and tear excepted, and to determine that all repairs/replacements have been completed. Property shall remain in such condition until the Closing Date at Seller's Expense. Closing of this sale constitutes acceptance of Property in its condition as of the time of Closing, unless otherwise noted in writing.

Gibbs v. Gilleland2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

Page 12: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind? (continued)

n The Gibbs had the property inspected and then closed on the sale.

n After obtaining permits, the Gibbs began construction. They were then advised by the County that the property was in an area of localized high water and aerial flooding, that the county had established a Base Flood Elevation (“BFE”) for the property, and that it was substantially below the required BFE.

Gibbs v. Gilleland2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

Page 13: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind? (continued)

n Construction ceased.n It was then determined the lot would need

extensive modifications to comply with the BFE to prevent flooding and that the lot was not suitable for residential construction.

n Litigation ensued.

Gibbs v. Gilleland2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

Page 14: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

4. When does equitable estoppel apply?

n In the mid-1980s, Stephen Cooper purchased the property located at 3659 Mendenhall Road in Memphis.

n The property is landlocked, but holds an easement for "perpetual ingress and egress."

n Within the easement area, Stephen and previous owners placed business signs advertising their respective businesses. Stephen always applied for sign permits.

3659 Mendenhall Inc. v. City of Memphis2015 Tenn. App. LEXIS 875 (Tenn. App. October 27, 2015)

Page 15: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

4. When does equitable estoppel apply? (continued)

n In 2003, the storm known as "Hurricane Elvis” destroyed Stephen’s sign. He obtained a new permit and then replaced his sign, moving its base just six inches from the original location.

n Stephen’s neighbor advised that the new sign was partially located on its property, but had no objection.

n Both properties were subsequently transferred. The new neighbor objected to the location of the sign, arguing it encroached. After meetings, the neighbor had the sign removed from his property.

3659 Mendenhall Inc. v. City of Memphis2015 Tenn. App. LEXIS 875 (Tenn. App. October 27, 2015)

Page 16: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

4. When does equitable estoppel apply? (continued)

n Stephen’s successor sued for lost profits, damages for destruction of the sign, and a declaration that the sign was located on a perpetual easement held by it.

n The parties later executed a sign easement agreement and the case was dismissed.

n Stephen’s successor then applied for a new sign permit, but the application was denied, classifying the sign as an “off-premises sign” prohibited in that zoning district.

n Litigation ensued.

3659 Mendenhall Inc. v. City of Memphis2015 Tenn. App. LEXIS 875 (Tenn. App. October 27, 2015)

Page 17: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

5. When should the court supply terms to permit a right of first refusal to survive?

n On January 29, 1996, Clyde Sr. subdivided his real property into four tracts, executing deeds to each of his four children.

n Each deed contained the following language:

Abbott v. Abbott2016 Tenn. App. LEXIS 512 (Tenn. App. July 20, 2016)

Page 18: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

5. When should the court supply terms to permit a right of first refusal to survive? (continued)

RIGHT OF FIRST REFUSAL: In the event that the grantee herein should decide to sell said property, the other children of [Clyde Sr.] shall have a right of first refusal to purchase said property and once a price is agreed upon, the grantee shall give the purchasing child a period of one (1) year to raise the money to pay for the property.

Abbott v. Abbott2016 Tenn. App. LEXIS 512 (Tenn. App. July 20, 2016)

Page 19: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

5. When should the court supply terms to permit a right of first refusal to survive? (continued)

n Two children decided to sell their tracts in May 2013. Both sent separate letters to the remaining siblings, indicating that they wished to sell tracts for $200,000.00 each.

n They requested letters of acceptance or a counteroffer within 30 days and requiring a good faith deposit of $10,000.00.

n One sibling responded, arguing there was no right to request a deposit and asked for a "more reasonable offer . . . that has a basis in reality."

Abbott v. Abbott2016 Tenn. App. LEXIS 512 (Tenn. App. July 20, 2016)

Page 20: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

5. When should the court supply terms to permit a right of first refusal to survive? (continued)

n Litigation ensued, requesting declaratory relief as to interpretation of the deeds, a request to supply any missing terms in the right of first refusal, or a finding that the right of first refusal was an unreasonable restraint on alienation of the property.

