Charles Pesce v. East Tennessee Construction Services, Inc. ( 2011 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
January 31, 2011 Session
CHARLES PESCE v. EAST TENNESSEE
CONSTRUCTION SERVICES, INC.
Appeal from the Circuit Court for McMinn County
No. 25444 J. Michael Sharp, Judge
No. E2010-01071-COA-R3-CV - Filed 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.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Reversed in Part; Remaining Judgment Affirmed as Modified;
Case Remanded with Instructions
C HARLES D. S USANO, JR., J., delivered the opinion of the Court, in which H ERSCHEL P.
F RANKS, P.J., joined. D. M ICHAEL S WINEY, J., filed a separate concurring opinion.
D. Mitchell Bryant, Athens, Tennessee, for the appellant, Charles Pesce.
Jerry M. Martin, Knoxville, Tennessee, for the appellee, East Tennessee Construction
Services, Inc.
OPINION
I.
It is undisputed at this stage of the litigation that the parties had a verbal contract for
the Builder to construct a dental office for the Owner on the latter’s lot. It was a cost plus
contract. The only plans were sketches by the Builder and drawings prepared by suppliers
of furnishings and fixtures for the office. Also, various components came with
manufacturer’s installation instructions and sketches. For example, the “Andersen” windows
called for flashing and caulking around the perimeter of the windows. It is undisputed that
the Builder constructed a building with numerous code violations and structural deficiencies.
The primary problem with the building is water leakage into the interior of the building with
resulting mold and mildew. Some of the water leakage appears to have come from around
windows that were not properly flashed and caulked. Much of the water leakage is into the
basement itself because of improper flashing and water-proofing around the perimeter of the
basement. The basement is the same size as the primary floor of the building, i.e, 2750
square feet. Originally, one-half the basement space, or 1375 square feet, was to be finished
to office grade space. The basement as constructed, has some interior walls but is otherwise
unfinished. Because of the water problems, the basement can only be used for storage.
Another major problem with the building is that the structural floor trusses are installed
below ground level. At the time of trial, repairs had not been made, but the Owner had, for
several years, been using the building as the site of his profitable dental practice.
The Owner hired numerous experts in an attempt to prove his case. One of the experts
is Mr. Faris Eid. The Builder took Mr. Eid’s deposition over the course of two days. On the
first day, the Builder asked Mr. Eid to provide copies of all his files in the case, including any
remedial plans and all his computer files. Mr. Eid informed the Builder’s counsel that it
would take several days of work to locate, copy, and organize all the material he had
requested, especially since it required revisiting computer web sites. Nevertheless, the
Builder insisted on the copies. Mr. Eid, with the help of his office staff, complied. They
assembled in excess of 1500 documents over the course of several days and produced them
at which time the deposition was resumed and completed on the second day.
Mr. Eid sent a bill in the amount of $6,667.46 directly to the Owner, who, through his
counsel, presented the bill to counsel for the Builder for payment. The Builder refused to pay
the bill. The Owner then filed a motion with the court requesting that the Builder be
compelled to pay the bill. The bill is attached to the motion. It reflects a total of 23 hours
for the witness at the rate of $200 per hour, approximately $300 for staff work, 1335 pages
of color copies at the rate of $1.00 per copy, and approximately 3400 pages of black and
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white copies at a rate of an average of approximately 12 cents per copy. Upon hearing the
motion, the court found
there was an implied agreement for the [Builder] to pay
reasonable fees to [the Owner’s] expert, Mr. Faris Eid . . ., for
making [himself] available at the request of the [Builder], for a
discovery deposition. [The Owner] is entitled to immediate
reimbursement for those fees which he has already paid.
The court found that the portion of the bill already paid by the Owner that was ripe for
reimbursement was “the amount of $1,582 consisting of 7.91 hours for actual deposition time
at $200 per hour.” The court further ordered “that the balance of the Motion to Compel
Payment and for Costs and Fees related to the remainder of the billing submitted by Mr. Eid
for deposition preparation time, as well as the time of other individuals at his firm, used to
copy and collate various documents requested by the [Builder], as well as costs for bringing
this Motion shall be deferred until time of further hearing in this cause.” The court
specifically noted that the reimbursement the Owner was requesting did not qualify as
discretionary costs under Tenn. R. Civ. P. 54.
