Robert H. Goodall, Jr. v. William B. Akers

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

January 21, 2011 Session

ROBERT H. GOODALL, JR. v. WILLIAM B. AKERS

Appeal from the Circuit Court for Sumner County

No. 26169-C Tom E. Gray, Chancellor

No. M2010-01584-COA-R3-CV - Filed March 1, 2011

Buyer of real property brought suit against seller for intentional misrepresentation, fraudulent

misrepresentation, breach of contract, and breach of express warranty. The trial court

determined that the buyer’s reliance upon the seller’s representations was reasonable. On

appeal, the seller argues that the evidence does not support the trial court’s decision and that

the trial court erred in excluding expert testimony offered by the seller. Because we have

determined that the trial court erred in excluding the expert testimony in question, we reverse

and remand.

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

Remanded

A NDY D. B ENNETT, J., delivered the opinion of the Court, in which R ICHARD H. D INKINS, J.,

joined. F RANK G. C LEMENT, J R., J., dissenting.

George Edward Barrett and Scott Patton Tift, Nashville, Tennessee, for the appellant,

William B. Akers.

Barbara Jones Perutelli, Nashville, Tennessee, for the appellee, Robert H. Goodall, Jr.

OPINION

F ACTUAL AND P ROCEDURAL B ACKGROUND1

William B. Akers owned a 716-acre tract of property in Sumner County that included

a four-or-five-acre lake. Robert Goodall, a real estate broker and developer, entered into a

contract with Akers on November 4, 2003, to purchase the property. On November 8, 2003,

Ed Kittrell, a neighbor who helped Akers with the property, told Goodall that the earthen

dam built to create the lake had been “condemned” by the Corps of Engineers. Goodall

requested and received a property disclosure statement from Akers. On the property

disclosure statement, Akers answered “No” to the question, “Have you received notices by

governmental or quasi-governmental agency affecting the Property including but not limited

to road changes, zoning changes, assessments, etc.?” and to questions regarding earth

stability and drainage or flooding problems.

Prior to the closing, Goodall talked to his attorney, Kay Housch, about the information

he had learned from Kittrell. Housch contacted Akers’s attorney, who reassured Housch and

informed her that Akers would put an additional warranty in the contract to address these

concerns. In an amendment to the sale contract, Akers added the following warranty: “[T]o

Seller’s knowledge there have been no problems with the existing dam on the lake on the

Property since same was repaired by Seller and since Seller constructed an enlarged spill way

years ago.”2 The amendment was dated February 24, 2004.

The closing occurred on March 2, 2004. Goodall thereafter learned of previous

communications between Akers and state dam safety officials concerning the condition of

the dam.

Prior history of dam safety issues

In April 1982, the Division of Water Resources of the Tennessee Department of

Conservation notified Akers that he was to file a certificate of approval and safety regarding

the dam. This letter referenced an October 1981 safety inspection conducted by the state and

the Army Corps of Engineers, a copy of which had been sent to Akers; according to the

1

Our summary of the facts is largely a duplication of the facts set forth in our opinion in the previous

appeal in this case. See Goodall v. Akers, No. M2008-01608-COA-R3-CV, 2009 WL 528784, at *1 (Tenn.

Ct. App. Mar. 3, 2009). The operative facts are not in dispute.

2

A few years after purchasing the property in the late 1950's, Akers and his brother had the earthen

dam built to create the lake. Prior to 1970, the dam washed out and was reconstructed with an enlarged

spillway.

-2-

letter, the report outlined “a number of significant safety deficiencies” and recommendations

for correction.

In July 1985, Akers received a letter from the Division of Water Management of the

Tennessee Department of Health & Environment3 (“TDHE”) attaching a recent safety

inspection report and stating that, “[b]ased on the deficiencies found during this inspection,

a Certificate of Approval and Safety cannot be issued at this time.” The dam was classified

as “a small dam with a high potential for downstream hazard.” Among the problems cited

in the letter was the inspector’s finding that the “downstream face of the dam is leaking

significantly over an area near to the top of the dam.” The letter referenced a recent

telephone conversation with Akers in which he was told that the lake should be drained as

soon as possible. Within 30 days of receiving the letter, Akers was to consult an engineer

concerning the condition of the dam. In a reply letter, Akers informed the TDHE that the

level of the lake had been lowered about ten feet and that it was his intention to drain the lake

and leave it drained. In October 1985, the TDHE notified Akers that, “[d]ue to the hazard

category of your dam and to the signs of instability of the structure itself, the dam cannot be

certified for operation even in the drained condition.” Akers was directed to contact an

engineer to assess the dam and propose actions to rehabilitate it. In January 1986, a letter

from the TDHE notified Akers that the lake had been classified as a farm pond and that the

TDHE therefore did not intend to regulate it.

