December 27, 2007

Trial court believes construction company's testimony over homeowner; Reasonable opportunity to cure violated by prohibiting contractor from entering

DAVID LAVY d/b/a DL CONSTRUCTION v. JOAN CARROLL (Tenn.Ct.App. December 27, 2007).

This is a home construction case in which the homeowner appeals the trial court's decision finding her liable to the contractor for the amount remaining due under their original agreement as well as for subsequently authorized modifications. The homeowner contended below that the contractor's work was defective, but the trial court ruled that she was required to have given the contractor notice of any defects in his work and then afforded him a reasonable opportunity to cure these alleged deficiencies. On appeal, the homeowner argues that the trial court erred both in finding that she had not done this and in holding that these actions were required of her as a matter of law. We affirm.

Opinion may be found at:

"Mr. Lavy testified that he was prohibited from ever returning to Ms. Carroll’s property after the incident on January 22, 2005. Testimony from Mr. Underhill corroborated Mr. Lavy’s account of these events. Thus, there was certainly evidence from which the trial court could have concluded that Mr. Lavy had not been provided a reasonable opportunity to cure. Put simply, the trial court believed Messrs. Lavy and Underhill rather than Ms. Waite. Because the evidence does not preponderate against the trial court’s findings, see Tenn. R. App. P. 13(d), we conclude that Ms. Carroll’s argument here is without merit." Id

"The trial court did not find that Mr. Lavy had been previously notified of any problems with his work, nor did it find that Mr. Lavy had ever refused to address any issues that had been brought to his attention. It did find, however, that, soon after he made his request for final payment, Ms. Carroll’s agents prohibited him from reentering the property. While Ms. Carroll contends that Mr. Lavy’s requesting payment and making filings with the Register of Deeds relieved her of the obligations imposed by McClain and Carter, she has failed to cite any law which would support this proposition. Likewise, the Court is unaware of any such authority. Filings under the lien law would have no effect on her duty to first give the contractor notice of the claimed defects and then allow him a reasonable opportunity to cure." Id

"Virgin" land surveys may trump multiple prior surveys based on the same inaccuracy

RALPH DAVIS, ET AL. v. DANIEL CUEL, ET AL. (Tenn.Ct.App. December 27, 2007).

In this boundary line dispute, Ralph Davis and his wife Jackie Davis ("the Davises") sued Daniel Cuel and Francine Cuel ("the Cuels"), alleging that the Cuels had improperly claimed a portion of the Davises' property as their own. Existing surveys supported the Cuels' claim, but the Davises asserted that a prior agreement gave them the right to an additional 0.42-acre tract ("the southern disputed area") on the Cuels' side of the survey boundary. The Cuels, meanwhile, believed that they were entitled to more land than the existing surveys indicated, so they hired a surveyor, Dave Bruce, to conduct a new survey ("the Bruce survey"). The Bruce survey indicated that the Cuels are entitled not only to the southern disputed area, but also to an additional area north of it ("the northern disputed area"), on what the earlier surveys had regarded as the Davises' side. The Bruce survey further indicated that an additional tract claimed by the Davises, immediately north of the northern disputed area, is actually a county right-of-way.

The trial court adopted the Bruce survey and awarded both the northern and southern disputed areas to the Cuels. As a consequence of this ruling, the Davises, the plaintiffs in this case, actually end up with less land than they started with. They appeal, claiming that the evidence preponderates against the court's factual findings, and also that they should have prevailed on a theory of estoppel or acquiescence. We hold that the evidence does not preponderate against the court's findings, and, even assuming that the Davises did not waive their alternative theories of recovery at trial, the evidence does not support those theories. We affirm.

Opinion may be found at:

"Disregarding the deposition, we find no merit in the Davises’ claim that the evidence preponderates against the trial court’s findings. The Davises note that the Bruce survey contradicts four earlier surveys, including Mr. Crutchfield’s, which all showed the boundary line at the same place. However, as noted earlier, Mr. Bruce testified that his was a “virgin” survey, and the court was entitled to credit it over the prior, non-virgin surveys; the number of previous surveys reaching a contrary conclusion certainly does not create a preponderance where those earlier surveys were, according to testimony that the court was entitled to accept, all built upon one another. Similarly, it is not dispositive that the parties’ own deeds lack any reference to the right-of-way that the Bruce survey defines as the boundary. The testimony indicated that Mr. Bruce relied on documents which pre-dated those deeds, including deeds that preceded them in the chains of title. The court was entitled to believe that the “virgin” Bruce survey, based in part on early deeds and tax maps that Mr. Crutchfield did not consider, more accurately describes the boundary in question than the Crutchfield “retracing” survey does." Id.

Use of a product manufacturer's literature in a contract does not establish agency; Employee's use of "we" and "us" may not be used to pierce the veil


Charles Burnette and Imogene Burnette ("Homeowners") allege that their driveway was damaged as a result of the faulty repair work of Concrete Maintenance Specialists ("CMS"), a company that employed, among others, Brian Cupp ("Cupp"). The repairs by CMS made use of a product sold by Fischl Enterprises, Inc., aka Lone Star Epoxies ("Lone Star"). Art Fischl is the principal of this corporation. No defect in the product is alleged, only a faulty installation by employees of CMS. Homeowners sued CMS, Cupp, Lone Star and several others (collectively "Defendants") seeking damages, claiming that CMS is directly liable, Lone Star is liable because CMS was its agent, and Cupp is liable because CMS's corporate veil should be pierced and Cupp is a principal of CMS. Cupp and Lone Star each filed a motion for summary judgment. Cupp argues that he was only an employee of CMS, not a principal, and thus could not be liable even if CMS's corporate veil were pierced. Lone Star argues that CMS was not its agent. The trial court granted both motions. Homeowners appeal, arguing that they successfully demonstrated the existence of material factual disputes regarding the issues pertaining to Cupp and Lone Star, and also that the trial court should not have granted summary judgment before ruling on Homeowners' motion to compel. We affirm.

