Monday, June 1, 2009

Reasonable reliance element of misrepresentation claims in real estate transactions require an undisputed statement of fact to merit summary judgment

ROBERT H. GOODALL, JR. v. WILLIAM B. AKERS (Tenn. Ct. App. March 3, 2009).

Buyer sued seller of large tract of real estate for intentional misrepresentation, fraudulent misrepresentation, breach of contract, and breach of express warranty based upon allegations that an earthen dam on the property was unsafe. The trial court granted summary judgment in favor of the buyer on all issues of liability. Because we have concluded that there is a genuine issue of material fact as to whether the buyer reasonably relied upon the seller’s misrepresentations, we reverse and remand.

Opinion may be found at the TBA website:

“Justifiable reliance is an essential element of a claim for fraudulent misrepresentation or fraudulent concealment. See McNeil v. Nofal, 185 S.W.3d 402, 408 (Tenn. Ct. App. 2005). The burden of proof is on the plaintiff to show that his reliance upon the defendant’s statements or representations was reasonable. Id. at 409; Metro. Gov’t of Nashville & Davidson County v. McKinney, 852 S.W.2d 233, 238 (Tenn. Ct. App. 1992). Whether the plaintiff’s reliance on a representation was reasonable is a question of fact that is generally not appropriate for summary judgment. City State Bank v. Dean Witter Reynolds, Inc., 948 S.W.2d 729, 737 (Tenn. Ct. App. 1996). In determining the reasonableness of a plaintiff’s reliance, a number of factors should be considered: (1) the plaintiff’s business expertise and sophistication; (2) the existence of a longstanding business or personal relationship between the parties; (3) the availability of the relevant information; (4) the existence of a fiduciary relationship; (5) the concealment of the fraud; (6) the opportunity to discover the fraud; (7) which party initiated the transaction; and (8) the specificity of the misrepresentation.” Id.

“We do not consider this affidavit alone sufficient to establish as a matter of law that Goodall’s reliance was reasonable. Goodall has the burden of proof on the issue of reasonable reliance and must allege undisputed facts establishing the existence of reasonable reliance in order to shift the burden of production.” Id.

“Was it reasonable, under the circumstances, for Goodall to forego any independent inspection or investigation concerning the dam? This determination will hinge in part on the trial court’s assessment of the credibility of the two parties, as well as any other witnesses. Weighing facts and assessing credibility are not appropriate for the summary judgment process.” Id.