The Tennessee Supreme Court has reversed an award of summary judgment and sent a contract dispute back to the trial court based on factual disputes about the parties’ intent to substitute a new contract for an existing one.
A development company had contracted with a Nashville architect firm, TWB Architects, Inc., to design a condominium project in Ashland City.
The development company ran short of money and could not pay the architect fee. The Braxton, LLC, a subsequent owner of the project, entered into a contract with Timothy Burrow, TWB’s president and sole owner, to deed Mr. Burrow a penthouse condominium in the project instead of paying the architect fee. Braxton, however, did not fulfill the condominium contract because it had pledged the condominium as collateral for a construction loan. TWB sued Braxton in the Cheatham County Chancery Court to recover its unpaid architect fee. The trial court granted summary judgment to TWB, finding that TWB was entitled to its architect fee because there was insufficient evidence about whether the parties intended for the condominium contract to replace the original architect contract. The Court of Appeals affirmed.
In a unanimous opinion, authored by Justice Sharon G. Lee, the Tennessee Supreme Court reversed the trial court and the Court of Appeals, holding that there were disputed questions of fact about whether TWB and Braxton intended a novation when they entered into the agreement for Braxton to deed a condominium to Mr. Burrow. A novation occurs when the parties agree to substitute a new contract for an existing one. If a novation is established, the parties are no longer bound by the original contract, and their rights and obligations are determined by the new contract. After a novation, the parties cannot revert back to the original contract even if one party later breaches the new agreement. To establish a novation, a party must show an original valid contract; the parties’ agreement to a new contract; the extinguishment of the original contract; and a valid new contract.
At issue in this case was whether TWB and Braxton intended to extinguish the architect contract and be bound only by the condominium contract or whether the parties intended to be bound by the architect contract. The resolution of this issue would determine whether Braxton was required to pay TWB the architect fee under the original agreement. The Supreme Court found witness credibility problems and conflicting evidence about the parties’ intent on this issue. Thus, the Court held that summary judgment was inappropriate because this contract dispute cannot not be decided as a matter of law, and the trial court needs to hear witness testimony, resolve credibility issues, and then decide what the parties intended.
To read the opinion of the Court in TWB Architects, Inc. v. The Braxton, LLC, authored by Justice Sharon G. Lee, please visit the Opinions section of tncourts.gov. Oral arguments for this case were video recorded and are available on tncourts.gov under Supreme Court and Oral Argument Videos.