Clayton Pickens v. John R. Underwood ( 2018 )

06/12/2018
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
April 19, 2018 Session
CLAYTON PICKENS v. JOHN R. UNDERWOOD, ET AL.
Appeal from the Circuit Court for Blount County
No. L-17937 David Reed Duggan, Judge
No. E2017-02120-COA-R3-CV
This appeal arises from a dispute over a construction contract between Clayton Pickens
(“Pickens”), a general contractor, and John R. Underwood (“Underwood”) and his wife
Suzanne Curtin (“the Underwoods,” collectively).1 Pickens sued Underwood initially in
Chancery Court but later transferred to the Circuit Court for Blount County (“the Trial
Court”) for allegedly failing to pay him under a contract to build the Underwoods’ home.
Underwood filed counterclaims against Pickens alleging, among other things, fraud, cost
overruns, violation of the Tennessee Consumer Protection Act, and entering into a
construction contract in excess of the monetary limit on Pickens’ contractor’s license.
This case was tried before a jury. The jury found the Underwoods breached the
construction contract and awarded Pickens $147,340.25. The jury also found that
Pickens breached the contract through certain errors in construction and awarded the
Underwoods $10,740.00. The Trial Court entered its final judgment affirming the jury’s
verdict and awards of damages. The Underwoods appeal, arguing in part that Pickens
should have been limited to his actual documented expenses because he entered the
construction contract in excess of his contractor’s license limit. We hold, inter alia, that
under the law in effect at the time of the execution of the contract, Pickens was not
limited in damages to his actual documented expenses. We affirm the judgment of the
Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II., JJ., joined.
1
Appellants’ brief refers to the parties collectively as the Underwoods despite their different surnames.
For convenience, we too will refer to Appellants collectively as the Underwoods.
James S. MacDonald, Knoxville, Tennessee, for the appellants, John R. Underwood and
Suzanne Curtin.
J. William Coley and Bart C. Williams, Knoxville, Tennessee, for the appellees, Clayton
Pickens and Jama Pickens.
Brad A. Fraser and J. Matt Drake, Knoxville, Tennessee, for the appellees, Danny Miller,
individually and d/b/a Miller’s Appliances Sales and Service/HVAC, Inc. a/k/a Miller’s
Heating & Air, Inc.
OPINION
Background
The Underwoods entered into a $572,000 contract with Clayton Pickens on June 2,
2008 for the construction of a home on 25 acres of land. Pickens subcontracted Miller’s
Heating & Air, Inc. to install the HVAC system. On May 9, 2009, the final bill which
totaled $679,314.94 was presented by Pickens to Underwood. The construction contract
provided that “[i]f proposed construction or under construction, it is understood that any
additions or changes not included in the plans and specifications are to be agreed upon
between the contracting parties and are to be confirmed in writing as the work
progresses.” Underwood objected to Pickens’ figure and declined to pay him the amount
he claimed was owed. On July 21, 2009, Pickens sued Underwood in Blount County
Chancery Court, alleging breach of contract, unjust enrichment, promissory fraud and
mechanics’ and materialmens’ lien. Underwood, meanwhile, learned that the monetary
limit of Pickens’ contractors’ license at the time he signed the contract was $350,000.
Underwood filed an answer and counterclaim seeking a jury trial. A hearing was
conducted by a Special Master in the case in February 2012. Counsel for Pickens
stipulated at that stage that Pickens was an unlicensed contractor limited in damages to
actual documented expenses. This case then was transferred to the Trial Court. In
November 2012, Pickens filed several third party complaints against certain sub-
contractors. Pickens sued Suzanne Curtin in a separate complaint. All of these various
cases were consolidated for trial.
In April 2014, the Trial Court entered an order, contrary to counsel for Pickens’
earlier stipulation, in which it determined Clayton Pickens was a licensed contractor,
stating in part: “Clayton Pickens is hereby determined to be a licensed contractor for
purposes of the Tennessee Contractor’s Licensing Act of 1994 Tenn. Code Ann. §62-6-
101, et seq. during the time period in question in this lawsuit even though the monetary
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limit of his license may have been less than the sum of the contract to construct the house
of John R. Underwood.” In May 2017, this case was tried before a jury.
Several evidentiary rulings made by the Trial Court gave rise to a number of the
issues the Underwoods raise on appeal. First, upon Miller’s motion the Trial Court
barred Gary Cobble (“Cobble”), an architect, from testifying for the Underwoods
regarding alleged defects in the HVAC system. Cobble, articulating the basis of his
views, stated in his deposition, in part:
Q. What was the reason for having Chancey & Reynolds [HVAC
technicians] come out to the property?
A. Earlier I testified that when you have humidity problems inside a home
or a building, it oftentimes is because — I don’t want to say oftentimes —
sometimes it’s because the units are too large and they don’t run long
enough to pull all the moisture out of the building. Well, that’s why I met
Steve initially, Steve Chancey, so he could run the Manual J load letter on
the home. The two pieces of equipment are sized properly, according to the
Manual J letter. So the next step is, is the equipment installed correctly and
cycling correctly, coming on and off correctly. And Ronnie Brock did
those tests on February 1, and they are. So by process of elimination, we
concluded that something in the zoning, in the configuration of the duct
work was just off, somehow wrong, or just not functioning properly. So
rather than redesigning the duct work, tearing it all out and trying to
reconfigure it, the easiest solution to the problem was to add dehumidifiers,
which ultimately was done.
