Court Opinion

ID: 1046614
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:37:49.5349+00
Date Added: 2024-06-11T12:06:04.522259
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                              AT NASHVILLE
                                    January 25, 2012 Session

                       ROZBEH ZAIRE v. AMIR ROSHAN-FAR

                    Appeal from the Circuit Court for Davidson County
                     No. 08C2898    Amanda Jane McClendon, Judge

                    No. M2011-00012-COA-R3-CV - Filed May 31, 2012

This appeal arises out of a lawsuit in which plaintiff sought recovery on claims of fraudulent
inducement, breach of contract, negligent misrepresentation, and intentional
misrepresentation with respect to the purchase of real property; the trial court awarded
judgment to plaintiff only on the claim for negligent misrepresentation only. Both parties
appeal. We affirm the judgement in all respects

   Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

R ICHARD H. D INKINS, J., delivered the opinion of the court, in which P ATRICIA J. C OTTRELL,
P. J., M. S., and F RANK G. C LEMENT, J R., J., joined.

Patrick Johnson, Nashville, Tennessee, for the Appellant, Rozbeh Zaire.

Cynthia S. McKenzie, Nashville, Tennessee, for the Appellee, Amir Roshan-Far.

                                              OPINION

B ACKGROUND

       On September 4, 2008, Rozbeh Zaire and Jamshid Akbara filed a complaint against
Amir Roshan-Far and his wife, Fruz Roshan-Far, the owners of commercial property located
at 324 Lutie Street (“the Property”) in Nashville. Plaintiffs alleged that Defendants induced
them to enter into an agreement to purchase the Property, and that Defendants represented
they would finance the purchase for five years and assist Plaintiffs in acquiring long-term
financing for the purchase and for renovations.1 Plaintiffs contended that a “closing” was
held on May 25, 2005; that they made a $5,000 down payment and paid Defendants $1,350
per month until August 2008, but that they never received title to the property; they asserted

        1
        The complaint stated that the written “agreement” was attached to the complaint as an exhibit, but
no such attachment is in the record. Mr. Zaire’s brief on appeal identifies the “agreement” as the
“Commercial Purchase and Sale Agreement,” which was introduced as an exhibit at trial.
causes of action for fraudulent inducement, breach of contract, and intentional
misrepresentation.

        Defendants answered the complaint and generally denied any wrongdoing. They
contended that they had offered to sell the Property to Plaintiffs but that Plaintiffs were
unable to consummate the purchase and instead elected to lease the Property. Defendants
also filed a counterclaim seeking recovery for damages that occurred during Plaintiffs’
occupancy of the Property; they later amended their answer to assert a second counterclaim
for “Quantum Meruit/Unjust Enrichment,” alleging that Plaintiffs had received the benefit
of the Property and were obligated to compensate defendants for use of the Property.
Plaintiffs answered and denied the allegations of the counterclaims.

       On February 20, 2009, Mr. Akbara voluntarily dismissed his claims and was dismissed
as a plaintiff. Prior to trial, on Mr. Zaire’s Rule 41 notice, the court entered an order
dismissing the action against Fruz Roshan-Far.

        The case proceeded to a four day bench trial. At the close of the proof, Plaintiff
moved to amend the complaint to add a claim for negligent misrepresentation. Defendant
also moved to amend his answer to add a counterclaim for fraud and to seek punitive
damages. The court granted both parties’ motion. The court proceeded to rule that the
“Commercial Purchase and Sale Agreement” was not an enforceable contract for the sale of
the Property and instead was a lease-purchase agreement. The court found that the
agreement was signed by defendant in 2008—not 2005, as indicated on the document
itself—and that defendant’s purpose in signing it was to enter into a lease-purchase
arrangement with Mr. Akbara and Mr. Zaire. The court held that Defendant was liable for
negligent misrepresentation but not on the basis of the other causes of actions asserted in
Plaintiff’s complaint. The court further held that defendant was entitled to a set-off against
plaintiff’s recovery based on the quantum meruit counterclaim and claim for damages to the
Property.

       The court entered an order awarding Mr. Zaire $33,254.50, representing one-half of
the amount of lease payments plus the $5,000 deposit. The court offset his recovery by
$32,200, representing what the trial court found to be the total fair market value of the rental
property ($800 per month) from June 2005 to July 2008, and including $1,800 incurred in
cleaning up the Property after Mr. Zaire and Mr. Akbara vacated. The court held that Mr.
Zaire could not recover any money on behalf of Mr. Akbara.