In August 1996, an inspector from the Safe Dams Section of the Division of Water

Supply of the Tennessee Department of Environment and Conservation 4 (“TDEC”)

performed a farm pond review and sent Akers a report stating that “the dam is not stable” and

suggesting that the lake be drained. Among the problematic conditions cited was seepage

around the outlet pipe. The inspector informed Akers that if he wanted to keep the lake “he

needed to have a licensed engineer evaluate the conditions of the dam and make

recommendations” to Akers. A July 2001 inspection report states that the property was

unchanged; Akers advised the inspector that the public was still not allowed on the property.

Lawsuit

Goodall filed the instant lawsuit against Akers on November 1, 2004, alleging causes

of action for intentional misrepresentation, fraudulent concealment, breach of contract, and

3

It appears that the Department of Health & Environment took over the dam inspection

responsibilities previously performed by the Department of Conservation.

4

The Tennessee Department of Environment and Conservation took over the dam safety

responsibilities previously performed by the TDHE.

-3-

breach of express warranty. In February 2006, Akers filed a motion for summary judgment.

Goodall filed a motion for partial summary judgment as to liability; he submitted an affidavit

from his attorney in the real estate transaction, Kay Housch. Both parties relied on the

depositions of Akers and Goodall.5 The trial court denied Akers’s motion for summary

judgment and granted Goodall’s motion for partial summary judgment as to liability. On

appeal, this court reversed the grant of summary judgment because there was “a genuine

issue of material fact as to whether [Goodall] reasonably relied upon [Akers’]

misrepresentations” concerning the condition of the dam. Goodall, 2009 WL 528784, at *1.

Back in the trial court, the parties filed a joint stipulation, which included their

agreement that the only issue remaining for trial was “the reasonableness of Mr. Goodall’s

reliance under the circumstances of Mr. Akers’s alleged representations.” The parties also

stipulated to the qualifications of their respective expert witnesses “to testify as experts to

matters pertaining to their respective fields.”

On April 6, 2010, Goodall filed a motion in limine asking the court to exclude the

expert testimony of Jeff Guild and Albert Buckley. Goodall asserted that Akers intended to

use these expert witnesses to testify “on the issue of whether Mr. Goodall’s reliance in this

case was reasonable” and, he argued, “[t]he determination of reasonable reliance is a legal

conclusion, not an opinion of fact.” At the beginning of the trial on April 9, 2010, the court

heard arguments on and granted the plaintiff’s motion in limine. The defendant made an

offer of proof as to both witnesses.

The plaintiff put on testimony from Kay Housch, the real estate attorney who

represented him during the real estate transaction at issue, and Goodall himself testified. The

defendant moved for a directed verdict after the plaintiff’s proof; the court denied the motion

and took the case under advisement. In a memorandum opinion entered on June 10, 2010,

the court entered judgment in favor of the plaintiff and detailed its factual findings. The

court entered its order on June 22, 2010, stating: “For the reason set forth in the

Memorandum, the Court finds that the Plaintiff’s reliance on the representations made by the

Defendant was reasonable, that the Plaintiff has carried the burden of proof on the elements

of intentional misrepresentation and should have a judgment against the Defendant.” The

court entered judgment in favor of the plaintiff in the amount of $250,000 plus reasonable

attorney fees.

5

A summary of these depositions appears in our previous opinion in this case. See Goodall, 2009

WL 528784, at *2-4.

-4-

On appeal, Akers argues that the trial court erred (1) in holding that it was reasonable

for Goodall to rely on Akers’s representations concerning the earthen dam and (2) in

excluding the testimony of Akers’s expert witnesses.

A NALYSIS

We begin with the evidentiary issue. A trial court’s decisions regarding the admission

or exclusion of evidence are reviewed under an abuse of discretion standard. Brown v.

Crown Equip. Corp., 181 S.W.3d 268, 273 (Tenn. 2005); Mercer v. Vanderbilt Univ., Inc.,

134 S.W.3d 121, 131 (Tenn. 2004). Under this standard, we are required to uphold the trial

court’s ruling “as long as reasonable minds could disagree about its correctness.” Caldwell

v. Hill, 250 S.W.3d 865, 869 (Tenn. Ct. App. 2007). So, “we are not permitted to substitute

our judgment for that of the trial court.” Id.

