Court Opinion

ID: 3178824
Source: CourtListenerOpinion
Date Created: 2016-02-19 15:38:56.953194+00
Date Added: 2024-06-11T14:46:50.260006
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                               November 17, 2015 Session

 CECIL MCNATT, ET AL. v. JANE VESTAL (KANIZAR); HENDERSON
            VILLA INC. v. CECIL MCNATT, ET AL.

                 Appeal from the Chancery Court for Chester County
                   No. 2010CV477 James F. Butler, Chancellor

                          ________________________________

               No. W2015-00870-COA-R3-CV – Filed February 18, 2016
                       _________________________________

This is a construction case. Appellee, Cecil McNatt, contracted to build and obtain the
required licensing for an assisted living facility for Appellant Jane Vestal. The facility was
constructed and licensed according to the parties‟ contract. Following completion, Appellant
refused to pay the balance of the contract amount, citing the Appellee‟s lack of a contractor‟s
license and numerous construction defects. Appellee filed suit against Appellant for breach
of contract, and Appellant counterclaimed for violations of the Contractors Licensing Act
and Tennessee Consumer Protection Act. The trial court concluded that Appellee did not
violate the Contractors Licensing Act or the Tennessee Consumer Protection Act, dismissed
Appellants‟ counterclaims, and awarded Appellees a judgment in the amount of $96,280.11.
We conclude that trial court erred in concluding that the Appellee did not violate the
Contractors Licensing Act, but we affirm the judgment to Appellee, with some modification
of the amount awarded.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is Affirmed
                     in Part, Reversed in Part, and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the Court, in which J. STEVEN STAFFORD,
P.J., W.S., and ARNOLD B. GOLDIN, J., joined.

Clinton H. Scott, Jackson, Tennessee and J. Brandon McWherter, Franklin, Tennessee, for
the appellants, Jane Vestal (Kanizar) and Henderson Villa, Inc..

Charles H. Barnett, III and Sara E. Barnett, Jackson, Tennessee, for the appellees, Cecil

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McNatt and Marcia McNatt.

                                          OPINION

                                        I. Background

        On May 8, 2009, Jane Vestal (“Vestal”) and Cecil McNatt (“McNatt”) executed a
contract under which Vestal agreed to pay $1,400,000 in exchange for McNatt “render[ing]
all services and duties required for the construction of and all licensing of the ASSISTED
LIVING FACILITY to be located in Henderson, Tennessee and owned by [Vestal].” The
contract listed McNatt‟s duties as: (1) “Building permit;” (2) “planning and zoning review
with the city;” (3) “review of plans by state health board;” (4) “application with state health
board;” (5) “review of plans by state fire marshall‟s office;” (6) “compliance with the 101
Life Safety code;” (7) “employing an architect to sign off on the plans;” (8) “acquiring all
engineering approvals;” (9) “building the facility according to plans and specs;” (10) “all
appliances in kitchen;” (11) “obtaining permit to occupy from state;” (12) “obtaining permit
to occupy from city;” and (13) “obtaining license to operate ASSISTED LIVING CENTER.”
 The contract described McNatt‟s work as a “turn key job,” and the contract specified that
payment was due “when the contract is fully performed by [McNatt], and [a] permit to
occupy has been issued.” It is undisputed that, at the time the parties executed the contract,
McNatt was not a licensed contractor.

        On May 11, 2009, three days after executing the contract with Vestal, McNatt
executed a “Joint Venture Agreement” with M.S. Burton Construction Co. Inc. (“Burton
Construction”). This agreement stated that the “joint venture shall be formed for the purpose
of constructing and developing two assisted living facilities in Tennessee….” The agreement
also stated that “[t]he joint venture shall be considered in all respects a joint venture between
the parties, and nothing in this agreement shall be construed to create a partnership or other
fiduciary relationship between the parties.” It is undisputed that Burton Construction held an
unlimited contractor‟s license at the time it executed this agreement with McNatt. However,
the contract between McNatt and Vestal included no reference to this joint venture agreement
or to Burton Construction. McNatt‟s contract with Vestal provides that McNatt will build the
assisted living facility for Vestal.

