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§30.2A Certain Opinions Can Be Basis for Fraudulent Misrepresentation Claim

The Case: Davis v. McGuigan, 312 S.W.3d 149 (Tenn. 2010).

The Basic Facts:  Plaintiff homeowners sued Defendant appraiser alleging that he intentionally and negligently over-stated the value of their home.  The appraisal was done based on construction drawings because the home had not yet been built. Defendant argued that his appraisal was an opinion, not a representation of fact, and an opinion cannot provide a basis for a claim.

The Bottom Line:

  • “The Davises must prove six elements to establish their claim of intentional misrepresentation at trial: (1) that Mr. McGuigan made a representation of an existing or past fact; (2) that the representation was false when it was made; (3) that the representation involved a material fact; (4) that Mr. McGuigan made the representation recklessly, with knowledge that it was false, or without belief that the representation was true; (5) that the Davises reasonably relied on the representation; and (6) that they were damaged by relying on the representation. Walker v. Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 311 (Tenn. 2008) (citations omitted).”  312 S.W.3d at 154.
  • “Regarding the first element, Mr. McGuigan contends that his appraisal was an opinion, not a representation of fact, and that an opinion cannot provide a basis for the Davises to show at trial that Mr. McGuigan made a representation of existing or past fact.” Id.
  • “In Sunderhaus v. Perel & Lowenstein, this Court stated that the general rule is that ‘ordinarily representations of value made by one seeking to dispose of property commercially are to be regarded as expressions of opinion...not constituting a basis of fraud.’ 215 Tenn. 619, 388 S.W.2d 140, 142 (1965). We observed, however, ‘a number of exceptions to this general rule.’ Id.  ‘Representations as to market price or market value are not mere statements of opinion, but are representations of fact which, if false, will support an action for fraud or deceit.’ Id. (quoting 23 Am. Jur. Fraud and Deceit § 62). We also stated,

Wherever a party states a matter, which might otherwise be only an opinion, and does not state it as the mere expression of his own opinion, but affirms it as an existing fact material to the transaction, so that the other party may reasonably treat it as a fact, and rely and act upon it as such, then the statement clearly becomes an affirmation of fact within the meaning of the general rule, and may be a fraudulent misrepresentation.

 

Id. at 142-43 (quoting 3 Pomeroy’s Equity Jurisprudence § 878b (5th ed.1941)).  ‘The statements which most frequently come within this branch of the rule are those concerning value.’ Id. at 143 (quoting 3 Pomeroy’s Equity Jurisprudence § 878b (5th ed.1941)).”  Id. at 154-55.

  • “The Restatement (Second) of Torts also states that an opinion may give rise to an intentional misrepresentation claim. Restatement (Second) of Torts § 525 (1977). It further explains that the form of an opinion may control whether it is a representation.  ‘I believe that there are ten acres here,’ is a different statement...from ‘The area of this land is ten acres.’  The one conveys an expression of some doubt while the other leaves no room for it.’ Restatement (Second) of Torts § 538A cmt.  c  (1977).  The speaker’s relationship to the recipient also is important.  A person may doubt a seller’s statement about the value of the property being sold while the same person may accept as true a disinterested expert’s opinion of value about the same property. See Restatement (Second) of Torts § 539 cmt. c (1977). Indeed, section 543 of the Restatement (Second) of Torts states, ‘The recipient of a fraudulent misrepresentation of opinion is justified in relying upon it if the opinion is that of a person whom the recipient reasonably believes to be disinterested and if the fact that such person holds the opinion is material.’”  Id. at 155 (footnote omitted).
  • “We therefore hold that an opinion of value may provide the basis for a fraudulent misrepresentation claim and overrule the holding of the Court of Appeals that Mr. McGuigan’s appraisal is not actionable because it is an opinion of value.”  Id.

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The foregoing is an excerpt from Day on Torts: Leading Cases in Tennessee Tort Law, published by John A. Day, Civil Trial Specialist, Fellow in the American College of Trial Lawyers, recipient of Best Lawyers in America recognition, Martindale-Hubbell AV® Preeminent™ rated attorney, and Top 100 Tennessee Mid-South Super Lawyers designee. Read John’s full bio here.

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