March 31, 2008

This opinion discusses several of the ways that courts use to decide which survey is correct

CONNIE R. (DAVIS) PHILLIPS, ET AL., V. LAWRENCE WOODS, ET AL. (Tenn.Ct.App. March 31, 2008).

This appeal involves a dispute over a boundary line and the ownership of a driveway. The plaintiffs, Connie R. (Davis) Phillips and Carol J. (Davis) Miller ("the plaintiffs" or "the Davis heirs"), and the defendants, Lawrence Woods and Charlotte Woods ("the defendants" or "the Woods"), own adjacent tracts of real property in Morgan County. When the initial complaint was filed, the northern tract of property was owned by the plaintiffs' mother, Stella Davis ("Mrs. Davis"), who had filed suit against the Woods, the owners of the southern tract, to quiet title, to establish the common boundary line, and for libel of title. After Mrs. Davis' death prior to trial, her daughters were substituted as plaintiffs.

Upon the conclusion of a bench trial, the trial court found, inter alia, that the Davis heirs owned the property over which the driveway ran, but that the defendants retained an easement by necessity in the roadway, and that the Woods had committed libel of title. While the trial court agreed with the common boundary line described by the surveyor for the Davis heirs, the court reformed the boundary between the parties upon finding that the defendants were entitled to a portion of the Davis property as a result of adversely possessing it for over 30 years. The Woods appeal. We affirm. Case remanded for further proceedings.

Opinion found at TBA website:

"In determining disputed boundaries, resort is to be had first to natural objects or landmarks, because of their very permanent character; next, to artificial monuments or marks, then to the boundary lines of adjacent landowners, and then to courses and distances. [] This rule of construction is to aid in determining the intention of the parties to a deed which is to be determined, if possible, from the instrument in connection with the surrounding circumstances." Id.(citations omitted; quoting Thornburg v. Chase, 606 S.W.2d 672, 675 (Tenn.Ct.App. 1980)).

"The legal description for Tract 1 of the Davis property also calls for the property described to contain about half an acre. ... The dimensions of Tract 1 as depicted on the Nance survey are much closer to the quantity of land called for by the deed than the dimensions of Tract 1 as depicted on the Steelman survey. The call for the quantity of land in a deed may be resorted to for the purpose of locating and identifying the land in certain circumstances. [] “The boundaries of a tract of land are not usually delineated by the quantity or acreage,” but “where boundaries are in doubt, the quantity may become an important factor.” [] Thus, the fact that the Nance survey more closely produces the quantity of land called for in the deed supports the conclusion that it correctly located Tract 1." Id.(citations omitted).

March 28, 2008

Evidence of "significant and pervasive" problems in an newly constructed home starts the statute of limitations period in claims against homebuilders


Home buyers brought suit against home builder alleging fraud, breach of contract, consumer protection violations, negligent misrepresentation, and negligence. The trial court granted the builder's motion for summary judgment based upon the statute of limitations and statute of repose. We affirm.

Opinion may be found at the TBA website:

"It is well-settled law in this state that 'the gravamen of an action, rather than its designation as an action for tort or contract, determines the applicable statute of limitations.' ... Pursuant to these authorities, we must conclude that, with respect to all but the consumer protection claims, the Liggetts’ claims are governed by the three-year statute of limitations set forth at Tenn. Code Ann. § 28-3-105. The claim for violations of the Consumer Protection Act is governed by the special one-year statute of limitations set forth at Tenn. Code Ann. § 47-18-110." Id.

"In interpreting the provisions of Tenn. Code Ann. § 28-3-105, the courts have held that, in a suit for property damages, 'the cause of action accrues at the time the injury occurs, or when it is discovered, or when in the exercise of reasonable care and diligence the injury should have been discovered.' ... The Liggetts filed their complaint on March 2, 2004. Under the statute of limitations of Tenn. Code Ann. 28-3--05, any cause of action that accrued prior to March 2, 2001 would be barred because the complaint would not be filed within three years of the accrual of the cause of action. ... In light of the overall picture of the information known to the Liggetts prior to March 2001, however, this Court has reached the conclusion that they were on notice that there were significant and pervasive problems with the construction of their home. ... Viewing the evidence in the light most favorable to the Liggetts, we must conclude that they knew of significant defects prior to March 2001 and either knew or should have known that they had a cause of action against Brentwood Builders for fraud and/or negligent misrepresentation." Id.

March 27, 2008

Contractual provisions allow real estate agents to sue for breach of contract when buyer does not make good faith attempts to meet conditions


Listing real estate agent and buyer's agent filed suit against prospective buyer to recover their commissions due under a contract for the sale of real estate. The trial court found that prospective buyer breached the contract and awarded commissions to both agents. On appeal, prospective buyer challenges the trial court's finding that he breached the contract as well as the determination that he was liable to the listing agent for a real estate commission. We affirm.