Opinion may be found at:

"King states that “[m]uch of the technical information and some of the marketing information utilized by CMS were actually Lone Star documents which CMS used replacing the name ‘Lone Star Epoxies’ with the name ‘Concrete Maintenance Specialists’ which gave the impression that the products were actually CMS products.” This statement fails to help Homeowners because it does not allege that Lone Star played any role in altering the documents, which would be necessary to establish that they were representations or conduct of the purported principal rather than of the purported agent. In addition, the foundation of King’s statement is unclear, and she does not allege that the documents were actually used to make representations to Homeowners, only that the documents existed. This is clearly inadequate to create a disputed issue of material fact on the issue of apparent agency." Id.

"The affidavit of Burnette, one of the homeowner plaintiffs, states that he “was informed by Brian Cupp that he managed employees and supervised work such that he gave orders to perform certain work on my driveway[.]” Burnette further quotes Cupp as making various statements about CMS using words like “we” and “our.” To bolster this argument, Homeowners point to a lengthy transcript of a recorded telephone conversation between Burnette and Cupp. Homeowners argue in their brief that Cupp’s statements to Burnette are evidence that Cupp “held himself out as a person with management authority.” This they may be, but they are not evidence that he is a principal of the company. A mere employee may exercise “management authority,” and certainly may refer to his employer as “we” or “us.” An employee may also promise that his employer company will get work done by a date certain, and he may order subordinate employees to do the work. None of these actions suggest principal status. To hold Cupp liable on a veil-piercing theory, Homeowners needed to provide evidence that he is not merely a “person with management authority” of an alleged “joint family venture,” but that he is a principal, shareholder, officer or director of the company, whatever its corporate status. This they have failed to do." Id.

Final plat approval and commitment letter conditions precedent clauses keep new home construction delays from constituting breach of contract

ASHRAF KHALIL, ET AL. v. CARCAR DEVELOPMENT, INC. (Tenn.Ct.App. December 26, 2007).

This appeal arises from two consolidated breach of contract actions involving two separate but nearly identical residential real estate transactions. The buyers brought suit alleging that the seller breached its contracts by failing to complete construction of their homes by the closing date set out in the contracts. After the close of the plaintiffs' proof, the defendant moved for involuntary dismissal under Rule 41.02 of the Tennessee Rules of Civil Procedure, arguing that the seller's obligation to sell the homes never arose due to the buyers' failure to satisfy several conditions in the contracts. The Chancellor granted the defendant's motion for involuntary dismissal and denied the plaintiffs' motions to alter or amend. We affirm.

Opinion may be found at:

"At the close of the plaintiffs’ proof, Seller moved for involuntary dismissal on the grounds that the evidence did not show that a lender commitment letter was received within 30 days of the execution of the contract or that final plat approval had been obtained. Seller argued that, because Buyers had not performed their obligations under the contracts, Seller had no obligation to sell them the homes. The Chancellor granted Seller’s motion for involuntary dismissal. The Chancellor concluded that, construing the evidence in the light most favorable to the plaintiffs as required under Rule 41, 'there is no evidence upon which the Court can reasonably infer that the Plaintiffs have sustained their burden of demonstrating that the Defendant failed to perform in accordance with the terms of the contracts.'" Id.

December 18, 2007

Fraudulent statements made by home builder to first purchaser suspend 4-year SOR, but do not constitute common law fraud against remote purchasers

ROBERT JENKINS ET AL. v. CHASE BROWN ET AL. (Tenn.Ct.App. December 17, 2007).

This appeal involves a dispute regarding the liability for the structural defects in a four-year-old house in a Mt. Juliet subdivision. Shortly after purchasing the house from its original owners, the property owners discovered that the house had been constructed on improperly compacted fill and other debris. When additional structural problems manifested themselves, the property owners filed suit in the Chancery Court for Wilson County seeking compensatory and punitive damages against the contractor who built the house and his wife, the original owners, the original owners' real estate agent and broker, their own real estate agent and broker, and their home inspector.

Following an eight-day trial, the jury determined that the contractor and the original owners had engaged in intentional and reckless misrepresentation by concealing the house's structural problems. The jury also determined that both real estate agents and the developer of the subdivision were at fault. The jury awarded the property owners $58,720.80 in compensatory damages to be apportioned among the parties at fault. The jury also awarded the property owners $20,000 in punitive damages against one of the original owners and $50,000 in punitive damages against the contractor. The trial court reduced the punitive damage award against the original property owner to $14,000, and granted a judgment notwithstanding the verdict for the two real estate agents with regard to the property owners' Tennessee Consumer Protection Act claims.

On this appeal, the property owners take issue with the dismissal of their claims against the real estate agents and their brokers based on their use of an outdated and incomplete real property disclosure form. The contractor also takes issue with the judgments awarded against him for compensatory and punitive damages. We have determined that the trial court did not err by dismissing the property owners' claims against the real estate agents and their brokers based on the use of the incomplete and outdated disclosure form. We have also concluded that the property owners presented insufficient evidence to establish their common-law fraud claim against the contractor who built the house. Accordingly, we reverse the portion of the judgment requiring the contractor to pay compensatory and punitive damages.