        Mr. Zaire filed a motion to alter or amend the judgment, asserting that (1) the trial
court erred in allowing the defendant a set-off for the fair market value of the property
because it unjustly enriched him for his negligent misrepresentation; (2) the court erred by
not allowing Mr. Zaire to recover payments made to defendant by Mr. Akbara; and (3) Mr.
Zaire should only be responsible for one-half the amount of the set-off since the court held
that Mr. Akbara and Mr. Zaire had separate rights of recovery and that defendant was entitled

                                              -2-
to a set-off. Mr. Zaire also filed a motion for discretionary costs pursuant to Tenn. R. Civ.
P. 54.04(2).

      The court granted Mr. Zaire’s motion to alter or amend, and amended his recovery to
$56,300.00, representing the total monthly lease payments made by both Mr. Zaire and Mr.
Akbara, plus the $5,000 deposit. The court did not modify the amount of defendant’s set-off.
The court granted Mr. Zaire’s motion for discretionary costs in the amount of $3,050.00.

       Mr. Zaire appeals, stating the following issues:

       1. The trial court’s ruling is against the preponderance of the evidence.

       2. Proof presented at trial established, by a preponderance of the evidence,
       that the defendant intended to defraud the plaintiff and thus committed
       fraudulent inducement and/or intentional misrepresentation.

       3. The trial court erred in finding that there was no contract between the
       plaintiff and defendant and in failing to grant a rescission of that contract.

       4. If the agreement between the plaintiff and defendant was a “lease purchase”
       agreement as the trial court found, it lacked mutuality of remedy.

       5. Plaintiff never received the benefit of the contract that he signed with the
       defendant.

       6. Whether the defendant committed a breach of contract, fraudulent
       inducement, intentional misrepresentation or “negligence by indirect
       misrepresentation” as found by the trial court, the latter erred in allowing the
       defendant a set-off for the fair market rental value.

       7. Whether the trial court erred in not allowing the appellant to present any
       proof on the issue of punitive damages.

Defendant cross appeals and asserts these additional issues for review:

       1. Whether the trial court erred in not finding that the appellant’s claims are
       barred by the three-year statute of limitations in Tenn. Code Ann. § 28-3-105.

       2. Whether the trial court erred in finding that appellee made an indirect
       negligent misrepresentation to appellant entitling appellant to damages.

       3. Whether the trial court erred in excluding the testimony of Amir Babak
       “Bobby” Banyan.

                                             -3-
S TANDARD OF R EVIEW

         The standard of review of a trial court’s findings of fact is de novo, and we presume
that the findings of fact are correct unless the preponderance of the evidence is otherwise.
Tenn. R.App. P. 13(d); Rawlings v. John Hancock Mut. Life Ins. Co., 78 S.W.3d 291, 296
(Tenn. Ct. App. 2001). For the evidence to preponderate against a trial court's finding of
fact, it must support another finding of fact with greater convincing effect. Id.; see also The
Realty Shop, Inc. v. R.R. Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn. Ct. App.
1999). No presumption of correctness, however, attaches to the trial court’s conclusions of
law and our review is de novo. Nelson v. Wal-Mart Stores, Inc., 8 S.W.3d 625, 628 (Tenn.
1999).

D ISCUSSION

      I. Breach of Contract, Negligent Misrepresentation, Intentional Misrepresentation,
and Fraudulent Inducement

          In its oral ruling, which the court incorporated in its written order, the trial court
stated:

          The Court does not find that the parties on May 5th , 2005 entered into an
          enforceable contract to purchase and sell the property known as 324 Lutie
          Street, Nashville, Tennessee. While the Court believes that Mr. Roshan-Far
          signed the agreement in 2008, it was done to help fulfill, what this Court
          believes, was the agreement, which was the defendant entering a lease-
          purchase agreement with Jamshid Akbari and later with [Mr. Zaire]. . . . the
          Court cannot help but conclude that this was a lease-purchase agreement
          wherein the terms of which were negotiated between Mr. Akbari and the
          defendant, Roshan-Far. The Court does not find any purposeful or fraudulent
          acts by the defendant. The Court does find that defendant was negligent by
          indirectly misrepresenting to plaintiff [Mr. Zaire] about obtaining a loan,
          whether for purchase of the property or for renovation of the Lutie Street
          property.

