Ursula Daniels v. George Basch ( 2005 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
August 19, 2005 Session
URSULA DANIELS v. GEORGE BASCH, ET AL.
Appeal from the Chancery Court for Davidson County
No. 02-903-III Ellen Hobbs Lyle, Chancellor
No. M2004-01844-COA-R3-CV - Filed October 27, 2005
Purchaser of a residence filed a suit against sellers and real estate agent for rescission of the contract
and damages, claiming that Defendants engaged in misrepresentation by suppressing or concealing
the existence of a TVA easement along the backside of the property. The Davidson County
Chancery Court granted Defendants summary judgment and Plaintiff appealed. The judgment of the
trial court is affirmed in all respects.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
WILLIAM B. CAIN , J., delivered the opinion of the court, in which PATRICIA J. COTTRELL and FRANK
G. CLEMENT , JR., JJ., joined.
Lawrence D. Wilson, Nashville, Tennessee, for the appellant, Ursula Daniels.
Derrick C. Smith, Nashville, Tennessee, for the appellees, George Basch and ReMax Elite.
Judy A. Oxford, Franklin, Tennessee, for the appellees, Brett Wickham and Susan Wickham.
OPINION
On December 5, 2001, Ursula Daniels (“Daniels”) closed on the purchase of a residence
owned by Brent and Susan Wickham (“the Wickhams”) through their Re/Max Elite real estate agent,
George Basch (“Basch”). In December 2002, approximately one year after the closing on the
purchase of the residence, Tennessee Valley Authority (“TVA”) representatives advised Daniels that
she could not plant trees or anything else along the backside of the property as TVA had an easement
that included thirty feet of Daniels’ backyard. Evidently, TVA had at some point procured an
easement from the Wickhams and later on January 9, 2002, TVA had repurchased the easement from
Daniels for $1900.00.
On March 22, 2002, Daniels filed a Complaint in Davidson County Chancery Court against
the Wickhams, Basch, and Re/Max Elite, seeking rescission of the purchase of the residence as well
as money damages. Daniels claimed that Defendants engaged in misrepresentation by concealment
for allegedly concealing or suppressing the TVA easement.
Daniels asserted that while viewing the house prior to closing on November 21, 2001, she
remarked to Mrs. Wickham that she intended to plant trees in the backyard and Mrs. Wickham
assured her that she did not think that doing so would pose a problem, but that Daniels should check
with the Homeowners Association first. Daniels also claimed that she specifically inquired as to
whether the TVA power lines and towers located in the backyard posed any problems and Mrs.
Wickham allegedly replied that they did not.
Also, on October 22, 2001, the Wickhams executed a Tennessee Residential Property
Disclosure Form which asked the Wickhams whether they knew of any encroachments, easements,
or similar items that may effect ownership interest in the property. The Wickhams answered “No.”
Daniels further argued that on November 22, 2001, she specifically described her plans to plant trees
in the backyard in the presence of Mr. Basch, and Mr. Basch allegedly made a sound that Daniels
interpreted as acknowledging her remarks.
After closing, Mr. Basch came to the property to remove a shed that was on the TVA
easement. Mr. Basch then proceeded to tell Daniels that TVA was powerful and had been known
to come through its easements for the purpose of cutting down trees and removing or tearing down
structures.
In reliance on the above stated facts, Daniels claimed that both the Wickhams and their real
estate agent, Basch, had knowledge of the TVA easement prior to the closing and had misrepresented
or concealed that fact. Daniels asserted that she relied upon Defendants’ representations that she
would be able to plant trees in the backyard and had she known of the TVA easement and its effect,
she would not have purchased the property.
Basch and his employer, Re/Max Elite, filed a Motion for Summary Judgment on April 28,
2004. The Chancery Court granted Basch and Re/Max Elite’s Motion on June 21, 2004, finding that
Daniels had no claim against Defendants regarding the Tennessee Residential Property Disclosure
Form because Defendants disclaimed any representation regarding said disclosure and because
Daniels’ version of the facts, as a matter of law, were not specific enough to rise to the level of a
misrepresentation.
On May 12, 2004, the Wickhams filed their own Motion for Partial Summary Judgment with
regard to the easement issue. The Chancery Court entered an Order granting the Wickhams’ Motion
on June 11, 2004, finding that because Daniels had a drawing at the time of closing which disclosed
the easement, as a matter of law, it was not reasonable or justifiable for Daniels to rely on the
statements of the Wickhams with regard to the easement issue. Daniels dismissed her remaining
claims against the Wickhams on June 21, 2004 and filed a timely appeal against all Defendants.