Q. Is it fair to say that you relied on Chancey & Reynolds’ expertise in
HVAC systems to form the basis of your opinions, then?
A. Yes.
Q. You’re saying you’re not a licensed HVAC repairman.
A. No.
Q. You’re not certified.
A. No. That’s why I had to go to Chancey & Reynolds and hire them to do
this work.
Q. Have you provided opinions in prior cases on HVAC issues?
A. Yes.
Q. Can you tell me which cases, or is that something you’d have to look at
records?
A. Off the top of my head, I can’t think of any, but oftentimes I have to
look at the HVAC system, not very often, but along that line, humidity
control, I’ve been involved with a lack of humidity control, I’ve been
involved with many times over my career.
-3-
Q. And I’d like to narrow that down to lack of humidity control that,
according to you, is caused by the HVAC system, or more specifically, the
zoning. Have you dealt with that in prior cases or have you testified in
prior cases concerning lack of humidity control by the HVAC system?
A. Lack of humidity control, yes. Zoning, no. And I can’t think of any
specific cases. There hasn’t been many times, but I’m just very familiar,
with the line of work I do and being in construction for so many years, I’ve
seen what lack of humidity control can do . . . .
***
Q. Now, he does mention here that there’s no bypass damper on the zoning
unit, and the owner may want to add one. Is that right?
A. It does say that. I don’t recall that, but it does say that, no bypass
damper.
Q. But he also mentions that wasn’t creating any problems, correct?
A. That is correct.
Q. So is it fair to say, based on your testimony and based on this invoice
that I have here, that the system was appropriate, the selection of the system
was appropriate, and the only issue was the zoning of the central area of the
house, correct?
A. That’s what it boiled down to. And by process of elimination, that’s
where we landed.
Q. What is your understanding of the zoning of the central area of the
house?
A. That somehow the zoning or lack of zoning or improper design of the
duct work and zoning was not allowing the units to pull the humidity out of
the central part of the house.
Q. You’re talking to somebody that doesn’t do HVAC work, and I don’t
think anyone else in here does, but tell me what zoning is.
A. In simple terms, a small, one-level house has one air-conditioning unit
and one thermostat. It has one zone. If you put a second story on that
house and put a separate air-conditioning system for the upstairs, you’ve
got two zones. So every thermostat controls a zone. This house has three
thermostats with two units. In my example that I gave you, you’ve got two
systems with one thermostat each and two zones. This one is more
complicated because you’ve got three thermostats and only two units, so
it’s split. It’s got dampers in it to divert the conditioned air into different
spaces. So that’s where we finally concluded there’s some kind of problem
in the zoning, the way the thermostats and the configuration of the duct
work was made up, and dampers. But the easiest way to solve the problem
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was just to add dehumidification, because that’s really all we were after,
anyway. We didn’t have issues with rooms being cold in the winter, rooms
being hot in the summer, that sort of thing. It was just we needed humidity
control in the central part of the house.
Q. You said a couple of times that “we” reached that conclusion, so was it
also Steve Chancey and Ronnie Brock’s opinion that the central portion of
the house was not zoned properly?
A. Well, I don’t think Ronnie Brock so much, because he’s a technical guy.
Steve and I spoke about it later, and I don’t want to put words into Steve’s
mouth, either, but ultimately, with talking with Steve and Ronnie, that was
my decision or my analysis of the problem, that there’s something going on
with the zoning, because that’s all that was left of the whole system. We
knew the thermostats were working properly. They were sized properly.
The equipment’s operating properly except for a couple of little small items
that Ronnie notes. That’s all that’s left to create the lack of humidity
control.
Q. And that’s basically just by process of elimination you got to that.
A. Exactly, by process of elimination, we got to that conclusion.
Chancey and Brock submitted affidavits stating that they had not rendered the
opinions attributed to them. The Trial Court excluded Cobble’s testimony as to the
HVAC system.
In addition, the Trial Court overruled the Underwoods’ motion in limine seeking
to bar the testimony of appraiser Fred Metz (“Metz”). Metz testified regarding the
quality of the construction and whether any alleged defects resulted in a diminution of
value. The Underwoods contend that this testimony was irrelevant and prejudicial.
Metz, opining on numerous aspects of the house, testified in part as follows:
Q. And, okay. Mr. Metz, in addition, did you, did you inspect an area in
the master shower?
A. I did.
Q. What was your understanding of the complaint?
A. The complaint was that the water did not drain out of the master shower
properly.
Q. And did you inspect that condition?
A. I did.
Q. What did you do to inspect it?
A. I turned on the shower. I turned on the shower and let it run for several
minutes, enough to notice that the water gradually drained out of the central
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drain, and it appeared it drained out, so I found that the complaint was
unfounded.
Q. All right. Now, do you have an opinion as to whether or not the
condition as you saw it in the master bath shower caused any diminution in
the fair market value of the structure of that home as you saw it on June 22,
2016?