       On September 15, 2009, McNatt obtained a building permit in Burton Construction‟s
name for construction of the facility. McNatt maintains that Vestal was aware from the
outset that Burton Construction would be acting as the general contractor on the project.
Burton Construction‟s name was on the building permit, which was posted in the
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construction office onsite, and Vestal admitted seeing the permit early on during
construction. Vestal also used Burton Construction‟s license number to obtain construction
insurance for the building being constructed. Vestal and Michael Burton (“Burton”), the
owner of Burton Construction, also attended the same church, and Vestal knew Burton was a
general contractor. Although Burton was listed as the general contractor on the project, it is
undisputed that McNatt selected most of the subcontractors, supervised all of the
subcontractors, and paid all of the subcontractors used on the project. McNatt was onsite
throughout the construction of the facility, and Burton only visited the construction site to
perform inspections and otherwise left the day-to-day supervision to McNatt. Construction
of the facility was completed in August of 2010, and Vestal executed the Notice of
Completion on September 1, 2010. The Notice of Completion identified Burton
Construction as the general contractor of the facility. The parties closed on the facility on
November 10, 2010, and Vestal began operating the facility under the name Henderson Villa.

       Following completion of the facility, Vestal refused to pay the balance owed on the
contract and amounts owed for other services. Consequently, on December 7, 2010, McNatt
and his wife Marcia (together, “the McNatts” or “Appellees”) filed a complaint in the
Chancery Court for Henderson County against Vestal. The complaint sought damages in the
amount of $127,205 for breach of contract, damage to business reputation, and failure to pay
for services rendered. On February 3, 2011, Vestal filed an answer and counter-complaint.
Vestal‟s counter-complaint asserted numerous claims, including: (1) breach of contract; (2)
breach of the Contractors Licensing Act;1 (3) negligence; (4) negligent misrepresentation; (5)
negligence per se; (6) fraud or intentional misrepresentation; (7) intentional interference with
business relationships; (8) intentional infliction of emotional distress; (9) violations of the
Tennessee Consumer Protection Act;2 and (10) breach of warranties.

       On March 3, 2011, the McNatts filed their answer to the counter-complaint. On July
5, 2011, Vestal filed a motion for leave to file an amended counter-complaint. The trial court
granted this motion, and, on July 27, 2011, Vestal filed an amended complaint. The amended
complaint re-asserted all the claims set out in the original complaint, and also named Burton
Construction and Michael Burton in his individual capacity as third-party defendants. On
September 19, 2011, Burton Construction filed a motion to dismiss or, in the alternative, to
transfer the matter to circuit court. Burton Construction‟s motion also asserted various
defenses to Vestal‟s claims against it. Vestal filed a motion for partial summary judgment on
February 1, 2012. The trial court heard the motion for partial summary judgment and the
motion to dismiss or transfer on April 11, 2012. On April 25, 2012, the trial court denied
both motions by separate orders.

       1
           See Tenn. Code Ann. § 62-6-101 et seq.
       2
           See Tennessee Code Annotated Section 47-18-101 et seq.
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       On November 26, 2012, Vestal and Henderson Villa, Inc. (“Henderson Villa”) filed a
joint motion to join Henderson Villa as an intervening plaintiff in the case, and the trial court
granted the motion. The case was then delayed for some time due to discovery issues and
continuances of the trial. On May 17, 2013, Burton Construction and Burton filed a motion
for summary judgment. On May 31, 2013, Burton Construction and Burton made an offer of
judgment to Vestal. On July 23, 2013, the trial court entered a consent order dismissing, with
prejudice, all claims against Burton Construction and Michael Burton. On September 4,
2013, Vestal and Henderson Villa (together, “Appellants”) filed a motion in limine seeking to
sanction Appellees for not producing evidence and seeking to exclude Appellees from
putting on any proof regarding construction costs. The trial court granted the motion on
September 11, 2013.

