Terry Lake and Linda Ousley v. Louis Haynes, Barbara Haynes and Running Bear Construction

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
January 19, 2011 Session
TERRY LAKE AND LINDA OUSLEY
V.
LOUIS HAYNES, BARBARA HAYNES AND RUNNING BEAR
CONSTRUCTION
An Appeal from the Circuit Court for Shelby County
No. CT-00220905 Charles O. McPherson, Special Judge
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No. W2010-00294-COA-R3-CV - Filed June 9, 2011
This is a construction case. The plaintiffs hired the defendant construction company to build
two residential houses. Disputes arose during construction over completion of the work and
the plaintiffs did not make some payments to the construction company. After the plaintiffs
terminated the contract, they sued the defendant construction company. The construction
company filed a counter-complaint. After a trial, the trial court dismissed the plaintiffs’
complaint and the defendants’ counter-complaint. However, the trial court failed to issue
written findings of fact and conclusions of law as required under Rule 52.01 of the Tennessee
Rules of Civil Procedure. We vacate the trial court’s judgment and remand the cause to the
trial court for written findings of fact and conclusions of law.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the
Circuit Court Vacated and Remanded
H OLLY M. K IRBY, J., delivered the Opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.
Scott A. Frick, the Frick Law Firm, PLLC, Memphis, Tennessee, for Plaintiff/Appellees,
Terry Lake and Linda Ousley
Stephen F. Libby, The Law Offices of Stephen F. Libby, Memphis, Tennessee, for
Defendant/Appellants, Louis Haynes, Barbara Haynes, and Running Bear Construction
OPINION
F ACTS AND P ROCEEDINGS B ELOW
In 1998, Plaintiff/Appellees Terry Lake (“Lake”) and Linda Ousley (“Ousley”) (collectively
“Plaintiffs”), hired Defendant/Appellants Louis E. Haynes, Barbara Haynes (“the Haynes”)
and their jointly-owned partnership, Defendant/Appellant Running Bear Construction
(“Running Bear”), under two separate contracts to construct two residential homes. Under
the contracts, construction was to begin ten days after receipt of the notice to proceed from
the Plaintiffs’ lenders. The contracts stated that Running Bear was to “achieve substantial
completion” on each home within 180 days of beginning construction.
Alas, it was not to be. After construction got underway, numerous disputes arose over the
quality of the construction, change orders, additions to the original construction, and delays
in completion. These disputes were accompanied by delays in payment to Running Bear; the
parties disagree over whether the payment delays were caused by Lake and Ousley or their
lenders. Finally, the Plaintiffs terminated the services of Running Bear and hired other
contractors to complete the construction.
Litigation was initiated in 2000 when the Haynes, d/b/a Running Bear, filed a lawsuit against
Lake and Ousley in the Shelby County Circuit Court, alleging breach of contract. Lake and
Ousley filed an answer and counter-complaint. Eventually, in 2005, this litigation was
dismissed without prejudice for lack of prosecution.
On April 21, 2005, Lake and Ousley filed the instant lawsuit1 against the Haynes and
Running Bear in the trial court below. The complaint alleged breach of the contracts for the
construction of the Plaintiffs’ homes. The complaint asserted that the construction was not
timely completed, was not performed in a workmanlike manner, and did not comply with
either the applicable building codes or the agreed-upon plans and specifications. The
Plaintiffs claimed that they placed Running Bear on notice of the alleged breaches, to no
avail. Ultimately, the complaint averred, the Plaintiffs were forced to get extensions on their
construction loans, and on March 11, 1999, sent letters to Running Bear halting any further
work. Other contractors were hired to complete the construction of the homes. The
Plaintiffs’ complaint sought monetary damages of no less than $25,000.
The Haynes and Running Bear filed an answer and counter-complaint, denying that they
were in breach of the construction contracts. Instead, they alleged, Lake and Ousley were
1
The second lawsuit was filed pursuant to Tennessee’s savings statute, Tenn. Code Ann. § 28-1-105 (2000).
