Frances Seward Bennett and Don Seward v. City of Memphis

IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

NOVEMBER 16, 2011 Session

FRANCES SEWARD BENNETT and DON SEWARD v. CITY OF

MEMPHIS.

Direct Appeal from the Chancery Court for Shelby County

No. CH-07-0229-2 Arnold Goldin, Chancellor

No. W2011-00577-COA-R3-CV - Filed December 21, 2011

Plaintiffs sued the City of Memphis, claiming that they were fraudulently induced to sign a

sewer easement agreement. The trial court granted summary judgment to the City of

Memphis. We reverse and remand for further proceedings.

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

and Remanded

A LAN E. H IGHERS, P.J., W.S., delivered the opinion of the Court, in which H OLLY M. K IRBY,

J., and J. S TEVEN S TAFFORD, J., joined.

Daniel A. Seward, Memphis, Tennessee, for the appellants, Frances Seward Bennett and Don

Seward

Jill Madajczyk, Senior Assistant City Attorney, Memphis, Tennessee, for the appellee, City

of Memphis

OPINION

I. F ACTS & P ROCEDURAL H ISTORY

Don Seward and Frances Seward Bennett are siblings who both own properties

located along Highway 64 in Memphis, Tennessee. On July 7, 2005, Mr. Seward and Mrs.

Bennett both executed separate documents granting sewer easements across their properties

in favor of the City of Memphis. On January 31, 2007, Mr. Seward and Mrs. Bennett

(collectively, “Plaintiffs”) filed a complaint in the chancery court of Shelby County seeking

to have the easement agreements set aside on the basis that the agreements were signed in

reliance upon “false, misleading, deceptive and fraudulent statements” by City of Memphis

employees. Plaintiffs, who do not have sewer service at their properties, claimed that they

had signed the easement agreements believing that the City was going to use the easement

to install a sewer line that would provide service to their properties. According to Plaintiffs’

complaint, they learned in January of 2007 that the easement was being used to install a

sewer line that would serve a nearby subdivision on Schaeffer Road, but not their own

homes. Plaintiffs sought declaratory and injunctive relief, and in the alternative, a judgment

for two million dollars in damages. Plaintiffs’ request for temporary injunctive relief was

denied, and a force main sewer line was installed on their properties in December 2008.

The City of Memphis filed a motion for summary judgment along with the affidavit

of its Real Estate Administrator, Deborah Daniels. Ms. Daniels explained that significant

sewer and septic tank problems had arisen in the nearby Schaeffer Road subdivision, which

posed an immediate health concern to the subdivision residents. As a result, Ms. Daniels

stated, the City developed a plan to install a “temporary force main sewer line” to provide

relief to the residents of the subdivision until a “permanent gravity line” could be

constructed. According to Ms. Daniels, a force main sewer line, by design, only serves those

properties at the end of the sewer line, and it is not possible for properties along the sewer

line to tie into it.1

Ms. Daniels stated that in order to install the sewer line, it was necessary to obtain

easements upon the properties of certain residents living along Highway 64. She said that

each affected resident was sent a letter announcing the project and describing the purpose for

which the City needed the easement, as well as a copy of the Schaeffer Road Sewer

Easement Agreement. The letter stated, in relevant part:

1

Ms. Daniels said that the City does have plans eventually to replace the force main sewer line with

a gravity fed sewer line, which, pursuant to city ordinance, Plaintiffs will be able to access, but no date has

been set for its construction.

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The City of Memphis is in the process of improving the existing sewer

easement over and across your property east of Roland Road (see attached

engineering drawing.) The project is required to serve downstream property

owners with sewer service.

This drawing shows the permanent easement . . . and a temporary

construction easement . . . that will be used during the construction phase only.

I will contact you by phone after you have had a chance to look over the

plans. If you have any questions, please call . . . .