The record does not reflect any effort by either party to bring the unresolved issue to
the court’s attention until the hearing on the Owner’s motion for discretionary costs. At that
juncture, the Owner included Mr. Eid’s fees and expenses for which he had not been
reimbursed in his request for discretionary costs. At the hearing on the motion, the Owner
renewed his request that he be reimbursed for the remainder of his payment of Mr. Eid’s bill,
without regard to whether it was called discretionary costs or something else. Specifically,
counsel argued:
Obviously, the full amount has been paid by [the Owner] to Mr.
Eid for that. The [Builder] has paid the $1582, or reimbursed
that . . . they were ordered to pay. And we are asking, whether
it be in the nature of discretionary costs or just regular
[litigation] costs, we are asking for the balance of $5085.46 to
be . . . reimbursed to Dr. Pesce. . . . [I]t was [done] at the
[Builder’s] request and demand. . . . .
. . . . So, that’s why I’m saying, you can look at it, I guess, as a
discretionary cost or you can look at it as just a litigation cost
based upon demands made by the [Builder] that were not paid.
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In its memorandum opinion on the issue of discretionary costs, the court stated,
With regard to. . . the expert fees paid to Mr. Faris Eid, this
court finds that the $1,582 already paid to Mr. Eid is a
recoverable discretionary cost. . . . . This court holds that any
other fees paid to Mr. Eid should not be recoverable, given the
facts and circumstances of this case, and given the limitations of
Tennessee Rule of Civil Procedure 54.02(2).
In its final order, the court stated its denial in slightly different terminology.
The Court further finds that [the Owner] is entitled to recover
the sum of $1,582 for expenses incurred related to Mr. Eid’s
deposition, and that said amount of $1,582 has already been
reimbursed to him by the [Builder].
The Owner chose to present his case, and specifically the issue of damages, from the
perspective of cost of repair. The Owner did not present proof of diminution in value and
neither did the Builder. In fact, the Builder’s only witness as to the value of the building
made his appraisal without inspecting the interior of the building and based his appraisal on
a street-side inspection with the assumption that the building’s condition was “good with no
deficiencies.” After hearing proof for approximately seven days, the court expressed its
concern that the cost of repairing the building could well exceed what it cost to build it. Out
of concern that the cost of repair would prove unreasonable and disproportionate to the
diminished value of the structure, the court ordered the parties to present proof of the
diminution in value as an alternative measure of damages under Wilkes v. Shaw Enterprises,
LLC, No. M2006-01014-COA-R3-CV, 2008 WL 695882 (Tenn. Ct. App. M.S., filed March
14, 2008).
The court convened a hearing on June 23, 2009, to hear proof on diminished value.
The Builder’s only live witness, Mr. Cobble, testified that diminished value should be
calculated by simply subtracting the cost of repair, which he placed at $107,451, from the
normal market value of the structure, whatever that value was. Mr. Cobble made it clear that
he did not attempt to value the building, either in its supposed-to-be constructed state or its
unrepaired state.
The primary focus of the proof became the testimony of Bryan Glascock. It was his
testimony that the court used as the basis for its findings related to damages. Glascock is a
commercial real estate appraiser, a real estate broker, and a real estate auctioneer, who has
been in the real estate business for 36 years. He is also licensed in Tennessee to do property
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tax appeals. Glascock inspected the building inside and outside and had numerous
conversations with the Owner about the building. He also reviewed all of the drawings and
sketches, such as they were. He based his appraisal of diminished value upon the actual
building, as is with its numerous defects, compared to a hypothetical building, “built to code
[with] no deficiencies, no leaks.” He based his values on two valuation methods, the first
being sales of comparable structures and the second being a cost to build the structure.
According to Glascock the two methods, as applied to the facts of this case, produced similar
figures. Glascock readily admitted that he did not find sales of dental offices, so he used
sales of other commercial offices, including medical offices and retail stores, as comparables.
Also, he admitted that his cost figures were based on a computer program using low grade
or deficient quality to produce the as built cost, and higher grade material to produce the
hypothetical building that the Owner expected based upon the contract for a dental office.
