Houston Humphreys LLC v. Houston Street Partners, LLC ( 2022 )


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  •                                                                                             08/19/2022
    IN THE COURT OF APPEALS OF TENNESSEE
    AT NASHVILLE
    March 2, 2022 Session
    HOUSTON HUMPHREYS LLC v. HOUSTON STREET PARTNERS, LLC
    ET AL.
    Appeal from the Chancery Court for Davidson County
    No. 20-0898-IV    Russell T. Perkins, Chancellor
    ___________________________________
    No. M2021-00235-COA-R3-CV
    ___________________________________
    This appeal concerns the purchase and sale agreement for a 98,094-square-foot, multi-use
    commercial development in Nashville, Tennessee, known as Houston Station. Before
    marketing the property for sale, the defendant-seller discovered that approximately 100
    square feet of the building encroached on neighboring property owned by CSX
    Transportation, Inc. and sought a lease from CSX to cover the encroachment. But before it
    could reach an agreement with CSX, the seller agreed to sell the property to the plaintiff-
    buyer. The buyer deposited $3 million as earnest money, and the parties scheduled a
    closing. Before closing, however, CSX demanded $550,000 per year for the encroachment.
    The seller then informed the buyer that it could not meet its obligations under their
    agreement. Meanwhile, the seller breached the agreement by executing two new leases
    without the buyer’s approval. The buyer extended the closing several times to allow the
    seller to cure its defaults, but the seller refused to terminate the new leases and could not
    reach a mutually agreeable arrangement with CSX. The buyer then let the closing deadline
    lapse and sued for, inter alia, reformation of the purchase agreement, specific performance,
    and damages. The seller then moved for summary judgment and requested an award of the
    earnest money on the theory that the buyer waived its objections by allowing the closing
    deadline to lapse. The trial court granted the motion, reasoning that the buyer had
    constructive notice of the encroachment and then breached the purchase agreement by
    failing to buy the property. Accordingly, the court found the seller was entitled to the $3
    million deposit as liquidated damages and an award of attorneys’ fees and expenses under
    the agreement as the prevailing party. The buyer appeals. Following a thorough review, we
    respectfully disagree that the buyer had constructive notice that the seller did not have good
    and marketable title. We also disagree that the seller had a right to terminate the contract
    and receive the earnest money. Thus, we reverse the trial court’s judgment and remand for
    further proceedings consistent with this opinion.
    Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed
    in Part, Vacated in Part, and Remanded
    FRANK G. CLEMENT JR., P.J., M.S., delivered the opinion of the Court, in which ANDY D.
    BENNETT and W. NEAL MCBRAYER, JJ., joined.
    Peter C. Sales and Edmund S. Sauer, Nashville, Tennessee, and Bradley J. Hamburger,
    Dione Garlick, James P. Fogelman, and Daniel R. Adler, Los Angeles, California, for the
    appellants Houston Humphreys, LLC.
    Ryan T. Holt, Andrea J. Sinclair, Amy K. R. Mohan, Alice E. B. Haston, and Mark A.
    Carver, Nashville, Tennessee, for the appellees, Houston Street Partners, LLC; Humphreys
    Street Investments, LLC; and Gordon Gilbreath.
    OPINION
    FACTS AND PROCEDURAL BACKGROUND
    I. BACKGROUND
    In the early 1900s, a large factory (“the Houston Station Building”) was constructed
    on a 1.53-acre, triangular piece of land (“the Houston Station Parcel”) at 434 Houston
    Street in Nashville, Tennessee. Around the same time, a 13-foot wide, 0.18-acre strip of
    the Houston Station Parcel was conveyed to the neighboring railway in exchange for the
    railway’s agreement to build a side track. The conveyance was recorded in a 1903 Deed
    (“the 1903 Deed”) that depicted the conveyed area as a darkened strip between the
    remaining land and the railway’s preexisting, 50-foot right-of-way:
    -2-
    One hundred years later, in 2005, Houston Street Partners, LLC (“Seller”),
    purchased the Houston Station Parcel and Building. Seller then obtained a land survey (“the
    2006 Survey”) that showed the parcel was 1.35 acres1 in size and revealed that the southeast
    corner of the Houston Station Building encroached onto a “13′ USE EASEMENT” on the
    railway’s property, which was now owned by CSX Transportation, Inc. (“CSX”):
    Over the next several years, Seller transformed the Houston Station Building into a
    mixed-use development and executed leases with several tenants, including one of
    Nashville’s most popular restaurants, Bastion, whose lease included the corner of the
    Building that encroached on CSX’s property (“the CSX Parcel”). Believing it had
    permission to use the CSX Parcel, Seller allowed its tenants to use the strip of land as an
    access road for deliveries, trash pickup, and employee parking.
    In December 2018, CSX sent Seller a cease-and-desist letter demanding Houston
    Station tenants stop using its property. Because the CSX Parcel was the only means of
    access to the rear of the Houston Station Building, Seller’s Chief Partner, Gordon
    Gilbreath, asked CSX for permission to use the Parcel for limited purposes. CSX responded
    by asking Mr. Gilbreath to submit a land lease application to cover the requested uses and
    the “~9 feet of the corner of the building . . . encroaching on CSX’s property.”
