Riley Bolding v. Dentis Sisson ( 2006 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
On-Briefs May 16, 2006
RILEY BOLDING, ET AL. v. DENTIS SISSON, ET AL.
A Direct Appeal from the Circuit Court for Madison County
No. C-02-23 The Honorable Roger A. Page, Judge
No. W2005-01507-COA-R3-CV - Filed June 14, 2006
This is an appeal from a judgment entered on a Jury verdict. The appeal arises out of a commercial
real estate sale and involves the alleged misrepresentation of a restrictive covenant attached to
property at issue. The Jury found that the Defendants/Appellants intentionally and negligently
misrepresented the restrictive covenant that applied to the property. Finding that there is no material
evidence to support the Jury’s finding that Plaintiffs/Appellants’ reliance upon
Defendants/Appellees’ representation was justified, we vacate the Judgment entered on the Jury
Verdict.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Vacated
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and DAVID R. FARMER , J., joined.
A. Russell Larson of Jackson, Tennessee for Appellants, Dentis Sisson and Cathy Sisson
Shannon A. Jones of Alamo, Tennessee for Appellees, Riley Bolding and Pam Bolding
OPINION
In 1999, Riley Bolding and Pam Bolding (the “Boldings,” “Plaintiffs,” or “Appellees”)
were in the market for real estate on which to build a commercial truck washing business. Dentis
Sisson and Cathy Sisson (the “Sissons,” “Defendants,” or “Appellants”) were offering for sale
ten acres of land in Madison County, Tennessee (the “Property”). The Boldings and Sissons
ultimately agreed to the sale of two acres of the Property for $66,500.00. On November 23,
1999, the Boldings and the Sissons entered into a sales agreement for the two acres of the
Property. The sales agreement contained contingencies, including “approval by planning
commission to install truck wash on property.” The record indicates that the Boldings did not
obtain the approval of the planning commission prior to the closing; however, the closing went
forward on January 4, 2000.
Thereafter, the Boldings began clearing the land of trees to make room for their proposed
truck wash and adjacent management office. A few days after the clearing began, one of the
neighbors of the Property contacted Jack Hall, the Madison County Building Commissioner, to
complain that the construction was in violation of a restrictive covenant placed on the Property
limiting it to residential use. After a neighbor complained to Mr. Bolding directly, Mr. Bolding
contacted Jack Hall to verify the information he had received from the neighbor concerning the
restrictive covenant. Thereafter, the Boldings discovered that there was, in fact, a restrictive
covenant on the Property, limiting it to residential use. The Boldings’ attempt to have the
restrictive covenant lifted was unsuccessful.
On January 23, 2002, the Boldings filed a Complaint in the Circuit Court at Madison
County, Tennessee against Jim and Joyce Henley, Real Estate Now, LLC, the Bank of Jackson
and R. Brad Hancock, as Trustee, and Dentis Sisson and Cathy Sisson. All defendants, except
the Sissons, were granted dismissal by summary judgment or directed verdict during the course
of the proceedings. The Complaint specifically alleges the following against the Sissons:
10. Plaintiffs aver that the sale was conditional upon Plaintiffs
being allowed to install a commercial truck wash on the property.
11. Plaintiffs aver that Defendants, Dennis [sic] Sisson and Cathy
Sisson, represented to Plaintiffs that the property was zoned for
commercial use and that the Plaintiffs would be allowed to use the
property to install a commercial truck wash.
* * *
15. Plaintiffs aver that Defendants Dennis [sic] Sisson and Cathy
Sisson knew or should have known that the property was
encumbered by restrict[ive] covenants restricting its use to
residential only and was not zoned for commercial use.
* * *
17. Plaintiffs aver that Defendants Dennis [sic] Sisson and Cathy
Sisson knowingly, intentionally and/or negligently or fraudulently
misrepresented to Plaintiffs that the property was zoned
commercial and could be used as such.
* * *
22. Plaintiffs aver that Defendants Dennis [sic] Sisson and Cathy
Sisson breached the contract entered between the parties because
the planning commission failed to approve the installation of the
truck wash by Plaintiffs.
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On April 9, 2002, the Sissons filed their Answer, in which they denied the material
allegations of the Complaint. On March 12, 2003, the Sissons filed a Motion for Summary
Judgment and a Statement of Material Fact and Affidavit in support thereof. The Boldings filed
a Response to Defendants’ Statement of Material Fact on October 2, 2003. The Sissons’ Motion
for Summary Judgment was denied by Order of December 3, 2003.