A. In my opinion, I found the complaint to be unfounded and there was no
negative effect on the market value.
Q. So no diminution in value?
A. That’s correct.
Q. Now, going back to the cupped hardwood floor complaint. Based on
your examination during your appraisal on June 22, 2016, do you have an
opinion whether the floors in their actual condition as you saw them have
any negative effect or diminution in value of the structure of that home?
A. In my opinion the day I saw the floors, they were not cupped. I found
the complaint to be unfounded and there was no negative effect on value.
No diminution in value.
Q. Okay. Now, I want to ask you also then about the HVAC system. Now,
Mr. Metz, in all due respect, you didn’t perform any testing on this HVAC
system, did you?
A. I did not.
Q. Did you look at the system?
A. I did.
Q. Did it appear to be a functional system?
A. Yes, it did.
Q. Did you look at the ductwork underneath the house for the system?
A. I did.
Q. How did it appear to you?
A. It appeared to be well-installed.
Q. Okay. Did you experience the interior of the home?
A. I did.
Q. Did you feel that the temperature was appropriate?
A. It was, yes.
Q. All right. Did you happen to check to see what the settings were that
day?
A. I did not.
Q. All right. Did you notice any humidity in the house on June 22, 2016?
A. It was a hot day outside but there was no humidity that I determined in
the house.
Q. Now, with respect to the basement, did you go into the basement area?
A. I did.
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Q. Did you detect what you considered to be excessive humidity in the, not
the basement, but the crawl space?
A. No, I did not find any humidity there either.
Q. All right. Now, do you have an opinion, with respect to the observation
you performed, whether or not the HVAC system as you saw it and
observed it caused any negative effect on the fair market value of that home
or any diminution in value as you saw it on June 22, 2016?
A. I found the HVAC system to be completely working fine and, in my
opinion, there was no negative effect. No diminution in value.
Q. I want to call your attention to the front porch. Let me -- before I do that
-- did you -- looking again at these cabinets, did you have an opportunity to
open and close the doors on the cabinetry?
A. I did.
Q. Did you have an opportunity to inspect closely the alignment of the
doors?
A. I did.
Q. Did you find that there was any warping of the doors?
A. I did not see any warping of the doors.
Q. Was there any difficulty in the operation?
A. None at all.
The Trial Court also overruled the Underwoods’ motion in limine to exclude from
evidence a letter from Underwood to Pickens stating “Enclosed you will find a check for
$65,327.84 as payment in full to you for our house constructed at . . .” as well as the
Underwoods’ check register. According to the Underwoods, this letter constituted an
offer to settle. The Trial Court found otherwise.
Following trial, the jury reached its verdict. Pickens was awarded $147,340.25
against the Underwoods for payment under the contract. The Underwoods, for their part,
were awarded $10,740 against Pickens for construction defects pertaining to the driveway
and to insulation. Motions for a new trial were filed and overruled by order of the Trial
Court. The Trial Court, in its oral ruling incorporated into its order on the Underwoods’
motion for a new trial, discussed in detail as follows:
In the motion as amended the defendants have suggested that the
court erred in granting a motion in limine concerning the monetary limits of
Mr. Pickens’s license. As I’ve said before, and including once again this
morning, if I’m wrong about this we’re going to have to retry this case.
And I guess I could be wrong in one of two respects. There’s the issue of
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was he a licensed contractor that Anchor Pipe dealt with.2 There’s also, I
suppose, a second issue about what law applies at a given point in time. Do
I apply the law at the time of the contract or do I apply the law at the time
of the filing of the suit. Because the law changed in the interim.3 So Mr.
MacDonald has suggested that I’ve erred on those two grounds.
The Court of Appeals may see this differently. And if they do I’m
sure they will explain to me why. But I think I have applied the Anchor
Pipe law correctly. And I think that it is the law that applies in this case.
And I’m doing the best I can to apply that law.
Now, as far as the fact that that law was amended by the legislature
and that Anchor Pipe was arguably legislatively overruled; that’s true, that
the law was changed by the time of the filing of the suit but I believe that
the law as it existed at the time of the contract is the law that I have to
apply. I think Mr. Pickens’s rights and the relief that he can seek are going
to be measured by what the law was at the time he entered into his contract,
not at the time that he sought a remedy.
Now, as you all have noted, I’ve addressed this matter several times
already including but not limited to Jama Pickens’s first motion to dismiss
and/or for summary judgment and Clayton Pickens’s motion to dismiss
counterclaims. I’ve also addressed it in a motion to reconsider and for
interlocutory appeal.
Now, Mr. MacDonald has correctly pointed out, as I’ve already said
this morning, that the statute which Anchor Pipe interpreted was amended
before the filing of the complaint. And the Anchor Pipe court specifically
noted that it was deciding its case under the old law. But, again, the Court
believes Mr. Pickens, as a plaintiff, is entitled to make a claim based on his
rights as they existed at the time of his contract. And at the time of the
contract only an unlicensed contractor was limited to documented expenses.
