Home inspectors that rubber stamp their prior inspection reports can be held liable under the TCPA

QUINTIN G. MACDONALD, ET AL. v. BILL GUNTHER, d/b/a BJK PROPERTY INSPECTIONS (Tenn.Ct.App. September 21, 2007).

The plaintiff homeowners contended that the defendant licensed property inspector had performed a negligent or fraudulent home inspection on the house they subsequently purchased, and that as a result, they incurred many unanticipated expenses for repairs. The parties agreed to resolve their dispute through binding arbitration, which resulted in an arbitration award of nearly $100,000 for the homeowners. The trial court granted the plaintiffs' motion to confirm the award. The defendant argues on appeal that the court should have dismissed the plaintiffs' motion to confirm because of their failure to comply with the court's scheduling order. We affirm the trial court.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/macdonaldq_092107.pdf

Failure to immediately appeal when the court ignores a contractual arbitration provision results in loss of enforceability

DANIEL E. LONG v. ANDREA ELISE MILLER, ET AL. (Tenn.Ct.App. September 21, 2007).

This is a breach of contract action filed by Daniel E. Long against R & M Builders, Inc. ("R & M"), the successful bidder on a governmental project to demolish and rebuild the plaintiff's house. The plaintiff claims that R & M performed its services in an unworkmanlike manner and that the company failed to complete several of the contractual requirements. R & M filed a motion to dismiss asserting that the parties had agreed to binding arbitration. The trial court denied the motion and the case proceeded to trial. The jury found that R & M had breached the contract and awarded the plaintiff damages of $15,000. R & M appeals, claiming the trial court erred when it refused to order the parties to arbitration. It also asserts that the trial court erred in excluding certain evidence. The plaintiff argues that this appeal is frivolous. We affirm the judgment of the trial court and conclude that R & M's appeal is frivolous. We remand this case to the trial court with instructions.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/longd_092107.pdf

Conveyance of land may be deemed fraudulent if the seller can prove certain "badges of fraud"

KATHERINE MCKAY v. RONNIE REECE AND HIS WIFE, MARY REECE; JAMES BLANKENSHIP AND HIS WIFE, PATRICIA BLANKENSHIP; AND CITIZENS BANK OF LAFAYETTE (Tenn.Ct.App. September 18, 2007)

This is an action to set aside a warranty deed based on fraud. The plaintiff inherited family-owned property after her father's death, and she lived on the property. She obtained a line of credit for $40,000 from the defendant bank, secured by the property. The plaintiff defaulted on the loan, and the bank initiated foreclosure proceedings. The plaintiff contacted the defendants, acquaintances of her father, seeking their advice on how to stop the foreclosure. The defendants told the plaintiff that the bank could not stop the foreclosure, but suggested that, in order to avoid foreclosure, they would assume the plaintiff's $40,000 loan and the plaintiff would transfer the property to them. The parties agreed that, in addition to the defendants' assumption of the $40,000 loan, the plaintiff could live on the property for one year and repurchase the property at the end of the year for the amount of the loan plus any incidental costs. With that understanding, the plaintiff executed a warranty deed transferring the property to the defendants, and the defendants assumed the loan. Before the end of the agreed year, the defendants listed the property for sale with a real estate agent for approximately $400,000. When the plaintiff questioned the defendants, she was told that she could purchase the property for one dollar over the highest offer the defendants had received for the property. The plaintiff then filed this lawsuit, asking the court to set aside the warranty deed transferring the property to the defendants. After a bench trial, the trial court set aside the deed based on inadequacy of consideration and other badges of fraud. The defendants now appeal. We affirm, upholding the trial court's credibility determinations and finding that the preponderance of the evidence supports the trial court's decision.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/mcKayk_091807.pdf

Fire insurers face higher evidentiary burden to limit payouts for cost of repair, replacement, or rebuild

ROGERSVILLE INVESTMENT CORPORATION d/b/a HOLIDAY INN EXPRESS v. MERIDIAN INSURANCE GROUP, INC. (Tenn.Ct.App. September 4, 2007)