Abbott v. Abbott2016 Tenn. App. LEXIS 512 (Tenn. App. July 20, 2016)

Page 21: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

6. What is the outcome when the promise of a right of first refusal is not honored?

n John and Peggy Hailey own real estate in Nashville, which they leased to Delain L. Deatherage for an initial term from August 1, 2012, to July 31, 2013.

n The lease was renewed twice in six-month increments.n On February 11, 2014, after renewing the lease for a

second time, Delain inquired with the agent managing the Haileys’ rental property as to whether they would be interested in selling.

n This email correspondence read:

Deatherage v. Hailey2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

Page 22: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

6. What is the outcome when the promise of a right of first refusal is not honored? (continued)

• Delain’s Email to Agent: [W]ould the Haileys be interested in any type of rent to own situation or even sell [their property]? I really like the area and think it's a good house. As I just mentioned, I am in no hurry to buy. There are some benefits to renting and I like to keep my expenses at a minimum. . .

Deatherage v. Hailey2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

Page 23: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

6. What is the outcome when the promise of a right of first refusal is not honored? (continued)

• Agent’s First Response: [I] [w]ill be happy to ask [Mr. Hailey]. I know he gets quick sale offers from people wanting to flip houses.

Deatherage v. Hailey2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

Page 24: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

6. What is the outcome when the promise of a right of first refusal is not honored? (continued)

• Agent’s Second Response: [Mr. Hailey] does not want to sell any of his properties at this time. He may need to at some point in the future. He did say you can stay as long as you want and should he decide to do something with the house you will be contacted first. You would have the first right of refusal. And of course if you do find something else you wanted to buy, I would understand. Let me know if I can help with anything.

Deatherage v. Hailey2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

Page 25: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

6. What is the outcome when the promise of a right of first refusal is not honored? (continued)

n Delain later renewed the lease for another year. In April 2015, the Haileys notified Delain that they had entered a sales contract with a third party. No option to purchase the property was given to her.

n Litigation ensued.

Deatherage v. Hailey2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

Page 26: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

7. When must a court enforce an oral agreement to collect rental income?

n In 2005, Carlene Elrod quitclaimed four parcels to her grandson, Michael.

n In 2011, Carlene sued Michael and his wife under a variety of tort theories, arguing Carlene lacked mental capacity to contract when the conveyances were made. Carlene based this on the fact that she was suffering from a severe illness and taking pain and anxiety medications that substantially affected her judgment at the time.

Estate of Elrod v. Petty2016 Tenn. App. LEXIS 424 (Tenn. App. June 23, 2016)

Page 27: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

7. When must a court enforce an oral agreement to collect rental income? (continued)

n Carlene further claimed that, when her health improved in 2007, she regained her mental competency and discovered the ramifications of the conveyances.

n Carlene ultimately abandoned and reasserted her tort theories in the course of two proceedings.

n She died in October 2013. n Carlene’s executor substituted as plaintiff, abandoned the tort

claims and amended to assert claims for breach of contract, promissory estoppel and equitable estoppel.

Estate of Elrod v. Petty2016 Tenn. App. LEXIS 424 (Tenn. App. June 23, 2016)

Page 28: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

7. When must a court enforce an oral agreement to collect rental income? (continued)

n The executor alleged Carlene entered into an agreement with Michael under which she would convey the real property in exchange for his promise to remit all of the rental income to Carlene for life.

n The executor alleged Michael honored that agreement for five years, but breached from February 2010 until Carlene’s death.

Estate of Elrod v. Petty2016 Tenn. App. LEXIS 424 (Tenn. App. June 23, 2016)

Page 29: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

8. Can a utility district condemn property outside of its district?

n West Warren-Viola Utility District of Warren and Coffee Counties (“West Warren”) has been operating a water and sewer system since July 28, 1982.

n West Warren’s system adjoins the Hillsville Utility District, which provides services in eastern Coffee County.

