Court Opinion

ID: 1054439
Source: CourtListenerOpinion
Date Created: 2013-10-08 20:49:35.181196+00
Date Added: 2024-06-11T10:36:23.918201
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                                 August 4, 2004 Session

   GIBBS BROTHERS CONSTRUCTION, INC. v. BROOK HOLLOW
     GREEN, LLC, NATIONAL GRANGE MUTUAL INSURANCE
        COMPANY, CONTINENTAL DEVELOPMENT AND
  CONSTRUCTION, INC., NICHOLAS S. PSILLAS, AND MARSHALL
    COLLIER, INDIVIDUALLY AND D/B/A P&C CONTRACTORS

              An Appeal from the Chancery Court for Williamson County
                     No. 27249    R. E. Lee Davies, Chancellor

                  No. M2003-01698-COA-R3-CV - Filed April 19, 2005

This case is about a construction lien. A real estate developer hired a contractor to perform
paving work on new roads in a subdivision. After the work was completed, the contractor sent
the developer an invoice for the work done, but the developer did not pay. Eventually, the
developer paid a portion of the invoice. When no further payments were made, the contractor
filed a lien on the developer’s roadway. The contractor then sued the developer to enforce the
lien. After the suit was filed, the developer asserted that the contractor’s workmanship was poor
and that, as a result, the pavement on the roadway was defective. The trial court found that the
contractor had a valid lien and awarded a judgment against the developer and the developer’s
surety. The trial court also awarded the contractor prejudgment interest. The developer appeals,
asserting that the road was public and not subject to lien, that the trial court made erroneous
evidentiary rulings, that the trial court erred in finding that a variance from the listed
measurements was permissible under the contract, that it should have been awarded a setoff
against the contractor’s judgment, and that the contractor should not have been awarded
prejudgment interest. We affirm, finding that the contractor’s lien was valid and enforceable,
that the trial court did not err in its evidentiary rulings, that the developer failed to prove
damages to setoff, and that the trial court did not abuse his discretion in the award of
prejudgment interest.

                Rule 3 Appeal; Judgment of the Chancery Court is affirmed

HOLLY M. KIRBY , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J.,
W.S. and DAVID R. FARMER , J., joined.

David M. Smythe, Nashville, for the Plaintiff/Appellee Gibbs Brothers Construction, Inc.
R. Francene Kavin, Brentwood, for Defendant/Appellants Brook Hollow Green, LLC, National
Grange Mutual Insurance Company, Continental Development, and Defendant Nicholas Psillas.

Defendant Marshall Collier, pro se.

                                                     OPINION

        Plaintiff/Appellee Gibbs Brothers Construction, Inc. (“Gibbs”) is a construction company
located in Nashville, Tennessee. Defendant/Appellant Brook Hollow Green, LLC (“Brook
Hollow”) is a limited liability company in the business of developing real estate. Brook Hollow
owned and developed the real property at issue in this case, located in the City of Fairview in
Williamson County, Tennessee. The managing member of Brook Hollow is Defendant
Continental Development & Construction, Inc. (“Continental”). Defendant Nicholas Psillas
(“Psillas”) is the president of Continental. Psillas is also a partner with Defendant Marshall
Collier (“Collier”) in a separate entity, Defendant P&C Contractors (“P&C”).1

        Brook Hollow planned to build a subdivision on the property. Toward that end, Brook
Hollow hired Gibbs to put in roads for the subdivision. Constructing the roads was comprised of
four phases: base stone work, asphalt binder work, concrete curb construction, and asphalt
topcoat work. The contract between Gibbs and Brook Hollow specified that Gibbs would
construct an 8-inch deep limestone base and a layer of asphalt binder 2 inches deep. The fourth
step, an asphalt topcoat, was to be added after construction on the subdivision was complete.
The contract stated that “[i]nvoices not paid when due are subject to late charges of 1.5% per
month.”