    1
    On page one we identified the acreage as being l.53 but here it is listed as 1.35. Although this
    may appear to be a typographical error, it is not. The lot comprised 1.53 acres before the 1903 conveyance
    to the railroad. Since that time, the acreage has been 1.35.
    -3-
    While Mr. Gilbreath was preparing the lease application, Seller engaged real estate
    broker Chad Grout to sell the Houston Station Parcel and two nearby parking lots owned
    by Humphreys Street Investments, LLC. Mr. Grout then notified real estate investment
    firm Rubicon Equities (“Buyer”) that the properties were for sale.2 Mr. Grout provided
    Buyer with a copy of the 2006 Survey and disclosed that Seller was negotiating a “parking
    lease with CSX for the north side of the building.”
    After some negotiation, Buyer and Seller executed a purchase and sale agreement
    (“the Purchase Agreement”) in December 2019. The Purchase Agreement was structured
    to provide Buyer with a 45-day inspection period, during which Seller would obtain and
    provide Buyer with a title insurance commitment, and Buyer would obtain a new survey
    of the properties. Seller represented that it had “good and marketable title” to the Houston
    Station Parcel and disclosed that it was “negotiating with CSX railroad . . . regarding the
    right . . . to use certain property located in the CSX right-of-way for access, parking, a
    ramp, loading area, and barriers.”
    After signing the Purchase Agreement, Buyer deposited $1.5 million in earnest
    money, and Seller provided Buyer with a title commitment from Fidelity National Title
    Insurance Company along with copies of all title documents referenced there. But none of
    the materials referenced the 1903 Deed or the encroachment. Buyer then had a new survey
    prepared based on the title materials that Seller provided. Because those materials did not
    reference the 1903 Deed, the resulting survey depicted the Houston Station Parcel in its
    pre-1903, 1.53-acre size and did not reveal the encroachment:
    2
    The plaintiff-appellant in this case, Houston Humphreys LLC, is Buyer’s successor in interest.
    -4-
    Both Buyer and Seller received a copy of the survey in January 2020. A few weeks later,
    the inspection period closed, and Buyer deposited another $1.5 million in earnest money.
    The next month, Mr. Gilbreath received a proposed land lease from CSX for
    $550,000 per year to use the CSX Parcel for, among other things, “the location and
    maintenance of a portion of [Seller]’s building.” Mr. Gilbreath sent the lease and a copy of
    the 1903 Deed to Buyer. In his email, Mr. Gilbreath acknowledged that the lease terms
    were “way out of bounds” and suggested that the parties negotiate for a lower price. Buyer,
    however, was more concerned that a portion of the Houston Station Building encroached
    on CSX’s property—a fact that Buyer claimed it was unaware of until then. Buyer rejected
    the idea of leasing the CSX Parcel at any price because it could not “allow . . . anyone else
    to own the land underneath the building.” In response, Mr. Gilbreath admitted that he failed
    “to recognize the scope and importance” of the encroachment. Mr. Gilbreath explained that
    Seller had no issues with lenders or title insurance underwriters in the past, and he
    presumed the lease would resolve any encroachment issues.
    A few days later, Buyer sent Seller a “Notice of New Objection” pursuant to § 3.2(a)
    of the Purchase Agreement. Section 3.2(a) gave Buyer the right to object to newly
    discovered title defects before closing:
    In the event that at any time following delivery of the Title Commitment or
    Survey described above, but prior to Closing, any changes . . . occur in the
    Title Commitment or Survey, in addition to other remedies permitted
    pursuant to this Agreement, then Buyer, in Buyer’s sole discretion and
    judgment, may: (a) accept the Property with such defects, or (b) give written
    notice to Seller and the Title Company of Buyer’s disapproval of any such
    matters (a “New Objection”). If Seller does not remove or cure such New
    Objection prior to the date of Closing, Buyer may at Buyer’s election either
    (i) extend the Closing date by up to thirty (30) days during which time Seller
    shall correct the New Objection if caused by or through the action or inaction
    of Seller, and if not then corrected, or [sic] (ii) exercise Buyer’s remedies
    provided in Section 10.1 herein.
    Buyer demanded Seller cure the encroachment by acquiring title to the CSX Parcel
    and extended the closing to July 6, 2020.
    Meanwhile, several Houston Station tenants decided not to renew their leases due
    to pandemic-related declines in business. Losing tenants presented a challenge for Seller
    because §§ 4.1 and 4.2(a) of the Purchase Agreement obligated Seller to operate Houston
    Station in the ordinary course of business but prohibited Seller from entering “into any
    New Lease . . . without the prior written approval of Buyer.” Seller identified several
    potential new tenants but could not get Buyer’s approval before executing the leases.