He also admitted that his methods produced a “wide range of values for buildings that are
well-built and well-designed, and then a range of values for buildings that are not so well-
built or maybe older or not really as well located.” Glascock testified that his appraisals are
“90 percent accurate.” The “bottom line” was a value of $722,000 for the hypothetical
building without deficiencies and $275,000 for the building as is. He explained in direct that
the latter figure was produced by multiplying the ground floor area of 2750 square feet, by
a value of $100 per square foot, to arrive at $275,000. He did not explain in direct how he
arrived at the calculation of $722,000 other than to say he based it upon a fully finished
ground floor and a basement of the same size with only one-half of the basement area
finished.
On cross-examination, Glascock was asked whether he assigned any value to the
basement in the as built, less than desirable, structure. He admitted that he did not assign a
value to the basement space, and he also admitted that the basement obviously had value.
He explained that he treated the basement as an “amenity,” the amenity being “storage space”
that was included in comparable sales that resulted in his valuation of the main floor at $100
per square foot rather than a lower figure. The cross-examination clarified the basis for the
valuation of the hypothetical structure at $722,000. He based it upon comparable sales in the
range of $160 to $180 per square foot and used $175 per square foot as the value per square
foot of the hypothetical building. He then multiplied his value per square foot by a gross
square footage of 4125, or the 2750 square feet of the ground floor plus 1375 square feet of
the basement that were supposed to have been finished. Glascock admitted on cross-
examination that in reaching his final diminished value of $447,000 he placed “great
reliance” on an estimate the Owner provided him reflecting cost to repair of $456,000. When
the attorneys finished with their questions, the court asked a few of its own “to make sure [it]
understood.”
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The Court: . . . . In your report, you figured 4,125 square feet in
order to come up with your 722 value?
The Witness: Yes.
The Court: And you figured the 2,750 square feet and come up
with the 275 value?
The Witness: That’s correct.
The Court: Okay. Which effectively, then, you didn’t figure
anything for basement space. And I heard your testimony as to
why. But it did figure a half-finished basement space, fully
usable basement space on the first?
The Witness: That’s correct.
The Court: All right. If you had figured in that we just had
unfinished basement space[,] . . . do you have a square foot
figure on that?
The Witness: The per square foot figure for . . . a class A
building with no deficiencies and had a completely wide open
basement space would probably be more per square foot than
my conclusions were for A. Let’s say we had 2,750 square feet
on both buildings.
* * *
One . . . is well-built. One of them may have problems. The
basements are wide open. On the well-built 2,750 square foot
building without a basement, the value per square foot would, in
my opinion, be greater than the $175 because you have a smaller
building, and usually the smaller the building the greater the
value per square foot. I would . . . estimate approximately
$100,000 difference because of the half-finished basement.
So . . . if I were asked to appraise 2,750 square foot building, I
would probably be in the mid $600 – 600,000 range. The
finished basement adds probably another $100,000 to that, and
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is based generally on what it would cost to – to have finished
space in the basement.
So the number I came up with, $175, I’m saying, you know,
really nice buildings out there are selling for more than two
hundred dollars a foot; however, if I’m including the basement
space in this I’d have to pull my value per square foot down to
reflect that some of my space is not aboveground [sic] space.
Upon hearing the proof, the court rendered its memorandum opinion in favor of the
Owner. The court noted that the construction cost of the building was approximately
$460,000. The court also noted that the testimony regarding the cost of repair ranged
“anywhere from the low $30,000 range, based upon the [Builder’s] proof, all the way up to
. . . exceeding $660,000 based upon the [Owner’s] proof.” However, the court effectively
narrowed that range to exclude the Builder’s proof when it rejected testimony on behalf of
the Builder that the building could be repaired for $107,000. The court rejected the
testimony because the testimony falsely assumed the building did not have substantial defects
and because repairs of $107,000 would not bring the building up to code or even allow it to
pass a building inspection. With regard to the proper measure of damages the court found:
The court adopts the Glascock appraisal as the court’s proper
measure to show the diminution in value damages. The court
does not believe that the cost of repairs that would be required
to repair this building are reasonable. The court specifically
finds that the cost of repair is disproportionate when compared
to the difference in the value of the structure actually
constructed and the one contracted for. Therefore, the court
finds the diminution in value is the proper measure of damages
in this matter.
Despite adopting the Glascock appraisal, the court made some modifications to the
appraisal based upon its understanding of the testimony.
