IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
July 18, 2006 Session
EARL INGRAM AND CHRISTA INGRAM v. CENDANT MOBILITY
FINANCIAL CORPORATION, CASSANDRA LEE DEES, AND JOHN L.
DEES, JR., AND UNDERWOOD HOME INSPECTION
Direct Appeal from the Circuit Court for Loudon County
No. 7188 Hon. Russell E. Simmons, Jr., Circuit Judge
No. E2005-01423-COA-R3-CV - FILED OCTOBER 5, 2006
Plaintiffs, house purchasers, sued defendant, seller, for breach of contract, negligent and fraudulent
concealment, negligence, wilful and negligent misrepresentation, and violations of the Consumer
Protection Act on the grounds the house was subject to flooding. The Trial Court granted summary
judgment. We affirm.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Circuit Court Affirmed.
HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the court, in which CHARLES D. SUSANO ,
JR., J., and SHARON G. LEE, J., joined.
Matthew J. Evans and John W. Elder, Knoxville, Tennessee, for appellants.
Ailsa Peppel Schuller, and Lars E. Schuller, Knoxville, Tennessee, for appellee.
OPINION
This action arises out of the conveyance of a residence (the “Residence”) by Cendant
Mobility Financial Corporation (“Cendant”) to Earl and Christa Ingram, and the subsequent flooding
in the basement and living areas of the Residence. The original builders and owners of the Residence
were John and Cassandra Dees. They built the Residence with John Dees acting as the general
contractor. After living in the Residence for four months, the Deeses sold it to Cendant.
As part of the sales transaction, the Deeses provided a signed disclosure statement
to Cendant, which stated they were not aware of any “water damage, flooding, drainage or grading
problems.” The Disclosure further provided, “Seller certifies that the information herein is true and
correct to the best of the Seller’s knowledge as of the date signed by the Seller.”
Cendant contracted with U.S. Inspect, an independent real estate inspection firm, to
inspect the Residence, which occurred on February 7, 2002. The inspector reported that there was
no evidence of “ongoing water penetration” in the basement. The report also informed that some
of the Residence’s down-spouts were disconnected and others were missing extensions and splash-
blocks, which allowed “roof run-off to empty onto the ground surface at the foundation walls.” The
inspector further noted the exterior wall surfaces were composed of stacked stone and that there were
some gaps where the stone and soffit join at the front of the house. After a second inspection of the
Residence, the inspector reported that these problems had all been repaired.
After receiving the Disclosure and the inspection reports, Cendant purchased the
Residence from the Deeses, and entered into a “Sales Agency Contract” with Coldwell Banker
Wallace & Wallace (“WW”) to market the property. WW’s initial disclosure to Cendant listed
Debra Yankey as the “Designated Agent of the Seller.” Yankey held this position from April 15,
2002 until closing. Ms. Yankey conducted a preliminary evaluation of the Residence to determine
its readiness to be shown to prospective buyers, and saw no water in the Residence when she
checked the property. She did not perceive any symptoms of water problems in the basement during
her subsequent visits to the Residence, and on April 17, 2002, she prepared a Cendant “Vacant
Property Report” in which she described the “Overall Condition” of the Residence to be “Very
good,” and reported the condition of the basement as “Good.”
Earl and Christa Ingram first viewed the Residence in August of 2002, and were
accompanied by Portia West, a broker affiliated with WW. On their second visit, the Ingrams
noticed a musty odor in the basement, and they asked Ms. West to ask Ms. Yankey if there had been
water damage in the basement. West told the Ingrams there had been no water damage. On
September 9, 2002, the Ingrams and Cendant entered into a “Contract for Sale and Purchase of Real
Estate” (the “Sales Contract”). The Ingrams obtained their own home inspection, and they asked the
inspector to look for water damage. On September 12, 2002, the home inspector’s report indicated
neither a history of flooding at the Residence nor a propensity for flooding. After receiving the home
inspection and touring the Residence on three to five separate occasions, the Ingrams closed the
purchase of the Residence, but after moving into the Residence, they experienced water intrusion
into the basement in February 2003.
