IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE FILED December 29, 1999
Cecil Crowson, Jr. Appellate Court Clerk
E1998-00535-COA-R3-CV JERRY DUNCAN FORD, INC., ) C/A NO. 03A01-9808-CH-00266 ) Plaintiff-Appellee, ) v. ) ) ) J. ROY FROST d/b/a FROST ) CONSTRUCTION COMPANY, ) ) Defendant-Appellant. ) ) ) J. ROY FROST d/b/a FROST ) CONSTRUCTION COMPANY, ) ) Plaintiff-Appellant, ) ) v. ) ) APPEAL AS OF RIGHT FROM THE JERRY DUNCAN FORD, INC., ) ROANE COUNTY CHANCERY COURT ) Defendant-Appellee. ) ) ) CUSTOMER SERVICE ELECTRIC ) SUPPLY, INC., ) ) Plaintiff-Appellant, ) ) v. ) ) JERRY DUNCAN FORD, INC., ) J. ROY FROST d/b/a FROST ) CONSTRUCTION CO., M. JERRY ) DUNCAN and wife, JUDY C. ) DUNCAN, ) ) HONORABLE FRANK V. WILLIAMS, III Defendants-Appellees.) CHANCELLOR
For Appellant Frost For Appellees Jerry Duncan Ford, Inc., M. Jerry Duncan and Judy WILSON S. RITCHIE C. Duncan WALTER B. JOHNSON, II Ritchie & Johnson, PLC J. POLK COOLEY Knoxville, Tennessee JENNIFER E. RABY Cooley, Cooley & Agee For Appellant Customer Service Rockwood, Tennessee Electric Supply, Inc.
WILLIAM A. NEWCOMB Harriman, Tennessee
1 O P I N IO N
AFFIRMED AND REMANDED Susano, J. This case is a consolidation of three breach of
contract actions, each of which arose out of disputes regarding
major renovations and additions to a commercial building in
Harriman housing an automobile dealership owned by Jerry Duncan
Ford, Inc. (“Jerry Duncan Ford”). Jerry Duncan Ford filed an
action against the general contractor in charge of the project,
J. Roy Frost, doing business as Frost Construction Company
(“Frost”), after terminating Frost’s services because of
unsatisfactory performance. Frost in turn filed an action
against Jerry Duncan Ford for breach of contract. The third
action was filed by Customer Service Electric Supply, Inc.
(“Customer Service”), against Jerry Duncan Ford, Frost, M. Jerry
Duncan (“Mr. Duncan”), and Judy C. Duncan (“Judy Duncan”),
seeking payment for certain exterior light fixtures that it had
installed at the dealership. After a bench trial, the court
awarded Jerry Duncan Ford damages reflecting the difference
between the total cost of the construction and $313,200, a
“ceiling” that -- as found by the trial court -- Frost had
guaranteed. The trial court also awarded Customer Service
damages against Frost, but denied the former’s request for a
judgment against Jerry Duncan Ford and the Duncans. Frost
appeals, raising the following issues for our consideration:
1. Did the trial court err in admitting parol evidence to vary the terms of the written contract?
2. Does the evidence preponderate against the finding of an oral agreement of a guaranteed maximum price?
2 3. Is Frost, rather than Jerry Duncan Ford, entitled to breach of contract damages due to the dealership’s failure to give Frost notice and an opportunity to cure any defects in construction?
Customer Service appeals the trial court’s dismissal of its
complaint against Jerry Duncan Ford and the Duncans.
I.
In December, 1995, the Duncans, as owners and corporate
officers of Jerry Duncan Ford, discussed with Frost the
possibility of doing major renovations and additions to the
dealership’s building. Upon Frost’s recommendation, Mr. Duncan
contacted Randy Denton (“Denton”), an engineer, who, after
meeting with Mr. Duncan and Frost, drafted a floorplan detailing
the plans for the anticipated work.
