### IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON AUGU ST 29, 20 01 Session GUY VARNADOE v. SHELTON McGHEE, JR., ET AL 

### . Direct Appeal from the Chancery Court for Shelby County No. 98-0667-2; The Honorable Floyd Peete, Jr., Chancellor

No. W2001-00075-COA-R3-CV - Filed December 27, 2001

This appeal arises from a breach of contract claim bro

ught by the Appellee ag ainst the A ppellant s in the Chancery

Court of Shelby

County. The trial court ente red a consent order, refer

ring the case t o a spe cial mast

er. Pursu ant to the

consent o

rder, th e trial c ourt dire cted the

special master to conduct an invest igation and repo rt his find ings tothe trial

court. The special master conducted an investig atio n and sub mitted his report to the trial court. The special master concluded that the Appellee was entitled to full pay ment under

the contr act but th at the App ellants w ere ent itled to a set-off. The trial court entered a judgment in the Appe llee’s favor and gave the A ppellants a set-off. The trial court

ordered that the fees approved by the special master be divided equally between the Appellants and the Appellee.
The Appellants appeal the entry of a judgment in the Appellee’s favor by the Chancery

Court of Shelby County . For the reasons stated herein, we a ffirm in part, reve rs e in part , and remand to the trial court for further proceeding s consistent with this opinion.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed in Part, Reversed in Part and Remanded
A LAN E. H IGHERS , J., delivered the opinion of the court, in which W. F RANK C RAWFORD , P.J., W.S., and H OLLY K IRBY L ILLARD , J., joined.
Adam M. Na

hmias, Me

mphis, TN, for Appe

llants John D. Horne, Memphis, TN, for Appellee-2- OPINION I. Facts and Procedural History
On Mar ch 23, 1998, the Appellee, Guy Varnadoe (“Mr. Varnadoe ”), entered into a written contract with the Appellants, Sandra and Shelton McGhee (“the McGhees”), whereby

Mr. Varnadoe agreed to complete a framing project at the McGhees’ residence in Memphi s , Tennessee. The contract requi red Mr. Varnad oe to c ompl ete th e frami ng p roject in a “workmanlike manner” and within approx i mately two wee

ks, weather permitting, from the date the contra ct was signed. The contract provided that the McGhees would pay Mr. Varnadoe $12,040.00 to perform the framing project

. Mr. V arnadoe did not have a residential contractor’s license or a home improvement contractor’s license.
Mr. Varnadoe com

men ced work on the framing project. The McGhees claim that disputes ar ose between the parties concerning the timeliness and quality of Mr. Var nadoe’s wor

k. Mr

. Varnadoe claims tha

t he substantially completed the fra ming project on April 13, 1998. Mr. Varnadoe claims tha

t he was unable to

procee d to comple

tion by hangin g window s, however , becau se the windows had not been provided by the McGhees. The McGhees refuse d to pay Mr. Var nadoe. On April 15, 1998, Mr. Varnadoe served a notice of nonpayment upon the

McGhees. On June 11, 1998, Mr. Varnadoe filed a mechanic’s a nd materialmen’s lien (“lien”) aga ins t the McGhee s’ residence in the Office of the Reg ister of Shelby County

. On July 28, 1998, Mr. Varnadoe filed a complaint aga inst the McGhees in the Chancery Court of Shelby County

to enforce the lien as well as for damages for br each of contract. On September 25, 1998, the McGhees file d an answ er and c ounterc laim for bre ach of c ontract

agains tMr. Varnadoe. On July 20, 1999, t

he McGhee s filed a m

otion to dism

iss Mr. Va

rnadoe’ s complain

t based on

his failure to have a

nd mainta in a home imp

rovemen t contra ctor’s li cense in

violation of section 62-37- 101 et seq. of the Tennessee Code. On July 21, 1999, Mr. Varnadoe filed an ans wer to th e counter claim. On December 9, 1999, Mr. Varnadoe filed a response to the motion to dismiss. On February 2, 2000, the trial court denied the motion to dismiss.
On February