       Beginning on September 19, 2013, the trial court held a bench trial, wherein McNatt
represented himself pro se. Mrs. McNatt did not appear during the trial, nor was she
represented by counsel before the trial court. On January 16, 2015, the trial court entered an
order either dismissing or denying all of Appellants‟ claims and awarding Appellees a
judgment against Vestal in the amount of $96,280.11. On February 5, 2015, Appellants filed
a motion to alter or amend the judgment, which the trial court denied in an order dated April
10, 2015. On April 29, 2015, Appellants filed the instant appeal, raising only limited issues.

                                           II. Issues

       We restate the issues presented on appeal as follows:

       1.    Whether the trial court erred in concluding that McNatt was a licensed
          contractor for purposes of the Contractors Licensing Act.
       2.    Whether the trial court erred by awarding $96,280 to the Appellants.
       3.    Whether the trial court erred in concluding that McNatt did not violate the
          Tennessee Consumer Protection Act.

                                    III. Standard of Review

        This case was tried without a jury. Accordingly, we review the findings of fact made
by the trial court de novo, with a presumption of correctness unless the preponderance of the
evidence is to the contrary. Tenn. R. App. P. 13(d). The trial court‟s conclusions of law,
however, are reviewed de novo and “are accorded no presumption of correctness.”
Brunswick Acceptance Co., LLC v. MEJ, LLC, 292 S.W.3d 638, 642 (Tenn. 2008).

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                                                  IV. Analysis

                                      A. McNatt’s Licensure Status

       Under Tennessee Code Annotated Section 62-6-103(a), it is “unlawful for any person,
firm or corporation to engage in, or offer to engage in, contracting…unless the person, firm
or corporation has been duly licensed under this part.” “Contracting” is defined as when “any
person or entity”

        undertakes to, attempts to, or submits a price or bid or offers to construct,
        supervise, superintend, oversee, schedule, direct or in any manner assume
        charge of the construction, alteration, repair, improvement, movement,
        demolition, putting up, tearing down or furnishing labor to install material or
        equipment for any building…project development, housing, housing
        development, improvement or any other construction undertaking for which
        the total cost is twenty-five thousand dollars ($25,000) or more.

Tenn. Code Ann. § 62-6-102(3); Id. § 62-6-102(4)(a)(i). “Any contractor required to be
licensed under this part who is in violation of this part…shall not be permitted to recover any
damages in any court other than actual documented expenses that can be shown by clear and
convincing proof.” Id. § 62-6-103(b).

        It is undisputed that McNatt did not possess a contractor‟s license at the time he
entered into the contract with Vestal, nor did he obtain a contractor‟s license afterward.
Appellants argue that because McNatt was unlicensed during the relevant time period, the
trial court erred in determining that he did not violate the Contractors Licensing Act.
Appellees, on the other hand, argue that McNatt‟s partnership with Burton Construction
negated the requirement that he hold a license to perform contracting work pursuant to
Tennessee Code Annotated Section 62-6-115.3

       Our supreme court examined the issue of whether a contractor must be licensed at all
times when performing contracting work in Kyle v. Williams, 98 S.W.3d 661 (Tenn. 2003).
In Kyle, a contractor filed a complaint asserting that he had entered a contract with the
defendants to construct a home and that the defendants had refused to pay the balance on the
contract. Id. at 663. The defendants in Kyle answered that they had no liability under the

