IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

July 10, 2003 Session

AMPRITE ELECTRIC COMPANY v. TENNESSEE STADIUM GROUP,

LLP

 Appeal from the Chancery Court for Davidson County

No. 99-2847-III Ellen Hobbs Lyle, Chancellor

No. M2002-00892-COA-R3-CV - Filed September 22, 2003

The electrical subcontractor on the Adelphia Stadium job was required by the contractor, on 212

occasions, to perform extra work. Although the subcontract provided that written change orders

must precede and authorize extra work, this requirement was soon mutually abandoned because the

contractor, encouraged by the owner, was concerned about a timely completion. The principal issue

concerns the dollar amount of compensation for the extra work. Amprite priced its extra work

according to manuals used in the construction industry, as contrasted to its actual costs plus 10

percent, as the subcontract provides. Amprite concedes that although its actual costs plus 10 percent

were substantially less than the amounts claimed, the contractor was estopped to deny the greater

compensation. The trial court held that the contract was abandoned and that, in lieu, a different

contract would be implied. Amprite was accordingly awarded compensation for “8686 hours never

worked, $90,245.00 for materials never purchased and $6,877.00 for taxes never paid,”for a total

recovery of $1,131,311.66. Contractor appeals insisting that the contract was not abandoned and that

its provisions control. We hold that the requirement of written change orders was waived by mutual

agreement but that the remainder of the contract was enforceable. The judgment is modified to allow

a recovery of $170,084.00.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court as Modified is

Affirmed 

WILLIAM H. INMAN, SR. J., delivered the opinion of the court, in which DAVID R. FARMER and

HOLLY M. KIRBY, J.J., joined.

Phillip Byron Jones, Nashville, Tennessee, attorney for appellant, Amprite Electric Company.

Craig V. Gabbert, Jr., Nashville, Tennessee, and F. Barry McCabe, Atlanta, Georgia, for the

appellee,, Tennessee Stadium Group, LLP.
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Todd E. Panther, Nashville, Tennessee, for the Amicus Curiae, The American Subcontractors

Association, American Subcontractors Association of Middle Tennessee, and American

Subcontractors Association of Western Tennessee.

OPINION

This litigation arises out of the construction of the NFL Stadium (“the Project”) for the

Tennessee Titans. Amprite Electric Company (“Amprite”, “the Plaintiff” or “the Subcontractor”)

was awarded a subcontract for the electrical work (“the Subcontract”) and was ultimately paid

$10,890,000.00 in accordance with the Subcontract by Tennessee Stadium Group, L.L.P. ( “the

Contractor” or “the Defendant”), a limited liability partnership of two foreign corporations

experienced in the construction of large projects. During the construction, changes in the various

drawings were required to be made, for which the Plaintiff seeks compensation attributable to the

extra work occasioned by such changes.

As pertinent here, the Subcontract provides:

CHANGE ORDERS. Owner has reserved the right under the

Contract documents to require Contractor to make changes in the

work, including additions thereto and deletions therefrom. Without

notice to any surety and without invaliding this Subcontract,

Contractor may from time to time, by written order (“Change Order”)

to Subcontractor, make changes in the work to the same extent and in

the same manner as may be required of Contractor by Owner under

the Contract documents. Subcontractor shall thereupon perform the

changed work in accordance with the terms of this Subcontract and

the Change Order.

Upon request of Contractor, and in time and manner sufficient to

permit Contractor to comply with its obligations under the Contract

documents, Subcontractor shall submit a written proposal for any

applicable price and time adjustment attributable to the changed

work, detailed as Contractor or Owner may require, supported and

conforming to the requirements of the Contract documents.

