July 31, 2008

No compensation for inverse condemnation resulting from "careful" construction by the government; No nuisance if government's conduct is reasonable


The city of Morristown appeals a judgment in favor of a commercial leaseholder who brought an inverse condemnation and nuisance action against the city for damages allegedly sustained as a result of dirt, debris, odor, noise, and interference with ingress and egress caused by the city's road and bridge construction project. After careful review, we reverse the judgment of the trial court as to the inverse condemnation claim upon our finding that the damages complained of by the leaseholder were the necessary effects of careful construction and not different from the effects suffered by the leaseholder's neighbors and because damages resulting from inconvenience during construction are not recoverable. We also reverse the trial court's judgment in favor of the leaseholder upon the claim of nuisance because the leaseholder failed to establish that the construction project was conducted in an unreasonable manner.

Opinion may be found at the TBA website:

"'Inverse condemnation' is the popular description for a cause of action brought by a property owner to recover the value of real property that has been taken for public use by a governmental defendant even though no formal condemnation proceedings under the government’s power of eminent domain have been instituted." Id. (citations omitted).

"Owners of land, no part of which has been taken for public purposes, are not entitled to compensation for damages naturally and unavoidably resulting from the careful construction and operation of the public improvement which damages are shared generally by owners whose lands lie within the range of the inconveniences necessarily attending that improvement." Id. (citations omitted).

"A nuisance has been defined as anything which annoys or disturbs the free use of one’s property, or which renders its ordinary use or physical occupation uncomfortable. Under the circumstances presented in the present matter, it is clear that the noise, dirt, debris, and obstruction complained of annoyed or disturbed Ms. Frank’s free use of her leasehold and rendered its ordinary use uncomfortable. However, as this court has further noted, the key element of any nuisance is the reasonableness of the defendant’s conduct under the circumstances. Acts of the government are not nuisances per se and it is actionable only when a nuisance is established by evidence that the governmental function is conducted in an unreasonable manner. Our careful review of the record reveals no finding by the trial court that the City acted unreasonably at any time during the construction project." Id. (citations and quotations omitted).

Breach of construction contract fails because signature was induced for discussion purposes only

THOMAS BUILDERS, INC. v. SHAILESH PATEL, ET AL. (Tenn.Ct.App. July 31, 2008).

Thomas Builders, Inc. sued Shailesh Patel and his LLC, alleging that Mr. Patel breached a construction contract. The parties had been in negotiations to build a hotel in downtown Knoxville. Thomas Builders' president, Darrell Thomas, claims that he and Mr. Patel agreed to a binding contract; Mr. Patel claims that no contract was ever made. At a bench trial, Mr. Patel testified that Mr. Thomas asked him to sign the purported contract as an "indication that I am really serious to continue discussions." This testimony was not directly rebutted. At the conclusion of the trial, the trial court stated that it believed Mr. Patel's testimony, and held that there was no breach. We affirm.

Opinion may be found at TBA website:

"If, as the court declared in its primary holding, Mr. Thomas induced Mr. Patel’s signature by telling him that the signature would only indicate that Mr. Patel was serious about continuing discussions, then it follows necessarily that Mr. Patel’s signature was not an acceptance of an offer by Thomas Builders. Indeed, on these facts, Mr. Thomas was not even making an offer; asking someone to sign a "proposal” in order to prove his "seriousness" is not the same thing as making a contractual offer to build a hotel. And if Mr. Patel’s signature was not given in response to an offer, it cannot have been an acceptance, nor a counter-offer, nor an acceptance in escrow." Id. (quotations omitted).

"The dispute in this case is not over the terms of the contract, but over whether a contract was formed at all, and we do not believe Mr. Patel’s scribbling of the word “accepted” necessarily speaks for itself in that regard. ... [W]e hold that the evidence does not preponderate against the trial court’s factual finding that Mr. Thomas induced Mr. Patel to sign the proposal “for discussion purposes only.” Based on these facts, we find that no contract was formed. Thomas Builders’ breach of contract claim therefore must fail." Id. (quotations omitted).

July 30, 2008

Judgment for fraudulent misrepresentation against seller for covering up termite damage; 30% comparative fault against termite company

STEVE L. ELCHLEPP, JR., ET AL. v. EMOL HATFIELD, ET AL (Tenn.Ct.App. July 30, 2008).

