August 16, 2010

Court reviews breach of contract and prompt pay notice issues in a case involving residential subdivision developers

CLAIBORNE HAULING, LLC v. WISTERIA PARK, LLC (Tenn. Ct. App. August 16, 2010)

Claiborne Hauling, LLC, contracted with Wisteria Park, LLC, to perform the excavating and grading, including installation of storm sewers and sanitary sewers, for a residential subdivision Wisteria was developing. The contract calls for Claiborne Hauling to commence work on November 6, 2006, with a substantial completion date of April 5, 2007. The contract further provides that Claiborne Hauling will receive a bonus of $500 per day for early completion but will pay a $500 per day "penalty" if completion extends past May 31, 2007. Claiborne did not finish by May 31, 2007.

Wisteria "fired" Claiborne Hauling during a heated exchange in August 2007, and confirmed termination of the contract in a letter from counsel. The ground stated for termination is failure to complete the project by May 31, 2007. However, Wisteria did not secure approval of its plans for construction of the sewer system until June 8, 2007.

When Wisteria did not pay the invoices and change orders outstanding at the time of the termination, Claiborne Hauling first sent a "prompt pay notice" and then filed this action alleging breach of contract against Wisteria. Wisteria answered and filed a counterclaim asserting, among other things, that it was entitled to recover $500 per day from May 31, 2007, until substantial completion, as liquidated damages.

After a bench trial, the court found that Wisteria was guilty of the first material breach and awarded Claiborne Hauling a judgment in the amount of $301,430.62, which included attorney fees under the Prompt Pay Act, Tenn. Code Ann. section 66-34-602 (2004). Wisteria appeals. We affirm.

Opinion may be found at: