tense question

[vkhu]

"What a pleasant surprise! I... you... in this city."

A. Don't know/were
B. Didn't know/were
C. Haven't known/are
D. Don't know/are

My teacher said B is the correct answer but I don't think so. Judging from the first sentence, the speaker said this when he saw this "you" guy face-to-face so I think at that moment in time, that "you" guy was still in the city. So why did the "I" character said "you were"? Isn't it supposed to be "you are"?

[5jj]

B is correct. It is indirect speech:

"O! You are in this city."
I didn't know (that) you were in this city
Now I know (that) you are in this city.

[vkhu]

B is correct. It is indirect speech:

"O! You are in this city."
I didn't know (that) you were in this city
Now I know (that) you are in this city.

Wait a minute, even if it is indirect speech, isn't it supposed to be "I hadn't known you were in this city?" Man this is so confusing.

[5jj]

]There is no reason for a past perfect.

[vkhu]

ok thanks. I get it now.

[Raymott]

Let me give you a timeline:
--------------------------------------------"you" stay in town--------------------------------> time of speaking
________________________________________________visit

------"I" don't know about it----------------------------------------------now know-----> time of speaking

As you can see, the fact that "I" don't know about it happened before the visit and after "I" know, the friend still stay in town (visiting him). So I think "I" had not know about "you" until the time of speaking.

But that is just my view. You might be right.

There's no doubt at all that he's right.

You can say to a third person, "I hadn't known he was in the city until I saw him."
But here's a simpler time line
i) ____B is in the city ____ii) A doesn't know B is in the city ____iii) A meets B ___ iv) A says, "I didn't know (referring back to ii) that you were in the city. (referring back to i).