Court reviews the damages awarded in a case involving the defective construction of a home

BROOKE BUTTREY v. HOLLOWAY’S, INC., ET AL. (Tenn. Ct. App. December 13, 2012)

A homeowner sued builders for the defective construction of a house, alleging breach of contract, intentional misrepresentations, and violations of the Tennessee Consumer Protection Act.

The trial court dismissed the Tennessee Consumer Protection Act claims, but found the builders liable for intentional misrepresentations and breach of the contract by failing to build the house in a workmanlike manner. The trial court awarded the homeowner the full amount she paid to have the house built as well as her attorney’s fees.

The builders appealed, claiming the evidence did not support the amount of damages awarded, the evidence did not support the court’s finding of intentional misrepresentation, and the homeowner was not entitled to attorney’s fees.

We modify the damages awarded to the homeowner to conform to the evidence presented. We reverse the court’s award of attorney’s fees, and we reverse the court’s finding that the builders intentionally misrepresented material facts.

Opinion available at:
https://www.tba.org/sites/default/files/buttreyb_121312.pdf

Court reviews whether a purchaser of real estate effectively exercised its right to terminate a contract.

CAMERON GENERAL CONTRACTORS, INC. v. KINGSTON PIKE, LLC (Tenn. Ct. App. December 21, 2011)

Cameron General Contractors, Inc., a Nebraska corporation ("Cameron"), sued Kingston Pike, LLC, a Georgia limited liability company ("Kingston Pike"), for breach of a contract concerning the sale of real property located in Knoxville, Tennessee. Prior to trial, Cameron elected to exercise its contractual right to terminate the contract, and the case proceeded to trial on the issue of damages.

After a bench trial, the Trial Court entered its order finding and holding, inter alia, that the contract did not limit Cameron to the return of its earnest money, and granting Cameron a judgment against Kingston Pike for damages in the amount of $872,418.22, plus attorney's fees of $137,656.56. Kingston Pike appeals to this Court.

We find and hold that the contract at issue clearly and unambiguously provides that once Cameron chose to terminate the contract, Cameron's sole remedy for Kingston Pike's breach was a return of Cameron's earnest money deposit. We, therefore, reverse the Trial Court's October 28, 2010 order.

Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/cameron_122111.pdf

Tennessee High Court hears Botched Home Repair Case

September 3, 2011

The Tennessee Supreme Court is considering a case that could change a homeowner's ability to recover damages when a subcontractor botches a home repair or remodeling job.

The case involves a Hamilton County couple whose house was destroyed by a fire while someone was fixing their roof.

The Tennessee Supreme Court heard oral arguments in the case Thursday.

Robert and Joanie Emerson hired a company to repair their roof but, unbeknownst to them, the firm subcontracted the job out to someone else. The Emersons accuse the subcontractor of setting the house on fire while using a propane torch during the repairs.

The damage amounted to more than $800,000.

Because repair and construction work is often subcontracted out to cheap laborers who lack insurance, some legal experts say a decision in favor of the general contractor could leave many homeowners saddled with the costs for botched repair jobs.

The full article is located at: http://www.expertwitnessinconstruction.com/httpdocs/news-Botched_Home_Repair.php

Court Reviews the Award of Damages in a Case about the Construction of a Defective Dentist Office

CHARLES PESCE v. EAST TENNESSEE CONSTRUCTION SERVICES, INC. (Tenn. Ct. App. February 28, 2011)

Charles Pesce ("the Owner") is a practicing dentist. He contracted with East Tennessee Construction Services, Inc. ("the Builder") to build him a new office for his practice on a lot owned by him. The Builder constructed the building, but with numerous undisputed defects.

The Owner filed this action which culminated in a bench trial that lasted several days. Based upon diminution in value, the trial court awarded the Owner $282,000 in damages. The trial court expressly found that the cost to repair the structure was an unacceptable measure of damages because it "is disproportionate . . . to the difference in the value of the structure actually constructed and the one contracted for." The court awarded the Owner discretionary costs of over $10,000.

