Appeals Court Rules 2-1 That City Waited Too Late To Sue For Expensive Waterfront Problems

Thursday, June 21, 2012

The Tennessee Court of Appeals has ruled 2-1 that the city of Chattanooga waited too long to file suit to try to gain compensation for the millions of dollars it has had to spend to correct problems at the 21st Century Waterfront.

Judge John McClarty wrote the majority opinion and he was joined by Judge Charles Susano. Judge Herschel Franks had a dissenting opinion.

Circuit Court Judge Jackie Bolton in March 2010 said that the city of Chattanooga knew about problems at the 21st Century Waterfront as early as May 2005, but waited almost four years to file suit.

She said all parties in the lawsuit agree that the applicable statute of limitations is three years on construction defects.

Judge Bolton dismissed the lawsuit against the RiverCity Company, Continental Construction, Hargreaves and Associates and others involved in the $120 million project.

The city has already spent $1.5 million to fix major problems at The Passage portion of the waterfront attraction. It is facing millions more in repairs to the "hard edge" portion along the riverfront at Ross's Landing Park.

Defendant attorneys include Marc H. Harwell and Benjamin T. Reese, Hoyt Samples for NABCO Electric Company, Bill Colvin for Masonry Specialist Corp. and Al Henry for the River City Company.

Here is the majority opinion:

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE

January 31, 2012 Session

CITY OF CHATTANOOGA, TENNESSEE, ET AL. v. HARGREAVES
ASSOCIATES, INC., ET AL.

Appeal from the Circuit Court for Hamilton County
No. 09C403
Jacqueline S. Bolton, Judge

No. E2011-01197-COA-R3-CV-FILED-JUNE 21, 2012

The plaintiffs in this matter, the city and a redevelopment group, filed this action against the
defendant entities involved in the design and construction of a large municipal project on the
city’s waterfront. Also named as a defendant was the development manager for the project.
The trial court granted summary judgment to the defendants on the basis that the plaintiffs’
lawsuit was barred by the applicable statute of limitations found in Tennessee Code
Annotated section 28-3-105. The plaintiffs appeal. We affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., J., joined and H ERSCHEL P. F RANKS, P.J., dissented, filing a dissenting opinion.

Michael A. McMahan, Valerie L. Malueg,, Sam D. Elliott, Wade K. Cannon, and David G.
McDowell, Chattanooga, Tennessee, for the appellants, City of Chattanooga, Tennessee, and
Chattanooga Downtown Redevelopment Corporation.

Marc H. Harwell and Benjamin T. Reese, Chattanooga, Tennessee, for the appellees,
Hargreaves Associates, Inc., Continental Construction Co., The River City Co., NABCO
Electric Co., Inc., Masonry Specialist Corp., Valley Crest Landscape Development, Inc.,
Hobbs Architectural Fountains, and Moffatt & Nichol, Inc.1

Pfists Enterprises, Inc. did not move for summary judgment and is not a party to this appeal.

OPINION

I. BACKGROUND

This lawsuit arises out of the Chattanooga 21st Century Waterfront Plan (“the
Project”), a construction project along the Tennessee River in the downtown area. The
Project was constructed in “Packages.” “Package 2” included the construction of “The
Passage.”2 This litigation specifically concerns alleged errors and omissions in the design
and construction of Package 2.

The City of Chattanooga (“the City”) and Chattanooga Downtown Redevelopment
Corporation (“CDRC”), a Tennessee non-profit corporation and instrumentality of the City
(collectively “Chattanooga”), entered into a contract for the provision of architectural
services for the Project with Hargreaves Associates, Inc. (“Hargreaves”), a consulting firm
comprised of landscape architects and planners, on December 2, 2002. CDRC was to
administer the Project on behalf of the City and was designated the “owner” of several
parcels of land in the Project area. Hargreaves was involved in the design and development
of the master plan for the approximately 129 acres of the Project. Hargreaves also was
responsible for reviewing completed surveys and reports, for notifying the development
manager of any noted discrepancies, and for providing “advice on the scope of work for
remaining field work.”

On July 1, 2003, CDRC entered into a Development Management Agreement (“the
Agreement”) with the River City Company (“RiverCity”), a Tennessee non-profit corporation
created in 1986 to implement the Tennessee River Park Master Plan.3 RiverCity’s board of
directors is made up of the Mayors of the City and Hamilton County, the Chairs of the City
Council and the Hamilton County Commission, and other community leaders. In the
Agreement, CDRC, listed as the “owner” in the contract documents, retained RiverCity as
the development manager to “organize, coordinate and provide advice with respect to design,
construction and development of the Project.”

According to Hargreaves, RiverCity was required by contract to notify CDRC of all

A reflecting pool and stairway located between the Aquarium and Market Street forms a passage
from First Street down to the Riverfront area at Ross’s Landing.

RiverCity notes that its chartered purpose is to assist the City and Hamilton County with economic
development initiatives for downtown Chattanooga.

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relevant issues associated with the Project.4 All contractors, including Hargreaves, were to
use RiverCity – CDRC’s Designated Representative – as a conduit to relay information to
Chattanooga concerning the Project.

On or around November 4, 2003, the drawings for the Package 2 construction, which
included The Passage, were completed and approved by Hargreaves. Construction began
shortly thereafter. Continental Construction Company, Inc. (“Continental”) acted as the
primary construction contractor. The other defendants/third-party defendants, Moffatt &
Nichol, Inc. (“M&N”), Masonry Specialist Corporation (“MSC”), NABCO Electric Co.
(“NABCO”), and Valley Crest Landscape Development, Inc. (“Valley Crest”), performed
various design or construction-related activities on the Project.

Throughout 2004 and 2005, Hargreaves claims that on many occasions, it informed
RiverCity of various construction problems and issues. Hargreaves notified RiverCity of
construction problems via reports it would periodically issue to individuals working on the
Project. According to Hargreaves, specific problems of which RiverCity was made aware
by Hargreaves include the following:

On October 28, 2004, Hargreaves created field report No. 156
regarding observations made on October 27, 2004. Joonyon
Kim and Gavin McMillan of Hargreaves, Mike Winters of
Moffatt & Nichol and Jeff Shelden of Moffatt & Nichol were
on-site and observed that wall #1 “is moving.” They also
“noticed the esplanade is settling on both sides of new parkway
bridge and caused hairline cracks on wall #1 facing the river.”
The information or action that was required was for “Arcadis to
visit the site and assess the damage on the wall #1 and provide
repair strategy.”