West Warren-Viola Util. Dist. v. Jarrell Enters.2016 Tenn. App. LEXIS 288 (Tenn. App. April 26, 2016)

Page 30: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

8. Can a utility district condemn property outside of its district? (continued)

n In early 2008, West Warren filed a petition to expand the geographic boundaries of the district to include portions of Coffee County, pursuant to applicable Tennessee statutes.

n On May 5, 2008, officials in Warren and Coffee Counties entered an order granting the petition.

n The order recited that, at the time the petition was filed, "the District already provides water service to substantially all of the areas within the proposed expanded boundaries in Coffee County.“

West Warren-Viola Util. Dist. v. Jarrell Enters.2016 Tenn. App. LEXIS 288 (Tenn. App. April 26, 2016)

Page 31: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

8. Can a utility district condemn property outside of its district? (continued)

n In January 2013, West Warren sought to condemn land owned by Jarrell Enterprises, Inc. for purposes of constructing a water storage tank. This property was outside of West Warren’s district.

n West Warren had not furnished water or sewer services on Jarrell’s property. Instead, Jarrell’s farm is serviced by the Hillsville Utility District.

n Jarrell contested West Warren’s right to condemn.

West Warren-Viola Util. Dist. v. Jarrell Enters.2016 Tenn. App. LEXIS 288 (Tenn. App. April 26, 2016)

Page 32: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

8. Can a utility district condemn property outside of its district? (continued)

n Tenn. Code Ann. § 7-82-301(a)(1)(B) provides:

So long as the district continues to furnish any of the services that it is authorized to furnish in this chapter, it shall be the sole public corporation empowered to furnish such services in the district, and no other person, firm or corporation shall furnish or attempt to furnish any of the services in the area embraced by the district, unless and until it has been established that the public convenience and necessity requires other or additional services;. . .

West Warren-Viola Util. Dist. v. Jarrell Enters.2016 Tenn. App. LEXIS 288 (Tenn. App. April 26, 2016)

Page 33: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

9. What are the consequences when a deed warrants there are no encumbrances and fails to acknowledge a recorded easement?

n Marilyn, Ewell and William owned farmland in rural Haywood County. Some hunters leased a portion of that land for hunting purposes for several years.

n In 2004, the hunters purchased the land. In addition to conveying 43 acres, the owners also granted the hunters a 30-foot easement for ingress and egress over an adjacent parcel.

Butler v. Pitts2016 Tenn. App. LEXIS 110 (Tenn. App. February 12, 2016)

Page 34: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

9. What are the consequences when a deed warrants there are no encumbrances and fails to acknowledge a recorded easement?

n Nine years after the easement was recorded, the Pitts purchased the land that was subject to the hunters' easement. Prior to their purchase, the Pitts had leased and actively farmed the same land for a number of years.

n The Pitts hired a closing attorney to perform a title examination and draft the deed. The Pitts’ attorney did not reference the recorded easement in the warranty deed conveying the farmland to the Pitts.

Butler v. Pitts2016 Tenn. App. LEXIS 110 (Tenn. App. February 12, 2016)

Page 35: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

9. What are the consequences when a deed warrants there are no encumbrances and fails to acknowledge a recorded easement?

n The deed contained the following language:

We covenant with the said Malvin Carvin Pitts, Jr., Marcia Lee Pitts and Malvin Carvin Pitts, III, that we are lawfully seized and possessed of said real estate; that we have a good and lawful right to sell and convey the same; that the same is unencumbered; and that we will forever warrant and defend the title thereto against the lawful claims of all persons whomsoever.

Butler v. Pitts2016 Tenn. App. LEXIS 110 (Tenn. App. February 12, 2016)

Page 36: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

9. What are the consequences when a deed warrants there are no encumbrances and fails to acknowledge a recorded easement?

n The Pitts then made substantive changes to the easement area by blocking the hunters' ingress and egress to their property.

n Litigation ensued.

Butler v. Pitts2016 Tenn. App. LEXIS 110 (Tenn. App. February 12, 2016)

Page 37: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

Q&A

Page 38: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

Contact Information

Joshua R. DentonPhone 615.921.4286

Email [email protected]

Thank you!

