Scott Campbell v. William H. Teague ( 2010 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
Assigned on Briefs January 20, 2010
SCOTT CAMPBELL, ET AL. v. WILLIAM H. TEAGUE, ET AL.
Direct Appeal from the Chancery Court for Henderson County
No. 18534 James F. Butler, Chancellor
No. W2009-00529-COA-R3-CV - Filed March 31, 2010
This is a construction case. Appellants/Builders appeal the trial court’s award of damages
to Appellees/Homeowners pursuant to the Tennessee Consumer Protection Act, and arising
from Appellants/Builders’ breach of warranty and contract. Discerning no error, we affirm.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Affirmed
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and D AVID R. F ARMER, J., joined.
Carthel L. Smith, Jr., Lexington, Tennessee, for the appellants, William H. Teague and
William T. Teague d/b/a Teague Construction.
Lewis L. Cobb and Lowe Finney, Jackson, Tennessee, for the appellees, Scott Campbell and
Sandie Campbell.
OPINION
In 2003, Scott Campbell and his wife, Sandie (together, the “Campbells,” or
“Appellees”), were in the market for a new home. To that end, the Campbells met with
builders William H. “Junior” Teague and his son, William T. “Terry” Teague (together, the
“Teagues” or “Appellants”), who were in the process of constructing a residence at 169
Britney Lane in Lexington, Tennessee (the “Property”). Mrs. Campbell testified that, upon
first meeting with the Teagues, she and her husband expressed their desire for a well-built
home; Mrs. Campbell was specifically concerned with finding a home that would withstand
tornadoes as well as possible. According to Mrs. Campbell, the Teagues indicated that the
Property was well built and that the basement was like a “bomb shelter.” The Teagues also
indicated that their work had passed all inspections on the first pass. The Teagues further
indicated that the Property was constructed with premium lumber, and that it contained a
five-ton, high-quality HVAC unit.
Although the Campbells were impressed with the Teagues’ representations, they
expressed concern over the grading of the lot. In response, the Teagues allegedly promised
that the grading issue would be remedied by the time construction was completed. Following
this conversation, the Campbells made an offer of the full asking price, which offer the
Teagues accepted. On July 2, 2003, the Campbells signed a purchase and sales agreement.
Prior to closing on the Property, the Campbells attempted to perform a “final walk through”
as promised in the sales contract; however, the inspection could not be done because too
many things had not yet been completed. Despite this problem, the Teagues and their realtor,
assured the Campbells that everything would be finished shortly after the closing. To
assuage the Campbells’ concerns, the Teagues offered an unlimited one-year warranty on the
home. On July 31, 2003, the Campbells went ahead with the closing, purchasing the Property
for $240,500.00.
The day after the closing, the Campbells allegedly noticed a large crack in the front
porch floor. The Campbells notified the Teagues, who made no indication that the repair
would be done. Mrs. Campbell testified that, in retrospect, she suspected that the problem
with the porch existed at the time of the final walk through prior to purchase. She testified
that, when she and her husband attempted to step out onto the porch, Mr. Junior Teague
blocked her, stating that there was wet paint on the porch.
As the weeks passed, the Campbells discovered more problems with the Property.
One of these problems was a strong stench (both inside and outside the house). Ultimately,
the Campbells discovered that the smell inside the house emanated from stagnant water and
mold in the crawl space. When the Campbells asked Mr. Junior Teague about the possible
cause of the exterior smell, he allegedly explained that the odor was “methane gas,” and
attributed the odor to the alleged fact that the Teagues “did too good a job on the plumbing
vent.”
As the weeks progressed, more problems with the Property allegedly arose.
According to the Campbells’ testimonies, the floors began to buckle, the basement leaked
when it rained, walls cracked, the HVAC unit was defective, the crown molding began to
separate. The Campbells contacted Tim Ferguson, a professional building inspector, to look
at the Property for possible building code violations. Following his inspection, Mr. Ferguson
provided the Campbells with a rather long list of violations.
Eventually, more water gathered in the crawl space, mold formed on the floor joists,
and the buckling of the floor worsened. According to the record, there was also
approximately an eighteen degree temperature variation between rooms. The problem with
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the HVAC system was ultimately diagnosed as inappropriate ductwork. Specifically, the
Teagues had used ductwork designed for a three-and-one-half ton unit, but had installed a
five ton unit.
The Campbells sent a certified letter to the Teagues, demanding that the problems be
remedied. In response, the Teagues sent an inspector, Tony Blankenship, to look at the
Property. After his inspection, Mr. Blankenship affirmed Mr. Ferguson’s findings of
numerous building code violations. Following Mr. Blankeship’s inspection, the Teagues
sent word through their first attorney, Steve Beal, that they would send a written offer to buy
the house back. After hearing nothing for more than three weeks, the Campbells sent a
second letter, requesting that the Teagues buy back the Property.
By mid-May 2004, mold had almost completely covered the entire flooring system,
including the floor joists, subfloor, girders, piers, and shims. The air quality was so
compromised that the EPA recommended that the windows be left open as much as possible,
and that the HVAC system not be used at all.
On July 7, 2004, the Campbells filed suit against the Teagues, seeking damages
pursuant to the Tennessee Consumer Protection Act, punitive damages, rescission of the
contract, fees, costs, pre-judgment and post-judgment interest, and other relief to which they
may have been entitled. By November 2004, the roof was sagging in at least three places;
and yet the Teagues still had not done anything to remedy the problems or to buy back the
Property. In December 2004, the Campbells sought the help of their attorney to request that
the Teagues at least repair the HVAC system, so that the Campbells could have sufficient
heat throughout the house. In response, the Teagues’ second attorney, Brad Box, indicated
to the Campbells’ attorney that the Teagues would send someone over to repair the heat.
However, no repairman came out. The Campbells made a second request for the Teagues
to repair the heat; and, again, no repairman came.
On February 26, 2006, the parties partially settled the matter through mediation.
Specifically, the Teagues agreed to buy back the property. As part of the settlement, the
Campbells reserved the right to seek consequential damages against the Teagues, as well as
attorney’s fees under the Tennessee Consumer Protection Act. On May 19, 2007, the
Chancellor heard arguments, concerning the issue of whether certain consequential damages
were recoverable, and subsequently ruled that the Campbells could present proof of their
damages at trial.