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the first to materially breach the contracts. The answers asserted the affirmative defense of
laches, failure of consideration, waiver, setoff, estoppel, failure to state a claim, and lack of
subject matter jurisdiction.
The counter-complaint alleged that Running Bear was wrongfully terminated under the
contracts, and that Lake and Ousley refused to pay Running Bear a total of $27,265, pursuant
to the contracts. The counter-complaint averred that Lake owed Running Bear $47,148.11
and Ousley owed Running Bear $45,529.84, including prejudgment interest, as damages for
breach of contract, and sought damages in the same amounts for unjust enrichment. Under
the contracts, Running Bear also requested an award of attorney fees. Discovery ensued.
The matter was tried over three non-consecutive days on January 14 and 15, 2009, and
December 17, 2009, before the Honorable Charles O. McPherson.2 Lake and Ousley put on
their proof over the course of three days, with over twenty exhibits and three witnesses. The
witnesses testified about numerous areas in which the construction was allegedly
substandard, the parties’ conversations and oral understandings, how many days of bad
weather there were during the construction, agreements on change orders and payment
schedules, and the like. The Plaintiffs proffered the testimony of an expert on the issue of
damages, but the trial judge disallowed the expert’s testimony.
At the conclusion of the proof submitted by Lake and Ousley, the defendants Haynes and
Running Bear made an oral motion to dismiss. The trial court ruled:
THE COURT: Well I’m – the Court would have to find this contract was
breached and that [Running Bear] failed to properly construct the contract, but
there’s no damages that have been properly proved so I don’t have any
alternative but to grant the motion for judgment for [Running Bear] for lack
of evidence on the damages incurred that have been properly proved under the
Rules of Evidence.
At that point, the trial court directed counsel for Running Bear to draft a judgment. The
following colloquy then occurred:
MR. LIBBY [representing Defendants]: We have a counter-complaint.
2
The case was originally assigned to Judge McPherson, sitting as Special Judge after the death of Judge Rita
Stotts. After the first two days of trial before Judge McPherson, the case was continued, apparently to permit
the Plaintiffs to obtain an expert on damages. After the election to replace Judge Stotts, the case was
assigned to Judge Lori Ridder. However, to keep from re-trying the entire case, it was reassigned to Judge
McPherson, who by then was sitting as Special Judge after the retirement of Judge D’Army Bailey.
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THE COURT: I’m sorry?
MR. LIBBY: There’s a counter-complaint in this cause which ----
THE COURT: I thought you agreed to dismiss that at the last hearing?
MR. LIBBY: Oh, no that was actually – that was the reason they [Plaintiffs]
couldn’t non-suit it at the last hearing was because we [Running Bear] had a
counter-complaint. [Running Bear] was terminated and maintained he still –
I’m sorry, I didn’t know you were – he was terminated and still had – is
entitled to damages under the contract.
MR. FRICK [representing Plaintiffs]: Your Honor, if I could, the Court’s
found [Running Bear] breached the contract, so [if] he’s breached the contract
he can’t recover on the same —
MR. LIBBY: I don’t —
THE COURT: Whatever damages I found that [Running Bear] did not build
these houses like he was required to do under the contract based on the
evidence that has been presented. I cannot award judgment for damages
because the damages have not been properly proved, but I can award a
judgment that he did, in fact, breach the contract and he therefore is not
entitled to damages.
MR. LIBBY: Aren’t we entitled to put on our proof? We haven’t – we’ve
never – we haven’t even put on our case of the breach of contract. All we’ve
being doing so far is just defending.
THE COURT: All right, gentlemen, bring him around.
MR. LIBBY: Your Honor, would you like to break for lunch?
THE COURT: No, I’m getting rid of this thing once and for all.