    Afraid of losing its opportunity to rent the vacant spaces, Seller executed two new leases
    -5-
    in mid-June 2020. When Seller notified Buyer about the leases, it also informed Buyer that
    “multiple closing conditions”—including “the encroachment issue with CSX”—would not
    be “satisfied or resolved prior to closing.” In response, Buyer sent Seller a notice of default
    and demanded that Seller terminate the new leases and acquire title to the CSX Parcel.
    Predictably, the parties did not close on July 6, 2020. That same day, Buyer sent
    Seller a “Notice of Closing Date Extension” pursuant to § 6.2 of the Purchase Agreement,
    which gave Seller the right to extend the closing by 60 days if Seller could not meet the
    closing conditions:
    In the event any of the foregoing conditions is not satisfied at the time
    the Closing is scheduled to take place, Buyer may (i) extend the Closing by
    not more than sixty (60) days to allow Seller to cure such breach of a
    Condition to Close, and/or (ii) in addition to any other remedy available to it
    hereunder, terminate this Agreement by written notice to Seller whereupon
    the Earnest Money shall be promptly refunded to Buyer . . . .
    Buyer also reasserted its demands that Seller obtain title to the CSX Parcel and terminate
    the new leases. Seller, however, refused to terminate the leases and informed Buyer that
    the encroachment issue would not be cured even with the extended deadline.
    Even so, on July 24, 2020, Seller made one last attempt to reach an agreement with
    CSX by offering to purchase the CSX Parcel for $375,000. In its offer, Seller explained
    that buying the land “would be the simplest solution to removing the cloud” on its title.
    CSX, however, was uninterested in selling the property. After CSX declined its offer, Seller
    informed Buyer a third time that it could not recertify the representations and warranties in
    the Purchase Agreement because it did not have “good and marketable” title to the Houston
    Station Parcel.
    On September 4, 2020, the rescheduled closing date, Buyer notified Seller that it
    had three days to cure the defaults before Buyer pursued its remedies under § 10.1 of the
    Purchase Agreement. Section 10.1 gave Buyer the right to obtain specific performance or
    terminate the Purchase Agreement if Seller failed to sell the properties:
    10.1. Seller’s Failure to Close/Buyer’s Remedies. If Seller fails or is
    unable to sell the Property to Buyer, then, unless Seller cures such failure
    within three (3) business days after Buyer provides written notice thereof,
    Buyer, as its sole and exclusive remedies, may either: (i) obtain specific
    performance of this Agreement, or (ii) terminate this Agreement without
    further liability to the Seller, provided that Buyer shall have the right to
    receive reimbursement of Buyer’s actual out-of-pocket costs and expenses in
    conjunction with this Agreement, not to exceed One Hundred Thousand and
    -6-
    No/100 Dollars ($100,000.00), in which event the Earnest Money shall also
    be distributed to Buyer.
    In response, Seller sent Buyer a notice claiming that Buyer was in default for failing
    to purchase the properties and giving Buyer three days to cure the default before Seller
    exercised its rights under § 10.2 of the Purchase Agreement. Section 10.2 gave Seller the
    right to terminate the Agreement and keep the earnest money as liquidated damages if
    Buyer defaulted by failing to purchase the properties:
    10.2. Buyer’s Failure to Close/Seller’s Remedies. If Buyer fails to
    purchase the Property and such failure constituted a default under this
    Agreement, then, unless Buyer cures such failure within three (3) business
    days after Seller gives it written notice thereof, Seller, as its sole and
    exclusive remedy, may terminate this Agreement and receive the Earnest
    Money as full and agreed upon liquidated damages.
    Shortly after that, Buyer commenced this action by filing a complaint for
    reformation of the Purchase Agreement, specific performance, and damages against Seller,
    Mr. Gilbreath, and John Does 1–3 (collectively, “Defendants”). After Buyer filed its
    complaint, Seller notified Buyer that it was terminating the Purchase Agreement and
    retaining the $3 million in earnest money as liquidated damages.
    II. TRIAL COURT PROCEEDINGS
    Buyer asserted six claims against Defendants, only four of which are at issue on
    appeal: (1) reformation of the Purchase Agreement based on fraud; (2) specific
    performance of the reformed Purchase Agreement; (3) breach of contract; and (4)
    fraudulent concealment.3 In short, Buyer alleged that Defendants fraudulently induced
    Buyer to enter the Purchase Agreement by misrepresenting and concealing the actual size
    of the Houston Station Parcel and misrepresenting the quality of its title, that it had good
    and marketable title. Thus, Buyer asserted that it was entitled to an abatement of the
    purchase price or an award of damages to reflect the smaller parcel size and the legal risks
    associated with the encroachment. Buyer also sought an award of damages to compensate
    for the allegedly inferior leases that Seller entered into without Buyer’s permission.
    Defendants responded by moving for summary judgment on all claims. Defendants
    argued that they were entitled to summary judgment on Buyer’s fraud claims because the
    3
    Buyer also asserted a claim against Seller for injunctive relief and a claim against Gordon
    Gilbreath and John Does 1–3 for violation of the Tennessee Consumer Protection Act (“TCPA”). The trial
    court granted summary judgment to Seller on these claims, and Buyer has not appealed that part of the
    court’s judgment.