Opinion may be found at the TBA website:

"Mr. Tinsley got mad and decided he didn’t want to go through with the contract, so he didn’t follow through what needed ... to be done to make the closing dates. So technically, in the contract, he is in default, and the contract provides if the buyer is in default, that the agents have the right to sue for damages or specific performance." Id(quoting the trial court).

"Mr. Tinsley emphasizes the fact that the contract contained two conditions: [the buyer's] ability to obtain financing from a lender of his choice and an appraisal at the sale price or above. Because these conditions were not met, Mr. Tinsley argues that he was excused from performing under the contract. However, Tennessee law implies in every contract a duty of good faith: 'Parties to a contract owe each other a duty of good faith and fair dealing as it pertains to the performance of a contract. [] Thus, each party to a contract promises to perform its part of the contract in good faith.' (citations omitted). The contract states that time was of the essence. ... Thus, there is ample evidence to support the trial court’s finding that Mr. Tinsley had the ability to obtain financing but simply decided he did not want to go forward because of a conflict with Mr. Boykin." Id.

March 25, 2008

U.S. Supreme Court limits judicial review of arbitration decisions, even when agreed to by contracting parties

High Court Rules in Arbitration Case
(by PETE YOST, March 25, 2008)

WASHINGTON (AP) — The Supreme Court has limited the role of the courts in reviewing arbitration awards under federal law.

In a 6-3 decision Tuesday, the justices said, however, that there may be other legal avenues besides the Federal Arbitration Act to enable a larger role for the courts in examining the work of arbitrators. The case before the Supreme Court involved a cleanup dispute between toymaker Mattel Inc. and the owner of a factory site in Oregon contaminated with an industrial solvent.

An arbitrator initially ruled in favor of Mattel, and the Supreme Court ruling is helpful to the toy manufacturer. The Federal Arbitration Act "confines its expedited judicial review" to narrow circumstances, Justice David Souter wrote in the majority opinion. Souter added, however, that the court is "is no position" to address possible alternatives to reliance on the FAA.

The issue before the Supreme Court was whether Mattel and Hall Street Associates L.L.C. could agree in advance to broad court review of an arbitration award to correct any errors of law.

An arbitrator ruled that Mattel did not have to pay for environmental cleanup on Hall Street's property. A federal judge subsequently rejected the arbitrator's legal reasoning. The 9th U.S. Circuit Court of Appeals in San Francisco sided with Mattel, saying the Federal Arbitration Act bars judicial review of arbitration awards in such circumstances. The appeals court finding in favor of Mattel underscores the concern of some businesses that are hesitant to settle disputes through arbitration. These businesses say that in most cases they cannot appeal to a judge if an arbitrator rules against them.

Expanding judicial review could have a positive impact, encouraging parties in a dispute to enter arbitration, knowing that serious errors could be corrected by the courts. Others in the business community say that the downside to expanded court review is that it could lead to an increase in the cost and time that result from losing parties attempting to overturn arbitration awards. The American Arbitration Association oversaw more than 137,000 cases in 2006, the large majority of them arbitrations. The association opposes expanded judicial review.

March 18, 2008

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:

"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.

March 13, 2008

Court finds contractual liquidated damage provision of $250 per day for contractor's failure to complete work reasonable


Claimant/Appellant Temple Baptist Church brought suit against Defendant/Appellee C & H Commercial Contractors, Inc. to enforce a provision for liquidated damages pursuant to a construction contract entered into by the parties. The contract contained a provision for liquidated damages at the rate of $250.00 per day if the contractor failed to complete the work within the time required by the contract. Temple Baptist Church also sought awards for a credit due under the contract for sales tax and for the contractor's failure to obtain a bond. C & H Commercial Contractors filed an answer and counterclaim alleging that the church had wrongfully terminated the contract. The case was tried without a jury in March of 2006. The trial court found that both parities were mutually responsible for the delay in construction for a period of 220 days. The trial court found that the contractor was responsible for delays after this period and awarded liquidated damages in the amount of $14,250.00. The trial court also awarded attorney fees in the amount of $16,034.50, but denied the credits sought by the church. We affirm.

Opinion may be found at:

"The term “liquidated damages” means a sum stipulated and agreed upon by the parties at the time they enter their contract, to be paid to compensate for injuries should a breach occur. 22 Am Jur Damages § 212 (1965); See Railroad v. Cabinet Co., 104 Tenn. 568, 58 S.W.303 (1900). The reason for allowing the parties to stipulate the amount of damages is to create certainty where damages are likely to be uncertain and not easily proven. Railroad, supra. The amount stipulated should be reasonable in relation to the terms of the contract and the certainty with which damages can be measured, there must exist a reasonable relationship between the amount and what might reasonably be expected in the event of a breach. Id. If the provision is a reasonable estimate of the damages that would occur from a breach, then the provision is normally construed as an enforceable stipulation for liquidated damages. See Bristol v. Bostwick, 146 Tenn. 205, 240 S.W.774 (1922); 22 Am Jur Damages § 227 (1965). A party will not be allowed, however, to recover liquidated damages where he is responsible for or has contributed to the delay or non performance alleged as a breach. (citations omitted)." Id.

