Court Opinion

ID: 1048444
Source: CourtListenerOpinion
Date Created: 2013-10-08 03:00:06.207673+00
Date Added: 2024-06-11T12:52:46.142937
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IN THE COURT OF APPEALS OF TENNESSEE
                              AT KNOXVILLE
                                       October 6, 2010 Session

 DILLARD CONSTRUCTION, INC. v. HAVRON CONTRACTING CORP.
                         ET AL.

                   Appeal from the Chancery Court for Hamilton County
                     No. 08-0319    W. Frank Brown, III, Chancellor

              No. E2010-00170-COA-R3-CV - FILED NOVEMBER 23, 2010

The only parties left litigating in what started out as a complex construction dispute are, on
one side, Dillard Construction, Inc1 , and, on the other, Dillard’s demolition subcontractor,
Havron Contracting Corp. After a bench trial and several post-trial motions, the court held
that (1) Dillard, while not having a contract with Havron, was required by quantum meruit
to pay Havron $91,100 for work performed by Havron’s subcontractors; (2) Dillard was not
entitled to an offset against that judgment for damage done to electrical equipment by
Havron’s subcontractor; (3) Havron was entitled to recover from Dillard, under a “pass-
through” indemnity theory, the attorney’s fees awarded against Havron and in favor of its
subcontractor; and (4) Havron was not entitled to recover the attorney’s fees that it, Havron,
incurred in defending against the claims of its subcontractor. Dillard appeals challenging
both the quantum meruit award and the denial of an offset. Havron challenges the trial
court’s denial of indemnification for attorney’s fees Havron incurred in defending the claims
of its subcontractor. We affirm.

        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                              Affirmed; Case Remanded

C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and JOHN W. M CC LARTY, JJ., joined.

        1
         The bonding company – International Fidelity Insurance Company – that posted a bond on behalf
of Dillard to remove a lien on the property where the demolition work was being done is also a party.
Fidelity’s interests are identical to Dillard and both are represented on this appeal by the same attorneys. For
simplicity, we will refer to both parties as “Dillard.”
Everett L. Hixson, Jr., and Adam U. Holland, Chattanooga, Tennessee, for the appellants,
Dillard Construction, Inc., and International Fidelity Insurance Company.

C. George Caudle, Chattanooga, Tennessee, for the appellee, Havron Contracting Corp.

                                          OPINION

                                               I.

       At an earlier time, there were a number of parties in this case and various cross-
claims, counterclaims, and third-party claims. Many of these claims have been resolved and
we are now focused only on the claims between Dillard and Havron.

       The basic facts that give rise to this dispute are fairly simple. Dillard contracted with
a property owner to relocate an industrial plant. Havron had bid on the same project, but the
owner chose Dillard. Havron specialized in demolition rather than “building” and was
therefore hired by Dillard to perform much of the demolition work on the project. The work
specifically at issue here is the demolition of “Bay 8.” After demolition work began on Bay
8, Dillard and Havron exchanged documents concerning the work on Bay 8, but the trial
court correctly found that the exchanges were only offers and counteroffers with no meeting
of the minds. That finding is not at issue on appeal. What the “minds” of the two parties
never met on was the demolition of the roof of Bay 8. Havron had priced demolition of
“sandwich panels” and “structural steel” for the sum of $63,100. According to Havron, this
price did not include the roof, but, according to Dillard, it did include the roof as part and
parcel of the structural steel demolition. Significantly, the proof at trial was that the term
“structural steel” has a specific meaning in the construction industry that does not include the
roof of a structure.

         On December 4, 2009, Dillard’s project manager, Kemp, instructed Havron to start
the demolition of Bay 8, beginning at the northeast corner. Kemp stated that the work needed
to start “yesterday.” This was after a brief walk through that did not include all of Bay 8 and,
as we have stated, before an agreement could be finalized.

