                 IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                November 15, 2012 Session

                ALISA LEIGH ELDRIGE, ET AL. v. LEE SAVAGE

               Direct Appeal from the Circuit Court for Overton County
                        No. 2012CV49      John Maddux, Judge


               No. M2012-00973-COA-R3-CV - Filed December 28, 2012


This case involves the sale of a home in 1994. The purchaser and her husband filed a
complaint against the seller, alleging that they discovered extensive fire damage to the home
in 2010. The complaint alleged misrepresentation, mistake, and violation of the Tennessee
Consumer Protection Act. The trial court granted the seller’s Rule 12 motion to dismiss on
the basis that the claims were barred by various statutes of limitations, as the trial court found
that the discovery rule was inapplicable. We find that the allegations in the complaint were
sufficient to survive a Rule 12 motion to dismiss, as they implicate the discovery rule and the
doctrine of fraudulent concealment. Therefore, we reverse in part the order of dismissal, to
the extent that the purchaser’s claims were dismissed on the basis of the statutes of
limitations, and we remand for further proceedings. We affirm in part the portion of the trial
court’s order that addressed a separate issue, as that ruling was not challenged on appeal.


 Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Reversed in
                       Part, Affirmed in Part and Remanded

A LAN E. H IGHERS, P.J., W.S., delivered the opinion of the Court, in which D AVID R. F ARMER,
J., and J. S TEVEN S TAFFORD, J., joined.

Michael R. Giaimo, Cookeville, Tennessee, for the appellant, Alisa Leigh Elidridge

Craig P. Fickling, Cookeville, Tennessee; John R. Officer, Livingston, Tennessee, for the
appellee, Lee Savage
                                               OPINION

                               I.   F ACTS & P ROCEDURAL H ISTORY

       Alisa Leigh Eldridge purchased a home from Lee Savage (“Defendant”) in 1994.1
The home had previously been damaged in a fire, and it is undisputed that Mrs. Eldridge and
her husband (sometimes hereinafter “Plaintiffs”) were aware of this fact. When Mr. and Mrs.
Eldridge inspected the home, there was very little visible damage from the fire. In fact, they
could not discern any noticeable fire damage other than some scorched, heat-damaged
cabinet doors and a burnt floor joist in the basement. Defendant told the Eldridges that he
had repaired all of the fire damage, and he assured them that the home was livable. The
Eldridges relied upon Defendant’s statements that he had repaired the fire damage in
deciding to purchase the home.

       After the purchase of the home, Mr. and Mrs. Eldridge had two children. The oldest
child developed chronic respiratory problems that progressively worsened. In January 2010,
when the child was about nine years old, specialists at Vanderbilt University Hospital advised
the Eldridges that environmental conditions must be causing or contributing to her condition.
The specialists were suspicious of mold and directed the Eldridges to scrub down the entire
house with bleach. In February 2010, Mrs. Eldridge was scrubbing the kitchen cabinets with
bleach when she noticed “black soot” appearing on the surface. The more she scrubbed, the
more soot appeared, and there was a terrible odor. The Eldridges subsequently discovered
“extensive fire damage” behind the cabinets, in the walls, and underneath the linoleum floor.
Charred flooring was found just beneath the linoleum installed by Defendant. The Eldridges
found that smoke-damaged walls had been simply painted over, and the home’s HVAC
return was filled with soot. The Eldridges’ doctors and the Federal Housing Administration
declared the home to be unlivable, and the Eldridges were forced to move. However, they
were still obligated to pay the mortgage on the home.

       On August 12, 2010, Mr. and Mrs. Eldridge filed a complaint against Defendant,
alleging several causes of action.          They alleged intentional and/or negligent
misrepresentation, claiming that Defendant had made false statements of fact regarding the
nature and extent of the fire damage and the subsequent repairs to the home. The Eldridges
alleged that they had relied upon Defendant’s express statements that he had repaired the fire
damage, and they claimed that they had acted reasonably and as prudent persons in their
inspection and purchase of the home. The Eldridges further asserted that Defendant’s actions
were unfair and deceptive, and therefore a violation of the Tennessee Consumer Protection


        1
          The facts set forth in this opinion are taken from the complaint, because this case was resolved on
a Rule 12.02(6) motion to dismiss.