       For roads such as those at issue in this case, the City of Fairview’s specifications were a
minimum of eight inches of crush rock, two inches of binder asphalt, and one and a half inches
of topcoat. Plans for the subdivision were drawn up by an engineer with defendant Continental,
and were approved by the City of Fairview. The plans indicated an eight-inch stone base and a
two-inch asphalt binder, with the notation “+/-” with the measurement requirements. These
plans were given to Gibbs for Gibbs’ use in submitting a bid for the roadwork. The bid was
submitted in August 1999 and was accepted by Brook Hollow in September 1999. The plans
were referenced in the contract between Gibbs and Brook Hollow.

        Defendant P&C was responsible for the utility and subgrade work, putting in the roadbed
and the preparation for utilities such as sewers and water drainage. This work was necessary to
prepare for the base stone and asphalt work by Gibbs. In October 1999, in a separate transaction,
P&C hired Gibbs to finish the grading of the roadways. On October 30, 1999, Gibbs invoiced
P&C $5,975.00 for this subgrade work. Collier forwarded this invoice to defendant Continental.
It was not paid.

1
 Continental, Psillas, Collier and P&C were named as defendants in the litigation below, but the trial court ultimately
dismissed Gibbs’ claims against them, and that decision was not appealed.

                                                         -2-
        Thereafter, Gibbs commenced work on the first three phases of laying the roadway, that
is, the base stone work, the asphalt binder, and construction of the concrete curbs. These first
three steps were completed in early November 1999. On November 11, 1999, Gibbs sent
Continental an invoice for $107,649.30 for the work completed to that point. This invoice
likewise was not paid.

       Gibbs’s bookkeeper at the time, James Potts, made a number of telephone calls to
Continental in an attempt to collect the invoices. In May 2000, Gibbs received a $50,000.00
check from Brook Hollow. No further payments were received.

      In June 2000, Gibbs filed a Notice of Lien for $63,624.30, which represented the balance
from two unpaid invoices on the roadwork for the subdivision, minus the $50,000.00 partial
payment.2 The Notice of Lien named Brook Hollow as the owner of the property.

        On July 31, 2000, Gibbs filed suit against Brook Hollow to enforce the lien and for
money damages against Brook Hollow. In October 2000, Gibbs amended the complaint to add
defendant National Grange Mutual Insurance Company, as surety for Brook Hollow. In its
answer to Gibbs’ first amended complaint, Brook Hollow denied liability and asserted as an
affirmative defense that Gibbs’ work was of poor quality. Brook Hollow asserted a claim for the
cost of correcting or redoing Gibbs’ work as a setoff against any damages for which it might be
held liable.

       In April 2001, Gibbs filed a motion to file a second amended complaint, adding as
defendants Continental, P&C Contractors, and Psillas and Collier individually. This amendment
was permitted by consent. In July 2001, Gibbs filed a motion to amend the complaint again. In
the motion, Gibbs alleged that it had inadvertently failed to invoice Brook Hollow for work done
on a model home at the site and sought to amend to include a claim for payment for this work, in
the amount of $8,793.14. This amendment was likewise permitted by consent.

        During the pendency of the litigation, the thickness of the base and the asphalt binder was
tested by core drilling on the roadway, performed by Professional Services Industries, Inc.
(“PSI”), an engineering and testing facility located in Nashville, Tennessee. PSI was hired by
the City of Fairview. PSI submitted a report dated January 13, 2003.

        In addition, Brook Hollow hired Dr. Louis Mishu, a geotechnical engineer, to test the
paving work done by Gibbs. By letter dated May 22, 2002, Brook Hollow notified Gibbs that it
intended to call Dr. Mishu as an expert witness at the trial, scheduled for June 3, 2002. Gibbs
filed a motion in limine to exclude Dr. Mishu’s expert testimony. The motion was granted on
the basis that Brook Hollow failed to timely supplement its response to Gibbs’ discovery request
seeking the identity of all experts.

