HOME GUAR. INS. v. Third Financial Services, Inc., 3-86-0869.
| Decision Date | 24 August 1988 |
| Docket Number | No. 3-86-0869.,3-86-0869. |
| Citation | 694 F. Supp. 438 |
| Parties | HOME GUARANTY INSURANCE CORPORATION v. THIRD FINANCIAL SERVICES, INC., et al. |
| Court | U.S. District Court — Middle District of Tennessee |
Boult, Cummings, Conners & Berry, Robert S. Patterson, Patricia Head Moskal, Nashville, Tenn., Raymond F. Scannel, Sr., Warren E. Zirkle, McGuire, Woods, Battle & Boothe, Elizabeth F. Edwards, Catherine N. Currin, Richmond, Va., for plaintiff.
David B. Fawcett, Jr., Richard S. Dorfzaun, Dickie, McCamey & Chilcote, Pittsburgh, Pa., for Home Guar. in No. 3-87-0353.
H. Naill Falls, Jr., Katherine Simpson Allen, Farris, Warfield & Kanaday, Nashville, Tenn., for Third Financial Services, Inc.
Wallace Dietz, Nashville, Tenn., William G. Merchant, Papernick & Gefsky, P.C. Pittsburgh, Pa., for Peoples Federal Sav. and Loan Ass'n.
For the reasons given from the bench, Home Guaranty's motion to join First Federal of New Castle Pennsylvania is denied. Motions by Third Financial Services, by Peoples Federal, and by Home Guaranty for summary judgment are also denied, based on the Court's analysis at the hearing and given its specific reliance on Verex Assurance, Inc. v. John Hanson Savings & Loan, Inc., 816 F.2d 1296 (9th Cir.1987).
Plaintiff Home Guaranty's complaint seeks rescission of a contract that it claims it would not have entered absent the borrower's misrepresentations, which were conveyed by the lender, Third Financial Services, to Home Guaranty. The complaint asserts that the contract is void and seeks only rescission, not money damages.
An individual induced by fraud to enter a contract may elect between two remedies: he may treat the contract as void and sue for the equitable remedy of rescission or he may treat the contract as existing and sue for damages under the theory of deceit. Vance v. Schulder, 547 S.W.2d 927, 931 (Tenn.1977). In cases where plaintiffs have brought actions at law under the second theory, Tennessee courts have found that the gravamen of the complaint is that fraud induced a contract in which the plaintiff sustained money damages. In these cases, the three-year statute of limitation at Tenn.Code Ann. § 28-3-105 was applicable. See e.g., Vance, 547 S.W.2d at 932 (); Prescott v. Adams, 627 S.W.2d 134, 137 (Tenn.Ct.App.1982) ().
In this case, plaintiff has brought the action under the first prong of the Tennessee Supreme Court's analysis: this is solely an equitable action for rescission that asserts the contract was void ab initio. It is neither an action in tort (for no injury has yet...
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