Dozier v. Hawthorne Development Co.

• Citation: 37 Tenn.App. 279,262 S.W.2d 705
• Parties: DOZIER et ux. v. HAWTHORNE DEVELOPMENT CO. et al.
• Decision Date: 26 June 1953
• Court: Court of Appeals of Tennessee

Page 705

262 S.W.2d 705

37 Tenn.App. 279

DOZIER et ux. v. HAWTHORNE DEVELOPMENT CO. et al.

Court of Appeals of Tennessee, Middle Section.

June 26, 1953.

Certiorari Denied by Supreme Court Dec. 11, 1953.

Thomas G. Watkins and Arthur Crownover, Jr., Nashville, for complainants.

Judson Harwood and Cecil Sims, Nashville, for defendants Hawthorne Development Co. et al.

Armistead, Waller, Davis & Lansden, Nashville, for defendant Guaranty Mortg. Co.

Martin & Cochran, Nashville, for Prudential Ins. Co. FELTS, Judge.

The bill herein was filed by Culver B. Dozier and his wife, Margaret T. Dozier, to rescind a conveyance of a house and lot made to them by the Hawthorne Development Company, to recover what they had paid on account of the purchase, and to obtain other incidental relief. The ground of relief alleged was that they had been induced to purchase the property by certain false and fraudulent representations hereinafter set out.

The property was Lot No. 17 on the Plan of Glen Echo Subdivision, a new suburban residential area in the Seventh District of Davidson County, developed by the Hawthorne Development Company, a Tennessee corporation. This house and lot was conveyed by that company to the complainants by deed dated October 23, 1948, for the consideration of $15,500, which was paid in cash by them--some $6,000 from money they had on hand and the balance from a loan procured by them on the property.

This loan was obtained by complainants on October 25, 1948, and on that day they conveyed their legal title to the property to Herschel Greer, Trustee, to secure their note for $9,300 for the loan made to them by the Guaranty Mortgage Company of Nashville. The note was to be paid in installments over a period of years and was payable to the order of that company and was negotiated by it to the Prudential Life Insurance Company of America. While this latter company was made a defendant to the bill, it was conceded to be a holder of the note in due course.

The house was completed and complainants began living there the latter part of October, 1948. In February, 1949 they complained to their vendor, the Hawthorne Development Company, that their septic tank did not properly dispose of the sewage but let it well up in their yard; and they called on the vendor to refund what they had paid on the property and on their note, and they offered it a deed conveying their equity to it and providing it should assume payment of the balance of their note.

The Hawthorne Development Company refused to do these things, and complainants brought this bill against it and its officers: Robert M. Condra, President, W. L. Bainbridge, Jr., Vice President, and William M. Wessely, Secretary and Treasurer. The bill charged that these officers of the company and its real estate agent made the false and fraudulent representations which induced complainants to buy the property. Such representations, which were the basis of the relief sought, were stated in the bill as follows:

'That complainants were induced to purchase said property only in reliance upon the representations made to them at the time the negotiations were started in September or October, 1948, and made to them while such negotiations were in progress that the residence was serviced by a septic tank operating properly, all as required by Davidson County, Tennessee, and by the Federal Housing Administration. It was represented to complainants that said property was eligible for an F.H.A. loan, which could be used by them in buying the same.

'Such representations were made to your complainants by the defendant, Hawthorne Development Company, acting through its Secretary-Treasurer and co-defendant, William M. Wessely and the real estate agent who interested complainants in acquiring the property.

* * *

* * *

'Your complainants relied implicitly upon the representations made to them by defendants, Hawthorne Development Company, Condra, Bainbridge and Wessely, and the sales agent negotiating the sale and have only just discovered the fraud practiced upon them.'

The bill prayed that the Clerk and Master be appointed Receiver of the property to take charge of it, keep it insured, and keep it rented out pending the outcome of this litigation; and that complainants recover of the Hawthorne Development Company and its officers, Condra, Bainbridge and Wessely, $6,889.41 and the costs.

Complainants were still occupying the property, and their application for a Receiver of it was denied. Later they filed a supplemental bill stating that they had moved out of the house and praying that the Clerk and Master be appointed Receiver of the property to keep it insured and rented during the outcome of this litigation. They also prayed for recovery of $250 as their moving expense.

