Century Fire Protection, LLC. v. Fowlers' Holdings, LLLP.

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
July 7, 2010 Session
CENTURY FIRE PROTECTION, LLC., v. FOWLERS' HOLDINGS, LLLP.,
et al.
Appeal from the Chancery Court for Loudon County
No. 11214 Hon. Frank V. Williams, III., Chancellor
No. E2009-02199-COA-R3-CV - FILED SEPTEMBER 16, 2010
Plaintiff alleged that it delivered materials and provided labor for the installation of a fire
protection system on the property of defendant and defendant had failed to pay money still
owed under the contract. Plaintiff sought a materialmen's lien to enforce any judgment
obtained against defendant for the amount of monies owed under the contract. Defendants
answered, filed a counter-complaint and raised multiple defenses. The Trial Court conducted
an evidentiary hearing and ruled in plaintiff's favor, holding that plaintiff was entitled to
recover monetary damages and the materialmen's lien would be enforced. Defendants have
appealed and we affirm the Judgment of the Trial Court.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.
H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which C HARLES D.
S USANO, J R., J., and J OHN W. M CC LARTY, J., joined.
T. Scott Jones and Mandy M. Hancock, Knoxville, Tennessee, for the appellants, Fowlers'
Holdings, LLLP., Fowler's Furniture, Inc., Atlantic Southern Bank, and Douglas S. Yates,
as Trustee for Atlantic Southern Bank.
Mary Beth Hagan, Murfreesboro, Tennessee, for the appellee, Century Fire Protection, LLC.
OPINION
Plaintiff, Century Fire Protection, LLC, filed a Verified Complaint to Enforce
Mechanics’ and Materialmen’s Lien against defendants, Fowlers' Holdings, LLLP; Fowler’s
Furniture, Inc.; Atlantic Southern Bank; and Douglas S. Yates, as trustee for Atlantic
Southern Bank. Plaintiff alleged that Fowlers' owned property in Lenoir City, and contracted
with plaintiff on July 25, 2006, to provide labor and materials for the installation of a fire
protection system on the property, and that it had fully performed its obligations under the
contract, and had improved the value of the property. Plaintiff further alleged that Fowlers'
still owed $23,250.00 under the contract, and had refused to pay. Plaintiff alleged that it had
sent a notice of lien to defendants on February 22, 2008, and had filed the same with the
Register’s Office and sought to have its lien declared superior to all others, and to be
enforced.
Defendants answered and filed a Counter-Complaint, and stated that plaintiff had
failed to state a claim and had failed to join an indispensable party. They also asserted the
defenses of failure of mutual assent, failure to mitigate, setoff, waiver, estoppel, and unclean
hands. The Counter-Complaint avers that there were change orders made to the original
contract and that they were to be given credits for certain items, but Century overbilled them
and they overpaid in the amount of $54,779.00. They further alleged the work performed
was defective, and that they had incurred additional expenses repairing plaintiff’s defective
work, and that part of their inventory was damaged by leaking sprinkler heads installed by
plaintiff.
Defendants sought compensatory and punitive damages, and asked that plaintiff’s lien
be removed.
The trial of the matter was held on August 26, 2009, and numerous witnesses testified
for the respective parties.
Upon completion of the evidence, the Trial Court ruled that the contract contained a
latent ambiguity regarding who was responsible for digging a trench. The court said the
weight of the evidence showed that digging the trench was going to be a problem, and that
Century expected to be able to take advantage of lines that were being dug by Fowlers' for
other purposes. The Court found that Fowlers' was going to have to dig lines for plumbing
and electricity in any event, and found that the plaintiff could not collect for the things it had
no written change orders for, and that Fowlers' could also not collect for damage to certain
furniture that they claimed in depositions.
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The Court then ruled that plaintiff was due an additional $18,000.00 under the
contract, minus $2,000.00 for damaged furniture. The Court ruled that the change orders
signed by Horrax were ratified, and that plaintiff was due a reasonable amount of attorney’s
fees, but not the entire amount claimed. The Court subsequently ruled that plaintiff’s
attorney would receive a fee of $18,000.00 plus $1,000.00 for expenses, and dismissed all
other claims.
In conclusion, the Court found that plaintiff’s lien had priority over all other
encumbrances on the property, and plaintiff then filed a Motion for Discretionary Costs,
which the Trial Court granted, and defendants have appealed.
The issues presented for appeal are:
1. Whether the Trial Court properly awarded damages to Century in the amount
of $18,000.00?
2. Whether the Trial Court properly awarded Century attorney’s fees of
$19,000.00?
3. Whether Century should have a lien against the property?
4. Whether Century should be awarded attorney’s fees on appeal?
Defendants contend that the Trial Court’s award of $18,000.00 to plaintiff for
damages under the contract was improper, because the change orders added to the contract
total were not signed by an authorized representative of Fowlers' and that the Trial Court did
not properly give credit for the mezzanine or trenching.