On January 7, 2005, Hargreaves issued a memo regarding action
items needed, and reference is made to the Passage wall #1
settling. With respect to the north wall, reference is made to the
control joints being in the wrong places. According to Arcadis
the cracks in the north wall “should not be of concern, but
further observation is required. Epoxy to be injected in cracks.”

In its answer to Chattanooga’s complaint, RiverCity noted that for most of the construction period,
former City Mayor – and current United States Senator – Bob Corker was CDRC’s designated contact on
all construction coordination. RiverCity related that it also worked closely with City’s Chief Financial
Officer and the Department of Public Works.

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The punch list also noted that the esplanade was settling on both
sides of the new bridge and such was the responsibility of both
Arcadis and Stein. The settlement was approximately 3/4”.
Hargreaves also noted that the pavers needed to be fixed with
Package 2. Hargreaves recommended that Dan Kral, the Project
representative for River City, get something in writing regarding
such a fix.

On January 14 and January 28, 2005, Hargreaves issued a
weekly update once again expressing concern about the same
problems as afore-referenced.

In daily field report #322 dated January 25, 2005, Hargreaves
issued a memo to Kenny Statham of Continental regarding a
concern about water being trapped inside the Passage panels
should flood water or even run-off water from the ceiling panels
migrate behind the dripping wall cladding. In response, Dan
Kral explained that the water would likely migrate “to the
corners where there is a slot approximately 1/8” square [which
would] allow the water to drain through the stiffener and then
down the sheet to the end (of each 8' sheet) to drain out of the
1/4" gap.” On January 26, 2005, Hargreaves responded to Dan
Kral’s assessment of the water infiltration behind the panels of
the Passage concern. Hargreaves specifically wanted to know
whether sediment from a flood would keep the panels from free-
draining.

According to “new RFI No. 62” dated February 1, 2005,
concerning the Passage cladding, Dan Kral was sent a memo by
Kenny Statham of Continental stating that the existing concrete
wall on the east side of the Passage is out of plumb by
approximately 3" and out of alignment in the north/south
direction by approximately 6". He was advised that the masonry
cladding will need to be adjusted in order to cover this wall.
The proposed solution was to make the “top cap 22" wide
instead of 18" wide in order to cover the wall irregularities,” and
he stated that there might be a time change associated with the
proposed fix and perhaps a cost change.

On February 25, 2005, Hargreaves issued a weekly update once

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again outlining the problems with Package 1 and noting in red
type that the Passage wall #1 was moving. The esplanade was
settling on both sides of the new bridge – dropped 1/4". Pavers
needed to be fixed. Hargreaves also noted in red a concern
about utility enclosure #1 BFP leak with responsibility attributed
to Continental or River City; concern about Passage 150 HP
pump butterfly valve (submittal #115) with responsibility
attributed to River City or Dan Euser; a concern about Passage
wall #2 irregularities with responsibility being attributed to
River City; a concern about a field test response with
responsibility to Valley Crest or Continental; a need to
coordinate utility vaults with responsibility being attributed to
River City; and a concern about Passage wall drainage outlet to
the river with responsibility being attributed to River City.

On March 1, 2005, Hargreaves prepared a memo regarding the
problems concerning the construction of Passage wall #1.
Hargreaves described the problem as follows:

We specified to fill behind the passage cladding
with latex modified mortar. The idea was to build
it like a stone wall – solid with no air gap so we
are good for flooding and debris impact and
mounting Cherokee art, etc. The subcontractor
has built it so far like a building veneer with air
gap that will withstand wind loads but not much
else. They have suggested filling gap with
Styrofoam sheeting and have weep-holes but
given the extreme variation in the gap because of
the poor concrete wall tolerances a neat fit is not
possible.

Other options include injecting urea-
formaldehyde foam into gap, loose fill with
vermiculite, mortar with perlite for lightweight,
etc.

Why can’t we just fill it with mortar every 4 or so
courses? How do you determine if the load from
the mortar is enough to push the cladding out

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before it dries?

(viii) Following this specific warning from Hargreaves, a number of
memos were exchanged between Moffatt and Nichol,
Continental, Hargreaves, and River City concerning a possible
solution to the problem. River City was told and observed that
the walls had not been properly constructed and was enlisting
the input of Hargreaves and others in an effort to avoid
demolition of the walls and reconstruction.

On March 11, 2005, Hargreaves issued a weekly update stating
that Passage wall #2 was moving and attributed responsibility to
Arcadis. Hargreaves also noted settlement along both sides of
the new bridge – dropped 3/4". Finally, Hargreaves expressed
continued concern about pavers that needed to be fixed with
regard to Package #2.

On March 18, 2005, Hargreaves sent a weekly update stating in
pertinent part the following concerns: settling of the esplanade
on both sides of the new bridge; a need for pavers to be fixed;
SS river jet shrouds; Passage wall filling material below the
100-year flood level; wall #1 west side cladding – continuous
surface . . . .

On April 1, 2005, Hargreaves issued a weekly update reiterating
the aforesaid problems. Hargreaves again noted that The
Passage wall filling material was below the 100-year flood level
and was a “red level concern.”

On April 7, 2005, Dan Kral of River City issued a memo to
Hargreaves with copy to Continental that an agreement had been
reached as to the cladding fill between the cladding and the wall.
Masonry Specialists had proposed a fix with an estimated cost
of $36,000 which Dan Kral estimated to more likely cost
$15,000-20,000. Dan Kral stated that he had authorized
Continental to release the work to be done by Masonry
Specialists.

(xiii) Hargreaves’ weekly update of April 8, 2005 reiterated the
concerns as stated in prior weekly updates; listed a concern

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about the Passage vault room vent power connection which was
attributed to Moffatt & Nichol; noted that LAM and DEW were
to conduct a site visit on May 9 and 10; and reported that the
river jet flow straightener remained a problem as did the Passage
150 HP pump butterfly valve and the SS river jet shrouds.

(xiv) On April 29, 2005, Hargreaves sent field notes to Dan Kral
following Hargreaves’ site visit which had occurred on April 28,
and those site notes provide in pertinent part the following:

Confirm what is in Valley Crest’s mortar mix (I
did not see latex and it is typically a wet mix, not
dry). If this dry mix does not get wet to stabilize
cement and then dry to set, then there is going to
be a big efflorescence problem.

