Klotz v. Underwood, CIV-2-81-21.

• Decision Date: 11 February 1982
• Docket Number: No. CIV-2-81-21.,CIV-2-81-21.
• Citation: 563 F. Supp. 335
• Parties: William E. KLOTZ, et ux., Plaintiffs, v. Robert W. UNDERWOOD, et ux., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

563 F. Supp. 335

William E. KLOTZ, et ux., Plaintiffs, v. Robert W. UNDERWOOD, et ux., Defendants.

No. CIV-2-81-21.

United States District Court, E.D. Tennessee, Northeastern Division.

January 4, 1982.

On the Merits February 11, 1982.

COPYRIGHT MATERIAL OMITTED

Michael A. Bragg, Bristol, Va., and Thomas M. Johnson, Bristol, Tenn., for plaintiffs.

Wendal Jackson and David W. Tipton, Bristol, Tenn., for defendants.

ON MOTION TO DISMISS

NEESE, District Judge.

This is a civil action for damages as a result of alleged deceit in connection with the private sale of a residence. 28 U.S.C. § 1332(a)(1). The plaintiffs assert claims under the common-law tort of deceit and also under the provisions of the Tennessee Consumer Protection Act of 1977 (the Act), T.C.A. §§ 47-18-101 et seq. The defendants moved for a dismissal of such latter claim, ostensibly for the failure of the plaintiffs to state a claim upon which relief can be granted, Rule 12(b)(6), Federal Rules of Civil Procedure. Such motion lacks merit.

The thrust of the claim of the plaintiffs herein is that, in connection with the sale of a residence to them, the defendants intentionally concealed from them the fact that a portion of such residence had extensive structural-damage, which damage was hidden from the plaintiffs and could not have been discovered by them through the exercise of reasonable diligence. The defendants argue in support of their motion: that the Act does not apply either (a) to transactions in real estate, as opposed to those involving goods or services, or (b) to isolated transactions between individuals not engaged regularly in the business of making such trades or sales.

The Court's reading of the somewhat confusing Tennessee Act^* is not convincing that either such contention is correct. In 3 separate places, the Act refers to real property. T.C.A. §§ 47-18-103(a), (h), 47-18-109(a). Thus, it would appear that the Act contemplates that its provisions cover transactions in real estate.

It is true that some 20 of the unfair or deceptive acts or practices listed in T.C.A. § 47-18-104(b) appear to be directed at the sale of goods or services, and not real estate. However, this would not seem to preclude the sale of real property from falling within the "catch-all" provisions of T.C.A. § 47-18-104(a) or § 47-18-104(b)(21). Subsection 104(b), supra, states that the acts or practices mentioned therein are not to limit the scope of subsection (a), supra. Had the Tennessee General Assembly desired to exclude transactions in real estate from the scope of the Act, they could easily have so provided in T.C.A. § 47-18-111, which lists certain exemptions from such Act.

Neither does the Court find any persuasive indication in the Act that it does not apply to isolated sales between individuals. Again, if the legislators had desired to so limit the Act, they easily could have provided; they did not appear to have any great difficulty in providing exemptions for the types of conduct which they felt should not fall within the scope of the Act. See idem.

Not being convinced that the Act could not apply to the transaction upon which this action is based, the motion of the defendants for a dismissal of such claim of the plaintiffs hereby is

DENIED.

ON THE MERITS

Mr. and Mrs. William E. Klotz (buyers) purchased through a realtor from Mr. and Mrs. Robert W. Underwood (sellers) for $90,000 property improved by a rural dwelling and a barn on Reedy Creek road, near Bristol in Sullivan County, Tennessee, on August 29, 1980. The sellers were moving their residence to Alabama; the buyers were moving theirs from New Jersey because of Mr. Klotz' transfer to this area.

The sellers vacated, and buyers occupied, such premises on October 21, 1980 prior to formal consummation of their sale-and-purchase of October 31, 1980. The initial portion of the dwelling was a century-old or considerably more; it was enlarged by additions 20 to 30 years before 1980; and a final enlargement was added 5 to 7 years ago. The end-result was a nice, unusual residence-property which the sellers had decorated in good-taste.

Mr. Klotz visited the premises briefly 3 times before the buyers moved in. The buyers voiced some objections and posed some questions concerning the property during negotiation, but all such matters were adjusted and none appertained to the current issues between the parties.

During these visits a cursory inspection was made of the dwelling by Mr. Klotz. He was not, to his knowledge, hindered in his inspections by anything either of the sellers did or failed to do. He wanted a professional engineering-inspection generally of the structure the buyers were purchasing, including its wiring and plumbing because the dealings of the parties were through a realtor.

