Court Opinion

ID: 1051950
Source: CourtListenerOpinion
Date Created: 2013-10-08 20:25:08.78722+00
Date Added: 2024-06-11T09:59:02.035308
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                                AT KNOXVILLE
                             December 4, 2007 Session

GWINN FAYNE AND ALFRED FAYNE v. TERESA VINCENT and DAVID
                       VINCENT

                Direct Appeal from the Chancery Court for Bradley County
             No. 98-267 consolidated with98-050  Hon. John B. Hagler, Judge

                  No. E2007-00642-COA-R3-CV - FILED MARCH 12, 2008

                 In this dispute over the sale of a home, the Trial Court initially granted purchasers a
rescission of the sale, but purchasers appealed to this Court. We ruled that the Trial Court had failed
to put the purchasers in the position they would have occupied had the sale never occurred, and
remanded the issues of various costs, pre-judgment interest and the fair rental of the property to take
into consideration in placing the parties in a pre-contract status quo position. Also, remanded was
the issue of attorney’s fees and whether the sellers had violated the Tennessee Consumer Protection
Act. On remand, the Trial Court ruled that sellers had violated the Tennessee Consumer Protection
Act and awarded attorney’s fees and pre-judgment interest, as well as adjusting the Judgment to
place the parties in status quo upon rescission.

              The appeal ensued by the sellers, and we affirm the Judgment of the Trial Court, as
well as an award of attorney’s fees to the purchasers for their representation on appeal.

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

HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the Court, in which CHARLES D. SUSANO ,
JR., J., and D. MICHAEL SWINEY , J., joined.

J. Michael Sharp, Cleveland, Tennessee, for appellants.

Michael A. Anderson, Chattanooga, Tennessee, for appellees.
                                             OPINION

                                            Background

              This suit originated when plaintiffs filed suit against defendants Teresa and David
Vincent regarding alleged defects in the septic system of the house the Vincents sold to plaintiffs.

                Plaintiffs alleged fraudulent and negligent misrepresentations and violation of the
Tennessee Consumer Protection Act (TCPA), Tenn. Code Ann. § 47-18-104(b)(27), and that
defendants admitted that Mr. Vincent built the residence in question and other homes in the
subdivision and that Ms. Vincent acted as the Vincents’ realtor for the transaction at issue. It was
further alleged that the TCPA was applicable because Teresa Vincent was “a realtor engaged in the
business of selling property” and David Vincent was a “developer engaged in the business of
building and selling property”. Defendants, in their Answer, denied the statute was applicable.

                 The case was tried on December 11, 2002 before Chancellor Jerri S. Bryant without
a jury. Following trial, the Chancellor ordered a rescission of the real estate sales contract, and
required the defendants to repurchase the property from plaintiffs for the 1997 purchase price. The
Court found the Vincents at fault and stated that her order of rescission was based on a determination
that the real estate disclosure statement was “violated” by Mr. Vincent and he was aware of the
problems with the septic system. She also found that his representations were not intentional,
malicious, or fraudulent.

               Plaintiffs appealed the Trial Court’s ruling on these issues:

               (1)     Whether the Trial Court erred in dismissing Re/Max on the grounds that
                       Teresa Vincent, a realtor with Re/Max, was an independent contractor.

               (2)     Whether the Trial Court erred in failing to put the Faynes in the position they
                       would have occupied if the Vincents had not misrepresented the condition of
                       the home they sold to the Faynes.

               (3)     Whether the Trial Court erred in failing to award attorney’s fees to the
                       Faynes.

                The appeal to this Court resulted in an Opinion by this Court in Fayne v. Vincent, No.
E2003-01966-COA-R3-CV, 2004 WL 1749189 at *3 (Tenn. Ct. App. Aug. 5, 2004) (hereinafter
Fayne I). Notably, the defendants did not appeal the Trial Court’s order of rescission based on a
finding of fault because of their failure to disclose the problem with the septic system of which they
were aware.