More riprap at River Walk West.

How are the shrouds going to be cut & adjusted &
affixed.

Expansion joints in wall cladding are missing.

Live stakes in riprap are too shallow and are all
dead -- replace.

How are Passage uplights in runnel fixed in?

Passage paver edge is not ground and looks crap.

Wall East has moved again 1/4” since last
marked.

On May 3, 2005, Hargreaves sent a memo to Jay Floyd of
Arcadis with a copy to Dan Kral which stated in pertinent part
as follows with respect to wall #2:

Since Dennis Gowins’ last assessment that the
wall had finished its movement out, it has indeed
moved out about 1/4” at the top intersection with

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the bridge where it was previously marked. This
I have seen.

The word from site is that wall #3 is still settling
and has cracked some cladding over it. This I
have not seen.

As the cladding is continuing going on for the
opening, this is Arcadis’ last chance to do
whatever you need to do before it gets real
expensive to do any further investigation or
remedial action.

(xvi) On June 10, 2005,5 Hargreaves issued a weekly update reporting
in red ink that the wall #2 was moving again and assigned
responsibility to Arcadis and Stein; and Hargreaves once again
reported the settling of both sides of the new bridge and the need
to unblock wall #2 sub-drain. Hargreaves also stated that The
Passage 150 HP pump butterfly valve had still not been
addressed; nor had the SS river jet shrouds installation been
conducted; nor had the jet manifold downsize been addressed;
G1 fixtures near the Passage were damaged; Passage wet mortar
mix was a problem; additional riprap on the corner of the non-
grade river walk needed to be installed; expansion joint on
Passage cladding was a problem; dead live stakes needed to be
replaced; Passage uplights (G6) fixing details were noted; a
Passage paver finish on the exposed side was noted; a Passage
river jet wind sensor was noted.

(xvii) On June 24, 2005, Hargreaves issued a Package 2 punch list
which recommended in pertinent part among other things as
follows: “Fix the water level control; clean & rub algae on wall,
steps & terraces; repair undermined joints at steps adjacent to
runnel; check the wet mortar mix; fix G6 light fixtures; remove
water stain on wall #1 north face and caulk top of the wall;
attend to the SS flashing on the parkway bridge ceilings; clean
the utility vault; complete cladding installation on wall #2; fix
the water sanitizing system; repair damaged cladding on wall

The substantial completion date for Package 2 was June 1, 2005.

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#2; SS river jet shrouds installation; install EJ on the wall #2
cladding; paver finish on the exposed side; repair hairline “crack
on terrace sloped walkway; replace dead/live stakes along the
riprap bank; . . . .”

(xviii) Dan Kral contacted Hargreaves on Friday, July 29, 2005 with a
“call for help” because things were falling apart at the Passage
fountain. In response, Hargreaves contacted Dan Euser – the
designer of the water feature – because the Passage fountain was
supposedly falling apart to the point of being inoperable. In
response, Dan Euser scheduled a meeting in Chattanooga for
August 18, 2005.

(xix) On September 6, 2005, Hargreaves contacted Jeff Shelden of
Moffatt & Nichol regarding a solution to the west end bump out
differential settlement, and Jeff Shelden recommended
“remov[ing] the existing slab and inspect[ing] the area adjacent
to the river walk. They should make sure that the filter fabric
and riprap is properly installed to ensure that material is not
being lost at this location. This may require some excavation of
the sub-grade material. . . . Next, the area should be
vibrocompacted and then the slab can be re-installed.” On the
same day, Hargreaves sent the recommendations to Dan Kral.

Contrary to the position of Hargreaves, it is contended by Chattanooga that issues with
the Project were first brought to the attention of the Administrator of the Public Works
Department for the City around July 19, 2007. According to Chattanooga, prior to a report
involving electrical matters with The Passage, the City and CDRC were unaware of any
material construction or design defects with the Project. After the identification of potential
problems in July 2007, Chattanooga hired TWH Architects, Inc. (“TWH”) to evaluate the
Project and prepare a report regarding the problems. TWH issued its report nearly a year
later on June 27, 2008. Hargreaves observes that the TWH report stressed four main areas
of concern: passage wall defects, defective installation of concrete pavers, electrical defects
and defects in the design and/or construction of the amphitheater and sidewalks resulting in
settling of the amphitheater and the sidewalks – items Hargreaves had previously identified
and raised with RiverCity.

RiverCity relates that it kept Chattanooga and its representatives completely informed
and updated regarding the status of construction matters and substantive changes throughout
the Project. According to RiverCity, Chattanooga gave direct or indirect approval regarding

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all issues raised pertaining to the Project. In fact, RiverCity asserts that “in some instances
the changes at issue were made at the direction of City employees.” RiverCity maintains that
Chattanooga never voiced a claim or concern that the organizational and/or reporting
obligations were not being fulfilled by RiverCity.

After receipt of the TWH report, Chattanooga sent letters to the necessary entities in
an attempt to initiate mediation. When no response was forthcoming to the request for
mediation, Chattanooga filed suit on March 19, 2009, against Hargreaves, Continental, and
RiverCity, alleging several theories of recovery arising out of the design and construction of
portions of the Project.

Hargreaves, in its answer, raised the affirmative defense that the statute of limitations
barred the lawsuit. In November 2010, Hargreaves filed a motion for summary judgment
contending that the cause of action filed by Chattanooga was barred by the applicable statute
of limitations that provides actions such as this one must be filed within three years from the
occurrence of the cause of action. See Tenn. Code Ann. § 28-3-105 (2000). Hargreaves
asserted that Chattanooga had knowledge of the Project’s problems more than three years
prior to the March 2009 filing of the action. MSC, one of the subcontractors on the Project,
filed a separate motion for summary judgment that incorporated Hargreaves’ motion and
added supplemental legal authorities and relied on additional documents produced by
Chattanooga during the course of discovery. All other original defendants and third-party
defendants (except for Pfists Enterprises, Inc.) joined in Hargreaves’ original motion.
Accordingly, the arguments raised by Hargreaves represent all the defendants participating
in this appeal.

