Earl and Christa Ingram filed a lawsuit against Cendant Mobility Financial Corporation and associated parties for breach of contract, negligent and fraudulent concealment, negligence, misrepresentation, and violations of the Consumer Protection Act due to flooding issues in a residence they purchased. The Circuit Court granted summary judgment, which was affirmed by the Court of Appeals of Tennessee.
The case arose from the sale of a residence by Cendant, which had been built by John and Cassandra Dees. The Deeses provided a disclosure statement claiming no knowledge of water damage or flooding issues before selling to Cendant. An independent inspection by U.S. Inspect found no evidence of ongoing water penetration, although it noted some drainage issues. After these issues were reportedly fixed, Cendant purchased the residence and marketed it through Coldwell Banker Wallace, with designated agent Debra Yankey observing no water issues during her evaluations.
The Ingrams first viewed the property in August 2002 and, during a subsequent visit, detected a musty odor in the basement. They inquired about past water damage and were told by the broker that there had been none. After entering a sales contract on September 9, 2002, the Ingrams obtained their own home inspection on September 12, which also indicated no history or likelihood of flooding at the residence.
The Ingrams purchased a residence after conducting multiple inspections but encountered water intrusion in the basement shortly after moving in. They filed a complaint on December 1, 2003, against Cendant and the Deeses, alleging breach of contract, negligent and fraudulent concealment, negligence, willful and negligent misrepresentation, and violations of the Tennessee Consumer Protection Act and Residential Property Disclosure Act. The complaint accused the defendants of misrepresenting the property’s water management capabilities. Following the defendants' denial of the claims, Cendant filed a motion for summary judgment, which was granted by the trial court on May 19, 2005. The Ingrams appealed, raising issues regarding the court's decision on their claims for fraudulent misrepresentation, negligent misrepresentation, breach of contract, and violations of the Consumer Protection Act. The standard of review for summary judgment is de novo, with the burden on the moving party to negate an essential element of the claims or establish a conclusive defense. For fraudulent misrepresentation, the plaintiffs must demonstrate a false representation of a material fact made knowingly or recklessly, that they relied on this representation, and suffered damages. For negligent misrepresentation, the plaintiffs must show that the defendant provided false information without exercising reasonable care, leading to the plaintiffs' justified reliance on that information.
Plaintiffs allege that Ms. Yankey made misrepresentations regarding the Residence, asserting that Cendant is liable as her designated agent. Cendant argues that the Sales Contract includes a disclaimer of reliance on Ms. Yankey's statements, stating it encompasses all prior agreements and cannot be altered without written consent. The contract specifies that no party relied on any representations not included in the contract. Exculpatory clauses are enforceable in Tennessee, and since Ms. Yankey's alleged misrepresentations are not found in the contract, the reliance element for both fraudulent and negligent misrepresentation is negated.
Regarding the Deeses’ Disclosure, which stated no known water issues, plaintiffs contend it contains misrepresentations, thereby implicating Cendant. However, plaintiffs signed an acknowledgment releasing Cendant from liability for the Disclosure's accuracy, indicating they had the opportunity to investigate the disclosures and accepted the property "AS IS." This acknowledgment means the question of misrepresentation in the Disclosure is not a material fact, as plaintiffs waived Cendant's liability.
Cendant's motion for summary judgment is supported by evidence showing Ms. Yankey’s misrepresentations do not satisfy the reliance requirement, and that plaintiffs released Cendant from liability regarding the Disclosure. Additionally, plaintiffs claim Cendant fraudulently concealed prior flooding evidence, which requires proof of a duty to disclose and actual knowledge of the defect.
Cendant was unaware of any alleged defects in the residence, as established by undisputed facts. Cendant’s knowledge derived solely from disclosures by the Deeses, home inspections by U.S. Inspect, a real estate appraisal, and reports from WW and Ms. Yankey, none of which indicated flood damage or other defects. The Deeses’ Disclosure denied any awareness of water-related issues, U.S. Inspect found no ongoing water penetration, and Ms. Yankey’s report characterized the property's overall condition as "very good," noting no signs of water problems during her visits. Prior to closing, an inspection by the plaintiffs’ home inspector also revealed no dampness or moisture issues.
The plaintiffs' argument hinges on the claim that Ms. Yankey's knowledge of prior flooding should be imputed to Cendant, which is incorrect under Tennessee law, as Ms. Yankey was the seller's designated agent. Consequently, Cendant cannot be held liable based on Ms. Yankey's potential knowledge. The plaintiffs provided no further evidence of Cendant's awareness of any defects, leading to the conclusion that the Trial Court appropriately granted summary judgment against the plaintiffs regarding their fraudulent concealment claim.
Additionally, the plaintiffs alleged that Cendant's misrepresentations and fraudulent concealment, along with the condition of the residence, breached the Sales Contract. For a breach of contract claim, essential elements include an enforceable contract, nonperformance constituting a breach, and resultant damages. Both parties agree there was an enforceable contract, but the plaintiffs must demonstrate specific contractual guarantees about the residence's condition at the time of sale. However, the Sales Contract included an "as-is" clause, stating that neither the seller nor the agent made any warranties or representations about the property's condition, which the plaintiffs acknowledged, thereby undermining their breach of contract claim.
The Sales Contract states that closing the sale and accepting a deed or lease by the buyer signifies acceptance of the property's condition, releasing the seller from further obligations and waiving any buyer rights regarding property conditions. These clauses are enforceable unless there is fraudulent misrepresentation or concealment, as supported by case law. Cendant has successfully disproved the plaintiffs’ allegations of fraud, affirming the enforceability of the "as-is" clause. The plaintiffs also contest the summary judgment concerning a claim under the Tennessee Consumer Protection Act (TCPA), alleging that Cendant provided unverified information and misrepresented the property's condition. The TCPA allows individuals to seek damages for losses resulting from unfair or deceptive acts. While the TCPA does not define "unfair or deceptive act," it includes a catchall provision for acts deemed deceptive. Plaintiffs argue that liability under the TCPA does not require knowledge of misrepresentations; however, this has been rejected by the Tennessee Supreme Court. In Ganzevoort v. Russell, the court ruled that sellers are not liable for undisclosed defects if they had no knowledge and the purchaser could have identified them through inspection. The court emphasized that the definition of unfair or deceptive acts can vary, with some situations requiring knowledge or intent to deceive for liability.
The petitioner’s assertion that proof of deception under the Act does not require evidence of intent or knowledge contradicts the Act's language. The Court establishes that in cases where property defects are non-apparent and typically reflected in the purchase price, sellers are not liable if they provide all known information about the property's condition. In this instance, the realtor's actions were neither deceptive nor unfair. The TCPA does not impose liability if: (1) the defect is non-apparent, (2) the seller lacks knowledge of it, (3) the seller discloses all known property conditions, and (4) a buyer’s inspection would reveal the same information. The undisputed facts indicate that the defect was non-apparent; inspections by both Cendant’s and the plaintiffs’ home inspectors found no evidence of issues such as water penetration or dampness. Cendant had no knowledge of the hidden defect, relying on disclosures and inspection reports that did not indicate prior flooding or the defects claimed by the plaintiffs. The plaintiffs’ argument that knowledge of prior flooding by Ms. Yankey can be attributed to Cendant is not permissible under Tennessee law. Cendant provided all known information about the property and, consistent with inspection findings, the plaintiffs could not meet the standard required to prove their claim. Thus, the Trial Court's summary judgment in favor of Cendant on the TCPA claim is affirmed, with costs assigned to the plaintiffs.