As the Campbells sought the advice of experts in preparation for trial, it allegedly
became clear that the Property could not be repaired in a cost effective manner, and that the
house needed to be demonlished. The reports of the Campbells’ experts, Dr. Hal Deatherage
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and Dr. Ruben Shmulsky indicate that: (1) substandard grade lumber was used in the
construction of the home, (2) the structural components of the house had begun to decay, (3)
the roofing and flooring systems needed to be replaced due to decay, and (4) the house was
not cost-effective to repair.1
A bench trial was held on July 25, July 26, and November 30, 2006. At these
hearings, the Campbells presented proof of the following damages:
(1) Lost Wages $ 5,000.00
(2) Moving Expenses $ 2,980.20
(3) Construction Cost Increase $45,695.00
(4) Increase in Value of Lot $11,500.00
(5) Improvements $ 5,000.00
(6) Utilities $ 8,858.78
(7) HVAC Repair $ 6,800.00
(8) Closing Costs $ 7,387.99
(9) Mortgage Interest $26,119.67
(10) Taxes, Insurance, and PMI $10,321.46
(11) 2006 Mortgage Interest, Taxes,
Insurance, and PMI $ 3.857.22
(12) Interest on Cash Payment $ 5,946.70
(13) Mortgage Cost Increase $31,025.50
(14) Closing Costs for Buy Back $ 75.00
TOTAL $171,117.52
Following the hearings, the trial court took the case under advisement. On November
15, 2007, the court issued its written findings by letter. In relevant part, the Court found that:
[The Campbells] were particularly interested in a well-built
home with a basement because of Mrs. Campbell’s fear of
tornadoes. Mrs. Campbell also had experience in the lumber
industry and was particularly interested in having good lumber
used in the construction.... The Court will not attempt to go
through all of the problems that began to be complained of,
1
Prior to trial, the Teagues filed a motion in limine, challenging Dr. Deatherage’s qualifications to
testify as an expert witness on the increased costs to the Campbells to reconstruct the same residence. On
July 27, 2009, the court denied the motion in limine, and allowed Dr. Deatherage to testify. No issue has
been raised concerning the motion in limine.
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some of them included a large crack in the front porch, which
was never repaired. The HVAC was not working
properly...[t]his was not repaired and the [Campbells] did have
to repair it themselves. There were other problems with mold,
foul odors, and buckling of the floor.... [The Campbells] sought
the advice of qualified experts who opined that substandard
lumber was used in the construction, that there was decay
beginning in the structural components, that the roofing and
flooring systems would need replacing and the home was not
cost effective to repair.
Based upon its conclusion that the Teagues “acted in an unfair and deceptive manner
toward the [Campbells],” and that the Teagues had violated the Tennessee Consumer
Protection Act, as codified at Tenn. Code Ann. §47-18-101 et seq., the court awarded the
Campbells damages as follows:
(1) Lost Wages $ 5,250.00
(2) Moving Expenses $ 2,980.20
(3) Construction Cost Increase $45,695.00
(4) Increase in Value of Lot $14,450.00
(5) Improvements $ 5,000.00
(6) Utilities $ 4,400.00
(7) HVAC Repair $ 6,800.00
(8) Closing Costs $ 7,387.99
(9) Mortgage Interest $26,119.67
(10) Taxes, Insurance, and PMI $10,321.46
(11) 2006 Mortgage Interest, Taxes,
Insurance, and PMI $ 3.857.22
(12) Interest on Cash Payment $ 5,946.70
(13) Mortgage Cost Increase $31,025.50
(14) Closing Costs for Buy Back $ 75.00
TOTAL $169,308.08
In addition, the court concluded that the Teagues were entitled to the following set-
offs against the $169,308.08 award:
(1) Painting and Repairs $2,950.00
(2) Country River Pools Estimate $1,000.00
(3) Discount Carpet Estimate $3,491.64
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(4) Rental from 8/1/03 to 3/31/06 at
$700.00 per month $22,400.00
TOTAL: $29,841.64
In addition, the trial court found that the Campbells were entitled to pre-judgment
interest in the amount of 7% per annum from the date of closing to the date of entry of the
judgment, and that post-judgment interest would accrue at a rate of 10% per annum on the
unpaid balance of the judgment until same was paid in full. Based upon the court’s
conclusion that the Teagues had acted in an unfair and deceptive manner, thereby violating
the Tennessee Consumer Protection Act, the court awarded the Campbells attorney’s fees and
expenses, and assessed costs against the Teagues. By letter of December 12, 2007, the Court
stated its findings, regarding pre-judgment interest, as follows:
1. Prejudgment interest at 7% per annum should be recalculated
on items comprising the total judgment as follows:
(a) Lost wages $5,250.00
Because the Court could not determine exactly what date the
wages were lost, the Court determined that the last day of lost
wages would be the last day of the trial. Therefore, the lost
wages pre-judgment interest would be computed from
November 30, 2006
(b) Moving Expenses $2,980.00
Compute prejudgment interest from May 31, 2006.
(c) Construction Cost Increase $45,695.00
Compute interest from May 31, 2006
(d) Increase in Value of Lot $14,450.00
Compute interest from May 31, 2006
(e) Improvements made by Plaintiffs $ 5,000.00
Compute interest from May 31, 2006
(f) Utilities $ 4,400.00
Compute interest from May 31, 2006
(g) HVAC Repairs $ 6,800.00
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Compute interest from May 31, 2006
(h) Closing Costs on Mortgage Loan $ 7,387.99
Compute interest from July 31, 2003
(date of original purchase)
(i) Mortgage Interest from 8/1/03 to
3/31/06 $26,119.67
Compute interest from April 1, 2006
(Date of retransfer of property)
(j) Taxes, Insurance, Private Mortgage
Insurance through 2005 $10,321.00
Compute interest from January 1, 2006
(k) 2006 Taxes, Insurance, Private Mortgage
Insurance and Mortgage Interest $ 3,857.22
Compute interest from May 31, 2006
(l) Interest on cash down payment $ 5,946.70
Compute interest from November 30, 2006
because this figure represents interest to that date.
(m) Mortgage Cost Increase $31,025.50
Interest denied because not yet accrued
(n) Closing Costs for Buy-Back $ 75.00
Compute interest from May 31, 2006
In addition, the trial court awarded the Campbells attorney’s fees in the amount of
$52,804.75, and discretionary costs in the amount of $11,297.82, with both amounts subject
to post-judgment interest only. The trial court purported to enter a final judgment on January
22, 2009, and the Teagues filed a timely notice of appeal. Following review of the appellate
record, this Court determined that the January 22, 2009 Order was not final because it did not
adjudicate: (1) the Campbells’ claim for treble damages under the Consumer Protection Act,
(2) the Campbells’ claims for punitive damages, (3) the Campbells’ motion for sanctions
filed on July 29, 2005, (4) the Teagues’ motion in limine, and (5) the Campbells’ motion for
temporary restraining order filed on August 15, 2007. On January 21, 2010, this Court
entered an order, instructing the Appellants to supplement the record with rulings on these
matters. On February 3, 2010, Appellants filed a supplemental volume (Vol. 16) with the
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Court, which supplemental volume contains an amended final decree, an order on the motion
for sanctions, and order on alternative dispute resolution, an order on the motion in limine,
and an order on the motion for temporary restraining order. The amended final judgment was
filed in the trial court on January 28, 2010, nunc pro tunc to January 22, 2009, and awards
the Campbells judgment as follows:
Damages: $169,308.08
Prejudgment Interest: $ 17,052.53
Attorney’s Fees: $ 52,804.75
Expenses and Costs: $ 11,297.82
Subtotal $250,463.18
Offsets Allowed Defendants ($ 29,841.64)
TOTAL: $220,621.54
Following review of this order, along with the other supplemental filings, it appears
that the case is now in the proper posture for our review. On November 30, 2009, the
Campbells filed a motion with this Court, requesting that the Court strike any and all
testimony of Greg Bird, the building inspector for the City of Lexington, from the Teagues’
brief. The Teagues did not oppose this motion; by Order of December 23, 2009, this Court
granted the Campbells’ motion.
