Terry Pritchett v. Comas Montgomery Realty & Auction Company, Inc.

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

February 27, 2015 Session

TERRY PRITCHETT V. COMAS MONTGOMERY REALTY & AUCTION

COMPANY, INC. ET AL.

Appeal from the Circuit Court for Rutherford County

No. 63540 Robert E. Corlew, III, Judge

No. M2014-00583-COA-R3-CV – Filed April 15, 2015

Plaintiff purchased a commercial building at auction. After determining that the building

was smaller than represented in the auction advertisements, Plaintiff filed suit asserting a

claim against the auction company for negligently misrepresenting the square footage of

the building. Defendant admits the advertisement incorrectly stated the square footage but

insists it is not liable because, prior to the auction, Plaintiff signed a “Terms of Sale”

agreement stating that Plaintiff “shall rely entirely on [his] own inspection and

information,” and that “[e]verything will be sold „AS IS, WHERE IS‟, with no guarantee

of any kind, regardless of statement or condition made from the auctioneer,” and the

same terms were restated immediately prior to the commencement of bidding. Defendant

further relies on the contract of sale, which included the “as is” clause and did not contain

a representation concerning the square footage of the building. After engaging in

discovery, Defendant filed a motion for summary judgment, arguing that Plaintiff could

not have justifiably relied on the representations in light of the “as is” disclaimers he

signed and heard, and that Plaintiff failed to establish the applicable standard of care. The

trial court granted summary judgment for Defendant, which Plaintiff contends was error.

We have determined that Plaintiff‟s agreement to rely entirely on his own inspection and

information and to purchase the property on an “as is” basis negates any reliance on

Defendant‟s representation, which is an essential element of a claim for negligent

misrepresentation. Therefore, we affirm the grant of summary judgment in favor of

Defendant.

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

FRANK G. CLEMENT, JR., P.J., M.S., delivered the opinion of the Court, in which

RICHARD H. DINKINS and W. NEAL MCBRAYER, JJ., joined.

Christina Duncan and J. Stanley Rogers, Manchester, Tennessee, for the appellant, Terry

Pritchett.

Aaron S. Guin, Nashville, Tennessee, for the appellee, Comas Montgomery Realty &

Auction Company, Inc.

G. Sumner Bouldin, Jr., Murfreesboro, Tennessee, for the appellee, BGS Limited, a

Tennessee Limited Partnership.

OPINION

In March 2010, Comas Montgomery Realty & Auction Company, Inc.

(“Defendant”) conducted an auction of a commercial building on behalf of the property

owner. Terry Pritchett (“Plaintiff”) attended the auction due in part to advertisements

circulated by Defendant, which stated that the building to be auctioned contained 11,556

square feet.1

On the day of the auction but prior to its commencement, Plaintiff signed a

“Terms of Sale” form that stated “[e]verything will be sold „AS IS, WHERE IS‟, with no

guarantee of any kind, regardless of statement or condition made from the auctioneer.

Buyer shall rely entirely on their own inspection and information.” Additionally,

immediately prior to the commencement of the auction, Defendant‟s auctioneer

announced to those in attendance that “[y]our bids today are based solely upon your

inspection. This real estate‟s being sold without physical warranty in as-is condition.”

After making this announcement the auction commenced.

At the conclusion of the auction Plaintiff was recognized as the successful bidder,

and he signed the contract of sale. The contract states in pertinent part that the parties

agreed “that this instrument contains the entire agreement between the parties and that

acceptance herein notes that there are no oral or collateral conditions, agreements or

representations, all such having been incorporated and resolved in this Contract.” The

contract additionally states “[b]uyer specifically acknowledges herein that the property is

being purchased „as is‟ and that neither the Seller nor [Defendant] makes any warranties

or representations, express or implied, as to the habitability or condition of the real

property contained herein.” Furthermore, the contract of sale does not contain a

representation concerning the dimensions of the building.

After acquiring the property, Plaintiff determined that the building comprised

9,353 square feet rather than 11,556 as advertised. As a consequence, Plaintiff

commenced this action against Defendant alleging that it negligently misrepresented the

1

Defendant relied upon a 2008 Retrospective Valuation Self-Contained Appraisal Report

(“Appraisal Report”) prepared by Crook & Company appraisers that erroneously listed the square footage

at 11,556 in several sections of the Appraisal Report, although under a section identified as Property

Assessment Data the square footage was listed as 9,603. Subsequently, the parties stipulated the actual

square footage to be 9,353.

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size of the building.2 After conducting discovery and taking the deposition of Plaintiff‟s

expert, Defendant filed a motion for summary judgment arguing: (1) expert testimony

was required to establish the standard of care for auctioneers and that Plaintiff‟s expert

failed to establish the standard of care; and (2) Plaintiff could not have relied on the

representation of square feet because of the “as is” language he agreed to in the contract

of sale, Terms of Sale form, and pre-auction announcement.

The trial court granted Defendant‟s motion for summary judgment on the ground

that Plaintiff had not established the standard of care. This appeal followed.