Mr. Glascock pointed out, and the court agrees, that any
potential buyer will not only want a dry building, they will
require a dry building that is mold and mildew free. Otherwise,
it would be extremely difficult, if not impossible, to market a
healthcare facility building, and in this specific case, a dental
office. Mr. Glascock’s “type A” appraised value is $722,000.
However, this was assuming the building had a fully completed
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and usable basement area. After further questioning by the
court, Mr. Glascock testified that the $722,000 value should be
decreased by about $100,000 due to the value put on the
basement in his “type A” value. Thus, the “type A” value
should be $622,000. Mr. Glascock’s “type B” value was
$275,000. However, he placed no value for the basement space
in his “type B” value. The court wishes to point out here that
the court questioned the [Owner’s] other expert witness, Ken
True, a Tennessee licensed building contractor licensed and
experienced in the building of dental offices a[s] to what the
basement value would be and/or what a basement in a similar
building would cost. The court also questioned the [Builder’s]
expert appraiser as to the basement value. The court finds the
actual basement value to be $65,000, which should be added to
Mr. Glascock’s “type B” appraisal value, for a total of $340,000.
Thus, the court finds Mr. Glascock’s diminution in value
damages to be $282,000.
The Owner moved the court to alter or amend the judgment to allow cost of repair
damages or to allow diminution in value damages according to Glascock’s report without
modifications. The Owner also moved the court to allow substantial discretionary costs.
Initially, the Owner did not file an affidavit in support of the motion for discretionary costs.
The Builder responded that the court should deny the motion for discretionary costs for lack
of a supporting affidavit. The Owner eventually submitted supporting affidavits, and the
court allowed the parties significant time after the hearing on the motion to submit legal
support for their positions. The court eventually entered a final order denying the motion to
alter or amend and allowing discretionary costs of over $10,000 after allowing the Builder
credits for amounts it had paid. The Owner has appealed.
II.
The issues in this appeal, as restated by this court, are:
Whether the evidence preponderates against the damages
awarded for diminution in value.
Whether cost of repair or diminution in value was the proper
measure of damages.
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Whether the trial court erred in not requiring the Builder to
reimburse the Owner for fees charged by the Owner’s expert for
copying and other services performed by the expert pursuant to
the Builder’s request during the expert’s deposition.
Whether the trial court erred in awarding the Owner
discretionary costs based on a motion that was not supported
with an affidavit, but was later supplemented with supporting
affidavits.
The last issue is raised by the Builder.
III.
The standard of review as to the measure and amount of damages was accurately
stated as follows in Faulkner v. Tom Emmett Const. Co., No. E2010-00361-COA-R3-CV,
2010 WL 4671008, at *7-8 (Tenn. Ct. App. E.S., filed Nov. 18, 2010).
The factual findings of the Trial Court are accorded a
presumption of correctness, and we will not overturn those
factual findings unless the evidence preponderates against them.
See Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721,
727 (Tenn.2001). With respect to legal issues, our review is
conducted “under a pure de novo standard of review, according
no deference to the conclusions of law made by the lower
courts.” Southern Constructors, Inc. v. Loudon County Bd. of
Educ., 58 S.W.3d 706, 710 (Tenn. 2001). In Beaty v. McGraw,
15 S.W.3d 819[, 827] (Tenn. Ct. App. 1998), this Court stated:
Determinations concerning the amount of
damages are factually driven. See Loftis v.
Finch, 491 S.W.2d 370, 377 (Tenn. Ct. App.
1972). Thus, the amount of damages to be
awarded in a particular case is essentially a fact
question. See Sholodge Franchise Sys., Inc. v.
McKibbon Bros., Inc., 919 S.W.2d 36, 42 (Tenn.
Ct. App. 1995); Buice v. Scruggs Equip. Co., 37
Tenn. App. 556, 571, 267 S.W.2d 119, 125
(1953). However, the choice of the proper
measure of damages is a question of law to be
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decided by the court. See American Trust Inv.
Co. v. Nashville Abstract Co., 39 S.W. 877, 881
(Tenn. Chan. App. 1896); see also Business
Men's Assurance Co. v. Graham, 891 S.W.2d
438, 449 (Mo. Ct. App. 1994); Town of Fifield v.