And under Anchor Pipe a contractor did not cease to be a licensed
contractor just because the contractor exceeded the monetary amount of his
2
Anchor Pipe Company, Inc. v. Sweeney-Bronze Development, LLC et al., No. M2011-02248-COA-R3-
CV, 2012 WL 3144638 (Tenn. Ct. App. Aug. 2, 2012), no appl. perm. appeal filed, a case standing for
the proposition that, under then-existing law, a licensed contractor who contracts above his or her
monetary limit still is considered licensed.
3
Tenn. Code Ann. § 62-6-103(b) provided in June 2008 when the construction contract was signed: “Any
unlicensed contractor covered by the provisions of this chapter shall be permitted in a court of equity to
recover actual documented expenses only upon a showing of clear and convincing proof.” Effective June
23, 2009, the statute was amended to read: “Any contractor required to be licensed under this part who is
in violation of this part or the rules and regulations promulgated by the board shall not be permitted to
recover any damages in any court other than actual documented expenses that can be shown by clear and
convincing proof.” The instant lawsuit was filed July 21, 2009 following this amendment, hence the
question over which version applies and to what effect.
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license. That case was decided under the old law prior to the 2009
amendment, as the Anchor Pipe case itself noted in a footnote. But that
same law was still in effect when this contract was entered into and I
believe that law governs Mr. Pickens’s rights. And, therefore, because he
was a licensed contractor, regardless of the monetary limits of his license,
and also because the limits of his license were irrelevant given that
financial security was not an issue in any claim in this case - there were no
materialman’s liens or supplier’s liens or laborer’s liens - I think that the
limits of his license were irrelevant. So the motion as amended in that
respect is denied.
The defendants have alleged in their motion as amended that the
Court erred in denying the defendants’s motion in limine to exclude the
June 3, 2009 letter from Mr. Underwood to Mr. Pickens enclosing a check
in what was proposed to be a final payment. The defendants have alleged
that that was a settlement offer and should have been excluded but the
Court does not agree with that. It was not a settlement offer. It was
perhaps the final step in brewing the dispute that led to the lawsuit but Mr.
Underwood was simply in that letter stating his position as to the final
amount due and owing under the contract. That’s how I see that letter. So
the motion as amended is denied in that respect.
Next, the defendants have alleged in their motion as amended that
the Court erred in denying the defendants’s motion in limine to exclude the
testimony of appraiser Fred Metz pertaining to diminution in value. The
Court does not agree with that. As the Court instructed the jury, and as was
a potential measure of damages for the jury, depending upon their factual
findings Tennessee law provides that if 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 an alternative measure of damages. Mr.
Metz’s testimony was relevant on that issue. And it seems to me that the
jury obviously didn’t decide the case on that basis anyway. The motion as
amended is denied in that respect.
Next, the defendants have alleged in the motion as amended that the
Court erred in excluding Mr. Pickens’s statement that he was fully licensed.
To me that’s just another attempt to raise the financial limits of his license
which the Court has already addressed and the Court incorporates its ruling
on that issue. But under Anchor Pipe, which was in effect at the time of the
contract, Mr. Pickens was a licensed contractor and the financial limits of
his license were irrelevant. Again, assuming and given that there were no
issues about financial security. So the motion is denied in that respect.
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***
Next, in the motion as amended the defendants have suggested that
the Court erred in granting the motion in limine excluding Gary Cobble’s
testimony concerning the heating, ventilation and air-conditioning system.
The Court disagrees.
It was clear from Mr. Cobble’s deposition testimony that he could
not say and did not have an opinion about what was wrong with the HVAC
system. And that he had no basis for any opinion that was straightforward
and supported by a rational explanation which reasonable persons could
accept as more correct than not. His opinion would not have substantially
assisted the jury to understand the evidence or to determine a fact in issue.
Nor were the facts that underlay his opinion indicative of trustworthiness.
In essence he said this -- and we’ve been through this numerous
times. He said there’s nothing wrong with this component of the HVAC
system and there’s nothing wrong with that component of the HVAC
system; therefore, by process of elimination, there must be something
wrong with the remaining component of the HVAC system. That was his
testimony.
And when he was asked, “Well, what’s wrong with that remaining
process of elimination system?” He said, “I don’t know.” I can’t let a jury
hear such evidence as that.
He also claimed to be relying on certain statements of Chancey &
Reynolds but the plaintiff filed affidavits from those Chancey & Reynolds
affiants saying that they had said no such thing to Mr. Cobble.
With respect to the HVAC system Mr. Cobble’s testimony was rank
speculation. And I think I feel probably stronger on this issue than I do on
any of the others. To have admitted that testimony would have been to
make a mockery - a mockery - of Rule 702 and 703 of the Rules of
Evidence. So the motion as amended is denied in that respect.
Next, the defendants suggest that the Court erred in failing to strike
those affidavits from those Chancey & Reynolds affiants. As the Court
said at the time, the Court understood why the defendants might not have
been happy with the testimony of someone their expert had allegedly
consulted with being used against them. But I’m not aware of any law or
rule of evidence and none was cited by the defendants other than in this
motion for a new trial, Rule 26, providing that someone’s statement that
another expert isn’t telling the truth should be precluded just because the
person who’s saying the other expert lied were consulted by that expert.
I’m not aware of any such rule.
