Menuskin v. Williams

• Decision Date: 14 May 1998
• Docket Number: No. 96-6479,96-6479
• Citation: 145 F.3d 755
• Parties: Max W. MENUSKIN, Sarah H. Newman, C.E. Barnes, Bess Barnes, Elizabeth S. Wynn, Lew Phillips, Mamie Phillips, Ed Merritt, and Judie Merritt, Plaintiffs-Appellants, v. Don WILLIAMS, Alice Williams, and First American National Bank, Defendants, Vicki Cooke, Cathleen N. Miles, Susan Parker, National Title Insurance Agency, and J.P. Sartain, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 755

145 F.3d 755

Max W. MENUSKIN, Sarah H. Newman, C.E. Barnes, Bess Barnes Elizabeth S. Wynn, Lew Phillips, Mamie Phillips Ed Merritt, and Judie Merritt Plaintiffs-Appellants, v. Don WILLIAMS, Alice Williams, and First American National Bank, Defendants Vicki Cooke, Cathleen N. Miles, Susan Parker, National Title Insurance Agency, and J.P. Sartain, Defendants-Appellees.

No. 96-6479.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 2, 1997.

Decided May 14, 1998.

Fred T. Hanzelik (argued and briefed), Carl Travis Maxwell, M. Brent James, Hanzelik & Associates, Chattanooga, TN, for Plaintiffs-Appellants.

Thomas E. Ray (argued and briefed), Ray & Bolen, Chattanooga, TN, for Defendant-Appellee Vicki Cooke.

Marvin Berke (argued), Andrew L. Berke (briefed), Berke, Berke & Berke, Chattanooga, TN, for Defendant-Appellee Cathleen N. Miles.

Joe A. Conner (argued and briefed), Richard J. McAfee (briefed), Baker, Donelson, Bearman & Caldwell, Chattanooga, TN, for Defendants-Appellees National Title Insurance Agency, J.P. Sartain.

W. Gerald Tidwell, Jr. (briefed), Chattanooga, TN, for Defendant-Appellee Susan Parker.

Before: BOGGS and MOORE, Circuit Judges; DOWD, ^* District Judge.

OPINION

MOORE, Circuit Judge.

The Plaintiffs-Appellants in this case purchased property from a development corporation, Don Williams Construction Co., Inc. ("DWCC"), and later discovered that, contrary to the warranty deeds they received, their properties were actually encumbered by a construction lien. The head of the development company, Don Williams, settled his portion of this case and is serving time in jail for his role in the events underlying this action. ¹ Based on a variety of state law claims, ² the appellants are attempting to collect damages from the development company employees, Vicki Cooke, Cathleen N. Miles, and Susan Parker, who allegedly indicated that the property would be free of encumbrances, and from the title company, National Title Insurance Agency ("National Title"), and its attorney, J.P. Sartain, who prepared the warranty deed for the closing on their properties. These claims include: negligent misrepresentation, negligence, gross negligence, fraud, violation of the Tennessee Consumer Protection Act ("TCPA"), TENN.CODE ANN. §§ 47-18-101 through § 47-18-121, breach of contract, breach of warranty, civil conspiracy, and negligent and intentional infliction of emotional distress. For the reasons discussed below, we AFFIRM the district court's granting of summary judgment for appellee Cooke on all claims, and for all of the other appellees on the gross negligence, fraud, breach of contract, breach of warranty, civil conspiracy, and negligent and intentional infliction of emotional distress claims. We AFFIRM the grant of summary judgment for appellees National Title and Sartain on the negligence claim, but REVERSE the grant of summary judgment on the negligence claim as it applies to appellees Parker and Miles. We also REVERSE the grant of summary judgment as it applies to all of the appellees, except Cooke, on the negligent misrepresentation and TCPA claims.

I. STATEMENT OF THE FACTS

The appellants contracted to have homes built for them in a subdivision and to purchase the homes from the development corporation, DWCC. The appellants allege that on an individual basis DWCC employees Cooke, Miles, and Parker assured individual appellants that they did not need to have their own attorneys or title insurance because DWCC's attorneys would handle the sales contracts and perform a title search. The identity of these attorneys or title companies was never disclosed to the appellants.

The sales contract for the property provided that:

The Seller agrees to convey said property to the purchaser by general warranty deed free of all encumbrances, except as hereinabove set out, and Seller agrees that any encumbrance not herein excepted will be cleared at the time of closing.

J.A. at 584 (Menuskin Sales Contract); J.A. at 586 (Newman Sales Contract); J.A. at 588 (Barnes Sales Contract); J.A. at 590 (Wynn Sales Contract); J.A. at 591 (Phillips Sales Contract); J.A. at 592 (Merritt Sales Contract). Appellants wrote checks made out to DWCC for $1,000 as earnest money, and appellants contend that the total price included the cost of all legal and title work. See, e.g., J.A. at 1089, 1098 (Newman Dep.); J.A. at 1067 (J. Merritt Dep.). At all times, appellants' contacts in relation to the purchase of the properties were with Don Williams or other DWCC employees.

