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.