On December 1, 2003, the Ingrams filed a Complaint against Cendant, Cassandra
Lee Dees, and John L. Dees, Jr., for claims for “breach of contract, negligent and/or fraudulent
concealment, negligence, willful and/or negligent misrepresentation as well [as] for violations of
Tennessee’s Consumer Protection Act and Residential Property Disclosure Act.”
The Complaint charged that the defendants “willfully, knowingly, and/or negligently
misrepresented the ability of the property to carry water and/or the flooding problems behind and
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beside the plaintiffs’ home.” After defendants filed an Answer denying the plaintiffs’ claims,
Cendant filed a Motion for Summary Judgment on February 22, 2005. On May 19, 2005, the Trial
Court entered an Order granting summary judgment in favor of the defendant.
Plaintiff raises these issues on appeal:
A. Whether the Circuit Court erred in granting summary judgment against the
Plaintiffs as to their claims for fraudulent and negligent misrepresentation.
B. Whether the Circuit Court erred in granting summary judgment against the
Plaintiffs as to their claim for fraudulent concealment.
C. Whether the Circuit Court erred in granting summary judgment against the
Plaintiffs as to their claim for breach of contract.
D. Whether the Circuit Court erred in granting summary judgment against the
Plaintiffs as to their claim for violation of the Tennessee Consumer
Protection Act.
“The standard of review of a summary judgment determination is de novo without
any presumption of correctness accorded the trial court’s judgment.” Guy v. Mutual of Omaha Ins.
Co., 79 S.W.3d 528, 534 (Tenn. 2002). The moving party must do more than make conclusory
assertions “that the nonmoving party has no evidence.” Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn.
1993). Instead, the moving party must either “affirmatively negate an essential element of the
nonmoving party’s claim” or “conclusively establish an affirmative defense that defeats the
nonmoving party’s claim.” Id. at 215 n.5.
Plaintiffs argue that Cendant made fraudulent misrepresentations to the plaintiffs
regarding the Residence. Cendant allegedly made these misrepresentations through Ms. Yankey and
the Deeses’ Disclosure:
In order to sustain a cause of action for fraudulent misrepresentation, the plaintiff
must show that: 1) the defendant made a representation of an existing or past fact;
2) the representation was false when made; 3) the representation was in regard to a
material fact; 4) the false representation was made either knowingly or without belief
in its truth or recklessly; 5) plaintiff reasonably relied on the misrepresented material
fact; and 6) plaintiff suffered damage as a result of the misrepresentation.
Metro. Gov’t of Nashville and Davidson County v. McKinney, 852 S.W.2d 233, 237 (Tenn. Ct. App.
1992); see also, Edwards v. Travelers Ins., 563 F.2d 105, 110-13 (6th Cir. 1977) (citing numerous
Tennessee cases).
Alternatively, the plaintiffs argue that if the alleged misrepresentations were not
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fraudulent they were at least negligent.
Liability for negligent misrepresentation will result, if defendant is acting in course
of his business, profession, or employment, or in transaction in which he has
pecuniary interest, and defendant supplies faulty information meant to guide others
in their business transactions, defendant fails to exercise reasonable care in obtaining
or communicating information, and plaintiff justifiably relies upon information. In
order to prevail in a suit for negligent misrepresentation, the plaintiffs must establish
by a preponderance of the evidence that the defendant supplied information to the
plaintiff; the information was false; the defendant did not exercise reasonable care
in obtaining or communicating the information and the plaintiffs justifiably relied on
the information.
Williams v. Berube & Assocs., 26 S.W.3d 640, 644-45 (Tenn. Ct. App. 2000) (citations omitted).
The plaintiffs allege that Ms. Yankey made misrepresentations regarding the
Residence. They argue Ms. Yankey was Cendant’s designated agent; therefore, Cendant is liable for
her misrepresentations. Cendant counters that the Parties’ Sales Contract expressly disclaims
reliance on Ms. Yankey’s representations. The relevant portion of the Sales Contract provides,
This contract incorporates all prior agreements between the parties, contains the
entire and final agreement of the parties, and cannot be changed except by their
written consent. Neither party has relied upon any statement or representations
made by the other party or the sales representative bringing the parties together
not contained herein.
