## Facts

- Christell Staggs agreed to purchase a residence owned by William E. Sells and Betty Jean Sells for $71,000.
- The Sellses never lived in the house; their daughter lived there for about eight years, while the Sellses lived nearby and visited regularly.
- The Sellses used a real-estate agent to negotiate and execute the sales contract on their behalf.
- The written contract included a representation that the property “has not been damaged or affected by flood or storm run-off,” and it indicated that the property did not require flood insurance.
- The Sellses’ agent was authorized to sign the contract for them but did not review the flooding language with the Sellses and did not determine whether the property had been affected by flooding.
- Staggs viewed the home several times, but she did not ask the Sellses or their agent whether the property had a flooding or storm-runoff history.
- Before closing, Staggs obtained an appraisal and a home inspection. The appraiser noted the house was in a low-lying area and could be subject to minor flooding and recommended a flooding survey, but no flooding survey was obtained.
- A flood certification placed the property in Flood Zone C (insurance available but not required). When Staggs asked her agent about Zone C at closing, she was told it was low risk and was not supposed to flood.
- After closing, the property flooded about 15 times over the next several years; flood water surrounded the house but did not enter it.
- Staggs sued the Sellses for negligent misrepresentation based on the contract’s flooding and storm-runoff representation.
- After a bench trial, the trial court found negligent misrepresentation, set damages at $25,000, allocated fault at 60% to the Sellses and 40% to Staggs, and entered a $15,000 judgment for Staggs.
- The Sellses appealed, disputing liability and the damages award.

## Issues

1. Whether the evidence supported the trial court’s finding that the Sellses, acting through their authorized agent, negligently misrepresented that the property had not been damaged or affected by flood waters or storm runoff.
2. Whether comparative fault applies to negligent misrepresentation in Tennessee and, if so, whether the trial court’s 60%/40% allocation was proper.
3. Whether the $25,000 damages finding (and resulting $15,000 judgment after fault apportionment) was supported by the evidence.

## Decision

- The Court of Appeals affirmed the trial court’s judgment.
- It upheld the finding of negligent misrepresentation, agreeing that the contract representation about flooding and storm runoff was made without reasonable care in obtaining or communicating the information.
- It rejected the Sellses’ attempt to avoid responsibility based on the agent’s handling of the contract, holding the sellers were accountable for misrepresentations made by their authorized agent in the sales transaction.
- It approved use of comparative fault in a negligent misrepresentation claim and found material evidence supported allocating 60% fault to the Sellses and 40% to Staggs.
- It affirmed the $25,000 damages determination and the reduced $15,000 award after applying comparative fault.

## Legal Principles

- Negligent misrepresentation may arise in a business transaction when a party supplies false information for another’s guidance and fails to use reasonable care in obtaining or communicating it, causing justifiable reliance and pecuniary loss.
- A principal may be liable for an authorized agent’s misrepresentations made within the scope of the agency during a real-estate transaction.
- A buyer’s reliance on an express written statement about a property condition can be justified even when there are warning signs suggesting further inquiry; the buyer’s conduct may be weighed through comparative fault.
- Tennessee comparative fault applies to negligent misrepresentation and reduces a plaintiff’s recovery in proportion to the plaintiff’s share of fault.
- Appellate courts will affirm damages and fault allocations when supported by material evidence in the record.

## Conclusion

Staggs v. Sells affirmed a judgment for negligent misrepresentation where the sellers, through an authorized agent, included a false contract statement that the property had not been affected by flooding or storm runoff. Although the buyer had information suggesting some flood risk, the court treated her failure to investigate further as comparative fault rather than a complete bar, upheld $25,000 in damages, and affirmed the 60/40 apportionment that produced a $15,000 award.


Staggs v. Sells, 86 S.W. 3d 219 (2001)