The matter proceeded to trial before a jury on November 11-12, 2004 . The Jury returned
a verdict in favor of the Boldings. Although the Jury found that the Sissons were not in breach
of contract, it did find that the Sissons made both negligent and intentional misrepresentations to
the Boldings concerning the restrictive covenant on the Property. Consequently, the Jury
awarded damages to the Boldings in the amount of sixty thousand three hundred and two dollars
and thirty-eight cents ($60,302.38). Judgment on the Jury Verdict was entered on December 20,
2004. On December 29, 2004, the Sissons filed a Motion for New Trial, which was denied by
Order of June 3, 2005.1
The Sissons appeal and raise the following issues for review as stated in their brief:
1. Whether there was sufficient evidence at trial to support
a verdict of misrepresentation and negligent misrepresentation on behalf of Dentis
Sisson.
2. The Effect of Waiver of Contingencies in a real estate
contract by the purchaser of property.
3. Duty of closing attorney to disclose to purchasers of
restrictive covenants of record which could affect use of property.
Where, as here, a trial judge has approved a jury's verdict, our standard of review is
whether there is any material evidence to support the jury's verdict. Tenn.R.App.P. 13(d);
Barnes v. Goodyear Tire and Rubber Co., 48 S.W.3d 698, 704 (Tenn.2000). When addressing
whether there is material evidence to support a verdict, an appellate court shall: (1) take the
strongest legitimate view of all the evidence in favor of the verdict; (2) assume the truth of all
evidence that supports the verdict; (3) allow all reasonable inferences to sustain the verdict; and
(4) discard all [countervailing] evidence. Crabtree Masonry Co. v. C & R Constr., Inc., 575
S.W.2d 4, 5 (Tenn.1978); Black v. Quinn, 646 S.W.2d 437, 439-40 (Tenn.Ct.App.1982).
Appellate courts shall neither re-weigh the evidence nor evaluate the credibility of witnesses.
White v. Vanderbilt University, 21 S.W.3d 315 (Tenn.Ct.App.1999). If the record contains “any
material evidence to support the verdict, [the jury's findings] must be affirmed; if it were
otherwise, the parties would be deprived of their constitutional right to trial by jury.” Crabtree
Masonry Co., 575 S.W.2d at 5.
1
Pursuant to Tenn. R. App. P. 3(e), the Motion for New Trial specifically sets out all of the issues raised on
appeal.
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Turning to the first issue, we address whether there is sufficient evidence in the record to
support a verdict of negligent misrepresentation and/or intentional misrepresentation. In
Robinson v. Omer, 952 S.W.2d 423 (Tenn.1997), our Supreme Court discussed the essential
elements of a negligent misrepresentation claim:
Tennessee has adopted Section 552 of the Restatement (Second) of
Torts“as the guiding principle in negligent misrepresentation
actions against other professionals and business persons.”
Bethlehem Steel Corp. v. Ernst & Whinney, 822 S.W.2d 592, 595
(Tenn.1991). Section 552 provides, in pertinent part, as follows:
(1) One who, in the course of his business,
profession or employment, or in any other
transaction in which he has a pecuniary interest,
supplies false information for the guidance of
others in their business transactions, is subject to
liability for pecuniary loss caused to them by their
justifiable reliance upon the information, if he fails
to exercise reasonable care or competence in
obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability
stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of
persons for whose benefit and guidance he intends
to supply the information or knows that the
recipient intends to supply it; and
(b) through reliance upon it in a transaction that he
intends the information to influence or knows that
the recipient so intends or in a substantially similar
transaction. Restatement (Second) of Torts, § 552
(1977) (emphasis added).
Id. at 427 (emphasis in original).
In discussing the requirements for recovery under Section 552, this Court has stated that
liability in tort will result, despite the lack of contractual privity between the plaintiff and
defendant, when:
(1) the defendant is acting in the course of his business, profession,
or employment, or in a transaction in which he has a pecuniary (as
opposed to gratuitous) interest; and
(2) the defendant supplies faulty information meant to guide others
in their business transactions; and
(3) the defendant fails to exercise reasonable care in obtaining or
communicating the information; and
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(4) the plaintiff justifiably relies upon the information.