28, 2000, the trial court entered a consent order requiring the McG hees to deposit the amount of the disputed lien, $12,436.0 0, with the court cl erk and r

eferr ing the c ase to a Special M aster. Pursuant to that consent order, the trial court directed the Special Maste r to conduct an investig ation and

report h is finding s to the tri al court on the following q

uestions:
1. Did Mr. Varnadoe perform the fra ming work in accordance with the specific ations se

t forth in the par ties’ Mar ch 23, 199 8 contra

ct? 2. Did Mr. Varnadoe perform the fra ming work cont em plated by the contra ct in a workmanlike manner? 3. Did Mr. Va

rnadoe c omplete th

e framin g work c ontempla te d by the cont

ract in a timely manner?-3-

4. If Mr. Varnadoe

performed his obligations under the contract, the Spec ial Master s hal l determine the reasonable value of the work performed by

Mr. Varnad

oe, his ag ents, subc ontract ors, and/or e mploy ees. 5. If the Special

Master sh all find th at Mr. Va rnadoe f ailed to perfor m his oblig ations se

t forth in the contr act in accordance with specifica tions, in a good and workmanlike manner, and/or in a timely manner, the Speci al Master shall set f

orth with p articula

rity each element of the contract that Mr. Varnadoe failed to perform, as we ll as the factual basis for each such conclusion. 6. If the Special Master sha ll find thatMr. Varn adoe fa iled to pe rform hisobligat

ions set fo rth in the contr

act in a g ood and wo

rkmanlike

manner, in accor

dance w ith its term s and con ditions, and/or in a timely manner, the Spec ial Master shall determine the nature and amount of

damages that were directly

and proximately caused by Mr. Varnadoe.
On J une 26, 2000, the Special Master submitted his report to the trial court. I n conducting his investigation, the Special Master met with the

parties, inspected the property , consulted with two gene ral contractors, and reviewed the court plea dings, the potential evidence, and the r ecord s pertaining to this case. The Spec ial Maste r found th at Mr. Va

rnadoe p erformed the fra

ming wor k in a workmanlike manner, in a timely manner, and

in accordance with the specifications set for th in the contract. The Special Master also found that there w as no evidence of any damages caused

by Mr. Varnadoe. The Special Master concluded that Mr. Varnadoe was entitled to full pay ment under the terms of the contrac t i n the amount of $12,040.00. The Special Master also concluded that the McGhees were e

ntitled to a

set-off for the c osts of inst

alling w indows an d the per formanc e of cer

tain punch list and rela ted reme dial work

items. The Special Master limited his f

indings t o the spec ific questions submitted b y the trial c ourt. No e xceptions w ere file d to the Spe cial Mast er’s re port.
On July 11, 2000, Mr. Varnadoe filed a m otion to confir

m the Spec ial Maste

r’s rep ort, to award costs, and to enter judgment. On July 20, 2000, the Mc Ghees filed an opposition to the motion to confirm. On July 26, 2000, Mr. Varnadoe filed his affidavit and his attorney ’s affidavit in rebuttal to the opposition to the motion to confirm . O n J ul y 28, 2000, the trial court held a hearing on the motion to confirm. On October 19, 2000, the trial court entered a judgment in favor of Mr. Varnadoe in the amount of