Page 39: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

Tennessee Real Estate Case Law Update

JOSHUA R. DENTON GULLETT SANFORD ROBINSON & MARTIN, PLLC

150 Third Avenue South, Suite 1700 Nashville, Tennessee 37201

615.921.4286 [email protected]

Page 40: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

1. When can a municipality sue its own Board of Zoning Appeals? Metro. Gov't of Nashville & Davidson Cnty. v. Bd. of Zoning Appeals of Nashville & Davidson Cnty., 477 S.W.3d 750 (Tenn. 2015)

• CBS Outdoor, Inc. applied for two permits with the Codes Department in Metro Davidson County regarding its billboard displays.

• The Zoning Administrator denied the permits. CBS Outdoor appealed to the BZA. On a four to two vote, the BZA reversed the Zoning Administrator’s decision and granted the permits to CBS Outdoor.

• Metro filed a petition for writ of certiorari seeking review of the BZA order.

• CBS moved to dismiss, arguing Metro did not have standing to seek review of a final order of its own Board.

• Metro argued it did have standing to bring the action.

Page 41: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

2. When are covenants and restrictions immune from foreclosure? Helmboldt v. Jugan, 2016 Tenn. App. LEXIS 523 (Tenn. App. July 25, 2016)

• In November 2006, Towering Oaks bought 13 acres in Farragut, Tennessee. The next

month, Towering Oaks executed a deed of trust in favor of TNBANK. • The Jugans owned property next door to the property that Towering Oaks bought. • Towering Oaks was to develop a neighborhood known as Ridgeland Park Subdivision on

its land. • Years later, Towering Oaks negotiated with TNBANK to release several acres from the

deed of trust, in order for Towering Oaks to sell that acreage to the Jugans. • Without telling the bank, Towering Oaks also negotiated covenants and restrictions with

the Jugans to create a “buffer easement” across a portion of Towering Oak’s property adjoining the Jugans. The buffer was designed to screen the Jugans from Ridgeland Park Subdivision

• The Restrictions provided that the buffer area would remain free from any improvements and would not be utilized for drainage purposes, that vegetation would not be cleared or trimmed and that a landscaping fence would be erected and maintained

• The Restrictions were binding upon Towering Oaks and “its successors and assigns,” running with the land for fifty (50) years.

• On April 23, 2010, two events occurred: o TNBANK executed the partial release of the deed of trust, allowing Towering

Oaks to sell the released acreage to the Jugans; and o The covenants and restrictions were executed and recorded between Towering

Oaks and the Jugans, and applied to part of the acreage still subject to TNBANK’s deed of trust.

• Towering Oaks later defaulted, and TNBANK foreclosed on the deed of trust. • TNBANK acquired the property via trustee's deed at the foreclosure, but did not release

its deed of trust prior to the foreclosure. • TNBANK later sold the property to the Helmboldts, who promptly filed suit against the

Jugans seeking a declaration as to the validity of the Restrictions.

Page 42: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

3. When can you rescind? Gibbs v. Gilleland, 2016 Tenn. App. LEXIS 161 (Tenn. App. February 29, 2016)

o Richard and Kathryn Gibbs reviewed a Property Disclosure Statement when considering purchasing property from the Gillelands in Rutherford County.

o The Gillelands marked "Yes" in response to the following question: "Are you aware of any past or present drainage or flooding problems [on the property]?"

o Follow up revealed the box was marked because the property had flooded during the massive storm of May 2010.

o The Gibbs hired a general contractor to assess any flooding or drainage problems. He determined that there were none that would hinder the ability to build a house on the lot.

o The parties then executed a purchase agreement containing provisions regarding inspections of the property. One provision gave the buyers the option to take the property “as is.” They did not select this option. The provision related to final inspections provided:

7. Final Inspection. Buyer and/or his inspectors/representatives shall have the right to conduct a final inspection of the Property . . . prior to Closing Date only to confirm Property is in the same or better condition as it was on the Binding Agreement Date, normal wear and tear excepted, and to determine that all repairs/replacements have been completed. Property shall remain in such condition until the Closing Date at Seller's Expense. Closing of this sale constitutes acceptance of Property in its condition as of the time of Closing, unless otherwise noted in writing.

o The Gibbs had the property inspected and then closed on the sale.

o After obtaining permits, the Gibbs began construction. They were then advised by the County that the property in an area of localized high water and aerial flooding, that the county had established a Base Flood Elevation (“BFE”) for the property, and that it was substantially below the required BFE.

o Construction ceased.

o It was then determined the lot would need extensive modifications to comply with the BFE to prevent flooding and that the lot was not suitable for residential construction.

o Litigation ensued.