        3
          Tennessee Code Annotated Section 62-6-115 states, in relevant part, that “Corporations and
partnerships may engage in the business of contracting, provided that at least one (1) of the major stockholders
or partners or full-time employees with a written power of attorney to bind the corporation has sufficient
knowledge of the construction business in which the persons are licensed to perform.”
                                                       5
contract because, inter alia, the contractor was unlicensed. Id. At the time the contractor in
Kyle entered into the contract with the defendants, he held a valid contractor‟s license;
however, his license expired while he was constructing the defendants‟ home. Id. Despite
the expiration of his license, the contractor continued to perform contracting work. Id. In
Kyle, our Supreme Court interpreted Tennessee Code Annotated Section 62-6-103(b) to
mean “that a contractor is unlicensed for the purposes of Tennessee Code Annotated Section
62-6-103(b) if the contractor does not maintain a valid contractor‟s license throughout the
entire time contracting services are performed under the contract.” Id. at 666 (emphasis
added). The Kyle court also noted that “„Contracting‟ is defined to encompass all stages and
activities of a construction project. The statute expressly requires persons engaging in any of
these activities to be licensed.” Id. (emphasis in original).

        The contract between McNatt and Vestal required payment in excess of $25,000. In
Tennessee, a contractor is required to be licensed for any contracting work in which the total
cost is $25,000 or more. Tenn. Code Ann. § 62-6-103(a)(1). Merely offering to construct the
assisted living facility constitutes contracting work, and the duties that McNatt performed
under the contract, set out supra, fall within the definition of contracting work as well. See
Tenn. Code Ann. § 62-6-102(4)(A)(i). Here, McNatt was not licensed at the time he made
his offer to Vestal or at any time during the construction project. Under the Kyle case, a
contractor must be licensed “throughout the entire time contracting services are performed
under the contract.” Id. at 666 (emphasis added). Because McNatt was never licensed, we
conclude that he acted as an unlicensed contractor.

        We turn now to the issue of whether McNatt‟s joint venture agreement with Burton
Construction negated the need for McNatt to hold a contractor‟s license. Tennessee Code
Annotated Section 62-6-115 allows that entities engaged in a partnership may perform
contracting work as long as one of the partners holds a contracting license. McNatt argues
that the “Joint Venture Agreement” between Burton Construction and himself means that he
was operating within a partnership wherein a partner held a contractor‟s license.

        The holding in Kyle is instructive regarding this issue. The holding in Kyle requires
persons engaged in contracting, which includes submitting a bid or offering to construct, as
occurred here, to be licensed at all times. Kyle, 98 S.W.3d at 666. It is undisputed that
McNatt and Burton Construction executed their agreement after McNatt executed his
agreement with Vestal. Even if the agreement between McNatt and Burton Construction
satisfies the requirements of Tennessee Code Annotated Section 62-6-115, McNatt was still
unlicensed when he made his offer and executed the agreement with Vestal. Kyle requires
that a contractor be licensed “throughout the entire time contracting services are performed
under the contract.” Kyle, 98 S.W.3d at 666. Because McNatt began performing contracting
services before associating with Burton Construction, the subsequent association with Burton
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Construction does not cure his unlicensed contracting activity.4 We, therefore, conclude that
the trial court erred in finding that McNatt did not violate the Contractors Licensing Act.

                                       B. Trial Court’s Award

        The trial court awarded Appellees $96,280.11 for breach of contract. We have
concluded, however, that McNatt violated the Contractors Licensing Act. Therefore, as an
unlicensed contractor, McNatt is only entitled to recover “actual documented expenses that
can be shown by clear and convincing proof.” See Tenn. Code Ann. § 62-6-103(b).
“[C]ourts of Tennessee for many years held that an unlicensed contractor had no right to
recover under [a] contract.” Kyle, 98 S.W.3d at 665 (citing Farmer v. Farmer, 528 S.W.2d
539, 5421 (Tenn. 1975)). “Moreover, prior to the enactment of Section 62-6-103(b),
unlicensed contractors had no right to recover based on quantum meruit—the reasonable
value of the benefits received and retained.” Id. “Therefore, the statutory provision allowing
unlicensed contractors to recover only documented expenses proven by clear and convincing
evidence is an expansion of the remedies previously available to unlicensed contractors in
Tennessee.” Id. (emphasis in original). At trial, Appellants did not challenge the formation
of the contract or the amounts already paid to the Appellees. These issues have also not been
raised on appeal. Therefore, in addressing the Appellants‟ issue of whether the trial court
erred in awarding $96,280.11 to the Appellees, we confine our analysis to whether there is
clear and convincing evidence to support the trial court‟s award.