$10,890.00 after giving the McGhee s a set-off of $1,150.00. The trial court denied Mr. Varna doe’s request for discretionary costs and ordered that the fees approved by the Spe cia l Master be divided equally be

tween Mr. Varnadoe and the M cGhees. On November 14, 2000, the McGhees filed a motion to alter or amend judgment. On November 16, 2000, Mr. Varna doe filed an opposition to the motion to alter or amend judgment. On December 14, 2000, the tria l court denied the motion to alter or amend judgment. This appeal followed.
II. Standard of Review
The trial court’s refer

ral of ma tters to a special master a ffects this Court’s standard of review on appeal. See Archer v. Archer , 907 S.W.2d 412, 415 (Tenn. Ct. App. 1995). A concurrent finding of fact by a specia l master a nd a tria l court “ is conclusive on appeal, except where the finding is on an issue not appropriate for referra l, where it is based on an error of law or a mixed question of fact and law, or w

here the factua l finding is notbased on material evidence.” Aussenberg v. Kramer , 944-4-

S.W.2d 367, 3 70 (Te nn. C t. App . 1996 ) (cit ing A rcher , 907 S.W.2d a t 415); see also

T ENN
. C ODE A NN
. § 27-1-113 (2000) (stating that “the court of appe als shall not have the right to disturb suc h [concurrent] finding” of the special master and the chancellor). If th ere is a ny material

evidenc e to support the trial court’s concurrent finding, the trial c ourt’s finding must be affirmed. See id.
III. Law and Anal

ysis The following issues are presented for our review:
1. Whether th

is Court is bound by the findings of fact made by

the Special Master and confirmed by the trial court when the McGhees filed no exceptions to those findings and submitted no transcript of evidence produced; 2. Whether the trial court erred by f ailing to consider Mr. Varn adoe’s f

ailure to have an d maintain a home improvement contractors license; 3. Whether there was sufficient material evidence to support the Special Master’s conclusion that Mr. Varnadoe was e

ntitled to p ayment in full for the l abor and service s he provi ded to the McGhee s; 4. Whether th

e trial c ourt err

ed by ass essin g fees awarded to the Special Master one -half to Mr. Varnadoe and one-half to the McGhe es; and 5. Whether

Mr. Varn adoe is e

ntitled to r

ecover damage s from the

McGhee s for fri volous app eal. We will examine each issue in turn.
The first issue presented for our revi ew is whe

ther this C ourt is bound by the findings of fact made by the

Special Master and confirmed by the trial court when the McGhees filed no exceptions to thos e find ings and submitted no transcript of evidence produced. Rule 53.04(1) of the Tennessee Rules of Civ

il Procedure states that a master shall prepare a report and file the report with the clerk of the court who then mails to all parties notice of the filing of the report. SeeT ENN
. R. C IV
. P. 53.04(1). Rule 53.04(2) of the Tennessee Rules of Civil Procedure st at es th at “[ w] it hi n t en (1 0) da ys after being served with notice o f th e filing of the report, any party may

serve written objections thereto upon the other parties.” T ENN
. R. C IV
. P. 53.04(2). An appellant waives an issue for purposes of appella te review when he

fails to ma

ke the ap propria te objec tion at t

he trial c ourt l evel. See Barnhi ll v. Barnhi ll , 826 S.W.2d 443, 458 (Tenn. Ct. App. 1991). Thus, the failure to serve written objections to a master’s report within ten day s constitutes a w aiver of any objection to a master ’s report on appeal. The record fails to r eflect that the McGhees formally objected to the Special Master’s report a s permitte d by Rule 53.04(2). Accordingly , we find that the McGhees have waived any issues fo r appell ate review conc erning the fac tual findings with

in the Spec ial Maste

r’s rep ort.
The second issue presented for our review is whether the trial court erred by failing to consider the legal issue of Mr. Varnadoe’s fa ilure to have and maintain a home improv ement contractor’s license. The McGh

ees arg ue that the trial c ourt fail ed to ade quately consid er the e ffect o f Mr. Varnadoe’s failure

to have and maintain a

home improvement contractor’s license when confir ming the Special Master’s report and entering judgment in favor of Mr. Varnadoe. Mr. Varna doe argues that the trial cou

rt did adequately

consider the McGhees’ arg ument as evidenced by

the trial court’s deni al o f the McGhees’ motion to dismiss Mr. Varnadoe’s complaint where the motion to dismiss was-5-

