FILED

May 28, 1999

Cecil Crowson, Jr.

Appellate Court Clerk

WILLIAM H. BUFORD and wife, )

ROSALYN BUFORD, )

)

Plaintiffs/Appellants, ) 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 CHANCERY COURT FOR 

DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

KIRK C. WAITE

Mooreland Mansion

7100 Executive Center Drive

P. O. Box 1966

Brentwood, Tennessee 37024-1966

ATTORNEY FOR PLAINTIFFS/APPELLANTS

DANIEL L. WISCHHOF

Wischhof & Allen

Glancy Square, Suite 207

110 Glancy Street

Goodlettsville, Tennessee 37072

ATTORNEY FOR DEFENDANT/APPELLEE

REVERSED AND REMANDED

WILLIAM B. CAIN, JUDGE
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OPINION

This appeal concerns a suit by appellants against appellee asserting

fraud and misrepresentation in the sale of a house.

Margie M. Cunningham, a 72 year old widow, owned a house and lot

located at 6036 Cane Ridge Road, Antioch, Davidson County, Tennessee. On

September 18, 1995, she listed her property for sale with Barnes Real Estate

Services through its affiliate broker, Rick Messick. At the time she listed her

property for sale she caused to be completed and signed a Tennessee Residential

Property Condition Disclosure Form as required by Tennessee Code Annotated

section 66-5-201, et seq. Among the questions in this disclosure form was ". .

. are you (seller) aware of any of the following? . . . 10. Flooding, drainage or

grading problems" to which question Mrs. Cunningham responded "no".

On September 28, 1995, William H. Buford and wife Rosalyn Buford

executed an offer to purchase the property and acknowledged receipt of the

disclosure 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 correct the water

problem she had Cook's Pest Control install a vapor barrier under the house.

During the September 1995 negotiations for the purchase of the house, Mr.

Buford noticed water standing on the plastic vapor barrier under the house near

the entrance to the crawl space.

At this point in their relationship, the terms of the contract between the

parties and the sequence of events leading up to the October 31, 1995 closing

become vital. The offer of Mr. and Mrs. Buford, dated September 28, 1995, was

made on a copy of the "Contract for Sale of Real Estate" which was a printed

form supplemented by handwritten additions thereto as indicated infra. The

pertinent provisions of the offer by the Bufords are as follows:
1This last sentence is handwritten and initialed by "M.C." (Margie Cunningham).

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12. CONDITION OF PREMISES: The Seller warrants

that the * * * improvements, including * * * plumbing

(including water heater, wells and septic system) * * * shall

be in good repair and working order when Buyer closes this

sale. Buyer has the privilege and RESPONSIBILITY to

inspect these items prior to closing, at Buyer's expense, and

any repairs required to be made prior to closing shall be

made by Seller at Seller's expense. CLOSING OF SALE

CONSTITUTES ACCEPTANCE OF THESE ITEMS BY

BUYER, AND SELLERS, AGENTS OR BROKERS

SHALL HAVE NO LIABILITY THEREAFTER.

13. REPAIRS/HOME INSPECTION. * * * Purchaser

does (X) desire to have a Professional Inspection of house.

* * * Sale conditioned upon Purchaser receiving an

acceptable report from inspector and if purchaser finds the

report unacceptable then purchaser shall give Seller notice of

unacceptable conditions and shall give seller opportunity to

make the necessary repairs or contract becomes null and

void. 1 * * * SELLERS REPAIRS ON ITEM 12, 13, 22 NOT

TO EXCEED 1,000.00.

 * * *

15. SELLERREPRESENTATIONS. Seller represents,to

the best of their knowledge, that: * * * (b) The property has

not been damaged or affected by flood, storm, or run-off. *

* * The determination by Buyer that any of these matters is

in fact materially untrue shall entitle Buyer to rescind this

contract and receive refund of the Earnest Money or to keep

the contract in force and accept the Property with such

exceptions. Seller shall have no responsibility for these

matters after closing.

* * *

21. ENTIREAGREEMENT. Thisinstrument containsthe

entire agreement between the parties and no addition deletion

or modification hereto shall be effective unless reduced to

writing and signed by both parties. There are no oral or other

collateral conditions, agreements, or representations, all such

having been incorporated and resolved into this agreement.

Buyer has not relied on any other oral or written

representations, and except as otherwise specified herein,this

property is purchased "AS IS" and neither Seller nor Agent

makes or implies any warranties as to the condition of the

premises, except as provided herein. 

Items 22 and 23 are entitled "Miscellaneous" and "Addendum(s)"
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respectively. Under item 22 "Miscellaneous" appears the following handwritten

provision initialed by Mrs. Cunningham: "Water and moisture problem in crawl

space and under to be corrected."

Item 23 "ADDENDUM(S)" contains the following handwritten

provision with an arrow reference back to item 22 to wit: "Sellers to correct

water/moisture in crawl space and Buyer to sign at closing acceptance of this

item." This provision in paragraph 23 is likewise initialed by Margie

Cunningham. 

Mrs. Cunningham signed her acceptance of the Buford offer on

September 29, 1995 with the purchase price being $226,000. 

The record is not completely clear as to exactly when these handwritten

provisions of the contract initialed by Margie Cunningham were put on the

contract, though one would assume the date to have been September 29, 1995.