Daniels asserts two issues on appeal. First, Daniels claims that the trial court erred in
granting the Wickhams summary judgment because the trial court based its summary judgment
determination solely on the reasonableness of Daniels’ reliance on the Wickhams’ assertions and the
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parties’ states of mind, which Daniels claims are issues left to the fact finder and thus an improper
ground for summary judgment. Next, Daniels contends that the trial court erred in granting Basch
and his employer, Re/Max Elite, summary judgment because the Tennessee Residential Property
Disclosure was ineffective to disclaim Defendants’ misrepresentations since Defendants knew that
the disclosure incorrectly asserted that there were no easements. Daniels also claims that she
presented sufficient evidence to establish that Defendants engaged in misrepresentation by
concealment.
The standard of review on a motion for summary judgment is well settled. A trial court’s
decision regarding a motion for summary judgment is a question of law and as such, the Court
reviews the record de novo with no presumption of correctness below to determine whether the
requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been met. Blair v. West
Town Mall, 130 S.W.3d 761, 763 (Tenn.2004). Tennessee Rules of Civil Procedure Rule 56
provides that summary judgment is appropriate when there is no genuine issue of material fact
relevant to the defense contained in the motion, and the moving party is entitled to judgment as a
matter of law on the undisputed facts. Blair, 130 S.W.3d at 763.
Daniels first claims that the trial court erred in granting the Wickhams’ Motion for Partial
Summary Judgment based solely upon on the reasonableness of Daniels’ reliance on Defendants’
assertions and the parties’ states of mind. However, it appears from the trial court’s Order that the
court granted the motion based upon the fact that Daniels received a drawing at the time of closing
which disclosed the easement. The trial court specifically stated in its Order,
After hearing the statements of counsel, and considering the record herein, the Court
found that the Motion for Partial Summary Judgment should be granted. More
specifically, the Court found that the plaintiff had a survey or drawing at the time of
closing which disclosed the easement, and that as a matter of law it was not
reasonable or justifiable for the plaintiff to rely on the statements of the defendants
with respect to the easement issue.
Daniels based her claim against the Wickhams on the theory of misrepresentation by
concealment, which requires a plaintiff to prove the following elements: (1) the defendant concealed
or misrepresentated a material fact; (2) the defendant was under a duty to disclose the fact to the
plaintiff; (3) the defendant intentionally concealed or suppressed the fact with the intent to deceive
the plaintiff; (4) the plaintiff was not aware of the fact and would have acted differently if the
plaintiff knew of the concealed or suppressed fact; and, (5) as a result of the concealment or
suppression of the fact, the plaintiff sustained damage. T.P.I. 3 - CIVIL 8.38; Lonning v. Jim Walter
Homes, Inc., 725 S.W.2d 682, 685 (Tenn.Ct.App.1986).
In the sale of real property, a fact or condition is "material" if it is one of "controlling
importance in determining the desirability and value of th[e] residence." Patel v. Bayliff, 121 S.W.3d
347, 353 (Tenn.Ct.App.2003) (quoting Simmons v. Evans, 206 S.W.2d 295, 296 (Tenn.1947)). The
defendant has a duty to disclose such a fact or condition "unless ordinary diligence would have
revealed the undisclosed fact." Lonning v. Jim Walter Homes, Inc., 725 S.W.2d 682, 685 (citing
Simmons, 206 S.W.2d at 296). Thus, there is no duty to disclose a material fact or condition if it was
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apparent through "common observation" or if it would have been discoverable through the exercise
of ordinary diligence. Simmons, 206 S.W.2d at 296; Patel, 121 S.W.3d at 353.
Clearly an easement is a material fact as it effects the desirability and value of the residential
property. However, the Wickhams had no duty to disclose the easement in this case because the
easement was apparent through “common observation.” The TVA wires ran across the entire
backside of the property and it is clear that Daniels noticed the wires because she inquired about
them on at least two occasions. Furthermore, Daniels commissioned a mortgage loan inspection
survey prior to closing which clearly designated the size and the location of the easement. Daniels
failed to offer any facts or evidence to show that it was reasonable for her to continue to rely on the
Wickhams’ alleged misrepresentations rather than the survey or her own observations, which plainly
showed the existence of an easement at the back of the property.
Plaintiff moved into the house December 1, 2001, four days before she actually closed the
transaction to purchase the house. She was well aware of the TVA easement and the power lines
above the easement as early as November 21, 2001. She testified:
A. Generalities, you know, how is the community? She said it was a
quiet community. She was away from all the noise in the back there, whatever that
meant. I was concerned about the back there, the power lines going across. I said,
are you having any problems with that? She said no.