Where a Change Order is issued pursuant to a change required by the

Owner, the price shall be adjusted by the net amount of any direct

savings and direct costs plus profit percentage attributable to the

Change Order and the time for performance of the work may be

adjusted according to the Contract documents . . .
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As used in this Subcontract, Subcontractor’s direct savings and direct

costs shall mean and be limited to the actual amount of the following:

cost of materials, including sales tax and cost of delivery; cost of

labor, including social security, old age and unemployment insurance,

and fringe benefits required by agreement or custom; worker’s

compensation insurance; bond premiums if and to the extent actually

increased; and actual rent not greater than the rent charged in the

locale, or reasonable value of Subcontractor-owned equipment and

machinery.

If the parties are able to agree upon the amount of the price

adjustment and the extent of any time adjustment, such adjustments

shall be set-forth in the Change Order which shall be accepted by

Subcontractor. If the parties are unable to agree upon such

adjustment, Contractor may elect to issue the Change Order to

Subcontractor directly such work to be performed by Subcontractor

and any adjustments to price or time shall be subject to ultimate

determination in accordance with this changed work . . . in no event

shall Subcontractor proceed with changed work without a Change

Order issued pursuant to this paragraph 8 and Contractor shall not be

liable for any additional costs incurred or delays encountered in the

performance of such changed work without such a written Change

Order.

From the beginning all parties understood that the construction of the stadium was to be

aggressively performed. The Construction Management Agreement (“Contract”) between the

Contractor and the Metropolitan Government of Nashville for Davidson County, Metropolitan

Development and Housing Agency (“the Owner” or “ MDHA”), included a $10 million contingency

fund to be used by the Contractor, in it discretion, to resolve problems arising from additional work

in order to keep the Project on schedule. If this fund was not depleted the Contractor retained it as

extra profit.

To the Subcontract was attached a document identified as Schedule H, which was to be

utilized as a uniform method to track the nature and cost of extra work. It provided an agreed upon

hourly rate for labor of $27.97 for extra work, and a flat percentage rate for small tool and other

expenses. It was also agreed that the hours necessary to perform certain tasks would be those

estimated by the National Electrical Contractors Association (“NECA”), and that the pricing of

materials for extra work would be as prescribed by the Trade Service Corporation’s publication.

While the basic Contract provided that Amprite would be paid ‘direct costs’ for extra work, Schedule

H provided that, in calculating these costs, fixed or set rates and prescribed units would be used.

It was agreed that if Amprite was asked to make changes, it would provide Contractor with

a Change Order Proposal, commonly referred to as a “COP.” Each COP would have attached a
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Schedule H in the format provided for in the Subcontract. Pricing would be consistent with NECA

and the Trade Service Corporation. The COP would then be approved and thereafter, a change order

would be issued, and the additional work would commence consistent with the Subcontract that

provided that in no event was Amprite to perform extra work unless a change order was issued.

Schedule H was a creation of the Contractor’s Project Manager, which had used a similar

method in construction of the Olympic Stadium in Atlanta, Georgia. But Amprite historically used

Superintendent Work Orders (“SWOs”) to document requests for additional work. However, the

Contractor insisted during the negotiation phase that the Schedule H be used and that it be attached

to and incorporated into the Subcontract. This was because the Manager was familiar with the

NECA Manual and the Trade Service Corporation publication and he believed that reliance upon

these Manuals was a “fair and reasonable” method to price additional work. According to the

Manager, it is also preferable to have a price agreed upon prior to starting extra work in order to

eliminate the risks of estimating costs.

Moreover, the Contractor also had an established corporate policy regarding extra work,

change orders, and payment for extra work. That policy was promulgated by Contractor’s Executive

Committee and compliance was mandated by Contractor’s auditors. It provided for the execution

of change orders before extra work is started.

The Contractor required Amprite to perform additional work to expedite the job or to

reconcile problems in the drawings. For instance, the mechanical drawings consistently called for

4-phase motors for pizza ovens in concession stands. The mechanical contractor ordered ovens

consistent with the plans, but, the electrical drawings required Amprite to install wiring for 3-phase

motors. When this was discovered, the Contractor asked Amprite to replace the wiring in order to

facilitate the 4-phase motors in dozens of concession stands.