The Schaeffer Road Sewer Easement Agreement that accompanied the letter, which Plaintiffs

eventually signed, stated, in relevant part:

KNOW ALL MEN BY THESE PRESENTS, That for and in consideration of

the sum of . . . $1.00 . . . and other valuable consideration paid by the City of

Memphis to [Plaintiff] the receipt of which is hereby acknowledged,

hereinafter termed Grantor, and for the further consideration hereinafter

mentioned, to-wit: the building or construction of a sanitary sewer line in

Memphis, Shelby County, Tennessee, the said grantor has this day bargained

and sold, and does hereby transfer and convey unto the City of Memphis, the

right of entry upon and occupancy by a sanitary sewer line over a certain strip

of land lying in Shelby County, Tennessee.

Ms. Daniels stated that the City’s Real Estate Department maintained a file on each property

affected by the proposed sewer line with notes of all communications between the Real

Estate Department and the property owner. Ms. Daniels explained that some affected

residents simply signed and returned the easement agreements without further discussion,

while the majority sought individually negotiated agreements with the Real Estate

Department. Ms. Daniels said that she had examined the files for both Plaintiffs’ properties

and that the files indicated there was no communication other than the initial notice letters

and the easement agreements that were signed and returned by mail.

In response to the City’s motion for summary judgment, Plaintiffs relied upon three

affidavits, which, they contended, created genuine issues of material fact. Plaintiffs filed the

affidavit of Don Bennett, who was the husband of Plaintiff Frances Seward Bennett. He

stated that before his wife signed the easement agreement, he contacted “the City of

Memphis” about the proposed sewer easement, and he was informed “by an employee of the

City of Memphis” that the easement was for a common sewer line that residents on Highway

64 in the Eads area would be able to use. Mr. Bennett stated that the aforementioned area

included the properties owned by Plaintiffs.

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Plaintiff Frances Seward Bennett also filed her own affidavit, stating that her husband

told her that he was informed by an employee of the City of Memphis that the easement was

for a common sewer line that residents on Highway 64 in the Eads area would be entitled to

use. She said that she signed the easement agreement based on the “false representations

[made] by the employee of the City of Memphis” to her husband.

Plaintiff Don Seward, who is the brother of Plaintiff Frances Seward Bennett, filed

an affidavit as well. He stated that he had, at some earlier time, contacted “the City of

Memphis” about its plans for a common sewer line, and he was informed that it “would

happen at some unknown time in the future.” Plaintiff Seward then stated that Mr. Bennett

told him that “an employee of the City of Memphis” told him that the proposed easement was

for the common sewer line that residents on Highway 64 in the Eads area would be able to

use. Plaintiff Seward said that “part of” his decision to sign the easement agreement was

based on the statements made by the City of Memphis employee to Mr. Bennett.

At the hearing on the motion for summary judgment, the City of Memphis argued that

the affidavits submitted by Plaintiffs in response to the motion for summary judgment

contained inadmissible hearsay and information made without personal knowledge of the

affiant, and therefore, Plaintiffs had failed to produce admissible evidence to rebut the City’s

evidence that it did not have any communication with the property owners other than the

mailing of the notice letter and easement agreement. In response, Plaintiffs argued that the

letter and easement agreement were ambiguous, such that a reasonable person would believe

that he or she would receive sewer service by signing the easement agreement.

Following the hearing, the trial court entered summary judgment in favor of the City

of Memphis, finding that the easement agreement was “clear and unambiguous” and that

“there [was] nothing in the agreement that makes any representation to the effect that the

Plaintiffs were going to be able to tie into the sewer line.” The trial court went on to state

that because it found the easement agreement unambiguous, there was no need to look

beyond the terms of the easement agreement in order to determine the parties’ intent. The

court then stated that it found “no issue of material fact as to fraud, misrepresentation, undue

influence, or any situation of like character, relating to the facts and circumstances

surrounding the execution” of the agreement. Plaintiffs timely filed a notice of appeal.