In early January, 1996, Frost gave Mr. Duncan a one-
page estimate showing the projected cost of the construction to
be $100,136.1 Mr. Duncan reviewed this estimate but noted that
it did not reflect everything that he wanted done. Mr. Duncan
told Frost that he wanted a list of everything that was to be
done and what each item would cost. On January 20, 1996, Frost
met with the Duncans at their home and gave them a revised
estimate. The four-page document shows detailed costs for the
construction, including the cost of (1) building a new service
building and new office area; (2) remodeling of the showroom and
1 Frost denies that he showed Mr. Duncan this one-page estimate, but Duncan testified to the contrary.
3 the existing office area; (3) remodeling of the exterior; and (4)
miscellaneous items, such as pouring concrete slabs, renovating
restrooms, patching the asphalt of the parking lot, and replacing
the exterior lights. For each renovation phase described, Frost
included a subtotal reflecting the addition of ten percent of the
estimated cost for profit and overhead and 2.5% of the estimated
cost for workers’ compensation and liability insurance. Every
page is signed by Frost and dated January 20, 1996. The last
page contains the line: “total projected cost for complete
project: $313,200.” The trial court found that, at the January
20, 1996, meeting, Frost orally guaranteed that the cost of the
project would not exceed $313,200.
Frost and his crew began work at the dealership the
following week and continued for several months. About once a
month, Frost submitted groups of invoices to Mr. Duncan for
payment. These invoices included the cost of materials and labor
plus the agreed-upon ten percent for overhead and profit and 2.5%
for workers’ compensation and liability insurance. The record
reflects that Jerry Duncan Ford made four payments to Frost
totaling $134,706.93. In addition, the dealership paid
$92,857.09 directly to several subcontractors and suppliers.
By February, 1996, the Duncans began to notice problems
with Frost’s work. First, there were deviations from the
original plans. The parties had initially agreed that additional
concrete would be poured on the existing concrete floors in
several areas of the building before tile or carpet was laid.
Frost, however, installed wood strips and plywood instead of
4 concrete in these areas. As a result, these floors squeaked,
moved, and in some places, swelled. The plans also called for
the two existing restrooms to be renovated and made wheelchair-
accessible in accordance with the Americans with Disabilities Act
(“ADA”). However, the restrooms were not renovated in accordance
with the ADA. Consequently, a unisex restroom, which is ADA
compliant, had to be built between the two existing restrooms.
The Duncans also experienced problems when changes were
made to the original plans. In the shop area, the original plans
called for a two-foot drain in the center of the room. Within
the drain, PVC pipe was to be installed for an exhaust system to
hook up to cars being serviced. Mr. Duncan decided instead to
install the exhaust system within the concrete that would be
poured for the floor. The exhaust ports were to be installed 30
feet from the wall on each side of the shop area. Mr. Duncan
discussed the change in plans with Frost before the concrete was
poured. However, after the exhaust system was installed, Mr.
Duncan noticed that on one side of the building, the exhaust
ports were only 15 feet from the wall. Mr. Duncan testified that
the misplacement of the exhaust ports made access to the ports
difficult and time-consuming.
Other problems developed as well. A wall in a hallway
was bowed, causing the tile on the floor to be laid out of
square. Shelving installed in the storage area collapsed due to
inadequate bracing. Doors were installed to cover an existing
communications system, but were installed in a way that blocked
access to part of the system. Doors and windows in the parts
5 area were improperly framed. The existing roof, which had been
re-roofed just months prior to Frost’s work, was damaged when a
support beam was removed from underneath the air conditioner on
the roof, causing the roof to sag and water to collect around the
air conditioner. The roof of the new service building leaked due
to excessive screws being placed in the metal. Leaks also
developed in the hallway where the roof of the new service
building connected with the existing roof. Cracks appeared in
the concrete poured in the service area. The drain in the newly
constructed wash bay did not have a proper slope. The wrong type
of carpet was installed in the general storage area and in a
hallway. The drain installed in the center of the shop area
would not drain properly, and the grate installed over the drain
had to be replaced because it was not strong enough to withstand
the weight of an automobile driving over it.