basedon Mr. Varn adoe’s f ailure to have an d maintain

a home improveme

nt contra ctor’s li cense in violation of section 62-37-101 et seq. of the Tennessee Code.
Section 62-6-101 et seq. of the Tenn essee Co de (“the Contractors Lice nsing Act”) covers licensing requirem ents of gen eral co ntracto rs. Secti on 62-6-1 01(3)(A ) define s a contr actor, i n pertine nt part, a s
any person or entity who under

takes to, attempts t

o, or submits a price or bid or offers to construct, supervise, super intend, oversee, schedule, direct, or in any manner assume charge of the construction, alteration, repair, improvement, movement, demolition, putting up, tearing down, or f

urnishing labor to in stall mate

rial or e quipment for any building , highway , road, railroad, sewer, gr ading, excavation, pipel ine, p ubli c util ity stru cture, proje ct dev elopm ent, h ousi ng, housing development, improvement, or any other construction undertaking for which the total cost of the same is twenty -five thousand dollars ($25,000) or more.
T ENN
. C ODE A NN . § 62-6-102(3)(A) (1997).
Sectio n 62-6-103(a) requires any person engaged in contra cting to submit evidence of his or her qualification to engage in contracting and to be licensed. SeeT ENN
. C ODE A NN . § 62-6-103(a) (1997). Section 62 -6-120 st ates tha t a ny person wh o enga

ges in c ontract

ing witho ut a licen se commits a Class A misdemeanor. See T ENN
. C ODE A NN . § 62-6-120 (1997). Section 62-6-103(b) permits an unlicensed contractor “to recove r a ct ual documented expenses only upon a showing of clear and convincing proof” in a court of equity. T

ENN
. C ODE A NN . § 62-6-103(b) (1997).
Section 62-37-101 et

seq. of the Tennessee Code (“the Home Improvement L

icensing Act”) covers licensing requirements of home improvemen t contra ctors. Se ction 62- 37-103(7 ) define s a home improvement contract as “an agreement between a contractor and an owner for the pe rformance of home improvement, and includes all labor, services and materials to be furnished and performed thereunder.” T ENN
. C ODE A NN . § 62-37-103(7) (1997). Section 62-37-10 3(6)(A) defines home improveme

nt as the repair, replacement, remodeling , alteration, conversion, moder niza tion , imp rovem ent, o r addi tion to any lan d or bu ildi ng, or that po rtion ther eof which is used or

designed to be use d as a residence or dwelling unit for one (1), two ( 2), three (3), or four (4) dwelling units, and includes the construction, replaceme nt, or improveme

nt of driv eway s, swimming pools, por

ches, g arage s, landscaping, fences, fall-out shelters, r oofing, painting, and other improvements to structures or upon land which is adjacent to a dwelling house for one (1), two (2), three (3), or four (4) dwelling-6- units. Withou

t rega rd to the e

xtent of af

fixation, ‘ home impro vement’ includes the installation of c entral heating or air-c onditionin g sy stems, storm windows or aw

nings;
T ENN
. C ODE A NN . § 62-37-103(6)(A) (1997).
Section 62-37-103(6)(B) states, in pertinent part, tha t home improvement does not include “[t]he construction of a new home building or work done by a contractor in compliance with a guarante e of completion of a

new building project.” T ENN
. C ODE A NN . § 62-37-103(6)(B) (1997). Section 62- 37-104(b) requires any

person engaged in a home improvement business to first obtain a license. See T E NN
. C ODE A NN . § 62-37- 104(b) ( 1997). Th e legis lative pu

rpose in e

nacting the Home Improvement L

icensing Act was “to safeg uard and protect the homeowne

r against abuse s by

home improvement

contractors through regula ting the home improvement business and by the licensing of persons engag ed in

such business.” T ENN
. C ODE A NN . § 62-37-102 (1997). Section 62-37-114 states that any person w

ho procures a home improvement contract witho ut a licen se commits a Class A misdemeanor. SeeT ENN
. C ODE A NN . § 62-37-114 (1997).
In th e case at bar, Mr. Varnadoe argues that the construction project for whic h he wa s contracted

to perform framing was of such magnitude that it was “newconstruction” covered by the Contractors Licensing Act ra ther than “home improvement” covered b y the Home Improvement Licensing Act. Mr . Varnadoe then argues that he was not required to be licensed under the Contractors Licensing