At any rate, the provisions were clearly in the contract at the time the parties

closed the transaction on October 31, 1995.

The Bufords engaged The Home Team Inspection Services to inspect

the house pursuant to their contractual right. This inspection was conducted

October 5, 1995, and a written report to the plaintiffs was issued the following

day. This report provided in part:

GENERAL DESCRIPTION: * * * The home was situated

on a lightly sloped lot. The general grade around the home

appeared to be adequate to direct rain water away from the

foundation. * * *

FLOOR STRUCTURE: * * * Note: Water was entering the

front foundation wall where the plumbing and wiring to the

well penetrate the foundation. This area should be

seal/pointed and the foundation vents left open so as to allow

the crawl space to air out. Moisture was also present on the

concrete blocks under the front porch. This may have been

the result of the earlier heavy rains from the tropical storm

Opal.

CRAWL SPACE: The crawl space was accessible at the

time of the inspection. The crawl space was not dry at the
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time of the inspection. The moisture appeared to be the

result of water entering through the electrical conduit going

to the well in the front yard. There were no other defects

observed at the time of the inspection. * * *

Recommendation: The electrical conduit should be properly

sealed and the hole in the foundation wall (for the conduit

and water supply lines), should be sealed.

After receiving the report from The Home Team Inspection Service,

Mrs. Cunningham employed a Mr. Nash to do the repairs recommended by the

appellants' inspector. Prior to closing, Mr. Denny, a realtor representing the

Bufords, informed them that the recommended repairs had been accomplished.

Mr. Nash delivered confirming documentation directly to the Bufords. Without

further inquiry or further inspection, the Bufords chose to close the purchase as

scheduled and signed a written form accepting the property in its state at that

time.

Mr. Buford testified that after the closing 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 was locked and Mrs.

Cunningham did not have a key. It is admitted by all parties and clearly

established by the undisputed record that finding of fact number 12 by the trial

court is in error. This finding states: "The defendant prevented plaintiffs from

inspecting the crawl space under the house prior to the closing of the

transaction."

The evidence not only preponderates against this 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 the closing and within the 19 day period

between the closing of the transaction and the time the Bufords actually took

possession of the property.

After the plaintiffs took possession of the property in November 1995

they discovered water standing on the vapor barrier and under the vapor barrier

in the crawl space.
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Plaintiffs then employed various contractors to inspect the property,

make estimates and present plans for alleviating the water problem.

Plaintiffs claim damages in diminution of value of the property of

$15,000. 

The above recitation of fact essentially parallels the finding of the

chancellor except as to the erroneous finding relative to number 12 discussed

above.

The chancellor made the following conclusions of law:

1. The agreement of the parties, in the contract for

the sale of the property, relating to the correction of the water

problem under the house is a valid and binding agreement

among the parties.

2. The defendant paid Nash Home Maintenance

$265.00 to repair the water problem. However, the water

problem was not corrected.

3. The defendant's liability for the correction of the

water problem, as provided in the contract for the sale of the

property is not to exceed $1,000.00.

4. The incorrect statements made by the defendant

on the Tennessee Residential Property Condition Disclosure

form, with respect to the condition of the property as to

flooding, drainage, or grading problems were effectively

deleted by the parties agreement in the contract for the

correction of the water problems.

Judgment was rendered in favor of the plaintiff in the amount of $1,000

and costs.

Plaintiffs appealed this limited judgment. The defendants sought

complete reversal of the award, or, in the alternative, credit for the $265 paid to

Nash Home Maintenance in seeking to correct the water problem.

We respectfully disagree with the chancellor's finding that the

defendant is liable to the plaintiffs in the amount of $1,000 because of the

contract provisions. The suit is for fraud and misrepresentation. The chancellor
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made no findings as to either fraud or misrepresentation, and no finding as to

reasonable reliance.

An action for fraud requires an intentional misrepresentation of a

material fact, knowledge of the representation's falsity and an injury caused by

reasonable reliance upon the representation. Dobbs v. Guenther, 846 S.W.2d

270, 274 (Tenn. App. 1992).

In order to prevail in a suitfor 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. Merriman v. Smith, 599 S.W.2d

548, 556-57 (Tenn. App. 1979).

This court has held:

In order to succeed in any action based upon

fraudulent or negligent misrepresentation, the plaintiff must

prove that it relied justifiably on the defendant's statements.

Graham v. First American 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 Development 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 plain provisions of the

contract between the parties, as a matter of law, plaintiffs cannot now establish

reliance on the assertion by Mrs. Cunningham in the Tennessee Residential

Property Condition Disclosure document that she was not aware of any ". . .

flooding, drainage, or grading problems". The record before this court clearly

shows that plaintiff's were aware of the problems and attempted to provide for

their remedy.

Plaintiffs then, with full knowledge of the crawl space water problems,
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thus disclosed, and without assurance of complete repair, chose to go ahead with

the closing of their purchase of this house. 

Their voluntary election to close the contract, armed as they were with

knowledge of the crawl space water problem, was an election that is binding

upon them. The record in this case supports neither fraud nor negligent

misrepre-sentation and 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 appellants. 

_______________________________________

WILLIAM B. CAIN, JUDGE

CONCUR:

_____________________________________

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

_____________________________________

WILLIAM C. KOCH, JR., JUDGE