The Teagues raise three issues for review, which we restate as follows:
1. Did the trial court err in finding that the Teagues had violated
the Tennessee Consumer Protection Act.
2. Based upon the fact that the Teagues repurchased the
property from the Campbells, to what damages are the
Campbells entitled?
3. If the Campbells are entitled to damages in this case, then
does the proof support the amount of the damages awarded?
In the posture of Appellee, the Campbells raise the issue of whether the trial court
erred in allowing the Teagues an offset against the damages, and also ask this Court to award
them attorney’s fees and expenses accrued in defense of this appeal.
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Because this case was tried by the court sitting without a jury, we review the case de
novo upon the record with a presumption of correctness of the findings of fact by the trial
court. Unless the evidence preponderates against the findings, we must affirm, absent error
of law. See Tenn. R. App. P. 13(d). Furthermore, when the resolution of the issues in a case
depends upon the truthfulness of witnesses, the trial judge who has the opportunity to observe
the witnesses and their manner and demeanor while testifying is in a far better position than
this Court to decide those issues. See McCaleb v. Saturn Corp., 910 S.W.2d 412, 415
(Tenn.1995); Whitaker v. Whitaker, 957 S.W.2d 834, 837 (Tenn. Ct. App.1997). The weight,
faith, and credit to be given to any witness' testimony lies, in the first instance, with the trier
of fact, and the credibility accorded will be given great weight by the appellate court. Id.; see
also Walton v. Young, 950 S.W.2d 956, 959 (Tenn.1997).
Tennessee Consumer Protection Act
On appeal, the Teagues contend that, due to the partial settlement entered into by the
parties (wherein the Teagues agreed to buy back the property), this case no longer hinges
upon the defective nature of the home. Based upon this fact, the Teagues argue that the
Tennessee Consumer Protection Act, Tenn. Code Ann. §47-18-101 et seq. (“TCPA”), is not
applicable and that, consequently, the trial court erred in applying the TCPA to award the
Campbells their attorney’s fees and expenses as provided by statute therein.
As noted by our Supreme Court in the recent case of Fayne v. Vincent, 301 S.W.3d
162 (Tenn. 2009), the TCPA “was passed, in part, to protect consumers from unfair and
deceptive acts and practices occurring ‘in the conduct of any trade or commerce’ in the state
and to provide a means ‘for maintaining ethical standards of dealing between persons
engaged in business and the consuming public.’” Id. at 172 (quoting Tenn. Code Ann.§
47-18-102(2), -102(4)). The Act is to be liberally construed in order to enable it to protect
the consumer and to promote the other policies that motivated its passage. Tenn. Code Ann.
§ 47-18-102; Myint v. Allstate Ins. Co., 970 S.W.2d at 926; Morris v. Mack's Used Cars,
824 S.W.2d 538, 540 (Tenn.1992); see also Tenn. Code Ann. § 47-18-115 (noting that the
Act is “remedial legislation,” which should be construed to effectuate its purposes).2
However, relying, in part, on the TCPA’s purpose of "maintaining ethical standards of
dealing between persons engaged in business and the consuming public," Tenn. Code Ann.
§ 47-18-102(4), courts have limited the Act's application to "transactions between businesses
and consumers and not to casual, non-commercial transactions between two individuals."
White v. Eastland, No. 01A01-9009-CV-00329, 1991 WL 149735, at *3 (Tenn. Ct. App.
2
The TCPA is also to be construed consistently with the Federal Trade Commission and federal
courts' interpretations of the Federal Trade Commission Act. Tenn. Code Ann. § 47-18-115. Fayne v.
Vincent, 301 S.W.3d at 173.
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Aug.9, 1991) (No Tenn. R. App. P. 11 application filed).
In order to accomplish its goal, the TCPA forbids “unfair or deceptive acts or
practices affecting the conduct of any trade or commerce.” Tenn. Code Ann. § 47-18-104(b).
The Act defines “trade,” “commerce,” or “consumer transaction” as “the advertising, offering
for sale, lease or rental, or distribution of any goods, services, or property, tangible or
intangible, real, personal, or mixed, and other articles, commodities, or things of value
wherever situated.” Tenn. Code Ann. § 47-18-103(11). The Act covers the transfer of real
property and applies to the Campbells, who fall under the definition of “consumer” as set out
in the Act.3 See Ganzevoort v. Russell, 949 S.W.2d 293, 297 (Tenn. 1997). In addition to
the general prohibition against unfair and deceptive acts or practices affecting the conduct
of any trade or commerce, the TCPA also sets out specific acts and practices that are
unlawful under the Act. As it relates to the case at bar, the applicable portion of the TCPA
is found at Tenn. Code Ann. §47-18-104(b)(7), which provides that it is unlawful to
represent “that goods or services are of a particular standard, quality or grade, or that goods
are of a particular style or model, if they are of another.” Moreover, Tenn. Code Ann. §47-
18-104(b)(27) is a “catch-all” provision, prohibiting “any other act or practice which is
deceptive to the consumer or any other person.”
In order to recover under the TCPA, the plaintiff must prove: (1) that the defendant
engaged in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that
the defendant's conduct caused an “ascertainable loss of money or property, real, personal,
or mixed, or any other article, commodity, or thing of value wherever situated....” Tenn. Code
Ann. § 47-18-109(a)(1). As discussed below, the defendant's conduct need not be willful or
even knowing; however, if it is, the TCPA permits the trial court to award treble damages.
Tenn. Code Ann. § 47-18-109(a)(3); Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901, 910
n. 13 (Tenn.1999); Haverlah v. Memphis Aviation, Inc., 674 S.W.2d 297, 306 (Tenn. Ct.
App.1984).
The TCPA does not impose a single, bright-line standard for determining whether a
particular act or practice is deceptive for the purpose of Tenn. Code Ann. §
47-18-104(b)(27); Fayne v. Vincent, 301 S.W.3d at 177 (relying on Ganzevoort v. Russell,
949 S.W.2d at 300. As a result, the standards to be used in determining whether a
representation is “unfair” or “deceptive” under the TCPA are legal matters to be decided by
the courts. Tucker v. Sierra Builders, 180 S.W.3d 109, 116 (Tenn. Ct. App. 2005) (internal
3
Tenn. Code Ann. § 47-18-103(2) defines “consumer” as “any natural person who seeks or acquires
by purchase, rent, lease, assignment, award by chance, or other disposition, any goods, services, or property,
tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever
situated.”
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citations omitted). However, whether a specific representation in a particular case is “unfair”
or “deceptive” is a question of fact. Id. Although there is no single standard for all cases, we
do know that, in order to be considered deceptive, an act is not necessarily required to be
knowing or intentional, and negligent misrepresentations may be found to be violations of
the Act. Fayne, 301 S.W.3d at 177 (relying on Holladay v. Speed, 208 S.W.3d 408, 416
(Tenn. Ct. App.2005; Tucker v. Sierra Builders, 180 S.W.3d at 115; Smith v. Scott Lewis
Chevrolet, Inc., 843 S.W.2d 9, 13 (Tenn. Ct. App.1992); Jeff Mueller, New Home
Construction Liability, Tenn. B.J., May 2007, at 18, 20)). A deceptive act or practice is, in
essence, “a material representation, practice or omission likely to mislead ... reasonable
consumer[s]” to their detriment. Ganzevoort v. Russell, 949 S.W.2d at 299 (quoting Bisson
v. Ward, 160 Vt. 343, 628 A.2d 1256, 1261 (1993)). In Tucker v. Sierra Builders, this Court
explained:
A deceptive act or practice is one that causes or tends to cause
a consumer to believe what is false or that misleads or tends to
mislead a consumer as to a matter of fact.FN10 Thus, for the
purposes of the TCPA and other little FTC acts, the essence of
deception is misleading consumers by a merchant's statements,
silence, or actions. Jonathan Sheldon & Carolyn L. Carter,
Unfair and Deceptive Acts and Practices § 4.2.3.1, at 118-19
(5th ed.2001) [hereinafter Unfair and Deceptive Acts and
Practices].