       Havron is a supervising contractor that does not have its own work crews. Havron
hired Sitton Construction, LLC to begin the demolition of Bay 8. Sitton began its demolition
work on a “lean-to” structure in which electrical components, including switchgear, were
located. In the course of the demolition of the lean-to, Sitton damaged the switchgear. This
did not sit well with the owner because the owner had planned to reuse the switchgear.
Dillard informed the owner that it would do whatever it took to make the owner whole.
Dillard instructed Havron to terminate Sitton. Havron did as instructed and almost

                                              -2-
immediately contracted with Paul Hutcherson dba H&S Construction, which will be referred
to herein as “H&S,” to perform the work started by Sitton.

       As work progressed, a disagreement between Dillard and Havron as to the scope of
the work came to light. Dillard insisted that the structural steel component of demolition
included the roof. Havron insisted that roof removal was an extra that was not included in
the price of $63,100. H&S concurred with Havron that roof removal was extra work H&S
had not agreed to perform. Dillard insisted that the roof be removed. Havron gave H&S a
change order adding a payment of $21,100 for removal of the roof, which, coincidentally,
brought H&S’s total contract amount with Havron to Havron’s initial price to Dillard of
$63,100. Havron added approximately $7,000 profit and billed Dillard $28,000 for roof
removal and $63,100 for sandwich panel and structural steel demolition for a total of
$91,100.

        The property owner secured replacement switchgear at a total cost of $72,688. Dillard
agreed with the owner that the cost of the replacement switchgear should be deducted from
Dillard’s contract price. Dillard then tried to pass the cost of the new switchgear on to
Havron. Dillard took the position that Havron was responsible for the full cost of the
replacement switchgear; it refused to pay Havron for the demolition work. Dillard also stood
by its claim that the roof was included in the structural steel demolition and that Havron was
not entitled to extra pay for the roof, beyond the original $63,100 price. Havron filed a lien
against the property in the amount of $91,100. Havron refused to pay H&S until Dillard paid
Havron. Havron relied on a “pay when paid” clause in its contract with H&S. H&S then
filed a lien against the property in the amount of $63,100. Dillard secured a bond from
International Fidelity Insurance Company to discharge the liens.

        Almost every person or entity in the chain between the property owner and H&S,
including the bonding company, sued every other person or entity in the chain on a variety
of theories. Included was a claim under the Tennessee Prompt Pay Act, Tenn. Code Ann.
§ 66-34-101 et seq. (2004 & Supp. 2009), by H&S against Havron and Dillard. The bench
trial lasted two days and was successful in resolving much of the case. After the trial, but
before the court decided the case, Havron moved to amend its claim against Dillard to
include a claim for indemnity in the event Havron were held liable to H&S. The trial court
allowed the amendment to conform to the evidence. Four aspects of the trial court’s final
judgment are implicated in this appeal. They are: (1) that there was no meeting of the minds
to support a contract between Havron and Dillard but that Havron was entitled to a quantum
meruit recovery against Dillard in the amount of $91,100, plus interest;(2) that Dillard was
not allowed to deduct the cost of the switchgear from the amount owed Havron; (3) that
Havron was responsible for H&S’s attorney’s fees under the Prompt Pay Act; and (4) that
Havron was entitled to be indemnified by Dillard for its payment of H&S’s attorney’s fees

                                             -3-
but not for Havron’s own attorney’s fees. The trial court’s findings and analysis as to each
of these points, in a well-reasoned opinion, are as follows:

              H&S seeks to recover its reasonable attorney’s fees and interest
              pursuant to the Prompt Pay Act of 1991, Tenn. Code Ann. § 66-
              34-101 et seq. . . .

                                          *   *     *

              There was no trial exhibit introduced whereby anyone responded
              to H&S’s claim and provided a reason for nonpayment.
              However, at trial on redirect of Mr. Havron, Havron defended
              its non-payment of H&S based upon a “pay when paid clause”
              in their subcontract agreement. . . . The . . . document reads as
              follows:

                     Payment in full within ten days receipt of full
                     payment by Havron, which shall be billed to
                     Owner upon completing of the work and which
                     shall become due 30 days from the date of such
                     billing to Owner.