A hearing on the motions for summary judgment was held on March 7, 2011. As
Hargreaves argued to the court that RiverCity served as CDRC’s agent with regard to
communications concerning the Project, the trial court reviewed the Agreement between
CDRC, owner, and RiverCity, the development manager, that notes as follows at paragraph
3.3:

[CDRC] shall cause all instructions from [CDRC] to the Project Architect, the
Contractor or other Project consultants or parties providing labor, equipment,
materials or services in connection with the Project to be coordinated through
[RiverCity] to the end of providing consistent instructions and
communications. It is essential to the construction process that [RiverCity] be
the principal point of contact and conduit of all information and instructions
between [CDRC] and such contractors and consultants. Accordingly, [CDRC]
agrees that [RiverCity] shall be [CDRC]’s representative for such purpose and
shall be so designated in the contract with contractors, the Project Architect

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and any other consultants. Where communication through [RiverCity] is not
feasible, [CDRC] will promptly provide [RiverCity] with a written copy of any
written notice given by [CDRC] directly to the parties involved in the Project
or a written summary of any oral communication so given, as applicable.
[CDRC] shall designate [RiverCity] as the party to receive communications
and documents from the other parties involved in the Project. [RiverCity]
agrees to communicate with [CDRC] with respect to any development which
will adversely and materially impact either the Project Schedule or the Project
Cost Budget.

(Emphasis added.). Based on the Agreement, all the defendants asserted that all information
imparted to RiverCity, the designated representative, should be imputed to CDRC.

Counsel for RiverCity noted at the hearing:

We were the owners’ representative. We weren’t engineers, architects or
experts.6 The City of Chattanooga was kept regularly informed regarding
this particular process and, in essence, in some respects we’re kind of puzzled
and continue to be as to why they sued us for what we did on their behalf, but
we agree that summary judgment should be granted on behalf of all the
defendants.

(Emphasis added.). In response to the trial court’s questioning as to whether RiverCity
served as an agent,7 counsel further replied:

[A]ll the contractual documents or otherwise, we’re the owner’s representative
on their behalf pertaining to the contract. It’s specifically in there, so I’m
somewhat puzzled as to some of those arguments on that.

RiverCity noted in its answer that it “was not hired to build or design this [P]roject; CDRC entered
into direct contracts with” the other defendants for those purposes. RiverCity stated that CDRC “maintained
full authority over [the other defendants] for design and construction for the [P]roject.”

“Agency in its broadest sense includes every relation in which one person acts for or represents
another.” Kerney v. Aetna Cas. & Surety Co., 648 S.W.2d 247, 252 (Tenn. Ct. App. 1982) (quoting Howard
v. Haven, 281 S.W.2d 480, 485 (Tenn. 1955)). “Whether an agency has been created is to be determined by
the relations of the parties as they in fact exist under their agreements or acts. If relations exist which will
constitute agency, it will be an agency, whether the parties understood it to be or not.” Id. at 252-53 (quoting
Smith v. Tennessee Coach Co., 194 S.W.2d 867, 869 (Tenn. 1946)).

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The trial court granted the motions for summary judgment of all original defendants
and third-party defendants on March 8, 2011. The court found that the relationship of the
City and CDRC with RiverCity was defined by the Agreement. The court’s memorandum
opinion and order provided as follows:

This case arises out of a dispute regarding a construction project on the
Chattanooga river front. The Plaintiff entered into an agreement with River
City Company for the management and coordination of design, construction
and development of the project. Based upon this agreement, River City was
to act as the contact point and agent of the City. As the project proceeded,
problems arose. These problems were repeatedly documented and noted to the
parties involved. The problems were so apparent that even an individual who
is not a construction expert, Lee Norris, took notice of several defects and
relayed these problems via email on May 2, 2005, to the appropriate parties.

Despite the problems, the Certificate of Substantial Completion was issued on
June 1, 2005. After the Substantial Completion date, similar problems
continued as evidenced by an email sent slightly over a month later, on July 29,
2005. An email was sent from an employee of River City, and in the words of
the employee, the email was a “call for help” because things were “falling
apart.” This lawsuit was not commenced until March 1[9], 2009. The parties
agree that the applicable statute of limitations for construction defects is three
(3) years.

It is this Court’s opinion, based upon the pleadings and the attached support,
the Plaintiff had notice at least by July 29, 2005, of a cognizable claim against
another party. The Plaintiff failed to timely file within the appropriate
statutory time period, and accordingly this Court lacks jurisdiction to hear this
case. The Defendants’ Motions for Summary Judgment are GRANTED.

The trial court made the memorandum opinion and order the final judgment of the court
pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure on April 25, 2011. This
appeal followed.

II. ISSUES

The issues raised by Chattanooga are as follows:

Whether the trial court erred in granting summary judgment against

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Chattanooga as to all claims as a result of finding that the applicable statute of
limitations for each of the claims began running at least by July 29, 2005.

2. Whether the trial court erred in granting summary judgment against
Chattanooga as to the claims instead of granting additional time pursuant to
Rule 56.07 of the Tennessee Rules of Civil Procedure8 to complete written
discovery and take depositions.

III. STANDARD OF REVIEW

Summary judgment is appropriate if the “pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show there are no
genuine issues as to any material facts and that the moving party is entitled to judgment as
a matter of law.” Tenn. R. Civ. P. 56.03. In Hannan v. Alltel Publ’g Co., 270 S.W.3d 1
(Tenn. 2008)9 and Martin v. Norfolk Southern Ry. Co., 271 S.W.3d 76 (Tenn. 2008), the
Court held that to be successful on a motion for summary judgment, a moving party must

“Tenn. R. Civ. P. 56.07 is intended to serve as an additional safeguard against an improvident or
premature grant of summary judgment. While it insures that a diligent party is given a reasonable
opportunity to prepare its case, it is not invoked to aid parties who have been lazy or dilatory.” Kenyon v.
Handal, 122 S.W.3d 743, 753 n. 7 (Tenn. Ct. App. 2003).

The recent legislation regarding Hannan does not affect this case because this matter was filed in
2009. See Burress v. City of Franklin, 809 F.Supp.2d 795, 817 n. 7 (M.D. Tenn. 2011) (“[T]he Tennessee
General Assembly has legislatively overruled . . . Hannan, but the new statute[ ] only appl[ies] to cases filed
on or after . . . July 1, 2011 . . . . Tenn. SB 1114/HB 158 (to be codified at Tenn.Code Ann. § 20–16–101),
setting forth new summary judgment standard).” Tennessee Code Annotated section 20-16-101 specifically
provides as follows:

20-16-101. Burden of proof in summary judgment motions.