The Clerk and Master was appointed Receiver of the property but was directed not to rent it. It was stipulated that complainants' continued payments of the monthly installments on their note would be without prejudice to their rights in this suit; and it appears that they have continued to pay these installments.

The Hawthorne Development Company filed an answer to the bill, which was adopted by Condra, Bainbridge, and Wessely. This answer denied that defendants had made any representations to induce complainants to purchase the property. It averred that the property was not purchased by complainants on October 23, 1948 but on August 21, 1948; that a written contract of purchase had been made on August 21, 1948, pursuant to which the deed had been made to complainants on October 23, 1948.

The answer further averred that Dick C. Thompson, Sanitary Engineer of Davidson County, had approved the location and installation of the septic tank on the property; and that proper and legal permits had been issued for placing said tank on the lot and its installation had been duly approved as required by law.

It was further stated in the answer that at the time complainants purchased the property the house was being constructed and the septic tank had not been commenced. The answer further stated that when complainants complained of the tank, after they had been living there some months, defendants investigated and found that the trouble could be corrected at small cost; and they offered to do this at their own expense, but their offer was refused by complainants.

A great mass of proof was taken, much of it outside the scope of the pleadings and foreign to the issue made by them: whether complainants had been induced to purchase the property by false and fraudulent representations by the vendor's officers and agent that the residence was serviced by a septic tank properly operating, and that the property was eligible for a F.H.A. loan, which could be used in buying it.

It appears that anyone proposing to develop a suburban residential area in Davidson County must first file a plan of the proposed subdivision with the County Zoning and Planning Commission. The Commission then asks Mr. Dick C. Thompson, Sanitary Engineer of the Davidson County Department of Health, to investigate the plan and report his opinion or judgment as to whether the plan is feasible and the land suitable for septic tank disposal of sewage.

If his report is favorable, the Commission may permit the planned development to proceed. But if his report is unfavorable, the Commission withholds approval and the development cannot proceed. Where the development of a subdivision has been approved by the Sanitary Engineer and authorized by the Zoning and Planning Commission, the property becomes eligible for a F.H.A. loan. In order to procure such loan the Sanitary Engineer must sign 'Form No. 2218' signifying that the sewerage disposal system is satisfactory to the health authority of the County.

It appears that there was an agreement between the Planning Commission and the Health Department by which the size of proposed lots was determined by the character of the soil with reference to its absorbing qualities. Testifying about this, Mr. Thompson said:

'In short, that was an agreement on determining lot sizes through percolation tests, observation, or whatever method might be desired or practical.

However, it developed that I never did attempt to give an opinion without the percolation test, as far as a subdivision is concerned. That is, an official opinion. I will give anyone my opinion from observation, but I certainly wouldn't want to go on record saying that it isn't or it is any given thing without the percolation test to prove or disapprove it.'

Since the favorable opinion of Mr. Thompson was a prerequisite to the development of suburban residential subdivisions in the County, it seems to have become more or less a practice for prospective developers to ask him to look at or test property which they proposed to develop.

It appears that Mr. Thompson in 1945, at the instance of other parties, looked at the area, part of which later became Glen Echo Subdivision, and expressed his opinion that the land was of 'poor porosity.' In February, 1946, he went on some of the same property with Mr. Condra, made some tests of it, and expressed a like opinion to Mr. Condra.

A year or so later the Hawthorne Development Company was organized as a corporation, and acquired 43 1/2 acres in that area. It was first proposed to divide this property into some 80 lots but Mr. Thompson disapproved, and stated the lots should each contain at least 40,000 square feet, approximately one acre.

Thereupon the corporation submitted a new plan dividing the 43 1/2 acres into 43 lots. The Planning Commission called upon Mr. Thompson to investigate and report on this plan. He went on the property, made tests, and reported his opinion to the Planning Commission, approving all of the lots, including Lot No. 17, for septic tank disposal of sewage, except five--Lots Nos. 8, 9, 10, 37 and 38, which he said were 'inadequate as building lots depending upon subsoil...