Tartera v. Palumbo

• Decision Date: 04 May 1970
• Citation: 224 Tenn. 262,2 Pack 262,453 S.W.2d 780
• Parties: , 224 Tenn. 262 Alex Jack TARTERA and Thersa D. Tartera, Plaintiffs in Error, v. Frank P. PALUMBO, Defendant in Error.
• Court: Tennessee Supreme Court

Page 780

453 S.W.2d 780

2 Pack 262, 224 Tenn. 262

Alex Jack TARTERA and Thersa D. Tartera, Plaintiffs in Error, v. Frank P. PALUMBO, Defendant in Error.

Supreme Court of Tennessee.

May 4, 1970.

C. Thomas Cates, Memphis, and Burch, Porter & Johnson, Memphis, of counsel, for plaintiffs in error.

James C. Warner, Memphis, Martin, Tate, Morrow & Marston, Memphis, of counsel, for defendant in error.

OPINION

DYER, Chief Justice.

This case comes to this Court from the action of the trial judge in sustaining a demurrer to the declaration dismissing the case. The issue presented is whether the facts alleged in the declaration will sustain a cause of action in tort where the plaintiff is not in privity with the defendant, the tort being based on negligent misrepresentation as opposed to fraudulent misrepresentation. In this opinion we will refer to the parties as they were in the trial court; that is, Alex Jack Tartera and wife, Thersa D. Tartera, as plaintiffs, and Frank P. Palumbo as defendant.

Plaintiffs owned and farmed about twenty acres of land in Shelby County, Tennessee, upon which land their home was located. On July 5, 1966, plaintiffs, by written contract, granted to the J. Gibson Riley Construction Company (hereafter referred to as Riley) an option to lease seven and one-half acres of this land and an option to purchase the remaining twelve and one-half acres. Riley could exercise either or both of these options, but in the event only the option to purchase was exercised, Riley was obligated to pay plaintiffs a stated sum of money as a penalty. The contract provided plaintiffs could remove any building from any land purchased or leased. It is alleged at the time the contract was executed it was understood between the parties, that in the event Riley exercised only the option to purchase the twelve and one-half acres, said acreage would not include the lot of land upon which plaintiffs' residence was located.

Prusuant to its contractual obligation to have the property rezoned, Riley employed and paid defendant to survey this property and prepare a subdivision plat. It is alleged Riley informed defendant this survey and plat would be used in any purchase of this property under the option and that the residence of plaintiffs was not to be included in the twelve and one-half acres optioned to be purchased. Defendant in accord with his employment by Riley completed his work.

After defendant completed his survey, plaintiffs noticed a survey stake in the center of their driveway and by sighting on same came to the conclusion, under this survey, the western boundary of the twelve and one-half acre tract might run through the center of their residence. Plaintiffs then went to the office of their attorney, who had been furnished a copy of defendant's survey and plat. Upon examining this survey plaintiffs and their attorney came to the conclusion their residence would be outside the boundaries of this twelve and one-half acre tract as designated by defendant's survey, but their attorney placed a telephone call to defendant inquiring of this matter. Defendant, in response to the question as to the location of the residence upon his survey, assured plaintiffs their residence was not inside the boundaries of the twelve and one-half acres, but was, in fact, about twenty feet west of the western boundary of said tract. Upon this assurance by defendant, plaintiffs again extended the option contract dated July 5, 1966.

Riley exercised the option to purchase the twelve and one-half acre tract but did not exercise the option to lease the seven and one-half acres. On February 23, 1968, in accord with the option contract, plaintiffs conveyed the twelve and one-half acres by warranty deed to Riley's designee. The description of the twelve and one-half acres conveyed by this deed was taken from the survey and plat prepared by defendant.

On February 26, 1968, construction crews began to uproot trees in the yard of plaintiffs' residence. Upon protest by plaintiffs the work was stopped until it was determined the western boundary of the twelve and one-half acre tract intersected plaintiffs' residence at about the center of same. Plaintiffs were required to remove the house and for this and other incidental damages suit was filed against defendant.