Opinion may be found at:

"Based on our review of the record, we have concluded that it contains sufficient material evidence to support the jury’s conclusion that Mr. Wright had committed 'fraud' with regard to his dealings with the Browns by concealing the extent to which fill material had been used on the lot and by asserting that the house had been constructed on 'original dirt.' This conduct amounts to 'fraud ... in performing the ... construction of' the house for the purpose of Tenn. Code Ann. § 28-3-205(b). Therefore, Mr. Wright was not entitled to assert the four-year statute of repose in Tenn. Code Ann. § 28-3-202 in this case." Id.

"It is important to note at the outset of this discussion that the 'fraud' that is relevant with regard to the application of Tenn. Code Ann. § 28-3-205(b) is different from the Jenkinses’ commonlaw fraud claim. In the context of Tenn. Code Ann. § 28-3-205(b), the fraud necessary to prevent a defendant from invoking the four-year statute of repose in Tenn. Code Ann. § 28-3-202 need not be made directly to the plaintiff. The same is not necessarily the case with regard to common-law fraud claims." Id.

"The Jenkinses concede that they never talked with Mr. Wright about the house. Likewise, there is no evidence in the record that the Jenkinses were privy to any of the misrepresentations that Mr. Wright may have made to the Browns regarding the structural stability of the house. Accordingly, there is no evidence upon which the jury could have concluded that the Jenkinses relied on any misrepresentations that Mr. Wright may have made. There is likewise no evidence that when Mr. Wright represented to Mr. Brown that the house was constructed on “original dirt” that he intended or understood that anyone other than Mr. Brown would rely on the statement. Thus, in light of the essentially undisputed evidence that Mr. Wright had no role in the Browns sale of the house to the Jenkinses, the Jenkinses cannot recover from Mr. Wright for fraud." Id.

December 14, 2007

County Powers Relief Act does not prevent cities from requiring residential developers to build or pay for sidewalks

Effect of County Powers Relief Act on City's Authority to Require Developers of Certain Real Property to Construct Sidewalks or Pay a Fee in Lieu of Construction (TN Attorney General Opinion 07-161, December 13, 2007).

Opinion may be found at:

"The Act restricts the enactment of impact fees and adequate facilities taxes after its June 20, 2006, effective date by providing that:
no county shall be authorized to enact an impact fee on development or a local real estate transfer tax by private or public act. In addition, this part shall be the exclusive authority for local governments to adopt any new or additional adequate facilities taxes on development. Tenn. Code Ann. § 67-4-2913 (2007)." Id.

"The Proposed Ordinance is not an adequate facilities tax. First, and most importantly, it is not a privilege tax on development. The Proposed Ordinance does not declare the development of property to be a taxable privilege. Also, unlike the taxes described above, it is not the intent of the Proposed Ordinance to ensure that developers pay their fair share of new or expanded public facilities caused by a substantial increase in property development. The City wants to create a network of sidewalks as part of its desire to promote the health, safety and welfare of the public. This desire exists outside of any residential development boom that might create the need for new or expanded sanitary sewers, roads, waterworks, and other facilities. Furthermore, the fee in lieu of construction is based on the actual cost of constructing the required sidewalk, not a calculation of the gross square footage or number of lots or units being developed. Finally, it must be noted that the default position of the Proposed Ordinance is for the developer to build the sidewalk, not for the City to impose a tax and collect revenue. Under the Proposed Ordinance, the City collects funds from the developer only when the developer requests a waiver of the construction requirement and the waiver is approved by the City’s Director of Engineering." Id.

"The General Assembly’s use of these particular terms demonstrates its desire to limit counties from enacting impact fees while allowing cities to do so. If the General Assembly had intended to limit cities, it could have used the term “local governments” as it did in the second sentence with regard to the restriction on adequate facilities taxes or the term “municipality” as it did in the third sentence." Id.

December 10, 2007

Partners in construction ventures must offer substantive evidence to back up allegations of fraudulent inducement, breach of fiduciary duty, duress

RICKY HOLLOWAY ET AL. v. CYRIL EVERS, ET AL. (Tenn.Ct.App. December 7, 2007).

A contractor who was a partner in a subdivision development venture sold his interest to the other partners for $175,000. He subsequently filed a complaint against them alleging that they had deliberately taken advantage of his weak financial and physical condition to force him out the partnership. His complaint included claims for violation of fiduciary duty, duress and fraud. The trial court dismissed the contractor's claim on summary judgment. We affirm.

Opinion may be found at:

"We note that the Rules of Civil Procedure require that averments of fraud be stated with particularity. Tenn. R. Civ. P. 9.02; Black v. Black, 166 S.W.3d 699, 705 (Tenn. 2005). However,Mr. Holloway does not indicate in his pleadings nor in his argument on appeal exactly what material existing fact the defendants misrepresented at the time the partnership was formed that he reasonably relied upon to his injury, and we have not found any evidence in the record of any such misrepresentation." Id.

"We note that Mr. Holloway does not allege that Mr. Evers or Mr. Golden failed to account to the partnership for any property, profit, or benefit derived from the partnership, or that they dealt with the partnership on behalf of any party having an adverse interest to it, or that they competed with the partnership in the conduct of the partnership business. He also does not allege that either defendant engaged in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of the law. He does claim that Evers and Golden acted in their own interest, but that is specifically permitted by Tenn. Code Ann. § 61-1-404(e)." Id.

