# FILED

May 28, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk WILLIAM H. BUFORD a nd wife, ) ROSALYN BUFORD, ) ) Plaintiffs/Appell

ants, ) Appeal No.

) 01-A-01-9806-CH- 00325 v. ) ) Davidson Chancery MARGIE M. CUNNINGHAM, ) No. 96-2887-I ) Defendant/Appellee. ) )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE CHAN CERY COURT FOR DAVIDSON COUNTY AT NASHVILLE, TENNESSEE

THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

KIRK C. WAITE Mooreland Mansion 7100 Executive Cente

r Drive P. O. Box 1966 Brentwood, Tenn

essee 37024-1966 ATTORNEY FOR PLAINTIFFS/APPELLANTS

DANIEL L. WISCHHOF Wischhof & Allen Glancy Squar

e, Suite 207 110 Glancy Street Goodlettsville, T

ennessee 37072 ATTORNEY FOR DEFENDANT/APPELLEE

REVERSED AND REMANDED

WILLIAM B. CAIN, JUDGE-2- 

# OPINION

This appeal concerns a s uit b y appellants aga

inst appellee asser

ting fraud and misrepresentation in the sale of a house.
Margie M. Cunningham, a 72 year old wido w, owned a house

and lot located at 6036 Cane Ridge Road, Anti och, D avidson County, Tennes see. On September

18, 1995, she listed her property fo r sal e with Barnes Rea l Estate Services through its affiliate broker, Rick Messick. At the time she listed her property for sale she cause

d to be completed and signeda Tennessee Residential Property Condition Disclosure

Form as requir

ed byTennessee Code

Annotated section 66-5-201, et seq. Among t he questi ons in this discl osure form was ". . . are you (se

ller) aware of

any of the follow

ing? . . . 10. Flooding, drainage or grading problems" to which question Mrs. Cunningham responded "no".

On September 28, 1995, William H. Bufordand wife Rosalyn Buford executed an offer to purchase th e property and acknowl edged rec eipt of the discl osur e form.

In May of 1995, Mrs. Cunningham had been informed by

Cook's Pest Control that there was water under the house . In order to cor rect the water problem she had Cook's Pest C

ontrol install a vapor barrier under the house. During the September

1995 negotiations f

or the pur chase of the house, Mr. Buford noticed water sta

nding on the plastic

vapor barrier

under the house near the entrance to the crawl space.

Atthis poin t in th eir re latio nshi p, the terms of the contract between the parties and the sequence of e vents leading up to the O ctober 31, 1995 closin

g become vital. The offer of Mr. and Mrs. Buford, dated September 28, 1995, wa s made on a copy o f the "Contract for Sale of Real Estate" which was a printed form supplemen t ed by handwritte n additions thereto as

indicated infra. The pertinent provisions of

the offer by th

e Bufords are as f

ollows:1 This last sentence is handwritten and initialed by "M.C." (Margie Cunning ham).

-3- 12. CONDITION OF PREMISES : The Seller wa rrants that the * * * improvements, i n cluding * * * plumbing (including water heater,

wells and septic syste

m) * * * shall be in good repair and wor king order when Buy

er closes this sale. Buyer ha s the privilege and RE SPONSIBILI

TY to inspect these items prior to closing,at Buyer's ex pense, and any repairs required

to be made pr

ior to cl osing shall be made by Seller at Seller's expens e. CLOSING OF SALE CONSTITUTES ACCEPTANCE OF THESE ITEMS BY BUYER, AND SELLERS, AG ENTS OR BROKERS SHALL HAVE NO LIA

BILITY THEREAFTER. 13. REPAIRS/HOME

INSPECTION. * * * Purchaser does ( X) desire to have a Professional Inspection of house. * * * Sale conditioned upon Purchaser recei ving an acceptable

report from inspector and if purc hase r finds the reportunacceptable then purchaser shall give Seller notice of unacceptable

conditions and shall

give seller opportuni

ty to make the nec essary r epa irs or contract bec omes null and void. 1 * * * SELLERS REPAIRSON ITEM 12, 13, 22 NOT TO EXCEED