    -7-
    actual boundary line and encroachment were disclosed on the 2006 Survey that Mr. Grout
    provided to Buyer in October 2019. Defendants also asserted that Buyer had constructive
    notice of the boundary line because the 1903 Deed was a public record. Thus, Defendants
    asserted that Buyer was not entitled to an abatement of the purchase price or damages. As
    for Buyer’s claims for breach of contract and specific performance, Seller asserted that it
    was entitled to summary judgment because the Purchase Agreement terminated after Buyer
    failed to close. Defendants also asked the court to release the earnest money to Seller and
    award reasonable attorneys’ fees. Buyer opposed the motion, arguing that it had no
    constructive notice and that there were multiple triable issues preventing summary
    judgment.
    Following a hearing, the trial court granted Defendants’ motion for summary
    judgment, awarded the earnest money to Seller as liquidated damages, and awarded
    $350,000 in attorneys’ fees and costs to Seller as the prevailing party. The court found that
    Buyer had constructive notice of the actual boundary line, the encroachment, and the 1903
    Deed, and that Seller “was capable of conveying good and marketable” title to “the
    Property as defined in the Agreement,” being “the land that ends where CSX’s property
    begins.” For these reasons, the court concluded that Defendants were entitled to summary
    judgment on Buyer’s claims for reformation and fraudulent concealment. The court also
    found that Seller was “ready, willing and able to convey the Property, as defined in the
    Agreement” and that Seller’s termination of the Purchase Agreement was valid. Thus, the
    court reasoned that Buyer could not suffer damages from Seller’s alleged breaches of the
    contract, and it found Seller was entitled to the earnest money as liquidated damages.
    Because Defendants were the prevailing party, the court awarded them $350,000 in
    attorneys’ fees and costs under the Purchase Agreement.
    This appeal followed.
    ISSUES
    Buyer raises four issues on appeal:
    1. Did the trial court err in concluding, as a matter of law, that Seller had
    not actually agreed to sell all of Houston Station to Buyer and therefore
    was entitled to summary judgment on the Buyer’s contract claims?
    2. Given that Tennessee courts have long held that constructive notice is not
    a defense against fraud, did the trial court err in granting summary
    judgment on Buyer’s fraud-based claims on the theory that Buyer had
    constructive notice of the true boundary line of the Houston Street parcel?
    3. Is there a genuine issue of material fact precluding summary judgment on
    Buyer’s fraud-based claims regarding whether Seller disclosed the true
    boundary line when it made available an outdated, inaccurate survey
    -8-
    completed in 2006 that, according to unrebutted expert testimony, no
    reasonable buyer would rely on?
    4. Did the trial court err in awarding Buyer’s deposit to Seller, even though
    Seller had (a) asserted no claim to the deposit and (b) by its own
    admission, not satisfied the closing conditions in the parties’ agreement
    that are a prerequisite for the Buyer’s forfeiture of the deposit?
    Seller states the issues on appeal as follows:
    1. Are Buyer’s new arguments on appeal waived?
    2. Did the trial court correctly rule that Buyer’s fraud claims fail as a matter
    of law and that Buyer is not entitled to reformation of the contract?
    2. Did the trial court correctly grant summary judgment on Buyer’s breach-
    of-contract claims?
    3. Are Buyer’s objections to the trial court’s award of earnest money
    waived, meritless, or both?
    4. Did the trial court correctly award attorneys’ fees to Seller as the
    prevailing party, and is Seller entitled to its attorneys’ fees on appeal?
    STANDARD OF REVIEW
    We review a trial court’s grant of summary judgment de novo without a presumption
    of correctness. See Rye v. Women’s Care Ctr. of Memphis, MPLLC, 
    477 S.W.3d 235
    , 250
    (Tenn. 2015). Accordingly, this court must make a fresh determination of whether the
    requirements of Tennessee Rule of Civil Procedure 56 have been satisfied. 
    Id.
     In so doing,
    we consider the evidence in the light most favorable to the nonmoving party and draw all
    reasonable inferences in that party’s favor. Godfrey v. Ruiz, 
    90 S.W.3d 692
    , 695 (Tenn.
    2002).
    Courts should grant summary judgment when “the pleadings, depositions, answers
    to interrogatories, and admissions on file, together with the affidavits, if any, show that
    there is no genuine issue as to any material fact and that the moving party is entitled to a
    judgment as a matter of law.” Tenn. R. Civ. P. 56.04. When the party moving for summary
    judgment does not bear the burden of proof at trial, as is the case here, it “may satisfy its
    burden of production either (1) by affirmatively negating an essential element of the
    nonmoving party’s claim or (2) by demonstrating that the nonmoving party’s evidence at
    the summary judgment stage is insufficient to establish the nonmoving party’s claim or
    defense.” Rye, 477 S.W.3d at 264.
    -9-
    When a party moves for summary judgment and supports the motion as required by
    Tennessee Rule of Civil Procedure 56, the nonmoving party may not rest on the allegations
    or denials in its pleadings. Id. at 265. Instead, the nonmoving party must respond with
    specific facts showing there is a genuine issue for trial. Id. A fact is material “if it must be
    decided in order to resolve the substantive claim or defense at which the motion is
    directed.” Byrd v. Hall, 
    847 S.W.2d 208
    , 215 (Tenn. 1993). A “genuine issue” exists if “a
    reasonable jury could legitimately resolve that fact in favor of one side or the other.” 
    Id.
    ANALYSIS
    I. CLAIMS FOR REFORMATION AND FRAUDULENT CONCEALMENT
    Buyer contends that the trial court erred in granting summary judgment on its claims
    sounding in fraud because there is a genuine issue of material fact as to whether the 1903
    Deed and the 2006 Survey constituted actual or constructive notice of Seller not having the
    right to use all the land under the Houston Station Building.4 We agree.
    To establish fraudulent concealment, a plaintiff must prove that “the defendant ha[d]
    a duty to disclose a known fact, the defendant faile[d] to disclose that fact, and the plaintiff
    reasonably relie[d] on the resulting misrepresentation, which cause[d] injury.” Archer,
    
    2020 WL 6075705
    , at *6 (citations omitted). “[A] seller of real property has a duty to
    disclose ‘a fact of controlling importance in determining the desirability and value of that
    [real property].’” Homestead Grp., LLC v. Bank of Tennessee, 
    307 S.W.3d 746
    , 752 (Tenn.
    Ct. App. 2009) (quoting Simmons v. Evans, 
    206 S.W.2d 295
    , 296 (Tenn. 1947)). That said,
    there is no duty to disclose a fact “where ordinary diligence would have revealed the
    undisclosed fact.” Odom v. Oliver, 
    310 S.W.3d 344
    , 350 (Tenn. Ct. App. 2009) (citing
    Simmons, 
    206 S.W.2d at 296
    ; Lonning v. Jim Walter Homes, Inc., 
    725 S.W.2d 682
    , 684
    (Tenn. Ct. App. 1986)).
    4
    Buyer also contends that the doctrine of constructive notice is not a defense to fraud under the
    circumstances of this case. Defendants argue that Buyer waived this argument by not raising it in the trial
    court. We agree. “Constructive notice” refers to “information or knowledge of a fact imputed by law to a
    person . . . because he could have discovered the fact by proper diligence.” Hawks v. City of Westmoreland,
    
    960 S.W.2d 10
    , 15 (Tenn. 1997) (quoting Kirby v. Macon Cnty., 
    892 S.W.2d 403
    , 409 (Tenn. 1994)).
    Generally, plaintiffs “cannot recover on a claim of misrepresentation or concealment when the plaintiff has
    constructive knowledge of the material fact at issue.” Archer v. The Home Team, Inc., No. M2019-01898-
    COA-R3-CV, 
    2020 WL 6075705
    , at *7 (Tenn. Ct. App. Oct. 15, 2020) (citing Winstead v. First Tennessee
    Bank N.A., Memphis, 
    709 S.W.2d 627
    , 633 (Tenn. Ct. App. 1986)). There are exceptions to this rule, such
    as when the defendant’s representations were “calculated to lull the suspicions of a careful man into a
    complete reliance” or when the defendant prevented or hindered the plaintiff’s efforts to investigate and
    discover the truth. 
    Id.
     (quoting 92 C.J.S. Vendor and Purchaser § 68). In the trial court, Buyer disputed
    whether the 1903 Deed was discoverable through proper diligence, but Buyer did not argue that any
    exception to the general rule applied. Thus, the issue is waived.
    - 10 -
    Generally, whether a fact would have been discoverable in the exercise of ordinary
    diligence is a question of fact. See id. at 352 (finding a factual dispute regarding whether
    the buyers could have discovered a defect in the exercise of ordinary diligence). Publicly
    recorded information, however, is “discoverable through ordinary diligence” as a matter of
    law. See Archer, 
    2020 WL 6075705
    , at *7 (citing PNC Multifamily Cap. Inst’l Fund XXVI
    Ltd. P’ship v. Bluff City Cmty. Dev. Corp., 
    387 S.W.3d 525
    , 550 (Tenn. Ct. App. 2012);
    Trent v. Mountain Com. Bank, 
    606 S.W.3d 258
    , 265 (Tenn. 2020)); see also 
    Tenn. Code Ann. § 66-26-102
     (providing that all recorded instruments such as deeds and judgments
    “shall be notice to all the world from the time they are noted for registration, . . . and shall
    take effect from such time.”).
    It is undisputed that the 1903 Deed was registered with the Davidson County
    Register’s Office. It is also undisputed that Seller gave Buyer a copy of the 2006 Survey,
    which referenced the 1903 Deed by book and page number. The 1903 Deed shows that a
    13-foot strip of the Houston Station Parcel bordering the railway’s right-of-way was
    conveyed to CSX’s predecessor. Thus, as a matter of law, Buyer had constructive notice
    of the facts contained in the 1903 Deed.