(Emphasis added). Exculpatory clauses are valid in Tennessee and are interpreted and enforced
according to the plain meaning of their terms. Ouzts v. Womack, 160 S.W.3d 883, 885 (Tenn. Ct.
App. 2004). The Sales Contract does not contain any of the representations allegedly made by Ms.
Yankey. Therefore, the contractual language quoted negates the reliance element of both fraudulent
and negligent misrepresentation as to Ms. Yankey’s alleged misrepresentations.
As to the alleged misrepresentations made through Deeses’ Disclosure, Cendant gave
plaintiff the Deeses’ Disclosure, which stated that the Deeses were not aware of any “water damage,
flooding, drainage or grading problems.” The plaintiffs argue that the Disclosure contains
misrepresentations; therefore, Cendant made misrepresentations by providing this Disclosure to the
plaintiffs.
Plaintiffs, however, released Cendant from responsibility or liability for the accuracy
of this Disclosure. When Cendant provided this and other disclosure documents to the plaintiffs, the
plaintiffs signed an acknowledgment which expressly refers to the Disclosure and states,
Buyer(s) acknowledge that they have had, or will have had, prior to closing, the
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opportunity to investigate the subject matter of the aforementioned disclosures on
their own and have, or will have, investigated such to their satisfaction, or waived
such investigation.
Neither Cendant Mobility nor Cendant Financial Corporation have
independently verified the contents of these documents and are not responsible
for their accuracy.
Buyer(s) acknowledge and agree that the purchase price of the property and other
terms and conditions of this purchase agreement were negotiated with full knowledge
and disclosure of the contents of the aforementioned disclosures; that said purchase
price reflects the agreed-upon value of the property AS IS; including the
aforementioned disclosures; to take the property subject to the disclosures; and that
Cendant Mobility shall have no responsibility or liability therefor.
(Emphasis added).
Thus, the issue of whether the Disclosure contains misrepresentations is not an issue
of material fact because the plaintiffs released Cendant from responsibility or liability for
inaccuracies in the Disclosure.
We affirm the Trial Court on this issue because Cendant supported its summary
judgment motion by presenting evidence showing that Ms. Yankey’s alleged misrepresentations
cannot be used to satisfy the reliance element. Cendant also established that plaintiffs released it
from any liability for any alleged inaccuracies in the Disclosure.
Plaintiffs also allege that Cendant fraudulently concealed evidence of prior flooding.
In this regard, “The tort of fraudulent concealment is committed when a party who has a duty to
disclose a known fact or condition fails to do so, and another party reasonably relies upon the
resulting misrepresentation, thereby suffering injury.” Chrisman v. Hill Home Dev., Inc., 978
S.W.2d 535, 538-39 (Tenn. 1998). Moreover a plaintiff must show that the defendant had actual
knowledge of the defect allegedly concealed. Akbari v. Horn, 641 S.W.2d 506, 507 (Tenn. Ct. App.
1982).
The undisputed facts establish that Cendant did not know of any alleged defect.
These facts are undisputed: (1) Cendant’s knowledge of the Residence came exclusively from
disclosures provided by the Deeses, home inspections conducted by U.S. Inspect, a real estate
appraisal, and reports filed by WW and Ms. Yankey; (2) neither these documents nor those who
prepared them provided any information to Cendant regarding flood damage or the other defects
complained of by the Plaintiffs; (3) The Deeses’ Disclosure stated that they were not aware of any
“water damage, flooding, drainage or grading problems”; (4) U.S. Inspect reported that there was no
evidence of “ongoing water penetration” in the basement and “no apparent problem” with the
basement floor; (5) Ms. Yankey’s “Vacant Property Report” to Cendant described the “Overall
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Condition” of the Residence to be “Very good,” and reported the condition of the basement as
“Good”; (6) Ms. Yankey did not perceive any symptoms of water problems in the basement during
her visits to the Residence; and (7) prior to closing, the plaintiffs’ home inspector found no evidence
of dampness in the basement and no evidence of moisture in the drywall. The only conclusion to
be drawn from these undisputed facts is that Cendant did not know of any alleged defects.
Apparently, the plaintiffs’ theory is dependant on the assertion that Ms. Yankey’s
alleged knowledge of prior flooding is imputed to Cendant.1 Cendant’s Statement of Undisputed
Material Facts lists 126 facts supporting its position, and the plaintiffs dispute only three of these
facts. These three factual disputes all arise from the plaintiffs’ belief that Ms. Yankey’s knowledge
is imputed to Cendant. Ms. Yankey, however, was the designated agent of the seller; therefore, Ms.
Yankey’s knowledge cannot be imputed to Cendant. Tenn. Code Ann. § 62-13-406(c) (1997)
(“There shall be no imputation of knowledge or information among or between clients, managing
broker and any designated agent(s) in a designated agency situation”).2 Other than allegations of Ms.
1
During the summary judgment hearing, the Circuit Court judge and Plaintiffs’ counsel had
the following exchange:
The Court: I did not find anything . . . in what I was given that indicated there was any
evidence that could be introduced that the information that Yankey had was ever
transmitted to Cendant. Do you have anything on that . . . or are you depending on the
agent’s knowledge being the principal’s knowledge?
Plaintiffs’ Counsel: Yes, Your Honor, I don’t have any proof that shows that, (A), anyone
from Ms. Yankey’s office told this to Cendant or, (B) that Cendant even asked.
2
WW gave Ms. Yankey sole responsibility for marketing the Residence. Therefore, Ms.
Yankey was the “designated agent” for purposes of § 62-13-406(c). Tenn. Code Ann. § 62-13-
102(7) (Supp. 2005) (defining “designated agent” as “a licensee who has been chosen by such
licensee’s managing broker to serve as the agent of an actual or prospective party to a transaction,
to the exclusion of other licensees employed by or affiliated with such broker”). Cendant entered
into a written agency agreement with WW. Therefore, Cendant satisfies the definition of “client”
for purposes of § 62-13-406(c). Tenn. Code Ann. § 62-13-102(5) (Supp. 2005) (defining “client”
as “a party to a transaction with whom the broker has entered into a specific written agency
agreement to provide services”).
The plaintiffs argue that § 62-13-406(c) does not prevent imputation of knowledge between
a designated agent and that agent’s client, but only prevents imputation from a designated agent to
the managing broker, from the managing broker to other designated agents, and from those agents
to their clients. (Reply Brief of Appellants, p. 4). The plain language of the statute, however, makes
no such distinction. State v. Blackstock, 19 S.W.3d 200, 210 (Tenn. 2000) (“The legislative intent
and purpose are to be ascertained primarily from the natural and ordinary meaning of the statutory
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Yankey’s knowledge, the plaintiffs have presented no evidence that Cendant knew of the alleged
defects. Based on the foregoing, we conclude the Trial Court correctly granted summary judgment
against the plaintiffs as to their fraudulent concealment claim.
Next, plaintiffs argue that Cendant’s alleged misrepresentations and fraudulent
concealment as well as the allegedly defective condition of the Residence constitute a breach of the
Parties’ Sales Contract. “‘The essential elements of any breach of contract claim include (1) the
existence of an enforceable contract, (2) nonperformance amounting to a breach of the contract, and
(3) damages caused by the breach of the contract.’” ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183
S.W.3d 1, 26 (Tenn. Ct. App. 2005) (quoting Custom Built Homes v. G.S. Hinsen Co., Inc., No.
01A01-9511-CV-00513, 1998 WL 960287, at *3 (Tenn. Ct. App. Feb. 6, 1998)). “The interpretation
of [a] written agreement is a matter of law and not of fact.” APAC-Tennessee, Inc. v. J.M.