As these defects became evident, Mr. Duncan noticed
that Frost was rarely, if ever, on the job site. Frost admitted
that during the months of March and April, he was spending only
30 minutes to an hour at the dealership, and that he usually
would come by at 6:00 or 6:30 in the morning -- well before the
Duncans got to the dealership –- to discuss the project with his
crew. In late April, Mr. Duncan went to another of Frost’s job
sites at the Rocky Top Market in Harriman and confronted Frost.
Mr. Duncan told Frost that Frost had to spend more time at the
site or he would pull Frost’s men off the job. The following
week, Frost spent over 50 hours at the dealership. During the
next four weeks, however, he spent no more than six hours per
week at the site. During the first week of June, Mr. Duncan made
6 several unsuccessful attempts to contact Frost. On the morning
of June 5, 1996, Frost contacted the dealership several times to
say that he would be there shortly. When he did not arrive by
that afternoon, Duncan “fired” Frost’s crew.
At the time of Frost’s termination, the work was only
50 to 60 percent complete, and Jerry Duncan Ford had already
expended $227,564.05 on the renovations and additions. On June
15, 1996, ten days after his termination, Frost submitted a group
of invoices, totaling $76,237.81, to Jerry Duncan Ford for
payment, but Mr. Duncan refused to pay them. Among these unpaid
bills was an invoice from Customer Service for the lights that
were installed on the exterior of the dealership in May, 1996.
On July 24, 1996, Jerry Duncan Ford filed a complaint
against Frost for breach of contract. On the same day, Frost
filed a complaint against Jerry Duncan Ford, also alleging a
breach of contract. On April 21, 1997, Customer Service filed a
complaint against Jerry Duncan Ford, Frost, Mr. Duncan, and Judy
Duncan, seeking payment for the exterior light fixtures. All
three actions were subsequently consolidated for trial, a trial
which extended over seven days of testimony.
At the conclusion of the proof, the trial court made
findings, including the following:
Mr. Frost admits that Mr. Duncan was upset about the progress and the quality of the work being performed in the dealership. He says that Mr. Duncan came to where he was working on the Rocky Top Market.
7 He claims that Mr. Duncan had his fist clenched and told him to spend more time on the job or just get his men off the job. Others apparently sent requests for Frost to come to the job, but he apparently, other than his early morning visits, did not do so.
Mr. Frost does admit –- does not admit, but the Court finds, that the work was not progressing properly. The work was progressing slowly, and some defective workmanship was showing up. Had Mr. Frost been on the job more of the time, some of this could have been avoided.
Time sheets clearly show that Mr. Frost, after the first few months, spent very little time at the dealership. He may have come by early in the morning to give instructions for the day, but Mr. Frost could have avoided much of these problems by giving his personal attention to the actual performance of the work, and the Court feels that this is not, per se, a breach of the contract but is related to the plaintiff’s complaint that the work was being improperly supervised, was not making reasonable progress, and that some defects in the workmanship were resulting.
The trial court held that Jerry Duncan Ford was
entitled to recover $215,826.10, the difference between the
guaranteed maximum price of $313,200 and the total cost expended
by the dealership on the renovations and additions.2 The court
then reduced this amount by $25,000, to reflect work that the
court determined was not reasonably necessary to remedy the
existing problems and for work done in excess of the original
contract. The trial court also awarded breach of contract
damages to Customer Service against Frost in the amount of
$24,856.53, plus attorney’s fees of $8,285.51. Because Customer
Service had failed to prove the reasonable value of the light
2 Duncan hired another crew to fix the defects in the work performed by Frost Construction and to complete the renovations of the building. The total cost to complete the renovations was $529,026.10.
8 fixtures in order to establish a claim for quantum meruit, the
trial court dismissed its action against Jerry Duncan Ford and
the Duncans.
9 II.
In this non-jury case, our review is de novo upon the
record, with a presumption of correctness as to the trial court’s
factual determinations, unless the preponderance of the evidence
is otherwise. Rule 13(d), T.R.A.P.; Union Carbide Corp. v.
Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). The trial court’s
conclusions of law, however, are accorded no such presumption.
Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996).
We also note that the trial court is in the best
position to assess the credibility of the witnesses; therefore,
such determinations are entitled to great weight on appeal.
Massengale v. Massengale, 915 S.W.2d 818, 819 (Tenn.Ct.App.
