Joe David Erwin v. Great River Road Supercross, LLC ( 2017 )


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  •                                                                                      10/19/2017
    IN THE COURT OF APPEALS OF TENNESSEE
    AT JACKSON
    September 19, 2017 Session
    JOE DAVID ERWIN ET AL. v. GREAT RIVER ROAD SUPERCROSS LLC
    ET AL.
    Appeal from the Chancery Court for Dyer County
    No. 15-CV-218     Tony Childress, Chancellor
    ___________________________________
    No. W2017-00150-COA-R3-CV
    ___________________________________
    At oral argument, the parties agreed that the trial court made a finding concerning the
    reliance element of Appellants’ fraud claim that was not supported by the record.
    Accordingly, we vacate the trial court’s order and remand the case for further
    proceedings.
    Tenn. R. App. 3 Appeal as of Right; Judgment of the Chancery Court
    Vacated and Remanded
    KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN
    STAFFORD, P.J., W.S., and ARNOLD B. GOLDIN, J., joined.
    Jason R. Creasy, Dyersburg, Tennessee, for the appellants, Joe David Erwin, and
    Amanda Rachel Erwin.
    Matthew W. Willis, Dyersburg, Tennessee, for the appellees, Great River Road
    Supercross, LLC, and Brian Klinkhammer.
    MEMORANDUM OPINION1
    I. Background
    Joe Erwin and Amanda Erwin (together, “Appellants”) entered into an oral
    agreement to purchase personal and real property from Great River Road Supercross,
    LLC (“the LLC”). The sole member of the LLC is Brian Klinkhammer (together with the
    LLC, “Appellees”). The purchase price was $160,000.00, and Appellants made a
    $40,000.00 down payment. The parties entered into a contract titled “Real Estate
    Installment Notes” (“the Note”) for payment of the balance of the purchase price. The
    Note required Appellants to make yearly payments of $12,000.00 for a period of ten (10)
    years. Appellees executed a warranty deed, which specifically warranted against
    encumbrances. However, when the parties executed the Note, unbeknownst to
    Appellants, there was a $20,000.00 mortgage on the property, which Mr. Klinkhammer
    did not pay off at the time of closing.
    The parties’ agreement provided that certain property/equipment was included in
    the sale. Appellants contend that a 10-foot fiber shank was to remain with the property.
    However, unbeknownst to Appellants, the shank was the property of a third party, who
    removed it. Rather than seek injunctive or other relief, in an effort to recoup for the
    alleged loss of the shank, Appellants tendered $10,000.00, as opposed to $12,000.00, as
    their first installment under the Note. Appellants believed that $2,000.00 was the
    approximate value of the piece of equipment that was removed. Appellees considered
    this reduced payment to be a material breach and foreclosed on the property. At the
    foreclosure sale, the property was purchased by Mr. Klinkhammer for the balance of the
    Note.
    On April 29, 2015, Appellants filed a Complaint in the Dyer County Chancery
    Court (“trial court”) for fraud, breach of warranty, and breach of contract. Appellees
    filed an Answer and Counterclaim on July 1, 2015. In the counterclaim, Appellees
    averred breach of contract and conversion by Appellants. The case was heard on October
    18, 2016. On December 8, 2016, the trial court entered an order, granting Appellants a
    $1,000.00 judgment against Mr. Klinkhammer for failure to perform the obligation to
    deliver the fiber shank. All other claims asserted by Appellants were dismissed.
    Appellants appeal.
    1
    Rule 10 of the Court of Appeals of Tennessee provides:
    This Court, with the concurrence of all judges participating in the case, may affirm, reverse or
    modify the actions of the trial court by memorandum opinion when a formal opinion would have no
    precedential value. When a case is decided by memorandum opinion it shall be designated
    “MEMORANDUM OPINION”, shall not be published, and shall not be cited or relied on for any reason
    in any unrelated case.
    -2-