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The Court further believes that Miller’s Heating & Air has made
several good points in their response - that the defendants never identified
these affiants as experts. Nothing before the Court suggests that these
defendants ever consulted with these affiants. Mr. Cobble, apparently,
contacted them. The affiants, apparently, were not experts consulted by the
defendants or their attorney whose testimony they then decided not to use.
That didn’t apply here.
If it was work-product, if that’s what the argument is, I’m not sure --
as has been questioned by the other parties here, I’m not sure that an expert
can invoke a work-product privilege by consulting with someone else. But
if he can, it would seem to me that that privilege was waived when Mr.
Cobble disclosed their identities and alleged opinions in his deposition and
in his report. But, most importantly, what we always want more than
anything else is the truth. And then to let the jury take that truth and make
a decision. And the Court is persuaded that Mr. Cobble was not telling the
truth with respect to these Chancey & Reynolds representatives and what
they allegedly told him. And all with respect to an opinion for which he
had no legitimate basis. So the motion in that respect is denied.
***
Next, in the motion as amended it’s been suggested that the Court
erred in sustaining objections to the testimony of Gary Cobble concerning
whether the humidity level in the plaintiffs’s home was workmanlike.
Now, I don’t mean to beat a dead horse but that’s been stated so
many times I just want to reiterate. Mr. Drake has addressed this.
Humidity cannot be workmanlike or unworkmanlike, it just is. It is or it is
not. Humidity exists or it doesn’t exist. And it’s at the -- well, it’s always
going to exist, I suppose. And it may be high, it may be low, it may be
higher than it should be inside a house or it may be fine. But humidity in
and of itself is not workmanlike or unworkmanlike, it just is.
Now, I know what you mean but, nevertheless, you keep saying that.
And that’s not the proper way to phrase the issue, to frame the issue. The
issue is - was something unworkmanlike done that caused the humidity to
be at an excessive level in the house.
I also want to say that to the extent it’s been suggested, and it’s been
said in writing, that I prevented Mr. Cobble from giving testimony about
humidity and that is a rank misrepresentation. That’s not true. We had
elaborate testimony from Mr. Cobble about humidity.
Now, I did not go back and review the transcript in its entirety. For
one thing, I don’t have the transcript in its entirety. I’ve read the portions
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that have been attached to the motions and responses. But I did go back
and look at my notes. And I’ve marked where Mr. Cobble started talking
about humidity.
Now, I can’t tell you how long it went on in terms of a period or for
how many pages of the transcript because these are just my notes. But Mr.
Cobble talked extensively about humidity.
He talked about the hardwood flooring. He said he visited the home
on January 13, 2011 and again in July of 2011. He said the floors had
cupped. That sometimes it occurs in summer but it should not have
happened in the winter. He said what caused that excessive cupping was
humidity.
We had collective Exhibit 71 which were several photos showing the
gap that he felt like was inappropriate between the wall and where the
boards began. He said it exceeded the recommended amount.
He talked about other humidity problems with photographs put into
evidence of cabinets and cabinet doors and closet doors swollen and not
shutting. He talked about and there were pictures of doors overlapping.
He talked about on July 26, 2011 he used a humidistat and
determined that the temperature inside the home was 73.6 degrees and that
the humidity was 66%. And he said an appropriate humidity in the summer
at that point in time would have been 50%.
He talked again about cupping of the floors.
He talked about doors now striking each other. And some doors
wouldn’t close.
He talked about how the dehumidifiers had been installed and that
now the humidity was under control. And he talked about there being a 72
degree temperature inside the home now and 50% humidity. And that the
doors were now working. And that the summer cupping was now normal.
So he talked extensively, testified extensively about humidity. Now,
what he could not say, by his own testimony and admission, was whether
the floors were installed in a workmanlike manner. It’s the Court’s
recollection that he testified at least once, and I think perhaps twice, that he
could not say whether or not the installation of the flooring was
workmanlike.
He also said that the problem with the flooring could have been
caused by either three or four things. I still think there were four things that
he identified. I may be wrong about that but I think he said there were four
things that could have caused those boards to cup. I only found three of
those in my notes. He said the materials could have been stored prior to
being sent to the site or shipped improperly. It could have had to do with
the ways in which the materials were stored or shipped. He said it could
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have been failure to allow the boards to acclimate once they got on-site. Or
it could have been improper installation. And I still think there might have
been a fourth thing he identified but there were, let’s just say there were at
least three.
He said it could have been any one of those. And he couldn’t say
which one caused the problem here. And it was only at that point, after the
Court believes he realized what he had said and done and the impact of it --
now this is my conclusion but I believe this to be true -- that he then tried to
change his testimony and say that he could say that the installation was
unworkmanlike. And it was only then that the Court sustained the
objection saying, no, I’m not going to allow him to say that; he’s already
told me he can’t say.
So I think not only was the objection properly sustained but Mr.
Cobble at that point had no credibility on the issue when he tried to change
his testimony. So the motion as amended is denied in that respect.
(Footnotes added). The Underwoods appealed to this Court.