Humphries Const. Co., 732 S.W.2d 601, 604 (Tenn. Ct. App. 1986). The Parties do not dispute that
they entered into an enforceable contract. Thus, the issue is whether the alleged misrepresentations,
fraudulent concealment, and allegedly defective condition of the Residence constitute a breach of
the contract.
The plaintiffs’ theory necessarily requires the existence of some guarantee in the Sales
Contract regarding the condition of the Residence at the time of the sale. The Sales Contract,
however, contains an “as-is” clause:
Neither Seller nor Seller’s agent has made any warrantees or representations, either
expressed or implied (except as may have been given to the Buyer(s) in writing[)],
as to the condition of the premises. Buyer(s) acknowledge that they have the
opportunity to inspect the property or have the same inspected by others on their
behalf except for any repairs specifically required to be made by Seller in accordance
with the terms of this Agreement. Buyer(s) understand that they are purchasing
the property in “As-Is” condition.
(Emphasis added). The Sales Contract further provides,
The closing of this sale and acceptance of a Deed or Lease Agreement by Buyer(s)
shall constitute acknowledgment that the condition of the premises and systems
contained therein are acceptable and Seller shall have no further responsibility or
obligation concerning the property, and Buyer(s) waive all rights they may have
concerning the condition of the property.
(Emphasis added). The foregoing clauses are valid and enforceable in the absence of fraudulent
misrepresentation and concealment. Chadwick v. Spence, No. W2003-00931-COA-R3-CV, 2004
WL 298367, at *5 (Tenn. Ct. App. Feb. 11, 2004); Edmondson v. Coates, No.
language, without a forced or subtle interpretation that would limit or extend the statute’s
application.”).
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01-A-01-9109-CH000324, 1992 WL 108717, at *11 (Tenn. Ct. App. May 22, 1992); Simmons v.
Evans, 206 S.W.2d 295, 296 (Tenn. 1947). Cendant has successfully negated the Plaintiffs’ claims
of fraudulent misrepresentation and concealment. Accordingly, the “as-is” clause is enforceable, and
we affirm the Trial Court on this issue.
Finally, plaintiffs argue that summary judgment should not have been granted on their
claim for violation of the Tennessee Consumer Protection Act (“TCPA”). They argue that the Act
was breached by Cendant when it provided unverified information to the plaintiffs and
misrepresented the condition of the property. The TCPA authorizes
[a]ny person who suffers an ascertainable loss of money or property, real, personal,
or mixed, or any other article, commodity, or thing of value wherever situated, as a
result of the use or employment by another person of an unfair or deceptive act or
practice declared to be unlawful by this part, [to] bring an action individually to
recover actual damages.
Tenn. Code Ann. § 47-18-109(a)(1) (2001). The TCPA does not define the phrase “unfair or
deceptive act or practice,” but § 47-18-104(b) provides a list of specific examples. One of these
examples is “[e]ngaging in any other act or practice which is deceptive to the consumer or to any
other person.” Tenn. Code Ann. § 47-18-104(b)(27) (Supp. 2005). The plaintiffs rely upon this
broad catchall provision as well as Smith v. Scott Lewis Chevrolet, Inc., 843 S.W.2d 9, 12 (Tenn. Ct.
App. 1992) which holds that “an unfair or deceptive act need not be willful or knowingly made to
recover actual damages under the Consumer Protection Act.” Essentially, plaintiffs argue that
liability under the TCPA is never dependant upon evidence of knowledge; therefore, Cendant may
be held liable even if it had no knowledge of the alleged misrepresentations and defects.
The Tennessee Supreme Court has rejected this argument in Ganzevoort v. Russell,
949 S.W.2d 293 (Tenn. 1997). In Ganzevoort, the plaintiff purchased a house and lot from the
defendants, and prior to closing, the home was inspected by numerous professionals. They found
only minor defects, which the seller repaired. After closing, however, the plaintiff discovered
extensive water damage, and brought an action against the sellers and their real estate agent, charging
that Tenn. Code Ann. § 47-18-104(b)(27) had been violated. Id. at 296. The Trial Court found for
the plaintiff, and the Court of Appeals reversed. Id.
