                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                                  February 19, 2004 Session

  JIMMIE LIPFORD, ET AL. v. FIRST FAMILY FINANCIAL SERVICES,
                            INC., ET AL.

                 Direct Appeal from the Circuit Court for Hardeman County
                          No. 9379 Jon Kerry Blackwood, Judge



                    No. W2003-01208-COA-R3-CV - Filed April 29, 2004


Plaintiffs in this lawsuit seek damages for fraud and under the Tennessee Consumer Protection Act.
The trial court excluded parol evidence and awarded Defendant summary judgment. We reverse.

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

DAVID R. FARMER , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and ALAN E. HIGHERS, J., joined.

Andrew S. Johnston, Somerville, Tennessee and Michael D. Hickman, Mobile, Alabama, for the
Appellants, Tom Brown and Ora Polk.

Leo Bearman, Jr., Eugene J. Podesta, Jr., and R. Alan Pritchard, Memphis, Tennessee, for the
Appellees, First Family Financial Services, Inc., First Family Financial Services Management Corp.,
Associates Financial Services Company of Tennessee, Associates Investment Corporation,
Associates Corp. of North America, Associates First Capital Corporation, Citigroup Inc.,
Citifinancial Credit Company, Stacy Powell, Lori Lax, Mary Robinson and Tammy Harper.


                                             OPINION

        Plaintiffs/Appellants Tom Brown (Mr. Brown) and Ora Polk (Ms. Polk; collectively,
Plaintiffs) reside together. Mr. Brown has an eighth grade education and cannot read. Ms. Polk has
a ninth grade education. This dispute arises from a consumer loan initially made by First Family
Financial Services, Inc. (“First Family”) to Plaintiffs in April 1996, and refinanced three times from
April 1996 through September 1998.

        In April 2001, Plaintiffs filed a complaint in the Circuit Court of Hardeman County, naming
as defendants First Family Financial Services, Inc., First Family Financial Services Management
Corp., Associates Financial Services Company of Tennessee, Associates Investment Corporation,
Associates Corp. of North America, Associates First Capital Corporation, American Security
Insurance Company, Union Security Life Insurance Company, Citigroup Inc., Citifinancial Credit
Company, and Stacy Powell (Ms. Powell), Lori Lax (Ms. Lax), Mary Robinson (Ms. Robinson), and
Tammy Harper (Ms. Harper).1 American Security Insurance Company and Union Security Insurance
Company were dismissed as Defendants as voluntarily non-suited (hereinafter, all remaining
Defendants will be referred to, collectively, as “First Family”).

        In their complaint, Plaintiffs allege First Family’s employee, Ms. Lax, fraudulently induced
them to purchase credit life insurance and property insurance when their existing loan was
refinanced. They further allege Ms. Lax fraudulently told them life and property insurance were
required for the loans, and that Ms. Lax “arbitrarily inflated” the value of the property financed by
the loan in order to receive a higher commission on the sale of the insurance products. Plaintiffs also
contend that when the loans were closed, Ms. Lax placed her hand over the portion of the loan
agreement that provides, “[c]redit life insurance, credit disability insurance and involuntary
unemployment insurance (IUI) are not required to obtain this loan.” Plaintiffs assert they did not
want First Family’s insurance products, and that they would not have purchased them absent Ms.
Lax’s statements that the insurance was required to receive the loans.

       Plaintiffs submit their action is a combination contract, tort, and statutory action brought
under Tennessee law. They allege intentional and negligent misrepresentation and/or fraud;
misrepresentation by concealment and fraud; negligent misrepresentation; violation of the Tennessee
Consumer Protection Act; negligence and/or gross negligence; negligent, gross negligent, reckless
supervision and training; and civil conspiracy. Plaintiffs pray for compensatory and punitive
damages, damages pursuant to the Tennessee Consumer Protection Act, and a permanent injunction
prohibiting Defendants from engaging in the improper conduct alleged by Plaintiffs.

        First Family answered in February 2002, denying the allegations and averring the claims were
barred by the parol evidence rule and by Plaintiffs’ failure to read the loan documents. In December
2002, First Family moved for summary judgment, asserting there were no issues of material fact in
dispute, and that the parol evidence rule precluded Plaintiffs from contradicting the written terms
of the loan documents through evidence of alleged oral representations by Ms. Lax. The trial court
awarded First Family summary judgment in April 2003, and Plaintiffs filed a timely notice of appeal
to this Court.

                                                 Issues Presented

         Plaintiffs raise the following issues for review by this Court:

         1
            Ten Plaintiffs, Jimmie Lipford, Judy Lipford, Lelsa Parks, Fonda Moody, Denice Parks, Tom Brown, Ora
Parks, Thomas Pittman, Daphne Pittman, and Fannie Sain, filed the original complaint in April 2001. In March 2002,
the trial court granted Defendants motion to sever the claims. Thus the only parties now before this Court as Plaintiffs
are Tom Brown and Ora Polk.



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       (1)     Whether the trial court erred in determining that summary judgment was
               appropriate regarding the Plaintiffs’ Tennessee Consumer Protection Act
               claims.