The concept of unfairness is even broader than the concept of
deceptiveness, and it applies to various abusive business
practices that are not necessarily deceptive. Unfair and
Deceptive Acts and Practices § 4.3.3.1, at 156. In the 1994
legislation reauthorizing the Federal Trade Commission,
Congress undertook to codify the Commission's policy statement
on unfairness by stating that an act or practice should not be
deemed unfair “unless the act or practice causes or is likely to
cause substantial injury to consumers which is not reasonably
avoidable by consumers themselves and not outweighed by
countervailing benefits to consumers or to competition.” 15
U.S.C.A. § 45(n). Following the mandate of Tenn. Code Ann.
§ 47-18-115, we will use this description of unfairness to guide
our interpretation of Tenn. Code Ann. § 47-18-104(a).
Tucker v. Sierra Builders, 180 S.W.3d 116-117 (footnotes omitted).
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Turning to the record in the instant case, we find several facts upon which the trial
court could base a determination that the Teagues violated the TCPA.
Licensing
It is undisputed that the Teagues held themselves out as qualified builders. However,
there is some question in the trial record as to whether the Teagues were properly licensed
in this case. When licensed by the Tennessee State Board of Licensing Contractors, a
contractor is assigned certain monetary limitations, over which he or she is not authorized
to act as a licensed contractor. Tenn. Code Ann. §62-6-111(a)(3). For example, if a
contractor’s monetary limit is $250,000, that contractor may not enter into contracts for work
in excess of that amount. Tenn Code Ann. § 62-6-136 provides, in pertinent part:
(a) It is unlawful for any person, firm or corporation to represent
itself as a licensed contractor or to act in the capacity of a
“contractor” as defined in §§ 62-6-102, or 62-37-103, and
related rules and regulations of this state, or any similar statutes,
rules and regulations of another state, while not licensed, unless
such person, firm or corporation has been duly licensed under §
62-6-103 or § 62-37-104.
(b) In addition to the penalties set out in § 62-6-120, §
62-37-114 or § 62-37-127, a violation of this section shall be
construed to constitute an unfair or deceptive act or practice
affecting the conduct of trade or commerce under the Tennessee
Consumer Protection Act of 1977, compiled in title 47, chapter
18, part 1; and, as such, the private right of action remedy under
the Tennessee Consumer Protection Act of 1977 shall be
available to any person who suffers an ascertainable loss of
money or property, real, personal or mixed, or any other article,
commodity or thing of value wherever situated as a result of the
violation.
Tenn Code Ann. § 62-6-136(a)-(b). In short, a contractor who holds himself or herself out
as a properly licensed contractor, and who is not, in fact, properly licensed commits a per se
violation of the TCPA.
The undisputed proof in this case is that the Teagues’ license had a monetary limit of
$200,000; however, they contracted to build a $240,500.00 house (even if we exclude the
value of the pool, the house was still valued over $200,000). Relying upon the 2002 version
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of Tenn. Code Ann. §62-6-102(D), which was in effect at the time of the construction of the
home at issue in this case, the Teagues argue that they are excepted from the monetary
limitation. Tenn Code. Ann. §62-6-102(D)(2002), provides that:
(D) “Contractor” does not include:
(I) Undertaking in one’s county of residence
solely to construct residences or dwellings on
private property for the purpose of resale if such
county has a population [less than 56,000].
On appeal, the Campbells assert that, at the time the Campbells’ house was built,
Henderson County was not within the specific population range contemplated in Tenn. Code
Ann. §62-6-102(D)(2002).4 Consequently, they assert that the Teagues’ exemption
argument is without merit. Neither party has cited this Court to the place in the record where
the Henderson County population may be found, nor is it incumbent upon this Court to sift
through the record in order to find proof to substantiate the positions of the parties. See
Redbud Coop. Corp. v. Clayton, 700 S.W.2d 551, 557 (Tenn. Ct. App.1985). Consequently,
we cannot find, as a matter of fact or law, that Henderson County was an exempt county
under Tenn Code. Ann. §62-6-102(D)(2002). That being said, there is sufficient proof,
beyond the licensing issue, from which the trial court could have concluded that the Teagues’
practices were in violation of the TCPA.
Lumber
The proof submitted at trial indicates that some of the lumber used in the construction
of the subject home was unstamped, ungraded, and/or undersized. In his evidentiary
deposition, Dr. Hal Deatherage, a professor of civil and environmental engineering at the
University of Tennessee and the owner of Construction Engineering Consultants, stated that
his inspection of the property revealed numerous construction defects, including the use of
ungraded lumber.
As indicated by the proof, the Southern Building Code requires use of grade 2 or
higher wood in the construction of homes because there are no strength requirements
associated with ungraded lumber. Consequently, use of ungraded lumber causes a house to
be structurally unsound and a safety hazard. In addition to finding ungraded wood in the
4
The Tennessee Attorney General rendered an opinion, holding that the population limits imposed
by Tenn. Code Ann. §62-6-102(D)(2002) are unconstitutional. 99 Tenn. AG 112, 1999 WL 321919(Tenn.A.G.). This statute has since been amended to remove the population limits.
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home, Dr. Deatheridge further testified that inappropriate spans were used in the construction
process, i.e., the lumber pieces were cut too long for the size of the lumber that was used.
Dr. Ruben Shmulsky, an expert in wood, wood-based products, and light-frame
construction, testified at trial that, upon inspection of the home, he also found many ungraded
pieces of wood, which he opined was a significant variance from the applicable building
standards. While the Teagues claimed that all lumber used in the construction of the subject
house was purchased from 84 Lumber Company, the receipts and invoices produced did not
add up to the full amount of lumber needed to construct the home. At the trial, the Teagues
eventually produced a receipt from 84 Lumber, which receipt purported to be for the missing
lumber. The problem with this invoice is that it was dated over one year before the Teagues
began construction on the Campbells’ house. Moreover, the claim that this receipt was for
lumber used for construction of the subject house is contradicted by the Teagues’ own
testimony that all construction materials were purchased with proceeds from their
construction loan, which loan was not obtained until June 2002, more than a year after the
date of the proffered invoice. When this discrepancy was brought to his attention, Mr. Junior
Teague testified that he had bought the lumber for the Campbells’ project fourteen months
prior to construction because the lumber was cheaper at that time. However, this claim was
shown to be false, as the lumber listed on the disputed 2002 invoice was significantly higher
priced than the same type of lumber that was purchased fourteen months later. The Teagues
ultimately admitted that they were building other houses during 2002, and that the disputed
lumber could actually have been used in those projects. The Teagues relied upon the
testimony of Charlie Conrad, a representative of 84 Lumber, to support their claim that all
of the lumber used in the construction of the subject home was purchased from 84 Lumber
and was of good quality. However, Mr. Conrad admitted that he did not know if the Teagues
purchased lumber from other sources, that the Teagues were building other houses in the
same subdivision at the same time they were constructing the Campbells’ house, and that it
would not make sense for someone to buy lumber fourteen months prior to beginning the
project. Moreover, while Mr. Conrad first testified that the lumber at issue was delivered to
the job site, he later changed his testimony to indicate that the lumber was, in fact, delivered
to Junior Teagues’ house. This change in testimony corresponds with Terry Teagues’
testimony that lumber used in the Campbells’ home was stored behind his father’s house
prior to use in the project. This fact, perhaps, explains the most egregious facts surrounding
the lumber used in the construction of the Campbells’ house.