       After review of the record, we conclude that the evidence does not preponderate
against the trial court’s findings that the agreement between the parties was a lease-purchase.
Defendant testified that he and Mr. Akbari had a series of conversations regarding the
possible purchase of the Property; that Mr. Akbari initially approached him expressing
interest in purchasing the Property, but was unable to acquire financing to consummate the
purchase. Defendant testified further that, after Mr. Akbari was unable to secure financing,
Mr. Akbari told Defendant that he and Mr. Zaire “eventually would like to purchase the
property from [me] . . . .,” and asked “how can we take possession of this property, you
know, so we can in the future buy it?” Defendant testified:

                                                -4-
       I said, what I can do, I can -- on the computer, I can run some examples of if
       you had gone to the bank and you had gone through the whole process with
       them, they probably would do the same thing and give you the cost involved
       and what would be the payment. I can do something like that to just show you
       what your payment would be. And if you agree, we have something in real
       estate called lease purchase which gives you the option to buy. That I can just
       -- you can just make the payment to me and you will get credit just as if you
       had purchased it from the bank. The only thing is nothing is going to be in
       your name until you obtain a loan. [Mr. Akbari] said, well, can you run
       something for me, I have to show [Mr. Zaire] so he will understand what we
       have to do in the future. I said, fine, I’ll do it for you.

Defendant testified that he put together the Commercial Purchase and Sale Agreement and
other documents showing Mr. Akbari what his monthly payment would be and how much
would be credited to him and Mr. Zaire if they later purchased the property. Defendant
testified that the documents constituted an offer on his part for Mr. Akbari and Mr. Zaire to
purchase the property, but that they failed to acquire financing that would enable them to
purchase the property and, consequently, his offer was not accepted.

       Defendant’s testimony supports the court’s holding that there was not an enforceable
contract for sale, but rather a lease-purchase agreement, and the evidence cited by Mr. Zaire
does not preponderate against the holding. Accordingly, the claim for breach of contract for
Defendant’s alleged “fail[ure] to convey title to [Mr. Akbari and Mr. Zaire]” fails because
the Commercial Purchase and Sale Agreement proferred by Mr. Zaire was not an enforceable
contract for sale of the Property. We also conclude that the evidence does not preponderate
against the court’s holding that Defendant was liable for negligent misrepresentation and that
the court did not err in holding that Defendant did not fraudulently induce Mr. Zaire or make
any intentional misrepresentations.

        Negligent misrepresentation occurs when a defendant, acting in the course of her
business, profession, or employment, or in a transaction in which she has pecuniary interest,
supplies faulty information meant to guide another in their business transactions; the
defendant fails to exercise reasonable care in obtaining or communicating information; and
the plaintiff justifiably relies upon the information provided by the defendant. John Martin
Co., Inc. v. Morse/Diesel, Inc., 819 S.W.2d 428, 431 (Tenn. 1991); accord Robinson v.
Omer, 952 S.W.2d 423 (Tenn. 1997); see also R ESTATEMENT (S ECOND) OF T ORTS § 552
(1977); Med. Educ. Assistance Corp. v. State, 19 S.W.3d 803, 816–17 (Tenn. Ct. App. 1999).
Mr. Zaire testified that he and Mr. Akbari intended to open a tire shop on the Property, but
that the house on the Property would have to be torn down or renovated; that Defendant told
him that if he and Mr. Akbari made six months worth of payments that Defendant would get
them a loan to renovate the Property; that Defendant “promised us he would get us a loan.
. . to tear down the building and then we would build back again, the property”; that
Defendant did not get them a loan to renovate the Property and did not later notify Mr. Zaire

                                             -5-
or Mr. Akbari that he could not acquire a loan for them. Defendant’s assurances that he
could acquire financing for Mr. Zaire and Mr. Akbari to renovate the Property—despite their
low credit ratings and lack of income—constituted faulty information, and the record shows
that Mr. Zaire relied on this information in deciding to lease the Property. The record
supports the trial court’s ruling that Defendant was liable for negligent misrepresentation.

        The five elements of a claim for fraudulent inducement to contract are: (1) a false
statement concerning a fact material to the transaction; (2) knowledge of the statement’s
falsity or utter disregard for its truth; (3) intent to induce reliance on the statement; (4)
reliance under circumstances manifesting a reasonable right to rely on the statement; (5) an
injury resulting from the reliance. Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 630 (Tenn. Ct.
App. 2000). The elements of a claim for fraudulent or intentional misrepresentation are (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. Walker v. Sunrise Pontiac-GMC Truck, Inc.,
249 S.W.3d 301, 311 (Tenn. 2008). Upon our review of the record, including the evidence
cited by Mr. Zaire, the evidence does not support a finding that Defendant made a false
statement concerning a fact material to the transaction or that he intentionally, knowingly,
or recklessly made a false representation regarding any fact; consequently, the court did not
err in dismissing these claims.2

        II. Punitive Damages

       Mr. Zaire asserts that the trial court erred in not allowing him to present proof
regarding punitive damages. A court may award punitive damages only if it finds by clear
and convincing evidence that the defendant has acted either (1) intentionally, (2)
fraudulently, (3) maliciously, or (4) recklessly. Hodges v. S.C. Toof & Co., 833 S.W.2d 896,
901 (Tenn. 1992). We have affirmed the trial court’s holding that Defendant was liable only
for negligent misrepresentation, which does not meet the standard under Hodges for a
punitive damages award. The trial court did not err in holding that punitive damages were
not available in this case.