1995); Bowman v. Bowman, 836 S.W.2d 563, 566 (Tenn.Ct.App. 1991).
In fact, this court has noted that
on an issue which hinges on witness credibility, [the trial court] will not be reversed unless, other than the oral testimony of the witnesses, there is found in the record clear, concrete and convincing evidence to the contrary.
Tennessee Valley Kaolin Corp. v. Perry, 526 S.W.2d 488, 490
(Tenn.Ct.App. 1974).
III.
The first issue raised by Frost is that the trial court
erred in admitting parol evidence to vary the terms of the
10 written contract between Frost and Jerry Duncan Ford. The trial
court, in its oral remarks after closing argument, made a
specific finding that the contract between the parties consisted
of the floorplan and the four-page estimate (“estimate” or
“Exhibit 8") drafted by Frost. Later in its remarks, the trial
court referred only to the estimate as the written contract. The
trial court stated that
[o]n the face of the writing, there is nothing ambiguous about it. It is clear and unambiguous. The figures set out were plainly estimates or projected costs. The written contract purports to contain all of the terms upon which the work was to be performed by the defendant Frost.
* * *
However, in this case both parties, all parties have offered without objection, and I want to repeat that because I think it’s important, without objection, extensive parole [sic] evidence bearing directly upon the terms of the contract, some of which have the effect of adding additional and conflicting terms to the contract, Exhibit No. 8.
In other words, this case was tried as if the parole [sic] evidence rule was not applicable with oral testimony being elicited from all parties about conversations and consequently agreements which tend to vary the plain and unambiguous language of Exhibit No. 8.
The evidence then as submitted to the Court raises no issue about the application of the parole [sic] evidence rule and simply leaves it to the Court to weigh the evidence, including the oral testimony, for the purpose of determining the agreement of the parties.
The trial court proceeded to examine the testimony concerning the
agreement between the parties and in so doing determined that
11 Frost had guaranteed that the cost of the project would not
exceed $313,200.
In order to determine whether the testimony regarding
Frost’s alleged guarantee was properly admitted, we must first
determine whether the parol evidence rule applies to the facts of
this case.
The parole evidence rule provides that extraneous
evidence is not admissible to alter, vary or qualify the terms of
an unambiguous written contract. GRW Enterprises, Inc. v. Davis,
797 S.W.2d 606, 610 (Tenn.Ct.App. 1990). Thus, the rule does not
exclude parol evidence where the agreement between the parties is
itself an oral contract.
We find that the four-page estimate is just that, an
estimate. Significantly, each page is signed by Frost, but none
of the four pages are signed by or on behalf of Jerry Duncan
Ford, or the Duncans or any of the three of them. While the
four-page estimate is clearly an offer by Frost to undertake the
subject project, there is nothing in the document to indicate an
acceptance by anyone. Therefore, we find that the four-page
estimate is only a part of the contract between the parties. A
contract that is partly in writing and partly oral is treated as
an oral contract. Myers v. Taylor, 64 S.W. 719, 720 (Tenn.
1901). In such a case, both the writing and the parol testimony
are competent evidence of the entire agreement of the parties.
Id. It is evident from the parol testimony presented at trial
that essential terms of the parties’ agreement -- such as Jerry
12 Duncan Ford’s acceptance; the date of commencement of work; the
method of paying for and selecting materials; the anticipated
date of substantial completion; the method for making change
orders and the like –- were not reduced to writing. The estimate
merely lists the areas of the dealership to be renovated, the new
areas to be constructed, and the projected cost for each phase of
the work. If in fact the estimate constituted the “written
contract” between the parties, the contract would fail for a lack
of definiteness because it does not sufficiently define the
essential terms of the parties’ understandings. See Peoples Bank
of Elk Valley v. ConAgra Poultry Co., 832 S.W.2d 550, 553
(Tenn.Ct.App. 1991). The testimony presented to the trial court
was properly admitted, not because the parties waived application
of the parol evidence rule,3 but because the testimony concerned
the formation of the parties’ oral contract and the terms
thereof.