              The . . . [a]greement . . . was not signed until after H&S
              comp[l]eted all of the work required . . . . Therefore, this “pay
              when paid” provision was not part of the original agreement and
              has no effect. . . .

                                           * * *

              Based upon Tenn. Code Ann. § 66-34-602(b), H&S is able to
              recover its reasonable attorneys fees from Havron, its contractor.
              . . . An award of $23,385.52 is reasonable under the facts of this
              case.

              H&S also alleged that Havron breached the duty of good faith
              and fair dealing. . . .

                                           * * *

                                              -4-
Here, the aspect of the case that deals with good faith and fair
dealing relates to the payment from Havron to H&S. Havron
hired H&S to do the work Sitton had previously agreed to do.
Havron sent H&S a letter of intent stating that the contract price
would be $42,000. The parties’ subsequent, written agreement
also contained the same sum. There was a compressed time
schedule to be met. Havron contracted with H&S after Havron
knew there could be a claim from [Dillard] or [the owner]
regarding the damaged switchgear. Havron’s contractual
clauses containing the pay when paid clause were presented to
H&S after H&S’s work was completed. Thus, the after-the-fact
contract terms should not be able to defeat H&S’s legitimate
claims for payment for work well done. The “pay when paid”
clause was not part of the H&S-Havron discussion prior to the
work being done by H&S. Havron also gave H&S a change
order for H&S to remove the roof for an additional $21,100. . . .
This document does not contain a “pay when paid clause.”

Under the specific fact situation, Havron would not be acting in
good faith and would not be dealing fairly with H&S to deny
H&S payment just because Havron had not been paid by
[Dillard], especially when the contract “pay when paid” term
was not shown to H&S until after the work was completed and
after . . . Havron’s knowledge regarding [Dillard’s] claim for the
damaged switchgear . . . . If H&S were not entitled to relief,
then this would be another example of the old saying that “No
good deed goes unpunished.”

                             * * *

Havron . . . claims money due from [Dillard] based upon a
quantum meruit theory. Quantum meruit serves as an equitable
substitution for a contract claim that may allow a party to
recover the reasonable value of certain goods and services it has
provided. Castelli v. Lien, 910 S.W.2d 420, 427 (Tenn. Ct.
App. 1995). The elements of quantum meruit are as follows
(citations omitted):

       (1) there must be no existing, enforceable contract
       between the parties covering the same subject

                               -5-
       matter; (2) the party seeking recovery must prove
       that it provided valuable goods and services; (3)
       the party to be charged must have received the
       goods and services; (4) the circumstances must
       indicate that the parties involved in the transaction
       should have reasonably understood that the person
       providing the goods or services expected to be
       compensated; and (5) the circumstances must also
       demonstrate that it would be unjust for the party
       benefitting from the goods or services to retain
       them without paying for them.

In the case at bar, the court has determined there is no
enforceable contract between [Dillard] and Havron. Further,
Havron has proved that it, through its subcontractors, especially
H&S, provided valuable services in performing the demolition
work on the Bay 8 work. [Dillard], as the general contractor . . .
received the services and benefitted therefrom. Also, there is no
doubt that the parties expected [Dillard] to pay for these
services. Indeed, the parties agreed upon a price of $63,100 but
did not agree on the other parts of an agreement, specifically the
scope of work. Finally, under the circumstances of this case, it
would be unjust for [Dillard to] benefit from Havron’s services
without paying for such services.

The issues are how much money does [Dillard] owe Havron and
whether any offset or credit for the damaged switchgear . . .
should be allowed in this case. [Dillard] and Havron initially
agreed on $63,100 as the value of the subcontract. Havron
billed [Dillard] $28,000 for the demolition of the roof. Thus,
Havron seeks a total of $91,100. Mr. Havron’s testimony
supported this amount. No proof has been presented showing
that this amount is inappropriate. The court concludes that the
only proof on the issue of amount substantiates a recovery by
Havron against [Dillard] for $91,100.