        2
           Moreover, the court awarded Mr. Zaire $56,300, which represented the total amount of payments
that both he and Mr. Akbari made to Defendant from June 2005 to July 2008. As general rules, the measure
of damages in an action to recover for fraud is the actual and direct pecuniary loss that the plaintiff has
sustained; in a tort action a plaintiff is entitled to recover only such damages as will compensate for the loss
or injury actually sustained in reliance on the misrepresentation and to place the plaintiff in the same position
the plaintiff would have occupied but for the fraud or if the representation had been true. See 37 AM . JUR .
2d FRAUD AND DECEIT § 379. Accordingly, even if the evidence supported a finding that Defendant
fraudulently induced Mr. Zaire to enter into the agreement or intentionally misrepresented a material fact,
Mr. Zaire would not be entitled to recover damages in addition to those awarded by the court.

                                                      -6-
        III. Basis of the Award to Mr. Zaire

       Rather than award Mr. Zaire the rent he paid at the rate of $1,350 per month, the court
determined that the Defendant was entitled to a set-off in the amount of the fair market rental
value of $800 on the basis of quantum meruit. Mr. Zaire contends that the trial court erred
in holding that he “received a benefit from the property” and that the court should not have
awarded Defendant a set-off. He asserts that the set-off was not proper because Defendant
should not have been permitted to benefit from his negligent misrepresentation.3

       As noted earlier, a plaintiff in a tort action is entitled to recover only such damages
as will compensate for the loss or injury actually sustained in reliance on the
misrepresentation and to place the plaintiff in the same position the plaintiff would have
occupied but for the fraud or if the representation had been true. See 37 A M. J UR. 2d F RAUD
AND D ECEIT § 379. An action based in quantum meruit is an equitable substitute for a
contract whereby a party that has provided goods and services to another may recover the
reasonable value of those goods and services where the following elements are present:

        (1) there must be no existing, enforceable contract between the parties
        covering the same subject matter;
        (2) the party seeking recovery must prove that it provided valuable goods and
        services;
        (3) the party to be charged must have received the goods and services;
        (4) the circumstances must indicate that the parties involved in the transaction
        should have reasonably understood that the person providing the goods or
        services expected to be compensated; and
        (5) the circumstances must also demonstrate that it would be unjust for the
        party benefitting from the goods or services to retain them without paying for
        them.

Castelli v. Lien, 910 S.W.2d 420, 427 (Tenn. Ct. App. 1995) (citations omitted). The first
four elements necessary for Defendant to establish a claim to recover on the basis of quantum
meruit are clearly established by the evidence. The remaining issue is whether it would be
unjust to allow Mr. Zaire to have had possession of the Property for three years without
paying for it.

        Mr. Zaire argues that “the property was purchased for the purpose of allowing [Mr.
Zaire] to put [a] tire shop onto the property,” and “while [Mr. Zaire] may have derived some
benefit from the contract, i.e. storage of tires on the property, he did not receive the essence
of the purpose for the contract, to be able to put a tire shop onto the property.”

        3
          Neither party challenges the court’s determination that $800 per month is the fair rental value for
the Property.

                                                    -7-
        The fact that he was not able to operate his business as he had planned, however, does
not detract from the fact that he had use of the property over the period at issue and, in so
doing, received the benefit thereof. Without the set-off, Defendant would be deprived of
rental income for the three years that Mr. Zaire occupied the Property under circumstances
in which, because Mr. Zaire was on the premises, Defendant was unable to make any other
use of the Property; this would result in an injustice to the Defendant. Under these
circumstances the court did not err granting the Defendant a set-off for the rental value of the
premises; in so doing the court awarded Mr. Zaire the amount of his actual financial loss,
being the amount he paid in rent that was in excess of the fair market rental value.

       Further, it was entirely appropriate for the court to set-off Mr. Zaire’s recovery by the
amount incurred by the Defendant in cleaning the Property after Mr. Zaire vacated same, the
amount of which is not contested by Mr. Zaire and was established by Defendant’s
testimony.