"The pastor of Temple testified that the liquidated damages would reflect the loss of donations, tuition for the private school, and escalation of building costs. The pastor further testified that Temple was expecting donations to the church to increase as the building progressed. Again, it is implicit in the trial court’s findings that the sum of $250.00 was reasonable. After review of the record, we find that the evidence does not preponderate against the trial court’s award of $14,250.00 in liquidated damages." Id.

March 11, 2008

Proposed amendment to construction lien law will allow owner to post and serve notice of completion on prime and remote contractors

SB 2950/HB 3102 - Mechanic's and materialmen's liens. Modifies provisions regarding mechanic's and materialmen's liens and notices pertaining thereto. Permits other authorized parties in addition to the owner or purchaser to serve notice of completion recorded with the register of deeds. States that no notice is required to be served on prime contractor if owner is also the general contractor. (S: Haynes; H: Curtiss)

Senate Status: Referred to Senate Judiciary.
House Status: House Utilities, Banking & Small Business Subcommittee deferred to 03/18/2008.

"(d)(1) On the same date of the recording of the notice of completion, a copy of the notice shall be served on each prime contractor and remote contractor who has served the required notice of nonpayment, pursuant to § 66-11-145, and the prime contractor and remote contractor:
(A) For improvements to or on real property for one-family, twofamily, three-family and four-family residential units, shall have ten (10) days from such service to serve notice in accordance with this section, and if notice is not served within that time, then the lien rights of the claimant shall expire; or
(B) For all other contracts for improvements to or on real property, shall have thirty (30) days from such service to serve notice in accordance with this section, and if notice is not served within that time, then the lien rights of the claimant shall expire.
[(d)](2) The lien rights of the prime contractor and each remote contractor not
so notified shall not be affected by the notice of completion." SB 2950/HB 3102.

March 07, 2008

Home purchaser must prove that homebuilder had actual knowledge of facts behind alleged misrepresentation to overcome 4-year statute of repose


This case involves the statute of repose for actions based on improvements to real property. The defendant developer purchased and developed a lot for sale as part of a residential development. The plaintiff purchased the lot by warranty deed. The developer represented to the plaintiff that the lot was suitable for the construction of a residential dwelling. Relying on this representation, the plaintiff purchased the lot and built a house on it. Two years after the purchase, the house began to develop cracks in the foundation and exterior walls. Over the next two years, the problems worsened, so the plaintiff obtained an evaluation by professional engineers. The engineers informed the plaintiff that the house's structural problems may have arisen because the soil on which the house was built was unsuitable to support such construction.

The plaintiff then sued the development company and its president, claiming fraudulent misrepresentation, breach of implied warranty, and breach of express warranty. The defendants moved for summary judgment, asserting that the four-year statute of repose on claims involving improvements to real property barred the plaintiff's action. The plaintiff argued that the statute of repose was not applicable because her claims were based on misrepresentation. The trial court granted the defendants' motion, and the plaintiff appeals. We affirm, finding that the plaintiff failed to introduce evidence that any of the defendants had knowledge that the soil conditions were unsuitable to support a residential dwelling at the time the alleged misrepresentations were made.

Opinion available at the Tennessee Bar Association website:

"In their statement of undisputed facts, the Defendants noted that Munford Development sold Lot 414 to Griffin on June 5, 2001; that Griffin began seeing cracks and other defects in the walls, floors, and foundation of her house in 2003; and that Griffin’s complaint was not filed until October 3, 2005. In light of these facts, the Defendants argued that the four-year statute of repose, set forth in Tennessee Code Annotated § 28-3-202, barred Griffin’s action. In Griffin’s response to the Defendants’ motion for summary judgment, she argued that because the Defendants had engaged in fraud, Tennessee Code Annotated § 28-3-205 precluded them from relying on section 28-3-202." Id.

"In Griffin’s response to the Defendants’ motion for summary judgment, on the issue of the Defendants’ knowledge, Griffin did not point to overlooked evidence, produce additional evidence, or request additional time for discovery. We have only Griffin’s evidence of the unsuitable soil conditions and her bare assertions regarding the Defendants’ knowledge and intent. Under these circumstances, we must find that Griffin failed to carry her burden to articulate specific facts showing that Defendants Walker and Munford Development had sufficient knowledge to support a finding by the trier of fact that their alleged misrepresentation about the suitability of the soil for construction was either intentional or reckless. Accordingly, Griffin cannot rely on Tennessee Code Annotated § 28-3-205(b), and the trial court properly concluded that the four-year statute of repose is applicable to Griffin’s cause of action." Id.