## Facts

- Seymour Kutner built a new residence and sold it to Evelyn C. Axline under a written real estate contract.
- The contract included an express one-year builder’s warranty and language stating that any implied warranties were limited to one year; it also stated Axline accepted the property “as is” and that Kutner made no warranties or representations except those stated in the contract.
- After the sale, Axline conveyed her interest in the property to her niece, Mary Ann Kincade, by quitclaim deed, and Kincade became the real party in interest.
- The purchasers later complained of substantial construction defects that they contended affected the home’s condition and usability; their allegations were reflected in, among other things, a letter dated March 3, 1987 and a “Field Report” dated July 20, 1987.
- Axline and Kincade sued Seymour Kutner and his wife, Mildred Kutner, asserting claims that included breach of implied warranty (good workmanship/habitability) and fraud in the inducement based on alleged misrepresentations and nondisclosures concerning the home’s condition and repair history.
- The Kutners sought partial summary judgment, arguing that the contract limited implied warranties to one year and that the complaint (as amended) did not state a claim for fraud in the inducement.
- The trial court granted partial summary judgment, limited plaintiffs’ case to the express one-year builder’s warranty (for the defects described in the March 3, 1987 letter and July 20, 1987 field report), and ruled the amended complaint failed to state a fraud-inducement claim. The court entered the order as a final judgment under Tenn. R. Civ. P. 54.02 to allow an immediate appeal.

## Issues

1. Whether the trial court properly granted partial summary judgment limiting plaintiffs to the express one-year builder’s warranty based on the contract’s “as is” and warranty-limitation language.
2. Whether the trial court correctly disposed of the fraud-in-the-inducement claim at the partial summary judgment stage on the ground that the amended complaint failed to state a claim.

## Decision

- The Court of Appeals of Tennessee reversed the trial court’s partial summary judgment and remanded for further proceedings.
- Because matters outside the pleadings were considered, the defense motion was treated as one for summary judgment under Tenn. R. Civ. P. 12.02, and the defendants bore the burden to show no genuine issue of material fact and entitlement to judgment as a matter of law.
- The appellate court held summary judgment was improper on the record presented because disputes of material fact remained concerning the alleged misrepresentations/nondisclosures and the effect of the contract language on implied-warranty liability.
- The appellate court rejected the conclusion that the contract’s express one-year warranty and related language barred, as a matter of law, claims for implied warranty of habitability/good workmanship and for fraud in the inducement.
- Costs on appeal were taxed to the defendants.

## Legal Principles

- When a Tenn. R. Civ. P. 12.02 motion asserting failure to state a claim presents matters outside the pleadings and the court does not exclude them, the motion is treated as one for summary judgment under Rule 56.
- Summary judgment is improper if there is a genuine issue of material fact; courts must view the evidence in the light most favorable to the nonmoving party, draw reasonable inferences in that party’s favor, and refrain from weighing competing proof.
- In Tennessee, a builder-vendor’s sale of a newly constructed home carries implied warranties of good workmanship and habitability; any disclaimer of those implied warranties must be stated in clear and unambiguous language.
- General “as is” language and a contractual one-year warranty/limitation provision do not automatically eliminate implied-warranty claims as a matter of law where the language and the surrounding circumstances leave room for factual dispute about what was waived and what was promised.
- An express contractual warranty and warranty limitations do not, by themselves, defeat a separate tort claim for fraud in the inducement when the alleged fraud concerns statements or omissions that caused the buyer to enter the contract.
- When the sufficiency of a complaint is attacked, well-pleaded factual allegations are taken as true and the pleading is construed liberally in the plaintiff’s favor; allegations of fraud must be stated with particularity, but amendments may cure pleading deficiencies and can make dismissal at an early stage improper.

## Conclusion

The Court of Appeals reversed the partial summary judgment that limited the plaintiffs to an express one-year builder’s warranty and rejected the trial court’s disposition of the fraud-inducement claim at that stage, holding that the contract language did not resolve implied-warranty and fraud questions as a matter of law and that material factual disputes required further proceedings on remand.


Axline v. Kutner, 863 S.W.2d 421 (1993)