               In Fayne I, this Court concluded that the Trial Court had failed to put the Faynes in

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the position they would have occupied had the sale never occurred and found that the Faynes had
incurred expenses associated with the purchase of the house, such as closing costs and the
acquisition of a mortgage. We explained that in a case of rescission the seller is usually awarded
compensation from the buyer for use of the property and that such awards are usually calculated from
the fair rental value of the property while it was under the buyer’s control. Fayne I at *4. We
remanded this issue to the Trial Court for consideration of closing costs, mortgage interest, real
estate taxes, prejudgment interest, fair rental value and other matters that needed to be taken into
consideration when placing the parties in their pre-contract status quo positions. Fayne I at *5.

                This Court also remanded the issue of whether attorney’s fees were appropriate. In
this case, the Trial Court had not articulated whether it had based its order of recession on the
common law theory of fraud and deceit or on a finding that the Vincents had violated the TCPA.

                Upon remand, the Trial Court appointed a special master, and the special master
issued an order regarding the expenses incurred by the Faynes in connection with the real estate
contract1 and the fair market rental value of property while the Faynes occupied it.2 The master
concluded that the amount due the Faynes was the original purchase price cost of the property
($104,500.00)3 plus expenses associated with the contract of sale ($66,591.31) , minus the fair rental
value of the house while the Faynes occupied it ($50, 400.00), which equaled a total of $120,691.31.
The master declined to award pre-judgment interest, and made a finding that based upon Mr.
Vincent’s testimony, the current value of the property was between $127,000.00 and $130,000.00
and that the cost of repair to the septic system was not more than $4,000.00. He concluded that
because “Mr. Vincent is an experienced builder and Mrs. Vincent is an experienced real estate
agent”, the defendants were in a superior position to make the necessary repairs and to sell the
residence.

               Finally, the master opined that the Vincents had not violated the Tennessee Consumer
Protection Act. He based his opinion on the Trial Court’s finding that defendants’ representations
were not “intentional, malicious or fraudulent.” This finding contradicts the Trial Court’s holding
that the Vincents were at fault based on a finding that “the disclosure statement was violated “ a

       1
          These expenses included moving expenses ($2,500.00); home insurance ($2,234.00);
mortgage interest ($55,169.00); property tax ($5988.31) and; laundry expenses associated with the
defective septic system ($200.00). The special master disallowed plaintiffs’ claim for closing costs
as this expense was paid for by Mr. Fayne’s employer.
       2
         The special master calculated the fair rental value of similar houses in the community at
$800.00. But he discounted the rent by 30% because of the inconveniences caused by the defective
septic system.
       3
           This cost was established by the Trial Court in its first opinion and not appealed in Fayne
I.

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finding that was not appealed in Fayne I.

                 Chancellor Bryant recused herself and the Honorable John B. Hagler then presided
over the case.

             The Vincents filed exceptions to the master’s report, and Judge Hagler subsequently
issued a Memorandum Opinion holding:

                 First, only the Trial Judge may make findings with respect to the application of the
                 Consumer Protection Act. In that regard, it’s important to record that the Chancellor
                 initially declined to award attorney fees only because she found that the fees, as
                 opposed to the premise for the fees, had not been proven. On remand, plaintiffs have
                 submitted the agreed amount ($37, 483.93) of fees.

                 Secondly, the plaintiffs specifically sought relief under the Consumer Protection Act
                 and the Chancellor, as does the undersigned, has made a string of findings clearly
                 sustaining violation of the statute: (1) The plaintiffs [sic] 4 knowingly installed the
                 septic system in violation of the permit setback restrictions; (2) Plaintiffs [sic] knew
                 and did not disclose that there was an ongoing problem with the ill-placed system;
                 (3) The plaintiffs [sic] knew, or should have known, that the system, as installed,
                 would not work properly. Whether resulting from negligence or fraud (the
                 Chancellor precluded fraud) these acts and omissions were unfair and deceptive to
                 the consumer. T.C.A.§ 47-18-104(b)(27) ; Smith v. Scott Lewis Chevrolet, Inc., 843
S.W.2d 913 (Tenn. App. 1992). Plaintiffs [sic] as a developer and a realtor,
                 respectively, are subject to the act. See Ganzevourt v. Russell, 949 S.W.2d 293, 298
                 (Tenn. App. 1997).

                 Rescission, as ordered, is an appropriate remedy under the act. The attorney’s fees,
                 as submitted, are an appropriate and fair remedy in this case. T. C. A. §47-18-
                 109(e)(1).

                 This court also awards pre-judgment interest to the extent of the equity value of the
                 property at the time of rescission. Otherwise, plaintiffs are not returned to a status
                 quo position as required by law and ordered on remand.

                 These issues are raised on appeal:

                 A.     Whether the Trial Court erred in finding that the Vincents violated the
                        Tennessee Consumer Protection Act?

       4
         The Trial Court filed a “Substituted Memorandum Order” on February 21, 2007 which
substituted the word “plaintiffs” for “defendants” in the original memorandum order. The places
where the substitutions were made are marked by [sic] in this memorandum.

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                B.      Whether the Trial Court erred in awarding pre-judgment interest to the
                        Faynes?

                C.      Whether the Faynes are entitled to attorney’s fees associated with this appeal?

                A trial court’s findings of fact in a non-jury trial are reviewed de novo upon the
record. The trial court is afforded a presumption of correctness unless the preponderance of the
evidence is otherwise. Tenn. R. App. P. 13 (d); Wright v. City of Knoxville, 898 S.W.2d 177, 181
(Tenn. 1995). 5

                One of the issues on appeal is whether the Trial Court erred in awarding the Faynes
prejudgment interest. Such awards are within the sound discretion of the trial court and will not be
disturbed by an appellate court unless the record reveals a “manifest and palpable” abuse of
discretion. Spencer v. A-1 Crane Service, Inc., 880 S.W.2d 938, 944 (Tenn.1994); Otis v.
Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn.1992). Thus, in cases where the evidence
supports the trial court's decision, no abuse of discretion is found unless the trial court has applied
an incorrect legal standard or reached a decision which is “against logic or reasoning that causes an
injustice to the party complaining.” Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001).

              The trial court’s conclusions of law are reviewed under a purely de novo standard
with no presumption of correctness. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn.
1993).

                 The record on appeal does not contain a trial transcript or a statement of the evidence,
and as explained in Sherrod v. Wix, 849 S.W.2d 780, 783 (Tenn. Ct. App.1992): “[t]his court cannot
review the facts de novo without an appellate record containing the facts, and therefore, we must
assume that the record, had it been preserved, would have contained sufficient evidence to support
the trial court's factual findings”.

                 This Court in Fayne I considered the Faynes’ argument that the Chancellor erred in
only awarding rescission of the sales contract because by not awarding them their expenses,
attorney’s fees and pre-judgment interest they were not put in the position they would have occupied
had the sale not occurred. We stated that “[t]he remedy of rescission involves the avoidance, or
setting aside, of a transaction. It usually involves a refund of the purchase price or otherwise placing
the parties in their prior status”. Fayne I, at *4. We remanded the case to the Trial Court for a
determination of all such factors that are necessary to place the parties in the positions in which they
would have been if the contract had not been accomplished. The Trial Court was to consider
prejudgment interest among such factors. Fayne I, 2004 WL 1749189 at * 5.

        5
         Concurrent findings of fact by a special master in the trial court are upheld if there is
material evidence to support the findings.

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               On remand the Trial Court awarded prejudgment interest to the “extent of the equity
value of the property at the time of rescission” to return the plaintiffs to a “status quo position as
required by law and as ordered on remand”.