1,000.00. * * * 15. SELLER REPRE SENTATIO NS. Seller re

pr esents, t o the best of

their knowledge, that: * * * (b) The property has not been damaged or

affected by f

lood, storm, or

run-off. * * * The determi

nation by Buyer that any of these

matters is in fact materi

ally untrue shal

l entitle Buyer

to rescind this contractand receive refu

nd of theEarnest Money or to keep the contract in force

and accept the Pro

pe rty wi th such exceptions. Seller shall have no responsibility f or these matters afte

r closing. * * * 21. ENTIRE AGREEMENT. This instr umen t contains th e entire agree ment between the parties and no add ition deletion or modifica tion h ereto shall be eff

ective unless reduc

ed to writing and signed by both parties. Thereare no oral or other collat eral con ditions, agreements, or representations, all such having been incor

po rated and resolved i

nto this agreem

ent. Buyer has not reli ed on any other oral or written re presentations, and except as otherw is e specified herein, thi s property is purchased "AS IS" and neither Se ller nor Agent makes or implies any

warranties as to the condition of the premises, except as provid ed herein.

Items 22 and 23 are entitled "Miscellaneous" and "Addendum(s)"-4-

respec tively. Under item 22 "Miscellaneous" app

ears the following handwritten provision init ialed by Mrs. Cunn ingh am: "Water and moisture problem in crawl space and under to b e corrected."

Item 23 "ADDENDU

M(S)" conta

in s the following handwritten provision with an arrow re

ference back to it

em 22 to wi t: "Sellers to correct water/moisture

in crawl space a

nd Buyer to sign at

closing acceptance

of this item." This provision in p aragraph 2 3 is likewise initial ed by Margie Cunningham.

Mrs. Cunningham signed her acceptance o

f the Buford offer

on September 29, 1995 with th e purchase price bein g $226,000.

The record is not completely clear asto exactly when these handwritten provisions of the co ntrac t initialed by Ma rgie Cunningham were put on the contract, though one would assume the date to have been September 29, 1995. At a ny rate, the provisions were clearly in the contract at the time the par t ie s closed the transact

ion on October 31, 199 5.

The Bufords engaged The Home Team Inspection Services to inspect the hous e pursuant to their contractual right. This inspection was conducted October 5, 1995, a

nd a written report to the plaintiffs was issued the follo wing day. This re

port provided in part: GENERAL DESCRIPTIO N: * * * The home was situated on a lightly sloped lo t. The gener al gra de aro und t he ho me appeared to be adequate to dir ect rain wate

r away from the foundation. * * * FLOOR STRUCTURE : * * * Note: Water was ent ering the front foundation wall whe

re the plumbing

and wiring to

the w ell penetrate the found ation. This area

should be seal/pointed and the foundation vents le ft open so as to allow the crawl space to air out. Moisture was also present on the concrete blocks unde

r the front porch. This may have been the result of the earli

er heavy rains

from the tropical stor m Opal. CRAWL SPACE: The cr awl space was ac

cessible at the tim e of the inspection. T he crawl space w

as not dry at th e-5- time of the inspection. T he moisture appe

ared to b e the result of water enteri

ng through the

electrical condui

t going to the well in the front yard. T he re were no other d efects observ ed at the time of t he inspection. * * * Recomme

ndation: The electrical

conduit should

be properly sealed and the hole in the foun dation wall (for the con

duit and water supply

lines), should be sea

led.
After receiving the report from The Ho me Te am Inspection Service, Mrs. Cunningham

employed a

Mr. Nash

to do the repairs re

commended

by the appel lants' inspector. Prior to closing, Mr. D

enny, a realt

or representing the Bufords, informed them

that the recom

mended repair

s had been accom

plished. Mr. Nash delivered confirming docu mentation direc

tly to the Bufords. W

ithout further inquiry or furth

er inspection, the B ufords chose to closethe purchase as scheduled and si gned a writ ten fo rm a c cepting the property in its state at that time.

Mr. Buford testified th at after the closi

ng on October 31, 1995 , prior to the transfer of possession, he attempted to enter the crawl space under

the house for further inspection. The crawl space door w as lo cked and Mrs. Cunningham

did not have a key.

It is admitted b

y all parties a

nd clearly established by the

undisputed record tha

t finding of fact number

12 by the trial court is in error. This finding states: "The defendant pr evented plaintiffs f

rom inspecting the crawl space under the house prior to the clos ing of the transaction."

The evidence not only

preponderates aga

inst th is finding of the trial court but indeed, the evidence is conclusive that the effort by Mr. Buford to enter the crawl space actually

occurred after t

he closing and within t

he 19 day period between the closing of the tra nsaction and the tim

e the Bufords a

ctually to ok posses sion o f the pr operty.