"Mr. Holloway argues that the defendants took advantage of his relatively
weak financial situation and some health problems he was experiencing to coerce him into selling his partnership interest, and that this likewise constituted duress of property. His allegations, in and of themselves, do not address the required elements of duress. Further, he has presented no evidence of any wrongful or illegal act by Mr. Evers or Mr. Golden or even improper external pressure. The financial and health problems he was facing were unfortunate and undoubtedly caused him stress. However, they were not caused by the defendants, and many people are required to make business and other decisions while facing such problems. There is simply no evidence that some action by the defendants deprived Mr. Holloway of his free will to make the best decision he could in the circumstances." Id.

December 04, 2007

Government need only cure constitutional defects to preclude development of landfill with zoning ordinances


The developer of a "construction and demolition" landfill appeals the denial of its application for a permit to construct the landfill. When the developer first applied for a permit in 1999 to develop the landfill, the Metropolitan Government denied the application based upon two zoning ordinances. In the lawsuit that ensued, the trial court found the ordinances unconstitutional.

In the appeal that followed, this Court affirmed the trial court and issued a stay of 150 days to afford the Metropolitan Government the opportunity to cure the constitutional infirmities. The Metropolitan Government timely amended one of the ordinances in 2003, but not the other ordinance, believing the amendment to that ordinance cured the constitutional infirmities identified in the first appeal.

Following the post-remand amendments to the ordinance, the developer renewed its request for a permit to construct the landfill. The Metropolitan Government again denied the permit, this time stating the landfill would violate Section 17.16.110(A)(2) of the Metro Code because the property was zoned in a district that permitted construction and demolition landfills with "conditions" and the proposed landfill did not meet the requisite conditions for two reasons. The landfill was within 100 feet of a property line for a residential area, and it was within 2000 feet of a park. Believing the Metropolitan Government had not cured the constitutional infirmities, the developer filed a motion to compel the Metropolitan Government to issue the twice-requested permit. After analyzing the two relevant ordinances and this court's opinion in the first appeal, the trial court concluded that the Metropolitan Government had cured all constitutional infirmities. It also concluded that the proposed landfill did not meet the requisite conditions for the reasons stated by the Metropolitan Government, and thus, affirmed the denial of the permit.

We have determined, as the trial court did, that the Metropolitan Government cured the constitutional infirmities and find no error with the determination that the plaintiff did not meet the requisite conditions for a construction and demolition landfill. Accordingly, we affirm.

Opinion may be found at:

"The trial court went on to conclude that the Metropolitan Government had corrected the constitutional infirmities in the buffer ordinance and, therefore, was in compliance with the declaratory judgment issued in this case and the mandate of this Court. Moreover, and significant to the second issue, is that the trial court found that '[n]o evidence has been presented that the ‘new’ buffer ordinance, which sets the current conditions that construction and demolition landfills must comply with, has any constitutional defects.' Finally, the trial court found Consolidated’s argument that the Metropolitan Government was out of compliance with its ruling in this case because it is still using the 'table ordinance,' to be without merit because, as the trial court determined, the table ordinance 'did not contain any constitutional defects.'" Id.

November 30, 2007

Court disregards two licensed surveyors, two fences, and an iron boundary marker in boundary line dispute.

JAMES O. OVERTON, ET AL. v. TERRY L. DAVIS, ET AL. (Tenn.Ct.App. November 29, 2007).

Landowners brought action against adjacent neighbors to establish boundary line. Following a bench trial, the court held that each side is entitled to approximately half of the disputed area. Landowners appeal from the trial court’s resolution of the boundary dispute. The neighbors agree with landowners’ assertion that the evidence does not support the line found by the trial court. The judgment of the trial court is vacated. This case is remanded for further proceedings.

Opinion may be found at:

"The construction of deeds and other instruments and documents and their legal effect as to boundaries is a question of law. What boundaries the grant or deed refers to is a question of law; where those boundaries are located on the face of the earth is a question of fact. If, therefore, the evidence concerning the location of the true boundary line between adjacent owners is conflicting, that issue is one of fact unless the legal construction of the deed or grant is such that the boundary is determined as a matter of law." Id. (citing 12 Am. Jur.2d Boundaries § 121 at 515 (1997) (footnotes omitted); see also Mitchell v. Chance, 149 S.W.3d 40, 45 (Tenn. Ct. App. 2004).

Testimony by plaintiff and expert helps case survive summary judgment for mold allegedly caused by runoff from construction site


In this action for damages allegedly due to water runoff from construction for a new school, the Trial Court granted defendants summary judgment. On appeal, we conclude there are disputed issues of material fact, and remand and vacate the summary judgment.

Opinion may be found at:

"Moreover, plaintiffs can offer their opinion of the cause of the mold growth. See Tenn. R. Evid. 701, and when plaintiffs’ testimony is coupled with the experts’ testimony, it is clear that an issue of disputed material fact has been established that precludes summary judgment. A causal connection may be established by expert opinion combined with lay testimony. White v. Werthan Industries, 824 S.W.2d 158 (Tenn. 1992)." Id.

November 20, 2007

Damages for construction defects and omissions is the cost of required repair, but plaintiff may argue diminution in value.

PEGGY J. COLEMAN v. DAYSTAR ENERGY, INC. (Tenn.Ct.App. November 19, 2007).

In this breach of construction contract suit, the Trial Court gave judgment in favor of plaintiff homeowner, and contractor defendant has appealed. We affirm.