As to the change orders signed by Mr. Horrax, both Mr. Long and Mr. Fowler
admitted that he was Fowlers' employee and that he was in charge of supervising the job
when Mr. Long could not be there, but they testified he did not have the authority to sign
contracts or otherwise bind the company in these agreements. Long admitted, however, that
Mr. Horrax discussed the purchase of the gravel with him, that he knew that Horrax was
signing the change orders on behalf of Fowlers', and that he also knew that the additional
work detailed on the change orders was being done. Long admitted that he received the
change orders from Horrax and then gave them to Mr. Fowler. Similarly, when asked if he
had seen the change orders signed by Horrax, Mr. Fowler said he didn’t look at those daily
because he would “presume that Robbie and Paul (Horrax) was more abreast of what was
going on out there and was depending on them to see that was done.” Neither Long nor
Fowler disputed that the work on these change orders was done and that it was necessary for
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completion of the job. Also, neither one of them at any time told any agent of Century that
Mr. Horrax did not have the authority to act for the company nor that these change orders
were unacceptable.
As our Supreme Court has explained:
‘Apparent agency is essentially agency by estoppel; its creation and existence depend
upon such conduct by the apparent principal as will preclude him from denying
another's agency.’
Generally, to prove apparent agency one must establish (1) the principal actually or
negligently acquiesced in another party's exercise of authority; (2) the third person had
knowledge of the facts and a good faith belief that the apparent agent possessed such
authority; and (3) the third person relied on this apparent authority to his or her
detriment.
Apparent authority is established through the acts of the principal rather than those
of the agent or through the perception of a third party. In Southern Ry. Co. v. Pickle,
138 Tenn. 238, 197 S.W. 675 (1917), this Court explained:
The apparent power of an agent is to be determined by the acts of the principal
and not by the acts of the agent; a principal is responsible for the acts of an
agent within his apparent authority only where the principal himself by his acts
or conduct has clothed the agent with the appearance of authority, and not
where the agent's own conduct has created the apparent authority. The liability
of the principal is determined in any particular case, however, not merely by
what was the apparent authority of the agent, but by what authority the third
person, exercising reasonable care and prudence, was justified in believing that
the principal had by his acts under the circumstances conferred upon his agent.
Id. at 677 (quoting 2 Corpus Juris 574, 575).
Boren ex rel. Boren v. Weeks, 251 S.W.3d 426, 433 (Tenn. 2008)(internal citations omitted).
Here, the Trial Court found that the change orders signed by Mr. Horrax were ratified
by Fowlers', and the evidence does not preponderate against this finding. Tenn. R. App. P..
13(d). Both Mr. Long and Mr. Fowler testified that they knew that Mr. Horrax was signing
change orders for Century while acting as construction supervisor on this project, and they
admitted acquiescence in same. Neither claimed to have disputed Mr. Horrax’s authority
to sign these change orders nor that the work done thereunder was improper or unnecessary.
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Accordingly, Mr. Horrax acted with apparent authority given him by Mr. Long and Mr.
Fowler, and Century justifiably relied on the same in getting these change orders signed and
it believed they would be paid. We agree with the Trial Court’s conclusion on this issue.
As to the trenching credit, the Trial Court found that the contract contained a latent
ambiguity regarding who was to be responsible for trenching the water lines, Century or
Fowlers’. The contract states that if 1120 feet of water line was installed by Century, this
would add $36,000.00 to the price. The contract does not specifically provide that trenching
would be done by Century, nor does it specifically exclude it. The contract is silent on the
issue of who would provide the trenching/backfilling of this water line.
DeWayne Spencer testified that he attended the meeting with Mr. Fowler before the
contract was signed, wherein he claimed that Mr. Fowler told them to price the job with
Fowlers' being responsible for the trenching/backfilling. Gary Daniels testified that he was
told by Mr. Horrax that Fowlers' was doing the excavation for the water lines when they
began work on the site. Long and Fowler both denied telling Century that Fowlers' would
be responsible for the excavation, although they admitted that they were handling the
excavation for the plumbing and electrical lines. Both of them admitted that Fowlers’ did
handle most of the excavation as an accommodation to Century, however, with the
understanding that they would receive some monetary credit for it.
Michael Duncan, owner of Tennessee Automatic Sprinkler, was called as an expert
on behalf of Fowlers', and he originally testified that he would have thought Century’s
contract included trenching and backfilling due to the expense allotted for running the water
line in the contract. He testified that $36,000.00 was too much for simply laying and
connecting the line. He admitted, however, that he had specifically excluded the trenching
on his estimate because the jobsite looked as thought that work would be very difficult. He
also admitted that his estimate for running water line was actually higher than Century’s even
with the trenching specifically excluded, thus seemingly creating a conflict with his earlier
testimony regarding expense. The subcontractor employed by Fowlers' to do the trenching
for the water line testified that the regular plumbing lines and electrical lines were put into
the same trench.