The Contractor requested Amprite on 212 occasions to perform additional and/or modified

work, without requiring Amprite to provide in advance a COP and/or a Schedule H for costs. The

Project Manager, who regularly instructed Amprite to perform the additional work, admittedly never

asked Amprite to provide a Schedule H before requiring Amprite to perform the additional work.

He informed Amprite consistently that the additional work was needed and that Amprite should

“proceed immediately” and bill Contractor thereafter according to Schedule H. Amprite complied

with those requests since it was repeatedly assured by the Contractor that it would be paid and that

change orders would be issued. Contractor acknowledges making these representations of payment

and concedes that it was “absolutely . . . reasonable for Amprite to believe” Contractor’s promises

of payment.

Mr. Lassetter, the Project Manager, testified concerning this practice:

Q. You admitted yesterday that there were occasions out in the

field where you also told Amprite to proceed ahead and you

also made a statement to them that they would be paid.
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A. I made the statement yesterday, and I stand by that statement,

any time [Contractor] directed Amprite to do work on

[Contractor’s] behalf, not an Owner initiated change, I did tell

Amprite they would be paid.

Q. Did you ever tell them that before they started the work?

A. Absolutely.

Q. Do you think they were reasonable to believe it?

A. I think that there was trust there and I think it was reasonable

for Amprite Electric to believe Louie Lassetter, yes, or, other

[Contractor] representatives.

Q. You said proceed and do this work and you will be paid?

A. It was a [Contractor] issue, yet, I would say that, and I think

that would be reasonable for Amprite to assume and believe

me when I said they were going to be paid for it.

Mr. Lassetter conceded that this method, i.e., proceeding with work first (without the benefit

of a signed change order) deviated from the contractual scenario and “does involve risks.”

In sum, Contractor essentially abandoned the contractual provision of the Subcontract

regarding change orders and in the process ignored its corporate policy which mandated written

change orders before the extra work was commenced. The absence, therefore, of a written change

order is no defense to the claim of the Subcontractor for compensation for the extra work entailed

by the oral changes directed by the Contractor. See, The Realty Shop, Inc. v. RR Westminister

Holding, Inc., 7 S.W.3d 581 (Tenn. Ct. App. 1999). Whether this conclusion is propelled by

implication, or by promissory estoppel, or by quantum meruit, or common sense, is needless

speculation. Contractor concedes the point.

But this easy resolution does not carry with it the further conclusion that the Subcontractor

was free to ignore the contractual provisions respecting the amount of its compensation for work

occasioned by requests to perform additional work.

If there were no advance change orders, Amprite confirmed the requests by letter and a

Schedule H calculating the costs according to NECA and the Manual of Trade Service Corporation,

utilizing a software styled AcuBid. The extra work for each of the 212 requests using the Schedule

H format, was priced by the NECA and Trade Service publications.
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The first 24 COPs submitted by Amprite were accepted by the Contractor, who paid Amprite

$228,977.00 for the additional work. But the Contractor balked at payment for the remaining 188

COPs; according to Burke Waugh, a senior executive of the Contractor, the Owner was informed

that the extra work could not be further funded without approved change orders, even though “we

were having to proceed with the work before we could get them to return them approved.” Initially,

the Contractor’s position was that it could not pay Amprite for the 188 COPs because it had not been

paid by the Owner, but by April 19, 2000, the Owner paid Contractor the final amount of the

contracted price, together with the contingency fee. The Contractor still declined to pay for the

remaining COPs, asserting that Amprite had grossly overcharged for the extra work. The essence

of the defense is the purported excessiveness of Amprite’s pricing of the COPs.