The Tennessee Supreme Court affirmed the Court of Appeals. Id. at 300. The
Supreme Court held that the sellers’ agent3 was not aware of the water damage; therefore, he did not
engage in an unfair or deceptive act. The Court’s reasoning relied on Klotz v. Underwood, 563 F.
Supp. 335 (E.D. Tenn.1982) for the standard that “the Tennessee Consumer Protection Act imposes
3
The home was inspected by an F.H.A. home inspector, an independent real estate appraiser,
a termite inspector, and the realtors.
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no liability where the seller had no knowledge of the hidden defects and where an inspection by the
purchaser would reveal the same information known by the seller.” Ganzevoort, 949 S.W.2d at 299.
Responding to a Petition, the Supreme Court further reasoned,
The conclusion that the same definition does not apply in every case is consistent
with the varying provisions of the Act defining unfair and deceptive acts in particular
situations. Tenn. Code Ann. § 47-18-104(b)(1-26) and (28-30). A review of these
provisions shows that though in most situations actionable fault is not a prerequisite
to liability, in others, knowledge is a prerequisite, and in still others, intent to deceive
is the standard. Consequently, the petitioner’s second contention, that under the Act
proof of deception is never dependent upon evidence of intent or knowledge, is
contrary to the plain language of the Act.
The Court’s opinion in this case defines the standard applicable to this case
and other similar cases in which the general deterioration and non-apparent defects
incident to the nature and age of the property being sold ordinarily are reflected in the
purchase price, and in which the purchaser is given all the information regarding the
condition of the property known by the person charged and not apparent to the
purchaser. The acts of the realtor in this case were not deceptive or unfair.
The TCPA imposes no liability upon a seller of real estate where (1) the defect at
issue is non-apparent, (2) the seller had no knowledge of the hidden defect, (3) the purchaser is given
all the information regarding the condition of the property known by the seller, and (4) an inspection
by the purchaser would reveal the same information known by the seller.
The undisputed facts of this case satisfy these foregoing conditions. Since the defect
at issue was non-apparent, Cendant’s home inspector reported that there was no evidence of
“ongoing water penetration” in the basement and “no apparent problem” with the basement floor.
In addition, the plaintiffs’ home inspector found no evidence of dampness in the basement and no
evidence of moisture in the drywall. Cendant had no knowledge of the hidden defect. Cendant’s
knowledge of the Residence came exclusively from disclosures provided by the Deeses, home
inspections conducted by U.S. Inspect, a real estate appraisal, and reports filed by WW and Ms.
Yankey. None of these sources indicated flood damage or the other defects complained of by the
Plaintiffs. Plaintiffs’ theory is dependant upon the belief that Ms. Yankey’s alleged knowledge of
prior flooding is imputed to Cendant, but such imputation is barred by § 62-13-406(c). Cendant gave
the plaintiffs all the information regarding the condition of the property known by Cendant, and
provided plaintiffs with the Deeses’ Disclosure and all of U.S. Inspect’s inspection reports.4 The
plaintiffs’ inspection revealed the same information known by Cendant, and plaintiffs’ home
4
The only information in Cendant’s possession not provided to the Plaintiffs were Cendant’s
real estate appraisal and reports filed by WW and Ms. Yankey, but the Parties do not dispute that
these documents contained no indication of the alleged defects.
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inspector found no evidence of dampness in the basement or in the drywall. This is the same finding
reported by Cendant’s home inspector, and based upon these undisputed facts, plaintiffs cannot
satisfy the standard established in Ganzevoort. Accordingly, we affirm the Trial Court on the
summary judgment as to plaintiffs TCPA claim.
We conclude that the Trial Court correctly granted Summary Judgment on all issues
raised by the plaintiffs, and we affirm the Trial Court’s Judgment and remand, with the cost of the
cause assessed against Earl and Christa Ingram.
______________________________
HERSCHEL PICKENS FRANKS, P.J.
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