Court Opinion

ID: 1047587
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:47:11.038986+00
Date Added: 2024-06-11T13:02:47.209002
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                                 August 23, 2011 Session

         NORTHWEST TENNESSEE MOTORSPORTS PARK, LLC
                            v.
                TENNESSEE ASPHALT COMPANY

             Direct Appeal from the Chancery Court for Weakley County
                    No. 20074    W. Michael Maloan, Chancellor

                 No. W2011-00450-COA-R3-CV - September 23, 2011

This is a breach of contract case. Appellants contracted with Appellees to pave their existing
drag strip. Because the soil under the drag strip contained too much moisture, the paving
project failed and other parts of the drag strip not included in the contract were damaged. The
trial court awarded damages for the Appellant, but later reduced the damages by the amount
over and above the original contract. Appellant appeals. Because the Appellant failed to
present any evidence that Appellee breached the contract, we reverse and remand.

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

J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and H OLLY M. K IRBY, J., joined.

Lewis L. Cobb and Teresa Anne Luna, Jackson, Tennessee, for the appellant, Northwest
Tennessee Motorsports Park, LLC.

Gregory L. Cashion, Nashville, Tennessee, for the appellee, Tennessee Asphalt Company.

                                         OPINION

                                       I. Background

      In the spring of 2007, Plaintiff/Appellant Northwest Tennessee Motorsports Park,
LLC (“Northwest”) began negotiations with Defendant/Appellee Tennessee Asphalt
Company (“TAC”) to re-pave approximately 700 feet of Northwest’s drag strip in Gleason,
Tennessee.
        In TAC’s bid on the project, it offered to mill two inches of existing asphalt from 700
feet of the drag strip, and to re-pave the area for $39,500.00. The bid specifically stated that:

       This price is with assuming [sic] that there is a proper subgrade and proper
       gravel or base specification when milling . . . . I’m sure you are getting tired
       of waiting on me so I wanted to get you these numbers under the assumption
       that we can mill and pave without sub-grade and base issues. I would still like
       to cut cores to investigate a little bit . . . .

       The bid further stated that: (1) “[s]ubgrade [is] to be proof rolled with a loaded truck
before installing hot-mix asphalt;” (2) the “[b]id is quoted assuming that the proper gravel
or base material (minimum of 6") is in place after milling 2" of asphalt surface;” and (3) that
the “[p]rice does not include gravel or base material, undercutting, or any other subgrade
work.”

        Northwest accepted the bid and entered into a contract with TAC. The contract re-
iterated the specific terms that were outlined in the bid, supra, and also included TAC’s
standard terms and conditions, which provide, in relevant part, as follows:

       DAMAGES AND GUARANTEES. Tennessee Asphalt Company guarantees
       that all supplied material will be as specified and all work shall be completed
       in a workmanlike manner according to standard industry practices. . . . All
       other liability, including liability for consequential damages is hereby
       excluded.
                                              ***
       WORK OF OTHERS. Neither grading or compaction of subsurface ground are
       the responsibility of Tennessee Asphalt Company under this agreement.
       Tennessee Asphalt Company does not warrant it’s [sic] work where defective
       work product or drainage problems result from improper preparation or
       installation of the underlying soil, gravel or base stone, when gravel or base
       stone is not a part of Tennessee Asphalt Company’s work.

        Prior to beginning work, TAC sent an employee to the drag strip to take core samples
in four locations on the site. The coring machine used a drill bit and a water cooling system
that could drop as much as two gallons of water onto the ground and into the holes left by
coring. The core samples took an approximately two-inch section of asphalt from the surface
of the drag strip to determine the depth of the existing asphalt. In two of the four samples,
TAC noted water in the holes, but TAC’s engineers testified that the water was due to the
drill and was not an indication of moisture in the sub-grade. According to TAC’s engineers,
water in the holes left from coring was usual and no one was concerned about it.

                                               -2-
       TAC began milling off the existing two inches of asphalt on April 30, 2007. During
the milling process, TAC became aware of “soft spots” in the asphalt that caused ruts in the
sub-grade when the milling machine went over them. Additionally, when the pavement was
proof rolled, as required under the contract, there was ground movement indicating a soft
sub-grade.