The Owner appeals challenging the measure of damages as well as the amount awarded under the diminution in value measure. The Owner also challenges the trial court's failure to order the Builder to reimburse him for fees charged by one of the Owner's experts in connection with his discovery deposition taken by the Builder. The Builder challenges the award of discretionary costs and argues that the damages awarded are excessive. We reverse in part and affirm the remaining judgment as modified.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/pescec_022811.pdf

SWINEY concurring
http://www.tba2.org/tba_files/TCA/2011/pescec_CON_022811.pdf

Court of Appeals confirms judgment against city for damages

BOBBY STEVE SIMMONS and JEANNIE L. SIMMONS v. CITY OF MURFREESBORO, ET AL. (Tenn. Ct. App. December 9, 2009)

Appellants granted a sewer line easement to the City. The City hired a sub-contractor to install the sewer line and to restore the property following construction. Appellants, who were dissatisfied with the sub-contractor's restoration, filed suit against the City and the sub-contractor. The sub-contractor subsequently went out of business, and the trial court entered a judgment against the City for $13,070.00, representing the value of Appellants' land plus the cost to repair a fence. Appellants appeal, claiming the proper measure of damages is the cost to restore their property -- $137,779.62. On appeal, the City contends that Appellants may not sue the City, that Appellants breached the contract by refusing the sub-contractor access to their property, and that the trial court's award should be reduced by $132.00.

The proper measure of damages in this case is the lesser of the cost to restore Appellants' property or the difference in reasonable market value of the premises immediately prior to and immediately after the injury. Although neither party presented evidence regarding the property's diminished value, we find that the trial court considered the appropriate factors in setting the amount of damages. Thus, the judgment of the trial court is affirmed.

The full text of this opinion may be found on the TBA website at:
http://www.tba2.org/tba_files/TCA/2009/simmonsb_121009.pdf

Court vacates judgment in favor of plaintiff homeowner

FORREST CONSTRUCTION COMPANY, LLC v. JAMES L. LAUGHLIN, II, ET AL. v. THOMAS B. NAIVE (Tenn. Ct. App. December 9, 2009)

This action involves a variety of claims arising from the construction of a residence in Williamson County. A homeowner, James Laughlin, entered into a cost plus contract with Forrest Construction Company, LLC to construct a home for he and his wife. Prior to the home being completed, Forrest Construction stopped work, filed a lien on the residence, and thereafter filed a breach of contract action against Mr. Laughlin and an action to recover damages based on the doctrine of quantum meruit against Mrs. Laughlin. Forrest Construction claimed that Mr. Laughlin was in breach of the contract for failure to pay according to the contract. Mr. and Mrs. Laughlin filed a counter-claim for negligent construction, gross negligence, negligence per se, breach of contract, and violations of the Tennessee Consumer Protection Act.

The trial court found that Mr. Laughlin had materially breached the contract by failing to pay according to the terms of the contract, and awarded damages to Forrest Construction. Conversely, the trial court found for the Laughlins on their claim of negligent construction and awarded damages against Forrest Construction. Both parties appeal. Forrest Construction contends that the trial court erred in holding it liable for alleged defects because Mr. Laughlin committed the first material breach and failed to give Forrest Construction notice and the opportunity to cure the alleged defects. Mr. Laughlin contends the trial court erred in finding that he committed the first material breach. The Laughlins also contend the trial court erred in reducing the cost of the repairs to their residence and in failing to pierce the corporate veil.

We find that Forrest Construction was the first to materially breach the contract by submitting requests for draws that were not properly supported by records of its costs and expenses as required by the contract, including submitting draws which erroneously included charges for work done on its other projects, and by failing to complete construction of the home. We, therefore, reverse the trial court's determination that Mr. Laughlin committed the first material breach and hold that Forrest Construction was the first to materially breach the contract. We affirm the trial court's determination that the Laughlins were excused from the duty to give notice of the alleged defects and an opportunity to cure; thus, the Laughlins are entitled to recover damages due to the negligent construction by Forrest.

As for the trial court's substantial reduction of the damages requested by the Laughlins for the cost to repair the yet unrepaired defects to their home, we are unable to determine whether the trial court considered or overlooked $55,000 of the estimated cost to repair the defects; therefore, we remand this issue to afford the trial court the opportunity to either restate its previous ruling or to increase the award of damages, if it so determines, based on the evidence presently in the record. As for the issue of piercing the corporate veil, we remand that issue for further proceedings.

The full text of this opinion may be found on the TBA website at:
http://www.tba2.org/tba_files/TCA/2009/forrestconst_121009.pdf

Builders must comply with building codes; Parties may contract for standard of workmanship, which negates implied warranty; Cost of repair preferred

ROGER WILKES, ET AL. v. SHAW ENTERPRISES, LLC (Tenn.Ct.App. March 17, 2008).