However, he was unable within the confines of the time available to him to locate an expert and was told there was no person readily available who was competent to render an opinion in that regard. The buyers made no claim that the sellers hampered them in any way in obtaining the services of a structural engineer.

For nearly 2 months during the negotiation of the terms of a memorandum of the eventually-executed agreement of the parties,^** Mr. Klotz was cognizant that it contained a proposed clause, by which the buyers would accept the structures on the premises in their condition physically at the time of purchase-and-sale and understood that such memorandum constituted the only warranties or representations being made to the buyers by the sellers. Despite these agreements, the buyers contend that Mrs. Underwood represented orally to them that there were "* * * no problems with the house * * *" except, according to the recollection of 1 witness, for "* * * 1 light-switch that doesn't work. * * *"

The buyers soon discovered after their occupancy blisters on 3 areas on the exterior-walls of the oldest and next-oldest portions of their home. Mr. Klotz could not observe any other defect at those places, although he suspected leakage of water where the oldest and newest portions had been adjoined in the most recent remodeling.

The buyers brought in, with more expertise to diagnose the condition of their home, Mr. Scotty Nunn who could conclude no more than had Mr. Klotz until he removed a portion of one wall. Underneath he discovered progressively rotten members and appurtenances of the structure, which it cost the buyers $7,078.46 to repair.

Mr. Klotz discussed with a former architect, a former contractor, a former worker, Mr. Nunn, 3 neighbors and the neighborhood-grocer the unexpected expense he had thus incurred. He then consulted a lawyer who wrote a letter concerning this to the sellers. Thereafter, the buyers commenced this lawsuit; the sellers hired themselves a lawyer; and the latter counter-claimed the buyers.

I

In addition to claiming that the sellers had engaged in acts which were deceptive to them as also claimed in violation of the Tennessee Consumer Protection Act of 1977 (Act), esp., T.C.A. §§ 47-18-104(a), (b)(21), see memorandum opinion and order of January 4, 1982 herein, the buyers asserted that Mrs. Underwood defrauded them in this transaction by concealment of hidden defects in the house and made misrepresentations to them of the absence of them, upon which they relied to their damage. There was insufficient evidence relative to either of these claims to have permitted the jurors to have found directly or by reasonable inferences for the buyers; (indeed, the Court could have decided such claims as a matter of law on the basis of the lack of disputed facts following the close of the buyers' evidence).

The nearest analogy to the claimed facts-at-issue herein, known to the Court now, was where, during negotiations for a sale-and-purchase of another dwelling in East Tennessee, the sellers told the buyers the latter "* * * would have all the water they wanted * * *" or "* * * could use all the water they wanted at the flat rate of $2.00 per month * * *," when the sellers knew the buyers could not have from the supplying-utility, or use, any water between 7:00 o'clock, p.m. each evening until the next 7:00 o'clock, a.m. The sellers testified that they did not share this knowledge they had with the buyers for fear of losing the sale.

By the exercise of ordinary diligence, there was no reasonable way the buyers, through common observation, could have discovered what the sellers admitted they knew, and the buyers did not know, about the limited water-use they were acquiring. Simmons, et ux. v. Evans, et ux. (1947), 185 Tenn. 282, 206 S.W.2d 295. Those buyers sought rescission judicially of their agreement with those sellers, on the ground of fraud and misrepresentation of a material fact; they were denied relief in the trial-court.

On appeal, however, the Supreme Court of Tennessee reversed that decision; it was of the opinion that in this situation equity required the sellers to perform their duty of disclosing the limitation-of-use of the required water unless "* * * common observation or such inquiry as the exercise of ordinary prudence required would have furnished such information. * * *" Ibid., 185 Tenn. at 286-287(3), 206 S.W.2d 295. That action is clearly distinguishable from this one because of their dissimilar facts.

Furthermore, if the buyers had proved their case, they had an adequate remedy at law herein. Where there is an adequate remedy at law, it is inappropriate for this Court to exercise its equitable powers. Moore v. Sims (1976), 442 U.S. 415, 424-425, 99 S.Ct. 2371, 2377-2378, 60 L.Ed.2d 994, 10044.

A similar duty on the sellers here would have attached only had it been shown that one or both of them had knowledge of the existence of hidden defects in their structure, caused by the ravages of time and weather, and, after and in the event of such showing, that an inspection by the buyers would not have revealed to them the same information known to the...