       (2)     Whether the trial court erred in determining that the parol evidence rule
               barred Plaintiffs’ fraudulent misrepresentation claims.

       (3)     Whether, as a matter of law, a Plaintiff cannot rely on an oral
               misrepresentation that contradicts the terms of a contract signed by the
               Plaintiff.

                                        Standard of Review

        Summary judgment is appropriate only when the moving party can demonstrate that there
are no disputed issues of material fact, and that it is entitled to judgment as a matter of law. Tenn.
R. Civ. P. 56.04; Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn. 1993). The party moving for summary
judgment must affirmatively negate an essential element of the nonmoving party's claim, or
conclusively establish an affirmative defense. McCarley v. West Quality Food Serv., 960 S.W.2d
585, 588 (Tenn. 1998).

        When a party makes a properly supported motion for summary judgment, the burden shifts
to the nonmoving party to establish the existence of disputed material facts. Id. A mere assertion
that the nonmoving party has no evidence does not suffice to entitle the moving party to summary
judgment. Id. In determining whether to award summary judgment, the trial court must view the
evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in
that party's favor. Staples v. CBL & Assocs., 15 S.W.3d 83, 89 (Tenn. 2000). The court should
award summary judgment only when a reasonable person could reach only one conclusion based on
the facts and the inferences drawn from those facts. Id. Summary judgment is not appropriate if
there is any doubt about whether a genuine issue of material fact exists. McCarley, 960 S.W.2d at
588. We review an award of summary judgment de novo, with no presumption of correctness
afforded to the trial court. Guy v. Mut. of Omaha Ins. Co., 79 S.W.3d 528, 534 (Tenn. 2002).


                                              Analysis

        The pivotal issue before this Court, as we perceive it, is whether, in a cause of action brought
pursuant to the Tennessee Consumer Protection Act and alleging fraud, parol evidence is admissible
to show a seller fraudulently induced a buyer into purchasing an additional, unwanted product, where
the terms of the contract expressly state that the purchase of that product is not required. First
Family relies on Lyons v. Farmers Insurance Exchange, 26 S.W.3d 888 (Tenn. Ct. App. 2000), and
Farmers & Merchants Bank v. Petty, 664 S.W.2d 77 (Tenn. Ct. App. 1983), for the proposition that
the parol evidence rule applies in this case to bar proof of oral representations which contradict the
terms of the written loan agreement. Plaintiffs, on the other hand, rely on Brungard v. Caprice


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Records, 608 S.W.2d 585 (Tenn. Ct. App. 1980), and Steed Realty v. Oveisi, Wardlow & Wolfe, 823
S.W.2d 195 (Tenn. Ct. App. 1991), in support of their assertion that the parol evidence rule does not
apply to a tort case involving fraudulent misrepresentation that induces a contract. We agree with
Plaintiffs that the parol evidence rule does not bar the admission of oral evidence in this case.

         The parol evidence rule serves to secure the integrity of contracts and to guard against fraud
by a party who agrees to the unambiguous terms of a written agreement and then seeks to disavow
those terms through extrinsic evidence. 32A C.J.S. Evidence § 1132, § 1159 (1996); see Tidwell v.
Morgan Bldg. Sys., Inc., 840 S.W.2d 373, 376 (Tenn. Ct. App. 1992). Accordingly, as First Family
asserts, courts do not permit parties to alter or contradict unambiguous contractual terms through the
use of extrinsic or parol (oral) evidence. Id. However, application of the parol evidence rule
includes many exceptions. 32A C.J.S. Evidence § 1194 (1996); see Huffine v. Riadon, 541 S.W.2d
414 (Tenn. 1976). One such exception is that extrinsic evidence is admissible to show fraud. See
id. When parol evidence is offered not to vary or disavow the terms of the contract, but to show an
alleged fraud or mistake, this Court is hesitant to exclude the evidence. See Maxwell v. Land Dev.,
Inc., 485 S.W.2d 869, 877 (Tenn. Ct. App.1972); Rentenbach Eng'g Co. v. General Realty, Ltd., 707
S.W.2d 524, 527 (Tenn. Ct. App.1985); Decatur County Bank v. Duck, 926 S.W.2d 393, 397 (Tenn.
Ct. App.1997). Thus, the parol evidence rule has been considerably relaxed by the courts "in order
that fraud may be thwarted, mistakes corrected, accidents relieved against, trusts set up and enforced,
and usury exposed and eliminated." Textron Fin. Corp. v. Powell, No. M2001-02588-COA-R3-CV,
2002 WL 31249913, at *5 (Tenn. Ct. App. Oct. 8, 2002)(no perm. app. filed)(quoting Gibson's Suits
in Chancery, § 189 (William H. Inman ed., 6th ed.1982)).

       The parol evidence rule is applicable to suits on a contract where a party seeks to disavow
the explicit terms of the contract. Brungard v. Caprice Records, Inc., 608 S.W.2d 585, 588 (Tenn.
Ct. App. 1980). Lyons v. Farmers Insurance, 26 S.W.3d 888, 889 (Tenn. Ct. App. 2000), for
example, was a breach of contract action brought by an insurance agent against an insurance
company. The plaintiff in Lyons sought to introduce parol evidence to prove the defendant had
breached alleged oral contract terms which expressly contradicted the terms of the parties’ written
agency agreement. Lyons, 26 S.W.3d at 892. In Lyons, we held that in accordance with the parol
evidence rule, the plaintiff could not rely upon parol evidence to support the breach of contract
claim. Id.