The buyers of a house and real property brought this action against the sellers and a termite control company, alleging that the house was completely infested with termites to the extent that it was worthless and unsalvageable. The buyers charged the sellers with fraudulent and negligent misrepresentation, fraudulent concealment of the extent of termite damage, and breach of contract. The buyers alleged that the termite control company was negligent in its inspection of the house.

Following a six-day jury trial, the jury found in favor of the buyers, holding the sellers 70 percent at fault and the termite control company 30 percent at fault and awarding the buyers $55,000 in damages. The trial court also awarded the buyers $25,000 in attorney's fees pursuant to the real estate sales contract. We find that the jury verdict is supported by material evidence and that the trial court committed no reversible error in its jury instructions and evidentiary rulings, and consequently affirm the trial court's judgment.

Opinion located on the TBA website:

"The clear and convincing standard of proof is appropriate to those cases where a party seeks the reform or rescission of a written instrument due to fraudulent inducement. But in all other cases involving claims of fraud, the standard of proof is preponderance of evidence." Id. (quotation omitted).

"Limit your damage consideration specifically to termite damage and the value of the land is not a consideration in determining the amount of damages in this case." Id. (quoting and affirming trial court's jury instruction).

"When a party intentionally misrepresents a material fact or produces a false impression in order to mislead another or to obtain an undue advantage over him, there is a positive fraud. The representation must have been made with knowledge of its falsity and with a fraudulent intent. The representation must have been to an existing fact which is material and the plaintiff must have reasonably relied upon that misrepresentation to his injury." Id. (quotation omitted).

"Simply stated, the central factual issue in this case was the credibility of the Hatfields’ assertion that they were unaware that the house was infested with termites. There is an abundance of evidence supporting the conclusion, obviously drawn by the jury, that the Hatfields were not believable on this point. ... The testimony of Mr. Elchlepp, including his testimony that Mr. Hatfield assured him that the termite damage discovered before closing was a limited and localized problem, also supports the jury verdict. ... We find that there is ample material evidence supporting the jury verdict in the case, and the Hatfields’ argument to the contrary is without merit." Id.

July 10, 2008

Noncompletion is not contemplated by the Tennessee construction statute of repose


Defendant Homebuilder left plaintiff Homeowners' job site before completing construction of their residence. Homebuilder appeals the chancery court's confirmation of an adverse arbitration award, arguing that the arbitrator exceeded his authority by refusing to enforce a provision of the contract that would have rendered the plaintiff Homeowners' suit time barred. The limitation provision applied to suits for defective improvements to real estate. The gravamen of this breach of contract action was partial performance, not defective performance. Further, the arbitrator awarded to Homeowners the cost to complete the construction plus interest, attorney's fees, and arbitration costs. Finding that the limitation period does not apply to this action, we affirm.

Opinion may be found at the TBA website:

"Paragraph 14 of the contract, which addressed the builder’s limited warranty and provided for the repair of covered defects, contained the provision in question. Subparagraph (F) provided as follows:
Repairs. Upon receipt of Owner’s written report of a defect, if the defective item is covered by Builder’s Limited Warranty, Builder shall repair or replace it at no charge to Owner, within thirty (30) days, (extended for delays caused by weather conditions, labor problems or material shortages). Notwithstanding the foregoing, Builder and Owner expressly waive the statutory limitations on actions for defective improvements of real estate, as provided by Tennessee Code Section 28-3-201 et seq., and in lieu thereof covenant and agree that all actions recoverable under this statutory provision shall be brought within one (1) year after substantial completion of the House." Id.

"To determine whether this lawsuit falls within the ambit of the referenced statute of repose, thus making it subject to the one-year limitation, we look to the gravamen of the complaint and to the basis for which the damages are sought. [] Although there are some references made to inferior workmanship[] in the complaint, the suit plainly rests upon nonfeasance more so than malfeasance, or partial performance rather than defective performance. The Ponses averred, and it is undisputed, that the following items were left uncompleted by Mr. Harrison ... . Moreover, it appears that the arbitrator awarded them the cost to complete the residence." Id. (citations omitted).

"In this breach of contract case, the chief complaint was nonfeasance, not malfeasance. This distinction removes the action from the purview of Tennessee Code Annotated Section 28-3-202 because the statute applies to actions predicated upon defective improvements to real property, property damage, and personal injury or wrongful death attributable to the defective work. Because the statute does not apply, neither do the contractual waiver and one-year limitation period. We accordingly affirm the chancellor’s confirmation of the award." Id.