WPCP Wb*N@ 00<<;M3p 0|>PN| }7-r'ǹqsq!8Kv31%E#T8O ujJB9 @rg[nmrP'@̋T)I? .]Cт(AahnjH$i)/^fƨmD[ h{N<%/XPF,BG8^Hǩ(j'j.(ɑ~:\VfY)eI='F Ü }f#ACÇb^F:OY4/V}^;zT 6xNp|.Fs*aJZ;yJ@!v?9xMK]b%ӧvUܗzPQ3X,pk׻=fMo{qH SfG`Z{v㒮 2@_ rzLk6j3ub#\ % # 0+ UN ^  w z  4] q  m  _ %  Nu 0Dw 1EH 72J 1u| 72 0c# 1 72bEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE 0MMMM B88 0U D3 D-, 0KYY AS 0 0Da AHP LaserJet 4050 Series PCL 5e,,,,0 (`$.8dd8    ("  Z6Times New Roman Regular p3+s  C:\PROGRA~1\COREL\WORDPE~1\TEMPLATE\CUSTOM~1\REVISE~1.WPTC:\Program Files\Corel\WordPerfect Office 2000\Template\Custom WP Templates\revised standard opinion.wptB+bk23|xULevel 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5  R""$      1    _ԀWhichallegedvariousgroundsforrecovery,includingbreachofcontract,breachoffiduciaryduty,negligent  misrepresentation,fraud,andviolationsoftheTennesseeSecuritiesAct.Noneofthesegroundswassustainedbythe t Chancellorexceptnegligentmisrepresentation.(#$  0  (CEMU]emu}AutoList1(1)(1)(1)(1)(1)(1)(1)(1)(1)3#37=CIQYag1.a.i.(1)(a)(i)1)a)i)(;3$2#  0  .3  0  (CEMU]emu}AutoList2(1)(1)(1)(1)(1)(1)(1)(1)(1)- -(|G2""$ !.8JUdXXd8         0   d(|3V$ !.8JUdXXd8     VVVV'dxd)!dxdx( $ Figure  1  ^_X`YE<<CLevel 1Level 2Level 3Level 4Level 5(|3V$ !.8JUdXXd8     ($$   1  X[Z&OLE 2.0 Box <=8C HKKKK !.8JUdd8     _  JU8)XXdd8  @ SdJUINTHECOURTOFAPPEALSOFTENNESSEE  @kk$ATNASHVILLE#JUSd #Ԉ &   August8,2001Session L X)XJU #JUXX)#CHARLESDAVID_KILLION_v.JOHNNY_HUDDLESTON_X)XJU  J @@ AppealfromtheChanceryCourtforDavidsonCounty  J @@No.993360IIIEllen_Hobbs_ԀLyle,Chancellor  6 @@*AV) ` dE<` A   @@TTNo.M200002413_COA_ԄR3CVFiledSeptember19,_2001_   AV) ` dE<|` A }     Thisisanactionfordamagesfornegligentmisrepresentation.Theplaintiffinvested$50,000.00in x  EurekaVacuumCleanerCompanyattheadviceandurgingofthe_unlicensed_Ԁdefendantwhowasto d receiveasubstantialcommission.Theinvestmentwasascam.Recoveryforthelosswasallowed. P Weaffirm. <  Tenn.R.App.P.3AppealasofRight;JudgmentoftheChanceryCourtAffirmed  d   #JUX)#X)X.JUWilliamH._Inman_,Sr.J.,deliveredtheopinionofthecourt,inwhichBenH._Cantrell_,_P.J._,M.S. < andWilliamC.Koch,Jr.,J.,joined. (    `     h      p      x  HarryR.Cash,Chattanooga,Tennessee,fortheappellant,Johnny_Huddleston_.  Wayne_Detring_,_Hendersonville_,Tennessee,fortheappellee,CharlesDavid_Killion_.  G OPINION #JUXX)v#X)XJU `     #JUXX) #X)XJU I. 8!     EachofthesepartieswasvictimizedbyoneFulton,afriendandpartnerofthedefendant, #`" whounwittinglybutnegligentlyparticipatedina_Ponzi_ԄlikeschemedevisedbyFulton. #L#   Thedefendantandplaintiffwereacquaintedbyvirtueoftheirlandlordtenantrelationship. %$!% ThedefendantownedcertainrealestateleasedtotheplaintiffwhooperatedaDairyQueenbusiness. &"& InOctober1999thedefendantapproachedtheplaintiffaboutinvestingmoneyintheEurekaVacuum '"' CleanerCompany.Theinvestmentwasdiscussedingeneralterms. (#(   Thedefendantexplainedtotheplaintiffthathehadapartnerandthattheywerearranging p*%* investmentswithEureka,whichwasbasedinIllinois.Thedefendantandhispartner,Fulton,were \+&+ selling commoditiesorcontractswhenEureka neededmoneyupfrontformanufacturing H,', purposes.Thedefendantdemonstratedinwritinghowaninvestmentworked,andundertookto 4-(- _explaintotheplaintiffhowhecouldselltheDairyQueenbusinessandinvesttheproceedsin  Eureka.Thedefendantprojectedthesuccessofsuchaninvestmentbydiagramingitsvaluein  incrementsoffour,eight,andtwelvemonths,basedonareturnof18percenteveryfourmonths.    