The Contractor asserted, before trial, upon the trial, and in this Court, that Amprite’s claims

for extra work “were drastically overstated,” and that Amprite’s cost records show that it

misrepresented its direct costs of work. Contractor further asserts that the trial court held that

Amprite was entitled to recover its admittedly overstated claims for extra work under an implied-infact theory, and awarded Amprite compensation for “8686 hours never worked, $90,245.00 for

materials never purchased, and $6,877.00 for taxes never paid.” This is heady language and a boost

to our resolve to study the record of this protracted trial at length. Amprite was awarded

$1,265,090.00 for extra work performed, $78,806.79 for certain insurance claims, later discussed,

prejudgment interest of 5 percent beginning May 14, 2000, and 5 percent interest amounting to

$52,062.87 on retained funds, less credits of $264,648.00, for a total recovery of $1,131,311.66.

Contractor appeals, and presents for review these issues which we reproduce verbatim:

1. Did the trial court err when it ordered Tennessee Stadium Group (“TSG”) to

compensate Amprite Electric Company (“Amprite”) for hours Amprite

admittedly neverworked,for materials Amprite admittedly never bought, and

for taxes Amprite admittedly never paid?

2. When TSG and Amprite had entered an enforceable written construction

contract that expressly provides that any extra work Amprite performs will

be compensated at cost-plus-10%, and when Amprite acknowledged at trial

that cost-plus-10% was the proper formula for awarding any compensation

for extra work, did the trial court err by awarding Amprite a much greater

amount under an implied-contract theory?

3. Did the trial court err when it held that TSG was estopped from refusing to

pay costs that Amprite admits were never incurred.

4. Did the trial court err by requiring TSG to pay Amprite twice for certain

work?
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5. Did the trial court err by awarding Amprite judgment on it “builder’s risk”

insurance claims when (a) Amprite offered no evidence in support of those

claims; and (b) the parties’ contract expressly precludes builder’s risk claims?

6. Did the trial court err when it awarded Amprite interest on retainage that

exceeds the compound interest actually earned on the funds in the retainage

accounts?

7. Did the trial court properly award Amprite pre-judgment interest when TSG

reasonably contested Amprite’s admittedly inflated claims?

Amprite also presents for review these issues:

1. Whether the Chancellor, in light of Contractor’s admissions, correctly held

that Contractor had abandoned the Contract’s time consuming Change Order

provisions and created instead a separate Contract, implied and by estoppel,

as a result of a consistent course of dealing.

2. Whether the Chancellor’s calculation of costs, per the Schedule H format,

was correct in light of Contractor’s admissions that the idea for Schedule H

was Contractor’s, that it had used the format on earlier jobs, that it used it

with other Sub-Contractors on this Project, and that it accepted that form

without objection in connection with Amprite’s initial bills.

Because the presented issues are tautological, we do not discuss them in seriatim, but

generally. Our review is de novo on the record accompanied with a presumption of correctness, as

to factual matters, unless the evidence otherwise preponderates. Rule 13(d) T.R.A.P. Issues of law

carry no presumption of correctness. Adams v. Dean Roofing Co., 715 S.W.2d 341 (Tenn. Ct. App.

1986). If the aggregate weight of the evidence demonstrates that a finding of fact other than the one

found by the trial court is more probably true, the judgment must be reversed and rendered. See,

Realty Shop Inc. v. RR Westminister Holding Inc., 7 S.W.3d 581 (Tenn. Ct. App. 1999).

I.

The trial court held:

The plaintiff’s legal right to recover under Tennessee law for this

work is not by the court enforcing the terms of the parties contract.

The court determines that the contract does not apply to these COPs.

Instead, the court awards the recovery based on contract in fact and

estoppel.
1

 Amprite’s executive conceded upon the trial that if a Schedule H attached to a COP conflicted with the

internal cost records, the cost records should control. The trial court noted: “The defendant proved that in numerous

(continued...)

