Day on Torts
Where a town asserted that an individual member of an LLC had promised that the LLC would pay a certain amount towards a road improvement project, but that the LLC never intended to pay that amount, the town had stated a cause of action for promissory fraud against the individual.
In CCD Oldsmith Henry, LLC v. Town of Nolensville, No. M2024-01102-COA-R3-CV (Tenn. Ct. App. Aug. 21, 2025), Plaintiff LLC asked Defendant town to rezone property so that the LLC could develop residential units. Plaintiff LLC had two members—Smith and Olderman. Both Smith and Olderman attended the rezoning hearing, but Olderman did not speak during the hearing. When the discussion turned to improvements to a nearby intersection that would be required by the rezoning, Smith stated that “we can contribute the difference” in reference to the amount remaining after the state contributed. After additional discussion, the board approved the rezoning and “limited [the LLC’s] contribution to no more than 50% of the costs.”
At some point following the meeting, the town sent a bill to the LLC, and the LLC refused to pay the amount requested. The town then refused to issue building permits, and the LLC filed suit. The town filed a counterclaim against the LLC, as well as a motion to join Smith and Olderman individually, alleging that Smith and Olderman “fraudulently and negligently misrepresented what Oldsmith was willing to pay.” The trial court denied the motion to add Smith and Olderman as individuals, ruling that there was no personal liability on their parts. On appeal, that ruling was overturned as to Smith.
The Court of Appeals began by analzying “whether the Town sufficiently alleged fraudulent or negligent misrepresentation against Smith and Olderman.” Looking to the elements of both torts, the Court noted that both fraudulent and negligent misrepresentation “must be based on a statement concerning a material past or existing fact.” (internal citation omitted). Because the statement at issue here concerned how much the LLC would pay in the future, the Court wrote that “the Town’s allegations better fit the claim of promissory fraud.” The Court explained:
When an alleged misrepresentation concerns a false promise to do something in the future, promissory fraud is implicated. …Following a pronouncement by the Tennessee Supreme Court that it would adopt the majority view allowing claims of promissory fraud in a proper case where justice demands, this Court has considered the tort on a number of occasions. In those cases, we have held that recovery is limited to those cases where the statement of intention is shown to be false when made (i.e., a misrepresentation of actual present intention) by evidence other than subsequent failure to keep the promise or subjective surmise or impression of the promise. Additionally, it is essential to recognize that, in the context of promissory fraud, the mere fact that the promisor failed to perform the promised act is insufficient by itself to prove fraudulent intent.
(internal citations and quotations omitted).
In this case, Smith stated at the meeting that the LLC would contribute up to half, but Olderman swore under oath that the LLC never intended to contribute more than 12%. The Court ruled that the town had therefore plead all the necessary elements of promissory fraud against Smith. The town had not, however, plead a claim against Olderman. The Court ruled that Olderman’s silence when Smith was talking was not enough to establish a claim for promissory fraud.
The Court next considered whether Smith was immune from tort liability because he was acting on behalf of the LLC, finding that he was not. The Court explained that while “an LLC member may not be held individually liable for an LLC’s tortious behavior simply by virtue of membership in the LLC…it is not the case that members of LLCs are ipso facto immune from being held individually liable for their own tortious acts or omissions while acting on behalf of the LLC.” The allegations here related to Smith’s personal conduct. The Court wrote that “[t]he fact that Smith appeared at the hearing on behalf of the LLC was not a shield for Smith to engage in tortious conduct as the Town alleges.”
The Court ultimately ruled that Smith could be held individually liable for his torts, and that the Town had sufficiently plead a claim for promissory fraud against Smith.
This opinion was released 1.5 months after oral arguments.