AftertheclosingoftheDairyQueensale,theplaintiffadvisedthedefendantwhoattended ` thesalethathewouldinvestinEureka.Thedefendantinstructedtheplaintifftomakethecheck L  payabletohispartner,Fulton.TheplaintiffbelievedhewastoreceiveacertificatefromEureka,but 8  wasgivenanotefor$50,000.00signedbyBillyFultonasPresidentofAirwaysVacuumCorp.On $ t May6,1998thedefendantcalledtheplaintiffandtoldhimthatFultondiedonMay5,1998andthat  ` theinvestmentwasascam.  L      Thedefendantalsoinvestedasubstantialsumwithhispartner,Fulton.Significantly,the $  defendantwastoreceiveacommissionof32percentonthe$50,000.00investment,whichwasnot   revealedtotheplaintiff.     ThedefendantsolicitedinvestmentsinEureka,throughFulton,fromfifteenindividuals   commencinginOctober1997.Theseinvestmentsamountedtomorethanonemilliondollars,and p thedefendantadmitsthatfundsreceivedfromnewinvestorswereusedtopayearlierinvestors.He \ admitsthathemadenoinvestigationofFulton,orthescheme,butsimplyacceptedhisword.He H admitsthatherepresentedhimselftobean authorizedrepresentativeofEureka,andthatthe 4  plaintiffdidhavefaithinme.  p    II.  H   Theforegoingrecitationformsthebasisofthecomplaint. #  1      ׀Thedefendantdeniedthe   allegationsbyanswer,notwithstandinghelateradmitted,eitherbydiscoveryorincourttestimony,   theessentialfacts.Hepleaded,alternatively,thattheplaintiffwashimselfnegligent,andthathis  comparativefaultbarsarecovery.Healsopleadedthebarofanunspecifiedstatuteoflimitations,  laches,andlackofconsideration.     III.  X    TheChancellordismissedtheclaimbasedontheSecuritiesAct,findingthattheoneyear 0"  statuteoflimitationsbarredtheaction.Theclaimsbasedonbreachofcontract,breachoffiduciary #l! duty,andfraudulentmisrepresentationwerealsodismissedforfailureoftheplaintifftosustainhis $X" burdenofproof. $D #   %0!$   TheChancellorfoundthattheplaintiffprovedbyapreponderanceoftheevidencethatthe  defendantwasguiltyofnegligentmisrepresentationandawardeddamagesof$50,000.00pluspre  judgmentinterest.     IV.  `   Thedefendantappealsandpresentsforreviewtheissueofwhetherthecourterredinfinding 8  himliableunderthetheoryofnegligentmisrepresentation.Theplaintiffpresentsforreviewthe $ t issuesofwhethertheChancellorerredindismissinghisclaimsbasedonfraudandbreachof  ` contract.Ourreviewisdenovoontherecordwithapresumptionofcorrectnessunlesstheevidence  L  preponderatesagainstthejudgment.Rule13(d)Tenn.R.App.P.  8     V.    .   ThetortcommonlyknownasnegligentmisrepresentationisrecognizedinTennessee.    Tarterav.Palumbo ,453S.W.2d780(Tenn.1970).Section552oftheRestatement(Second)of   Tortsisthestandardfornegligentmisrepresentation. Robinsonv.Omer ,952S.W.2d423,427 p (Tenn.1997)( TennesseehasadoptedSection552astheguidingprincipleinnegligent \ misrepresentationactions)(citing BethlehemSteelCorp.v.Ernst&Whinney ,822S.W.2d592, H 595(Tenn.1991)). 