In motions for summary judgment in any civil action in Tennessee, the moving party who
does not bear the burden of proof at trial shall prevail on its motion for summary judgment
if it:

(1) Submits affirmative evidence that negates an essential element of the
nonmoving party’s claim; or

(2) Demonstrates to the court that the nonmoving party’s evidence is
insufficient to establish an essential element of the nonmoving party’s
claim.

Acts 2011, ch. 498, § 3. July 1, 2011.

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either (1) affirmatively negate an essential element of the non-moving party’s claim, or (2)
show that the non-moving party cannot prove an essential element of the claim at trial. Once
the moving party has satisfied this burden, the non-moving party must then demonstrate with
evidence beyond the pleadings that issues of fact exist that must go to trial. Byrd v. Hall, 847
S.W.2d 208, 211 (Tenn. 1993).

Summary judgment is inappropriate when the facts lead to more than one reasonable
conclusion. Seavers v. Methodist Med. Ctr. of Oak Ridge, 9 S.W.3d 86, 91 (Tenn. 1999).
Summary judgment must be overruled “if there is doubt as to whether or not . . . [a] genuine
issue remains for trial.” Buddy Lee Attractions, Inc. v. William Morris Agency, Inc., 13
S.W.3d 343, 347 (Tenn. Ct. App. 1999).

IV. DISCUSSION

Hargreaves asserts it was required to report any problems with the Project to
RiverCity. In turn, RiverCity was required by contract to act as a conduit for passing these
communications along to CDRC, who had hired RiverCity to be its “eyes and ears” with
respect to the development of the Project. Pursuant to the Agreement, RiverCity was “to
organize, coordinate, and provide advice with respect to design, construction and
development of the Project.” In particular, RiverCity’s “Development Services” are detailed
as follows:

2.2.7 Construction Meetings. Schedule and conduct meetings to discuss
construction procedures, progress and scheduling with Contractor and the
Project Architect. As deemed necessary, [RiverCity] shall prepare minutes of
such meetings and promptly distribute such meeting minutes to [CDRC] and
the meeting attendees or direct the Contractor or Project Manager Architect to
prepare and distribute such minutes, as appropriate.

***

2.2.10 Punch List. Coordinate with the Project Architect in its review of the
Project to enable the Project Architect to determine the date of substantial
completion. At the substantial completion by the Contractor of the Project
work, monitor the Project Architect in its inspection of the Project and
preparation of a detailed “Punch List” specifying any items which require
completion, installation or repair.

***

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2.3 Reporting. [RiverCity] shall furnish to [CDRC] monthly reports
containing (i) a status of construction; (ii) a comparison of the Project Budget
to construction costs incurred through the date of the report and a comparison
of the Project Schedule to the work actually completed through the date of the
report; (iii) a summary of change orders made during the month covered by the
report; and (iv) any revision to the Project Schedule and/or Project Cost
Budget made during the month covered by the report.

Additionally, the contract entered into between Hargreaves and CDRC – AIA Document
B141-1997 – states as follows in Section 1.2.2.3:

[CDRC]’s Designated Representative identified in Paragraph 1.1.3 shall be
authorized to act on [CDRC]’s behalf with respect to the Project. [CDRC]
or [CDRC]’s Designated Representative shall render decisions in a timely
manner pertaining to documents submitted by the Architect in order to avoid
unreasonable delay in the orderly and sequential progress of the Architect’s
services.

Paragraph 1.1.3 lists RiverCity as the Owner’s Designated

RiverCity clearly had a duty to report to CDRC and was authorized to act on CDRC’s
behalf. Accordingly, Hargreaves and the other defendants/third-party defendants were
entitled to rely upon RiverCity’s knowledge and notice. See Am. Jur.2d Agency § 274
(2010). All that RiverCity knew concerning the problems with the Project must be imputed
to CDRC.

In the instant matter, the applicable statute of limitations is Tennessee Code Annotated
section 28-3-105(1) (2000), pursuant to which actions for injuries to personal or real property
shall be commenced within “three (3) years from the accruing of the cause of action.”

Hargreaves asserts that between October of 2004 and no later than September 6, 2005,
CDRC, through RiverCity, knew of the alleged property damage on the Project in light of the
many reports distributed to RiverCity by Hargreaves. RiverCity acknowledges that it
“regularly kept CDRC and the City of Chattanooga and its representatives completely aware
and updated regarding the status of construction and substantive changes.” Hargreaves
argues that Chattanooga also knew of the problems through internal discussions with
employees concerning the Project. Despite having such knowledge, Chattanooga waited
until 2008 to have an architect review the issues, and then waited another year – March 19,
2009 – to file a complaint for damages. Hargreaves argues that Chattanooga must be found

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to have known of the problems before March 19, 2006 – three years prior to the filing of the
complaint.

It is argued by Chattanooga that the cause of action did not accrue before March 19,
2006, because the information imparted by Hargreaves to RiverCity in late 2004 and
throughout 2005, concerned only “minor corrective work.” The Chattanooga entities rely on
the affidavit of expert Vance Travis of TWH, who claims that “all items listed in the
[Hargreaves] Affidavit . . . are ‘punch list’ items.” According to Mr. Travis, “the ‘punch
list’ becomes a part of the certificate of substantial completion[; i]n the construction industry
a punch list is defined as the architect’s list of work to be corrected or performed by the
contractor prior to completion of the contract for construction.” It is stressed by Chattanooga
that Mr. McMillan of Hargreaves also categorized these problems as ‘punch list’ items.
Therefore, according to Chattanooga, items described as “punch list” did not provide notice
that the problems could not be corrected prior to the completion of the Project; such “punch
list” items could not be considered significant enough to constitute breach of the
construction contract and would not have started the clock running on the applicable statute
of limitations.

