Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Some court decisions provide little instruction for future disputes.  Other court decisions give you a great road map for analyzing your claims.  Every now and then you find a decision where the court is split and you wonder which side is right, such as the opinion in Davis v. McGuigan (pdf), issued by the Supreme Court Tennessee on October 26, 2010.

A husband and wife alleged that the appraiser, who was hired by the bank financing the husband and wife’s home construction, recklessly overestimated the value of their proposed construction and that they reasonably relied on the appraisal value to their detriment. The intermediary appellate court affirmed the trial court’s ruling, holding that an appraisal is an "opinion" that cannot form the basis for a fraudulent misrepresentation claim. 

In the (3-2) opinion by the Supreme Court of Tennessee, the majority held that an "opinion" can form the basis of a fraudulent misrepresentation claim. The majority also concluded that genuine issues of material fact precluded summary judgment as to the husband and wife’s claims against the appraiser.  The dissent reached a different conclusion as to the facts of the case: "Even though an opinion can provide the basis for a fraudulent misrepresentation claim, the undisputed facts in this record, and the inferences reasonably drawn from these facts, support only the following conclusions."

The opinion in Davis is 32 pages with both the majority and dissent opinions.  The majority opinion provides a good road map for what elements are required to prove an intentional misrepresentation claim, including an analysis of each element and the applicable factual allegations.  The dissent opinion provides a good road map of proof required to establish summary judgment and to shift the burden of production to the non-moving party.

If you are a legal practitioner, the Davis decision is worthy of a read (although it may take you some time to fully digest the two opinions).  If you are an owner, developer, seller or appraiser, be warned that opinions may be used to establish an intentional misrepresentation claim.

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Every construction litigator in the residential arena knows that a state's consumer protection laws are good grounds for disputes.  Will my client get treble damages?  Will they recover attorney fees for deceptive trade practices?  Does my client have any defenses to these types of claims?

In Fayne v. Vincent (pdf), the Supreme Court of Tennessee held that the Consumer Protection Act applied to real estate professionals engaged in the sale of their personal residence. The case involved problems with a septic tank that were discovered after sale of the residence to the purchasers.  Mr. Vincent was a builder and developer and his wife was a realtor. Mr. Vincent was the developer of the neighborshood and he constructed the home in question, moving into the house after it was completed. Mrs. Vincent signed the Tennessee Residential Property Condition Disclosure Statement in her dual capacity as owner of the property and as realtor for the property.

After the purchasers moved into the home, they began to notice odorous fluid seeping from around the septic tank. After investigation, the purchasers filed suit against the builder and the realtor for various claims including negligent misrepresentation, fraud, deceit, and violation of the Tennessee Consumer Protection Act.

Following a two-day jury trial in the trial court, an appeal to the Court of Appeals, a remand back to the trial court, and a subsequent appeal, the Supreme Court held that the sale of the home was covered by the Tennessee Consumer Protection Act (TCPA). Specifically, the Court recognized that the TCPA does not apply to sellers who are “not in the business of selling property as owners or brokers” and therefore that “persons making an isolated sale of their home [is] not covered.” The Court reasoned:

We adhere to the holding ... that homeowners participating in the casual and isolated sale of their personal residence and not in the conduct of trade or commerce cannot be sued for damages under the TCPA. This principle applies to developers, contractors and realtors who are selling their personal residence in a casual or isolated sale and who are not performing or providing professional services to facilitate or finalize the sale. However, we have also concluded that developers, contractors, and realtors cannot insulate themselves from liability under the TCPA simply by owning and briefly residing in a house before they offer it for sale as their personal residence.

Accordingly, the Supreme Court held that the TCPA applied to the facts of this case.

The Fayne case is a good reminder to developers, contractors, and realtors, as well as to purchasers of residential property, to know and understand the full breadth of your state’s consumer protection laws.  Imagine the case of where verbal abuse by the builder against a purchasing couple gives rise to a claim for intentional infliction of emotional distress and consumer protection act violations.  It happens.

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