After the plaintiffs took pos session of the property

in November 199 5 they discovered water

standing on the vapor barrier and under the vapor barrier in the crawl space.-6- Plaintiffs th en empl oyed var ious co ntract ors to i nspect the pro perty, make es timate s and p resen t plan s for a llevi ating the wa ter pr oble m.

Plaintiffs claim damages in diminution of value o f the property of $15,000.

Th e abov e recitation of fa ct essentially parallels the findin g of the ch ancellor

except as to the erroneous finding relative to number 12 discussed above.

The chancellor made the foll owing conclusion s of law:

1. The agreement of

th e pa rties, in the contr

act for the sale of the property, relating to the correction of the water problem under the house is a va

lid and binding agreement among the parties. 2. The def

endant paid Nash Home Maintenance $265.0 0 to repair the water problem. However, the water problem was not

corrected. 3. The defendant's liabil ity for the correcti

on of the water problem, as pr

ovided in the

contract for

the sale of the property is not to exceed $1,000.00. 4. The incorrect statem ents made

by the defendant on the Tennessee Residential Property Condition Disclosure form, with respe ct to the condition of the p roperty as to flooding, drainage, or grading problem s wer e effectively deleted by theparties agreem ent in the contract f

or the correction of the w

ater problems

. Judgment was rendered in f

avor of the plaintiff in t

he amount of $1, 000 and costs.

Plaintiffs appealed this lim ited judgment.

The defendants soug

h t complete reversal of the a

ward, or, in the alternative, credit for the $265 p aid to Nash H ome Mai nten ance i n seek ing t o corr ect th e wate r prob lem.

We respectfully d

isagree with the chancellor's findi ng that the defendant is liable to the plaint

iffs in the

a mount of $1,000 be

cause of the contractprovisions. The

suit is for fraud and misr

epresentation. T

he chancellor-7-

made no findings as to either f raud or misreprese

ntation, and no finding

as to reasonable reliance.

An action for fraud requires an intentional misre pre sentation of a material fa

ct, knowledge of

the representatio

n's falsity and an injury caused by reasonable

reliance upon the rep resentation. Dobbs v . Guenther , 846 S.W.2d 270, 274 (Tenn. App. 1992).

In order to prevail in a suit for negligent misrepresentation the plaintiffs must establish by a pr

eponde ranc e of the evidence that the defendant supplied information

to the plaintiff; t he information was false; the def endant did not exercise reasonable care

in obtaining or

communica

ting the informa

tion and the plaintiffs justifiably relied on th e information. Merriman v. Smit h , 599 S.W.2d 548, 556-57 (Tenn. App. 1979).

This court has held: In order to su cceed in any action based upon fraudulent

or negligent misre

presentation, the plaintiff m ust prove that it relied just

ifiably on the defendant's state

ments. Graham v. First Ameri

can National Bank

, 594 S.W.2d

723, 725 (Tenn.Ct.App. 1979); Southern States Development Co. v. Robinson , 494 S.W.2d 777 , 782 (Tenn.Ct.App. 1972); and Dozier v. Hawthorne Dev

elopment Co. , 262 S.W.2d 705 , 709 (1953). Lambdin v. Garland

, 723 S.W.2d 953, 956 (Tenn. App. 1986).
Given the true sequence of events and the p lain p rovisions of the contractbetween the parti es, as a matt

er of law, plaintiffs cannot now establish reliance on the assertion by Mrs. Cunningham

in the Tennessee R

eside nt ial Prop erty Cond ition Disclosure d ocument that she was not a ware of any ". . . flooding, drainage, or gra ding problems". The record b ef ore this court clea

rly shows that plaintiff's w

ere aware of th

e pr oblems and attempted t o provide for their r emedy.

Plaintiffs then, with

full knowledge of the cr

awl space water

problems,-8-

thus disclosed, and without assuranc e of complete

repair, chose to g

o ahead with the closing of thei r purchase of this ho use.

Their voluntary elec

tion to close the

contract, armed

as they were

with kn owledge

of the crawl spac

e water problem

, was an election

that is bin din g upon them. The record i n this case supports ne ither fraud nor negl

igent misrepre-se

ntationand further shows no reasonable reliance by plaintiffs on any statements made by the defendant.

The judgment of the

trial court is

reversed and the

case is dismissed at the costs of appell ants.

______________________ ____________

____ _ WILLIAM B. CAIN, JUDGE

CONCUR:

__________________________________ ___ BEN H. CANTRELL, P .J., M.S.

__________________________________ ___ WILLIAM C. KOCH, JR., JUDGE