        At this point, TAC’s engineer proposed two options: (1) purchase additional asphalt
to fill in the ruts, which would be relatively quick and inexpensive, also known as an
overrun; or (2) excavate and replace the existing sub-grade and re-pave the track, which
would take considerably more time and money. While there is no evidence that TAC
specifically guaranteed the work, Monte Smith, one of the owners of Northwest, testified that
TAC informed him that they had successfully performed the faster, less expensive option on
numerous occasions, and he relied on that information in choosing the first option. The
parties entered a change order for the additional asphalt on April 30, 2007. The change order
specifically provided for the additional asphalt at $60.00 per ton above the original amount
in order to obtain “the best paving project possible when paving over the soft sub-grade.”
During testimony, Austin Bateman, an engineer for TAC, stated that the overrun agreement
was “a standard practice in these situations.”

        TAC began paving on May 1, 2007. On the first pass over the drag strip, the paving
machine became stuck. TAC continued paving, however, and the paver became stuck again,
this time requiring heavy machinery to pull it out. TAC’s use of the heavy equipment
damaged other parts of the drag strip, including the staging and runoff area,1 that were not
covered under the contract. At this point, TAC suspended work on the project, except to
place the remaining asphalt, which was ordered under the contract, onto the track and to
smooth the surface with a tractor.

        At this time, TAC and Northwest agreed to each pay one-half of the cost to test the
sub-grade of the drag strip. The parties contracted with Construction Materials Laboratory,
who sent engineer David Evans to do the testing and make a report. The report showed that
the sub-grade had a high moisture content, which had caused the paving project to fail and
the trucks to become stuck. According to Mr. Evans, the problem with the sub-grade pre-
existed the contract to pave and was caused by improper drainage at the drag strip. He went
on to testify, however, that, in the context of a two- or three-foot core sample, finding water
was “not good” and that he, from an engineering and testing standpoint, would have
recommended that the paving project cease at that time.

        1
          The staging area is the area before the start of the actual race track, where the cars line up to be
paired off for racing. The runoff area is a long strip after the finish line of the race track where the cars
decelerate safely and regain control in order to return to the staging area.

                                                     -3-
       After the testing, TAC offered to complete the job by excavating the area, laying down
new sub-grade or a special type of fabric to stabilize the area, and paving the drag strip. TAC
estimated that the project would cost Northwest approximately $200,000.00. Instead of
contracting again with TAC, Northwest contracted with Ford Construction to repair and
replace the damaged drag strip with soil cement and two and three-fourths inches of asphalt,
and to pave the staging and runoff areas that were damaged by TAC’s equipment. Ford
Construction charged $186,803.00 for the repairs.

        While the repairs were being made, Northwest lost 13 weeks of business, during the
peak racing season. Northwest also lost existing racers due to the unique point system
utilized in drag racing.2

       On July 16, 2007, Northwest filed suit against TAC in the Chancery Court of Weakley
County, Tennessee, claiming breach of contract, negligent damage to real property, and
violation of the Tennessee Consumer Protection Act. TAC counter-claimed, alleging breach
of contract, violation of the Tennessee Consumer Protection Act, and violation of the Prompt
Pay Act.

       The case was tried on April 6, 2010. Northwest called several witnesses, including
the owner of the drag strip, who generally attributed the defects in the drag strip to TAC.
Northwest also called James E. Harrison from Ford Construction Company. While Mr.
Harrison stated that movement during proof rolling would indicate some sort of problem, he
never testified that the overrun agreement was not a standard industry practice or that water
in two- to three-inch core samples indicated sub-grade moisture.