4   Section552oftheRestatement(Second)ofTorts,inpertinentpart,provides:  \  (83"3"  8  3#2(  1  )3  0`     Onewho,inthecourseofhisbusiness,professionoremployment,orinany 4 othertransactioninwhichhehasapecuniaryinterest,suppliesfalse   informationfortheguidanceofothersintheirbusinesstransactions,is   subjecttoliabilityforpecuniarylosscausedtothembytheirjustifiable  relianceupontheinformation,ifhefailstoexercisereasonablecareor  competenceinobtainingorcommunicatingtheinformation.3#$݌` `  Ќ  8        Thissectioncanbereducedtofourdistinctelements: X  ! ! (88"3"  8  3'2(  1  )3  0`     Thedefendantmustbeactinginthecourseofhisorherbusinessor 0"  profession,orinatransactioninwhichheorshehasapecuniaryinterest;3''(݌#l!` `  Ќ  "3"  8  3r)2(  2  )3  0`     Thedefendantmustsupplyfalseinformationtotheplaintiffandmustintend $D # thatthisinformationguidethedefendantinabusinesstransaction;3r))݌%0!$` `  Ќ  "3"  8  3*2(  3  )3  0`     Thedefendantmustfailtoexercisereasonablecareinobtainingor '#& communicatingtheinformation;and3*/+݌(#'` `  Ќ  "3"  8  3O,2(  4  )3  0`     Theplaintiffsrelianceupontheinformationmustbejustifiable.3O,,݌|*%)` `  Ќ   h+&*  JohnMartinCo.v.Morse/Diesel,Inc. ,819S.W.2d428(Tenn.1991).    Thefirstelementallowsrecoveryonlyinsituationswherethedefendantisreceivingsome  financialincentive.Ifthedefendantisactinginthecourseofhisemployment,Section552will t apply.However,nodirectmonetaryrewardwithregardtothetransactioninvolvingthealleged ` faultyinformationisrequired.Attorneyshavebeenheldliabletononclientsforerroneousadvice L  giveninrealestatetransactions. Collinsv.Binkley 750S.W.2d737(Tenn.1988); Stinsonv. 8  Brand ,738S.W.2d186(Tenn.1987).Accountantshavebeenheldliabletononclientsforfaulty $ t auditinformation. BethlehemSteelCorp., supra ;JohnMartinCo., supra(constructionmanager  ` heldliabletosubcontractorforfaultyinformation); Tartera, supra,453(landsurveyorheldliable  L  tononclientpurchaserofpropertyforfaultypropertydescriptionindeed).Thetestforwhetherthe  8  informationfitswithintheparametersofSection552isnotprivity,norisitdirectfinancialgain. $  Thetestiswhethertheinformationwasgiveninabusinesstransaction.Sincethedefendant   admittedthathehadapecuniaryinterestinthetransactiona32percentcommissionthefirst   elementissatisfied.     Thesecondelementrequiredisthattheinformationmustbefalseandmustbegiventothe p plaintiffwiththeintentthatitguidehimorherinabusinesstransaction.Therequirementoffalsity \ meanssimplythatthecourtmustlookattheexactinformationprovidedanddetermineifitistrue H ornot.Thestatementmadebythedefendantmustbeastatementofamaterialpastorpresentfact. 4  McElroyv.BoiseCascadeCorp. ,632S.W.2d127,130(Tenn.Ct.App.1982).However,  p statementsofopinionarenotactionable. Brungardv.CapriceRecords ,608S.W.2d585,590  \ (Tenn.Ct.App.1980); Brownv.Brown ,863S.W.2d432,434(Tenn.Ct.App.1993).Conjecture H orrepresentationsaboutfutureeventsarenotactionable,evenifthestatementslaterturnouttobe 4 false. McElroy ,supra,130.     