Discussion
Although not stated exactly as such, the Underwoods raise the following issues on
appeal: (1) whether the Trial Court erred in classifying Pickens as a licensed contractor
and, therefore, not limiting his recovery to actual expenses proved by clear and
convincing evidence; (2) whether the Trial Court erred in excluding the testimony of
Cobble regarding problems with the HVAC system and humidity; (3) whether the Trial
Court erred in denying the Underwoods’ motion in limine to exclude the testimony of
Metz; and (4) whether the Trial Court erred in denying the Underwoods’ motion in limine
and admitting into evidence the June 3, 2009 letter from Underwood to Pickens enclosing
a $65,327.84 “final payment on house” check as well as Underwood’s check register of
June 3, 2009 in violation of Tenn. R. Evid. 408. Clayton and Jama Pickens raise their
own issue on appeal of whether this appeal should be dismissed because the Underwoods
failed to serve a copy of the notice of appeal and file proof of service with respect to
unrepresented parties Thomas Pickens and Chris Finchum.
“A trial court’s conclusions of law are subject to a de novo review with no
presumption of correctness.” S. Constructors, Inc. v. Loudon County Bd. of Educ., 58
S.W.3d 706, 710 (Tenn. 2001). As to evidentiary issues, this Court “review[s] a trial
court’s decision to admit or exclude evidence, including a ruling following a motion in
limine, under the abuse of discretion standard of review . . . .” Allen v. Albea, 476
S.W.3d 366, 377 (Tenn. Ct. App. 2015). As our Supreme Court has instructed:
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Questions regarding the qualifications, admissibility, relevancy, and
competency of expert testimony are matters left within the broad discretion
of the trial court. See McDaniel, 955 S.W.2d at 263-64; State v. Ballard,
855 S.W.2d 557, 562 (Tenn. 1993). On appellate review, the trial court’s
ruling shall not be overturned absent a finding that the trial court abused its
discretion in admitting or excluding the expert testimony. Ballard, 855
S.W.2d at 562. “[A]n appellate court should find an abuse of discretion
when it appears that the trial court applied an incorrect legal standard, or
reached a decision which is against logic or reasoning that caused an
injustice to the party complaining.” State v. Shuck, 953 S.W.2d 662, 669
(Tenn. 1997).
State v. Stevens, 78 S.W.3d 817, 832 (Tenn. 2002)
We first address Pickens’ issue of whether this appeal should be dismissed
because the Underwoods failed to serve a copy of the notice of appeal and file proof of
service with respect to unrepresented parties Thomas Pickens and Chris Finchum. No
relief has been sought by or against these third-party defendants in this appeal, and it is
unclear where their interests even are involved in this appeal. The Underwoods filed a
motion with this Court on appeal for permission to file an amended and supplemental
certificate of service along with a notice of appeal to these parties. We granted the
Underwoods’ motion to the extent that we accepted the amended and supplemental
certificate of service attached to the motion.
Pickens cites Rule 3(e) of the Tennessee Rules of Appellate Procedure for the
proposition that we may dismiss an appeal for failure to comply with the rules. In this
case, Rule 5(a) concerning serving each party with a copy of the notice of appeal is
implicated. Pickens fails to identify exactly how these third-party defendants would be
injured should we decide this appeal. The issues on appeal do not relate directly to these
parties. These parties were served with the amended and supplemental certificate of
service. We do not believe that the drastic option of dismissal is warranted under these
circumstances.
Moving to the Underwoods’ issues, we next address whether the Trial Court erred
in classifying Clayton Pickens as a licensed contractor and, therefore, not limiting his
recovery to his actual expenses proved by clear and convincing evidence. Tenn. Code
Ann. § 62-6-103(b) was amended effective June 23, 2009. This amendment “clarified”
that “any contractor” required to be licensed under that chapter in violation of either the
chapter or attendant rules or regulations would be limited to actual documented expenses.
The issue then is whether Pickens, in undertaking this project in excess of his contractor’s
license monetary limits, is limited to his actual documented expenses. If so, argue the
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Underwoods, he already has been paid more than his actual documented expenses and his
claim should be dismissed.
The Tennessee Constitution prohibits retrospective laws. Tenn. Const. Art. I, §
20. Specifically, this constitutional provision provides “[t]hat no retrospective law, or
law impairing the obligations of contracts, shall be made.” Id. Accordingly, our
Supreme Court has held “[s]tatutes are presumed to operate prospectively unless the
legislature clearly indicates otherwise.” Nutt v. Champion Int’l Corp., 980 S.W.2d 365,
368 (Tenn. 1998). Nevertheless, this rule has two exceptions for remedial or procedural
statutes since these two types of statutes may be applied retrospectively. Id. A statute is
procedural “ ‘if it defines the ... proceeding by which a legal right is enforced, as
distinguished from the law which gives or defines the right.’ ” Doe v. Sundquist, 2
S.W.3d 919, 923 (Tenn. 1999) (quoting Kuykendall v. Wheeler, 890 S.W.2d 785, 787
(Tenn. 1994) (alteration in original)). A remedial statute is one that “provides the means
by which a cause of action may be effectuated, wrongs addressed, and relief obtained.”
Id.