The Trial Court found that while the contract contained a latent ambiguity regarding
who was to provide the trenching, the weight of the evidence showed that Fowlers' had
agreed to provide the same because they were already going to have to dig the trench for the
regular water and electrical lines anyway. The Court found that Century knew that digging
the trench was going to be a problem, and that this was not included in their contract price.
The evidence does not preponderate against the Trial Court’s findings. There is no
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question that Fowlers' own expert admitted that trenching on this site would be difficult, and
that his own estimate was higher per square foot for installing the line than Century’s even
though he specifically excluded trenching, which conflicted with his earlier testimony that
the price quoted by Century should include trenching. Moreover, Century’s employees
testified that Fowlers' was to provide the trenching, and that Mr. Fowler had asked them to
price the contract with Fowlers' providing the same. The proof demonstrated that Fowlers'
did, in fact, provide the same, and that the same trench was dug not only for the sprinkler
lines but also for the regular water and electrical lines as well, and these lines were clearly
Fowlers' responsibility to trench. Long and Fowler disputed that Fowlers' was to provide the
trenching for the sprinkler lines, but the Trial Court obviously did not credit their testimony.
The evidence does not preponderate against the Trial Court’s finding that Century was not
to provide the trenching as a part of the contract. Tenn. R. App. P. 13(d).
Next, Fowlers' argues that it was error for the Trial Court to consider parol evidence
in interpreting this contract. The Trial Court found, however, that the contract contained a
latent ambiguity. As stated by the Supreme Court:
A latent ambiguity is where the equivocality of expression or obscurity of intention
does not arise from the words themselves, but from the ambiguous state of extrinsic
circumstances to which the words of the instrument refer, and which is susceptible of
explanation by the mere development of extraneous facts, without altering or adding
to the written language, or requiring more to be understood thereby then will fairly
comport with the ordinary or legal sense of the words and phrases made use of.
Teague v. Sowder, 114 S.W. 484, 488 (1908).
In this case, the contract did contain a latent ambiguity, because the language
contained in the contract does create a latent ambiguity, in that the line would have to be
trenched and backfilled in addition to being laid or installed created a question of who would
be responsible for trenching and backfilling. Accordingly, a latent ambiguity in a contract
may be explained by the use of parol evidence. Ward v. Berry & Associates, Inc., 614 S.W.2d
372 (Tenn. Ct. App. 1981). The Trial Court properly allowed parol evidence on this issue.
Finally, regarding the mezzanine credit, Fowlers' argues that the credit allowed by the
Trial Court, while not specifically quantified, was obviously inadequate based on the proof
presented. Century admittedly allowed a credit of a little over $12,000.00 for the mezzanine,
which Fowlers' argues that Century’s own witness stated was originally slated to cost
between $20,000.00 and $30,000.00 to Century in the original bid. Century explained,
however, that the amount of credit was reduced due to other work that was added, i.e.
sprinkler system put in the added offices and radio station, etc. Century also admittedly
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reduced its claim by another $9,000.00 in an effort to settle this issue and be paid. Thus,
while Century originally sought payment of over $32,000.00 for the unpaid items under the
contract, Century offered to settle for $23,250.00.
The Trial Court awarded Century $18,000.00 in payment of its claims, thereby
reducing Century’s lesser claimed damages by another $5,000.00. While approximately
$2,000.00 of this reduction included items that the Trial Court simply excluded because
Century did not obtain signed change orders, the Court did allow sufficient credit for the
mezzanine, as the Court reduced Century’s original damage claim by over $14,000.00 and,
when added to the original $12,000.00 deduction, a total credit for the mezzanine of
approximately $26,000.00 was allowed. This is in accordance with what Fowlers' claims it
was due, and the evidence supports the amount. The Trial Court’s judgment awarding
plaintiff damages of $18,000.00 is affirmed.
Fowlers' argues that the Trial Court erred in awarding attorney’s fees to plaintiff, as
there is no contractual or statutory provision providing for this. There is a contractual
provision providing for these fees, as the change orders ratified by Fowlers' include the
following language, “I will pay all costs of enforced collection incurred by CFP, including,
without limitation, CFP’s attorneys fees”. Thus, the Trial Court properly awarded attorney
fees under the contractual provision.
Having found plaintiff is entitled to damages from defendants, a lien to enforce such
judgment is appropriate. This issue is moot.
Century argues that it should be given an award of fees for defending this appeal.
While it is unclear whether Century is claiming that it is due a fee award pursuant to the
contractual terms or whether Century is claiming this is a frivolous appeal, we hold an
additional award of attorney's fees in this case is not warranted.
We affirm the Judgment of the Trial Court and remand, with the cost of the appeal
assessed to Fowlers' Holdings, LLLP.
_________________________________
HERSCHEL PICKENS FRANKS, P.J.
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