        The clear and convincing standard is “more exacting than the preponderance of the
evidence standard, [but] it does not require such certainty as beyond a reasonable doubt
standard.” O’Daniel v. Messier, 905 S.W.2d 182, 188 (Tenn. Ct. App. 1995) (internal
citations omitted) (see also Hughes v. Bd. of Professional Responsibility of Supreme Court
of Tennessee, 259 S.W.3d 631, 642 (Tenn. 2008)). “Clear and convincing evidence
eliminates any serious substantial doubt concerning the correctness of the conclusions to be
drawn from the evidence.” Id. (internal citations omitted). It should produce in the fact-
finder‟s mind a firm belief or conviction with regard to the truth of the allegations sought to
be established.” Id. (internal citations omitted).

       At trial, Appellees presented an itemized list of costs totaling $91,996.06. These costs
included architect fees, appraisal fees, interest paid on construction loans, application fees for

        4
          Because we conclude that McNatt‟s offer to construct the assisted facility while unlicensed renders
him in violation of the Contractors Licensing Act, we do not reach the issue of whether McNatt‟s association
with Burton Construction would have satisfied the requirements of Tennessee Code Annotated Section 62-6-
115.
                                                     7
licensure, charter fees, attorney‟s fees,5 insurance costs, payments to engineers, the costs of
blueprints, gasoline, and an administrative fee. Upon review of the record, we conclude that
the majority of these costs are supported by clear and convincing evidence. However, we
conclude that the awards for Marcia McNatt‟s administrative duties and the costs of gas are
not supported by clear and convincing evidence.

        Appellees assert that Vestal was supposed to pay Mrs. McNatt $7,000 for her service
as Henderson Villa‟s administrator. McNatt testified that Vestal agreed to this price. The
record contains a letter written by Vestal appointing Marcia McNatt as the administrator for
Henderson Villa. This letter does not, however, specify an amount for which Mrs. McNatt is
to be reimbursed for her service as administrator, nor is there any other evidence in the record
regarding the value of these services or whether those serves were ever provided by Mrs.
McNatt. Furthermore, Mrs. McNatt did not testify at trial. Thus, we conclude that McNatt‟s
statement of the price, alone, does not rise to the level of clear and convincing evidence, and,
therefore, the claim for this particular cost is not supported by the evidence.

        McNatt also claims he incurred $12,044.03 in gasoline costs associated with the
project. At trial, McNatt stated that he spent these funds traveling “to get this project
financed, and get it approved, and get all [of] the development work done.” He presented
credit card statements as evidence of these gasoline costs. Most of the credit card statements
merely show charges incurred at gas stations and convenience stores. The charges incurred
at convenience stores and Wal-Mart, however, are not specific. There is no indication that
the charges were solely for gasoline, and, as such, could include payment for any number of
other items. We conclude that such evidence is not sufficient to meet the high evidentiary
standard required to prove such costs in this case.

        The credit card statements solely for gas charges also do not meet the clear and
convincing standard required to award such costs. While McNatt testified that all the charges
submitted were in furtherance of building Henderson Villa, McNatt did not specify in any
detail the dates on which he drove to work on the Henderson Villa project. He also did not
present mileage records documenting such trips to the project. There is also no evidence in
the record to establish that each gasoline charge was solely for McNatt driving to develop
Henderson Villa, as opposed to personal trips or other projects that McNatt had in the same
area. For these reasons, we must conclude that the evidence of McNatt‟s gasoline costs do
not meet the clear and convincing standard required to recover such costs.