John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428, 431 (Tenn. 1991); accord
Ritter v. Custom Chemicides, Inc., 912 S.W.2d 128, 130 (Tenn. 1995); Robinson v. Omer, 952
S.W.2d at 427.
In addition to the four prima facie requirements for negligent misrepresentation,
intentional, or fraudulent, misrepresentation requires a fifth element, which is that “the false
representation [must be made] either knowingly or without belief in its truth or recklessly [with
regard to its truth].” Metropolitan Gov't v. McKinney, 852 S.W.2d 233, 237 (Tenn. Ct.
App.1992); see also Restatement (Second) of Torts § 525 (1977). “[A] person acts fraudulently
when (1) the person intentionally misrepresents an existing, material fact or produces a false
impression, in order to mislead another or to obtain an undue advantage, and (2) another is
injured because of reasonable reliance upon that representation.” Hodges v. S.C. Toof &
Co., 833 S.W.2d 896, 901 (Tenn., 1992).
For either a finding of intentional misrepresentation or negligent misrepresentation, a
plaintiff must produce evidence that his or her reliance upon the misrepresentation(s) was
justified. It is undisputed in this record that the restrictive covenant at issue here was of public
record. In fact, the Warranty Deed indicates that the restrictive covenants are of record in “Trust
Deed Book 784, page 164 as amended in Trust Deed Book 771, page 536 and Trust Deed Book
1040, page 455 in the Register’s Office of Madison County, Tennessee....” This is a fact that
Mr. Bolding admits in his testimony, to wit:
Q. ...Well, let me ask this question: You’ve [Mr. Bolding] done an
investigation and you understand that the restrictive covenants that
are preventing you from building your truck wash are actually
written into the deed that was at the closing; is that right?
A. Yeah.
In Winstead v. First Tennessee Bank N.A., 709 S.W.2d 627 (Tenn. Ct. App. 1986),
plaintiffs purchased a parcel of real property on which they planned to relocate their appliance
store. Id. at 629. In so doing, they relied upon representations from their real estate agent and
their attorney that the parcel was zoned for commercial use. Id. However, similar to the case at
bar, the property was also subject to subdivision restrictions that prevented commercial use of
the property, a fact that was imparted to plaintiffs' attorney but which plaintiffs did not discover
until after the sale. Id. at 630. When plaintiffs learned that they could not relocate their store to
the newly purchased property, they sued their attorney, their real estate broker and the seller,
among others, to rescind the agreement and recover their down payment and damages, alleging
fraud and/or negligent misrepresentation. Id. The trial court granted judgment to plaintiff finding
that defendants defrauded them by failing to disclose that the property could not be used for its
intended purpose. Id. In reversing the trial court’s judgment, this Court stated that purchasers of
real property are:
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[c]hargeable with notice, by implication, of every
fact affecting the title which would be discovered
by an examination of the deed or other muniments
of title of his vendor, and of every fact as to which
the purchaser, with reasonable prudence or
diligence, ought to become acquainted. If there is
sufficient contained in any deed or record, which a
prudent person ought to examine, to produce an
inquiry in the mind of an intelligent person, he is
chargeable with knowledge or notice of the fact so
contained. Hall v. Hall, 604 S.W.2d 851 (Tenn.
1980). See also Teague v. Sowder, 121 Tenn. 132,
114 s.W.484 (1908).
Id. at 632 (citing). The Winstead Court further reasoned:
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:
[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
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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.
Id. at 633
It is undisputed that the sales agreement signed by the Sissons and the Boldings
specifically provided “conveyance shall be by warranty deed transferring good and merchantable
title; subject to any restrictions, zoning ordinances, set-back lines and usual and customary
easements of record.” Moreover, the warranty deed from the Sissons to the Boldings set out
with particularity the recorded subdivision restrictions and easements. Thus, it is clear that the
Boldings were made aware that there existed subdivision restrictions on the property, and yet,
they took no action whatsoever to determine what those restrictions were.
Based on the above, there is no material evidence to satisfy the requirement that the
Boldings justifiably relied upon any information, if there was information by the Sissons. At the
very least, they had equal knowledge by virtue of the restrictive covenants of record. Failure to
prove this necessary element is fatal to their cause of action in this case.
Accordingly, the judgment of the trial court is vacated. The remaining issues are
pretermitted. Costs of the appeal are assessed against the Appellees, Riley Bolding and Pam
Bolding.
__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.
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