        Various employees testified in favor of TAC. First John Taylor, an estimator salesman
with no engineering training, testified that he could detect poor subsurface conditions only
when the surface was visibly cracked, or “alligatored,” and that, if he observed any cracking
when looking over a property, he would not bid on the job. However, Mr. Taylor went on to
state that, when he visited the Northwest property, he did not notice any “alligatoring” or any
other conditions that led him to believe there were poor subsurface conditions. Consequently,
he bid on the project. Additionally, he testified that TAC never does extensive testing on a
property’s sub-grade and that there was no basis to diverge from TAC’s usual practice in this

        2
          In drag racing, racers accumulate points throughout the year and receive cash prizes at the end of
the season depending on the number of points accumulated. Therefore, it is in the best interest of a racer to
remain with the same drag strip throughout an entire season, as accumulated points do not transfer from one
drag strip to another. During the time that Northwest’s drag strip was being repaired, the drag racers went
to other drag strips and many declined to return to Northwest because they had already begun accumulating
points at the other drag strips.

                                                    -4-
case. Mr. Taylor also testified that the water in the holes left by the corings did not concern
him after speaking with TAC’s engineers. On cross-examination, he did admit that, during
his deposition testimony, he had stated that water in the core sample holes was an indicator
of water in the sub-grade. However, on re-direct, Mr. Taylor stated that, at the time of his
deposition, he did not know that the drill used to cut cores used a water cooling system, so
he believed that the only source of water was the sub-grade.

        TAC called several other employees who testified that the water found in the holes
left by the corings was not indicative of moisture in the sub-grade. Austin Bateman testified
that nothing put TAC on notice of the moisture in the sub-grade. This was because there was
no water on the base stone after proof rolling. Moreover, Mr. Bateman stated that there was
never any surface water on the drag strip or flowing into the test pit that TAC dug prior to
paving.

        On April 30, 2010, the trial court entered its judgment, including findings of fact and
conclusions of law. In its judgment, the trial court relied on cases outside our jurisdiction,
which imply a duty to warn in paving contracts. Thus, the trial court found that there was no
negligence in the case, but that TAC had breached the warranty of workmanlike conduct
expressed in the contract by failing to warn Northwest of the potential for moisture in the
sub-grade after water was found in the core samples taken by TAC. The trial court further
found that “the measure of damages for breach of a paving contract is the cost of repairing
and resurfacing the entire area so as to rectify the inadequate pavement originally applied.”
Consequently, the court found TAC liable for the entire cost to excavate and re-pave the drag
strip, including the staging and runoff areas not covered under the contract. The court also
found that Northwest failed to establish its lost profit damages to a “reasonable certainty,”
and denied those damages. Finally, the court found that TAC’s counterclaim was without
merit and entered judgment in favor of Northwest in the amount of $186,803.00.

       TAC filed a timely motion to alter or amend the judgment. After hearing the motion,
on November 8, 2010, the trial court entered a revised judgment on December 21, 2010. In
the revised judgment, the court again found that TAC had a duty to warn Northwest, but
agreed with TAC that awarding Northwest the total cost of repair, i.e., $186,803.00, would
put Northwest in a better position than it would have been in had the contract been fully
performed. Therefore, the court credited TAC with: (1) $39,500.00 for the cost under the
original contract; (2) $25,227.00 for the additional three-fourths inch of asphalt that Ford
applied; and (3) $86,000.00 for the cost of the soil cement for the entire track. The court
entered a revised judgment in favor of Northwest for $36,076.00. Northwest appealed.

                                    II. Issues Presented

                                              -5-
       Appellant Northwest raises two issues on appeal, which we restate as follows:

       1. Whether the trial court erred in failing to award lost profits damages?
       2. Whether the trial court erred in allowing credits for the additional three-fourths inch
of asphalt and the cost of repairing the subsoil?

       In the posture of Appellee, TAC raises the following, additional issues:

        1. Whether the trial court erred in finding that TAC had a duty to warn Northwest of
the inadequate sub-grade?
        2. Whether the trial court erred in finding that TAC was responsible for the inadequate
sub-grade?
        3. Whether the trial court erred in awarding damages for re-paving an additional 700
feet of track that was not covered under the original contract?
        4. Whether the trial court erred in failing to award TAC the contract price, as TAC did
not breach the contract?