In this case involving an insurance claim for property damage when a nearly-completed Holiday Inn building in Rogersville partially burned, the issue is how much money the insurance company must pay under the contract. The insurance contract provided that the insurer would pay the insured "the cost to repair, replace or rebuild the property with material of like kind and quality." The insured submitted proof that the contractor's bill for the covered repairs was $47,982.92. Over the insured's hearsay objection, the insurance company introduced evidence that its third-party investigator, who inspected the damaged property, prepared an estimate approximating the loss at $20,532.94. The trial court rejected the insurer's defense of accord and satisfaction, and awarded the insured $33,757.93. We affirm the trial court's judgment that the insurer did not prove accord and satisfaction, and hold that under the unambiguous terms of the contract, the insurer is required to pay the insured $46,982.92, in the absence of proof that the amount charged by the contractor for repairs is excessive or unreasonable. We therefore affirm the judgment of the trial court as modified.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/rogersville_090407.pdf

Contractors who improperly install advanced earthwork features may be liable under the TCPA

KENNETH BARRETT v. FRANK VANN dba FRANK VANN CONSTRUCTION COMPANY, ET AL (Tenn.Ct.App. August 29, 2007)

The plaintiff, Kenneth Barrett, entered into a written contract with Frank Vann, doing business as Frank Vann Construction Company ("Vann"), for Vann to construct a parking area on the plaintiff's property and to re-pave the plaintiff's driveway. It was later discovered that a retaining wall would be necessary to support the parking area due to the steep slope of the plaintiff's property. Vann suggested to the plaintiff that he use Matt Johnson, doing business as ProGreen Landscaping & Lawn Maintenance ("Johnson"), to build the wall. Johnson agreed to build it. After the wall was completed, it began to collapse. This prompted the plaintiff to file suit. A jury returned a money verdict against Vann and Johnson for violating the Tennessee Consumer Protection Act, T.C.A. section 47-18-101 (Supp. 2006) ("the TCPA"). The jury also found Vann guilty of breach of contract. When, as to Vann, the jury returned separate monetary verdicts for the TCPA violation and the breach of contract, the trial court required the plaintiff to elect between the two monetary awards. Under compulsion, the plaintiff chose the damage award under the TCPA. The trial court then trebled the TCPA damages and awarded the plaintiff a part of his request for attorney's fees. The plaintiff and Vann both raise issues on appeal. We modify the trial court's judgment. As modified, it is affirmed. This case is remanded to the trial court with instructions.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/Barrettk_082907.pdf

Puffing does not negligent misrepresentation make, even in the new home construction context

O. HOGAN HARRISON, ET AL. v. AVALON PROPERTIES, LLC, ET AL. (Tenn.Ct.App. August 27, 2007).

Hogan Harrison and Sally D. Harrison ("Plaintiffs") sued Avalon Properties, LLC ("Avalon Properties"), Avalon Golf Properties, LLC ("Avalon Golf"), and Usonia Homes, Inc. ("Usonia") for breach of contract and negligent misrepresentation, among other things, in connection with the construction of Plaintiffs' house. Plaintiffs were granted a default judgment against Usonia for its failure to answer the complaint. After a bench trial, the Trial Court entered an order of involuntary dismissal pursuant to Tenn. R. Civ. P. 41.02 as to Avalon Properties. The Trial Court also entered a Final Judgment incorporating by reference the Trial Court's Opinion finding and holding, inter alia, that Avalon Golf made representations to Plaintiffs through its agent that Usonia was qualified to build the house and implicitly vouched that Usonia had the ability to fund the work; that the representations were made with the intent to induce Plaintiffs to rely on them; that Plaintiffs did rely on the representations to their detriment and were damaged; and that Avalon Golf was negligent in the selection of Usonia as the exclusive builder. The Trial Court awarded Plaintiffs a judgment of $164,065.87. Avalon Golf appeals to this Court. We reverse that portion of the Trial Court's judgment holding Avalon Golf liable for negligent misrepresentation and negligent selection, and affirm as to the other defendants.