In its final order, the court included its ruling on the plaintiff’s motion in limine:

Prior to trial the court took oral argument on the Motion in Limine and granted

the motion that the expert witnesses could not give an opinion which is a legal

conclusion and specifically that the reliance of Mr. Goodall on representation

of Mr. Akers was not reasonable. No prohibition was made by the court that

the defendant’s expert witnesses could not testify; they would not be allowed

to give an opinion on the ultimate issue to be decided by the court after

determination of fact.

Akers argues on appeal that the court’s action in excluding the testimony of his two expert

witnesses was erroneous because the court applied an incorrect legal standard in that the

reasonableness of Goodall’s reliance was a factual issue, not a legal issue.

Tenn. R. Evid. 702 provides: “If scientific, technical, or other specialized knowledge

will substantially assist the trier of fact to understand the evidence or to determine a fact in

issue, a witness qualified as an expert . . . may testify in the form of an opinion or otherwise.”

Pursuant to Tenn. R. Evid. 704, “[t]estimony in the form of an opinion or inference otherwise

admissible is not objectionable because it embraces an ultimate issue to be decided by the

trier of fact.” As our Supreme Court has made clear, “expert opinion testimony which

embraces an ultimate issue must be ‘otherwise admissible’ and not objectionable on other

grounds.” State v. Shuck, 953 S.W.2d 662, 669 (Tenn. 1997) (citing Neil P. Cohen, Donald

F. Paine & Sarah Y. Sheppeard, T ENNESSEE L AW OF E VIDENCE § 704.3 (2d ed. 1990)).

Justifiable reliance is an essential element of a claim for fraudulent misrepresentation

or fraudulent concealment. See McNeil v. Nofal, 185 S.W.3d 402, 408 (Tenn. Ct. App.

-5-

2005). Whether the plaintiff’s reliance on a representation was reasonable is a question of

fact. City State Bank v. Dean Witter Reynolds, Inc., 948 S.W.2d 729, 737 (Tenn. Ct. App.

1996); see generally Smith v. Sloan, 225 S.W.2d 539, 541 (Tenn. 1949) (determination of

reasonable conduct as question of fact). There are a number of factors relevant to the

determination of whether a plaintiff’s reliance was reasonable:

(1) the plaintiff’s business expertise and sophistication; (2) the existence of a

longstanding business or personal relationship between the parties; (3) the

availability of the relevant information; (4) the existence of a fiduciary

relationship; (5) the concealment of the fraud; (6) the opportunity to discover

the fraud; (7) which party initiated the transaction; and (8) the specificity of the

misrepresentation.

Pitz v. Woodruff, No. M2003-01849-COA-R3-CV, 2004 WL 2951979, at *10 (Tenn. Ct.

App. Dec. 17, 2004); see also Allied Sound, Inc. v. Neely, 58 S.W.3d 119, 122 (Tenn. Ct.

App. 2001).

Since justifiable reliance is a question of fact, the trial court was in error in basing its

exclusion of the defendant’s expert testimony on the premise that this was a question of law.

Moreover, the fact that justifiable reliance is an ultimate issue to be decided is not a basis for

exclusion of expert testimony. Tenn. R. Evid. 704. The trial court gave no other reason for

its exclusion of the evidence at issue. We must, therefore, conclude that the trial court erred

in excluding the expert testimony offered by Akers on the reasonableness of Goodall’s

reliance on Akers’s representations.6

In light of our conclusion regarding the evidentiary issue presented, we have

determined that the trial court’s decision must be reversed and remanded.

6

The dissent is based on three points: that the proposed testimony would not substantially assist the

trier of fact, that the experts were not prohibited from testifying as to other relevant matters, and that the

exclusion of the experts' opinions, if error, was harmless. We would observe that the first point was not

mentioned by the trial court and amounts to mere speculation. The only reason given by the trial court for

the exclusion of the evidence (that the proposed testimony offered a legal conclusion) is erroneous. The

second point, while accurate, does not address the majority's ruling that the experts were improperly

prohibited from testifying as to the reasonableness of Goodall's reliance. The third point is additional

speculation.

-6-

C ONCLUSION

The judgment of the trial court is reversed and the matter is remanded for further

proceedings consistent with this opinion. Costs of the appeal are assessed against the

appellee, for which execution may issue if necessary.

______________________________

ANDY D. BENNETT, JUDGE

-7-