Act because the contract did not exceed $25,000.00. We ag ree that, had

the Contractors Lice

nsing Act been ap

plicable to the ca se at bar , Mr. Var nadoe wo uldnot be re quired to be licensed because the contract did not exceed $25,000.0 0. We disagree, however, with Mr. Varnadoe’s argument that the Home I mprovement Licensing Actis not applicable to the case at bar. The Hom e Imp rov eme nt Li censing Act defines home improvement as an addition to any land or buil ding. The par

ties’ contract

states tha t Mr. Var nadoe a greed to “fra me an add

ition on the

home of Mr. and Mrs. McGhee.” Beca use the Home Improvement L icensing Act

defines hom e i mp rovement

as an addition to any building a nd the contract in the case at bar conce rns a framing project of an addition to a building, this contract and the failure of Mr. Varn adoe to ob taina licens e falls squarely within the Home Improvement L icensing Act.
We must determi

ne whether an unlicensed home improvement contractor is entitled to recover on the contract. Unlike the Contractors Licensing Act, the Home Improvement L icensing Act does notaddress the recovery

of an unlicensed

home improvement contractor. The Contractors L icensing Act permits a

n unlicen sed ge

neral c ontract

or to rec over his a

ctual doc umented e

xpense s upon a showing of clear and co nvincing pr oof. Both the Home Improve ment Licensing Act a

nd the Contractors Licensing Act a re penalty sta

tutes in that they state that any person engaged in contrac ting commits a Class A misdemeanor for failure to have a license . As such, we find the following analy sis by the T ennes see Supreme Court construing the Contractors L icensing Act analogous to cases involving the Home I

mproveme

nt Lic ensing A

ct: The statute was designed for protection of the general public from-7- unlicensed and unqualified persons. However, whe n this policy creates a disproportionate penalty , the general rule cannot stand and the c ourt will b e permitt ed to cons ider the

merits of the case to avoid a forfeiture. Therefore , in Carondolet , we permitted recovery under a quantum m eruit

theory. . . . We interpre

ted such penalty statutes a s providin g suffi cient pr otection to the publ

ic to render unnecessary

the judicially crea

ted bar to quantum m eruit

. Since nothing in the statute reveals an implied intent to deprive unlicensed contractors of the right to rec over the reasonable value of their services, when the wrong c ommitted by the violation of th e s ta tu te is me re ly malum prohibitum and does not endanger health or morals, w e conclu ded that a dditional p

unishment

should not be imposed unless the legislative intent is clear.
Chedester v. Phillips , 640 S .W.2 d 207, 208 (T enn. 1 982) ( citi ng Gene Tay lor & Sons Plumbing Co., Inc . v. Caron dolet Rea

lty T rust , 611 S.W.2d 572 (Tenn. 1981).
While we are not concerned with an unlicense d gener al contr actor in this case but, rather, an unlicensedhome improvement contractor, the parallel betwee n the two is clear. The application of quantum meruit in the case at bar would prevent the McGhee s from reaping an unfair windfall and would not harm th

e legis lati ve intent of the Home Improvement L icensing Act. To prevent Mr. Varnadoe from recoveringhis actual documented expenses expended on the framing project would result in additional punishment to Mr. Varnadoe for his failure to have a license. There is no clear legislative intent b ehind the Home I mproveme