Inaddition,thestatementmustbegiveninabusinesstransactionsetting.Inthecasescited  abovewherenonclientsareallowedtorecoverfromcertainprofessionals,theinformationwasgiven  intransactionswheretheprofessionalknewitwaslikelythatotherswoulduseitasadecision  makingreferencepoint.Forexample,landsurveyorsknowthatpropertydescriptionsusedindeeds l inpurchasetransactionswillberelieduponbynonclientbuyersoftheproperty.Inthesame X  manner,accountantsknowthattheauditinformationtheyprovidetotheirclientsislikelytoberelied D! uponbynonclients.Theproofclearlyestablishedthattheinformationprovidedtotheplaintiffby 0"  thedefendantwasfalseandthatitwasintendedtoguidetheplaintifftoaninvestmentinEureka. #l!   Thethirdelementofnegligentmisrepresentationrequiresthatthedefendantmusthavefailed $D # toexercisereasonablecareinobtainingorcommunicatingtheallegedfalsestatements.The %0!$ SupremeCourtaddressedthiselementandstatedthat: &"% 8  [t]heburdenisalwaysontheplaintifftoestablishthatthesupplierviolatedhisduty (#' toexerciseduecareandcompetenceinobtainingorcommunicatingtheinformation. )$(  Foreseeabilitybytheprovideroftheinformationandreliancebytheuserofthe |*%) informationareimportantsafeguards.Negligencebytheuseroftheinformationmay  beabartorecovery.     JohnMartin ,supra,435. t   Thedefendantadmittedthathefailedtoexerciseduecareandproperjudgment. L    ThefinalelementofanegligentmisrepresentationunderSection552iswhetherthe $ t plaintiffsrelianceupontheinformationwasjustified.Todeterminethisissue,welookatthe  ` relativepositionsoftheparties.Theplaintiffreposedtheutmosttrustinthedefendant,who  L  acknowledgedthisfact.Whileitistrue,thedefendantargues,thattheplaintiffcouldhave  8  investigatedthematter,themeansofknowledgewerenotreadilyavailabletohimandhedidnot $  knowFulton.Fromallthecircumstanceswebelievetheproofjustifiedtheconclusionthatthe   plaintiffjustifiablyreliedupontheinformationgiventohimbythedefendant.      VI.    B  Thedefenseofcomparativenegligencewillpreventtheplaintifffromrecoveringifhisown ` faultwasequaltoorgreaterthanthatofthedefendant. JohnMartin ,supra,435.Thedefendant L arguesthattheplaintiffsrefusaltomeetwithFultonconstitutescomparativenegligence.The 8 plaintiffadmittedthathedeclinedtotraveltoChattanoogatomeetFultonbeforeinvestinghisfunds, $t becausehewasdoingbusinesswiththedefendant,notwithFulton. `   Itmaywellbearguedthattheplaintiffwasnaive,buthispositioninthisscenariowasclearly 8 juniortothatofthedefendant.WeagreewiththeChancellorthattheplaintiffsrelianceonthe $ defendantwasjustifiedandthatsuchreliancewasnotnegligence.Theevidencedoesnot  preponderateagainstthejudgmentallowingarecoveryfornegligentmisrepresentation.     VII.   (G  Wehaveconsideredtheissuespresentedbytheplaintiffrespectinghisclaimsforfraudulent \  misrepresentationandfraudofcontract,andfindthattheevidencedoesnotpreponderateagainstthe H! judgment. 4"    Thejudgmentisaffirmedatthecostsoftheappellant,JohnnyHuddleston.  $\"    %4!$    `     h     ___________________________________ (#'    `     h     WILLIAMH.INMAN,SENIORJUDGE