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This conclusion, with which we cannot agree, is essentially based on the finding that the

Contractor “made a deliberate decision to dispose with the delay of the change order process so as

to bring the project in on time.” This finding is supported by a preponderance of the evidence, but

in our judgment it does not justify a nullification of the entire Contract. We think the parties

essentially waived the requirement for written change orders, a common occurrence, but this waiver,

or abrogation of the contractual provision, in no way affected the amount of the compensation for

extra work to which Amprite was justly entitled. See, Realty Shop, supra.

In this jurisdiction, contracts are not taken lightly, and their interpretation is a matter of law

the aim of which is first to ascertain and then to give effect to the intentions of the parties. See,

Gredig v. Tennessee Farmers Mut. Ins. Co., 891 S.W.2d 909 (Tenn. Ct. App. 1994). As we held

in Realty Shop, supra, these intentions, in written contracts, are reflected in the contracts. Hall v.

Jeffers, 767 S.W.2d 654 (Tenn. Ct. App. 1988). Absent fraud, mistake or waiver, courts are required

to interpret contracts as written, giving the language used a natural meaning, and must strive to avoid

constructions which create ambiguities where none would otherwise exist. Whaley v. Underwood,

922 S.W.2d 110 (Tenn. Ct. App. 1995). It is firmly planted in our jurisdiction that the courts may

not make a new contract for the parties. Petty v. Sloan, 277 S.W.2d 355 (Tenn. 1955).

Against the backdrop of these settled principles, we conclude that the trial court erred in

nullifying the written contract and, in lieu, substituting the legal theories of contract-in-fact and

estoppel as bases for recovery. We cannot conceive that such drasticity was required in order to

adjust the equities between these parties. To this end it is well to keep in mind, as this record reaches

us, that the Contractor does not dispute that the extra work was performed by Amprite, that the

Contractor ordered or approved the extra work, and that Amprite is entitled to be compensated.

Contractor insists that the intention of the parties controls the issue of the amount of

compensation, which must be ascertained from the Contract, citing Commerce Street Co. v.

Goodyear Tire & Rubber Co., 215 S.W.2d 4 (Tenn. Ct. App. 1948) and Galleria Asso. v. Mogk, 34

S.W.3d 874 (Tenn. Ct. App. 2000). Its continuing argument is that the Subcontract provides that

Amprite is entitled to receive only its direct costs plus 10 percent for extra work performed. Direct

cost as defined in the Contract is the actual cost of materials, including sales taxes and delivery

charges, costs of labor, including Social Security, old-age and unemployment, insurance and fringe

benefits required by custom, worker’s compensation insurance, bond premiums, and applicable rent

charges.

The extra work performed by Amprite was recorded in separate job numbers. These cost data

were maintained at its home offices and were periodically furnished to its job-site office. It was

frequently the case that the job costs, as officially recorded, conflicted with the costs reflected on the

COPs.1
1

(...continued)

instances the Schedule H forms attached to the COPs listed above deviate from the actual costs incurred in performing

the work.” As to this, there can be no doubt, the Plaintiff concedes the fact.

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Suffice to state that during the progress of this protracted trial, Amprite conceded time and

again, that many of the 188 COPs with Schedules H attached did not accurately reflect its direct costs

as required by the Contract. For instance, in COP 42, with a Schedule H attached, Amprite

represented that it incurred 415 man-hours, although its internal cost records revealed only 154

hours; in COP 115 there was a discrepancy of 627 hours; in COP 139, a discrepancy of 505 hours;

in COP 144, a discrepancy of 402 hours; in COP 90, a discrepancy of 395 hours; in COP 43 a

discrepancy of 313 hours; in COP 75, a discrepancy of 214 hours; in COP 130, a discrepancy of 176

hours; in COP 88, a discrepancy of 174 hours. In sum, Amprite represented that it had invested

19,940 man-hours for extra work, when its internal cost records revealed that it had only worked

11,254 man-hours. We reiterate that Amprite verified, upon the trial, the accuracy of its internal cost

records.