Having determined that the testimony regarding the
parties’ agreement was properly considered by the trial court, we
now address Frost’s argument that the evidence preponderates
against the trial court’s finding of a guaranteed price. Frost
contends that the evidence preponderates against a finding of a
guaranteed price because (1) his version of the conversation is
corroborated by the “written contract”; and (2) the parties’
conduct was not consistent with a contract for a guaranteed
maximum price.
3 As to whether an objection to inadmissible parol evidence is necessary to raise the parol evidence rule, see Tri-Cities Forlift Co. v. Conasauga River Lumber Co., 700 S.W.2d 548, 549 (Tenn.Ct.App. 1985).
13 The trial court was presented with the testimony of Mr.
Duncan, Judy Duncan, and Frost regarding their discussions on
January 20, 1996, the date on which the parties’ basic agreement
was struck. The parties each testified to their version of the
conversation that ensued when Frost presented the Duncans with
the estimate for $313,200. Mr. Duncan testified as follows:
I asked Roy, I said, Roy, can you build this building the way we want it here for this amount of money? He said, yes, I can.
I said, we didn’t anticipate spending this much money. And I told him, I said, but things always run a little more than what you anticipate. And he said yes. And I said I wanted to spend $300,000 on doing the building.
He said, Jerry, he said, I don’t think I can do that for 300,000, but I’ll tell you what I will do. He said, I’ll try to get you out for 300,000, but I will guarantee you that it will not exceed 313,200.
And I said at that point, I said to him, now, Roy, I said, how are you going to do the buying and so on and so forth? He said, you all can buy anywhere you want to as long as we agree on it. He said, I’ll give Judy budgeted amounts to spend in certain areas. And I said, well, I understand that.
And he said again that he would build a building that we would be proud of. And I said, are you sure you can build this building for three-thirteen-two? Oh, yes, he said, I try to figure my jobs a little high; I’d rather come in a little high as to come in low and then have to go up on the person.
And at that time I said to him, I said, well, Roy, sign this right here. And we were sitting at the bar at the house.
Judy Duncan then testified as follows:
Q: Okay. Going back to the discussions that you and Mr. Duncan had with Mr. Frost on
14 January the 20th, was there any discussion as to the contract price, the entire contract price?
A: Yes, very much so, because Jerry and I had talked privately about what we felt like we could do. And when Mr. Frost came back with the price that was somewhat over 311 or 312,000 or 300 or 311,000 or whatever, Jerry kept reiterating –- and I said to him –- I said to Mr. Frost the same thing, that we really wanted to stretch that out for the 300,000. And Mr. Frost replied to me that “When I am doing a project contract, writing out a project and figuring a project contract, I always figure those high because I always like to come in low on my contracts. That has just always been my technique.” So he said, “I feel like that we have room here that we can very well come in within the 300,000 or below that.” So, then, I talked to him about lighting. And –-
Q: Wait. Was there in that price, that $313,200, was there any discussion about the supervision of the job and, if so, can you describe the substance of those conversations?
A: What Mr. Frost said to us over and over and reiterated to us is that he took great pride in his work, that he was in a position that he could be on our job continually because he did not have another job at that time, and that he would see to it that everything was done as he knew we wanted it to be done, that we were –- he knew we were particular and we had certain things in mind, he wanted to adhere to those, and he also wanted to see that the best work was done. So he promised us at that time and upon signing that contract, that he would be on the job daily overseeing.
Q: Was there any agreement as to the completion date of the contract?
A: Yes. Mr. Frost told us that he would be finished by June 1st. And jerry [sic] said, “Now, this is going to effect [sic] our business because, you know, when you tear up, it’s hard to do business around that and it’s costing you money on a daily basis.” And so Jerry was emphatic about that because of possibility of losing business. So, because
15 of that, Roy said, “I can guarantee you that I can complete all of this work by June 1st.”
Later, Judy Duncan was again questioned about the contract price:
Q: And can you tell the Court again the total contract, because I think that was confusing you a few minutes ago. What was the contract amount?
A: $313,000 and –- 213,200.
Q: In thinking back, Ms. Duncan, to that afternoon when you were going over those figures and discussing that contract price, were the words “guaranteed” ever mentioned to you that day in regard to that contract and that price?