The principal issues presented by this appeal of a residential construction dispute between a contractor and the homeowner are (1) whether the standard of workmanship required of the contractor by the chancellor was correct and (2) whether the proper measure of damages was applied. The chancellor found that some of the house construction was defective, but that the cost of repair of the defects was excessive and disproportionate. The chancellor held that the proper measure of damages was the diminished value of the house and awarded damages on that basis. We affirm in part, reverse in part and remand for proof of the contractual workmanship standard of "good building practices" and for proof of the diminished value of the home.

Court opinions may be found at the TBA website:
http://www.tba2.org/tba_files/TCA/2008/wilkesr_031708.pdf

"The Wilkes contend that state law requires compliance with the building code. We agree. Tenn. Code Ann. § 5-20-102 provides that the governing body of any county may adopt by reference a specific building code, which serves as the enforceable building code in the county. Tenn. Code Ann. § 5-20-102; see also Tenn. Code Ann. §§ 5-20-101-106. ... Mr. Hatch’s office was charged with ensuring the houses were constructed in accordance with the 1995 CABO Code." Id.

"In an earlier case, however, this Court stated, “in the absence of express plans and specifications, the standard of workmanship prevailing in the area coupled with conformity to the applicable codes ... is the standard by which the appellee’s performance is to be tested.” Carter v. Krueger, 916 S.W.2d 932, 935 (Tenn. Ct. App. 1995). ... However, the language of the contract provides that “Seller agrees to erect the house in substantial accordance with the plans and specifications selected and in accordance with good building practices.” (emphasis added). ... Accordingly, the standard set out in Carter v. Krueger, supra at 935, does not apply because the parties contracted for a specific standard." Id.

"Ordinarily, the implied warranty standard set out in Dixon would apply where there is no warranty. However, the Supreme Court has provided that “[t]his warranty is implied only when the written contract is silent.” Id. at 541-42. In line with the Supreme Court’s reasoning, the specific standard provided for in the contract prevails over the implied standard of workmanship because the contract is not silent on the issue of the standard to which the contractor will be held." Id.

"Generally, courts have assessed two types of damages for breach of a construction contract – “cost of repair” or “diminution in value,” also referred to as “difference-in-value.” ... “Generally, the measure of damages will be the cost [of] repair unless the repairs are not feasible or the cost is disproportionate to the [diminution] in value.” GSB Contractors, Inc., 179 S.W.3d at 543 (citations omitted). In a case where 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 the measure of damages.” Id. at 543 (quoting Redbud Cooperative Corporation v. Clayton, 700 S.W.2d 551 (Tenn.App.1985))." Id.

Fair rental value damages must not be "disproportionate, speculative, or unfair"

BEVERLY C. SMITH v. RONNIE R. SMITH ET AL. (Tenn.Ct.App. February 22, 2008).

Buyers of commercial property, who were denied possession of that property for a period of two years, appeal from the trial court's determination that they failed to carry their burden of proving a fair rental value for one of the three units of the property. Finding that the evidence preponderates against the trial court's determination, we reverse.

Opinion available at the Tennessee Bar Association website:
http://www.tba2.org/tba_files/TCA/2008/smithb_022208.pdf

"The unrebutted testimony of Ronnie Smith established a fair rental value of $600 per month for C Building. Moreover, the cancelled checks of Mr. Buckner supported Mr. Smith’s testimony concerning his current rental agreement with Mr. Buckner, which includes $600 in rent for C Building. The amount Ronnie Smith and Mr. Bucker agreed to in an arms-length transaction is at least some evidence of the rental value at the time of the breach. See BanccorpSouth, 223 S.W.2d at 231; Myer v. Whitacre, No. 01-A-01-9701-CH00014, 1997 WL 367483, at *2 (Tenn. Ct. App. July 2, 1997). ... In this context, the $600 rental value for C Building does not seem disproportionate, speculative, or unfair." Id.

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

JOHN KIRK TARVER, ET AL. v. GARRISON'S CUSTOM CABINETS, INC. (Tenn.Ct.App. October 31, 2007).

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:
http://www.tba2.org/tba_files/TCA/2007/tarverj_103107.pdf

"[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.