Opinion can be found at TBA website:
http://www.tba2.org/tba_files/TCA/2007/harrisono_082707.pdf

Once the Department of Transportation completes a project, claims against it relating to the project may be moot.

IN RE: ORDER TO ENCAPSULATE NATIVE AMERICAN INDIAN GRAVESITES IN CONCRETE AND PAVE OVER WITH ASPHALT (Tenn.Ct.App. August 24, 2007).

During construction involving Hillsboro Road in Davidson County, the Department of Transportation discovered three Native American Indian graves. The Department of Transportation eventually reinterred the graves and encapsulated the graves in concrete. The Department of Transportation later determined, after the fact, that simply encapsulating the graves in concrete did not comply with relevant statutory law. A first lawsuit was filed challenging the Department's alleged policy of encapsulating graves. While the first lawsuit was pending, the construction project was completed. On appeal in the first lawsuit, this Court determined that the plaintiffs' claims were moot and none of the applicable exceptions to the mootness doctrine applied. The present case involves the same claims as the first lawsuit, with the only exception being that this lawsuit initially was filed pursuant to the Uniform Administrative Procedures Act, Tenn. Code Ann. section 4-5-101, et seq. The Trial Court dismissed this lawsuit after finding that the same claims raised by the plaintiffs in this case were held to be moot in the first appeal. We affirm.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/encapsulate_082407.pdf

Lack of use of an easement obtained by adverse possession does not revoke the easement

FRANK BAILEY and wife, ALMA SUE BAILEY; EARL BAILEY; CALVIN CHESNEY; and RALPH BAILEY, v. CARROLL S. GWYN and wife, ROSE F. GWYN (Tenn.Ct.App. August 24, 2007).

In this action to have an easement established across defendants' property, the Trial Court held there was clear and convincing evidence that plaintiffs were entitled to an easement by adverse use. We affirm.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/baileyf_082407.pdf

Attorney fees available for plaintiffs suing for breach of covenant against encumbrances

CHARLES AND ANN HALFORD v. HAROLD R. GUNN (Tenn.Ct.App. Aug. 22, 2007)

The plaintiff-buyers entered into an installment sales contract in 1991 in which they agreed to purchase real property owned by the defendant-seller. The contract provided that upon the plaintiffs' payment of the purchase price, the defendant would provide a deed conveying the property to them free of encumbrances. In 2002, a general sessions judgment was entered against the defendant in an unrelated case, and the defendant appealed that judgment to the circuit court, where that case currently remains pending. The judgment was filed as a lien on the real property in 2002.

In late 2004 or early 2005, the plaintiffs had made all necessary payments on the real property, and the defendant conveyed the property to them by warranty deed. While attempting to sell the real property in 2005, the plaintiffs discovered the existence of the 2002 judgment lien on the property, and they placed funds in escrow in order to satisfy their intended purchaser that the lien would be removed or paid. The plaintiffs filed a warrant in general sessions court against the defendant, alleging that he was liable for breach of the covenant against encumbrances contained in the warranty deed. The general sessions court entered judgment in favor of the plaintiffs, and the defendant appealed to the circuit court. The plaintiffs filed a motion for summary judgment and sought an award of reasonable attorney's fees. The circuit court granted the motion for summary judgment, but denied the plaintiffs' request for attorney's fees. On appeal, we affirm in part, reverse in part, and remand for a determination of reasonable attorney's fees incurred below and on appeal.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/halfordc_082207.pdf

Boundary dispute over easements

CRAIG GREEN v. MORGAN HINES (Tenn.Ct.App. May 29, 2007)

Appellant and cross-plaintiff appeals the trial court's order which, among other things, granted an easement across the appellant's property. The record contains no statement of the evidence or transcript of the proceedings; therefore, the trial court's findings of fact are presumed to be correct. We affirm.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2007/greenc_081607.pdf

Developers: Stay away from the gas line

One lesson that shouldn't need further instruction is to not interfere with gas lines while developing property. In MEMPHIS LIGHT, GAS & WATER DIVISION v. TOMMY CARL STARKEY, the developer graded property with a gas line running through it. Dirt above and around the line was removed such that only a "teepee" of dirt remained along the line. The easement was 75 feet wide, so the developer worked extensively in the easement. The utility company discovered the work, nearly had the developer arrested, and re-installed over 20,000 yards of dirt around the gas line. The Court noted that the duties owed by the utility and the developer to maintain a safe gas line reigned supreme. As such, the utility company was given compensatory damages for the dirt and $11,000 in punitives.

TCPA claim against homebuilder

Homeowners of newly constructed houses may be proactive with their contracts and their litigation. In WAYNE'S CONSTRUCTION, INC. v. WILLIAM JONES, ET AL., the Tennessee Court of Appeals upheld treble damages ($417,750) plus attorney fees against the homebuilder, who appealed based on the proof of damages. In what was certainly a battle of the experts, the Court held that the homeowners "were [not] required to adopt a wait and see attitude to see if the house was going to fall down before being able to come to court with proof that was sufficiently definite to support an award of damages." The contract specified a three-month timeframe, and despite repeated assurances, the homeowners dismissed the builder after five months. At the time of termination, major aspects of the home had not been constructed, including the gutters, painting, trim, driveway, and site grading. At that point, the homeowners had already paid the builders the full $330,000 specified in their construction agreement. Further, the house was replete with structural problems, mainly stemming from the failure to properly connect the foundation girders to shift the load to the piers. Thus, the Court has come to the aid of individuals contracting for new home construction, allowing them to fire homebuilders who fail to live up to their contractual obligations, mitigate damages, and collect damages in court.

Interestingly enough, the builder originally filed the suit and demanded payment for services to date. After reviewing the opinion, one wonders why the builder would initiate the litigation. Was it a preemptive strike? Did the court overstate the nature of the proof against the builder? Did the builder fail to inform its attorney of all the relevant facts?

Additionally, the opinion noted that the only issue on appeal was proof of damages. It's difficult to tell from this opinion, but one has to wonder why the TCPA claim itself was not at issue.

It's not a contract until the "By:" line is executed

An unexecuted written agreement can be binding, but only if there is mutual assent between the parties to the agreement. In TERRY PAUL, ET AL. v. MERIT CONSTRUCTION, INC., the Tennessee Court of Appeals held that a defendant general contractor could not enforce an arbitration provision contained in a contract that was partially filled out by the plaintiffs. The plaintiffs were were masonry subcontractors who had been working on the subject construction site for months, before the GC presented them with the standard form of Agreement between Contractor and Sub-Contractor. The facts discussed by the court indicate that there was evidence of an unresolved disagreement about the terms of the Agreement between the parties. One of the plaintiffs wrote their name in the "Subcontractor: ______" line of the acknowledgement in the Agreement, but did not execute the "By: ______" line. According to the Court, this did not constitute execution or mutual assent.

Perhaps the holding would have been different had the GC presented the Agreement before the plaintiffs began their work. That way, the GC could argue that the act of beginning work would manifest assent to the terms of the agreement. In this case, the Agreement was presented months after the start date, and therefore the act of continuing work merely manifested the intent to continue under the prior oral agreement.

Sellers must search and investigate the chain of title before purchasing land

This point is obvious, but in AARON BURKHART v. WELLS FARGO BANK WEST, N.A., ET AL., the Tennessee Court of Appeals held that the duty of a purchaser of land to discover and investigate matters of public record (in this case, a deed of trust at the courthouse) trumps the duty of the seller to disclose material facts affecting the property’s value known to the seller but not reasonably known to or discoverable by the buyer. Further, the Court held that failure to disclose said matters of public record does not constitute an unfair or deceptive practice under th Tennessee Consumer Protection Act, § 47-18-101 et seq.

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This blog relates to construction law as practiced in Tennessee.