. . . . [T]he court finds that Havron should . . . recover a portion
of its attorney’s fees from [Dillard], not under the Prompt Pay
Act but under the indemnity claim.

                                -6-
The basis for indemnity is stated as follows:

       The right to indemnity rests upon the principle
       that everyone is responsible for the consequences
       of his own wrong, and if another person has been
       compelled to pay the damages which the
       wrongdoer should have paid, the latter becomes
       liable to the former.

14 Tenn. Jur., Indemnity, § 8 (2009). Basically, Havron argues
that if it is liable to H&S, then [Dillard] should indemnify
Havron because [Dillard] was the cause of such liability.

                             * * *

The court holds that Havron is entitled to indemnity from
[Dillard]. It was [Dillard], as the general contractor, that was
supposed to be in charge of the project. [Dillard] told Havron
when and where to work. [Dillard] made the decision to allow
[the owner] to withhold money from the contract price, instead
of letting [the owner] make a claim against [the owner’s]
insurance. [Dillard] agreed to an inflated claim and
deduction . . . . [Dillard], in effect, by giving [the owner] a
“blank check,” set up a self-fulfilling prophecy that its subs . . .
would not get paid. Therefore, [Dillard] was responsible for
Havron’s non-payment of H&S because [Dillard] withheld
payment from Havron. . . . Therefore, Havron should be
indemnified by [Dillard] for the monies, over and above the base
$63,100 that Havron owes H&S.

Counsel for Havron submitted an affidavit of time and services
which totaled $67,545.08 with expenses. . . . The court does not
find that Havron should recover all of its attorney’s fee from
[Dillard] for several reasons. First, Havron’s attorney’s fee
represents additional services over and above its defense of the
H&S . . . claim. Second, the court has determined Havron’s
recovery of attorney’s fees against [Dillard] to be based upon
indemnity. The following quotation seems appropriate:

                                -7-
       [I]n a suit for indemnity, the indemnitte[e]
       [Havron] seeks a full recovery from the
       indemnitor [Dillard] for the former’s legal
       liability to a third party [H&S]. 41 Am. Jur. 2d
       Indemnity § 1 (1968).

Denny v. Goodwin, No. 89-325-II, 1990 Tenn. App. LEXIS 193
at *9 (March 23 1990).

Thus, because Havron owes H&S the sum of $23,385.52 for
attorney’s fees and expenses, Havron should be limited, under
principles of indemnity, to recovering only $23,385.52 in
attorney’s fees and expenses from [Dillard].

                            * * *

There are many considerations that have gone into the court’s
decision. First, [the owner] was in a hurry and this “need for
speed” was “passed down” the contracting line to [Dillard],
Havron and others yet there was no printed demolition schedule.
Second, [the owner] was behind the game in several ways. One,
there is no evidence in the record that any [owner] or [Dillard]
representative showed anyone the inside of the switchgear room,
which was always locked. Two, [the owner] did not obtain a bid
. . . to move the switchgear and transformer until December 5,
2007. This proposal was accepted on December 10, 2007. . . .
By then, Sitton’s employees were taking down the sandwich
panels and getting ready to take down the switchgear room. . . .
Third, neither [the owner] nor [Dillard] placed any warning
signs, tapes or other notices or devices on the door to the
switchgear room to warn . . . Havron and others about saving the
switchgear inside the room. It was interesting to note that
Sitton’s employees removed the roof above and walls around the
transformer but did not touch the transformer, as such
transformer was specifically pointed out to Havron and Sitton as
an item not to be touched. Fourth, [the owner] did not
follow . . . specs by having the switchgear removed before
demolition. . . . [The owner] changed the engineers’ time frame
by making removal of the switchgear occur after, not before,
most of the demolition had already been accomplished. Fifth,

                              -8-
[the owner’s] efforts to contract with H&[S] indicates that [the
owner] was keeping control of the project, rather than [Dillard],
who was allegedly the general contractor.