As part of the development project, Don Williams, through DWCC, obtained a construction loan to build the homes; Williams hired National Title to prepare a construction lien on the properties in order to finance this loan with a local bank. Rather than paying off the construction loan when the appellants paid for their property, Williams used appellants' payments to finance the development of a golf course that he was also developing. See J.A. at 390-92 (Sentencing Hr'g Tr.). Shortly thereafter, DWCC declared bankruptcy. Approximately a year after they purchased their homes, the local bank informed the appellants of the liens on their homes and that the bank would foreclose on the properties. The appellants were able to negotiate an agreement with the bank whereby the appellants essentially had to repurchase their homes from the bank. The appellants filed suit against DWCC and its employees and officers in their individual capacities. A settlement was entered against Mr. Williams, see J.A. at 1301 (Dist.Ct. J.), and he is also serving a jail sentence for his associated crimes.

Appellants are also attempting to recover from National Title and J.P. Sartain, an attorney for National Title, who prepared the warranty deeds on the properties. The only evidence in the record indicates that DWCC, and not the appellants, asked National Title to prepare the warranty deeds and nothing more. See J.A. at 121 (Sartain Aff.). In other words, National Title was never asked to perform a title search or to provide title insurance. See id. The warranty deeds stated that:

Grantor, covenants that it is lawfully seized and possessed of said real estate, has full power and lawful authority to sell and convey the same; that the title thereto is clear, free and unencumbered except as hereinabove mentioned, and Grantor will forever warrant and defend the same against all lawful claims.

See, e.g., J.A. at 837 (Menuskin Warranty Deed). These deeds also included a stamped notation, located in various spots on the deeds, reading as follows: "Prepared by James P. Sartain, Jr., Attorney at Law." Id. When delivered to the appellants, the deeds were contained in a folder bearing the National Title logo. For the preparation of these documents, National Title received thirty dollars per document from DWCC. See J.A. at 121 (Sartain Aff.). The appellants never had any contact with National Title or Sartain other than the receipt of the warranty deeds. Several of the appellants did, however, indicate that they saw signs or folders that bore National Title's name or logo when they were dealing with DWCC employees. See, e.g., J.A. at 958, 970 (Barnes Dep.); J.A. at 976-77 (Burchard Dep.); J.A. at 1020-23, 1026 (E. Merritt Dep.); J.A. at 1043, 1065-66 (J. Merritt Dep.); J.A. at 1003-05 (Menuskin Dep.).

The district court entered summary judgment for defendants National Title, Sartain, Cooke, Parker, and Miles. See J.A. at 1259 (Dist.Ct.Mem.). Judgment was entered against Don Williams and DWCC. See J.A. at 1301 (Dist.Ct. J.).

II. ANALYSIS

This court reviews a district court's decision to grant summary judgment de novo. See Rowley v. United States, 76 F.3d 796, 799 (6th Cir.1996). Summary judgment is appropriate "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." FED.R.CIV.P. 56(c). In applying this standard, we view the evidence so that all justifiable inferences are drawn in favor of the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A federal court exercising supplemental jurisdiction is bound to apply the law of the forum state, including its choice of law rules. See Haynes v. Marshall, 887 F.2d 700, 705 (6th Cir.1989) (citing Guaranty Trust Co. v. York, 326 U.S. 99, 108-09, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945)); see also United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Because these transactions are wholly connected with Tennessee, we agree with the parties' assumption that Tennessee supplies the governing substantive law.

The appellants' claims against the appellees include: negligence, gross negligence, fraud, negligent misrepresentation, violation of the Tennessee Consumer Protection Act ("TCPA"), TENN.CODE ANN. §§ 47-18-101 through § 47-18-121, breach of contract, breach of warranty, civil conspiracy, and negligent and intentional infliction of emotional distress. After addressing a preliminary matter regarding the liability of appellee Cooke, we will discuss each of these claims in turn, distinguishing among the appellees where relevant.

A. A PRELIMINARY NOTE ON VICKI COOKE'S LIABILITY

We discuss preliminarily the status of Vicki Cooke since the appellants have argued that her situation is unique to the extent that she is the daughter of Don and Alice Williams and she served as an officer of DWCC. Under Tennessee law, a corporate officer is only personally liable for torts in which he or she participated in the wrong. See Cooper v. Cordova Sand & Gravel Co., 485 S.W.2d 261, 271-72 (Tenn.Ct.App.1971). The appellants insist that "Cooke knew of the prior existing liens in her inside position as Secretary, Treasurer, billpayer and bookkeeper...