Page 43: Tennessee Real Estate Case Law Update - TBA CLE · considering purchasing property from the Gillelands in Rutherford County. nThe Gillelands marked "Yes" in response to the following

4. When does equitable estoppel apply? 3659 Mendenhall Inc. v. City of Memphis, 2015 Tenn. App. LEXIS 875 (Tenn. App. October 27, 2015)

o In the mid-1980s, Stephen Cooper purchased the property located at 3659 Mendenhall Road in Memphis.

o The property is landlocked, but holds an easement for "perpetual ingress and egress."

o Within the easement area, Stephen and previous owners placed business signs advertising their respective businesses. Stephen always applied for sign permits.

o In 2003, the storm known as "Hurricane Elvis” destroyed Stephen’s sign. He obtained a new permit and then replaced his sign, moving its base just six inches from the original location.

o Stephen’s neighbor advised that the new sign was partially located on its property, but had no objection.

o Both properties were subsequently transferred. The new neighbor objected to the location of the sign, arguing it encroached. After meetings, the neighbor had the sign removed from his property.

o Stephen’s successor sued for lost profits, damages for destruction of the sign, and a declaration that the sign was located on a perpetual easement held by it.

o The parties later executed a sign easement agreement and the case was dismissed.

o Stephen’s successor then applied for a new sign permit, but the application was denied, classifying the sign as an “off-premises sign” prohibited in that zoning district.

o Litigation ensued

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5. When should the court supply terms to permit a right of first refusal to survive? Abbott v. Abbott, 2016 Tenn. App. LEXIS 512 (Tenn. App. July 20, 2016)

o On January 29, 1996, Clyde Sr. subdivided his real property into four tracts, executing deeds to each of his four children.

o Each deed contained the following language:

RIGHT OF FIRST REFUSAL: In the event that the grantee herein should decide to sell said property, the other children of [Clyde Sr.] shall have a right of first refusal to purchase said property and once a price is agreed upon, the grantee shall give the purchasing child a period of one (1) year to raise the money to pay for the property.

o Two children decided to sell their tracts in May 2013. Both sent separate letters to the remaining siblings, indicating that they wished to sell tracts for $200,000.00 each.

o They requested letters acceptance or a counteroffer within 30 days and requiring a good faith deposit of $10,000.00.

o One sibling responded, arguing there was no right to request a deposit and asked for a "more reasonable offer . . . that has a basis in reality."

o Litigation ensued, requesting declaratory relief as to interpretation of the deeds, a request to supply any missing terms in the right of first refusal, or a finding that the right of first refusal was an unreasonable restraint on alienation of the property.

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6. What is the outcome when the promise of a right of first refusal is not honored? Deatherage v. Hailey, 2016 Tenn. App. LEXIS 501 (Tenn. App. July 19, 2016)

o John and Peggy Hailey own real estate in Nashville, which they leased to Delain L. Deatherage for an initial term from August 1, 2012, to July 31, 2013.

o The lease was renewed twice in six-month increments.

o On February 11, 2014, after renewing the lease for a second time, Delain inquired with the agent managing the Haileys’ rental property as to whether they would be interested in selling.

o This email correspondence read:

o Delain’s Email to Agent: [W]ould the Haileys be interested in any type of rent to own situation or even sell [their property]? I really like the area and think it's a good house. As I just mentioned, I am in no hurry to buy. There are some benefits to renting and I like to keep my expenses at a minimum. . .

o Agent’s First Response: [I] [w]ill be happy to ask [Mr. Hailey]. I know he gets quick sale offers from people wanting to flip houses.

o Agent’s Second Response: [Mr. Hailey] does not want to sell any of his properties at this time. He may need to at some point in the future. He did say you can stay as long as you want and should he decide to do something with the house you will be contacted first. You would have the first right of refusal. And of course if you do find something else you wanted to buy, I would understand. Let me know if I can help with anything.

o Delain later renewed the lease for another year. In April 2015, the Haileys notified Delain that they had entered a sales contract with a third party. No option to purchase the property was given to her.

o Litigation ensued.