The court notes some of the same problems with [Dillard]. As
Mr. Kemp said . . . to Mr. Havron, “we want you to start
yesterday.” . . . The scope of work should have been concretely
staked out before the work began. This duty to detail the scope
of work lies with the general contractor, not the subcontractor.
Due to the time issues, Mr. Kemp decided that Havron should
work first and be signed up second.

Dillard did not post any notices, warnings or any other
instructions on the switchgear room to warn others of the need
to save the switchgear and busway. . . . Worse yet, [Dillard] had
a job superintendent on site: Bill Edgeman. . . .

There was testimony from several witnesses that Mr. Edgeman
was present on site at Bay 8, when Sitton began the demolition
of the switchgear room and its contents. However, Mr.
Edgeman did not tell Sitton or his employees to refrain from
going into the switchgear room, to stop their work, or anything
else. . . . [Dillard] did not call Mr. Edgeman as a witness. Such
creates an inference that his testimony would not have been
helpful to [Dillard’s] position . . . .

In addition to the construction issues, the court finds that
[Dillard] agreed, without any fight or attempt to mitigate its loss,
to pay whatever [the owner] wanted to replace the switchgear
equipment and busway. The switchgear was initially purchased
in 1957 or 1958 by [the owner’s] predecessor . . . . [Witness]
Berner saw the damaged switchgear . . and the replacement
switchgear. He described the replacement switchgear as a
“Cadillac” compared to the pre-existing equipment, which the
court would refer to as a “Yugo.” Mr. Berner described the
many differences and advances between the damaged
switchgear and the replacement switchgear. . . . The before and
after values were not comparable or close in amounts.

                                -9-
              From a business standpoint alone, one can see the good
              “customer relations” in [Dillard’s] decision to let [the owner]
              get what it wanted. However, from [Dillard’s] subcontractors’
              viewpoint, [Dillard] “hung them out to dry” and denied them
              any payment on the Bay 8 demolition project due to the
              “inflated” cost of the replacement equipment, compared to its
              pre-destruction value. [Dillard] came across, to the court, as
              being rather indifferent to the plight [of] its subcontractors,
              H&S in particular.

(Underlining in original; headings in original omitted.)

       On competing motions to alter or amend, the trial court held that there was a written
contract between H&S and Havron that allowed H&S to recover its attorney’s fees from
Havron under the Prompt Pay Act, but since there was no contract, written or otherwise,
between Dillard and Havron, Havron could not recover attorney’s fees under the Prompt Pay
Act. However, it upheld its earlier award on the basis of indemnity:

              The alternative theory for the allowance of attorney’s fees, for
              both H&S and Havron, was indemnity. The leading case in
              Tennessee is Pullman Standard, Inc. v. Abex Corp., 693
S.W.2d 336 (Tenn. 1985). The Tennessee Supreme Court held:

                     We are in agreement with the majority view that
                     attorneys’ fees are recoverable under an implied
                     indemnity agreement in appropriate cases. We
                     continue to adhere to the rule in Tennessee that
                     attorneys’ fees are not recoverable in the absence
                     of a statute or contract specifically providing for
                     such recovery, or a recognized ground of equity;
                     however, we recognize an exception to that rule
                     and hold that the right of indemnity which arises
                     by operation of law, based upon the relationship
                     of the parties, see Cohen v. Noel, 165 Tenn. [1
                     Beeler] 600, 56 S.W.2d 744 (1933), includes the
                     right to recover attorneys’ fees and other litigation
                     costs which have been incurred by the indemnitee
                     in litigation with a third party.

              Id. at 338.