State Farm Mut. Auto. Ins. Co., 119 Wis. 2d 220,
349 N.W.2d 684, 686 (Wis. 1984).
Our de novo review is subject to the recognition that the trial judge saw and heard the
witnesses and is in a better position than are we to evaluate the credibility of their testimony.
Keaton v. Hancock County Bd. Of Educ., 119 S.W.3d 218, 223 (Tenn. Ct. App. 2003).
“The party who takes issue on appeal with a trial court's decision regarding discretionary
costs has the burden of demonstrating that the trial court abused its discretion.” Duran v.
Hyundai Motor America, Inc., 271 S.W.3d 178, 215 (Tenn. Ct. App. 2008). A trial court’s
decision on a discovery matter will not be reversed unless a clear abuse of discretion is
shown. Benton v. Snyder, 825 S.W.2d 409, 416 (Tenn. 1992).
IV.
We begin with the issue of whether the evidence preponderates against the trial
court’s finding that the diminution in value damages are $282,000. The Owner argues that
having concluded that diminution in value was the correct measure of damages and having
adopted Glascock’s appraisal as the basis for its findings, the court erred in modifying
Glascock’s appraisal to reflect lesser damages. This equates with arguing that the evidence
preponderates against interpreting Glascock’s testimony to allow the downward adjustment
of the value of the hypothetical “type A,” i.e., correctly-built, structure by $100,000 and the
upward adjustment of the value of the actual “type B,” i.e., built-with-defects, structure by
$65,000. We agree in part with the Owner’s argument.
It is clear to us that the trial court misunderstood or misinterpreted Glascock’s
testimony when it stated that “[a]fter further questioning by the court, Mr. Glascock testified
that the $722,000 value should be decreased by about $100,000 due to the value put on the
basement in his ‘type A’ value.” Glascock’s testimony must be read with the understanding
that he clearly explained during cross-examination how he valued the “type A” structure. He
determined a per square foot value of $175 and multiplied it by 4,125 square feet. The 4,125
square feet is made up of 2750 square feet on the ground floor and 1375 square feet in the
basement that was to have been finished. The product of $175 per square foot multiplied by
4,125 square feet is $721,875. The court’s questions to Glascock were apparently prompted
by concerns that Glascock did not assign value to the basement in the “type B” structure, the
as-built structure. Unfortunately, the response spilled over into the “type A” structure. In
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his attempt to respond to the questions, Glascock conceded that basement space would drive
the overall per square foot value of a structure down below the per square foot value of a
similar structure that did not have basement space, but that the basement space would still
add value to the structure. In his attempt to relate his response to the facts of this case,
Glascock explained that a building similar to Dr. Pesce’s office but without defects and
without a basement would probably be worth approximately $650,000 (approximately $240
x 2750), and then he would add, not subtract, approximately $100,000 for the basement.
Both ways, according to Glascock, he essentially arrived at the same figure – somewhere
above $700,000. The only reference to reducing the value for a basement in Glascock’s
testimony was that the inclusion of basement space drove the overall per square foot value
of a given structure down below the per square foot value of an identical building without
a basement. For the “type A” structure in the present case, the reduced figure was $175 per
square foot that he ultimately used. It is clear to us that the trial court misunderstood
Glascock’s reference to the $100,000 and how it related to the comparison of structures built
with basement space and structures built without basement space. Accordingly, we agree
that the evidence preponderates against the trial court’s modification of Glascock’s appraisal
of the “type A” structure by subtracting $100,000 to reduce the value of the structure to
$622,000 from $722,000.
We disagree, however, with the Owner’s contention that the evidence preponderates
against the trial court’s addition of $65,000 to Glascock’s valuation of the as built, “type B”
structure for the existence of basement space. Glascock admitted both during cross-
examination and in response to directed questioning of the court that he did not assign
independent value to the basement even though it clearly existed and clearly had value. The
court mentioned in the course of questioning Glascock that it understood his explanation that
he had treated the basement as an “amenity” that was included in the valuation of the ground
floor at $100 per square foot. However, it is clear that the court did not wholeheartedly
accept that part of Glascock’s testimony. We note that the trial court gave Glascock ample
opportunity to place a value on an unfinished basement but he did not. The trial court was
in a better position than this court to evaluate the witness and his failure to give a direct
answer to a direct question. See Keaton, 119 S.W.3d at 223. The evidence does not
preponderate against the trial court’s decision to assign an independent value to the “type B”
structure for the existence of the basement.
