Tammy R. Ganzevoort v. Richard B. Russell, Martha T. Russell, and Jim Cassetty, D/B/A Cassetty Realty ( 1995 )

TAMMY R. GANZEVOORT, )
)
Plaintiff/Appellee, )
) Appeal No.
) 01-A-01-9502-CV-00038
VS. )
) Sumner Circuit
) No. 12365-C
RICHARD B. RUSSELL, MARTHA T. )
RUSSELL and JIM CASSETTY d/b/a )
JIM CASSETTY REALTY, )
)
FILED
Defendants/Appellants. ) Oct. 25, 1995
Cecil Crowson, Jr.
Appellate Court Clerk
COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
APPEALED FROM THE CIRCUIT COURT OF SUMNER COUNTY
AT GALLATIN, TENNESSEE
THE HONORABLE THOMAS GOODALL, JUDGE
MICHAEL W. EDWARDS
177 East Main Street
Hendersonville, Tennessee 37075
Attorney for Plaintiff/Appellee
JOHN R. BRADLEY
ANTHONY D. MILLER
311 East Main Street, Suite 3
Hendersonville, Tennessee 37075
Attorney for Defendants/Appellants
REVERSED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
INMAN, S. J.
OPINION
The Circuit Court of Sumner County awarded the purchaser of a home
a judgment against the sellers and their real estate agent, for deceptive practices as
defined in the Tennessee Consumer Protection Act. Because we find that the
evidence preponderates against a finding that the plaintiff suffered any ascertainable
harm from a deceptive act, we reverse.
I.
The plaintiff purchased a home in Hendersonville, and discovered
immediately that the plywood subfloor, the floor joists, and the hardwood floors under
two baths and part of another room had extensive water damage. Two leaking
commodes and perhaps a leaking shower as well caused the damage. The plaintiff
discovered the problem when she removed some old carpet in the room adjacent to
the two bathrooms, in order to expose the hardwood floor underneath.
The plaintiff sued the sellers and their real estate agent for deceptive
practices under the Tennessee Consumer Protection Act, Tenn. Code. Ann. § 47-18-
101, et seq.
At a bench trial the proof showed that the house was originally
purchased by the defendants Richard B. Russell and Martha T. Russell in 1969. The
Russells later divorced and Mrs. Russell moved out of the house early in 1991. Mr.
Russell continued to live in the house with his oldest daughter until January of 1993;
the daughter moved out in April of 1993.
Mr. and Mrs. Russell offered the house for sale in the latter part of 1992
and the plaintiff signed a contract to purchase the house on February 1, 1993 for
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$68,500. The plaintiff applied for a FHA loan, and an FHA representative inspected
the house on May 6, 1993. The inspection report noted that the house needed some
minor repairs; it did not, however, cite any water damage to the floor, subfloor, or floor
joists. The same inspector conducted a follow-up inspection on May 12, 1993 and
issued a clean report.
On May 15, 1993 a pest control company inspected the house for
termites. During the inspection, the inspector noted some apparent water damage to
the subflooring under the bathroom. He didn't note it on his report because, in his
opinion, it did not affect the structural integrity of the house. He did, however, report
it to the sellers' real estate agent, who went out to see for himself. The agent noticed
the damage to one or more floor joists under the bathroom, and hired a carpenter to
make the repairs. The carpenter added some sheets of plywood under one of the
bathrooms and reinforced the joists by nailing additional members alongside the
damaged ones. All the old wood was dry, even though it had obviously been wet
previously.
Mr. Russell was aware of the repairs made underneath the house, and
authorized his agent to deduct the cost from the proceeds paid to the sellers at the
closing. The sellers' agent also notified the buyer's agent that a small problem had
been detected and corrected. The buyer's agent says she relayed the information to
the buyer. The buyer and her agent walked through the house a few days before the
closing, and did not notice any of the damaged areas.