Plaintiffs insist this action can be maintained under authority of Dickle v. Abstract Company, 89 Tenn. 431, 14 S.W. 896 (1890); Denton v. Nashville Title Company, 112 Tenn. 320, 79 S.W. 799 (1903); and Equitable Building and Loan Association v. Bank of Commerce & Trust Company, 118 Tenn. 678, 102 S.W. 901 (1907). In the Dickle case this Court stated 'the allegations of the bill clearly make a privity of contract between the purchasers (plaintiffs) and the defendant (Abstract Company).' In the Denton case this Court found there was privity between the parties although recovery was denied on other grounds. In the Equitable case this Court denied recovery because there was no privity between the parties. These three cases hold the defendants, in the preparation of the abstracts, owed a duty to the plaintiffs under the contract of employment to act with care. The point is where there was privity, recovery was allowed, and where there was not privity, recovery was denied.

In the case at bar the declaration does not allege plaintiffs had any contract with the defendant. In fact, the declaration alleges to the contrary. If this declaration is considered as an action resulting from the negligent performance of a contract, then the trial judge was correct in sustaining the demurrer.

This bring us to the question of whether this suit can be maintained as an action for deceit, which is a tort action not requiring privity. Search along this line usually begins with the case of Derry v. Peek, 14 App.Cas. 337, 58 L.J.Ch. 864 (1889). In this case the court said:

First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground; for one who knowingly alleges that which is false has obviously no such honest belief.

In Shwab v. Walters, 147 Tenn. 638, 251 S.W. 42 (1922), this Court said:

This court has more than once in unreported cases approved and followed the rules laid down by Lord Herschell in Derry v. Peek, L.R. 14 App.Cas. 337 as follows: (Here follows the language above quoted from Derry v. Peek).

In Crouch v. Gray, 154 Tenn. 521, 290 S.W. 391, 50 A.L.R. 1023 (1926), this Court stated:

All actionable wrongs are either torts, contracts, or crimes. If this demand may be held to be in tort, it must be based on deceit--fraudulent misrepresentation--and it is well settled that the element of will or intent is essential to such a charge.

There has been criticism by text writers and a few courts that though many jurisdictions, including Tennessee, give lip service to Derry v. Peek, Supra, they, in effect, have bypassed the holding of this case. This criticism is stated by Prosser, Torts § 88, p. 537, in the following language:

The majority (of the American courts) purport to accept it as sound law, but a great many of them have devised various more or less ingenious fictions and formulae which permits them to render lip service to Derry v. Peek, and yet allow recovery in deceit for misrepresentation which falls short of actual intent to deceive. If one looks to the facts of the cases rather than the formulae adopted by the courts, it is by no means clear that Derry v. Peek is supported by the weight of American authority.

See also Prosser, Misrepresentation and Third Persons, 19 Vand.L.Rev. 231, at 249 (1966).

Among the Tennessee cases (not necessarily cited by counsel in the case at bar) by which is has been claimed we have at least diluted the holding in Derry v. Peek, Supra, are the following: Southern v. Cowan Stone Co., 188 Tenn. 576, 221 S.W.2d 809 (1949); State ex rel. Harbin v. Dunn, 39 Tenn.App. 190, 282 S.W.2d 203 (1955); Jackson v. B. Lowenstein & Bros. Inc., 175 Tenn. 535, 136 S.W.2d 495 (1940); Justus v. Wood, 209 Tenn. 55, 348 S.W.2d 332, 349 S.W.2d 793 (1961); Figuers v. Fly, 137 Tenn. 358, 193 S.W. 117 (1916); Lowe v. Wright, 40 Tenn.App. 525, 292 S.W.2d 413 (1956); Tennessee Hospital Service Ass'n v. Strang, 49 Tenn.App. 263, 354 S.W.2d 488 (1961); Dickle v. Abstract Co., Supra; Denton v. Nashville Title Co., Supra; Equitable Building & Loan Ass'n v. Bank of Commerce & Trust Co., Supra.

We have examined the above cited Tennessee cases and it would, without profit, unduly lengthen this opinion to go into the facts of each of them. The facts of these cases are such they cannot be considered a rejection of Derry v. Peek, Supra, adopted in this jurisdiction in Shwab v. Walters, Supra.

In the case at bar there are no allegations of fraud and this action cannot be maintained as an action for deceit.

Plaintiffs cite the case of Howell v. Betts, 211 Tenn. 134, 362 S.W.2d 924 (1962). This suit was a tort action for negligent misrepresentation, absent privity, against the defendant surveyor alleging damages to plaintiff resulting from an error made by the defendant in surveying a tract of land, the plaintiff having relied on the survey in the purchase of the land. The case in the trial court was dismissed upon demurrer for lack of privity.

In Howell v. Betts, Supra, this Court cited MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916); ...