Opinion may be found at:

"As a general rule, the measure of damages for defects and omissions in the performance of a construction contract is the reasonable cost of the required repairs. This is especially true when the structure involved is the owner’s home. However, in the event that the cost of repairs is disproportionate when compared with the difference in value of the structure actually constructed and the one contracted for, the diminution value may be used instead as a measure of damages. However, this rule is applicable only when proof has been offered on both factors. . . . We hold that the plaintiffs do not have the burden of offering alternative measures of damages. The burden is on the defendant to show that the cost of repairs is unreasonable when compared to the diminution of value due to the defects and omissions . . . ." Id. (quoting Hopper v. Moling, No. W2004-02410-COA-R3-CV, 2005 WL 2077650 at *7, (Tenn. Ct. App. Aug. 26, 2005)).

November 19, 2007

Proof of notice of substandard work before non-payment makes owner the "non-defaulting party" who may collect attorney fees under the contract

ROBERT G. O'NEAL, d/b/a R & R CONSTRUCTION CO. v. PAUL E. HENSON, ET AL (Tenn.Ct.App. November 16, 2007).

This is a construction contract dispute. The trial court entered judgment in favor of Defendants buyers/Counter-Plaintiffs in the amount of $72,418, less an offset in the amount of $48,713.15 for payments due to Plaintiff Builder; attorney's fees; and costs. Plaintiff Builder appeals. We affirm.

Opinion may be found at:

"The trial court awarded attorney’s fees to the Hensons as the 'prevailing parties.' However, although we agree with Mr. O’Neal that he 'prevailed' on his claim, the determination of who is entitled to attorney’s fees under the plain language of the contract again requires a determination of which party 'defaulted' and which party was the 'non-defaulting' party." Id.

November 09, 2007

FAA preempts TUAA and trumps its separate-initial provision when materials used in new home construction are manufactured outside Tennessee


The trial court denied Defendant Tennessee Heritage Enterprises's motion to compel arbitration under the Federal Arbitration Act notwithstanding the arbitration clause contained in the construction contract executed by Plaintiff homeowner and Defendant. The trial court denied arbitration on the basis of insufficient interstate commerce. Defendant appeals; we reverse and remand.

Opinion may be found at:

"In this case, it is undisputed that a substantial number of the materials used by THE in the construction of the Newell home, including the roof shingles, lumber, windows, tile, carpet, insulation, appliances, mortar, HVAC units, wood trim, flooring, and the floor warming system at the center of this dispute, were manufactured outside of Tennessee. Further, although State Farm asserts these materials were purchased by THE after leaving the flow of commerce, the FAA clearly reaches beyond the “flow” of commerce and is applicable even where interstate commerce was not contemplated by the parties at the time the contract was executed. We are not insensitive to the trial court’s observation that virtually every modern construction contract falls within the purview of the FAA under the broad interpretation urged by THE. However, in light of the Supreme Court’s holdings in Allied-Bruce and Citizens Bank, we must agree that the contract here involves interstate commerce where a substantial amount of materials used in the Newell home were manufactured out of Tennessee by non-Tennessee entities. We agree with THE that the FAA is applicable in this case. " Id.

November 01, 2007

Damages equal the cost of having the job redone if defects in workmanship render the contract worthless.


Based on a Special Master's report, the Circuit Court of Shelby County entered judgment against the appellant for damages for breach of a contract to install cabinets in the appellee's home. The appellant contends that the trial judge did not independently review the evidence in the record and that the damage award was not supported by the evidence. We affirm.

Opinion may be found at:

"[I]f the defects in workmanship are so substantial that the performance of the contract is worthless, the contractor must pay the other party the cost of having the job redone." Id.

October 31, 2007

No TRCP 34A spoliation for plaintiff who demolished home after suing homebuilder, who had opportunity to obtain factual evidence during construction

CHARLES GROSS ET AL. v. MICHAEL K. McKENNA ET AL. (Tenn.Ct.App. October 30, 2007).

This case arose out of a construction contract between Charles Gross and Kathy Gross ("Homeowners") and Woodbridge Construction Services, LLC, a company run by Michael K. McKenna ("Builder"). The parties' relationship went sour in the midst of construction, and Homeowners sued Builder and Woodbridge seeking damages for breach of contract, fraud, misrepresentation, and violations of the Tennessee Consumer Protection Act ("the TCPA").

After a bench trial, the court awarded Homeowners damages of $79,622.31 against both defendants. Builder appeals on various grounds. Regrettably, he has failed to provide us with either a transcript of the proceedings or a statement of the evidence, and, as a result, we are unable to reach most of the issues raised by him, as we must accept the trial court's factual determinations as conclusive in the absence of a record. The only issue requiring extended discussion is Builder's claim that the trial court should have dismissed the case or imposed some other sanction against Homeowners for demolishing the home and thus destroying evidence during discovery without first notifying the court and Builder. Although this was a violation of the Tennessee Rules of Civil Procedure, the trial court has broad discretion to determine what, if any, sanctions to impose for such violations, and we do not find an abuse of discretion in its decision to impose no sanction. The remainder of Builder's issues are also found to be without merit. We therefore affirm.

Opinion may be found at:

October 30, 2007

Court strictly construes contractual size and notice requirements against landscaping company, condoning contractor's contractual "takeover" rights


This appeal involves a dispute between a contractor and a landscaping subcontractor over the subcontractor's installation of undersized trees and the contractor's subsequent invocation of the take over clause upon the landscaper's failure to cure the defect. Both parties asserted breach of contract, and the trial court awarded damages to the defendant contractor for the cost of completing the job through a third-party landscaper and for attorney's fees and expenses. Concurring with the trial court that the subcontractor breached the contract when it installed undersized trees and, despite sufficient notice and opportunity to cure, failed to do so, we affirm the trial court's judgment.