Hargreaves responds that the easiest way to refute the contentions of Chattanooga is
to compare the observations and recommendations provided by Mr. McMillan of Hargreaves
in 2005 with the observations and recommendations provided by Mr. Travis in the 2008
TWH Report. The TWH Report, in its executive summary, provides as follows:

Part One-Demolition, Reconstruction, Electrical and Plumbing

Wall Repair – We recommend the East, West, and North walls to be
demolished down to the 100 year flood line. Any existing open cavities
between the remaining veneer and concrete retaining walls should be grouted
solid. The block walls would be rebuilt with a full bed of mortar. Precast
concrete coping units will replace existing cap blocks. Included will be the
addition of through-wall flashing and weeps at the 100 year flood line
sufficient to equalize pressure in a flood event greater than the 100 flood year
elevation, and provide drainage at controlled locations to hopefully minimize
the existing wall staining by efflorescence. The West stepped walls adjacent
to the Aquarium would be repaired and receive precast concrete copings.
Remediation work will occur at the bridge to separate the veneer from the
bridge vibration and movement. Demolition and reconstruction will require
the removal and re-installation of all art work cutouts and probably the round
wall medallions on the West side.

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Paving Repair – We recommend the complete removal of all paving units on
the sand beds within the water feature. The extent would include the runnel
adjacent to the Aquarium, all stepped landings leading down to and including
the pool bottom. Demolition and reconstruction will require the removal and
re-installation of the water spider at the pool bottom.

Electrical/Plumbing Repair – We recommend the complete removal of all
niche light fixtures, housings, and junction boxes from the paving areas, along
with the overhead fixtures below the bridge. All existing electrical panels
would receive proper weatherproof housings, and the pump room equipment
located in the vault at the upper end may need adjustments for proper
clearances. New lighting would be provided and attached to a lighting truss
located along the walkway adjacent to the Market Street Bridge. This truss
would be the target of an arts grant for a cladding appropriate to the
philosophy of The Passage.

In comparison, the observations and recommendations of Hargreaves to RiverCity provide
as follows:

1) On October 28, 2004, Hargreaves reported to RiverCity that wall #1 is
moving. It is also noted that the esplanade is settling on both sides of new
parkway bridge and causing hairline cracks on wall #1 facing the river.
Hargreaves recommended that Arcadis get involved to provide a repair
strategy.

2) On January 7, 14, and 28, 2005, Hargreaves reported to RiverCity that the
Passage wall number one was settling, control joints were in the wrong place,
and the pavers needed to be fixed.

3) On January 25, 2005, Hargreaves reported to RiverCity the concern about
water migrating into or being trapped behind wall cladding in the Passage.

4) On February 1, 2005, Continental reported to RiverCity that the concrete
wall on the east side of the Passage was serpentine as it was out of plumb by
three inches and out of alignment by six inches. Continental said that the
masonry cladding would have to be changed from the design. (Hargreaves
designed a straight, solid wall with no air gaps rather than a wall with veneer
cladding affixed to a serpentine-like structure).

5) On February 25, 2005, Hargreaves reported to RiverCity that the Passage

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wall was moving, the esplanade on both sides of the bridge was settling, and
the pavers needed to be fixed. Hargreaves also noted a concern about the
utility enclosures having to do with the electrical system.

6) On March 1, 2005, Hargreaves presented a detailed memo to RiverCity
about the problems at the Passage and the possibility of demolition of one of
the moving walls and the need for new construction.

7) On March 11, 2005, Hargreaves reported movement of Wall #2, a 3/4" drop
on both sides of the new bridge, and a problem with the Package 2 pavers.

8) On March 18, 2005, Hargreaves reported to RiverCity again that the pavers
needed to be fixed and that the Passage wall filling material was below the 100
year flood level.

9) On April 1, 2005, Hargreaves reported that the filling material was below
the 100 year flood level, and it was a red level concern.

10) On April 8, 2005, Hargreaves reported to RiverCity its concerns about the
Passage vault room vent power connection.

11) On April 29, 2005, Hargreaves reported to RiverCity its concerns about the
mortar mix behind the veneer that attaches to the wall with specific reference
to a possible big efflorescence problem. Hargreaves also noted the need to
build a concrete wall because of weeping concerns. Hargreaves reported that
expansion joints were missing in the wall. Hargreaves reported that the East
Wall had moved another 1/4". Hargreaves reported concern about how some
of the lighting in the Passage at the runnels had been done.

12) On May 3, 2005, Hargreaves reported that Wall #2 was moving and had
cracked cladding on it and that it was the last chance to do whatever needed
to be done before remedial action is necessary. Also reported that Wall #3 was
settling with associated damage to cladding.

13) On June 10, 2005, Hargreaves reported to RiverCity that Wall #2 was
moving again, that there was settling on both sides of the new bridge, that
there was a problem with the mortar for the pavers, and that the expansion
joints for the cladding were missing.

14) On September 6, 2005, Hargreaves reported to RiverCity problems

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regarding the bump-out terrace differential settlement.

Obviously, the majority of the problems identified by Mr. McMillan of Hargreaves – the
walls, the pavers, the mortar, the cladding, the expansion joints, the esplanade (sidewalks),
wall filling below the 100 year flood level, problems with efflorescence – likewise are
addressed in the TWH Report in a consistent fashion. The contentions of Chattanooga that
the problems identified by Hargreaves in 2004 and 2005 were minor punch list items
necessitating simple corrective measures must be disregarded. Descriptions of items
involving terms such as “demolition” and “reconstruction” simply cannot be considered
punch list items requiring “minor corrective work.”

Hargreaves further notes that emails produced by Chattanooga during written
discovery reveal that City employees were discussing the construction defects and property
damage among themselves and with employees of RiverCity during May 2005. According
to Hargreaves, these documents reveal an awareness of the damage and apparent construction
defects more than three years before the lawsuit was filed. Specifically, on May 2, 2005, Lee
Norris, Director, City Wide Services, Department of Public Works, City of Chattanooga, sent
an email to Dan Kral of RiverCity asking:

Who is responsible for correcting construction defects?

That same day, he was informed that

CDRC has been the city[’]s eyes and ears on all projects including
infrastructure. They are responsible for the final walkthrough and getting
punch list items corrected. Obviously, the contractor is responsible for fixing
problems during the warranty period and after that it is US.

Later that same day, Mr. Norris replied,

If we don’t have someone involved in the final checkout phase, I see long term
issues. I walked the waterfront Sunday for a short while and easily identified
6-7 issues that will need to be corrected.

Mr. Kral further responded to Mr. Norris,

As I am sure you saw in my other email. Construction defects and/or damage
as a result of construction is covered in all of our contracts.