The plaintiff testified that she did not rely on any statements made by
the sellers or their agent. She relied on the FHA inspections, the termite inspection
and her own personal observations, in deciding the house was in good condition. The
closing took place on June 3, 1993.
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II.
The Consumer Protection Act makes unfair or deceptive acts unlawful,
Tenn. Code Ann. § 47-18-104(a). The Act lists certain specific deceptive acts and
then adds a broad category: "Engaging in any other act or practice which is deceptive
to the consumer or to any other person." Tenn. Code Ann. § 47-18-104(b)(27). The
plaintiff relies on the quoted section as the basis for her claim against the sellers and
their agent.
The Consumer Protection Act does apply to transactions in real estate,
Steed Realty v. Oneisi, 823 S.W.2d 195 (Tenn. App. 1991), and the deceptive acts
or practices do not have to be wilful or knowing. Smith v. Scott Lewis Chevrolet, Inc.,
843 S.W.2d 9 (Tenn. App. 1992); Haverlah v. Memphis Aviation, Inc., 674 S.W.2d 297(Tenn. App. 1984). But does the plaintiff have to rely on the deceptive act or practice?
If so, the plaintiff cannot recover in this case because she testified that she did not rely
on any acts of the defendants, and the allegedly deceptive act took place after the
date of the agreement.
The parties have not provided any authority on the reliance issue under
the Consumer Protection Act and we have not been able to find an answer in the
Tennessee cases. We are persuaded, however, that reliance is not a part of the
cause of action, simply because the Act does not require it. Tenn. Code Ann. § 47-
18-109 gives a person who has suffered an ascertainable loss a cause of action to
recover the actual damages caused by the deceptive act or practice. It does not
mention reliance, and the whole tenor of the act makes it clear that the technical
requirements of a cause of action for fraud and deceit are not a part of the cause of
action under the act.
We turn next to the question of whether the defendants were guilty of
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a deceptive act. The trial judge did not make a finding of the defendants' specific
acts. He found simply that "the defendants were guilty of unfair or deceptive acts or
practices and violated the provisions of T.C.A. § 47-18-104(a)(27)."
With respect to Mrs. Russell, we think that finding is clearly erroneous.
She had no part in the events that occurred between the execution of the contract and
the closing. She had not lived in the house for over two years, and there is no proof
that she had any knowledge of the water damage. The fact that her real estate agent
may have acted deceptively should not be imputed to her. There is no proof that she
authorized the agent to act for her in any way, except in selling the house. Therefore,
the action against her should be dismissed.
As to Mr. Russell and the real estate agent, we think a conclusion could
be drawn (as the trial judge did) that they engaged in a deceptive act by, either
intentionally or negligently, covering over a serious defect in the house. Such a
finding, however, does not automatically impose liability on the defendants. The
statute also requires that the deceptive act affect the "conduct of any trade or
commerce." Tenn. Code Ann. § 47-18-104(b). We have difficulty finding from the
record in this case how the deceptive act affected the trade. The contract had been
signed, the FHA inspection had been made, and the loan had been approved; the
sellers had a clear termite letter, and the closing was only a few days away. If Mr.
Russell and the agent had done nothing, the transaction would undoubtedly have
closed. Therefore, we do not think it can be argued that the deceptive act affected the
trade.
For the same reasons, we are also convinced that the proof fails to
establish how the plaintiff was damaged by the deceptive act. The only proof in the
record concerns the cost of repairs. But the deceptive act did not cause the harm to
the structure, nor did it cause the transaction to close. Therefore, we find that the
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plaintiff failed to show that she had an ascertainable loss as a result of the deceptive
act. See Tenn. Code Ann. § 47-18-109.
The judgment of the court below is reversed and the cause is remanded
to the Circuit Court of Sumner County for any proceedings that may become
necessary. Tax the costs on appeal to the appellee.
_____________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
WILLIAM H. INMAN, SENIOR JUDGE
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