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Fayne v. Vincent: Brokerage Dismissed from Lawsuit

David Vincent ("Developer") developed a residential subdivision. The Developer's wife, Teresa Vincent ("Salesperson"), was a licensed real estate professional associated with Re/Max Real Estate Professionals ("Brokerage"). In the "Independent Contractor Agreement" between the Brokerage and the Salesperson, the Salesperson was obligated to pay a fee for use of office facilities to the Brokerage and was responsible for all other expenses, such as license renewal fees and taxes. All of her listings were to be taken in the Brokerage's name and she was required to attend the Brokerage's education classes, commit to maintaining certain ethical standards, and to meet all applicable legal standards. The Salesperson retained 100% of all commissions she earned.

The Developer installed a septic tank on the property of one of the subdivision's homes ("Property") which was too close to the street. In his report approving the septic field, the government inspector noted that the septic tank on the Property was too close to the street and a pump would need to be installed if problems arose. The Developer and the Salesperson completed a property condition disclosure form stating that they were not aware of any problems with the Property's septic system. Thereafter, the Developer and the Salesperson moved onto the Property. They began noticing problems with the septic field such as sewage leakage, and the Developer tried to fix the problem.

Gwinn and Alfred Fayne ("Buyers") were shown the Property and eventually agreed to purchase the Property. The Salesperson represented her and her husband in the sale of the Property, and she split the commission from the sale with the Buyers' representative. The Buyers hired an inspector to test the septic field and his testing did not discover any problems with the septic field. Following their taking possession of the Property, the Buyers began noticing problems with the septic system, with an "odorous" fluid seeping out of the ground in the area of the septic field every time the washing machine or bath was used.

The Buyers filed a lawsuit against the Developer, the Salesperson, and the Brokerage, seeking to rescind the purchase contract, based on alleged fraud and violation of the state's deceptive trade practices act. The trial court dismissed the Brokerage from the lawsuit, ruling that the Salesperson was an independent contractor. In a non-jury trial, the trial court ordered the purchase contract rescinded and awarded the Buyers $104,500 in damages. The Buyers appealed this verdict.

The Court of Appeals of Tennessee affirmed the trial court's dismissal of the Brokerage, but sent the case back to the trial court for a reconsideration of the damages awarded to the Buyers. The court first considered the trial court's dismissal of the Brokerage from this case. The court looked at the traditional factors for determining whether or not someone qualified as an independent contractor. The court listed a series of factors such as method of payment and how the individual performed his/her work duties, but stated that the primary consideration was the amount of control exercised by the employer over the individual.

Here, the agreement between the Brokerage and the Salesperson required the Salesperson to attend classes presented by the Brokerage and identify the Brokerage as the listing broker for any listings she acquired, but also gave the Salesperson total control over her approach to selling properties and allowed her to retain all of the commissions earned. The Salesperson was also responsible for all of her personal expenses. Looking at the factors, the court determined that the Salesperson qualified as an independent contractor and so the court affirmed the ruling dismissing the Brokerage from the lawsuit.

Next, the court considered the damages the trial court had awarded to the Buyers. The Buyers challenged the damages, arguing that they did not adequately compensate them and also sought attorney's fees. The court agreed that the trial court's award failed to reflect moving expenses and property taxes, and so the court sent the case back to the trial court for further consideration on the amount of damages. Attorney's fees are not generally recoverable by a party, unless a statutory or contractual right exists. The state's deceptive trade practices act allowed for recovery of attorney's fees, but it wasn't clear whether the trial court had found violations of the act. Therefore, the issue of attorney's fees was remanded to the trial court for further consideration.

Fayne v. Vincent, No. E2003-01966-COA-R3-CV, 2004 WL 1749189 (Tenn. Ct. App. Aug. 5, 2004). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].