Likewise, the evidence does not preponderate against the trial court’s valuation of the
existing basement at $65,000. The Owner criticizes the court for the court’s statement that
it questioned expert Thurman – this because Thurman did not appear in person but rather by
deposition. The Owner also criticizes the court for taking a “basement” value from the
testimony of Thurman after the court had stated that the Thurman appraisal was of no value
to the court. Despite these criticisms we will not fault the trial court for taking one simple
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figure, i.e., the value of an unfinished basement, from the Thurman testimony. It appears to
us that the reasons the court gave for rejecting Thurman’s overall appraisal do not totally
undercut his ability to place a value on an unfinished basement based on typical construction
cost as a factor of square footage. We note that the Owner’s expert, Eid, testified that it
would cost approximately $60 per square foot to build a basement, which cost alone would
exceed the value that the court assigned to the basement. Therefore, we conclude that the
evidence does not preponderate against the trial courts modification of the Glascock appraisal
by adding $65,000 to the “type B” building for the value of the basement. The result of our
holdings as to diminution in value is a modification of the court’s judgment. The $282,000
in damages awarded will be increased by $100,000 thereby correcting the trial court’s
erroneous interpretation of Glascock’s testimony. Accordingly, we hold that the evidence
preponderates in favor of a damage award of $382,000 based upon diminution in value.
The Builder argues that the evidence preponderates against a finding of damages in
the amount of $282,000, a figure that we have now determined should have been $382,000.
The argument is built upon select portions of the appraisals of the various experts, mainly
Glascock and Thurman, combined in such a way as to produce a figure favorable to the
Builder. The trial court’s rejection of Thurman’s appraisal and the correct adoption of
Glascock’s is not against the preponderance of the evidence. Having so held, we will not
allow the Builder to selectively blend the two appraisals to produce a figure out of proportion
to both appraisals. There is no merit to the Builder’s argument.
The second issue is arguably impacted by the resolution of the first. The Owner
asserts that “[c]hanging the amount of damages awarded by the Trial Court, may justify the
Court using cost of repair as opposed to Diminution in Value as the proper measure of
damages.” As we understand the argument, the Owner is conceding that based on a finding
that diminution in value was only $282,000 the trial court was correct to find that the cost of
repair was disproportionate to diminution in value. However, the Owner is arguing that
assuming this Court increases the diminution in value damages, which we have done, the cost
of repair is no longer disproportionate and should become the correct measure of damages.
We do not necessarily disagree with the logic of the argument, but we disagree that it
changes the result in this particular case. Although we do not have the benefit of a specific
finding as to the cost of repair, it is apparent that it would be close to, if not more than, the
construction cost of approximately $460,000. If we were to make our own findings, we, like
the trial court, would reject the modest cost of repairs asserted by the Builder’s witnesses.
Thus, the result of adopting cost of repairs as the measure of damages in this case would be
to award the Owner as much in damages as he paid to have the structure built and leave him
in possession of a fully operational, profitable, dental office. This result, we believe, renders
cost of repairs disproportionate to any substantially lesser figure. Since diminution in value
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damages of $382,000 are at least $80,000 less than cost of repair, we hold that the trial court
did not err in selecting diminution in value damages as the proper measure of damages.
The Owner’s final argument is that the trial court erred in not requiring the Builder
to reimburse him for the fees charged by expert witness Eid. The Builder’s brief is of little
help on this issue. Without citing any authority, or mentioning the word “waiver,” the
Builder seems to argue that the Owner waived the issue by not giving the trial court an
opportunity, after the order which reserved the issue for further hearing, to consider the issue.
We disagree. In the first hearing on the motion to compel payment by the Builder of the fees
and expenses charged by the expert, the trial court specifically found that there was an
implied agreement that the Builder would pay the reasonable charges of the expert. The
court awarded such amounts as had been paid, which related to the actual time spent in sitting
for deposition, and specifically ordered further hearing on the issue of additional fees
included in the expert’s invoice. There were numerous parts of the record not sent up on
appeal, including the transcript of the majority of the trial. Therefore, the record is unclear
to us whether the matter was ever brought to the court’s attention before the hearing on
discretionary costs. Even if it was not, we do not believe it was too late at that juncture to
have the hearing that had been ordered much earlier in the proceedings. We do not see any
prejudice to the Builder, and the judgment had not yet become final because of pending post-
trial motions. We also note that the trial court did not articulate a finding that the Owner had
waived the right to reimbursement of the subject charges. Accordingly, we hold that the
Owner did not waive the right to reimbursement of Eid’s fees and expenses.