                                  III. Standard of Review

        Because this case was tried by the court, sitting without a jury, this Court conducts a
de novo review of the trial court's decision with a presumption of correctness as to the trial
court's findings of fact, unless the evidence preponderates against those findings. Wood v.
Starko, 197 S.W.3d 255, 257 (Tenn. Ct. App. 2006). For the evidence to preponderate
against a trial court's finding of fact, it must support another finding of fact with greater
convincing effect. Walker v. Sidney Gilreath & Assocs., 40 S.W.3d 66, 71 (Tenn. Ct. App.
2000); The Realty Shop, Inc. v. R.R. Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn.
Ct. App. 1999). This Court reviews the trial court's resolution of legal issues without a
presumption of correctness. Johnson v. Johnson, 37 S.W.3d 892, 894 (Tenn. 2001).

        The question of interpretation of a contract is a question of law. Guiliano v. Cleo,
Inc., 995 S.W.2d 88, 95 (Tenn. 1999). Therefore, the trial court's interpretation of a contract
is not entitled to a presumption of correctness on appeal. Allstate Insurance Company v.
Watson, 195 S.W.3d 609, 611 (Tenn. 2006); Angus v. Western Heritage Ins. Co., 48 S.W.3d
728, 730 (Tenn. Ct. App. 2000). “This Court must review the document ourselves and make
our own determination regarding its meaning and legal import.” Hillsboro Plaza Enters. v.
Moon, 860 S.W.2d 45, 47 (Tenn. Ct. App. 1993).

        “The central tenet of contract construction is that the intent of the contracting parties
at the time of executing the agreement should govern.” Planters Gin Co. v. Fed. Compress
& Warehouse Co., Inc., 78 S.W.3d 885, 890 (Tenn. 2002). “The court's role in resolving

                                               -6-
disputes regarding the interpretation of a contract is to ascertain the intention of the parties
based upon the usual, natural, and ordinary meaning of the language used.” Allstate Ins. Co.,
195 S.W.3d at 611; Staubach Retail Services-Southeast LLC v. H.G. Hill Realty Co., 160
S.W.3d 521, 526 (Tenn. 2005); Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth Inc.,
521 S.W.2d 578, 580 (Tenn. 1975).

       “Where a trial court hears a case without a jury, we review the amount of damages
awarded by the trial court as a question of fact with a presumption of correctness, and will
only alter or amend the amount if the trial court utilized the wrong measure of damages or
when the evidence preponderates against the amount of damages awarded.” Smith v.
Williams, No. E1999-01346-COA-R3-CV, 2000 WL 277059, at 4 (Tenn. Ct. App. March
15, 2000) (citing Tenn. R. App. P. 13(d)).

                                         IV. Analysis

      Because the damages issues raised by Northwest rest on the liability of TAC, we first
address TAC’s argument that it did not breach the contract.

       A plaintiff alleging breach of contract must prove: “(1) the existence of an enforceable
contract, (2) non-performance amounting to a breach of the contract, and (3) damages caused
by the breached contract.” Johnson v. Dattilo, No. M2010–01967–COA–R3–CV, 2011 WL
2739643, at *5 (Tenn. Ct. App. July 14, 2011) (citing ARC LifeMed, Inc. v.
AMC–Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005)).

        The parties agree that this contract is enforceable and includes the express provision
that TAC will perform the contract in a “workmanlike manner according to standard industry
practices.” When a construction contract is silent regarding the standard of conduct that
applies to the contract’s performance, the courts will imply a standard of workmanlike
conduct. See Bowling v. Jones, 300 S.W.3d 288, 291 (Tenn. Ct. App. 2008) (citing 13
Am.Jur. 2d Building and Construction Contracts § 10 (2000)). However, if the parties choose
to employ a different or more specific standard of conduct through the express terms of the
contract, the different or more specific standard will apply. See Johnson, 2011 WL 2739643,
at *5; Dewberry v. Maddox, 755 S.W.2d 50, 54 (Tenn. 1988) (citing Dixon v. Mountain City
Constr. Co., 632 S.W .2d 538, 541–42 (Tenn. 1982)); see also Wilkes v. Shaw Enters., LLC,
No. M2006–01014–COA–R3–CV, 2008 WL 695882, at *8 (Tenn. Ct. App. March 14, 2008)
(“[T]he implied standard of workmanship did not accompany the construction for the house
at issue because the explicit language of the contract provided a different standard.”). In this
case, the parties specifically agreed to judge what constituted “a workmanlike manner” based
on standard industry practices.