        IV. Mutuality of Remedy and Enforceability of the Lease-Purchase Agreement

        Mr. Zaire contends that the lease-purchase agreement was unenforceable because it
lacked mutuality of remedy.4 Defendant responds that he “agrees, and has always agreed,
that there is no enforceable contract of any kind between the parties.” Mr. Zaire does not
identify what remedy he is seeking or what action this Court should take based on the fact
that the agreement was unenforceable.5 We have held that Defendant was liable for negligent
misrepresentation and that the trial court properly applied the correct standard in determining
the measure of damages. Assuming arguendo that the agreement was unenforceable, no
additional remedy is available to Mr. Zaire.

        V. Statute of Limitations

        Defendant asserts that the complaint should have been dismissed because the
applicable statute of limitation, Tenn. Code Ann. § 28-3-105, expired in May 2008—three
years after the parties entered into the lease purchase agreement—while the complaint was
not filed until September 4, 2008.

       Cases have established that Tenn. Code Ann. § 28-3-105, which provides that actions
for injuries to personal or real property shall be commenced within three years from the

        4
         Mr. Zaire asserts that “even if [Mr. Zaire] had made all of the payments, the Defendant could not
have conveyed title to the property without his wife joining into the transfer, which she might or might now
have done,” and that Defendant’s promise to transfer title “would have been ‘illusory’ . . . .”
        5
           In the portion of his brief addressing this issue, Mr. Zaire cites a number of cases for the
proposition that a court will not order specific performance of a contract where there is no mutuality of
remedy or where an agreement is unenforceable. Neither party sought specific performance of the lease-
purchase agreement, however, and those cases are not helpful in determining the outcome of this appeal.

                                                    -8-
accrual of the cause of action, is the applicable statute of limitations for claims of negligent
misrepresentation. See, e. g. Med. Educ. Assistance Corp. v. State, 19 S.W.3d 803, 817
(Tenn. Ct. App. 1999); City State Bank v. Dean Witter Reynolds, Inc., 948 S.W.2d 729
(Tenn. Ct. App. 1996); Ne. Knox Util. Dist. v. Stanfort Const. Co., 206 S.W.3d 454, 459
(Tenn. Ct. App. 2006). “A cause of action accrues for either intentional or negligent
misrepresentation when a plaintiff discovers, or in the exercise of reasonable care and
diligence, should have discovered, his injury and the cause thereof.” Med. Educ. Assistance
Corp., 19 S.W.3d at 817; see also City State Bank v. Dean Witter Reynolds, Inc., 948 S.W.2d
at 735.

        Mr. Zaire testified that he did not discover his injury until July 2008, when he learned
that the Property was not titled in his name. At that time, the cause of action for negligent
misrepresentation accrued; suit was timely filed within two months.

       VI. Exclusion of Bobby Banyan’s Testimony

        Defendant called Bobby Banyan as a witness; Plaintiff objected to Mr. Banyan
testifying because he had not been disclosed as a possible witness 72 hours in advance of
trial, as required by Rule 29.01 of the Rules of the 20th Judicial District; counsel for
Defendant acknowledged that he did not notify counsel for Plaintiff that he intended to call
Mr. Banyan as a witness. On appeal, Defendant contends that the court determined that his
counsel had done nothing wrong with respect to Mr. Banyan, that Plaintiff was able to
vigorously cross-examine Mr. Banyan and, consequently, suffered no prejudice by his
testimony, and that the testimony goes to “a very central and important issue in the case.”
Defendant urges that we reverse the trial corut and consider the testimony as part of the
record in this appeal.

        Trial courts have broad discretion with respect to the admission or exclusion of
evidence and the enforcement of local rules. Pennington v. Pennington, M2007-00181-
COA-R3-CV, 2008 WL 1991117, at *3 (Tenn. Ct. App. May 7, 2008). An appellate court
will find an abuse of discretion “only when the trial court applies an incorrect legal standard,
reaches an illogical decision, bases its decision on a clearly erroneous assessment of the
evidence, or employs reasoning that causes an injustice to the complaining party.” Francois
v. Willis, 205 S.W.3d 915, 916 (Tenn. Ct. App. 2006).

        We have reviewed the transcript, which includes an extended colloquy between the
trial court and both counsel regarding the reason that counsel had not disclosed Mr. Banyan
as a witness. The court considered the statements of counsel and sustained Plaintiff’s
objection to the testimony. The record does not show that the trial court abused its discretion
in excluding the testimony.

                                              -9-
C ONCLUSION

     For the foregoing reasons, we affirm the trial court in all respects.

                                         ___________________________________
                                         RICHARD H. DINKINS, JUDGE

                                           -10-