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.

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.

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.

Initial post

This blog relates to construction law as practiced in Tennessee.