    As such, we agree with the trial court that Buyer had constructive notice that CSX
    owned a strip of land between the Houston Station Parcel and the railway. However, the
    1903 Deed did not provide Buyer with constructive notice that the Houston Station
    Building encroached on CSX’s property because the 1903 Deed did not show or describe
    the Building’s location.
    To establish that Buyer had notice of the encroachment, Defendants relied on the
    2006 Survey. It was undisputed that Mr. Grout gave Buyer a copy of the Survey in October
    2019 and that the Survey showed the southeast corner of the Houston Station Building
    encroaching on the CSX Parcel. Thus, we agree with the trial court’s conclusion that Buyer
    had constructive notice that the Houston Station Building encroached on the CSX Parcel.
    That said, it was also undisputed that the 2006 Survey showed a 13-foot “use
    easement” covering the encroachment and that Defendants themselves mistakenly believed
    they had a right to use the easement for at least 12 years.5 For this reason, viewing these
    5
    Defendants contend that Buyer waived any argument concerning the use easement because
    “Buyer neither pled in its complaint nor argued to the trial court that it was defrauded by an alleged false
    disclosure of a use easement.” This argument is misplaced. As Defendants correctly point out, Buyer does
    not contend that it was defrauded by Defendants’ failure to disclose the use easement; Buyer contends that
    it was defrauded by Defendants’ failure to disclose the unauthorized encroachment of the Houston Station
    Building on the CSX Parcel. The use easement rebuts Defendants’ contention that the 2006 Survey gave
    Buyer actual or constructive notice of this fact.
    - 11 -
    facts in a light most favorable to Buyer, we disagree with the trial court’s conclusion that
    it is undisputed Buyer had actual or constructive notice of the encroachment being
    unauthorized. To the contrary, we find that it is disputed whether Buyer had sufficient
    notice that the encroachment was unauthorized by CSX. We also find this disputed fact
    material because the unauthorized encroachment of a building on adjoining property
    exposes the landowner to liability. See Cross v. McCurry, 
    859 S.W.2d 349
    , 354 (Tenn. Ct.
    App. 1993) (holding that landowner was entitled to damages when neighboring building
    encroached on property). Thus, “[s]uch an encroachment makes the title of the purchaser
    unmarketable because the adjoining owner may compel the removal of the encroachment
    or sue for damages caused by it.” 77 Am. Jur. 2d Vendor and Purchaser § 164; see also
    Rogers v. Roop, 
    92 S.W.2d 423
    , 429 (Tenn. Ct. App. 1935) (defining “merchantable” or
    “marketable” title as “title free from serious defects, evidenced by public record and in no
    way dependent upon parol evidence, and that nothing appears casting a cloud upon it from
    which litigation can arise”).
    Buyer seeks reformation of the Purchase Agreement and damages for Defendants’
    alleged misrepresentation of the Houston Station Parcel’s size and the quality of its title,
    i.e., that Seller had “good and marketable” title to the property. In particular, Buyer sought
    an abatement of the purchase price to account for the legal risks associated with the
    unauthorized encroachment. It was undisputed that Seller knew the encroachment was an
    issue with CSX by early 2019 when CSX demanded Seller submit a land lease application
    to cover various uses, including the approximately “9 feet of the corner of the
    building . . . encroaching on CSX’s property.” Yet six months later, Seller negotiated a
    contract to sell the Houston Station Parcel based on representations that it owned “good
    and marketable title.” Seller later admitted that it could not live up to this representation
    due to the encroachment. Neither the 2006 Survey nor the 1903 Deed establishes that Buyer
    knew or should have known that the encroachment clouded the title to the Houston Station
    Parcel.
    For these reasons, Defendants are not entitled to judgment as a matter of law on
    Buyer’s claims for reformation and fraudulent concealment.
    II. CONTRACT-BASED CLAIMS
    Buyer contends that the trial court erred when it granted summary judgment to Seller
    on its contract-based claims for several reasons. As stated in its brief,
    The Seller admitted, among other things, that it could not live up to its end
    of the bargain—specifically, that it could not convey all 1.53 acres of
    Houston Station because CSX owned [a portion] of it. It had also entered into
    dubious leases without the Buyer’s approval, in violation of the parties’
    agreement. The Seller breached the agreement in other ways, too, including
    - 12 -
    by not disclosing CSX’s threat of a trespass suit. All of these contractual
    breaches were either admitted or are beyond dispute, which means that the
    Seller was in no position to close on the deal. The trial court nonetheless
    declared that the Buyer had defaulted by not going through with the purchase
    and that the agreement had been terminated. . . . That conclusion is entirely
    divorced from the evidentiary record.
    Buyer also contends that Seller had no right to terminate the contract or keep the
    earnest money because Buyer’s failure to close was not a default under the Purchase
    Agreement. Buyer asserts that its obligation to close was conditioned on, among other
    things, Seller not being in default and Seller’s representations being true, accurate, and
    complete. Because Seller admitted to breaching § 4.2 of the Agreement, Buyer contends
    that Seller did not meet the closing conditions and thus Buyer had no obligation to close.6
    For its part, Seller argues that Buyer’s failure to close was a default because Buyer
    opted to proceed to closing rather than terminating the Purchase Agreement after Seller
    admitted that it could not meet the closing conditions.