nt Lic ensing A

ct to impose

additiona l punishme

nt upo n an unlicensed home improvement co nt ra ct or . A cc or di ng ly, we find that Mr. Varnadoe is permitted to recove r under q uantum me

ruit limite d to the actual documented expenses expended on the framing project as shown by

clear and convincing proof. We reverse the tr ial court’s judgment permitting Mr. Varnadoe to recover on the contract and rema nd this issue to the trial court for a determination of the actual documented expenses incurred by Mr. Varnadoe.
The third issue presented for our review is whether there wa s suffici ent mater ial evide nce to support the Special Master’s conclusion that Mr. Varnadoe wa s en titled to payment in full for the labor and services he provided to the McGhees. This issue is preter mitted by the resolution of the previoustwo issues . Accor dingly , we dec line to ad

dress thisissue on a

ppeal.
The fourth iss ue prese

nted for our revi ew is whe

th er the tr

ial court erred by

assessing fees awarded to the Spec ial Maste

r one-ha lf to Mr. V arnadoe

and one- half tothe McGhees. Rule 53.01 of the Tenn essee Ru les of Civi l Procedu re state s, “The c ompensat ion to be a

llowed to a

master sh all be fixed by the court, and shall be charged upon such

of the parties or paid out of any fund or subject matter of the action, which is in the custody a nd control of

the court as the court may direct.” T ENN
. R. C IV
. P. 53.01. The trial court’s decision to assess fees to a party unde r Rule 53.01 is reviewed under an abuse of discretion standard. See Nguy en v. Hart , 1993 WL 291411, at *4 (Tenn. Ct. App. July 29, 1993) . We find no

evidenc e of an a

buse of di scretion

by t he tria l court. Accor dingly, we-8-

affirm the trial court’s assessment of fees awarde d to the Special Master one-half to Mr. Varnadoe and one- half to the

McGhee s. The final issu e prese

nted for our revi ew is w hether Mr. Varnadoe is entitled to recover damages from the McGhees for frivolous appeal. Tenne ssee law permits an y reviewing cour t to award d amage s for fri volous app eal:

When it appears to any r

eviewing court that the appeal from any court of record was frivolous or taken solely for delay , the court may, either upon motion of a pa rty or of its own motion, award just damages against the appellant, which may include, but need not be limited to, costs, interest on the judgment, and expenses incurre d by

the appe llee as a result of the appe al.
T ENN
. C ODE A NN . § 27-1-122 (2000).
A frivolou s appeal

is one tha

t is devoid

of merit o r has no reasonable chance of succ eeding. See Combustion Eng’g, I

nc. v. Kennedy , 562 S.W.2d 202, 205 (Tenn. 1978); Davis v. Gulf Ins. Group , 546 S.W.2d 583, 586 (Tenn. 1977); Jackson v. Ald ridge , 6 S.W.3d 501, 504 (Tenn. Ct. App. 1999); Industrial Dev. Bd. v. Hancock , 901 S.W.2d 382, 385 (Tenn. Ct. App. 1995). Determining whether to award damages based on a f rivolous appeal is a discretionary decision. See Ban

ks v. St. Fr

ancis Hosp. , 697 S.W.2d 340, 343 (Tenn. 1985).
Mr. Varnadoe argues that this Court should award d amage s becaus e the McG hees’ a ppeal is frivolou s. We do notdeem this to be an appropriate case for imposition of sanctions for a frivolous appeal and, therefore, respectfully deny Mr. Varnadoe’s request in this rega rd.
IV. Conclusion
For the foregoing reasons, the de cision of the trial court is affirmed in part, r everse d in part, and r emanded for further procee dings consistent with this opinion. Costs of this appeal are taxe d equally agains t the Appe

llants, Sandra and Shelton McGhee, and their surety , and the Appellee, Guy Varnadoe, for which execution may issue if necessary

.

___________________________________ ALAN E. HIGHERS, JUDGE