      Because we conclude that the evidence presented regarding the award for gasoline and
Mrs. McNatt‟s administrative services does not meet the high evidentiary standard of clear

5
    The attorney‟s fee costs are related to closing costs for the project, not for the litigation of this case.
                                                           8
and convincing evidence, we conclude that the trial court erred in awarding those costs. In
subtracting these costs from the total costs presented at trial, we conclude that there is clear
and convincing evidence to support an award of only $72,952.03. Mrs. McNatt, of course,
was not a party to the original contract, and, therefore, her only claim is for $7,000 for
administrative duties. Because Mrs. McNatt‟s claim in this case is not supported by the
evidence, the award in this case is solely to Mr. McNatt.

                         C. Tennessee Consumer Protection Act

       Finally, Appellants contend that the trial court erred in concluding that Appellees did
not violate the Tennessee Consumer Protection Act (“TCPA”). Specifically, Appellants
argue that McNatt‟s violation of the Contractors Licensing Act is a per se violation of the
TCPA. See Tenn. Code Ann. 62-6-136(b). Appellees argue that the Appellants failed to
prove any damages resulting from such a violation, and, thus, the trial court did not err in not
awarding the Appellants a judgment for such a violation.

       Tennessee Code Annotated Section 62-6-136(b) states that
       a violation of [the Contractors Licensing Act] shall be construed to constitute
       an unfair or deceptive act or practice affecting the conduct of trade or
       commerce under the Tennessee Consumer Protection Act of 1977…and, as
       such, the private right of action remedy under the Tennessee Consumer
       Protection Act of 1977 shall be available to any person who suffers an
       ascertainable loss of money or property….

Because we conclude that McNatt operated as an unlicensed contractor and, thereby, violated
the Contractors Licensing Act, we must also conclude that McNatt engaged in a practice
declared unlawful for purposes of the TCPA.

       In order to bring a claim under the TCPA, the plaintiff must prove: (1) that the
       defendant…engaged in an unfair or deceptive act or practice declared
       unlawful…and (2) that the defendant‟s conduct caused an „ascertainable loss
       of money, or property, real, personal, or mixed, or any other article,
       commodity, or thing of value wherever situated….

Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. 2005). Although we have concluded
that McNatt engaged in a practice declared unlawful for purposes of the TCPA, we must also
review whether Appellants sustained an “ascertainable loss” as a result of McNatt‟s conduct.
Whether there is evidence to support a finding of damages is a question of fact. See
BancorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d 223, 230-31 (Tenn. Ct. App. 2006).

                                               9
        In its order, the trial court dismissed the Appellants‟ TCPA claim because “Vestal is
unable to prove that she suffered an ascertainable loss of any money or property.” In their
complaint and at trial, Appellants asserted that the construction of the assisted living facility
was defective. The trial court found that “any defects are already fixed or are not called for
by the plans and do not actually constitute defects.” In its order, the trial court also stated
that “Vestal and McNatt entered into a contract for the development of an assisted living
facility and for the facility to be properly licensed and sanctioned by the State of Tennessee
under its rules and regulations. Vestal received that pursuant to the contract and accepted the
building and facility.” Although Appellants dispute these findings on appeal, we have
reviewed the record and cannot conclude that the evidence preponderates against the findings
of the trial court on the issue of ascertainable loss. Accordingly, we affirm the trial court‟s
dismissal of Appellants‟ TCPA claim for a lack of evidence establishing damages.

                                          Conclusion

       For the foregoing reasons, we reverse the trial court‟s finding that McNatt did not
violate the Contractors Licensing Act and reduce the trial court‟s award to $72,952.03.
Because Mrs. McNatt‟s only claim is not supported by clear and convincing evidence, the
judgment is awarded to Mr. McNatt only. We affirm the trial court‟s judgment in all other
respects. The case is remanded for such further proceedings as may be necessary and are
consistent with this opinion. Costs of the appeal are taxed to the Appellants, Jane Vestal and
Henderson Villa, Inc., and their surety, for all of which execution may issue if necessary.

                                                    _________________________________
                                                    KENNY ARMSTRONG, JUDGE

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