    II. Issues
    1. Whether the trial court erred in finding that Appellants’ fraud claim failed since
    Appellants did not rely on the language in the Warranty Deed.
    2. Whether the trial court erred in determining that Appellants were not damaged by
    Appellees’ breach of warranty and breach of contract.
    III. Standard of Review
    This case was tried without a jury. Therefore, we review the trial court’s findings
    of fact de novo with a presumption of correctness unless the evidence preponderates
    otherwise. Tenn. R. App. P. 13(d). The trial court’s conclusions of law, however, are
    reviewed de novo and “are accorded no presumption of correctness.” Brunswick
    Acceptance Co., LLC v. MEJ, LLC, 
    292 S.W.3d 638
    , 642 (Tenn. 2008).
    IV. Analysis
    Appellants alleged that Appellees engaged in fraud because Appellees sold
    Appellants real property that was encumbered by a mortgage when Appellees asserted the
    property was unencumbered. The four elements for a fraud claim are: (1) an intentional
    misrepresentation of a material fact, (2) knowledge of the representation’s falsity, (3) an
    injury caused by reasonable reliance on the representation, and (4) the requirement that
    the misrepresentation involve a past or existing fact. Kincaid v. SouthTrust Bank, 
    221 S.W.3d 32
    , 40 (Tenn. Ct. App. 2006) (citing Dobbs v. Guenther, 
    846 S.W.2d 270
    , 274
    (Tenn. Ct. App. 1992) (citations omitted)).
    In its findings of fact and conclusions of law, the trial court found:
    One Plaintiff testified that he did not rely on the unencumbered language in
    the deed when making the decision to purchase the property, and the other
    Plaintiff did not testify. There was indeed an intentional misrepresentation
    made that the real property was unencumbered, but since it was not
    established that the Plaintiffs relied on this misrepresentation when making
    their purchasing decision, there is no fraud.
    However, at trial Mr. Erwin testified in part as follows:
    Q: Did [Mr. Klinkhammer] provide you with a warranty deed that
    specifically had a covenant that said the property was not to be
    encumbered?
    A: Yes, sir.
    -3-
    Q: Did the property continue to be encumbered after you purchased it?
    Did it - - the mortgage still continue on the property until 2012?
    A: Yes, sir.
    ***
    Q: . . . The first time you realized that there was, well, a deed of trust or
    anything owed to First Citizens was after - - was when you received the
    foreclosure notice; right?
    A: Yes, sir.
    Q: Before then, no idea.
    A: No; I was told there was no liens against it.
    ***
    Having reviewed Mr. Erwin’s testimony, we agree with the parties’ statements at
    oral argument that Mr. Erwin did not testify “that he did not rely on the unencumbered
    language in the deed when making the decision to purchase the property . . . .” The trial
    court’s finding regarding the reliance element, which provided the basis for the trial
    court’s decision that there was no fraud, is simply not supported by the evidence. As
    such, the record preponderates against the trial court’s finding regarding Appellants’
    fraud claim. We therefore vacate the trial court’s judgment in favor of Appellees and
    remand the case for further proceedings. Our holding in this case does not preclude the
    trial court from reopening proof on remand. We pretermit all remaining issues.
    V. Conclusion
    For the foregoing reasons, we vacate the trial court’s order and remand for such
    further proceedings as may be necessary and are consistent with this opinion. Costs of
    the appeal are assessed one-half to the Appellants, Joe Erwin, Amanda Erwin, and their
    surety, and one-half to Appellees, Great River Road Supercross, LLC, and Brian
    Klinkhammer, for all of which execution may issue if necessary.
    _________________________________
    KENNY ARMSTRONG, JUDGE
    -4-
    

Document Info

Docket Number: W2017-00150-COA-R3-CV

Judges: Judge Kenny Armstrong

Filed Date: 10/19/2017

Precedential Status: Precedential

Modified Date: 10/20/2017