                                                    -2-
Act (“TCPA”), as Defendant was, upon information and belief, involved in a commercial
enterprise of purchasing properties purely for resale. Plaintiffs sought compensatory,
punitive, and/or treble damages.2 Finally, the Eldridges argued, in the alternative, that the
parties were operating under a mutual misunderstanding or mistake regarding the nature and
extent of the fire damage, which would justify rescission of the original contract and sale.

        Defendant filed a motion to dismiss the complaint on the basis that all of the claims
asserted were time-barred. Because the complaint was filed in 2010, and it involved a sale
of property in 1994, Defendant contended that the misrepresentation claims were barred by
the three year statute of limitations for injuries to real property, Tenn. Code Ann. § 28-3-105;
the TCPA claim was barred by the one year statute of limitations set forth in the Act itself,
Tenn. Code Ann. § 47-18-110; and the claim for rescission was barred by the ten year statute
of limitations for equitable claims, Tenn. Code Ann. § 28-3-110. Defendant argued that the
Eldridges’ claims were not tolled by the discovery rule because “[they] should have noticed
any fire damage in 1994.” He claimed that the Eldridges “were obligated to use reasonable
care and diligence to discover any alleged fire damage” at the time of the purchase or shortly
thereafter. Defendant further argued that the doctrine of fraudulent concealment should not
toll the statutes of limitations in this case because the complaint did not allege fraudulent
concealment.3 Finally, Defendant argued that the action should be dismissed as to Plaintiff
Larry Eldridge, as he was not the purchaser of the property, Mrs. Eldridge was.

        In response to the motion to dismiss, Plaintiffs conceded that the various statutes of
limitations cited by Defendant were applicable to the claims set forth in their complaint.
However, Plaintiffs argued that the issue of whether the discovery rule tolled the statutes of
limitations, or more specifically, whether they exercised due diligence in discovering their
injury in a timely manner, was a fact question that should not be decided based on a motion
to dismiss. Plaintiffs also argued that a liberal construction of their complaint alleged
fraudulent concealment.

        After hearing arguments from counsel on the motion to dismiss, the trial court entered
an order granting the motion and dismissing the complaint. The court first found that
Plaintiff Larry Eldridge acquired no interest in the property at the time of the transaction, as
the conveyance was solely to Plaintiff Alisa Eldridge, and therefore, the court granted the

        2
          It is undisputed that the complaint did not seek to recover damages for any personal injuries; it only
sought recovery for damage to property.
        3
          In the motion to dismiss, Defendant also argued that the Eldridges' claim under the TCPA was
barred pursuant to the five year statute of repose found in Tenn. Code Ann. § 47-18-110. However, the trial
court did not base its ruling on this issue, and the Defendant does not argue on appeal that dismissal was
appropriate on that basis. Therefore, this opinion does not address the applicability of any statute of repose.

                                                      -3-
motion to dismiss “as to him as a Plaintiff.” This finding is not challenged on appeal.

       Next, with regard to the timeliness of the claims asserted by Plaintiff Alisa Eldridge,
the court found that Mrs. Eldridge was aware, when she purchased the home in 1994, that
the home had fire damage, and therefore, “it was her mistake not to look into the matter
further.” The court explained, “The question for the Court is whether the facts as
acknowledged by the Plaintiff in the Complaint were sufficient to put a reasonable person
on notice that she may have a cause of action. The Court finds that they were and that the
discovery rule in this case does not toll [the] applicable statutes of limitation.” Mrs. Eldridge
timely filed a notice of appeal.4

                                         II.    I SSUE P RESENTED

       On appeal, Mrs. Eldridge basically argues that the allegations in her complaint were
sufficient to survive a motion to dismiss because they implicated the discovery rule and the
tolling doctrine of fraudulent concealment. We agree with Plaintiff’s contention that
dismissal of the complaint was premature, and therefore, we reverse the trial court’s order
of dismissal in part, to the extent that it was based on the statute of limitations, and remand
for further proceedings. The portion of the order dismissing the claims asserted by Mr.
Eldridge, which was not challenged on appeal, is hereby affirmed.

                                     III.      S TANDARD OF R EVIEW

        A motion filed under Rule 12.02(6) of the Tennessee Rules of Civil Procedure “is an
appropriate way to seek to invoke the statute of limitations as grounds for dismissing a
complaint.” Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436, 455-56
n.11 (Tenn. 2012) (citing Hawk v. Chattanooga Orthopaedic Grp., P.C., 45 S.W.3d 24, 28
(Tenn. Ct. App. 2000); 1 Lawrence A. Pivnick, Tennessee Circuit Court Practice § 11:3, at
857-58 (2011 ed.)). However, this type of motion “tests only the legal sufficiency of the
plaintiff's complaint,” not the strength of the plaintiff’s proof or evidence. Id. at 455 (citing
Highwoods Props., Inc. v. City of Memphis, 297 S.W.3d 695, 700 (Tenn. 2009)). Thus, we
resolve a motion to dismiss by an examination of the pleadings alone. Webb v. Nashville
Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011). “A defendant who
files a motion to dismiss ‘admits the truth of all of the relevant and material allegations


        4
           We note that Mr. Eldridge’s name was also listed on the notice of appeal. However, the appellate
brief filed on behalf of the Eldridges did not present any argument to challenge the portion of the trial court’s
order dismissing Mr. Eldridge as a plaintiff because he had no interest in the property. It only challenged
the portion of the order dismissing the claims filed by Mrs. Eldridge as untimely. For clarity, in discussing
this issue, we will proceed as if Mrs. Eldridge was the only appellant.

                                                      -4-
contained in the complaint, but . . . asserts that the allegations fail to establish a cause of
action.’” Id. (quoting Brown v. Tenn. Title Loans, Inc., 328 S.W.3d 850, 854 (Tenn. 2010)).
At this early stage of the proceedings, courts “‘must construe the complaint liberally,
presuming all factual allegations to be true and giving the plaintiff the benefit of all
reasonable inferences.’” Id. (quoting Tigg v. Pirelli Tire Corp., 232 S.W.3d 28, 31-32 (Tenn.
2007)). The motion to dismiss should be granted “‘only when it appears that the plaintiff can
prove no set of facts in support of the claim that would entitle the plaintiff to relief.’” Id.
(quoting Crews v. Buckman Labs. Int'l, Inc., 78 S.W.3d 852, 857 (Tenn. 2002)). This is
because we are “assessing the sufficiency of a single document filed at the very beginning
of a case,” and “[o]ur motion-to-dismiss jurisprudence reflects the principle that this stage
of the proceedings is particularly ill-suited for an evaluation of the likelihood of success on
the merits or of the weight of the facts pleaded.” Id. at 437.

        On appeal, a trial court’s legal conclusion regarding the adequacy of the complaint is
reviewed de novo. Webb, 346 S.W.3d at 426. Likewise, “[t]he determination of whether
a suit should be dismissed based on the statute of limitations presents a question of law which
we review de novo with no presumption of correctness.” Redwing, 363 S.W.3d at 456 (citing
Fahrner v. SW Mfg., Inc., 48 S.W.3d 141, 144 (Tenn. 2001)).

                                      IV. D ISCUSSION

        “Statutes of limitations promote fairness and justice.” Redwing, 363 S.W.3d at 457
(citing Pero's Steak & Spaghetti House v. Lee, 90 S.W.3d 614, 621 (Tenn. 2002)). They
“reflect ‘a societal choice that actions must be brought within a certain time period.’” Id.
(quoting Parrish v. Marquis, 172 S.W.3d 526, 532 (Tenn. 2005)). “They are based on the
presumption that persons with the legal capacity to litigate will not delay bringing suit on a
meritorious claim beyond a reasonable time.” Id. (citing Hackworth v. Ralston Purina Co.,
214 Tenn. 506, 510, 381 S.W.2d 292, 294 (1964)).

        “A defense predicated on the statute of limitations triggers the consideration of three
components—the length of the limitations period, the accrual of the cause of action, and the
applicability of any relevant tolling doctrines.” Redwing, 363 S.W.3d at 457. “The length
of the limitations period is perhaps the most straightforward of the three elements,” and it is
determined by considering the “gravamen” of the complaint. Id. Here, the parties agree that
the applicable statutes of limitations were those cited in Defendant’s motion to dismiss.

       The second component, the concept of accrual, “relates to the date on which the
applicable statute of limitations begins to run.” Id. (citing Columbian Mut. Life Ins. Co. v.
Martin, 175 Tenn. 517, 526, 136 S.W.2d 52, 56 (1940)). Under the current discovery rule,
a cause of action accrues and the statute of limitations begins to run when the plaintiff has

                                              -5-
either actual or constructive knowledge of a claim.5 Id. at 459. However, the discovery rule
does not allow the plaintiff to delay filing suit until he knows the full extent of his damages,
or the specific type of legal claim he has. Id. Constructive or “inquiry” notice occurs “when
the plaintiff has actual knowledge of facts sufficient to put a reasonable person on notice that
he or she has suffered an injury as a result of wrongful conduct.” Id. (internal quotation and
alteration omitted). In other words, “inquiry notice ‘charges a plaintiff with knowledge of
those facts that a reasonable investigation would have disclosed.’” Id. (quoting Sherrill v.
Souder, 325 S.W.3d 584, 593 n.7 (Tenn. 2010)). Once the plaintiff “gains information
sufficient to alert a reasonable person of the need to investigate the injury, the limitation
period begins to run.” Id.

        As for the third component, there are various tolling doctrines that can suspend or
extend the running of the limitations period. Redwing, 363 S.W.3d at 459. Tennessee courts
have long recognized that the doctrine of fraudulent concealment will toll the running of a
statute of limitations. Id. at 461. The doctrine of fraudulent concealment applies to toll the
statute of limitations when “‘the defendant has taken steps to prevent the plaintiff from
discovering he [or she] was injured.’”6 Id. at 462 (quoting Fahrner, 48 S.W.3d at 146).
Stated differently, it applies “to circumstances in which the defendant purposefully engages
in conduct intended to conceal the plaintiff's injury from the plaintiff.” 7 Id. A plaintiff


        5
             Under the traditional accrual rule, a cause of action accrued and the applicable statute of
limitations began to run when the plaintiff had a cause of action and the right to sue, even though the plaintiff
may have had no knowledge of his right to sue, or the facts out of which that right arose. Redwing, 363
S.W.3d at 457. However, as time passed, it became apparent that the policies furthered by statutes of
limitations should give way when the interests of justice would be served by permitting the pursuit of
legitimate claims. Id. at 458. As a result, "courts and legislatures began to recognize exceptions to the
traditional accrual rules that ‘take the sting out of a statute of limitations for equitable reasons.'" Id. (quoting
Adam Bain & Ugo Colella, Interpreting Federal Statutes of Limitations, 37 Creighton L. Rev. 493, 502
(2004)). In 1974, the Tennessee Supreme Court adopted the "discovery rule" rule, in response to the harsh
results of the traditional accrual rule, in circumstances in which the injured party was unaware of the injury.
Id. In short, “the discovery rule was developed to prevent plaintiffs from being barred from filing a claim
before they even knew it existed.” Young v. Enerpac, 299 S.W.3d 815, 817 (Tenn. Ct. App. 2009).
        6
            “As it currently exists in Tennessee, the doctrine of fraudulent concealment is aligned with the
discovery rule.” Redwing, 363 S.W.3d at 462. For instance, “[i]n a discovery rule case, the plaintiff may
claim that the defendant intentionally prevented him from discovering his injury,” and if that claim is proved
true, “the doctrine of fraudulent concealment applies.” Id. at 462 n.26. “For the purposes of both the
discovery rule and the doctrine of fraudulent concealment, the pivotal issue is whether [the plaintiff] would
have discovered the [defendant’s] allegedly wrongful acts had he exercised reasonable care and diligence.”
Id. at 466.
        7
            The doctrine of fraudulent concealment also applies “to circumstances in which the defendant
                                                                                           (continued...)

                                                        -6-
invoking the fraudulent concealment doctrine must allege and prove four elements:

        (1) that the defendant affirmatively concealed the plaintiff's injury or the
        identity of the wrongdoer or failed to disclose material facts regarding the
        injury or the wrongdoer despite a duty to do so;
        (2) that the plaintiff could not have discovered the injury or the identity of the
        wrongdoer despite reasonable care and diligence;
        (3) that the defendant knew that the plaintiff had been injured and the identity
        of the wrongdoer; and
        (4) that the defendant concealed material information from the plaintiff by
        withholding information or making use of some device to mislead the plaintiff
        in order to exclude suspicion or prevent inquiry.

Id. at 462-63 (footnotes omitted). “The statute of limitations is tolled until the plaintiff
discovers or, in the exercise of reasonable diligence, should have discovered the defendant's
fraudulent concealment or sufficient facts to put the plaintiff on actual or inquiry notice of
his or her claim.” Id. at 463. “At the point when the plaintiff discovers or should have
discovered the defendant's fraudulent concealment or sufficient facts to put the plaintiff on
actual or inquiry notice of his or her claim, the original statute of limitations begins to run
anew, and the plaintiff must file his or her claim within the statutory limitations period.” Id.

       In the case at bar, there is no dispute that Defendant made out a prima facie defense
based on various statutes of limitations, and therefore, “the question before us is whether the
factual allegations in [the Plaintiff’s] complaint regarding the statute of limitations issue are
sufficient to survive a Tenn. R. Civ. P. 12.02(6) motion to dismiss.” See Redwing, 363
S.W.3d at 463. When the undisputed facts establish a statute of limitations defense, “the
burden shifts to [the plaintiff] to demonstrate that the allegations in [the] complaint are
sufficient to articulate at least a colorable basis for concluding that the statute of limitations
has not run on his claims.” Id.

        As noted above, “[f]or the purposes of both the discovery rule and the doctrine of
fraudulent concealment, the pivotal issue is whether [the plaintiff] would have discovered
the [defendant's] allegedly wrongful acts had he exercised reasonable care and diligence.”
Id. at 466. “Whether the plaintiff exercised reasonable care and diligence in discovering the
injury or wrong is usually a fact question for the jury to determine.” Wyatt v. A-Best Co.,
910 S.W.2d 851, 854 (Tenn. 1995); see also Gerdau Ameristeel, Inc. v. Ratliff, 368 S.W.3d


        7
         (...continued)
engages in conduct intended to conceal the identity of the person or persons who caused the plaintiff's injury
from the plaintiff.” Redwing, 363 S.W.3d at 462.

                                                     -7-
503, 509 (Tenn. 2012). “However, where the undisputed facts demonstrate that no
reasonable trier of fact could conclude that a plaintiff did not know, or in the exercise of
reasonable care and diligence should not have known, that he or she was injured as a result
of the defendant's wrongful conduct, Tennessee case law has established that judgment on
the pleadings or dismissal of the complaint is appropriate.” Schmank v. Sonic Automotive,
Inc., No. E2007-01857-COA-R3-CV, 2008 WL 2078076, at *3 (Tenn. Ct. App. May 16,
2008) (citing Roe v. Jefferson, 875 S.W.2d 653, 658 (Tenn. 1994) (affirming summary
judgment where “no reasonable trier of fact could find that [plaintiff] was unaware that she
had suffered an injury for purposes of the discovery rule”); Stanbury v. Bacardi, 953 S.W.2d
671, 677-78 (Tenn. 1997) (affirming dismissal of complaint where plaintiff held to have been
“aware of facts sufficient to put a reasonable person on notice that she had suffered an
injury” despite her assertion that she did not discover her claim until later); Brandt v.
McCord, No. M2007-00312-COA-R3-CV, 2008 WL 820533, at *4 (Tenn. Ct. App. Mar. 26,
2008) (affirming dismissal of complaint where facts established “as a matter of law” that
plaintiffs had enough knowledge to put a reasonable person on notice, despite plaintiffs'
invocation of discovery rule)).

        According to the allegations stated in the complaint filed by Mrs. Eldridge, which we
must accept as true at this juncture, the Eldridges inspected the home prior to purchasing it
and found very little visible damage from the fire. The only noticeable fire damage was a
burnt floor joist in the basement and some scorched, heat damaged cabinet doors. Defendant
told the Eldridges that he had “repaired” all of the fire damage, and he assured them that the
home was livable. Plaintiff relied on Defendant’s statements and, according to the
complaint, she acted reasonably and as a prudent person in the inspection and purchase of
the home. It was not until 2010, when Plaintiff scrubbed the kitchen cabinets with bleach,
at the doctors’ instruction, that she discovered “black soot” appearing on the surface of the
cabinets, along with a terrible odor. Upon further investigation, Plaintiff found “extensive
fire damage behind the cabinets, in the walls and just underneath the linoleum floor.”
Charred flooring lay just beneath the linoleum installed by Defendant, smoke damaged walls
“were merely painted over with fresh paint,” and the HVAC return was filled with soot.
Upon this discovery, the FHA and the Eldridges’ doctors declared that the home was in fact
unlivable, and they were forced to move.

        In the complaint, Plaintiff alleged that Defendant made false statements of fact
“regarding the nature and extent of the fire damage and subsequent repairs to the home.”
Construing the complaint liberally, presuming all factual allegations to be true, and giving
the Plaintiff the benefit of all reasonable inferences, it is not apparent from the face of the
complaint that Plaintiff “can prove no set of facts in support of the claim that would entitle
[her] to relief.” See Webb, 346 S.W.3d at 438. Considering Plaintiff’s allegations in their
best light, they would, if proven, provide a basis for a reasonable fact-finder to conclude that

                                              -8-
the Plaintiff acted with reasonable diligence and, therefore, she should not be held to have
known of the allegedly concealed fire damage at the time of purchase. The allegations could
also provide a basis for a reasonable fact-finder to conclude that Defendant fraudulently
concealed the fire damage, thereby tolling the statutes of limitations. We reject the
Defendant’s argument that the Plaintiff had constructive notice of the injury simply by reason
of the fact that she knew a fire had occurred at the home. The statute of limitations begins
to run “when the plaintiff has actual knowledge of a claim” or of “facts sufficient to put a
reasonable person on notice that he [or she] has suffered an injury as a result of wrongful
conduct.” Redwing, 363 S.W.3d at 459 (emphasis added). True, Plaintiff knew at the time
of purchase that a fire had occurred at the home. However, she is not suing Defendant for
that reason alone. The basis of this lawsuit is that Defendant made false statements regarding
“the nature and extent of the fire damage and subsequent repairs to the home.” At this stage
of the proceedings, there is nothing to indicate that a reasonable person would have
discovered the allegedly concealed fire damage, which was “behind the cabinets, in the walls
and just underneath the linoleum floor,” prior to when it was discovered by Plaintiff.
Therefore, it was premature for the trial court to dismiss Mrs. Eldridge’s complaint for failing
to exercise reasonable diligence in discovering her injury.

                                      V.   C ONCLUSION

        For the aforementioned reasons, we reverse in part the decision of the circuit court,
to the extent that the order dismissed the complaint on the basis of the statutes of limitations,
and we remand for further proceedings. The portion of the order dismissing the claims
asserted by Mr. Eldridge, which was not challenged on appeal, is affirmed. Costs of this
appeal are taxed to the appellee, Lee Savage, for which execution may issue if necessary.

                                                     _________________________________
                                                     ALAN E. HIGHERS, P.J., W.S.




                                               -9-