Dr. Shmulsky testified, and photos supporting his testimony were admitted into
evidence, that one of the issues he found was I-beams under the house that were splitting
from “weathering associated with months-long storage outside,” sub-flooring that was
delaminated (i.e., separated), and multiple colonies of spores and mold on wood throughout
the house. Dr. Shmulsky testified that delamination of the sub-floor would be caused by the
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wood being exposed to moisture, and opined that “most of the moisture problems,
weathering, and delamination occurred prior to or during construction.” The photos support
this conclusion, as they show bad wood scattered throughout the house, as opposed to
concentrated in one area (which would indicate damage caused by a water leak). From all
of the evidence in the record, it appears that the Teagues either purchased sub-standard
lumber, or stored good lumber outside so that it deteriorated to the point of being unsuitable
for use in home construction. Regardless, the fact remains that much of the lumber used in
the home was defective and, in fact, was already growing dangerous mold at the time it was
installed.
General Construction of the Home
Due in large part to the use of unfit, or water damaged, wood, Dr. Shmulsky opined
that there were five major problems with the overall construction of the home. These
problems included: (1) moisture infiltration, (2) mildew and decay, (3) bad construction of
the main floor of the house, (4) bad construction in the attic/roof of the house, and (5)
mineral streaking on the finished main floor of the house.
It is undisputed that there was water leaking into the basement area, and this fact is
evinced by photos showing water marks on the walls of the basement. In addition, and this
too is undisputed, the grading on the property was such that water did not drain properly, and
accumulated in the crawl space under the house. Dr. Shmulsky testified that his inspection
revealed that the crawl space was muddy, and that there were waterlines on the cement
blocks, suggesting times of standing water in the crawl space. According to Dr. Schmulsky,
this standing water feeds the mold spores that are already present in the wood, causing mold
infestation and spreading to all parts of the flooring system. Dr. Shmulsky further opined
that this excess moisture was also responsible for the mineral streaking in the main floor of
the house. To further compromise the flooring system, damaged I-beams were used, and Dr.
Shmulsky found that some I-beams were splitting and that one was, in fact, crushed.
Moreover, some of the I-beams were not resting on the piers so as to properly support the
structure.
In the attic, Dr. Shmulsky found approximately ten rafter ceiling joists that were
molding and decaying, which would account for the alleged sagging of the roof. He also
found the unstamped and wrong sized lumber that is discussed above.
Dr. Shmulsky’s testimony is corroborated by that of Tim Ferguson, a home inspector.
According to Mr. Ferguson’s report, the Campbells’ home had some twenty-six building
code violations and eighteen workmanship violations. The Teagues’ own inspector, Tony
Blankenship, could not refute these findings.
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Dr. Deatheridge also opined that the construction of the home was inferior and
defective. Specifically, he testified that: (1) ungraded lumber was used in the construction,
(2) floor trusses had been compromised, (3) piers had been compromised (the Teagues admit
that many of the cinder blocks used in the construction were seconds), (4) there were
inadequate foundations for the piers, (5) there was a water infiltration problem, (6)there was
deterioration of framing lumber, (7) there was evidence of rot and mold, (8) the roof sagged
due to spans that were too long, and (9) there was excessive cracking in the concrete. Dr.
Deatheridge opined that the repair costs would total approximately $217,643.00.
Perhaps most egregious is the fact that, despite giving the Campbells a one-year
express warranty when they purchased the home, the Teagues repeatedly refused to honor
that agreement, even though they knew of the safety concerns and code violations. For
example, the Teagues refused to fix a large crack in the front porch concrete and, in fact,
there is some evidence that the Teagues blocked the Campbells’ final walk-through
inspection of the porch. In addition, the Teagues ignored the Campbells’ complaints (and
Mr. Ferguson’s report) that the flooring system needed repairs, and that there were numerous
code violations. The Teagues refused to repair the HVAC system, forcing the Campbells to
endure winter temperatures without proper heat. Even though made in writing, and made
several times, these requests were systematically ignored by the Teagues.
From all of the above, we conclude that there is ample evidence to support the trial
court’s finding that the Teagues acted in violation of Tenn. Code Ann. §47-18-104(b)(7),
by representing that the goods and services were of a particular standard, while they were
not, and in violation of Tenn. Code Ann. §47-18-104(b)(27) by engaging in deceptive acts
and practices. Consequently, the trial court did not err in awarding the Campbells’ attorney’s
fees as provided under the Act. The Teagues have raised no issue concerning the amount of
fees awarded; however, after reviewing the record, we conclude the preponderance of the
evidence supports the trial court’s award of $52,804.75 in attorney’s fees and $11,297.82
in expenses.
Other Damages
Waiver of Warranties
As noted above, the Teagues provided the Campbells with a “Builder’s One Year
Warranty,” which was admitted into evidence as Trial Exhibit 6. This warranty provides:
I, William Teague hereby agree[s] to provide a One (1) year
warranty, excluding manufacturers warranties, and “Act[s] of
God” on the property located at 168 Britney Lane. This is a
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workmanship warranty and excludes routine maintenance and
normal wear and tear.
This warranty is signed by Mrs. Campbell and by both Junior Teague and Terry Teague.
Paragraph 8 of the Purchase Agreement was subsequently replaced with an
amendment titled “Amendment to Inspection Contingency,” which was admitted into
evidence as part of Trial Exhibit 4. This amendment, which is only signed by Mr. Campbell,
provides for a waiver of a home inspection except for the final inspection to insure that the
Property was in the same condition as it was in on the date of the Purchase Agreement, and
to determine that all repairs/replacements had been completed. This provision provides:
CONDITION OF PROPERTY. The improvements of said
property are to be delivered in as good a condition on the date of
closing as they were on the date of [the] Purchase and Sale
Agreement, ordinary wear and tear excepted. All
heat/air/plumbing/electrical equipment, appliances and septic
tank to be in good working condition at [the] time of closing and
all warranties and representations contained herein shall become
null and void after closing of said property.
Relying upon this provision, the Teagues argue that the Campbells waived any warranties,
express or implied, and that the Campbells are, consequently, barred from recovery. We
disagree.