Opinion may be found at:

October 10, 2007

Homebuilders may be liable for misrepresentation for constructing features that would violate neighborhood restrictions when used by the homebuyer


The defendant had her house built in a restricted subdivision and began using it for operation of her fitness training business. The owners of the corporation that developed the neighborhood and constructed the defendant's house were also controlling members of the subdivision homeowners association's board of directors. The homeowners association filed suit to permanently enjoin the defendant from conducting her business out of her home upon grounds that such activity violated subdivision restrictions. In her answer and countersuit, the defendant argued that the homeowners association's controlling board members had waived the restrictions by certain actions during construction of her house. The defendant also filed a third party complaint against the development corporation and against the individual owners of the corporation for misrepresentation. Upon motions for directed verdict, the trial court granted the homeowners association's request for a permanent injunction and dismissed the defendant's countercomplaint against that entity. The trial court also dismissed the defendant's complaint against the individual owners by directed verdict, but denied the development corporation's motion for directed verdict. A jury then found the development corporation liable for misrepresentation. On appeal, we conclude that the trial court did not err in granting the homeowners association's motion for directed verdict or in failing to grant the development corporation's motion for directed verdict. However, we conclude that the trial court did err in granting the individual owners' motion for directed verdict. Accordingly, the judgment of the trial court is affirmed in part, reversed in part and the case is remanded.

Opinion may be found at:

October 01, 2007

If the Water Quality Control Board deems an issue to be "complex" and "contested," a lawyer must prosecute the claim.


The sole issue on appeal is whether a non-attorney's attempt to participate in a contested case hearing before the Water Quality Control Board as the representative of a corporation is permitted pursuant to Tenn. Code Ann. Section 4-5-305(a), which expressly provides that a corporation may participate in the hearing by a duly authorized representative, or prohibited as constituting the unauthorized practice of law. Notwithstanding the fact that the statute provides that a duly authorized representative of a corporation may "participate" as the representative of the corporation in a hearing, we have determined that a non-attorney may not participate as the representative of a corporation if doing so requires the non-attorney to exercise the professional judgment of an attorney.

Opinion may be found at:

September 24, 2007

Home inspectors that rubber stamp their prior inspection reports can be held liable under the TCPA


The plaintiff homeowners contended that the defendant licensed property inspector had performed a negligent or fraudulent home inspection on the house they subsequently purchased, and that as a result, they incurred many unanticipated expenses for repairs. The parties agreed to resolve their dispute through binding arbitration, which resulted in an arbitration award of nearly $100,000 for the homeowners. The trial court granted the plaintiffs' motion to confirm the award. The defendant argues on appeal that the court should have dismissed the plaintiffs' motion to confirm because of their failure to comply with the court's scheduling order. We affirm the trial court.

Opinion may be found at:

Failure to immediately appeal when the court ignores a contractual arbitration provision results in loss of enforceability

DANIEL E. LONG v. ANDREA ELISE MILLER, ET AL. (Tenn.Ct.App. September 21, 2007).

This is a breach of contract action filed by Daniel E. Long against R & M Builders, Inc. ("R & M"), the successful bidder on a governmental project to demolish and rebuild the plaintiff's house. The plaintiff claims that R & M performed its services in an unworkmanlike manner and that the company failed to complete several of the contractual requirements. R & M filed a motion to dismiss asserting that the parties had agreed to binding arbitration. The trial court denied the motion and the case proceeded to trial. The jury found that R & M had breached the contract and awarded the plaintiff damages of $15,000. R & M appeals, claiming the trial court erred when it refused to order the parties to arbitration. It also asserts that the trial court erred in excluding certain evidence. The plaintiff argues that this appeal is frivolous. We affirm the judgment of the trial court and conclude that R & M's appeal is frivolous. We remand this case to the trial court with instructions.

Opinion may be found at:

September 20, 2007

Conveyance of land may be deemed fraudulent if the seller can prove certain "badges of fraud"


This is an action to set aside a warranty deed based on fraud. The plaintiff inherited family-owned property after her father's death, and she lived on the property. She obtained a line of credit for $40,000 from the defendant bank, secured by the property. The plaintiff defaulted on the loan, and the bank initiated foreclosure proceedings. The plaintiff contacted the defendants, acquaintances of her father, seeking their advice on how to stop the foreclosure. The defendants told the plaintiff that the bank could not stop the foreclosure, but suggested that, in order to avoid foreclosure, they would assume the plaintiff's $40,000 loan and the plaintiff would transfer the property to them. The parties agreed that, in addition to the defendants' assumption of the $40,000 loan, the plaintiff could live on the property for one year and repurchase the property at the end of the year for the amount of the loan plus any incidental costs. With that understanding, the plaintiff executed a warranty deed transferring the property to the defendants, and the defendants assumed the loan. Before the end of the agreed year, the defendants listed the property for sale with a real estate agent for approximately $400,000. When the plaintiff questioned the defendants, she was told that she could purchase the property for one dollar over the highest offer the defendants had received for the property. The plaintiff then filed this lawsuit, asking the court to set aside the warranty deed transferring the property to the defendants. After a bench trial, the trial court set aside the deed based on inadequacy of consideration and other badges of fraud. The defendants now appeal. We affirm, upholding the trial court's credibility determinations and finding that the preponderance of the evidence supports the trial court's decision.