                                              -7-
        Although the contract specifically includes a clause requiring the work to be
performed in a workmanlike manner according to standard industry practices, it does not
clearly define what that means in the context of this contract. Nonetheless, it is well settled,
that, in order to prove a breach of contract based on a failure to perform in a workmanlike
manner according to standard industry practices, the plaintiff must prove that “conditions
found to be defective by [the plaintiff] fell below the applicable standard.” Carter v.
Krueger, 916 S.W.2d 932, 935 (Tenn. Ct. App. 1995). Northwest must, therefore, prove that
the methods employed by TAC in this project constituted a breach of standard industry
practices; and, assuming a breach is found, that the breach caused the problems that
Northwest has identified. See Johnson, 2011 WL 2739643, at *5.

       The methods employed by TAC are undisputed. TAC performed core samples of the
existing asphalt to a depth of two- to three-inches, milled off two-inches of asphalt, then
proof rolled with a loaded truck. At this point they became aware of some instability and
offered Northwest a choice of either expensive, time-consuming excavation or adding
additional asphalt with the overrun agreement. Northwest chose the overrun agreement.

        Northwest now argues that TAC breached the warranty to perform in a workmanlike
manner according to standard industry practices by failing to inform Northwest of the water
in the core samples before milling or to inform them of the unsuitable sub-grade before they
agreed to the overrun. However, Northwest failed to present any evidence regarding the
standard industry practice in this case. In fact, the only evidence of a standard practice is in
favor of TAC: Austin Bateman, the engineer for TAC, stated, in uncontradicted testimony,
that the use of the overrun agreement was “ a standard practice in these situations.” While
David Evans stated that, in his opinion, finding water in a core sample was a sign that the
project could not be completed properly, this statement was with regard to two- to three-foot
core samples that hypothetically could have been taken by an engineer, and did not involve
the much more shallow core samples actually taken by TAC. Mr. Evans never testified that
continuing to pave after finding water in a two- to three-inch core sample was contrary to the
standard industry practice. In fact, he qualified his testimony by stating that he was in the
testing rather than the paving business, and that his perspective might be different than that
of someone in paving. Other than the above, there was no evidence that the standard industry
practice was to inform owners of, or to be concerned by, the presence of water in two- to
three-inch core samples. Nor was there any testimony that standard industry practices
required TAC to do more extensive testing with regard to subsurface conditions in a paving
project or to use less heavy machinery or different access points to pave an area of light-duty
asphalt.

      As discussed by this Court, in Johnson v. Datillo, which dealt with the standard of
“good building practices,” “a determination cannot be made that the defects in the house

                                              -8-
constitute a breach of the contract resulting from construction that fell below the standard of
‘good building practices' because the record is silent regarding [the meaning of] ‘good
building practices.” Johnson v. Dattilo, No. M2010–01967–COA–R3–CV, 2011 WL
2739643, at *5 (Tenn. Ct. App. July 14, 2011) (quoting Wilkes v. Shaw Enters., LLC, No.
M2006–01014–COA–R3–CV, 2008 WL 695882, at *9 (Tenn. Ct. App. March 14, 2008)).
The court went on to state that defects pointed out by witnesses for the plaintiff are
“immaterial unless it is shown that the conditions found to be defective by them fell below
the applicable standard.” Johnson, 2011 WL 2739643, at *5 (quoting Carter, 916 S.W.2d
at 935). Simply put, there is no evidence that TAC breached its duty to perform according
to standard industry practices because there was no evidence presented of what standard
industry practices were applicable in this situation.

       The trial court, however, found that implied in the contract in this case is the duty to
warn Northwest of any defects in the soil that the contractor knew or should have known.
The trial court found that the water in the core samples taken by TAC was enough to put
TAC on notice that the sub-grade was unsuitable for the paving project prior to milling, and
that failing to warn Northwest of the unsuitable sub-grade amounted to a breach of the
provision requiring workmanlike conduct. Accordingly, the trial court found that TAC had
breached the contract and awarded damages to Northwest.