With respect to the cost of materials purchased to perform extra work, according to COP 121

Amprite spent $19,881.00, when its internal cost records reveal it spent only $7,387.00; COP 115

claims an expenditure of $14,312.00 as contrasted to internal records revealing that the expenditure

was $4,559.00; COP 144 claims an expenditure of $25,901.00, as contrasted to the internal record

revealing the expenditure was $18,339.00. COPs 42, 77, 152, 130, 116, 113, 188 collectively claim

an expenditure of $44,838.00 as contrasted to actual costs of $25,643.00.

Amprite argues that the Schedule H document, attached to the Subcontract and to each COP,

was “established as a uniform measure to track the nature and price of any extra work,” and since

it provided for an hourly labor rate of $27.99 for extra work, plus additional amounts for other costs,

the “direct costs” provided for by the Contract would be calculated by using the fixed ratio used in

Schedule H. It further argues that the Contractor’s Manager testified that the parties agreed that the

hours necessary to perform a certain job would be as prescribed by the NECA Manual.

But we have studied the Manager’s testimony carefully. He testified that the NECA rates

could be used only when pricing an estimate before the work was performed. Significantly,

Amprite’s Manager testified:

Q. And so rather than go through each and every [COP] you

would agree . . . that if there is a discrepancy between

Amprite’s cost report tracking a given COP, and the Schedule

H submitted to TSG [the Contractor] the actual cost should

govern, correct?

A. Yes, sir.

The Contractor argues that Amprite’s Manager repeatedly admitted that Amprite knew the

Contract required it to track its actual costs for extra work, that it knew it was not entitled to more
2

 Amprite somewhat cryptically refers to the continency fee as having been paid to the Contractor as a “buffer

to cover things left out” if the Guaranteed Maximum Price was inadequate. But the Owners representative testified that

the “buffer” was spent on various subcontractors, and was “not profit to TSG [the Contractor}.”

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than actual costs plus 10 percent, that it knew the Defendant Contractor was relying on Amprite to

present it actual costs, but repeatedly submitted Schedule H forms which contained amounts in

excess of actual costs, that the Schedule H forms are not a proper basis for determining the amount

of compensation due Amprite, and that the proper way to compensate Amprite is to resolve each

discrepancy between any Schedule H and its corresponding cost report by reliance upon the cost

report and revise the COP claim to reflect the direct cost plus 10 percent. The record supports this

argument. The judgment represents a substantial windfall for Amprite2

 which cannot reasonably be

justified under any rationale. Amprite is entitled to recover its actual costs for the extra work plus

10 percent, as its Subcontract provides, and nothing more.

Estoppel

COPs 1 through 24 were accepted by the Contractor, and were later incorporated into eight

Change Orders signed by the Contractor which increased Amprite’s Contract by $228,977.00 which

was routinely paid. Amprite consequently argues that Contractor is estopped to question the

remaining COPs, because the proof established clearly that the Contractor agreed to pay for the extra

work and did so on twenty-four occasions. We think this argument overlooks the fact that the

Contractor, in this litigation, does not deny that Amprite is entitled to be paid for the extra work

performed; the issue is the amount of the compensation. The principle of estoppel is not implicated

in any way insofar as the amount of compensation is concerned. Amprite relies on Realty Shop,

supra, which is inapposite here since the Contractor agreed that Amprite was entitled to be

compensated for extra work.

The Contractor cannot be estopped from paying the Schedule H amounts merely because it

failed to discover in a timely manner that these amounts were more than Amprite’s actual costs plus

10 percent.

The doctrine of equitable estoppel requires evidence of conduct amounting to false

representation or concealment of material facts, the intention that such conduct shall be acted upon

by the other party, and knowledge of the real facts. Werne v. Sanderson, 954 S.W.2d 742 (Tenn.

Ct. App. 1997). The party asserting estoppel must prove that it had no knowledge of the truth and

could not obtain such knowledge, and that it changed its position to its detriment. See, Warren Bros.

v. Metro Govt., 540 S.W.2d 243 (Tenn. Ct. App. 1976). This point need not be further labored.