Opinion may be found at:

September 10, 2007

Fire insurers face higher evidentiary burden to limit payouts for cost of repair, replacement, or rebuild


In this case involving an insurance claim for property damage when a nearly-completed Holiday Inn building in Rogersville partially burned, the issue is how much money the insurance company must pay under the contract. The insurance contract provided that the insurer would pay the insured "the cost to repair, replace or rebuild the property with material of like kind and quality." The insured submitted proof that the contractor's bill for the covered repairs was $47,982.92. Over the insured's hearsay objection, the insurance company introduced evidence that its third-party investigator, who inspected the damaged property, prepared an estimate approximating the loss at $20,532.94. The trial court rejected the insurer's defense of accord and satisfaction, and awarded the insured $33,757.93. We affirm the trial court's judgment that the insurer did not prove accord and satisfaction, and hold that under the unambiguous terms of the contract, the insurer is required to pay the insured $46,982.92, in the absence of proof that the amount charged by the contractor for repairs is excessive or unreasonable. We therefore affirm the judgment of the trial court as modified.

Opinion may be found at:

Contractors who improperly install advanced earthwork features may be liable under the TCPA


The plaintiff, Kenneth Barrett, entered into a written contract with Frank Vann, doing business as Frank Vann Construction Company ("Vann"), for Vann to construct a parking area on the plaintiff's property and to re-pave the plaintiff's driveway. It was later discovered that a retaining wall would be necessary to support the parking area due to the steep slope of the plaintiff's property. Vann suggested to the plaintiff that he use Matt Johnson, doing business as ProGreen Landscaping & Lawn Maintenance ("Johnson"), to build the wall. Johnson agreed to build it. After the wall was completed, it began to collapse. This prompted the plaintiff to file suit. A jury returned a money verdict against Vann and Johnson for violating the Tennessee Consumer Protection Act, T.C.A. section 47-18-101 (Supp. 2006) ("the TCPA"). The jury also found Vann guilty of breach of contract. When, as to Vann, the jury returned separate monetary verdicts for the TCPA violation and the breach of contract, the trial court required the plaintiff to elect between the two monetary awards. Under compulsion, the plaintiff chose the damage award under the TCPA. The trial court then trebled the TCPA damages and awarded the plaintiff a part of his request for attorney's fees. The plaintiff and Vann both raise issues on appeal. We modify the trial court's judgment. As modified, it is affirmed. This case is remanded to the trial court with instructions.

Opinion may be found at:

August 28, 2007

Puffing does not negligent misrepresentation make, even in the new home construction context

O. HOGAN HARRISON, ET AL. v. AVALON PROPERTIES, LLC, ET AL. (Tenn.Ct.App. August 27, 2007).

Hogan Harrison and Sally D. Harrison ("Plaintiffs") sued Avalon Properties, LLC ("Avalon Properties"), Avalon Golf Properties, LLC ("Avalon Golf"), and Usonia Homes, Inc. ("Usonia") for breach of contract and negligent misrepresentation, among other things, in connection with the construction of Plaintiffs' house. Plaintiffs were granted a default judgment against Usonia for its failure to answer the complaint. After a bench trial, the Trial Court entered an order of involuntary dismissal pursuant to Tenn. R. Civ. P. 41.02 as to Avalon Properties. The Trial Court also entered a Final Judgment incorporating by reference the Trial Court's Opinion finding and holding, inter alia, that Avalon Golf made representations to Plaintiffs through its agent that Usonia was qualified to build the house and implicitly vouched that Usonia had the ability to fund the work; that the representations were made with the intent to induce Plaintiffs to rely on them; that Plaintiffs did rely on the representations to their detriment and were damaged; and that Avalon Golf was negligent in the selection of Usonia as the exclusive builder. The Trial Court awarded Plaintiffs a judgment of $164,065.87. Avalon Golf appeals to this Court. We reverse that portion of the Trial Court's judgment holding Avalon Golf liable for negligent misrepresentation and negligent selection, and affirm as to the other defendants.

Opinion can be found at TBA website:

August 27, 2007

Once the Department of Transportation completes a project, claims against it relating to the project may be moot.


During construction involving Hillsboro Road in Davidson County, the Department of Transportation discovered three Native American Indian graves. The Department of Transportation eventually reinterred the graves and encapsulated the graves in concrete. The Department of Transportation later determined, after the fact, that simply encapsulating the graves in concrete did not comply with relevant statutory law. A first lawsuit was filed challenging the Department's alleged policy of encapsulating graves. While the first lawsuit was pending, the construction project was completed. On appeal in the first lawsuit, this Court determined that the plaintiffs' claims were moot and none of the applicable exceptions to the mootness doctrine applied. The present case involves the same claims as the first lawsuit, with the only exception being that this lawsuit initially was filed pursuant to the Uniform Administrative Procedures Act, Tenn. Code Ann. section 4-5-101, et seq. The Trial Court dismissed this lawsuit after finding that the same claims raised by the plaintiffs in this case were held to be moot in the first appeal. We affirm.

Opinion may be found at:

Lack of use of an easement obtained by adverse possession does not revoke the easement


In this action to have an easement established across defendants' property, the Trial Court held there was clear and convincing evidence that plaintiffs were entitled to an easement by adverse use. We affirm.

Opinion may be found at:

August 23, 2007

Attorney fees available for plaintiffs suing for breach of covenant against encumbrances

CHARLES AND ANN HALFORD v. HAROLD R. GUNN (Tenn.Ct.App. Aug. 22, 2007)

The plaintiff-buyers entered into an installment sales contract in 1991 in which they agreed to purchase real property owned by the defendant-seller. The contract provided that upon the plaintiffs' payment of the purchase price, the defendant would provide a deed conveying the property to them free of encumbrances. In 2002, a general sessions judgment was entered against the defendant in an unrelated case, and the defendant appealed that judgment to the circuit court, where that case currently remains pending. The judgment was filed as a lien on the real property in 2002.