                The Supreme Court set forth several principles that offer guidance to a trial court in
exercising its discretion to award or deny prejudgment interest in Myint v. Allstate Ins. Co. 970
S.W.2d 920 (Tenn.1998) as follows: “Foremost are the principles of equity. Tenn. Code Ann. § 47-
14-123. Simply stated, the court must decide whether the award of prejudgment interest is fair,
given the particular circumstances of the case. In reaching an equitable decision, a court must keep
in mind that the purpose of awarding the interest is to fully compensate a plaintiff for the loss of the
use of funds to which he or she was legally entitled, not to penalize a defendant for wrong doing.
Myint 970 S.W.2d at 927-928 (citing Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn.1994); Otis
v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn.1992)). The rational behind the award
of prejudgment interest was further explained by the Court of Appeals in Scholz v. S. B. Intern., Inc.,
40 S.W.3d 78, 82 (Tenn. Ct. App. 2000):

               Parties who have been wrongfully deprived of money have been damaged in two
               ways. First, they have been damaged because they have not received the money to
               which they are entitled. Second, they have been damaged because they have been
               deprived of the use of that money from the time they should have received it until the
               date of judgment. Awards of pre-judgment interest are intended to address the second
               type of damage. They are based on the recognition that a party is damaged by being
               forced to forego the use of its money over time. General Motors Corp. v. Devex
               Corp., 461 U.S. 648, 655-56, 103 S. Ct. 2058, 2062-63, 76 L. Ed. 2d 211 (1983);
               Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn.1994). Thus, our courts have
               repeatedly recognized that prejudgment interest is awarded, not to punish the wrong-
               doer, but to compensate the wronged party for the loss of the use of the money it
               should have received earlier.

                 The Faynes were deprived of the use of the money they used to purchase the house
for approximately ten years. Fairness required that they be awarded prejudgment interest in the
effort to return them to the position they would have occupied if the sale had not occurred. We hold
the Court did not abuse its discretion by awarding prejudgment interest.

               The original Trial Judge did not state whether she relied on the TCPA or common law
when she ordered a rescission of the sale. Judge Hagler, upon review of Chancellor Byrant’s
Opinion, review of the record and the trial transcript stated that the evidence supported a finding that
the Vincents had violated the TCPA and that the defendants, as a real estate developer and a realtor,
were subject to the TCPA.

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                The Faynes allege that the Vincents violated the Tennessee Consumer Protection Act
(TCPA), Tenn. Code Ann. § 47-18-104(b)(27), by not disclosing the problems with the septic
system at the time of the sale of the house. The TCPA was enacted “to protect consumers and
legitimate business enterprises from those who engage in unfair or deceptive acts or practices in the
conduct of any trade or commerce ..., [t]o encourage and promote the development of fair consumer
practices; [and] ... [t]o declare and to provide for civil legal means for maintaining ethical standards
of dealing between persons engaged in business and the consuming public to the end that good faith
dealings between buyers and sellers at all levels of commerce be had in this state ....” Tenn. Code
Ann. § 47-18-102. “The TCPA is to be liberally construed to protect consumers and others from
those who engage in deceptive acts or practices.” Morris v. Mack's Used Cars, 824 S.W.2d 538, 540
(Tenn.1992), Tenn .Code Ann. § 47-18-102(2). The TCPA authorizes a private cause of action at
Section 47-18-109(a)(1): “Any person who suffers an ascertainable loss of money or property, real,
personal, or mixed, or any other article, commodity, or thing of value wherever situated, as a result
of the use or employment by another person of an unfair or deceptive act or practice declared to be
unlawful by this part, may bring an action individually to recover actual damages”. The TCPA is
applicable to the sale of real estate when the sellers/defendants are in the business of selling real
estate, as owners or brokers, and are acting in that capacity regarding the transaction at issue.
Ganzevoort v. Russell, 949 S.W.2d 293, 298 (Tenn. 1997). The Act, however, does not apply if the
sellers/defendants are professionally engaged in the real estate profession but are not acting in that
capacity in connection with the sale. Abouelatat v. Davis, No. E2005,02616-COA-R3CV, 2006 WL
3193685 at * 6 (Tenn. Ct. App. Nov. 6, 2006).