Hargreaves further contends that the affidavits of Don Lewis, General Supervisor of the

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River Front Park for the Parks and Recreation Department of the City of Chattanooga, and
Bob Saylors, the Director of Parks for the Parks and Recreation Department of the City of
Chattanooga, reveal that Chattanooga had notice of problems with the electrical circuits for
the niche lights along the west wall of The Passage in 2005.

“Accrual” in a property damages action under Tennessee Code Annotated section 28-
3-105(1) occurs upon discovery. Damron v. Media Gen., Inc., 3 S.W.3d 510, 512 (Tenn. Ct.
App. 1999). A statute of limitations will not be tolled in cases where the plaintiff has
information that would place a reasonable person on inquiry notice that he may have a cause
of action. See Estate of Morris v. Morris, 329 S.W.3d 779, 783 (Tenn. Ct. App. 2009). In
Northeast Knox. Util. Dist. v. Stanfort Constr. Co., 206 S.W.3d 454, 460-461 (Tenn. Ct. App.
2006), we held that “[a]ccrual did not require Stanfort to actually know the specific type of
legal claim it had, and its lack of knowledge concerning the specific nature of the defendants’
alleged tortious conduct is irrelevant for purposes of determining when the cause of action
accrued.”

Chattanooga had constructive and actual knowledge of the construction defects and
damage regarding the Project. The evidence supports the determination of the trial court that
Chattanooga had notice of a cognizable claim against another party at least three years prior
to the filing of the complaint and failed to timely file this lawsuit within the statute of
limitations period codified at Tennessee Code Annotated section 28-3-105. As the facts are
not in dispute and clearly show that a cause of action has accrued and that the statute of
limitations has run, summary judgment may be entered. Osborne Enter., Inc. v. City of
Chattanooga, 561 S.W.2d 160, 165 (Tenn. Ct. App. 1977). The trial court did not abuse its
discretion in refraining from granting additional time for discovery.10 Hargreaves’ motion
for summary judgment was filed one year and eight months after the complaint was filed.
As the statute of limitations defense was raised in Hargreaves’s original answer, Chattanooga
had been aware of the issue since June 1, 2009. Hargreaves had responded to the written
discovery requests six months prior to the filing of the motion and 10 months prior to the
hearing on the motion. Chattanooga had 10 months to review the documents. The date for
the oral argument on the summary judgment motion was agreed upon 45 days prior to the
hearing. Chattanooga had ample time to conduct discovery. Hargreaves and the other
defendants and third-party defendants were entitled to judgment as a matter of law.

Counsel for Chattanooga did not request depositions of representatives of Hargreaves or RiverCity or anyone else. They did not file a motion for discovery or a motion to continue the hearing. Instead, they waited until the day of the agreed upon hearing date to argue the issue that consideration of the summary judgment motion was premature. As noted by defendants, waiting until the day of the hearing on a motion for summary judgment to seek additional time is usually too late. See Harden v. Danek Medical, Inc., 985 S.W.2d 449, 453-54 (Tenn. Ct. App. 1998).

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V. CONCLUSION

The judgment of the trial court is affirmed and the cause remanded for collection of
costs below. Costs on appeal are taxed to the appellants, the City of Chattanooga, Tennessee,
and Chattanooga Downtown Redevelopment Corporation.

Here is the dissenting opinion by Judge Franks:

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
January 31, 2012 Session

CITY OF CHATTANOOGA, TENNESSEE, et al., v. HARGREAVES
ASSOCIATES, INC., et al.

Appeal from the Circuit Court for Hamilton County
No. 09C403 Jacqueline S. Bolton, Judge

No. E2011-01197-COA-R3-CV-FILED-JUNE 21, 2012

DISSENTING OPINION

I respectfully dissent from the majority's Opinion affirming the Trial Court's granting
of summary judgments to all defendants. In my view, the record in this case does not
demonstrate that this case is ripe for summary judgment.

Regarding the claims against River City, the City of Chattanooga/CDRC alleged that:

River City was contractually obligated to oversee the waterfront project and
was to provide monthly reports regarding same, including any change orders,
to the City;

River City breached the contract by failing to schedule construction meetings,
failing to provide monthly reports to the City, and failing to obtain City
approval before approving changes to the design (specifically substitution of
mortar and use of fixtures in reflective pools not consistent with the plans);

River City acted in excess of its authority; and

the City was damaged thereby.

River City filed an Answer, asserting that it kept the City informed regarding the
construction progress and changes, and that all reporting requirements were met/exceeded.

Hargreaves (architect) filed the first Motion for Summary Judgment, and filed a
Statement of Undisputed Facts, asserting that Hargreaves reported numerous
construction/design problems to River City from October 2004 through June 2005.
Hargreaves filed an affidavit of its employee, Gavin McMillan, who stated that he was the
principal in charge of this project, and that he communicated extensively with River City
regarding the problems Hargreaves encountered. McMillan stated that he sent numerous
memos and emails to all the parties involved, including River City, and attached copies of
those communications. One communication which was relied upon heavily by both the Trial
Court and the majority, was a memo dated 7/30/05 from McMillan to “DEW” which states
that McMillan got a call from Dan Kral (of River City) on the prior day which he
characterizes as a “call for help”, stating that Kral relayed that the fountain was “falling apart
to the point of being inoperable”. There is no actual email or written documentation in the
record regarding this alleged conversation other than this memo, which was not to or from
anyone at River City.

The other communication which is relied upon by the defendants and the majority
opinion in this case to establish notice is a string of emails that were sent in May 2005,
between Lee Norris, a director with the Chattanooga City Department of Public Works, and
Dan Kral with River City. Norris asked who was responsible for construction defects, stating
that he had walked the waterfront recently and noticed 6-7 issues that needed to be corrected.
Norris later explained in his Affidavit that this memo only concerned minor cosmetic issues
that he noticed, and that he had neither the responsibility nor expertise to identify latent
construction defects, and further that the City had no notice of any actual construction defects
until July 2007.