In late 2004 or early 2005, the plaintiffs had made all necessary payments on the real property, and the defendant conveyed the property to them by warranty deed. While attempting to sell the real property in 2005, the plaintiffs discovered the existence of the 2002 judgment lien on the property, and they placed funds in escrow in order to satisfy their intended purchaser that the lien would be removed or paid. The plaintiffs filed a warrant in general sessions court against the defendant, alleging that he was liable for breach of the covenant against encumbrances contained in the warranty deed. The general sessions court entered judgment in favor of the plaintiffs, and the defendant appealed to the circuit court. The plaintiffs filed a motion for summary judgment and sought an award of reasonable attorney's fees. The circuit court granted the motion for summary judgment, but denied the plaintiffs' request for attorney's fees. On appeal, we affirm in part, reverse in part, and remand for a determination of reasonable attorney's fees incurred below and on appeal.

Opinion may be found at:

August 17, 2007

Boundary dispute over easements

CRAIG GREEN v. MORGAN HINES (Tenn.Ct.App. May 29, 2007)

Appellant and cross-plaintiff appeals the trial court's order which, among other things, granted an easement across the appellant's property. The record contains no statement of the evidence or transcript of the proceedings; therefore, the trial court's findings of fact are presumed to be correct. We affirm.

Opinion may be found at:

July 18, 2007

Developers: Stay away from the gas line

One lesson that shouldn't need further instruction is to not interfere with gas lines while developing property. In MEMPHIS LIGHT, GAS & WATER DIVISION v. TOMMY CARL STARKEY, the developer graded property with a gas line running through it. Dirt above and around the line was removed such that only a "teepee" of dirt remained along the line. The easement was 75 feet wide, so the developer worked extensively in the easement. The utility company discovered the work, nearly had the developer arrested, and re-installed over 20,000 yards of dirt around the gas line. The Court noted that the duties owed by the utility and the developer to maintain a safe gas line reigned supreme. As such, the utility company was given compensatory damages for the dirt and $11,000 in punitives.

July 02, 2007

TCPA claim against homebuilder

Homeowners of newly constructed houses may be proactive with their contracts and their litigation. In WAYNE'S CONSTRUCTION, INC. v. WILLIAM JONES, ET AL., the Tennessee Court of Appeals upheld treble damages ($417,750) plus attorney fees against the homebuilder, who appealed based on the proof of damages. In what was certainly a battle of the experts, the Court held that the homeowners "were [not] required to adopt a wait and see attitude to see if the house was going to fall down before being able to come to court with proof that was sufficiently definite to support an award of damages." The contract specified a three-month timeframe, and despite repeated assurances, the homeowners dismissed the builder after five months. At the time of termination, major aspects of the home had not been constructed, including the gutters, painting, trim, driveway, and site grading. At that point, the homeowners had already paid the builders the full $330,000 specified in their construction agreement. Further, the house was replete with structural problems, mainly stemming from the failure to properly connect the foundation girders to shift the load to the piers. Thus, the Court has come to the aid of individuals contracting for new home construction, allowing them to fire homebuilders who fail to live up to their contractual obligations, mitigate damages, and collect damages in court.

Interestingly enough, the builder originally filed the suit and demanded payment for services to date. After reviewing the opinion, one wonders why the builder would initiate the litigation. Was it a preemptive strike? Did the court overstate the nature of the proof against the builder? Did the builder fail to inform its attorney of all the relevant facts?

Additionally, the opinion noted that the only issue on appeal was proof of damages. It's difficult to tell from this opinion, but one has to wonder why the TCPA claim itself was not at issue.

June 28, 2007

It's not a contract until the "By:" line is executed

An unexecuted written agreement can be binding, but only if there is mutual assent between the parties to the agreement. In TERRY PAUL, ET AL. v. MERIT CONSTRUCTION, INC., the Tennessee Court of Appeals held that a defendant general contractor could not enforce an arbitration provision contained in a contract that was partially filled out by the plaintiffs. The plaintiffs were were masonry subcontractors who had been working on the subject construction site for months, before the GC presented them with the standard form of Agreement between Contractor and Sub-Contractor. The facts discussed by the court indicate that there was evidence of an unresolved disagreement about the terms of the Agreement between the parties. One of the plaintiffs wrote their name in the "Subcontractor: ______" line of the acknowledgement in the Agreement, but did not execute the "By: ______" line. According to the Court, this did not constitute execution or mutual assent.

Perhaps the holding would have been different had the GC presented the Agreement before the plaintiffs began their work. That way, the GC could argue that the act of beginning work would manifest assent to the terms of the agreement. In this case, the Agreement was presented months after the start date, and therefore the act of continuing work merely manifested the intent to continue under the prior oral agreement.

Sellers must search and investigate the chain of title before purchasing land

This point is obvious, but in AARON BURKHART v. WELLS FARGO BANK WEST, N.A., ET AL., the Tennessee Court of Appeals held that the duty of a purchaser of land to discover and investigate matters of public record (in this case, a deed of trust at the courthouse) trumps the duty of the seller to disclose material facts affecting the property’s value known to the seller but not reasonably known to or discoverable by the buyer. Further, the Court held that failure to disclose said matters of public record does not constitute an unfair or deceptive practice under th Tennessee Consumer Protection Act, § 47-18-101 et seq.

June 14, 2007

Initial post

This blog relates to construction law as practiced in Tennessee.