Wednesday, May 27, 2009

Lawsuits for seller's intentional nondisclosure should also include allegation of negligent misrepresentation


(Tenn. Ct. App. October 30, 2008).  

Travis and Stephanie Goodman ("Buyers") filed a lawsuit for monetary damages or rescission of a residential deed due to defects in a septic system. Buyers sued under the theories of breach of contract, misrepresentation, fraud and violation of the Tennessee Consumer Protection Act. Buyers argue that they did not plead a violation of Tenn. Code Ann. section 66-5-208 (2004) of the Tennessee Residential Property Disclosures Act; however, the trial court treated the case as one under the Act. The jury returned a verdict for Seller. Reviewing the record de novo, we hold that the theories of breach of contract and negligent misrepresentation were pleaded and supported by the proof. These causes of action should have been charged to the jury. We also hold that the parties litigated the issue of intentional misrepresentation and that the trial court charged the jury on this issue. In addition we hold that material evidence supports the jury's verdict for Seller under theories of intentional or willful misrepresentation of the condition of the subject property under the statute or common law. Accordingly, we affirm in part, vacate in part and remand with instructions.

Opinion may be found at the TBA website:

"There is nothing in the record before us showing that the trial court failed to recognize and charge the Buyers’ theory of common law fraud or intentional misrepresentation.  In fact, the court gave the jury a generic but complete charge on the subject of intentional misrepresentation. Under the facts of this case, we hold that the Buyers’ theory of common law fraud or intentional misrepresentation was fully litigated, correctly charged, and resolved by the jury’s verdict. The jury found in favor of Seller.  As a result, there is no remaining cause of action based on intentional misrepresentation under the Tennessee Residential Property Disclosure Act or the common law."  Id.

"A trial court should instruct the jury upon every issue of fact and theory of the case that is raised by the pleadings and is supported by the proof. Reviewing the record de novo, we find that Buyers alleged, and the proof supported, the common law theories of breach of contract and negligent misrepresentation. The trial court erred in not letting those two theories go to the jury. We thus affirm in part and vacate in part. The case is remanded for a new trial on the issues of breach of contract and negligent misrepresentation." Id.