                 Defendants argue they did not violate the TCPA when they failed to disclose the
problem with the septic tank, and also that the Act does not apply to them as the transaction involved
the sale of their personal home. The TCPA applies to Ms. Vincent as she admitted at trial that she
was acting as both the owner and real estate agent at the time of the sale and that she signed the
disclosure statement as both the owner of the property and the listing real estate agent. This Court,
in Fayne I, stated that Mr. Vincent was “the developer of the subdivision and builder of the house
at issue.” The Court also stated that Mr. Vincent installed the septic system in violation of the permit
issued by the Tennessee Department of Environment and Conservation. Fayne I, 2004 WL 1749189
at * 1). On remand, the Trial Court held, based on Ganzevoort, that the defendants were a developer
and a realtor and that the TCPA applied to them. There is no evidence before us to contradict this
determination.

                 The Vincents continue to argue that there was no intentional misrepresentation, and
that the Faynes failed to prove the septic system was in fact defective. Their argument as to fraud
or intentional misrepresentation is misplaced. Recovery under the Act is not limited to fraudulent
or willful acts; it also contemplates recovery for negligent conduct. Smith v. Scott Lewis Chevrolet,
Inc., 843 S.W.2d 9, 12 (Tenn. Ct. App. 1992).

               The Chancellor ordered rescission of the contract of sale based on a finding that “the

                                                  -7-
disclosure statement was violated” and that Mr. Vincent knew there was a problem or potential
problem with the septic system. This holding was not appealed in Fayne I, and is the law of the case.
Defendants cannot now argue that they did not know of the septic system problem or that the Faynes
never proved that there was a defect in the system. Based upon the Chancellor’s finding that the
Vincents’ knew of and failed to disclose the problem, the Vincents did violate the TCPA as their
actions constituted “unfair or deceptive acts or practices in the conduct” of commerce.

              On remand, the Trial Court held that the acts or omissions were unfair and deceptive
to the consumers, and we affirm the Judgment of the Trial Court on this issue.

                The Act provides for an award of reasonable attorney’s fees “upon a finding by the
court that a provision of this part has been violated. Tenn. Code Ann. § 47-18-109(e), Fayne I, 2004
WL 1749189 at * 5. The Trial Court, upon remand, held that under the Act attorney’s fees of
$37,483.93 “were an appropriate and fair remedy in this case”. An award of attorney's fees pursuant
to the TCPA is intended to make prosecution of such claims economically viable to plaintiff. Miller
v. United Automax, 166 S.W.3d 692, 697 (Tenn. 2005). Here, the award of attorney’s fees was
appropriate.

                 The Faynes have requested an award of attorney’s fees associated with defending this
appeal. The Supreme Court has held that a plaintiff may be awarded reasonable attorney’s fees
incurred during an appeal on a claim brought pursuant to the TCPA when there is a finding that the
TCPA has been violated. Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406, 410 (Tenn.
2006). The Court noted that TCPA’s provision regarding the award of attorney’s fees does not limit
the award to fees incurred at the trial level. Id. at 410; Tenn. Code Ann. § 47-18-109(e)(1). The
rational for an award of appellate attorney’s fees is that “the wronged plaintiffs’ monetary judgment
is at risk of being consumed by the resulting appellate attorney’s fees unless they are also subject to
being awarded. A plaintiff successful at trial is therefore at risk of being “de-remedied” if unable
to collect his or her reasonable appellate legal fees. . . . [A] potential award of attorney’s fees under
the TCPA is intended to make prosecution of such claims economically viable to plaintiff”.
Killingsworth at 410 (citing Miller v. United Automax, 166 S.W.3d 692, 697 (Tenn. 2005). We
conclude an award of attorney’s fees in defending this appeal to the Faynes is appropriate, and upon
remand to the Trial Court, the Trial Court will determine reasonable attorney’s fees for the plaintiff’s
attorney’s representation of the plaintiffs in this appeal.

               The Judgment of the Trial Court is affirmed and the cause remanded, with the cost
of the appeal assessed to Teresa and David Vincent.

                                                        ______________________________
                                                        HERSCHEL PICKENS FRANKS, P.J.

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