        Similarly, Farmers & Merchants Bank v. Petty, 664 S.W.2d 77 (Tenn. Ct. App. 1983), was
a case in which a debtor sought to avoid the terms of a written loan agreement by asserting the
president of the lending institution had stated that the note would not have to be paid. On appeal by
Farmers and Merchants Bank, this Court framed the pertinent issue as “[w]here the payee of a note
obtains the signature of a maker of the note by a promise that the maker will never be required to pay
the note, does this constitute a fraud by which the maker may successfully defend a suit on the note?”
Farmers & Merchants Bank, 664 S.W.2d at 79. We noted that “in order for a fraudulent
misrepresentation to be actionable, it must consist of a statement of an existing or past material fact,
made with knowledge of its falsity or with reckless disregard of the truth.” Id. at 80 (quoting Fowler
v. Happy Goodman Family, 575 S.W.2d 496, 499 (Tenn. 1978)). In Farmers & Merchants Bank,


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we determined that the evidence, consisting only of the debtor’s affidavit, was not sufficient to
establish fraudulent inducement. Id. We observed that the “promise” was “I guarantee that you will
never have to pay,” and that it was made in light of the circumstances surrounding the loan
transaction. Id. at 81. We determined, “[t]his was not equivalent to a promise that the bank would
never prosecute a suit against appellee.” Id.

        In Farmers & Merchants Bank, we considered the parol evidence rule in the context of
whether that case was a suitable one for adoption, as the appellee urged, of a rule of promissory
fraud. In determining it was not, we noted that the appellee’s assertion basically was “I signed a
written obligation to pay $35,000, but he told me I was not to be obligated.” Id. Thus, the appellee
in Farmer & Merchants Bank sought to disavow the entire contractual obligation based on parol
evidence. We noted, moreover, that the parol evidence rule is a “quasi statute of frauds” by which
a party to a contract cannot seek to alter written contractual terms based on parol evidence. Id. at
82.

       As the concurring opinion in Farmers & Merchants Bank observed, the doctrine of
promissory fraud was adopted by this Court in Brungard v. Caprice Records, 608 S.W.2d 585 (Tenn.
Ct. App. 1995), and by implication by the Tennessee Supreme Court by denial of permission to
appeal. Id. (Conner, J., concurring). Moreover, as Judge Conner noted, the parol evidence rule
would bar admission of oral evidence on the original contract claim, but would not be applicable to
the counter-claim sounding in tort. Id. at 83. The parol evidence rule “has no application to a case
involving a fraudulent misrepresentation which induces the execution of a contract.” Id. at 83-84
(quoting Haynes v. Cumberland Builders, 546 S.W.2d 228, 231 (Tenn. Ct. App. 1976)).

        The parol evidence rule bars admission of oral evidence to contradict or disavow the terms
of a written contract. The rule simply does not apply to claims of fraudulent misrepresentation
inducing a contract. Brungard, 608 S.W.2d at 588. In the case before us, Plaintiffs do not contend
that the terms of their loan agreement are or should be other than those expressed by the written
terms of their contract with First Family. Rather, Plaintiffs assert that the requirements should be
those as written in the loan agreement, and that they were fraudulently induced into purchasing
unwanted products by fraudulent oral misrepresentations made by Ms. Lax. Thus, in this case, the
written loan contract is proof that, if Ms. Lax made the oral representations as alleged, those
representations were false. In essence, Plaintiffs here seek to enforce, not contradict, the written
terms of the loan agreement, which state that life insurance is not required, and that property
insurance may be obtained through “anyone you want, provided the insurance carrier is acceptable
to Creditor.”

        This lawsuit simply is not a contract claim wherein Plaintiffs seek to disavow their written
contractual obligations. Rather, it is a tort action based on allegations of fraud and violations of the
Tennessee Consumer Protection Act. The parol evidence rule, therefore, is not applicable in this
case to bar admission of oral evidence. Having reviewed the entire record in this cause, we find a
genuine issue of material fact exists regarding whether Plaintiffs were fraudulently induced into



                                                  -5-
purchasing insurance products in violation of Tennessee law, including the Tennessee Consumer
Protection Act.

                                              Holding

        In light of the foregoing, we reverse summary judgment in favor of the Defendants. This
cause is remanded for further proceedings consistent with this opinion. Costs of this appeal are taxed
to the Defendants/Appellees, First Family Financial Services, Inc., First Family Financial Services
Management Corp., Associates Financial Services Company of Tennessee, Associates Investment
Corporation, Associates Corp. of North America, Associates First Capital Corporation, Citigroup
Inc., Citifinancial Credit Company, Stacy Powell, Lori Lax, Mary Robinson and Tammy Harper.



                                                       ___________________________________
                                                       DAVID R. FARMER, JUDGE




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