    Resolving these issues requires interpretation of the Purchase Agreement. We
    review a trial court’s interpretation of a contract de novo without a presumption of
    correctness. See State ex rel. Pope v. U.S. Fire Ins. Co., 
    145 S.W.3d 529
    , 533 (Tenn. 2004).
    The trial court based its decision to grant summary judgment on Seller’s purported
    termination of the Purchase Agreement under § 10.2. This section gave Seller the right to
    terminate the contract and retain the earnest money as liquidated damages if Buyer failed
    to close and its failure to close constituted a default:
    10.2. Buyer’s Failure to Close/Seller’s Remedies. If Buyer fails to
    purchase the Property and such failure constituted a default under this
    Agreement, then, unless Buyer cures such failure within three (3) business
    days after Seller gives it written notice thereof, Seller, as its sole and
    6
    Buyer also contends that summary judgment and the award of damages was not appropriate
    because “there was at least a triable question whether the Seller had breached the agreement by failing to
    disclose a threat of legal action by CSX” and because Seller’s request for an award of the earnest money
    was procedurally improper. Defendants argue that Buyer waived these arguments by not making them in
    the trial court. We agree. Arguments not first raised in the trial court are waived on appeal. Barnes v. Barnes,
    
    193 S.W.3d 495
    , 501 (Tenn. 2006). Additionally, “[a] skeletal argument that is really nothing more than an
    assertion will not properly preserve a claim . . . .” Newcomb v. Kohler Co., 
    222 S.W.3d 368
    , 400 (Tenn. Ct.
    App. 2006) (citing United States v. Dunkel, 
    927 F.2d 942
    , 956 (7th Cir. 1991)). Buyer did not oppose
    Seller’s claim for liquidated damages on procedural grounds in the trial court. Further, Buyer’s complaint
    did not allege that Seller breached its obligation to disclose threatened litigation, and Buyer made only a
    passing reference to this allegation in its oral argument to the trial court.
    - 13 -
    exclusive remedy, may terminate this Agreement and receive the Earnest
    Money as full and agreed upon liquidated damages.
    At the same time, as Buyer correctly points out, § 6.2 conditioned Buyer’s
    obligation to close on, among other things, “Seller not being in default under [the]
    Agreement” and “all of the representations and warranties made by Seller . . . being true,
    accurate and complete.” But Seller relies on additional language in § 6.2 that gives Buyer
    the right to extend the closing or terminate the contract:
    In the event any of the foregoing conditions is not satisfied at the time
    the Closing is scheduled to take place, Buyer may (i) extend the Closing by
    not more than sixty (60) days to allow Seller to cure such breach of a
    Condition to Close, and/or (ii) in addition to any other remedy available to it
    hereunder, terminate this Agreement by written notice to Seller whereupon
    the Earnest Money shall be promptly refunded to Buyer and . . . then Seller
    shall reimburse Buyer for its actual and documented out-of-pocket costs and
    expenses not to exceed $100,000.
    Buyer alleges that Seller breached the Purchase Agreement by “failing to own good
    and marketable fee simple title to the Property.” The trial court found it undisputed that
    “Seller[] owned good and marketable fee simple title to the Property as defined in the
    Agreement,” which the court construed as “land that ends where the CSX Parcel begins.”
    Buyer contends this interpretation is incorrect because Seller agreed to sell “the full
    property and building, including the portion owned by CSX.”7
    We agree with the trial court’s conclusion that Seller owned fee simple title to “the
    Property” as defined in the Purchase Agreement. The Purchase Agreement, through a series
    of defined terms, identifies “the Property” as including the “Houston Station Parcel,” which
    the Agreement defines as an “approximately 1.53-acre parcel of land in Nashville,
    Davidson County, Tennessee with an address of 434 Houston Street and a Tax Parcel
    Identification of 10503019800 as more particularly described on Exhibit A-1.” Exhibit A-
    1 “more particularly” describes the Houston Station Parcel as follows:
    Land in Davidson County, Tennessee, being a triangular shape lot in South
    Nashville, fronting on the west side of the N.C. & St. L. Railroad, and
    being bounded on its westerly side by Brown Street, and on its southerly side
    by Houston Street; said lot has a frontage on Brown Street of 280 feet, and
    7
    In the alternative, Buyer contends that the Purchase Agreement is ambiguous as to what the parties
    agreed to buy and sell. Seller argues that Buyer waived this argument by failing to raise it in the trial court.
    We agree. Buyer did not argue that the Purchase Agreement was ambiguous in the trial court and, as such,
    waived the issue on appeal. See Barnes, 
    193 S.W.3d at 501
    .
    - 14 -
    on Houston Street of 512 feet; said lot being a part of the Humphrey Houston
    and Martin Plan of lots as registered in Book 36, page 117, in the Register’s
    Office for Davidson County, Tennessee.
    .      .            .   .