A: Yes. More than once Mr. Frost said that he would guarantee us that it would not exceed this 313,200, but that he would do his best, his very best, and felt very confident that he would be able to stay within the $300,000 range.
Q: Is that contract signed?
A: Yes, each page, because Jerry and I asked that he sign each page of the contract –-
Q: Is Roy Frost’s signature –-
A: –-- and date it. Yes. And he dated –- and he dated the page also.
Roy Frost testified as follows:
A: Jerry said, well, I’d like to get by for 300,000 if I could, and I told him –-
Q: Do you know where he derived the figure of 300,000 in that discussion?
A: That is the first I ever heard of 300,000. I never heard of it, but he said, I would like to –- I would like to get by with $300,000 if I could. I said, well, the only thing that I can tell you is that we’ll go to
16 work like we agreed upon because we talked about a cost-plus fee basis. He would pay my labor bills from timecards, and they could be furnished if they were needed.
[Jerry Duncan] could control the cost. They could help control the cost, and we’ll spend whatever money that they wanted to spend, and when we got to the $300,000, we would either quit –- quit at any time they wanted to quit.
Q: Was there ever a discussion by you and Mr. Duncan or his wife when you took this construction cost estimate up there to their home that you would do this work for the specified sum of three hundred thirteen thousand 200 some odd dollars?
A: I never heard of that figure until it come up to lawsuit time. I never heard that.
Q: As a specified sum?
A: As a specified sum, never had any idea.
Q: Did you at that meeting ever guarantee either one of them that you would do this renovated project for the specified sum of three hundred thirteen thousand and 200 some odd dollars?
A: No. I did not. The only thing that was agreed upon at this time when we started that job I was asked the question about when I could start, and I told him we’d start it immediately. Jerry and I discussed about his dealership having to be open and first one thing and another and the difficulty it would be and things like that.
I told him that we could start immediately on the project and that we would work around all that we could and that once we started that project that Frost Construction Company, not Roy Frost, would never leave that job. I said Frost Construction Company will not quit on this job. We will not stop this job until we are completed.
After hearing this conflicting testimony, the trial court
resolved the factual issue of the alleged guarantee in favor of
the Duncans, finding that Frost’s testimony was not credible:
17 I had no way of resolving any of this dispute about the guaranteed maximum, because I had the Duncans saying one thing, at least in part, and I had Mr. Frost swearing to the exact opposite. But Mr. Frost, on the 4th day, endured what can only be described as a rigorous if not a grueling cross-examination in which he did very badly, I will have to say for Mr. Frost.
The testimony appeared quite often to be very deceptive, to be not credible on many fronts...
[A]t the conclusion of his cross-examination, I had lost confidence in what he was telling me.
He denied that Mr. Duncan ever told him that he, Mr. Duncan, wanted to know what the building was going to cost him. Well, I just don’t believe that. I believe Mr. Duncan did want to know what the building was going to cost him. I think that he asked him, and I think Mr. Frost made some statements in that regard.
Frost argues that the trial court’s determination of his
credibility was in error because his version of the events of
January 20, 1996, is, according to Frost, corroborated by the
estimate, which does not mention a guaranteed price. While it
can be argued that the failure of the four-page estimate to
mention the concept of a guarantee is consistent with Frost’s
testimony, the trial court nonetheless found his testimony “to be
very deceptive” and not worthy of belief. The determination of a
witness’ credibility is for the trial court and such
determinations “will not be disturbed on appeal unless real
evidence compels a contrary conclusion.” McReynolds v. Cherokee
Ins. Co., 815 S.W.2d 208, 210 (Tenn.Ct.App. 1991). The four-page
estimate’s silence on the question of a guarantee is not enough
“to compel[] a contrary conclusion.” Id. Thus, we will not
18 disturb the trial court’s finding that Frost guaranteed that the
cost of the renovations and additions would not exceed $313,200.