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7. When must a court enforce an oral agreement to collect rental income? Estate of Elrod v. Petty, 2016 Tenn. App. LEXIS 424 (Tenn. App. June 23, 2016)

o In 2005, Carlene Elrod quitclaimed four parcels to her grandson, Michael.

o In 2011, Carlene sued Michael and his wife under a variety of tort theories, arguing Carlene lacked mental capacity to contract when the conveyances were made. Carlene based this on the fact that she was suffering from a severe illness and taking pain and anxiety medications that substantially affected her judgment at the time.

o Carlene further claimed that, when her health improved in 2007, she regained her mental competency and discovered the ramifications of the conveyances.

o Carlene ultimately abandoned and reasserted her tort theories in the course of two proceedings.

o She died in October 2013.

o Carlene’s executor substituted as plaintiff, abandoned the tort claims and amended to assert claims for breach of contract, promissory estoppel and equitable estoppel.

o The executor alleged Carlene entered into an agreement with Michael under which she would convey the real property in exchange for his promise to remit all of the rental income to Carlene for life.

o The executor alleged Michael honored that agreement for five years, but breached from February 2010 until Carlene’s death.

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8. Can a utility district condemn property outside of its district? West Warren-Viola Util. Dist. v. Jarrell Enters., 2016 Tenn. App. LEXIS 288 (Tenn. App. April 26, 2016)

o West Warren-Viola Utility District of Warren and Coffee Counties (“West Warren”) has been operating a water and sewer system since July 28, 1982.

o West Warren’s system adjoins the Hillsville Utility District, which provides services in eastern Coffee County.

o In early 2008, West Warren filed a petition to expand the geographic boundaries of the district to include portions of Coffee County, pursuant to applicable Tennessee statutes.

o On May 5, 2008, officials in Warren and Coffee Counties entered an order granting the petition.

o The order recited that, at the time the petition was filed, "the District already provides water service to substantially all of the areas within the proposed expanded boundaries in Coffee County."

o In January 2013, West Warren sought to condemn land owned by Jarrell Enterprises, Inc. for purposes of constructing a water storage tank. This property was outside of West Warren’s district.

o West Warren had not furnished water or sewer services on Jarrell’s property. Instead, Jarrell’s farm is serviced by the Hillsville Utility District.

o Jarrell contested West Warren’s right to condemn.

o Tenn. Code Ann. § 7-82-301(a)(1)(B) provides:

So long as the district continues to furnish any of the services that it is authorized to furnish in this chapter, it shall be the sole public corporation empowered to furnish such services in the district, and no other person, firm or corporation shall furnish or attempt to furnish any of the services in the area embraced by the district, unless and until it has been established that the public convenience and necessity requires other or additional services;. . .

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9. What are the consequences when a deed warrants there are no encumbrances and fails to acknowledge a recorded easement? Butler v. Pitts, 2016 Tenn. App. LEXIS 110 (Tenn. App. February 12, 2016)

o Marilyn, Ewell and William owned farmland in rural Haywood County. Some hunters leased a portion of that land for hunting purposes for several years.

o In 2004, the hunters purchased the land. In addition to conveying 43 acres, the owners also granted the hunters a 30-foot easement for ingress and egress over an adjacent parcel.

o Nine years after the easement was recorded, the Pitts purchased the land that was subject to the hunters' easement. Prior to their purchase, the Pitts had leased and actively farmed the same land for a number of years.

o The Pitts hired a closing attorney to perform a title examination and draft the deed. The Pitts’ attorney did not reference the recorded easement in the warranty deed conveying the farmland to the Pitts.

o The deed contained the following language:

We covenant with the said Malvin Carvin Pitts, Jr., Marcia Lee Pitts and Malvin Carvin Pitts, III, that we are lawfully seized and possessed of said real estate; that we have a good and lawful right to sell and convey the same; that the same is unencumbered; and that we will forever warrant and defend the title thereto against the lawful claims of all persons whomsoever.

o The Pitts then made substantive changes to the easement area by blocking the hunters' ingress and egress to their property.

o Litigation ensued.