Jerry Faerber v. Troutman & Troutman, P.C.
E2016-01378-COA-R3-CV
| Tenn. Ct. App. | Jun 22, 2017Background
- Jerry and Margaret Faerber purchased a lot in a PUD for $75,000; Troutman & Troutman (Mark Troutman) acted as settlement agent and prepared the warranty deed and settlement statement.
- The settlement statement showed a $30,000 payoff to Tennessee State Bank and a $387.50 charge for title insurance; the Faerbers paid the purchase price to Troutman’s trust account.
- Troutman issued a $30,000 check but did not obtain a release of the bank’s lien and did not procure title insurance; the deed nonetheless stated the property was unencumbered.
- The property was later foreclosed; the Faerbers sued for negligent and fraudulent misrepresentation, breach of contract, legal malpractice, and violation of the Tennessee Consumer Protection Act (TCPA).
- Trial court found negligent misrepresentation and TCPA violations, awarding rescission (purchase price), closing costs, prejudgment interest, and TCPA-based attorney’s fees; trial court denied fraud, breach, and malpractice claims.
- On appeal the court affirmed negligent misrepresentation and the damages (purchase price, closing costs, interest) but reversed TCPA liability and the TCPA attorney’s fees award, holding the conduct constituted practice of law and thus was outside the TCPA.
Issues
| Issue | Faerber's Argument | Troutman’s Argument | Held |
|---|---|---|---|
| Whether TCPA applies | Troutman’s misrepresentations about title insurance and payoff were deceptive acts affecting trade or commerce and violate the TCPA | Preparing closing documents and related acts were the practice of law, so TCPA’s professional-services exemption applies | TCPA does not apply; preparing and reviewing deed/settlement were the practice of law, so TCPA-based liability and fees reversed |
| Whether negligent misrepresentation occurred | Troutman supplied false information (deed and settlement), failed to exercise reasonable care, and Faerbers justifiably relied | Errors were professional/legal acts; Troutman argued against personal liability and disputed elements | Affirmed: elements met (false info in deed/settlement; negligent failure to verify release/title insurance; justifiable reliance) |
| Measure and amount of damages (rescission/award of purchase price, costs, interest) | Rescission/return of purchase price, closing costs and prejudgment interest appropriate to make plaintiffs whole | Argued alternate damages measure; challenged calculation | Affirmed: trial court’s award (purchase price, $1,083 closing costs, prejudgment interest) was appropriate under facts |
Key Cases Cited
- Morrison v. Allen, 338 S.W.3d 417 (Tenn. 2011) (elements of negligent misrepresentation)
- John Martin Co., Inc. v. Morse/Diesel, Inc., 819 S.W.2d 428 (Tenn. 1991) (foreseeability limits negligent information-supplier liability)
- Old Hickory Eng’g & Mach. Co. v. Henry, 937 S.W.2d 782 (Tenn. 1996) (preparation and filing of pleadings requires lawyer professional judgment; drafting legal documents is practice of law)
- Audio Visual Artistry v. Tanzer, 403 S.W.3d 789 (Tenn. Ct. App. 2012) (TCPA scope; issues of unfair/deceptive acts are factual)
- Petition of Burson, 909 S.W.2d 768 (Tenn. 1995) (Supreme Court’s role in defining practice of law; acts requiring professional judgment constitute practice of law)