                                             -10-
              Here, [Dillard] filed suit for a declaratory judgment that it owed
              Havron and H&S nothing and that the liens filed by Havron and
              H&S were invalid. Because [Dillard] voluntarily agreed to
              allow [the owner] an exorbitant credit against the money
              due . . . ., [Dillard] was thereby able to take the position that it
              did not have to pay its subcontractors because it did not get paid
              in full by [the owner]. When [Dillard] told Havron to fire Sitton
              and hire a replacement subcontractor, there is nothing in the
              record that supports any notice to Havron (or H&S) that
              [Dillard] would not pay for the work. If [Dillard] had told
              Havron, and if Havron had told H&S, that [Dillard] was not
              going to pay any money on the demolition project, then the court
              doubts that H&S would have agreed to do any work and Havron
              would have probably abandoned the project. Thus, [Dillard]
              would have had to pay any “new” contractor coming onto the
              site to complete the demolition work. H&S was such a “new”
              contractor.

                                           * * *

              In allowing Havron to collect from [Dillard] the amount of
              attorney’s fees Havron is having to pay H&S, the court relies
              upon [Estate of Wilson]v. Arlington Auto Sales, 743 S.W.2d
923 (Tenn. Ct. App. 1987) and the general principles that:

                     The right to indemnity rests upon the principle
                     that everyone is responsible for the consequences
                     of his own wrong, and, if another person has been
                     compelled to pay the damages which the
                     wrongdoer should have paid, the latter becomes
                     liable to the former.

(Some citations omitted.)

                                               II.

       The judgment in favor of H&S has now been satisfied. The only amounts at issue in
this appeal are the $28,000 (for the demolition of the roof) and prejudgment interest awarded
to Havron above and beyond the $63,100 awarded to H&S, and the attorney’s fees –

                                             -11-
Havron’s – denied Havron. Specifically, Dillard raises two issues, as we have rephrased
them:

              Whether the evidence preponderates against the quantum meruit
              award in favor of Havron.

              Whether the evidence preponderates against the trial court’s
              denial of an offset for damage to the switchgear.

Havron raises a single issue which we have also restated:

              Whether the trial court erred in denying Havron its attorney’s
              fees incurred in defense of the claims asserted by H&S.

                                             III.

       A trial court’s factual findings are reviewed de novo with a presumption of correctness
unless the evidence preponderates against those findings. Tenn. R. App. 13(d); Bogan v.
Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). When the trial court’s decision is based on the
credibility of witnesses, it will be accorded “great weight” on appellate review and will not
be reversed absent clear and convincing evidence to the contrary. Machinery Sales Co. v.
Diamondcut Forestry Prods., 102 S.W.3d 638, 643 (Tenn. Ct. App. 2002).

                                             IV.

                                             A.

      Dillard’s position as to the quantum meruit award is concisely stated in its brief as
follows:

              Havron is not entitled to any recovery under a quantum meruit
              theory where it was simply a broker of subcontractors on the
              Project who provided no value or benefit to [the owner] or
              Dillard.

Having lost in the trial court and having now satisfied the judgment in favor of H&S, Dillard
now takes the position that it and the owner received a benefit from the excellent work of
H&S, but nothing from Havron. Dillard further states in its brief, that “Havron did not take
down the roof, the structural steel, or the sandwich panels . . . .” Dillard also argues that

                                             -12-
Havron did not even adequately supervise the work as proven by the damage to the
switchgear.

        Dillard furnishes no authority for the proposition that a party cannot recover for the
value of work done by a subcontractor. It seems to us implicit in the reasons for the rule of
quantum meruit that a contractor in the position of Havron who finds itself without an
enforceable contract with its expected payor, Dillard, would be allowed to recover the value
of services bestowed upon Dillard by Havron’s subcontractors. “The most significant
requirement for a recovery on quasi contract is that the enrichment . . . be unjust.”
Paschall’s, Inc. v. J.P.Dozier, 407 S.W.2d 150, 155 (Tenn. 1966). The measure of recovery
is not the “material and labor costs” of the plaintiff, but the “actual value of the . . . services”
to the recipient. Castelli, 910 S.W.2d at 430, 427. In applying Castelli to the present case,
the trial court stated, “there is no doubt that the parties expected [Dillard] to pay for these
services.” See id. at 427. The party to be charged, Dillard, received the services, regardless
who provided them. See id. Also, it is clear from Castelli, that Havron is entitled to
something for its efforts and is not limited to its expenditures for “material and labor costs.”
Id. at 430. We therefore hold that Havron was entitled to recover the value of the services
H&S rendered, under the Havron/H&S contract, to Dillard and ultimately to the owner.