2
 The invoices and Notice of Lien did not include late charges. The trial court awarded prejudgment interest in lieu
of late charges. The late charge issue was not raised on appeal.

                                                         -3-
        The three-day bench trial was held on June 3, 2002, and March 13-14, 2003. At trial,
Gibbs’ representative, Kenneth Brown (“Brown”), testified that Gibbs did not receive
notification of any perceived defects in its work until after Gibbs filed suit to enforce the lien
against Brook Hollow. To address alleged defects in workmanship, Brown said, a one year
implied warranty for labor and materials was customary for this type of construction work.
Brown noted, however, that Brook Hollow’s first mention of any defects in Gibbs’ workmanship
came well over a year after Gibbs completed the invoiced work.

       As to the alleged defects in Gibbs’ work, Brown testified that any failures in the paving
work was caused by subgrade failure or abuse, not by Gibbs’s workmanship. Brown stated that a
plus or minus tolerance or variance was customary in the paving industry in this geographical
area.

        Collier testified on behalf of Brook Hollow. Collier noted that the City of Fairview’s
specifications required a minimum of eight inches of stone and two inches of binder. He stated
that he was not familiar with a plus or minus tolerance level. However, he acknowledged that
the plans on which Gibbs based its bid indicated a plus or minus variance in the thickness
measurements. Collier also said that a quarter to a half an inch of tolerance would be acceptable
on the asphalt binder and less than one inch of tolerance would be acceptable on the base stone.

       Despite the grant of Gibbs’ motion in limine, Dr. Mishu was permitted to testify on
Brook Hollow’s behalf on some issues. Mishu testified that he could not approximate the
amount of the pavement that was bad at the time he tested Gibbs’ paving work. Dr. Mishu
alleged that the primary reason for problems with the pavement was that the paving material
contained too many fine particles. Mishu stated that the secondary reason for the pavement
problems was that the paving was not thick enough.

         PSI’s representative, Wayne Haranack (“Haranack”), testified on the results of PSI’s
testing of core samples of the pavement. Haranack found that the average of the core samples
for the binder coat was 1.83 inches, or .17 inches short of the required two inches. Haranack
testified that PSI also found that the average of stone base samples was 8.09 inches, or .09 more
than required. PSI’s report stated that, in general, the binder was performing adequately, with
relatively isolated problem areas.

        At the conclusion of the trial, the learned trial judge issued an oral ruling. The trial court
found that Gibbs completed the work according to the contract between the parties. The trial
court also found that Brook Hollow did not complain of any defects in the workmanship until
after Gibbs filed a lien on the property for the amount owed. The trial judge noted that the
experts disagreed about the extent of problems with the pavement, but accepted the testimony of
PSI’s representative, Haranack. The trial court found that Gibbs’ paving work was within the
tolerance levels accepted in custom and practice and within the provisions of the plans, which
noted a “+/-” on the measurements.

                                                 -4-
        The trial judge found that any needed repairs should have been addressed pursuant to
applicable warranties, but noted that Brook Hollow could not reasonably ask Gibbs to make
warranty repairs when Gibbs had not been paid for the work. The trial court found no evidence
of a specific request that Gibbs make any repairs. Regardless, the trial court noted that no proof
was submitted at trial of any amount needed to make such repairs. Consequently, the trial court
held that it was impossible to determine any setoff amount or recoupment amount.

       As a result of these findings, the trial court entered a judgment against Brook Hollow in
favor of Gibbs for $72,417.44. Of that amount, $57,649.30 was awarded against National
Grange Mutual on the surety bond. In addition, the trial court awarded prejudgment interest of
10 per cent per annum from December 11, 1999 to June 30, 2002. The claims against the
remaining defendants were dismissed. From this order, Brook Hollow and National Grange
Mutual appeal.