STANDARD OF REVIEW

This appeal arises from the grant of summary judgment. Summary judgments do

not enjoy a presumption of correctness on appeal. BellSouth Adver. & Publ’g Co. v.

Johnson, 100 S.W.3d 202, 205 (Tenn. 2003). The resolution of a motion for summary

judgment is a matter of law, thus we review the trial court‟s judgment de novo with no

presumption of correctness. Id. The appellate court makes a fresh determination that the

requirements of Tenn. R. Civ. P. 56 have been satisfied. Hunter v. Brown, 955 S.W.2d

49, 50-51 (Tenn. 1997).

Summary judgment is appropriate when a party establishes that there is no genuine

issue as to any material fact and that a judgment may be rendered as a matter of law.

Tenn. R. Civ. P. 56.04; Stovall v. Clarke, 113 S.W.3d 715, 721 (Tenn. 2003). It is

appropriate in virtually all civil cases that can be resolved on the basis of legal issues

alone. Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn. 1993); Pendleton v. Mills, 73 S.W.3d

115, 121 (Tenn. Ct. App. 2001). It is not appropriate when genuine disputes regarding

material facts exist. See Pendleton, 73 S.W.3d at 121; Tenn. R. Civ. P. 56.04.

This case was filed after July 1, 2011; therefore, the summary judgment standard

set forth in Tenn. Code Ann. § 20-16-101 applies. Pursuant to this statutory standard, in

order to prevail in its motion, Defendant must submit affirmative evidence that negates an

essential element of Plaintiff‟s claim or demonstrate to the court that Plaintiff‟s evidence

is insufficient to establish an essential element of his claim. See Tenn. Code Ann.

§ 20-16-101.

ANALYSIS

2

Plaintiff also asserted a claim of intentional misrepresentation against Defendant; however, he

voluntarily dismissed this claim. Plaintiff sued another defendant, BGS, Ltd., the prior owner of the

property that hired Defendant to conduct the auction, which claim remains with the trial court. The

judgment dismissing Plaintiff‟s claims against Defendant was declared a final appealable judgment

pursuant to Tenn. R. Civ. P. 54.02.

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Plaintiff contends that the trial court erred in granting summary judgment because

expert testimony is not required to establish the standard of care for auctioneers and

genuine issues of material fact exist regarding possible violations of the rules and

regulations governing auctioneers.

For its part, Defendant insists it was entitled to summary judgment on each of the

two grounds it relied upon. Specifically, Defendant insists that the trial court correctly

determined that Plaintiff failed to establish the applicable standard of care; however,

Defendant also contends the trial court should have additionally ruled that Defendant

negated the element of justifiable reliance by establishing without dispute that Plaintiff

agreed to the written “Terms of Sale” prior to the auction which stated that “[e]verything

will be sold „AS IS, WHERE IS‟, with no guarantee of any kind, regardless of statement

or condition made from the auctioneer. Buyer shall rely entirely on their own inspection

and information,” and agreed to the terms as announced by the auctioneer immediately

prior to the commencement of the auction that the property was being sold “as is” and

that all bidders must rely on their own inspections of the property.

For the reasons stated below, we affirm the summary dismissal of Plaintiff‟s claim

upon different grounds than those stated by the trial court, 3 that Defendant negated the

essential element of reliance due to the undisputed fact that Plaintiff agreed to rely

entirely on his own inspection and information and that he was purchasing the building

“„AS IS, WHERE IS‟, with no guarantee of any kind, regardless of statement or

condition made from the auctioneer.”

Negligent misrepresentation occurs when a plaintiff justifiably relies on faulty

information supplied by a defendant who, acting in the course of her business, profession,

or a transaction in which she has pecuniary interest, has failed to exercise reasonable care

in obtaining or communicating that information. See Robinson v. Omer, 952 S.W.2d 423,

427 (Tenn. 1997); see also Restatement (Second) of Torts § 552 (1977). The essential

elements of a claim for negligent misrepresentation are: (1) the defendant was acting in

the course of its business or profession or in a transaction in which it had a pecuniary

interest; (2) the defendant supplied faulty information meant to guide others in their

business transactions; (3) the defendant failed to exercise reasonable care in obtaining or

communicating the information; and (4) the plaintiff justifiably relied upon the

information. Robinson, 952 S.W.2d at 427. To sustain a claim for negligent

misrepresentation, the plaintiff must establish each of these elements by a preponderance

of the evidence. Id. Therefore, Plaintiff cannot succeed on a negligent misrepresentation

3

This court may affirm a judgment on different grounds than those relied on by the trial court

when the trial court reached the correct result. City of Brentwood v. Metro. Bd. of Zoning Appeals, 149

S.W.3d 49, 60 n.18 (Tenn. Ct. App. 2004).

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claim unless he can establish the essential element of reliance. See McNeil v. Nofal, 185

S.W.3d 402, 409 (Tenn. Ct. App. 2005).