        Dillard also argues that there was no proof of the value of the work performed and
that the trial court simply based the award on the contract price. We can illustrate Dillard’s
argument by quoting an excerpt from the trial court’s opinion:

               The issues are how much money does [Dillard] owe Havron and
               whether any offset or credit for the damaged switchgear . . .
               should be allowed in this case. [Dillard] and Havron initially
               agreed on $63,100 as the value of the subcontract. Havron
               billed [Dillard] $28,000 for the demolition of the roof. Thus,
               Havron seeks a total of $91,100. Mr. Havron’s testimony
               supported this amount. No proof has been presented showing
               that this amount is inappropriate. The court concludes that the
               only proof on the issue of amount substantiates a recovery by
               Havron against [Dillard] for $91,100.

Dillard is correct that a quantum meruit award cannot be based solely on the price of an
unenforceable contract. Castelli, 910 S.W.2d at 428; Bauman v. Smith, 499 S.W.2d 935,
939-40 (Tenn. Ct. App. 1972). However, Dillard’s argument tries to stretch the facts and law
farther than they will comfortably fit. “No one doubts . . . that the contract price or rate
agreed upon by the parties is admissible . . . to show what is the reasonable value of the
performance that the defendant has received.” Bauman, 499 S.W.2d at 940. Also, “the

                                               -13-
required proof may be an estimation of the value of the goods and services.” Castelli, 910
S.W.2d at 428. As stated in Nations Rent of Tennessee, Inc. v. Lange, M2001-02368-COA-
R3-CV, 2002 WL 31467882 (Tenn. Ct. App. M.S., filed Nov. 6, 2002):

              The reasonable value of goods and services may be proven in
              several ways. The party seeking to recover in quantum meruit
              can explain the method used to arrive at a base fee and markup.
              Additionally, proof as to reasonable value can be obtained from
              other professionals or experienced workers in that field.

Id. at *2(citations omitted).

        Our de novo review of the record convinces us that the trial court was aware of the
elements of quantum meruit and the proper measure of recovery and properly analyzed the
proof under the law as set forth above. A former employee of the property owner whose job
included evaluating bids of various contractors testified that the demolition work on Bay 8
was worth approximately $93,000 to the owner because that is what it paid Dillard for the
work. The owner of Havron testified that based on his involvement at the job site and his 18
years of experience in demolition, the value of the work performed was $91,100 and
“probably more.” He testified that a fair price for removal of the roof alone was $28,000.
In addition to his knowledge from his general experience, Mr. Havron relied upon the fact
that the “expedited” nature of the work, the height of the roof, the labor-intensive nature of
the work, and the need for specialized equipment were factors to consider in setting the
reasonable value of the work. The trial court accurately noted that no evidence was offered
in opposition to the value assigned by Havron. The best Dillard can come up with on appeal
is that Havron’s testimony coincides with the contract prices discussed. Dillard’s attempt
falls far short of convincing us that the evidence preponderates against the trial court’s award
of $91,100 to Havron for the demolition work.

                                              B.

       Dillard also argues that the trial court erred in not allowing it a set-off for the value
of the electrical equipment that Sitton damaged. This challenge is premised upon the fact
that Havron was familiar with the plans and that the plans called for the equipment to be
removed by “others.” Dillard has furnished no legal authority as to how this requires a result
different from what the trial court reached. We have quoted at length above from the trial
court’s opinion and find no need to print those quotes a second time. For the purpose of our
present analysis, it is sufficient to state that we believe the trial court understood Dillard’s
position but found that the owner’s and Dillard’s actions taken to serve their “need for speed”
placed the responsibility for the damage to the electrical equipment at their feet. The trial

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court also found that in simply agreeing to a “Cadillac” replacement while spurning any offer
by Havron to help find a replacement, Dillard inflated the claim of damages and failed to
mitigate the damages. The evidence does not preponderate against the trial court’s findings.
We hold that there was no error in refusing Dillard a credit or an offset for the value of the
damaged switchgear.