    Being the same property conveyed to Houston Street Partners, LLC, a
    Tennessee limited liability company, by Thomas T. Pennington and Jeffrey
    A. Kay, Co-Trustees of the Rich Trust by Special Warranty Deed dated
    November 23, 2005, of record at Instrument No. 20051128-0143055,
    Register’s Office for Davidson County, Tennessee.
    (Emphasis added). Thus, the Purchase Agreement obligated Seller to convey what it
    received in 2005: the triangular parcel of land bounded by Brown Street, Houston Street,
    and the railroad. It is undisputed that Seller still owned all the property it received in 2005.
    While we agree that Seller owned fee simple title to “the Property,” we respectfully
    disagree with the trial court’s conclusion that Seller owned “good and marketable fee
    simple title to the Property.” As discussed, the encroachment of a building onto
    neighboring land “makes the title of the purchaser unmarketable because the adjoining
    owner may compel the removal of the encroachment or sue for damages caused by it.” 77
    Am. Jur. 2d Vendor and Purchaser § 164; see also Rogers, 
    92 S.W.2d at 429
    . It is
    undisputed that the Houston Station Building’s encroachment onto CSX’s property created
    a cloud on Seller’s title.
    Thus, it is undisputed that Seller could not satisfy the closing conditions at the time
    of the September 4, 2020 closing date. Seller told Buyer that it could not recertify its
    representations and warranties because it did not have “good and marketable” title to the
    Houston Station Parcel. Additionally, Seller does not dispute that it breached the Purchase
    Agreement by executing two new leases without obtaining Buyer’s consent. Nevertheless,
    Seller contends that Buyer’s only options were to extend the closing date, terminate the
    contract, or proceed with the closing. Because Buyer did not extend the closing date or
    terminate the contract, Seller argues that Buyer breached its obligation to close. We
    disagree.
    Section 6.2 expressly conditioned Buyer’s obligation to close on Seller meeting the
    closing conditions. We do not interpret Buyer’s right to extend closing or terminate the
    Agreement as abrogating this. See Teter v. Republic Parking Sys., Inc., 
    181 S.W.3d 330
    ,
    342 (Tenn. 2005) (recognizing that the provisions in a contract should be interpreted
    harmoniously with each other when possible). Simply put, if Seller did not meet the closing
    conditions by the closing date, Buyer was not obligated to close. In addition, Buyer had the
    right to extend the closing, terminate the Agreement, or exercise “any other remedy
    - 15 -
    available” under the Purchase Agreement. Relevant here, § 10.1 gave Buyer the right to
    seek specific performance.
    Thus, when Seller had not satisfied the closing conditions by the September 4, 2020
    closing date, Buyer had no obligation to close, and it had the right to seek specific
    performance, which it did. Because Buyer had no obligation to close, Buyer’s failure to
    close was not a default. Therefore, Seller had no right to terminate the Purchase Agreement
    and receive the $3 million deposit as liquidated damages.
    For these reasons, Seller is not entitled to judgment as a matter of law on Buyer’s
    contract-based claims. This includes the trial court’s ruling that the Purchase Agreement
    terminated upon Buyer’s failure to close on September 4, 2020, and its ruling that Seller
    was entitled to retain the earnest money as liquidated damages. Accordingly, both of the
    above rulings are vacated.
    The above ruling also requires that we vacate the ruling that Buyer could not
    establish damages based on Seller’s admitted breach of § 4.2 of the Purchase Agreement
    by entering into two new leases after the expiration of the inspection period without
    Buyer’s approval.
    III. ATTORNEYS’ FEES
    Buyer contends this court should also vacate the award of attorneys’ fees and costs
    because Defendants are no longer the “prevailing parties.” Section 11.13 of the Purchase
    Agreement entitles the “prevailing party” in any action related to the Purchase Agreement
    to an award of reasonable costs, expenses, and fees. Because we have reversed the trial
    court’s grant of summary judgment in favor of Seller on the breach of contract claims,
    Seller is not the prevailing party. Therefore, Seller is not entitled to attorneys’ fees and
    expenses at this stage. Accordingly, we vacate this portion of the trial court’s judgment.8
    IN CONCLUSION
    Based on the above, we reverse the trial court’s judgment concerning Buyer’s claims
    for reformation and fraudulent concealment, as well as Buyer’s contract-based claims, and
    we vacate its award concerning the earnest money deposit and attorneys’ fees and expenses
    and remand for further proceedings consistent with this opinion. Costs of appeal are
    8
    Because Buyer did not appeal the summary judgment on its TCPA claim, Defendants contend
    that the award of attorney’s fees should be affirmed in part under Tennessee Code Annotated § 47-18-
    109(e)(2). We decline to do so. The trial court did not address Buyer’s request under § 47-18-109(e)(2),
    and Buyer’s decision to abandon its TCPA claim on appeal does not automatically entitle Defendants to an
    award under that statute.
    - 16 -
    assessed against the appellees, Houston Street Partners, LLC; Humphreys Street
    Investments, LLC; and Gordon Gilbreath, jointly and severally.
    ________________________________
    FRANK G. CLEMENT JR., P.J., M.S.
    - 17 -