Frost contends that the parties did not act in a manner
consistent with a contract for a fixed price because (1) Frost
was paid on a cost-plus basis; and (2) because Jerry Duncan Ford,
allegedly without Frost’s knowledge, paid $92,857.09 directly to
suppliers and subcontractors. Frost argues that if the contract
had been for a fixed price, he would have exercised stricter
control over such expenditures.
We find that the parties’ actions were not inconsistent
with a guaranteed maximum price. There is no dispute that the
parties agreed that the work would be performed on a cost-plus
basis; however, the parties also agreed -- as found by the trial
court -- that the total cost, including the “plus” additions,
would not exceed $313,200. Thus, although the work was paid for
on a cost-plus basis, the evidence preponderates that the parties
were operating under a guaranteed maximum budget. Denton
testified that he heard Frost say that the project was within
budget. Both Mr. Duncan and Judy Duncan testified that before
selecting any supplies, they would ask Frost whether they were
within the budget, and that Frost always replied in the
affirmative. Steve Kirkham, the owner of the Rocky Top Market
where Frost was also working at the time, testified that he heard
Frost mention that he was below budget on the Jerry Duncan Ford
project. We find that the existence of this budget is not
inconsistent with a guaranteed maximum price.
19 Moreover, the fact that Jerry Duncan Ford bought
supplies or paid some suppliers directly for their services does
not contradict a finding of a guaranteed price. First, the
evidence preponderates that the parties had agreed that Jerry
Duncan Ford could purchase materials directly so long as Frost
approved of such purchases. Both Duncans testified that they
sought and obtained Frost’s approval before making any purchases.
As for the direct payment of suppliers, Jerry Duncan testified
that he had to pay some suppliers because they were due payment
when the supplies arrived on the site, and Frost was not there to
pay for them. Thus, we find Frost’s argument on this point to be
without merit.
IV.
Frost next argues that because Jerry Duncan Ford made
the first material breach of contract by failing to give Frost
notice of the defects in the construction and an opportunity to
cure, the trial court erred in awarding damages to Jerry Duncan
Ford. Frost claims that he is entitled to damages arising from
Jerry Duncan Ford’s breach.
Generally speaking, notice and an opportunity to cure
must be given before a party may terminate a contract for faulty
performance. McClain v. Kimbrough Constr. Co., 806 S.W.2d 194,
198 (Tenn.Ct.App. 1990). Failure to give such notice constitutes
a material breach of the contract and entitles the party, who was
denied the opportunity to cure, to an award of damages. Id. at
199.
20 Frost and several members of his crew, including the
supervisor of the project, Michael Frost, testified that, with
few exceptions, they did not receive any complaints about the
quality of the work. The defendant Frost testified that a
complaint was made about a door being out of square, but it was
immediately corrected. He also stated that “some statement was
made” concerning the wrong kind of carpet being installed in the
storage area, but that it was not a “big deal.” Frost testified
that “bubbles”, which appeared in some of the areas covered by
the wood strips and plywood, were also corrected.
The Duncans testified, on the other hand, that they
made several complaints throughout the course of the
construction. The Duncans complained to Frost about cracks in
the concrete in the service area. They complained to Michael
Frost about the drain backing up in the shop area. Mr. Duncan
called Frost’s attention to water collecting on the roof around
the air conditioner. An employee of Jerry Duncan Ford testified
that he pointed out to Michael Frost that the exhaust ports were
being installed too close to the wall. The Duncans complained
about the interior painting in several areas of the dealership.
Also, the metal roof began leaking while Frost’s crew was still
on the job, and thus would have been an obvious defect that
needed correction.
The record further shows that Frost received notice
approximately one month prior to his termination that the Duncans
were very dissatisfied with his performance. In late April,
1996, Mr. Duncan confronted Frost at the Rocky Top Market. Mr.
21 Duncan told Frost that he would pull Frost’s men off the job
unless Frost returned to the job site. This confrontation
notified Frost of Mr. Duncan’s dissatisfaction with the
progression of the work and Mr. Duncan’s belief that Frost’s lack
of attendance was contributing to the defective workmanship.
Although Frost returned to the job site the next week, his
attendance declined thereafter. By June, 1996, Duncan was still
faced with numerous defects in the construction that were
unresolved; also, Frost was not appearing on the job site. It
was at this point that Mr. Duncan told Frost’s crew to leave the
job site.