In Dixon v. Mountain City Construction Co., 632 S.W.2d 538 (Tenn.1982), our
Supreme Court adopted the doctrine of the implied warranty of good workmanship and
materials as applied to newly built dwellings, stating:
[W]e hold that in every contract for the sale of a recently
completed dwelling, and in every contract for the sale of a
dwelling then under construction, the vendor, if he be in the
business of building such dwellings, shall be held to impliedly
warrant to the initial vendee that, at the time of the passing of
the deed or the taking of possession by the initial vendee
(whichever first occurs), the dwelling, together with all its
fixtures, is sufficiently free from major structural defects, and is
constructed in a workmanlike manner, so as to meet the standard
of workmanlike quality then prevailing at the time and place of
construction; and that this implied warranty in the contract of
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sale survives the passing of the deed or the taking of possession
by the initial vendee.
Id. at 543.
The Dixon Court also noted that:
This warranty is implied only when the written contract is silent.
Builder-vendors and purchasers are free to contract in writing
for a warranty upon different terms and conditions or to
expressly disclaim any warranty.
Id. at 542.
Subsequently, this Court, in Dewberry v. Maddox, 755 S.W.2d 50, 55 (Tenn. Ct. App.
1988), stated:
[W]e think that in order to have a valid disclaimer of the implied
warranty, it must be in clear and unambiguous language. The
buyer must be given “adequate notice of the implied warranty
protections that he is waiving by signing the contract.”
Id. at 55 (quoting Tyus v. Resta, 328 Pa. Super. 11, 476 A.2d 427, 432 (1984)); see also
Axline v. Kutner, 863 S.W.2d 421, 424 (Tenn. Ct. App.1993). In so holding, the Dewberry
Court noted that “[i]t would completely defeat the precedent set by Dixon if a seller could
circumvent the implied warranty by expressly warranting some aspect of a new house which
has nothing to do with the workmanship or the materials used.” Dewberry, 755 S.W.2d at
54. The Dewberry Court ultimately held that the attempted disclaimer at issue in that case
was not “adequate to disclaim the implied warranty,” because such waiver “must be in clear
and unambiguous language.” Id.5 Specifically, the Court reasoned that:
5
The purported waiver at issue in Dewberry provides, in pertinent part:
Seller agrees to have plumbing, heating, electrical, appliances, and air
conditioning systems in good working order at the time of closing....
Purchaser accepts Property in its existing condition, no warranties or
representations having been made by Seller or Agent which are not
expressly stated herein.
(continued...)
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Because the buyer is completely relying on the skills of the
vendor-builder in this situation, we think that in order to have a
valid disclaimer of the implied warranty, it must be in clear and
unambiguous language. The buyer must be given “adequate
notice of the implied warranty protections that he is waiving by
signing the contract.” Tyus v. Resta, 328 Pa. Super. 11, 476
A.2d 427, 432 (1984). In addition, such a “disclaimer” must be
strictly construed against the seller. Id.
Dewberry, 755 S.W.2d at 55.
In the subsequent case of Axline v. Kutner, 863 S.W.2d 421 (Tenn. Ct. App. 1993),
this Court again found that a disclaimer almost identical to the one at issue in Dewberry, see
fn. 5, was inadequate to disclaim the implied warranty. In addition, the Axline Court held
that the inclusion of a provision in the sales contract, providing for a “1 year builders
warranty” was “meaningless,” and was not sufficient to avoid the implied warranty of good
workmanship and materials “because there is no indication [as to] what the builder is
warranting.” Axline, 863 S.W.2d at 424.
Based upon the foregoing authority, it is clear that no waiver of the implied warranty
of good workmanship and material is present in this case. Specifically, there is no express
provision notifying the Campbells that they are waiving the implied warranties. Moreover,
the inclusion of a one year builder’s warranty is not sufficient, under the Axline case, to
waive the warranties implied in law.
Types of Damages Allowed
The Teagues primary argument concerning the award of damages in this case is that,
because of the buy-back of the property, the Campbells should not receive additional
damages in this case. However, the trial court specifically ruled that consequential damages
were allowed above and beyond the buy-back price. We find that this ruling was not in error.
In Edenfield v. Woodlawn Manor, Inc., 462 S.W.2d 237, 241 (Tenn. Ct. App.1970),
this Court explained the relationship between the two measures of damages for defects or
omissions in the performance of construction contracts, to wit:
As a general rule, the measure of damages is the cost of
5
(...continued)
Dewberry, 755 S.W.2d at 54.
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correcting the defects or completing the omissions, rather than
the difference in value between what ought to have been done
in the performance of the contract and what has been done,
where the correction or completion would not involve
unreasonable destruction of the work done by the contractor and
the cost thereof would not be grossly disproportionate to the
results to be obtained. On the other hand, the courts generally
adhere to the view that if a builder or contractor has not fully
performed the terms of the construction agreement, but to repair
the defects or omissions would require a substantial tearing
down and rebuilding of the structure, the measure of damages is
the difference in value between the work if it had been
performed in accordance with the contract and that which was
actually done, or (as it sometimes said) the difference between
the value of the defective structure and that of the structure if
properly completed. 13 Am.Jr.2nd, pp. 79, 80, 81 Section 79.
Edenfield v. Woodlawn Manor, Inc., 462 S.W.2d at 241. In short, 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. See, e.g., Estate of Jesse v. White, 633 S.W.2d
767 (Tenn. Ct. App. 1982). This is especially true when the structure involved is the owner’s
home. Edenfield, 462 S.W.2d at 237.
In addition to damages associated with diminution in value and cost of repairs, courts
may also award all damages that are the normal and foreseeable result of a breach of contract.
Holladay v. Speed, 208 S.W.3d 408, 415 (Tenn. Ct. App. 2005) (citing Morrow v. Jones,
166 S.W.3d 254 (Tenn. Ct. App. 2004)). These types of damages include reasonably
foreseeable consequential and incidental damages. Id. In the present case, the parties
stipulated that the Campbells did not need to prove a breach of contract in order to recover
consequential damages. Consequently, the only issue the trial court had to determine was the
amount of the consequential damages to which the Campbells are entitled.
In Isaacs v. Bokor, 566 S.W.2d 532, 536 (Tenn. 1978), a case involving rescission
and restitution, our Supreme Court approved a jury’s award of purchase payments, interest
payments, and other incidental expenses to the purchaser of a residence. Relying upon its
previous holding in Isaacs, our Supreme Court, in Mills v. Brown, 568 S.W.2d 100, 103
(Tenn. 1978), held that “a purchaser who has been the victim of fraud or mistake may
recover, in addition to the purchase price, other damages which he may have incurred in good
faith by reason of mistake, such as cost of improvements and the like.”
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In fact, the range of potentially recoverable consequential and incidental damages is
very broad and varies from case to case. We now turn to discuss the specific damages
awarded in this case to determine whether they are allowable under the law of our State and,
if so, whether the proof in the record supports the amount(s) awarded by the trial court.
Specific Consequential Damages Awarded to the Campbells
1. Lost Wages
In the case of Gray v. Johnson Mobile Homes of Tennessee, Inc., No. W2001-
01982-COA-R3-CV, 2003 WL 1618084 (Tenn. Ct. App. March 26, 2003), a purchaser of
a defective mobile home presented proof of lost wages, and sought recovery of the lost wages
and mortgage payments from the manufacturer and seller of the mobile home. Id. In
affirming the trial court’s award of damages to the purchaser, this Court concluded, without
discussion, that the award of lost wages as a consequential damage was proper. Id. at *4.