Q. Well, when did you see those power lines? When was the first time
you saw them?
A. I believe it was after the contract was signed. We had made some
amendments to the contract on the 22nd.
Q. Well, let me ask you that again. When was the first time that you
knew there were power lines back behind this property?
A. On the 21st.
Q. The 21st of what month?
A. Of November of 2001.
Q. Why did you not see those when you were out there on November
19th or 18th, whatever.
A. I wasn’t paying attention. I was not paying attention. I was so happy
to find something.
Q. But I thought you asked Ms. Wickham about – –
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A. On the 21st I did. I did not see those power lines before. Didn’t pay
any attention to them. That’s when I asked her about you have any problems with
those huge towers and the power lines? She said no.
...
Q. On November the 21st when you signed this contract, is that when
you’re telling us that you first became aware of some power lines at the house?
A. I don’t remember the dates. I’m telling you, I don’t remember was it
the 21st or 22nd or even 23rd.
Q. You don’t remember whether it was before or after you signed the
contract, do you?
A. I didn’t pay attention to it. I’m sorry.
Q. But at some point in time you’re telling me you realized there were
power lines back there; is that right?
A. Yes.
Q. Is that because you saw it on your own?
A. Yes.
Q. So it would have been at some point when you were out at the house?
A. Yes.
Q. Did you, upon seeing the power lines, inquire about that?
A. Yes.
Q. Who did you inquire of?
A. Ms. Wickham.
Q. And what did Ms. Wickham say?
A. She said it was no problem.
Q. What did you ask about it?
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A. I asked, I noticed those huge towers over there. Do you have any
problems with those or the line coming across? She said no.
Q. And that was the extent of your question?
A. Yeah. Maybe I went on a little bit about static electricity for the
children and so forth and so on, you know. But basically I had a question whether
or not she had a problem. She said no she didn’t.
Q. So that was the extent of your question, about whether she had a
problem with it?
A. Basically. As best as I recall it.
Q. And your concern was the static, the electricity may be coming from
it?
A. Was part of my question.
Q. And was there any other part of your question?
A. Whether or not she had problems.
Q. What did she say?
A. No. She had no problems.
The photographs exhibited to her deposition disclose that the TVA power lines and the
towers supporting those lines are indeed “huge” and plainly visible. The survey drawing delivered
to Plaintiff prior to closing clearly discloses a “50' TVA easement” traversing the rear of the
property.
It is well settled that if a purchaser of real property has notice or with ordinary diligence
should have had notice of a problem with the real estate, the purchaser cannot attack the validity of
the contract for fraud, misrepresentation, or concealment of that problem. Winstead v. First
Tennessee Bank N.A., Memphis, 709 S.W.2d 627, 631 (Tenn.Ct.App.1986). The Western Section
of this Court further explained,
If one who is in possession of all material facts, either actually or constructively,
proceeds with a purchase of realty, notwithstanding such knowledge, such a person
cannot thereafter recover on the basis of fraud, misrepresentation, or concealment of
the information to which all parties had equal access. In Pakrul v. Barnes, supra, the
Court quoted the following language with approval from 91 C.J.S. Vendor and
Purchaser § 68, at 945-6:
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[W]here the means of information are at hand and equally accessible
to both parties so that, with ordinary prudence or diligence, they
might rely on their own judgment, generally they must be presumed
to have done so, or, if they have not informed themselves, they must
abide the consequences of their own inattention and carelessness.
Unless the representations are such as are calculated to lull the
suspicions of a careful man into a complete reliance thereon, it is
commonly held, in the absence of special circumstances, that, where
the means of knowledge are readily available, and the vendor or
purchaser, as the case may be, has the opportunity by investigation or
inspection to discover the truth with respect to matters concealed or
misrepresented, without prevention or hindrance by the other party,
of which opportunity he is or should be aware, and where he
nevertheless fails to exercise that opportunity and to discover the
truth, he cannot thereafter assail the validity of the contract for fraud,
misrepresentation or concealment with respect to matters which
should have been ascertained, particularly where the sources of
information are furnished and attention directed to them, as, for
example, where the source of accurate information is indicated or
referred to in the contract.
Winstead, 709 S.W.2d at 633.