Justifiable or reasonable reliance involves two different issues: whether the

plaintiff actually relied on the misrepresentation and whether that reliance was

reasonable. See Edmondson v. Coates, No. 01-A-01-9109-CH00324, 1992 WL 108717,

at *2 n.1 (Tenn. Ct. App. May 22, 1992). The issue the parties have presented in this

appeal is whether the exculpatory language in the Terms of Sale agreement and the oral

terms announced immediately prior to the commencement of the auction negates

Plaintiff‟s actual reliance.

Parties may agree to disclaim reliance on another‟s representations. See Ingram v.

Cendant Mobility Financial Corp., 215 S.W.3d 367, 371-72 (Tenn. Ct. App. 2006). In

Ingram, the plaintiff purchased a home and signed a sale contract that stated “[n]either

party has relied upon any statement or representations made by the other party or the

sales representative bringing the parties together not contained [in this contract].” Id. This

court enforced this provision as written and held that it negated the plaintiffs‟ contention

that they relied on representations that the seller‟s representative had made. Id. at 372; see

Morgan Dev., LLC v. Morrow, No. E2010-00610-COA-R3-CV, 2011 WL 662948, at *4

(Tenn. Ct. App. Feb. 23, 2011) (noting that signing a contract containing a disclaimer of a

broker‟s obligation to verify certain characteristics of the property at issue implicitly

admits that any reliance on representations about those characteristics was not

justifiable).

Similarly, agreeing to accept real property “as is” may negate any reliance on

representations about the condition of that property. See Stafford v. Emberton, No.

M2008-02250-COA-R3-CV, 2009 WL 2960391, at *3 (Tenn. Ct. App. Sept. 15, 2009).

In Stafford, the misrepresentation at issue involved the completion of certain repairs on

the property. Id. at *1. Before purchasing the property, the plaintiffs signed an agreement

stating that “[b]uyer agrees that they have carefully inspected the premises prior to

signing this Agreement, and without reservation accept the Property as suitable and ready

for use as their home, that all repairs or replacement have been completed to their

satisfaction . . . .” Id. at *2. This court held that the plaintiffs had agreed to purchase the

property “as is” and that doing so negated any reliance on the misrepresentation. Id. at

*2-3.

Although Plaintiff voluntarily dismissed his claim that Defendant‟s conduct was

intentional or grossly negligent,4 Plaintiff contends that generic “as is” language is not

4

Of course, disclaimers and exculpatory language will not protect a party from its intentional

conduct or gross negligence. See Adams v. Roark, 686 S.W.2d 73, 75 (Tenn. 1985) (noting that the law of

Tennessee does not favor contracting against liability for gross negligence). Such clauses are also invalid

when they violate public policy. Olson v. Molzen, 558 S.W.2d 429, 432 (Tenn. 1977) (holding that an

exculpatory contract signed by a patient as a condition of receiving medical treatment was invalid as

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sufficient to negate his reliance on Defendant‟s statements. We are not persuaded by this

argument. Although the disclaimer language in Stafford specifically addressed the issue

of repairs on the property, this court did not base its decision on the specificity of the

language the plaintiffs signed. See id. at *2-3. Instead, we concluded that “the agreement

by the [plaintiffs] to accept the property „as is‟ defeats any negligent misrepresentation

claims.” Id. at *3 (emphasis in original).

It is undisputed that the Terms of Sale agreement that Plaintiff signed prior to

making a bid and the announcement that immediately preceded the auction clearly and

unequivocally stated that the property was being sold “as is.” It is also undisputed that the

Terms of Sale and the announcement both established that Plaintiff shall rely entirely on

his own inspection and information.

Conditions of a sale at auction that are announced at the auction are binding on the

bidder. Cunningham v. Lester, 138 S.W.3d 877, 881 (Tenn. Ct. App. 2003); Moore v.

Berry, 288 S.W.2d 465, 468 (Tenn. Ct. App. 1955). Therefore, since there is no claim

that Defendant engaged in fraud, intentional misconduct, or gross negligence, we have

concluded that Defendant successfully negated the essential element that Plaintiff relied

on Defendant‟s misrepresentation that the building was 11,556 square feet. Because

Defendant negated an essential element of Plaintiff‟s claim, Defendant is entitled to

summary judgment. Accordingly, we affirm the summary dismissal of Plaintiff‟s claim

on different grounds than those relied on by the trial court.5

IN CONCLUSION

The judgment of the trial court is affirmed, and this matter is remanded with costs

of appeal assessed against Plaintiff, Terry Pritchett.

______________________________

FRANK G. CLEMENT, JR., JUDGE

contrary to public policy); Gross v. McKenna, No. E2005-02488-COA-R3-CV, 2007 WL 3171155, at *5

(Tenn. Ct. App. Oct. 30, 2007) (quoting In re Sikes, 184 B.R. 742, 746 (Bankr. M.D. Tenn. 1995)).

5

Our ruling on this issue renders the other issues moot.

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