In the case at bar, the Campbells presented uncontested proof that Mr. Campbell
suffered lost wages as a direct consequence of the Teagues’ breach of contract, breach of
warranty, and violation of the TCPA. Specifically, Mr. Teague testified that, as a result of
having to have the home inspected, and having to have repairs made to the home, he missed
in excess of seventeen days of work. The undisputed testimony was that Mr. Campbell made
$37.50 per hour, or $300 per eight-hour day. We conclude that the preponderance of the
evidence supports the trial court’s award of $5,500.00 in lost wages.
2. Interest on Cash Portion of Purchase Price, Mortgage Payments, Insurance, Taxes and
Moving Expenses
In Turner v. Benson, 672 S.W.2d 752 (Tenn. 1984), a breach of contract case
involving a buyer’s failure to close on the purchase of a residence, our Supreme Court held
that “every item of expense incurred by plaintiffs as a direct result of owning two homes was
within the contemplation of the parties at the time the contract was executed and is
recoverable.” Id. at 756. In the Turner case, these damages included interest paid by the
non-breaching party on money borrowed as a result of the defaulting buyer’s breach, and also
included interest on the cash that should have been paid by the breaching party at the
scheduled closing. Id. In addition, this Court approved the trial court’s consequential
damages award for moving expenses, repair costs necessary to maintain the residence,
insurance costs, and utilities. Id. at 756-57. Concerning the award of utilities, the Turner
Court held that these expenses were incurred in an effort to mitigate damages, and opined
that, “[h]ad the plaintiffs failed to insure the property and a loss resulted as a result thereof,
they could easily have been chargeable with failure to carry such insurance. The same is true
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with respect to the cost of heating the premises.” Id. at 757 (internal citations omitted).
In Gray v. Johnson Mobile Homes of Tennessee, Inc., this Court affirmed the award
of mortgage payments to the purchaser of the defective mobile home. Gray, 2003 WL
1618084, at *4. Similarly, in Isaacs, our Supreme Court held that interest should be awarded
to a rescinding purchaser for the time period that the rescinding purchaser failed to have the
benefit of the purchase price. Isaacs, 566 S.W.2d at 529; see also Masson v. Swan, 53 Tenn.
450 (1871) (where the court allowed recovery of taxes paid during the period of occupancy).
Our courts have held that, when rescission is granted, a purchaser is entitled to the
purchase money and any considerations paid for the property. Estate of Minton v. Markham,
625 S.W.2d 260, 262 (Tenn.1981). Relying upon Estate of Minton, this Court, in Harrison
v. Laursen, No. 01-A-01-9204-CV-001771992, 1992 WL 301309 (Tenn. Ct. App. Oct. 23,
1992), allowed recovery of the purchase price, plus taxes paid on the property. Harrison,
1992 WL 301309, at *4. The court also noted that interest on the purchase money could be
an appropriate award as well. Id. at *3 (citing Mason v. Lawing, 78 Tenn. (10 Lea) 264, 267
(Tenn. 1882)).
Turning to the record in this case, the Campbells purchased the Property from the
Teagues for the purchase price of $240,500.00. The purchase price was paid from proceeds
from a Bank of America loan in the amount of $216,450.00, with a 5.25% interest rate, and
with cash in the amount of $22,993.08. The trial court awarded the Campbells $5,946.70 in
interest on the cash payment of $22,993.08 (or 10% per annum). Following our review, we
conclude that this amount is supported by a preponderance of the evidence. In addition, the
court awarded the Campbells all of the interest paid on the mortgage, from the closing date
to the date of the buy-back, in the total amount of $40,298.35 (which amount includes
mortgage interest, taxes, insurance, and mortgage insurance). The court also awarded the
Campbells their initial closing costs of $7,387.99, as well as the $75.00 closing costs for the
buy-back. Based upon the foregoing, we conclude that these specific awards were proper
consequential damages in this case, and that the preponderance of the evidence supports the
amount of the awards. Concerning the moving expenses of $2,980.20 that were awarded to
the Campbells, at the May 19, 2006 hearing, the Teagues conceded that this award was
proper.
3. Improvements
In Isaacs v. Bokor, 566 S.W.2d 532 (Tenn. 1978), our Supreme Court noted that “[i]t
does not necessarily follow... that because refund of the purchase price is a common measure
of damages upon rescission, it is the only amount which can ever be recovered by the
complaining party.” Id. at 538. The Isaacs Court went on to hold that a rescinding purchaser
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may recover the value of permanent improvements placed upon the property. Id. at 538-40.
At trial, the Campbells provided proof of the following improvements:
Improvement Cost
Waterfall at end of pool $4,607.73
Cabinet work $ 100.00
Lighting $ 109.12
Upgrade carpet pad $ 450.77
DSL installation $ 325.22
Gas line for dryer $ 50.00
Satellite installation $ 218.23
TOTAL $5,861.07
During her testimony, Mrs. Campbell opined that these improvements increased the
value of the property by $5,000.00, which is the amount awarded by the trial court. From our
review of the record, neither the improvements, nor the amounts provided by the Campbells
is disputed. Consequently, the evidence does not preponderate against the trial court’s award
of $5,000 for general improvements.
In addition to the improvements noted above, the evidence indicates that the
Campbells paid McCoy’s Heating and Air $6,800.00 to repair the defective HVAC system.
It is undisputed in the record that, despite numerous requests from the Campbells and their
attorney, the Teagues continually refused to remedy the problems with the HVAC.
Therefore, the Campbells were forced to undertake the repairs themselves. Specifically, the
HVAC repairs included the replacement of the improperly sized ductwork. The undisputed
proof is that, because of the improper installation of the HVAC, there was an eighteen
degree difference in temperature between rooms. Moreover, there is evidence to suggest that
the original ductwork was contaminated with mold from the problems with the wood used
in the construction. The HVAC was, in fact, the subject of a conference call with the trial
court in 2005. At that time, the trial court agreed that the Campbells could make the
expenditures that were necessary to repair the HVAC, and that these expenditures would be
considered in the final ruling. From all of the proof, we conclude that the Campbells were
entitled to recover their expenditure of $6,800.00 for necessary repairs to the HVAC system.
4. Increase in Cost of Construction, Increase in Mortgage Costs, and Increase in Lot Value
Concerning increases in construction costs, Dr. Deatherage testified that the increase
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in the cost of construction, from the time the Campbells purchased the house in August 2003
until the time the Teagues bought the house back on March 21, 2006, would be
approximately 18.5%, or $44,500.00.6 Another expert, Johnny Freeman, a licensed
contractor, testified at trial that construction costs had risen almost 19% from 2003 to 2006.
Specifically, in 2003, he stated that the cost for a new build was $53 per square foot; in 2006,
the cost per square foot had risen to approximately $63. Mr. Freeman opined that the
difference in building costs from 2003 to 2006 would be approximately $45,695.00. Even
the Teagues’ own expert, Jason Ussery, opined that the fair market price for a comparable
house in today’s market would be approximately $90 per square foot, which amount
corroborates the testimonies of Dr. Deatherage and Mr. Freeman. From this testimony, we
conclude that the evidence does not preponderate against the trial court’s award of
$45,695.00 in increased building costs.