Because Daniels knew of the power lines before she closed the transaction and had a survey
revealing the existence of the easement prior to closing, she cannot now be permitted to assail the
validity of the contract on the basis of misrepresentation. Daniels was in possession of all material
facts regarding the easement and she chose to disregard those facts and continue with the sale. As
this Court has held:
Where information is reasonably discovered, and here where the plaintiff was invited
to inquire, it cannot claim reasonable reliance upon a misrepresentation. In Solomon
v. First American National Bank of Nashville, 774 S.W.2d 935 (Tenn.Ct.App.1989),
this Court stated, “[g]enerally, a party dealing on equal terms with another is not
justified in relying upon representations where the means of knowledge are readily
within his reach.”
Allied Sound, Inc. v. Neely, 58 S.W.3d 119, 123 (Tenn.Ct.App.2001).
Daniels next claims that the trial court erred in granting Basch and Re/Max Elite summary
judgment because the Tennessee Residential Property Disclosure was ineffective to disclaim any
misrepresentations of Defendants since Defendants knew that the disclosure incorrectly asserted that
there were no easements. Daniels also claims that there was sufficient evidence presented to the trial
court to show that Basch and Re/Max Elite engaged in misrepresentation by concealment.
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The Tennessee Act pertaining to conveyances of property provides that the representations
contained in a Residential Property Disclosure statement are those of the owner and are not the
representations of the real estate agent. Tennessee Code Annotated Section 66-5-202 provides:
With regard to transfers described in § 66-5-201, the owner of the residential property shall
furnish to a purchaser one of the following:
(1) A residential property disclosure statement in the form provided in this part
regarding the condition of the property, including any material defects known to the
owner. Such disclosure form may be as included in this part and must include all
items listed on the disclosure form required pursuant to this part. The disclosure form
shall contain a notice to prospective purchasers and owners that the prospective
purchaser and the owner may wish to obtain professional advice or inspections of the
property. The disclosure form shall also contain a notice to purchasers that the
information contained in the disclosure are the representations of the owner and are
not the representations of the real estate licensee or sales person, if any. The owner
shall not be required to undertake or provide any independent investigation or
inspection of the property in order to make the disclosures required by this part.
Tenn.Code Ann. § 66-5-202 (emphasis added).
Tennessee Code Annotated section 66-5-206 further provides that a real estate licensee
representing an owner of residential real property is not liable to any party unless he fails to inform
the owner of his rights or duties, intentionally misrepresents or defrauds a purchaser, or fails to
disclose “adverse facts” which the licensee has actual knowledge. Tennessee Code Annotated
section 66-5-206 states:
A real estate licensee representing an owner of residential real property as the listing
broker has a duty to inform each such owner represented by that licensee of the
owner's rights and obligations under this part. A real estate licensee representing a
purchaser of residential real property or, if the purchaser is not represented by a
licensee, the real estate licensee representing an owner of residential real estate and
dealing with the purchaser has a duty to inform each such purchaser of the
purchaser's rights and obligations under this part. If a real estate licensee performs
those duties, the licensee shall have no further duties to the parties to a residential
real estate transaction under this part, and shall not be liable to any party to a
residential real estate transaction for a violation of this part or for any failure to
disclose any information regarding any real property subject to this part. However,
a cause of action for damages or equitable remedies may be brought against a real
estate licensee for intentionally misrepresenting or defrauding a purchaser. A real
estate licensee will further be subject to a cause of action for damages or equitable
relief for failing to disclose adverse facts of which the licensee has actual knowledge
or notice. "Adverse facts" means conditions or occurrences generally recognized by
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competent licensees that significantly reduce the structural integrity of improvements
to real property, or present a significant health risk to occupants of the property.
Tenn.Code Ann. § 66-5-206.
Therefore, as long as Basch and Re/Max Elite did not intentionally misrepresent or defraud Daniels
or fail to disclose any adverse facts of which Defendants had actual knowledge, then they effectively
disclaimed any representation in the Tennessee Residential Property Disclosure.
We have already determined that Daniels is precluded from recovering under the theories of
misrepresentation or fraud because Daniels had notice of the easement prior to closing through her
own observations as well as through the mortgage loan inspection survey. See Winstead, 709 S.W.2d
at 631-633.
The Court need not reach the issue of whether Daniels provided sufficient facts to establish
that Basch and Re/Max Elite engaged in misrepresentation by concealment because Daniels is
precluded from recovery under that theory as a result of her knowledge of the TVA easement prior
to closing. The judgment of the trial court is affirmed in all respects. Costs of appeal are assessed
against Appellant.
___________________________________
WILLIAM B. CAIN, JUDGE
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