         Respectfully, we disagree with this finding and conclude that the evidence
preponderates against the trial court’s finding that TAC was on notice that the sub-grade was
unsuitable for the paving project prior to milling. According to the evidence presented at
trial, the presence of water in two of the four two- to three-inch core samples was not
indicative of a poor sub-grade. The engineer for TAC testified that water in holes left by the
core samples was not evidence of moisture in the sub-grade, but was caused by the water
cooling system in the drill used to core. TAC’s witnesses further stated that finding water in
the cores was usual and was no cause for concern. Additionally, TAC’s witnesses testified
that other indications of moisture in the sub-grade—e.g., alligatoring, surface water on the
drag strip, water on the base stone after milling and proof rolling, or water in the test
pit—were not present in this case. The only evidence that Northwest introduced to indicate
that TAC was put on notice of moisture by the water in the holes left by the core samples was
Mr. Taylor’s statement in his deposition that water was “bad” and could indicate moisture
in the sub-grade. However, Mr. Taylor was merely a salesman for TAC and explained, in his
testimony at the hearing, that he did not learn, until after his deposition, that the drill used to
cut the core samples put a considerable amount of water onto the ground. Other than Mr.
Taylor’s deposition testimony, which was negated by his direct testimony, the record is
devoid of other evidence that water in two of the four two- to three-inch core samples should
have put TAC on notice of moisture in the sub-grade. We are always are hesitant to overturn
a trial court’s factual findings. However, from our review of the entire record and the totality

                                                -9-
of the circumstances, we conclude that the evidence preponderates against the trial court’s
finding that TAC was put on notice of moisture in the sub-grade by the water found in the
holes left by the core samples.

        Because we conclude that TAC was not on notice of the moisture in the sub-grade,
it is not necessary for us to address the question of whether notice of moisture would have
given rise to a duty to warn in this case. Additionally, there was no evidence that standard
industry practices required a paver to warn a property owner of water found in holes left from
core samples. Accordingly, we conclude that TAC has not breached the express warranty to
perform in a workmanlike manner according to standard industry practices.

        The trial court also concluded that there was no negligence in this case. Neither party
appealed this decision. Although Northwest argued for damages relating to the alleged
negligence of TAC in its reply brief, “it is not the office of a reply brief to raise issues on
appeal.” Regions Financial Corp. v. Marsh USA, Inc., 310 S.W.3d 382, 392 (Tenn. Ct.
App. 2009) (quoting Gentry v. Gentry, No. E2000–02714–COA–R3–CV, 2001 WL 839714,
at *4 n.3 (Tenn. Ct. App. July 25, 2001)). Therefore, the issue of negligence has been
waived. See Childress v. Union Realty Co., 97 S.W.3d 573, 578 (Tenn. Ct. App. 2002)
(stating that an issue is waived if it is not raised in the statement of the issues, even if the
issue is argued in the party's appellate brief).

       The trial court made no findings that TAC breached the contract other than its failure
to warn, and awarded TAC a credit against the judgment in the amount of $39,500.00.
Northwest did not object to this credit in its appellate brief. TAC argues, however, that it
should be awarded the entire contract price including the overrun agreement, i.e., $44,918.40.
The overrun agreement provides that TAC would apply additional asphalt to obtain “the best
paving project possible when paving over the soft sub-grade.” According to the testimony,
TAC paved the drag strip with all the asphalt that had been purchased by Northwest. As
discussed above, there is no testimony that the use of the additional asphalt was contrary to
standard industry practices. Therefore, TAC did not breach the overrun agreement. Because
Northwest failed to prove that TAC breached the original contract or the overrun agreement,
we conclude that TAC is entitled to the full contract price of $44,918.00. Having concluded
that TAC did not breach the contract, all issues raised by Northwest are pretermitted.

                                       IV. Conclusion

      The judgment of the trial court is reversed and TAC is awarded a judgment against
Northwest in the amount of $44,918.00. Costs of this appeal are assessed to the Appellant
Northwest Tennessee Motorsports Park, LLC, and its surety.

                                              -10-
       ______________________________
       J. STEVEN STAFFORD, JUDGE

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