        On appeal, Brook Hollow argues that the trial court erred in ruling that Gibbs had a valid
lien. Brook Hollow further contends that the trial court erred in ruling that Gibbs was not
obligated to honor an implied warranty and in finding that the roads constructed by Gibbs were
private roads instead of public roads. Brook Hollow also asserts that the trial court erred in
limiting Dr. Mishu’s testimony, in finding that a variance in thickness was permissible under the
contract, in finding that Gibbs’ paving work was within acceptable tolerance levels, in refusing
to permit Brook Hollow to setoff the cost of repairs to the roadway, and in the award of the
prejudgment interest against Brook Hollow.

       Our review of this case is governed by T.R.A.P. 13(d), which provides that review of
findings of fact by the trial court shall be de novo upon the record of the trial court, accompanied
by a presumption of correctness of the factual findings, unless the evidence preponderates
otherwise. T.R.A.P. 13(d); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn.
1993). The trial court is afforded discretion to determine the “admissibility, qualifications,
relevancy and competency of expert testimony.” McDaniel v. CSX Transp., Inc., 955 S.W.2d
257, 263 (Tenn. 1997). The trial court’s rulings in this regard will be upheld except upon a
showing of an abuse of this discretion. Id. at 263-64. “Resolving the conflicting testimony of
experts falls within the province of the trier of fact[,]” Atkins v. State, 2004 WL 787166, *5
(Tenn. Ct. App. Apr. 14, 2004) (citing State v. Flake, 88 S.W.3d 540 (Tenn. 2002)), “and where
an expert witness’s testimony is supported by the evidence and the trier of fact credits that
testimony over others, there is no basis to reverse the court’s findings.” Id. (citing Balsinger v.
Town of Madisonville, 435 S.W.2d 803 (Tenn. 1968)).

       Brook Hollow first argues that Gibbs’s lien was invalid because the roads constructed by
Gibbs were public roads rather than private roadways, and thus are not subject to lien under
Tennessee Code Annotated §§ 66-11-101 and 102. The relevant portion of Section 66-1-102
provides: “There shall be a lien upon any lot of ground or tract of land upon which . . .
improvements [are] made, by special contract with the owner or the owner’s agent, in favor of
the contractor, mechanic, laborer.” Section 66-11-101 (7) defines the term “improvement” as
follows:

                                                -5-
               Improvement means any building, structure, erection, alteration,
               demolition, excavation, or any part thereof, including . . . private
               roadways, on real property for its permanent benefit, whether there
               is existing at the time of such work, any building, structure or other
               improvements upon the real property.

Tenn. Code Ann. § 66-11-101(7) (2004). Thus, improvements regarding a roadway may be
subject to lien, so long as the roadway is private.

        Brook Hollow asserts that the roads in the subdivision were not private roadways because
the City of Fairview gave plat approval to Brook Hollow before the roads were built, making
them public roads. Tennessee statutes, however, are contrary to Brook Hollow’s position.
Tennessee Code Annotated § 13-3-405 states expressly that plat approval does not constitute
public acceptance of the road. T.C.A. § 13-3-405 (1999). Moreover, in Hackett v. Smith
County, 807 S.W.2d 695 (Tenn. Ct. App. 1990), this Court explained that a road becomes public
after there has been an offer of dedication of the road and an acceptance of its dedication to
public use. Id. at 699. Acceptance of a road to public use may be implied through ongoing
public use. Id. Here, the facts are inconsistent with any acceptance of the roads to public use.
It is undisputed that Brook Hollow remained the owner of the property on which the roads were
located. Therefore, there could be no acceptance of the roads’ dedication to public use.
Moreover, at the time Gibbs filed the lien, the final layer of asphalt had not yet been put on the
roads; therefore, there could be no implied acceptance of the roads to public use through ongoing
public use. Consequently, the roadways on which Gibbs performed work remained “private
roadways” within the meaning of Section 66-11-101(7), and the work performed by Gibbs would
be deemed an “improvement” within the meaning of Section 66-11-102, and subject to lien on
the land owned by Brook Hollow. Accordingly, the trial court is affirmed on this issue.

