Wednesday, July 15, 2009

(Tenn. Sup. Ct. March 27, 2009)

The eleven Plaintiffs, investors in a real estate development in Tunica, Mississippi, suffered losses when the financing for hotels on the tracts of land they had leased failed to materialize. Five of the Plaintiffs first learned of the investment opportunity in 1993 while attending a presentation by real estate agents Lloyd and Betty Link in Gatlinburg. After suit was filed against several Defendants based upon breach of oral and written contracts, the trial court entered an order of dismissal as to the Links and other of the Defendants and, later, granted a motion for summary judgment in favor of D.C. Parker and Richard Flowers, the owners of the land. When judgments had been entered as to all of the Defendants, the Plaintiffs appealed, but only as to Parker and Flowers. The Court of Appeals reversed, holding that whether an agency relationship existed between Parker and Flowers, as principals, and the Links, and whether the Links had been guilty of misrepresentation were disputed questions of fact. Upon remand, a jury found that the Links were the agents of Parker and Flowers, who were vicariously liable for fraudulent misrepresentations made by the Links. Damages were awarded to the Plaintiffs. In a second appeal, this time by Parker and Flowers, the Court of Appeals affirmed as to those five Plaintiffs who had attended the presentation in Gatlinburg, but remanded for a new trial as to those who did not. We granted an application for permission to appeal to consider whether the order of dismissal in favor of the agents precluded any adjudication of vicarious liability as to the principals. We find that the order of dismissal in regard to the Links has become final, was on the merits, and involves the same cause of action as the pending fraudulent misrepresentation claims. The doctrine of res judicata applies. Because the Plaintiffs' right of action against the agents has been extinguished by operation of law, the Plaintiffs are not entitled to a judgment against Parker and Flowers based solely upon the fraudulent misrepresentations by the Links as agents. Moreover, the Plaintiffs did not properly preserve for appeal their claims of direct liability against Parker and Flowers. The judgment of the Court of Appeals is, therefore, reversed, the jury's verdict assigning vicarious liability to Parker and Flowers is vacated, and the case is dismissed.

The opinion may be found at the TBA website: