                                                                                     10/19/2017
               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                            September 19, 2017 Session

JOE DAVID ERWIN ET AL. v. GREAT RIVER ROAD SUPERCROSS LLC
                           ET AL.

                 Appeal from the Chancery Court for Dyer County
                  No. 15-CV-218     Tony Childress, Chancellor
                    ___________________________________

                          No. W2017-00150-COA-R3-CV
                      ___________________________________

At oral argument, the parties agreed that the trial court made a finding concerning the
reliance element of Appellants’ fraud claim that was not supported by the record.
Accordingly, we vacate the trial court’s order and remand the case for further
proceedings.

       Tenn. R. App. 3 Appeal as of Right; Judgment of the Chancery Court
                            Vacated and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN
STAFFORD, P.J., W.S., and ARNOLD B. GOLDIN, J., joined.

Jason R. Creasy, Dyersburg, Tennessee, for the appellants, Joe David Erwin, and
Amanda Rachel Erwin.

Matthew W. Willis, Dyersburg, Tennessee, for the appellees, Great River Road
Supercross, LLC, and Brian Klinkhammer.
                                  MEMORANDUM OPINION1

                                           I. Background

       Joe Erwin and Amanda Erwin (together, “Appellants”) entered into an oral
agreement to purchase personal and real property from Great River Road Supercross,
LLC (“the LLC”). The sole member of the LLC is Brian Klinkhammer (together with the
LLC, “Appellees”). The purchase price was $160,000.00, and Appellants made a
$40,000.00 down payment. The parties entered into a contract titled “Real Estate
Installment Notes” (“the Note”) for payment of the balance of the purchase price. The
Note required Appellants to make yearly payments of $12,000.00 for a period of ten (10)
years. Appellees executed a warranty deed, which specifically warranted against
encumbrances. However, when the parties executed the Note, unbeknownst to
Appellants, there was a $20,000.00 mortgage on the property, which Mr. Klinkhammer
did not pay off at the time of closing.

       The parties’ agreement provided that certain property/equipment was included in
the sale. Appellants contend that a 10-foot fiber shank was to remain with the property.
However, unbeknownst to Appellants, the shank was the property of a third party, who
removed it. Rather than seek injunctive or other relief, in an effort to recoup for the
alleged loss of the shank, Appellants tendered $10,000.00, as opposed to $12,000.00, as
their first installment under the Note. Appellants believed that $2,000.00 was the
approximate value of the piece of equipment that was removed. Appellees considered
this reduced payment to be a material breach and foreclosed on the property. At the
foreclosure sale, the property was purchased by Mr. Klinkhammer for the balance of the
Note.

       On April 29, 2015, Appellants filed a Complaint in the Dyer County Chancery
Court (“trial court”) for fraud, breach of warranty, and breach of contract. Appellees
filed an Answer and Counterclaim on July 1, 2015. In the counterclaim, Appellees
averred breach of contract and conversion by Appellants. The case was heard on October
18, 2016. On December 8, 2016, the trial court entered an order, granting Appellants a
$1,000.00 judgment against Mr. Klinkhammer for failure to perform the obligation to
deliver the fiber shank. All other claims asserted by Appellants were dismissed.
Appellants appeal.


       1
           Rule 10 of the Court of Appeals of Tennessee provides:

        This Court, with the concurrence of all judges participating in the case, may affirm, reverse or
modify the actions of the trial court by memorandum opinion when a formal opinion would have no
precedential value. When a case is decided by memorandum opinion it shall be designated
“MEMORANDUM OPINION”, shall not be published, and shall not be cited or relied on for any reason
in any unrelated case.
                                                  -2-
                                        II. Issues

   1. Whether the trial court erred in finding that Appellants’ fraud claim failed since
      Appellants did not rely on the language in the Warranty Deed.

   2. Whether the trial court erred in determining that Appellants were not damaged by
      Appellees’ breach of warranty and breach of contract.

                                III. Standard of Review

       This case was tried without a jury. Therefore, we review the trial court’s findings
of fact de novo with a presumption of correctness unless the evidence preponderates
otherwise. Tenn. R. App. P. 13(d). The trial court’s conclusions of law, however, are
reviewed de novo and “are accorded no presumption of correctness.” Brunswick
Acceptance Co., LLC v. MEJ, LLC, 292 S.W.3d 638, 642 (Tenn. 2008).

                                      IV. Analysis

       Appellants alleged that Appellees engaged in fraud because Appellees sold
Appellants real property that was encumbered by a mortgage when Appellees asserted the
property was unencumbered. The four elements for a fraud claim are: (1) an intentional
misrepresentation of a material fact, (2) knowledge of the representation’s falsity, (3) an
injury caused by reasonable reliance on the representation, and (4) the requirement that
the misrepresentation involve a past or existing fact. Kincaid v. SouthTrust Bank, 221
S.W.3d 32, 40 (Tenn. Ct. App. 2006) (citing Dobbs v. Guenther, 846 S.W.2d 270, 274
(Tenn. Ct. App. 1992) (citations omitted)).

      In its findings of fact and conclusions of law, the trial court found:

      One Plaintiff testified that he did not rely on the unencumbered language in
      the deed when making the decision to purchase the property, and the other
      Plaintiff did not testify. There was indeed an intentional misrepresentation
      made that the real property was unencumbered, but since it was not
      established that the Plaintiffs relied on this misrepresentation when making
      their purchasing decision, there is no fraud.

      However, at trial Mr. Erwin testified in part as follows:

      Q: Did [Mr. Klinkhammer] provide you with a warranty deed that
      specifically had a covenant that said the property was not to be
      encumbered?

      A: Yes, sir.
                                           -3-
      Q: Did the property continue to be encumbered after you purchased it?
      Did it - - the mortgage still continue on the property until 2012?

      A: Yes, sir.

                                           ***

      Q: . . . The first time you realized that there was, well, a deed of trust or
      anything owed to First Citizens was after - - was when you received the
      foreclosure notice; right?

      A: Yes, sir.

      Q: Before then, no idea.

      A: No; I was told there was no liens against it.

                                           ***

        Having reviewed Mr. Erwin’s testimony, we agree with the parties’ statements at
oral argument that Mr. Erwin did not testify “that he did not rely on the unencumbered
language in the deed when making the decision to purchase the property . . . .” The trial
court’s finding regarding the reliance element, which provided the basis for the trial
court’s decision that there was no fraud, is simply not supported by the evidence. As
such, the record preponderates against the trial court’s finding regarding Appellants’
fraud claim. We therefore vacate the trial court’s judgment in favor of Appellees and
remand the case for further proceedings. Our holding in this case does not preclude the
trial court from reopening proof on remand. We pretermit all remaining issues.

                                    V. Conclusion

       For the foregoing reasons, we vacate the trial court’s order and remand for such
further proceedings as may be necessary and are consistent with this opinion. Costs of
the appeal are assessed one-half to the Appellants, Joe Erwin, Amanda Erwin, and their
surety, and one-half to Appellees, Great River Road Supercross, LLC, and Brian
Klinkhammer, for all of which execution may issue if necessary.


                                                 _________________________________
                                                 KENNY ARMSTRONG, JUDGE


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