The trial court then allowed Running Bear to put on its proof on the counter-complaint. The
proof consisted of Mr. Haynes’ testimony and several exhibits, seeking damages for the
Plaintiffs’ failure to pay under the contracts and also for unjust enrichment. Mr. Haynes
testified about his dealings with the Plaintiffs, the agreements on changes and additions to
the construction, the bad weather they encountered, the delays in payment, the failure to give
him the opportunity to cure, and the amount he was due for the work that Running Bear did.
At the conclusion of Running Bear’s proof, the trial court issued the following oral ruling:
Gentlemen, the Court has reviewed every bit of this evidence . . . and I even
went through this transcript today, and to say that that work was done properly
from looking at those photographs and there’s no way I can find that the work
was properly completed. So I’m going to grant a judgment on the counter-
complaint to the counter-Defendant and the judgment on the original
complaint to the Defendant.
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Thus, under the oral ruling, neither party would recover from the other. Several weeks later,
on January 12, 2010, the trial court entered a written order. The order stated in its entirety:
This matter came on to be heard on the 17th day of December, 2009 following
the initiation of the trial on January 14-15, 2009, live testimony of the plaintiff,
Dr. Terry Lake and Linda Ousley, the proffered testimony of Eric Tabor, the
testimony of the Defendant, Louis Haynes, exhibits introduced and the record
as a whole from all of which the Court finds as follows:
1. The Plaintiffs’ Complaint is hereby dismissed with prejudice.
2. The Defendants’ Counter complaint is hereby dismissed with
prejudice.
3. The Court awards the Defendant the costs related to the
deposition and partial transcript of Eric Tabor. Alternatively,
Plaintiffs may paid [sic] said charges directly to the court
reporter, Julia Hargrove.
4. The costs related to Plaintiffs’ Complaint are hereby assessed
against the Plaintiffs.
5. The costs related to the Defendant’s Counter complaint are
hereby assessed against the Defendant.
ALL OF THE ABOVE IS HEREBY ORDERED, ADJUDGED AND
DECREED.
The Haynes and Running Bear now appeal.
ISSUES ON A PPEAL AND S TANDARD OF R EVIEW
On appeal, Defendants the Haynes and Running Bear raise several issues:
I. Whether the Appellees waived the requirement that Appellant
complete his work within the 180 days referenced in the construction contract
where Appellees knowingly allowed Appellant to continue work after the
contractually defined time had elapsed
II. Whether Appellees committed the first uncured material breach of
the subject contract by their failure to give Appellant Haynes notice of and an
opportunity to cure any alleged deficiencies in his work before repudiating the
contract
III. Whether Appellees further committed the first uncured material
breach of contract when they terminated Appellant in violation of the
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contract’s termination requirements which required Appellees to obtain a
certification from the architect that sufficient grounds existed to justify
termination of the contractor and where Appellees failed to provide 7 days
written notice of their intent to terminate the contractor, each as required by
the parties’ contract
IV. In the alternative, whther [sic] the evidence preponderates in favor
of finding that Appellees commited [sic] the first uncured material breach of
contract where it wrongfully terminated the Appellant contractor and where
there was an absence of evidence that Appellant’s work violated any
applicable building codes
V. Whether the trial court erred in failing to award Appellant a
monetary judgment for its loss of unpaid contract balances anticipated profit
on the job due to Appellees’ breach of contract
On cross-appeal, Plaintiffs Lake and Ousley raise additional issues:
I. Whether the Appellant breached the contracts for the construction of
the Appellees’ houses by performing defective construction.
II. Whether the Appellant breached the contracts for the construction
of the Appellees’ houses by failing to complete construction of the houses
within the 180 day time period required by the contracts.
III. Whether the trial court erred in excluding proof of Appellees’ costs
to complete and correct defective and incomplete work performed by the
Appellant.
On appeal from a bench trial, we review the case de novo upon the record with a presumption
that the trial court’s findings of fact are correct, unless the evidence preponderates otherwise.
T ENN. R. A PP. P. 13(d); Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996).
The trial court’s legal conclusions are reviewed de novo with no presumption of correctness.
