## Facts

- William Howard Hutchison, Jr., and Jo Lynn Hutchison bought a house and lot from Robert L. Pyburn and Carol Pyburn in January 1973 for $24,000, largely financed by a deed of trust loan.
- The house had been built by Jack Williams, who previously sold the property to the Pyburns; John Williams acted as the real-estate agent in the Pyburn-to-Hutchison sale.
- About six months after closing, the Hutchisons discovered sewage seepage and learned the property had not been approved as a home site because it lacked sufficient topsoil to support a septic system and overflow field.
- Local authorities had information indicating the lot was unsuitable; a building permit had been issued to Jack Williams by mistake.
- The chancellor found the Pyburns and Jack Williams knew of the sewage/septic defect and failed to disclose it to the Hutchisons, constituting fraudulent misrepresentation.
- The chancery court ordered rescission of the contract and deed, awarded incidental damages (with an offset for reasonable rental value during occupancy), and awarded $5,000 in punitive damages against the Pyburns and Jack Williams; the claim against John Williams was dismissed.
- On appeal, the only challenged issue was whether punitive damages could be awarded when rescission was granted.

## Issues

1. Whether a plaintiff who rescinds a real-estate transaction induced by fraud may also recover punitive damages under Tennessee law.
2. Whether the election of remedies doctrine bars punitive damages when the plaintiff chooses rescission rather than damages for deceit.

## Decision

- The Court of Appeals of Tennessee affirmed.
- The court held rescission and punitive damages are not inconsistent remedies in a fraud case.
- The election of remedies doctrine did not bar punitive damages as an additional sanction for fraudulent conduct.
- The decree rescinding the transaction and awarding incidental damages (less rental value) and $5,000 punitive damages against the Pyburns and Jack Williams was upheld.

## Legal Principles

- Election of remedies prevents pursuing two inconsistent and irreconcilable substantive remedies (e.g., affirmance with damages for deceit versus disaffirmance with rescission).
- Punitive damages are penal, serving punishment and deterrence, and are distinct from compensatory measures restoring the plaintiff.
- When fraud is established, punitive damages may be awarded as ancillary relief even where the primary remedy is equitable rescission.
- Courts of equity may award punitive damages in an appropriate fraud case, and rescission does not preclude that award.

## Conclusion

A buyer who rescinds a fraudulently induced real-estate sale in Tennessee may also recover punitive damages, because punitive damages are a punishment for the defendant’s misconduct rather than a second, inconsistent contract remedy barred by election of remedies.


Hutchison v. Pyburn, 567 S.W.2d 762 (Tenn. Ct. App. 1977)