We find that the evidence does not preponderate against
a finding that both notice and an opportunity to cure were
provided to Frost prior to the termination of the contract.
Again, the trial court was presented with conflicting testimony
from the parties. Although the trial court did not specifically
address the issue of notice in its opinion, the court did discuss
at length the credibility of the witnesses. The trial court
clearly gave little credence to Frost’s testimony, which was
severely discredited on cross-examination. Thus, we cannot say
that the evidence preponderates against a finding that Frost and
his crew were provided sufficient notice and an opportunity to
cure the defects that arose during the construction.
V.
Customer Service appeals the dismissal of its claim for
damages against Jerry Duncan Ford and the Duncans, arguing that
22 an express contract for the exterior light fixtures existed
between the parties. In the alternative, Customer Service argues
that it should recover quantum meruit because an implied contract
existed between the parties. In support of both arguments,
Customer Service contends that Mr. Duncan, acting on behalf of
Jerry Duncan Ford, ordered the light fixtures for which Customer
Service was not paid.
We find that the trial court correctly dismissed
Customer Service’s claim. The evidence overwhelmingly indicates
that an express contract for the exterior lights existed between
Frost and Customer Service. Mike Edwards, co-owner and vice-
president of Customer Service, testified that Frost initially
ordered the exterior light fixtures. The next day, Frost called
and cancelled the order. One week later, a meeting occurred
between Edwards, Frost, Mr. Duncan, and the electrical
subcontractor for the purpose of selecting exterior light
fixtures. Although at that meeting Duncan selected the type of
fixtures to be installed, it was Frost who later called Edwards
and placed the order. Moreover, the manner in which Customer
Service had been paid prior to the submission of the June 15,
1996, invoice also reflects an express contract between Frost and
Customer Service. Helen Neal, an employee of Jerry Duncan Ford,
testified that the Customer Service invoices were billed to
Frost. Frost would then turn in the invoices, including a charge
for the “plus” additions, to Jerry Duncan Ford. A check would
then be issued payable to Frost to cover the amount of the
invoice as well as the percentages added for the “plus” items.
23 Thus, the parties’ conduct demonstrates that an express contract
existed between Frost and Customer Service.
Customer Service’s argument that it should recover
against Jerry Duncan Ford or the Duncans on an implied contract
theory is also without merit. An implied contract or quantum
meruit action is an equitable remedy that allows a party who has
provided goods and services to recover the reasonable value of
those goods and services if the following five factors are met:
(1) there must be no existing, enforceable contract between the parties covering the same subject 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.
Castelli v. Lien, 910 S.W.2d 420, 427 (Tenn.Ct.App.
1995)(citations omitted). A recovery for quantum meruit is
limited to the actual value of the goods or services received,
not the contract price. Id. Thus, a party seeking quantum
meruit must prove the reasonable value of the goods or services.
Id. at 428; Bokor v. Holder, 722 S.W.2d 676, 681 (Tenn.Ct.App.
1986).
24 Customer Service presented no proof concerning the
reasonable value of the fixtures. Counsel attempted to elicit
testimony in regard to the contract price of the fixtures, but
made no attempt to establish the fixtures’ reasonable value.
Customer Service argues that the trial court “thwarted” its
attempt to prove reasonable value; however, we find no merit in
this claim. The trial court merely sustained an objection made
to repetitive questions asked by Customer Service’s counsel
concerning the contract price for the fixtures. The record shows
no attempt by Customer Service to establish the reasonable value
of the goods. Thus, the trial court correctly dismissed Customer
Service’s implied contract claim against Jerry Duncan Ford and
VI.
The judgment of the trial court is in all respects
affirmed. Costs on appeal are taxed to the appellants. This
case is remanded to the trial court for enforcement of that
court’s judgment and for collection of costs assessed below, all
pursuant to applicable law.
__________________________ Charles D. Susano, Jr., J.
CONCUR:
______________________ Herschel P. Franks, J.
25 ______________________ D. Michael Swiney, J.