In Anchor Pipe, this Court applied the previous version of Tenn. Code Ann. § 62-
6-103, the one in effect when these parties signed the construction contract now before
us, and concluded that a contractor’s exceeding his or her monetary limit did not render
him or her unlicensed. We stated in part:
We disagree with the trial court’s legal conclusion that Anchor
should be considered unlicensed. We find instructive the Supreme Court’s
analysis in Helton v. Angelopolous, 629 S.W.2d 15, 16 (Tenn. 1982), a case
in which the actual construction costs ended up exceeding the monetary
limitations on the contractor’s license. Id. at 17. The contractor sued the
property owner for the unpaid balance on a building contract. In examining
the applicable common law and statutory background, the Court noted the
underlying public policy of protecting “the consuming public from
unqualified builders.” Id. The Court went on to distinguish between
contractors who are “completely unlicensed” from those “who have
complied with the licensing laws ... and may in some manner violate the
provisions or limitations of their respective licenses.” Id. at 18. As to the
monetary limitations on contractors’ licenses, the Court found their purpose
to be “to afford financial security to owners, vendors and others dealing
with a contractor.” Id.
There was no evidence that the contractor in Helton was guilty of
any negligence in submitting his bid. Id. at 19. The Court observed,
however, that there were other means (apart from precluding the contractor
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from recovering on the contract) for addressing violations by licensed
contractors:
[I]f a licensed general contractor fraudulently, or in bad faith,
or through collusion with an architect or engineer, submitted
a bid upon a project obviously beyond the monetary limit on
his license, ample sanctions, both civil and criminal, are
available either through the courts or through the licensing
agency. A rather complete statutory scheme exists for
dealing with violations of licensed personnel, as contrasted
with individuals or firms which, under prior law, undertook to
operate in a regulated field without any attempt at compliance
with the licensing requirements.
Id. Based on this reasoning, the Court reversed the decision of the lower
courts dismissing the contractor’s claim. Id.
While Helton was decided based largely on caselaw, we consider its
distinction between unlicensed contractors and contractors bidding above
the monetary amount of their license to be relevant here. The purpose of
the monetary limit is to ensure the contractor’s financial security and
stability. Id. at 18. There is a regulatory scheme set up to address
violations of the monetary limits by licensed contractors. Id.; see Tenn.
Comp. R. & Regs. § 0680-01-.13,-.19. Furthermore, the case before us
involves a dispute between a contractor and the bank that provided
financing to the developer. It has generally been held that the rule
restricting “an unlicensed contractor’s access to court does not apply to
disputes between contractors and other licensed professionals in the
construction business.” Custom Built Homes v. G.S. Hinsen Co., Inc., No.
01A01-9511-CV-00513, 1998 WL 960287, at *3 (Tenn. Ct. App. Feb. 6,
1998); see also Gene Taylor & Sons Plumbing Co., Inc. v. Corondolet
Realty Trust, 611 S.W.2d 572, 575-76 (Tenn. 1981); Roberts v. Yarbrough,
No. 01-A-01-9802-CH-00096, 1999 WL 43252, at *2 (Tenn. Ct. App. Feb.
1, 1999). This rationale seems equally applicable here where the bank was
in the business of approving construction loans and reviewing the
credentials of contractors. The public policies underlying Tenn. Code Ann.
§ 62-6-103(b)—namely, protecting the safety and property of the public—
are not implicated in a dispute between knowledgeable professionals.
We, therefore, conclude that Anchor was not an unlicensed
contractor under Tenn. Code Ann. § 62-6-103(b).
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Anchor Pipe, 2012 WL 3144638, at *3-4 (footnote omitted).
To recap, the contract in the instant case was signed on June 2, 2008. The statute
was amended effective June 23, 2009. The complaint in this case was filed July 21,
2009, less than a month after the amendment took effect. We believe the date of the
contract to be more significant here than the date of the filing of the complaint. By the
time Pickens filed his complaint, all the operative, underlying events of this case had
transpired. The amendment to Tenn. Code Ann. § 62-6-103 was substantive in nature.
The effect of the amendment was to expand the limitation of actual documented expenses
to any contractor required to be licensed under the statute and rules, whereas before this
limitation applied only to unlicensed contractors. When Pickens signed the contract and
performed the work for the Underwoods, he was not subject to that limitation as he was
not unlicensed. Id. Pickens is not limited retroactively by the provisions of the amended
statute.
While not necessarily dispositive, the Underwoods fail to explain how they were
damaged by Pickens exceeding his monetary limit. The Underwoods’ asserted damages
arise from alleged cost overruns and defects. Pickens’ financial security, the rationale of
the statutory provision, played no role in this case. We do not condone contractors
exceeding their monetary limits, nor indeed deviating from any law or rule governing
their licensure and profession. We hold merely that, given the law in effect at the time of
the contract in the instant case, Pickens was not limited to his actual documented
expenses. We find no reversible error by the Trial Court as to this issue.
We next address whether the Trial Court erred in excluding the testimony of
Cobble regarding problems with the HVAC system and humidity. “The trial court,
therefore, must determine that the expert testimony is reliable in that the evidence will
substantially assist the trier of fact to determine a fact in issue and that the underlying
facts and data appear to be trustworthy.” Brown v. Crown Equipment Corp., 181 S.W.3d
268, 274 (Tenn. 2005). The Trial Court considered Cobble’s testimony and clearly was
unpersuaded as to its reliability. Chiefly the Trial Court was troubled by Cobble’s
inability to pinpoint exactly what was wrong with the HVAC system. The issue with
Cobble’s testimony was not a lack of credentials, but rather the speculative basis for his
opinion and his lack of credibility as determined by the Trial Court. We find no
reversible error in the Trial Court’s decision to exclude Cobble’s testimony regarding
problems with the HVAC system.