        Brook Hollow asserts that the trial court erred in refusing to permit some of Dr. Mishu’s
testimony. Initially, the trial court refused to allow Dr. Mishu’s testimony as an expert, because
Brook Hollow failed to timely supplement its discovery responses to disclose Dr. Mishu as an
expert who would testify on behalf of Brook Hollow at trial. During the trial, however, the trial
court allowed Dr. Mishu to testify, primarily as a fact witness, but also as an expert on some
topics. As noted above, the trial court is afforded wide discretion to determine the admissibility
and competency of expert testimony, the decision of a trial court regarding an expert will be
upheld unless it is shown to be an abuse of discretion. Atkins v. State, 2004 WL 787166, *5
(Tenn. Ct. App. Apr. 14, 2004). Further, Tennessee Rules of Civil Procedure provide specific
discovery sanctions, which include preventing a party from introducing certain matters into
evidence. Tenn. R. Civ. P. 37.02(B); Kuehne & Nagel, Inc. v. Preston, Skahan & Smith
Intern., Inc., 2002 WL 1389615, *4 (Tenn. Ct. App. June 27, 2002). To the extent that the trial
court excluded Dr. Mishu’s expert testimony, we find no error in this decision, and it is affirmed.

          Brook Hollow also asserts that the trial court erred in finding that a variance from the
listed measurements was acceptable under the contract between the parties. Brook Hollow relies
on Estate of Jessee v. White, 633 S.W.2d 767 (Tenn. Ct. App. 1982) in support of its position

                                                -6-
that a deviation from the contractual specifications constitutes a material breach of contract.
White, however, does not stand for this proposition. In White, the defendant contractor was
hired to pave a parking lot. Id. at 768. The contract called for a minimum base of no less than
four inches, and required the contractor to upgrade the specifications as required to meet the
recommendations of the Asphalt Association and the State Highway Department. Id. at 768.
The contractor hired a subcontractor to do the paving work. Id. The subcontractor did not
comply with minimum standards and made no effort to ascertain the recommendations of the
Asphalt Association or the State Highway Department. Id. Under the contract, the contractor
remained liable for the subcontractor’s breach of the contractual duties. Id. at 769.
Consequently, the contractor in White was held liable under the agreement. Id. In contrast, in
this case, the trial court held that a variance was acceptable under the contract in light of the
explicit provision in the plans, referenced in the contract, and in light of testimony regarding
industry custom and practice.

       In the case at bar, Brook Hollow’s witness, Collier, testified that the original plans for the
pavement allowed for a variance and that the plans were drawn up by an engineer hired for
Continental. Collier acknowledged that these plans were approved by the City of Fairview, were
referenced in the contract, and were given to Gibbs in order for Gibbs to rely on them in
submitting a bid. Under these circumstances, we must affirm the trial court’s decision on this
issue.

        Brook Hollow argues on appeal that the trial court erred in crediting Haranack’s
testimony over the testimony of Dr. Mishu on the amount of variance in the paving and the
reason for any problems in the pavement. The appellate court accords great deference to the
credibility determinations of the trial court, since the trial judge has the opportunity to observe
the manner and demeanor of the witnesses while testifying. Bowman v. Bowman, 836 S.W.2d
563, 566 (Tenn. Ct. App. 1991). Brook Hollow notes that the trial court, in its oral ruling,
erroneously described Haranack as having been selected by both Gibbs and Brook Hollow. We
find this to be harmless error; the fact is simply that the trial court apparently credited
Haranack’s testimony over that of Dr. Mishu. We find no basis in the record for reversing this
credibility determination.

       Brook Hollow argues on appeal that it is entitled to recoupment—a setoff of the amount
of necessary repairs from the judgment in favor of Gibbs. In its ruling, the trial court stated

               there does not appear to be any evidence of a specific request to
               make repairs articulated either in writing . . . or even orally by
               [Brook Hollow]. Instead, it appears that [Brook Hollow] latched
               on to these problems as a reason to not pay anything else. The
               Court finds that to be unacceptable. Likewise, there is no proof of
               any amount needed to make repairs. Therefore, it’s impossible to
               determine setoff or recoupment in this case.

