THERESA S. BIANCHERI, TRUSTEE OF THE MERCER FAMILY TRUST v. CHARLES M. JOHNSON, JR. ET AL. (Tenn. Ct. App. March 19, 2009).
The matters at issue arise from a contract for the sale of a residence and the buyers’ refusal to close on the purchase of the residence. The seller, the trustee of a family trust, and the buyers entered into a contract for sale of a residence. Prior to closing, the buyers discovered that elaborate audio-visual equipment, that was material to them, had been removed by the husband of the Trustee. The buyers considered this a material breach and refused to close; as a result, the seller filed suit against the buyers for breach of contract. The buyers counter-claimed alleging the seller breached the contract first and that the seller, through its real estate agent, had made fraudulent misrepresentations to induce the buyers to sign the contract, specifically that the audio-visual equipment was part of the sale and that the previous resident, who died inside the home after being shot by his wife in the bedroom closet, had not died in the home. The buyers also filed a separate action against the seller’s real estate agent alleging fraudulent misrepresentation, fraud, promissory fraud, fraud in the inducement, negligent misrepresentation, and violations of the Tennessee Consumer Protection Act. The buyers’ claims against the seller were summarily dismissed upon findings by the trial court that the contract was valid and that the buyers breached the contract by failing to close. The real estate agent was summarily dismissed upon a finding that the buyers could not establish actionable misrepresentations. The buyers then filed a motion for summary judgment on the issue of damages for breach of contract, contending the contract afforded the seller the option of electing liquidated damages, in lieu of compensatory damages, in the amount of the earnest money and that the seller had made that election by retaining the earnest money. The trial court summarily ruled that the seller had elected to receive liquidated damages as its exclusive remedy. The buyers appeal the summary dismissal of their claims against the seller and the seller’s real estate agent. The seller appeals the summary ruling that it elected to recover liquidated damages in lieu of compensatory damages. We have determined the real estate agent was not entitled to summary judgment as material facts are in dispute concerning whether the agent made material misrepresentations to induce the buyers to enter into the contract. We have determined the seller was not entitled to summary judgment on the issue of liability for the buyers’ alleged breach of the contract because material facts are in dispute concerning whether the buyers are entitled to rescission of the contract based on the agent’s alleged misrepresentations and whether the seller breached the contract prior to the buyers’ alleged breach by removing components from the integrated television system, which the buyers contend was a material part of the contract. Due to our ruling that the seller was not entitled to summary judgment on the issue of liability, the seller is not entitled to damages for breach of contract, and it is premature to determine which party may be entitled to damages and in what amount. Accordingly, the award of liquidated damages in favor of the seller is reversed.
Opinion may be found at the TBA website:
“We have determined that a finder of fact could conclude that the Johnsons were damaged as a result of being induced to enter into a contract to purchase a residence that Ms. Johnson insists she cannot live in if Mr. Mercer died in the residence instead of the ambulance. Further, we have determined that a finder of fact could conclude that the Johnsons were damaged as a result of being induced to enter into the contract with the reasonable belief the sophisticated and apparently expensive integrated television system was part of the sale.” Id.
“We, therefore, reverse the summary dismissal of the Johnsons’ claims of fraudulent misrepresentation and negligent misrepresentation.” Id.