Extra Costs

The Subcontract defines extra costs in plain language, heretofore recited. Amprite argues

that it was justified in using the estimates prescribed by the Manuals, notwithstanding that these

estimates far exceeded the actual costs recorded in its records and vouchers offered as accurate by
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its executives. We cannot under any legal principle affix a judicial imprimatur to this argument,

which redefines windfall. Contractor describes Amprite’s bills as “unreasonable, fictitious, and

grossly inflated,” and far in excess of actual costs plus 10 percent as contractually provided. We

agree.

The Builder’s Risk Claims

Amprite was awarded $78,806.79 “on its builder’s risk claims.”

The Subcontract provides

[Amprite] hereby acknowledges it obligation for any loss to its work,

including stored materials, paid for or not, whether or not such loss

is reimbursable by Builder’s Risk Insurance.

Amprite’s builder’s risk claims involved repairs to damaged duct work, damage to electric

equipment, and tornado damage. Contractor argues that Amprite failed to meet its burden of proof

on this issue because Amprite admitted that it did not know whether these claims were valid or

whether its losses had been paid by insurance.

Amprite alleged “also outstanding are three claims on Contractor’s Builders Risk Insurance

which total $96,977.04. Amprite reserves the right to pursue those claims if unpaid.” The complaint

was amended to allege “the defendant has since made a small payment on the Builders Risk Claim,

thereby reducing it to $78,806.79.” It appears to be reasonably inferential that the builder’s risk

coverage assumed the balance, but the point is not crucial in light of the quoted contractual

provision.

The Defendant pleaded that any payments due to Amprite “for these builder’s risk claims are

contingent on approval and payment by MDHA, which has not yet occurred.”

Amprite’s Manager testified that the three claims were submitted [for payment] to the

builder’s risk insurance company, but he had no knowledge of whether payment had been made.

The trial court’s basis for its ruling was “the . . . contract requires a waiver of insurance to

be in writing. The defendants did not present a signed waiver.” The Contract provided that its terms

can be changed only in writing; we find no provision in the Contract which amends the quoted

provision that Amprite acknowledges its obligation for any loss for its work. The proof presented

is meager and somewhat nebulous, and falls short of establishing the liability of the Contractor for

these losses.

Interest on Retained Funds
3

 $60,000.00 remained in the retention account owing to a dispute concerning work apparently never performed

by Amprite.

4

 The record does not reveal the reason why a 5 percent rate was utilized by the accountant. It appears to have

been arbitrary.

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The trial court awarded Amprite $52,062.87 for “interest wrongfully withheld” on funds

retained by the Contractor from each payment request by Amprite. The Subcontract provides for

retainage in boiler plate language as one assurance the work will be properly accomplished by the

subcontractor.

Tennessee Code Annotated § 66-11-144 provides that the retained funds shall be deposited

in a separate escrow account but “shall become the sole and separate property of the . . .

subcontractor. . . . All funds accumulated in the escrow account together with any interest thereon

shall be paid immediately to the . . . subcontractor” upon satisfactory completion of the contract.

The proof established that the retention was deposited “to two specific cash accounts” by the

Owner, which were interest-bearing at a rate not revealed, and apparently not inquired into. The

Contractor paid the subcontractors, including the plaintiff Amprite, the actual interest earned. The

total amount of Amprite’s retention was $555,948.85, the balance of which, $222,379.54, was

“released to Amprite” on May 17, 2000.3

Amprite contends that the Contractor violated the statutory requirement that the escrowed

funds be deposited in a separate account. Contractor contends that it simply commingled the

retained funds of all of its subcontractors which is not prohibited by the statute. In any event we do

not see how the procedure employed adversely affected Amprite. 