                                                -7-
Brook Hollow asserts that it could not present proof of damages because the trial court refused to
allow testimony from its expert witness, Dr. Mishu. As noted above, we find no abuse of
discretion in the trial court’s determination on the admissibility of Dr. Mishu as an expert
witness. McDaniel v. CSX Transp., Inc., 955 S.W.2d 257, 263 (Tenn. 1997). Brook Hollow
does not point to any place in the record in which it made, or sought to make, an offer of proof of
Dr. Mishu’s testimony regarding damages. Moreover, after the trial court ruled on Gibbs’
motion in limine regarding Dr. Mishu’s testimony, Brook Hollow was on notice that his
testimony would be limited. After the first day of trial, June 3, 2002, the remainder of the trial
testimony was heard on March 13-14, 2003, and Brook Hollow nevertheless did not proffer
evidence from which the trial court could determine an amount to award as recoupment to Brook
Hollow. We find no error in the trial court’s decision on this issue.

        Finally, Brook Hollow argues that the trial court erred in awarding prejudgment interest.
Brook Hollow asserts that the trial court was biased and awarded prejudgment interest to punish
Brook Hollow, rather than to fully compensate Gibbs. Brook Hollow bases this argument on the
trial judge’s statement that “it appears that [Brook Hollow] latched onto these problems as a
reason to not pay anything else.”

        In Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998), the Tennessee Supreme
Court noted that the purpose of prejudgment interest is to “fully compensate a plaintiff for the
loss of use of funds to which he or she was legally entitled, not to penalize a defendant for
wrongdoing.” It held that an “award of prejudgment interest 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.” Id. at 927 (citing Spencer v. A-1 Crane Service,
Inc., 880 S.W.2d 938, 944 (Tenn.1994)); Otis v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d
439, 446 (Tenn.1992). The Myint court observed that, “in cases where the evidence supports the
trial court’s decision, no abuse of discretion is found.” Id. at 927.

        In the case at bar, it is undisputed that Brook Hollow did not send Gibbs any written
communication regarding perceived defects in Gibbs’ workmanship until Brook Hollow filed its
answer to Gibbs’ complaint to enforce its lien. Brook Hollow presented testimony from Psillas
that he began observing failures in the paved roadways in December 1999, and that he
mentioned these failures to Collier. In contrast, Gibbs presented testimony that, in the course of
its efforts to collect the amount due from Brook Hollow before filing a lien, including
discussions with Psillas, there were no assertions of defects in Gibbs’ work. Gibbs’ position was
that it had no notice that Brook Hollow considered its workmanship defective until it received
Brook Hollow’s answer to the complaint. The statement by the trial judge to which Brook
Hollow objects indicates that the trial court credited the testimony presented by Gibbs on this
issue. Again, we accord great deference to the trial court’s determinations of credibility.
Bowman, 836 S.W.2d at 566. With appropriate deference to the trial court’s credibility
determination, there is ample evidence in the record to support the trial court’s conclusion that
Brook Hollow gave Gibbs no notice of perceived defects until after Gibbs filed suit to enforce its
lien, and the resulting inference that Brook Hollow “latched onto” these defects as a reason not
to pay Gibbs any more money for its work. Under these circumstances, we find no error by the

                                                -8-
trial court in reaching this conclusion. Accordingly, we affirm the trial court’s decision to award
prejudgment interest to Gibbs.

      The decision of the trial court is affirmed. Costs of this appeal are assessed against
Defendant/Appellants, Brook Hollow Green, LLC, and National Grange Mutual Insurance
Company, for which execution may issue, if necessary.

                                             __________________________________________
                                             HOLLY M. KIRBY, JUDGE

                                               -9-