                                              C.

       We turn now to Havron’s argument that the trial court erred in failing to award the
attorney’s fees and expenses incurred by Havron in defending against the claims of H&S.
Before commencing our analysis, we note that Dillard does not challenge the $23,385.52
awarded to Havron for indemnification against the attorney’s fees incurred by and awarded
to H&S. Havron argues that having gone as far as finding an obligation on the part of Dillard
to indemnify, the court was required, under Pullman, to take the additional step of finding
an obligation to make Havron whole by paying also the fees and expenses Havron incurred
defending against H&S. We agree with Havron that the holding of Pullman, “in appropriate
cases” allows a party in its position to recover the fees and expenses it incurred in defending
against a claim brought by a third party. 693 S.W.2d at 338. We do not agree that Pullman
requires a different result than the one reached by the trial court in this case.

        It is important to understand that Pullman was before the Supreme Court on an
interlocutory appeal from the denial of a motion to dismiss. Id. at 337. In earlier lawsuits,
both Pullman Standard, as the manufacturer of a railroad car, and Abex Corp., as the
manufacturer of a wheel fitted on the car, had been sued for damages caused by a massive
train derailment and explosion. Id. Abex settled most of the cases without Pullman paying
anything. Id. Pullman then filed an action that ultimately made it to the Supreme Court.
Pullman alleged that “no act or omission of its own contributed to the derailment” even
though the earlier lawsuits had contained allegations that Pullman and Abex were both at
fault. Id. at 338. The High Court was required to take Pullman’s allegations of innocence
at face value. Id. The Court held that “the indemnitee’s actual wrongdoing rather than
allegations of wrongdoing [in the earlier cases] . . . should determine the indemnitee’s rights.
. . .” Id. at 339.

        In the present case, we do not have mere allegations that Havron was complicit in the
wrongdoing; we have a finding of the trial court supported by a preponderance of the
evidence. The trial court found that “Havron would not be acting in good faith and would
not be dealing fairly with H&S to deny H&S payment just because Havron had not been paid
by [Dillard], especially when the contract ‘pay when paid’ term was not shown to H&S until
after the work was completed and after . . . Havron’s knowledge regarding [Dillard’s] claim
for the damaged switchgear . . . .” The trial court found Havron in violation of the Prompt

                                              -15-
Pay Act. That was the basis for the award to H&S which has not been challenged. In light
of these findings, and after considering the “principles of indemnity” the trial court found
that Havron “should [not] recover all of its attorney’s fees from [Dillard]”; “Havron should
be limited, under principles of indemnity, to recovering only” those fees and expenses paid
to H&S. We have reviewed this ultimate finding de novo, as an application of law to the
facts2 , and find no error in the trial court’s conclusion. We hold that the trial court did not
err in refusing to award Havron the expenses it incurred in defending the claims filed against
it by H&S.

                                                     V.

       The judgment of the trial court is affirmed. Costs on appeal are taxed to appellants
Dillard Construction, Inc., and International Fidelity Insurance Company. This case is
remanded, pursuant to applicable law, for enforcement of the trial court’s judgment and for
the collection of costs assessed by the trial court.

                                                           _______________________________
                                                           CHARLES D. SUSANO, JR., JUDGE

        2
        The application of law to the facts of a case is treated as a question of law to be reviewed de novo.
Jaeger v. Civil Service Com'n of Metropolitan Government of Nashville and Davidson County, No.
M2007-02451-COA-R3-CV, 2009 WL 248266, at *4(Tenn. Ct. App. M.S., filed Feb. 2, 2009)(citing Sanifill
of Tennessee, Inc. v. Tennessee Solid Waste Disposal Control Bd., 907 S.W.2d 807, 810 (Tenn.1995)).

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