II. I SSUES P RESENTED

On appeal, Plaintiffs insist that the trial court erred in failing to consider parol

evidence regarding their allegations of fraudulent inducement. They also argue that the trial

court erred in granting summary judgment to the City of Memphis. The City of Memphis

claims that the trial court properly granted it summary judgment because Plaintiffs failed to

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present admissible competent evidence in response to its motion for summary judgment. We

reverse and remand for further proceedings.

III. D ISCUSSION

A. Parol Evidence

“‘Parol evidence is generally inadmissable to contradict, vary, or alter the terms of a

written contract where the written instrument is valid, complete, and unambiguous.’”

Biancheri v. Johnson, Nos. M2008-00599-COA-R3-CV, M2007-02861-COA-R3-CV, 2009

WL 723540, at *9 n.9 (Tenn. Ct. App. Mar. 18, 2009) (quoting Butler v. Butler, No. W2007-

01257-COA-R3-CV, 2008 WL 5396019, at *6 (Tenn. Ct. App. Dec.23, 2008)). However,

there are a number of exceptions to the parol evidence rule, and in Tennessee, extrinsic

evidence can be admitted to establish allegations of fraud or fraudulent misrepresentation in

the negotiation of a contract. Hines v. Wilcox, 33 S.W. 914, 915-16 (Tenn. 1896); Brungard

v. Caprice Records, Inc., 608 S.W.2d 585, 588 (Tenn. Ct. App. 1980). Simply stated, “the

[parol evidence] rule does not apply to claims of fraudulent misrepresentation in inducement

of a contract.” Biancheri, 2009 WL 723540, at *9 n.9. Therefore, we find that the trial court

erred in finding that it was not necessary to look beyond the terms of the easement agreement

when considering Plaintiffs’ claims.

B. Summary Judgment Standards

A motion for summary judgment should be granted only “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is entitled to

a judgment as a matter of law.” Tenn. R. Civ. P. 56.04. “When ascertaining whether a

genuine dispute of material fact exists in a particular case, the courts must focus on (1)

whether the evidence establishing the facts is admissible, (2) whether a factual dispute

actually exists, and, if a factual dispute exists, (3) whether the factual dispute is material to

the grounds of the summary judgment.” Green v. Green, 293 S.W.3d 493, 513 (Tenn. 2009).

“A disputed fact presents a genuine issue if ‘a reasonable jury could legitimately resolve that

fact in favor of one side or the other.’” Martin v. Norfolk S. Ry., 271 S.W.3d 76, 84 (Tenn.

2008) (quoting Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993)). In other words, “[i]f

reasonable minds could justifiably reach different conclusions based on the evidence at hand,

then a genuine question of fact exists.” Green, 293 S.W.3d at 514 (citing Martin, 271

S.W.3d at 84; Louis Dreyfus Corp. v. Austin Co., 868 S.W.2d 649, 656 (Tenn. Ct. App.

1993)). “If, on the other hand, the evidence and the inferences reasonably drawn from the

evidence would permit a reasonable person to reach only one conclusion, then no material

factual dispute exists, and the question can be disposed of as a matter of law.” Id. (citing

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Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002); Seavers v. Methodist Med. Ctr. of Oak

Ridge, 9 S.W.3d 86, 91 (Tenn. 1999)).

“The party seeking the summary judgment has the burden of demonstrating that no

genuine disputes of material fact exist and that it is entitled to a judgment as a matter of law.”

Green, 293 S.W.3d at 513 (citing Martin, 271 S.W.3d at 83; Amos v. Metro. Gov't of

Nashville & Davidson County, 259 S.W.3d 705, 710 (Tenn. 2008)). “The moving party may

make the required showing and therefore shift the burden of production to the nonmoving

party by either: (1) affirmatively negating an essential element of the nonmoving party's

claim; or (2) showing that the nonmoving party cannot prove an essential element of the

claim at trial.” Martin, 271 S.W.3d at 83 (citing Hannan v. Alltel Publ'g Co., 270 S.W.3d

1, 5 (Tenn. 2008)). In order to negate an essential element of the claim, “the moving party

must point to evidence that tends to disprove an essential factual claim made by the

nonmoving party.” Id. at 84 (citing Blair v. W. Town Mall, 130 S.W.3d 761, 768 (Tenn.

2004)). “If the moving party is unable to make the required showing, then its motion for

summary judgment will fail.” Id. (citing Byrd, 847 S.W.2d at 215).

If the moving party does make a properly supported motion, the nonmoving party is

then required to produce evidence of specific facts establishing that genuine issues of

material fact exist. Id. (citing McCarley v. West Quality Food Serv., 960 S.W.2d 585, 588

(Tenn. 1998); Byrd, 847 S.W.2d at 215). “The nonmoving party may satisfy its burden of

production by: (1) pointing to evidence establishing material factual disputes that were

over-looked or ignored by the moving party; (2) rehabilitating the evidence attacked by the

moving party; (3) producing additional evidence establishing the existence of a genuine issue

for trial; or (4) submitting an affidavit explaining the necessity for further discovery pursuant

to Tenn. R. Civ. P., Rule 56.06.” Id. (citing McCarley, 960 S.W.2d at 588; Byrd, 847 S.W.2d

at 215 n.6). “The nonmoving party's evidence must be accepted as true, and any doubts

concerning the existence of a genuine issue of material fact shall be resolved in favor of the

nonmoving party.” Id. (citing McCarley, 960 S.W.2d at 588).

The resolution of a motion for summary judgment is a matter of law, which we review

de novo with no presumption of correctness. Id. However, “we are required to review the

evidence in the light most favorable to the nonmoving party and to draw all reasonable

inferences favoring the nonmoving party.” Id. (citing Staples v. CBL Assocs., Inc., 15

S.W.3d 83, 89 (Tenn. 2000)).

C. Fraudulent Inducement

“Misrepresentation goes to the inducement of the contract and precludes a finding of

mutual assent. The result is that the contract is voidable by the recipient of the

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misrepresentation.” Scruggs v. Roach, No. 03A01-9209-CH-00358, 1993 WL 93362, at *4

(Tenn. Ct. App. W.S. Mar. 31, 1993) perm. app. denied (Tenn. July 26, 1993); see also

Biancheri, 2009 WL 723540, at *11. “To be successful, a party making a fraudulent

inducement claim has the burden of proving that the defendant (1) made a false statement

concerning a fact material to the transaction (2) with knowledge of the statement’s falsity or

utter disregard for its truth (3) with the intent of inducing reliance on the statement, (4) the

statement was reasonably relied upon, and (5) an injury resulted from this reliance.” Baugh

v. Novak, 340 S.W.3d 372, 388 (Tenn. 2011) (citing Lamb v. MegaFlight, Inc., 26 S.W.3d

627, 630-31 (Tenn. Ct. App. 2000)).

D. Plaintiffs’ Claim

The City of Memphis argues that it negated an essential element of Plaintiffs’

fraudulent inducement claim by establishing, through the affidavit of Ms. Daniels, that no

false statements were made to Plaintiffs. As explained above, Ms. Daniels stated that,

according to the Real Estate Department’s files, there was no communication between the

Real Estate Department and Plaintiffs except the letter and attached easement agreement.

We conclude that the City of Memphis did affirmatively negate an essential element of

Plaintiffs’ claim by producing evidence that tended to disprove Plaintiffs’ factual allegation

that they relied upon false statements by City of Memphis employees.

As a result, Plaintiffs were required to “produce evidence of specific facts establishing

that genuine issues of material fact exist” in order to show that summary judgment was not

warranted. Martin, 271 S.W.3d at 84. They could satisfy their burden of production by: “(1)

pointing to evidence establishing material factual disputes that were over-looked or ignored

by the moving party; (2) rehabilitating the evidence attacked by the moving party; (3)

producing additional evidence establishing the existence of a genuine issue for trial; or (4)

submitting an affidavit explaining the necessity for further discovery pursuant to Tenn. R.

Civ. P., Rule 56.06.” Id. Plaintiffs relied upon the three affidavits in an effort to

demonstrate that an employee of the City of Memphis made allegedly false statements to Don

Bennett, the husband of Plaintiff Frances Seward Bennett. The City of Memphis argues that

the relevant testimony in all three affidavits was inadmissible hearsay, and therefore,

Plaintiffs failed to meet their burden of production in response to the motion for summary

judgment.

“The legal sufficiency of the evidentiary materials in the record when a court

considers a summary judgment motion is of pivotal importance.” Davis v. McGuigan, 325

S.W.3d 149, 168 (Tenn. 2010) (J. Koch, dissenting). “When issues have been raised

regarding the compliance of affidavits with the standards prescribed by Tenn. R. Civ. P. 56

or the admissibility of evidence contained in these affidavits, the threshold issue of

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admissibility should be resolved before determining whether or not unresolved questions of

fact exist.”2 Id. (citing Travis v. Ferraraccio, No. M2003-00916-COA-R3-CV, 2005 WL

2277589, at *4-5 (Tenn. Ct. App. Sept. 19, 2005)). “After these threshold questions have

been addressed, the trial court may then determine whether, taking the strongest view of the

admissible evidence in favor of the non-moving party, there remain any genuine issues of

material fact to be decided at trial.” Id. (citing Byrd, 847 S.W.2d at 210-11) (emphasis

added); see also Green, 293 S.W.3d at 514 (instructing courts deciding summary judgment

motions to first focus on whether the evidence establishing the facts is admissible).

The two affidavits submitted by each of the Plaintiffs recounted what Plaintiffs were

told by Don Bennett regarding his conversation with the City of Memphis employee. The

testimony of Plaintiffs as to what they were told by Mr. Bennett is clearly inadmissible

hearsay. See Tenn. R. Evid. 801. For facts to be considered at the summary judgment stage,

they must be admissible in evidence. Green, 293 S.W.3d at 513 (citing Byrd, 847 S.W.2d

at 215-16; Tenn. R. Civ. P. 56.06). Tennessee Rule of Civil Procedure 56.06 provides that

“[s]upporting and opposing affidavits shall be made on personal knowledge, shall set forth

such facts as would be admissible in evidence, and shall show affirmatively that the affiant

is competent to testify to the matters stated therein.” “To permit an opposition to be based

on evidence that would not be admissible at trial would undermine the goal of the summary

judgment process to prevent unnecessary trials since inadmissible evidence could not be used

to support a jury verdict.” Byrd, 847 S.W.2d at 216. Clearly, Plaintiffs would not be allowed

to establish that a false statement was made by testifying at trial as to what Don Bennett told

them about his conversation with an employee of the City of Memphis. Because the relevant

statements in Plaintiffs’ affidavits were inadmissible hearsay, they cannot be considered for

purposes of summary judgment. See Perlberg v. Brencor Asset Mgmt., Inc., 63 S.W.3d 390,

397 (Tenn. Ct. App. 2001); Tomlin v. Warren, 958 S.W.2d 354, 355 (Tenn. Ct. App. 1997)

(explaining that hearsay testimony in affidavits may not be used to support or oppose

summary judgment).

The affidavit testimony of Don Bennett, however, must be considered separately. Mr.

Bennett stated that he contacted “the City of Memphis” about the proposed easement, and

that “an employee of the City of Memphis” told him that the easement was needed for a

common sewer line that residents on Highway 64 in the Eads area would be able to use. The

2

We normally review a trial court's decisions regarding the admissibility of evidence using the abuse

of discretion standard, and that standard of review should also be used at the summary judgment stage. Id.

at 169 (citing General Electric Co. v. Joiner, 522 U.S. 136, 142-43 (1997)). However, in this case, the trial

court declined to consider the evidence in the affidavits not because of hearsay concerns but based upon its

erroneous conclusion that the parol evidence rule barred their consideration. Consequently, the trial judge

did not make a finding regarding the admissibility of the alleged hearsay testimony.

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City of Memphis argues on appeal that this testimony constituted hearsay and that Plaintiffs

failed to establish the applicability of any exception to the hearsay rule. However, we find

that Don Bennett’s testimony about the employee’s false statement does not qualify as

hearsay in the first instance because the employee’s statement was not offered for the truth

of the matter asserted but instead for the mere fact that the statement was uttered, as an

“operative fact” of the fraudulent inducement claim. “A statement introduced to prove only

that it was made, regardless of the truth or falsity of the statement, does not violate the rule

against hearsay.” State v. Brown, 836 S.W.2d 530, 551 (Tenn. 1992) (citing Cannon v.

Chadwell, 25 Tenn.App. 42, 150 S.W.2d 710, 712 (1941)).

One of the more difficult, though infrequently encountered, categories

of nonhearsay evidence encompasses operative facts, sometimes referred to as

verbal acts. Operative facts are words that operate, by force of law, to cause

legal consequences wholly apart from the truth or falsity of the words.

Substantive law may make the utterance of words an event that causes a

change in legal relationships, irrespective of the truth or falsity of the words

or the credibility of the speaker. Such words are not hearsay by definition

since they are not being used to prove their truth. Indeed, the truth or falsity of

the words is irrelevant; what matters is that the words were uttered.

State v. Eads, No. E2006-02792-CCA-R3-CD, 2008 WL 2152494, at *8 (Tenn. Crim. App.

2008) (quoting Neil P. Cohen et al., Tennessee Law of Evidence § 8.01[6][a] (5th ed. 2005)).

Some examples of nonhearsay operative facts include words of acceptance in the context of

whether a contract was formed and words of donative intent when deciding whether an object

was a gift. Id. (citing Cohen, § 8.01[6][b], [c]). In a case involving rights acquired to land

by prescription, one party’s out-of-court statements giving the other permission to remain on

the property were said to have had “legal significance and effectuate[d] legal consequences,

in and of themselves,” and therefore, the statements were not inadmissible hearsay. Brown

v. Daly, 968 S.W.2d 814, 817-18 (Tenn. Ct. App. 1997). In another case involving tortious

interference with a business relationship, the Court recognized that the defendant’s statement

about the plaintiff to his business partner “could be nonhearsay operative facts which are

admissible.” Collins v. Greene County Bank, 916 S.W.2d 941, 947 (Tenn. Ct. App. 1995).

The Court compared the situation to a defamation action, where it is necessary to prove that

the defendant wrote or spoke defamatory words. Id. See also Harvey v. Farmers Ins.

Exchange, 286 S.W.3d 298, 304 (Tenn. Ct. App. 2008) (explaining that testimony about

what an insurance agent said did not implicate the hearsay rule when offered in support of

an estoppel defense because it was not offered to prove the truth of the matter asserted: “In

other words, the evidence was intended to demonstrate that Agent said the policy would

cover Mr. Harvey's intended use of the van, not necessarily that the policy actually did cover

such use.”); Bailey v. USF Holland, Inc., 444 F.Supp.2d 831, 847 (M.D. Tenn. 2006)

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(involving racial discrimination claims and holding that testimony about the racial epithets

used was not hearsay but verbal acts offered to show the statements were made).

In a situation more comparable to the one before us,3 involving a charge of obtaining

money under false pretenses, the Court of Criminal Appeals held that it was proper to allow

a bank president to testify about an out-of-court telephone conversation that led to the

exchange of the money. State v. Kenner, 640 S.W.2d 51, 55 (Tenn. Crim. App. 1982).

Because the testimony was not offered to prove the truth of the statements made, the

testimony was “admissible as a verbal act as a part of the fraudulent transaction and as res

gestae.” Id.

Finally, courts in other jurisdictions have held that fraudulent out-of-court statements

are admissible as nonhearsay operative facts in various instances. See, e.g., U.S. v. Kirk, 844

F.2d 660, 663 (9th Cir. 1988) (finding that the statement constituted the “operative fact” of

the fraud alleged and was not offered for the truth of the matter asserted but to show that a

misrepresentation was made); Alliance Nat. Bank & Trust Co. v. State Sur. Co., 390

N.W.2d 487, 492-93 (Neb. 1986) (explaining that the misrepresentations were independently

material to a determination of whether fraud had been perpetrated and constituted “a premise

or predicate in a claim for fraud,” therefore, the misrepresentations were verbal acts and not

hearsay); Tinnes v. Immobilaire IV, Ltd., No. 00AP-87, 2001WL 122073, at *7 (Ohio Ct.

App. Feb. 13, 2001) (holding that alleged misrepresentations offered to establish an element

of fraud claims should have been admitted as “verbal acts”); Busse v. Pacific Cattle Feeding

Fund No. 1, Ltd., 896 S.W.2d 807, 816 (Tex. Ct. App. 1995) (explaining that statements

offered only to show that they were made, as elements of the fraud the plaintiff was trying

to prove, were admissible as operative facts). See also U.S. v. Howard, 751 F.2d 336, 339

(10th Cir. 1984) (finding that statements constituting fraudulent inducements made to get the

victims to part with their property were not hearsay because they were not offered to prove

the truth of the matter asserted).

We similarly conclude that Don Bennett’s testimony about the statement made by the

City of Memphis employee is admissible as the statement constituted a nonhearsay operative

fact. The evidence was offered not to prove the truth of the matter asserted, but rather to

prove the operative fact that a misrepresentation was made that induced Plaintiffs to sign the

easement agreements. The mere utterance of the statement has legal significance as an

3

In a fraudulent inducement case like the one before us, this Court stated that "a party may introduce

an out of court statement in order to prove that one relied on the statement when entering a transaction, as

long as the reliance of the parties is an issue in the lawsuit." Caterpillar Financial Services Corp. v. Page,

1991 WL 191621, at *3 (Tenn. Ct. App. Sept. 30, 1991). However, we did not specifically discuss

nonhearsay operative facts.

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element of the fraudulent inducement claim that Plaintiffs were trying to prove.

Because we find that Don Bennett’s affidavit contained admissible evidence that

could be considered for purposes of summary judgment, we further conclude that Plaintiffs

met their burden of production in response to the motion for summary judgment. Viewing

the evidence in the light most favorable to Plaintiffs, as we are required to do, Martin, 271

S.W.3d at 83, we find that Plaintiffs have demonstrated that genuine issues of material fact

exist with regard to their fraudulent inducement claim such that it was improper to grant

summary judgment to the City of Memphis.4

In conclusion, we find that the City of Memphis made a properly supported motion

for summary judgment by negating an essential element of Plaintiffs’ claim for fraudulent

inducement – the element of a false statement. In response, however, Plaintiffs produced

admissible evidence of specific facts establishing that genuine issues of material fact existed.

Accordingly, we find that the City of Memphis was not entitled to summary judgment.

IV. C ONCLUSION

For the aforementioned reasons, we reverse and remand the decision of the chancery

court for further proceedings. Costs of this appeal are taxed to the appellee, the City of

Memphis, for which execution may issue if necessary.

_________________________________

ALAN E. HIGHERS, P.J., W.S.

4

We note that the City of Memphis limited its argument on appeal to insisting that the affidavits

did not contain admissible evidence that could be considered for purposes of summary judgment. The City

of Memphis offered no alternative argument to suggest that summary judgment would be inappropriate if

the affidavit testimony was deemed admissible. Having concluded that one of the affidavits did contain

admissible testimony, we have resolved the issue presented, and we decline to consider whether summary

judgment would have been appropriate on other grounds not raised or briefed by the parties.

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