We next address whether the Trial Court erred in denying the Underwoods’
motion in limine to exclude the testimony of Metz. According to the Underwoods,
Metz’s testimony focused wrongly on questions of diminution of hypothetical market
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value as opposed to what the Underwoods themselves wanted. Metz testified fairly
glowingly as to how well-built the house was. The Underwoods assert that this was
irrelevant to their specific complaints and, coming at the onset of trial, served only to
prejudice the jury.
As pertinent to this issue, this Court discussed the measure of damages in GSB
Contractors, Inc. v. Hess:
“Generally, the measure of damages will be the cost or repair unless
the repairs are not feasible or the cost is disproportionate to the dimunition
in value.” Radant v. Earwood, No. 02A01-9802-CV-00029, 1999 WL
418339, at *8, 1999 Tenn. App. LEXIS 390, at *20 (Tenn. Ct. App. June
22, 1999) (emphasis added); see also Estate of Jessee v. White, 633 S.W.2d
767, 769 (Tenn. Ct. App. 1982). When selecting the appropriate measure
of damages applicable in this case, we are mindful of the following:
As a general rule, the measure of damages for defects and
omissions in the performance of a construction contract is the
reasonable cost of the required repairs. Estate of Jessee v.
White, 633 S.W.2d 767 (Tenn. App. 1982). This is especially
true when the structure involved is the owner’s home.
Edenfield v. Woodlawn Manor, Inc., 62 Tenn. App. 280, 462
S.W.2d 237 (1970). However, in the event that 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. Redbud Cooperative Corporation v.
Clayton, 700 S.W.2d 551 (Tenn. App. 1985) . . . .
Nutzell v. Godwin, No. 33, 1989 Tenn. App. LEXIS 485, at *2-3 (Tenn. Ct.
App. July 13, 1989) (emphasis added).
GSB Contractors, Inc. v. Hess, 179 S.W.3d 535, 543 (Tenn. Ct. App. 2005).
We disagree with the Underwoods’ contention that diminution in value was
irrelevant. This was one possible measure of damages. Metz, an appraiser, was well-
placed to testify on this topic. Contrary to the Underwoods’ implicit argument that they
could define subjectively any defects in the house, it was proper for the jury to hear
evidence as to the objective condition of the home and what effect, if any, the alleged
defects had on its value. This in turn relates to Pickens’ case that he adhered to his
contractual obligations and should be paid accordingly. We find no reversible error in
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the Trial Court’s denying the Underwoods’ motion in limine to exclude the testimony of
Metz.
The final issue we address is whether the Trial Court erred in denying the
Underwoods’ motion in limine and admitting into evidence the June 3, 2009 letter from
Underwood to Pickens enclosing a $65,327.84 “final payment on house” check as well as
Underwood’s check register of June 3, 2009 which the Underwoods argue is a violation
of Tenn. R. Evid. 408. Rule 408 provides:
Evidence of (1) furnishing or offering to furnish or (2) accepting or offering
to accept a valuable consideration in compromising or attempting to
compromise a claim, whether in the present litigation or related litigation,
which claim was disputed or was reasonably expected to be disputed as to
either validity or amount, is not admissible to prove liability for or
invalidity of a civil claim or its amount or a criminal charge or its
punishment. Evidence of conduct or statements made in compromise
negotiations is likewise not admissible. This rule does not require the
exclusion of any evidence actually obtained during discovery merely
because it is presented in the course of compromise negotiations. This rule
also does not require exclusion when the evidence is offered for another
purpose, such as proving bias or prejudice of a witness, negativing a
contention of undue delay, or proving an effort to obstruct a criminal
investigation or prosecution; however, a party may not be impeached by a
prior inconsistent statement made in compromise negotiations.
“Rule 408 is intended to encourage settlement of suits by forbidding a party from
pointing to an opponent’s settlement offer as proof that the opponent thought he would
lose.” Goss v. Tommy Burney Homes, Inc., No. M2008-02376-COA-R3-CV, 2009 WL
2868765, at *9 (Tenn. Ct. App. Sept. 2, 2009), no appl. perm. appeal filed.
We agree with the Trial Court that the June 3, 2009 letter was not an offer to
settle. Rather, this was a unilateral declaration of final payment by Underwood. Nothing
in its own terms suggests the letter was meant to engage in negotiations to settle a
lawsuit. Further, we do not see how the jury could mistake the letter as any sort of
concession of being in the wrong and thus generating the kind of negative inference Rule
408 is designed to prevent. We find no reversible error in the Trial Court’s denying the
Underwoods’ motion in limine to exclude the June 3, 2009 letter. We affirm the
judgment of the Trial Court in its entirety.
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Conclusion
The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
Appellants, John R. Underwood and Suzanne Curtin, and their surety, if any.
____________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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