Contractor contends that the calculation of interest by Amprite is erroneous because (1) a

fictitious rate of interest [5 percent] was applied4 as opposed to the actual compound interest rate

earned, (2) the accountant failed to consider - did not deduct from the principal - $60,000.00

withheld by the Owner for lighting Amprite admittedly did not install, (3) the award of interest on

the retention did not take into account the compound interest earned and paid to Amprite, and (4)

since the Owner withheld the $60,000.00, Contractor could not be liable for interest thereon. We

conclude that from all the evidence this critique of Amprite’s calculation of interest is well taken,

but in any event all the interest earned on the retainage was paid to Amprite. The award of additional

interest is vacated.

Pre-Judgment Interest

Contractor argues that the trial judge erroneously awarded pre-judgment interest because the

costs Amprite incurred are not related to the judgment it seeks, pointing out that the claim was

unliquidated and reasonably disputed.
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It is provided by statute that pre-judgment interest may be awarded in accordance with

equitable principles. Tenn. Code Ann. § 47-14-123. In Myint v. Allstate Ins. Co., 970 S.W.2d 920

(Tenn. 1998) our Supreme Court explained that it

. . . is within the sound discretion of the trial court and the decision will not be

disturbed by an appellate court unless the record reveals a manifest and palpable

abuse of discretion. . . . This standard of review clearly vests the trial court with

considerable deference in the prejudgment interest decision. Generally stated, the

abuse of discretion standard does not authorize an appellate court to merely substitute

its judgment for that of the trial court. Thus, in cases where the evidence supports

the trial court’s decision, no abuse of discretion is found.

The Supreme Court expounded further:

Foremost are the principles of equity. . . . 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.

Had Amprite sought to recover only its actual costs plus 10 percent, it unquestionably would

be entitled to pre-judgement interest. But Amprite sought to recover a windfall to which it was not

entitled. It may reasonably be inferred from this record that if Amprite had simply requested that the

Contractor pay its actual costs plus 10 percent for the extra work this litigation would not have been

necessary. Under these circumstances, we think it was an abuse of discretion to allow pre-judgement

interest.

Conclusion

In sum, we hold that neither the Contract between the Owner and Contractor nor the

Subcontract between the Contractor and Amprite, was abandoned. We hold that the provision

requiring Change Orders be in writing was waived by the Contractor and Amprite. We hold that all

other portions of the Subcontract are valid and enforceable, particularly the provision which fixes

compensation for extra work at actual cost plus 10 percent. We hold that the internal records of

Amprite, as generated and authenticated, with respect to its actual costs, prevail over the flat or

estimated rates prescribed by Schedule H. We hold that the Contractor was not estopped to insist
5

 COPs 99 and 139, [$26,740.00] were allowed, probably inadvertently. The evidence revealed that the work

attributed to these COPs was included in the base Contract and for which Amprite had already been paid. The actual

costs should accordingly be reduced to $447,164.00. We have studied the testimony of the expert witness Miller and

do not agree with Amprite that his calculations of actual costs were $700,309.00

6

 The Contractor claims a credit of $12,452.00 for overpayment of interest on retained funds. We cannot

determine from the record whether these numbers are correct any therefor disallow this claimed credit.

-14-

upon proof of actual costs per the Contract. We hold that Amprite failed to prove its entitlement to

additional interest on the retainage.

Our analysis of the Exhibits, particularly 9A, 9B, and 12 reveal that the represented costs

aggregate $897,582.00 as contrasted to actual costs of $483,904.00.5

The internal reports of Amprite are the sole evidence of its costs. No citation of authority

is required for the assertion that it was incumbent upon Amprite to prove its case by a preponderance

of the evidence. We think the proof established that Amprite was entitled to recover $447,164.00,

less an undisputed credit of $264,648.00,6 or $170,084.00. The judgment is accordingly modified

to allow a recovery of $170,084.00. Costs are taxed evenly and the case is remanded for all

appropriate purposes.

___________________________________ 

WILLIAM H. INMAN, SENIOR JUDGE