As to the merits of the claim to reimbursement, we read the transcript of the hearing
and the orders to show that the trial court simply failed to appreciate that the claim was one
more properly being asserted under Tenn. R. Civ. P. 26.02(4) than 54.04(2). The finding in
the initial order on the issue of Mr. Eid’s fees of an implicit agreement by the Builder to pay
is entirely consistent with the language of Rule 26.02(4) with regard to the payment of
testifying experts for their deposition: “Unless manifest injustice would result, . . . the court
shall require that the party seeking discovery pay the expert a reasonable fee for time spent
in responding to discovery [of an expert witness expected to testify at trial].” Thus, we hold
that the trial court erred in denying the request altogether. We are not holding that any and
all charges recorded on the invoice are chargeable to the Builder any more than we are
holding that any particular charge is not to be charged to the Builder. On remand, the trial
court is directed to hold a hearing and, in the exercise of its discretion based on suitable and
necessary findings, order the Builder to reimburse the Owner for such charges of expert Eid
as are just.
The final issue is the one stated by the Builder, i.e., whether the court erred in
awarding discretionary costs when the motion was made without supporting affidavits. We
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interpret the Builder’s argument as an all or nothing challenge to discretionary costs in any
amount and not a challenge to any one component of the award. We hold that the trial court
did not err in considering the affidavits submitted after the motion. The present version of
the applicable rule, 54.04(2)1 , does not explicitly require that the motion be accompanied by
an affidavit or affidavits. All it requires, on its face, is that “a party requesting discretionary
costs . . . file and serve a motion within thirty (30) days after entry of judgment.” Tenn. R.
Civ. P. 54.04(2). Case law has held that the motion should be supported by an affidavit so
as to allow the court to make the findings required for an award of discretionary costs. See,
e.g., Waggoner Motors, Inc. v. Waverly Church of Christ, 159 S.W.3d 42, 65 (Tenn. Ct.
App. 2004). By the time the court ruled on the Owner’s motion in this case, it had the benefit
of the required affidavits. Although the Builder complains that the affidavits were filed only
approximately three days before the hearing, the Builder has not shown how it was
prejudiced by the belated filing, nor does it indicate that it asked the court for additional time
to counter the affidavits. We note that the trial court specifically recited in an order that it
wanted to “get it right” on this issue and allowed the parties additional time after the hearing
to file legal argument and authority. We will not assume that the trial court would have
overlooked a request for a continuance to overcome prejudice to the Builder. Accordingly,
we hold that the trial court did not err in awarding discretionary costs based on affidavits
filed after the motion for discretionary costs was filed and within a few days of the hearing
on the motion.
1
A previous version of Rule 54.04(2), as quoted in Lock v. National Fire Ins. Co. Of
Pittsburgh, Penn., 809 S.W.2d 483 (Tenn. 1991), stated, in pertinent part:
A party who desires to recover discretionary costs or any recoverable costs
not included in the bill of costs prepared by the clerk of the trial court shall
move the court to assess discretionary costs and attach thereto an itemized
and verified bill of costs. The affidavit shall be made by the party or his
duly authorized attorney or agent having knowledge of the facts, certifying
that such items of costs are accurate and were reasonable and necessary to
preparation and trial of the case and that the services for which such fees
have been charged were actually performed.
Id. at 489.
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V.
The judgment of the trial court is reversed in part and affirmed in part as modified.
That part of the judgment denying the Owner reimbursement for the fees and expenses
charged by expert Eid is reversed. The award of damages of $282,000 based on diminution
in value is increased by $100,000 to $382,000. Costs on appeal are taxed to the appellee,
East Tennessee Construction Services, Inc. This case is remanded, pursuant to applicable
law, for a hearing to determine the amount of the reimbursement to the Owner for Eid’s fees
and expenses related to his deposition; for enforcement of the judgment as modified; and for
collection of costs assessed by the trial court.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
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