The City filed a Response to the Motion for Summary Judgment and the Statement
of Undisputed Facts, and stated the City knew of no construction defects until July 2007.
The City filed an Affidavit of Don Lewis, who stated that he was General Supervisor with
the Parks and Recreation Department of Chattanooga, and that his department took over
management of the project after substantial completion in 2005. Lewis stated that they had
no notice of any material issue with the construction of the project until spring 2007
(although there was some minor issue with niche lighting noted in 2005). The City also filed
an Affidavit of Bob Saylors, Director of the Parks and Recreation Department, who also said
that the City had no notice of material issues in connection with the design/construction of
the project until the spring of 2007. Further, the City filed an Affidavit of Steve Leach, who
stated that he was Administrator of the City of Chattanooga Public Works Department, and
that electrical issues with the Passage were discovered on July 19, 2007, and that prior to this
date, the City nor CDRC had any knowledge of any construction or design defects with the
Project. Leach stated that these issues caused the City to hire TWH Architects to review the
project and identify any problems, and that TWH issued its report detailing the

-2-

construction/design defects in July 2008.

The City also filed a copy of a letter it received in discovery documents that is dated
August 9, 2007, and is addressed to Gavin McMillan with Hargreaves, from Paul Brock with
River City. This letter states that River City is disappointed with Hargreaves’ response to
issues with the Passage wall, and that a public safety issue had developed after one of the
masonry units from the wall had fallen the prior weekend. Brock states “It has been almost
a year since you came to Chattanooga to advise us regarding the wall and the problems it is
experiencing”, and further alleges that Hargreaves did not properly inform River City of the
design modifications made during construction and the potential consequences thereof.

River City filed a Motion for Summary Judgment on its own behalf, as did all the
defendants, but River City filed no supporting documentation. Plaintiffs assert that Dan Kral
of River City was scheduled to be deposed as were many other actors in this project, but
summary judgment was granted before depositions took place.

The Trial Court ruled that River City had notice of construction defects as of the July
29, 2005, “call for help” allegedly made by Dan Kral of River City, and thus that the City had
notice as of that date, rendering the Complaint filed in March of 2009 untimely under the
three year statute of limitations. The Trial Court then granted summary judgment to all
defendants, including River City. The majority opinion affirms that ruling.

First and foremost, it is important to note the City’s claims against River City were
completely different than the claims against the other defendants. The City alleged claims
of breach of contract and acting outside the proper scope of authority, asserting that River
City failed to keep the City informed regarding design/construction changes and problems
on this Project, and further that River City approved changes to the design without City
approval. These claims are not claims of injury to real property, as were the claims against
the other defendants. Rather, these are strictly breach of contract claims which are subject
to a six year statute of limitations rather than a three year statute of limitations. See Tenn.
Code Ann. §28-3-105 and 109. As such, the claims filed in March 2009 against River City
were timely, and River City was not entitled to a summary judgment. Moreover, as agent of
the City it had a fiduciary duty to the City.

Regarding the other defendants, however, the statute of limitations is a three year
period which accrues upon discovery, i.e., when the plaintiff has information that would
place a reasonable person on inquiry notice that he may have a cause of action, as the
majority opinion correctly explained. The problem in this case is that there is a dispute
regarding when plaintiffs actually had such information. As stated earlier, Gavin McMillan
of Hargreaves asserted that he reported numerous problems to River City during the project,

-3-

and that after the project was completed, he received a call on July 29, 2005, from Dan Kral,
which he characterized as a “call for help” because the fountain was “falling apart”. While
the fountain was only a part of the entire project, this could still be considered constructive
notice that there were defects requiring further inquiry. The problem is that this is evidence
set forth by a defendant, and on a summary judgment motion, it is the evidence of the
plaintiff or non-movant that is to be accepted as true, with any doubts concerning the
existence of a genuine issue of material fact being resolving in the non-moving party’s favor.
Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76 (Tenn. 2008).

In contrast, the plaintiffs filed at least three affidavits from City employees who
insisted that the City was unaware of any design/construction defects until at least the spring
of 2007. All of these City employees stated that while they might have seen a few minor
cosmetic-type defects before that time, they were unaware of any major defects until 2007,
and that they didn’t know the extent of the defects until TWH issued its report in 2008.
Further, the City filed a letter that was sent from River City to Hargreaves in 2007, which
impliedly asserts that River City knew of no problems until summer of 2006. Accepting even
the earliest of these dates as the true date of “discovery” of the construction defects, the
Complaint filed in March 2009 would be timely as to all defendants.

This is a classic example of a genuine issue of material fact regarding the date of
discovery which should preclude summary judgment. Establishment of the date of discovery
is crucial to determining whether the statute of limitations would bar plaintiffs’ claims. The
Trial Court and the majority opinion both rely upon the July 29, 2005, “call for help” as
establishing the date of discovery, when there is countervailing proof filed by the non-
moving party on this issue.

Further, even if defendant’s proof could/should be accepted as true, the City has
alleged that it is error to impute the knowledge of River City to the City, even though River
City was clearly the City’s agent, because River City allegedly exceeded its scope of
authority.

In order to determine whether the knowledge of the agent may be imputed to the
principal, it is of “primary importance to ascertain the exact scope and extent of the agency.”
Hurst Boillin Co. v. S.S. Jones & Co., 279 S.W. 392 (Tenn. 1925). These questions are to
be “determined by the trier of fact from all the facts and circumstances in evidence.” Sloan
v. Hall, 673 S.W.2d 548 (Tenn. Ct. App. 1984). Moreover, as appellants point out, there is
case law which holds that the doctrine of apparent authority is modified to accommodate the
public interest when a private party deals with a municipal corporation. Faust v. Metro.
Gov’t of Nashville, 206 S.W.3d 475 (Tenn. Ct. App. 2006). In that case, this Court stated,
“Although a private agent, acting in violation of specific instructions, yet within the scope

-4-

of a general authority, may bind his principal, the rule, as to the effect of a like act of a public
agent, is otherwise.” Id. In this case, there was no determination made regarding the scope
and extent of River City’s agency by the Trial Court.

Summary judgment was improperly granted in this case based upon the evidence
presented. Plaintiffs’ breach of contract claims against River City were not considered by
the Trial Court, and plaintiff’s affidavits and proof presented at the summary judgment stage
were not taken as true, in violation of proper summary judgment standards. There was
clearly a genuine issue of material fact regarding when plaintiffs discovered their claims. As
such, the Trial Court’s grant of summary judgment should be reversed, and the cause
remanded for further proceedings.

_________________________________
HERSCHEL PICKENS FRANKS, P.J.

 


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