Concerning the increased mortgage costs from 2003 to 2006, Stacy Flynn, a mortgage
expert, testified by affidavit that the best mortgage rate possible, at the time of the trial,
would be 6.375%, which is 1.125 percentage points higher than the Campbells’ prior rate of
5.25%. Ms. Flynn went on to explain that, although the Campbells could buy the present rate
down to 5.75% (at a cost of $6,493.50), there would still be a .5% difference from their prior
rate. So, over the life of a thirty year mortgage, this increased rate would translate to
additional payments in the amount of $24,532.00. From the record as a whole, we conclude
that the evidence does not preponderate against the trial court’s award of $31,025.50 in
increased mortgage costs.
Turning to the land value, the trial court awarded $14,450.00 in increased costs. At
the time construction began in 2003, the evidence indicates that lots in the subject
neighborhood were selling for approximately $13,500.00. By the time the Teagues bought
the property back, lots in the neighborhood were selling for at least $25,000.00. During their
respective testimonies, both Mr. Junior Teague and Mr. Terry Teague stated that the lots had
increased in value at least $11,500.00.
Although the amount of damages arising from increased mortgage costs, building
costs, and land costs are not exactly known, it is well settled that courts will allow recovery
even if it is not possible to prove the exact amount of damages from a breach of contract.
Cummins v. Brodie, 667 S.W.2d 759, 765 (Tenn. Ct. App. 1983). Uncertain and speculative
damages are prohibited only when the existence of damages is uncertain, not when the
amount is uncertain. Id. When there is substantial evidence in the record relative to damages
and reasonable inferences may be drawn therefrom, mathematical certainty is not required
6
Dr. Deatherage’s opinion was based, in part, on the construction cost index promulgated by the
United States Census Department.
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to support an award of damages. Id. Consequently, we conclude that the trial court did not
err in allowing recovery for increased mortgage costs, building costs, and land costs.
Moreover, from the record as a whole, the evidence does not preponderate against the
amount of these awards.
5. Pre-Judgment Interest
On appeal, the Teagues challenge the trial court’s award of pre-judgment interest, as
set out above. Tenn. Code Ann. §47-14-123 allows the trial court to award pre-judgment
interest as an element of damages “in accordance with the principles of equity at any rate not
in excess of a maximum effective rate of ten percent (10%) per annum.” It is well settled
that an award of pre-judgment interest is within the sound discretion of the trial court, and
the decision will not be disturbed by this Court absent an abuse of discretion. Myint v.
Allstate, 970 S.W.2d 920, 927 (Tenn. 1998). The purpose of pre-judgment interest is to fully
compensate a party for the loss of the use of funds, to which he or she is legally entitled. Id.
Tennessee courts have shifted the balance to favor awarding pre-judgment interest whenever
doing so will more fully compensate plaintiffs for the loss of use of their funds. Scholz v.
S.B. Int’l, Inc., 40 S.W.3d 78, 83 (Tenn. Ct. App. 2000) (citing Myint, 970 S.W.2d at 927).
In Myint, our Supreme Court set out certain principles that are to guide us in the
decision of whether to award pre-judgment interest, to wit:
Several principles guide trial courts in exercising their
discretion to award or deny prejudgment interest. Foremost are
the principles of equity. Tenn. Code Ann. § 47-14-123. Simply
stated, the court must decide whether the award of prejudgment
interest is fair, given the particular circumstances of the case. In
reaching an equitable decision, a court must keep in mind that
the purpose of awarding the interest is to fully compensate a
plaintiff for the loss of the use of funds to which he or she was
legally entitled, not to penalize a defendant for wrongdoing.
In addition to the principles of equity, two other criteria
have emerged from Tennessee common law. The first criterion
provides that prejudgment interest is allowed when the amount
of the obligation is certain, or can be ascertained by a proper
accounting, and the amount is not disputed on reasonable
grounds.... The second provides that interest is allowed when
the existence of the obligation itself is not disputed on
reasonable grounds.
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Myint, 970 S.W.2d at 927 (internal citations omitted). However, uncertainty as to either the
existence or as to the amount of damages does not mandate a denial of pre-judgment interest.
Id. at 928. Moreover, the test of whether the amount of damages is certain is not whether the
parties agree on a fixed amount, but rather whether the amount of damages is ascertainable
by computation or by any recognized standard of valuation, even if there is a dispute over the
monetary value or if the parties’ experts have differing estimates. Id.
Applying the above principles to the case at bar, we find that the Campbells’ damages
are, for the most part, ascertainable, and also largely undisputed in the record. Moreover, the
Campbells did not unreasonably delay the filing of this suit, but rather moved quickly to
protect their interests when it became clear that the Teagues would not make good on their
promises to make necessary repairs. In addition, there is no indication that the Campbells
engaged in activities meant to delay the proceedings once the suit was filed. Despite the
protracted procedural history of this case, there is no indication that any delays were
intentionally caused by the Campbells. From the totality of the circumstances, we cannot
conclude that the trial court abused its discretion in awarding pre-judgment interest to the
Campbells in this case.
6. Offsets
As set out above, the trial court allowed the Teagues $29,841.64 in offsets against the
judgment. While we concede that the specific amounts constituting the $29,841.64 are
somewhat disputed, from the record as a whole, we cannot conclude that the evidence
preponderates against this offset. Consequently, we cannot conclude that the trial court erred
in this decision.
Attorney’s Fees
The Campbells have asked this Court to award them attorney’s fees and costs accrued
in defense of this appeal pursuant to the TCPA. As held by our Supreme Court, “a plaintiff
may be awarded reasonable attorney’s fees incurred during an appeal on a claim brought
under the TCPA where one or more of the TCPA’s provisions has been violated.”
Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406, 410(Tenn. 2006). As reasoned by
our Supreme Court:
If an appeal ensues, the wronged plaintiff's monetary judgment
is at risk of being consumed by the resulting appellate attorney's
fees unless they are also subject to being awarded. A plaintiff
successful at trial is therefore at risk of being "de-remedied" if
unable to collect his or her reasonable appellate legal fees.
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Given the broad remedial goals our legislature determined to
pursue with the TCPA, we do not think the General Assembly
intended that result. As this Court has previously recognized, a
potential award of attorney's fees under the TCPA is intended to
make the prosecution of such claims economically viable to a
plaintiff. Miller v. United Automax, 166 S.W.3d 692, 697
(Tenn. 2005) (citing Killingsworth, 104 S.W.3d at 535)). The
same concern with economic viability applies equally to
appellate attorney's fees.
Id. The Campbells have properly requested attorney fees on appeal. Based upon our finding
that the trial court did not err in finding violations of the TCPA, we find it is appropriate to
award the Campbells attorney’s fees for this appeal. Consequently, we remand to the trial
court for a determination of attorney’s fees on appeal.
For the foregoing reasons, we affirm the decision of the trial court and remand for a
determination of attorney’s fees. Costs of this appeal are assessed against the Appellants,
William H. Teague and William T. Teague d/b/a Teague Construction, and their surety.
_________________________________
J. STEVEN STAFFORD, JUDGE
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