Campbell, 919 S.W.2d at 35. Insofar as the trial court’s finding was based on its credibility
determinations, we accord those determinations great weight on appeal. Cornelius v. DCS,
214 S.W.3d 906, 907 (Tenn. Ct. App. 2009).
The trial court is afforded wide discretion in the admission or rejection of evidence, and the
trial court’s action will be reversed on appeal only when there is a showing of an abuse of
discretion. Otis v. Cambridge Mut. Fire Ins. Co., 850 S.W.3d 439, 44 (Tenn. 1992); Davis
v. Hall, 920 S.W.3d 213, 217 (Tenn. Ct. App. 1995).
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A NALYSIS
On appeal, both parties raise substantial issues that require a detailed review of the trial
court’s findings. Upon the Court’s review of the record, however, we find neither findings
of fact nor conclusions of law by the trial court in this matter.
Rule 52.01 of the Tennessee Rules of Civil Procedure, as amended effective July 1, 2009,
provides as follows:
In all actions tried upon the facts without a jury, the court shall find the facts
specially and shall state separately its conclusions of law and direct the entry
of the appropriate judgment. The findings of a master, to the extent that the
court adopts them, shall be considered as the findings of the court. If an
opinion or memorandum of decision is filed, it will be sufficient if the findings
of fact and conclusions of law appear therein. Findings of fact and
conclusions of law are unnecessary on decisions of motions under Rule 12 or
56 or any other motion except as provided in Rules 41.02 and 65.04(6).
T ENN. R. C IV. P. 52.01 (emphasis added). Thus, as we have noted previously, “Rule 52.01
of the Tennessee Rules of Civil Procedure, as amended, requires trial courts to issue findings
of fact and conclusions of law in all actions tried upon the facts without a jury.” Clement
Homes, Inc. v. Chilcutt, No. W2009-02277-COA-R3-CV, 2010 WL 2812574, at *2 (Tenn.
Ct. App. Jul. 16, 2010 (citing T ENN. R. C IV. P. 52.01). The amendment to Rule 52.01,
making the issuance of findings of fact and conclusions of law mandatory, became effective
on July 1, 2009. Clement Homes, Inc., 2010 WL 2812574, at *2. As the trial court issued
its order in this case on January 12, 2010, the mandate in Rule 52.01, as amended, was
applicable.
Even if the amendment to Rule 52.01 were not applicable to the trial court’s decision, we
would have little choice but to remand the case for findings of fact and conclusions of law.3
Specific findings of fact are of particular importance in a construction case such as this. In
general, construction cases rarely lend themselves to a global finding that one party or the
other was entirely at fault; frequently the quality of the construction may be in compliance
with the applicable standards in some respects but not in others, and the oral communications
over the course of the construction can lead to an array of misunderstandings and differing
accounts of events. This case is no exception. Appellate review demands a detailed
examination of the trial court’s findings as to each specific item or event that the parties
3
We note that, when the parties began trying this case in January 2009, specific findings of fact and
conclusions of law were required under Rule 52.01 only if requested.
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dispute. That is not possible in the absence of specific findings of fact and conclusions of
law by the trial court.
However, tempting it may be to enter a cursory order without findings of fact and
conclusions of law in order to “get[] rid of this thing,” Rule 52.01 mandates such findings.
Moreover, they are necessary to give the parties the resolution they need. We have little
choice but to vacate the trial court’s judgment and remand the case with instructions to issue
detailed findings of fact and conclusions of law as to both the complaint and the counter-
complaint in this cause.
C ONCLUSION
The decision of the trial court is vacated and the cause is remanded with directions to enter
a final judgment in compliance with Rule 52.01 of the Tennessee Rules of Civil Procedure.
Cost on appeal shall be taxed one-half to Appellants Louis Haynes, Barbara Haynes, and
Running Bear Construction and their sureties, and one-half to Appellees Terry Lake and
Linda Ousley, for which execution may issue, if necessary.
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HOLLY M. KIRBY, JUDGE
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