06/29/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 9, 2020 Session
GREG CALFEE BUILDERS LLC v. NEILL MAGEE AND DIANE MAGEE
Appeal from the Chancery Court for Bradley County
No. 2016-CV-068 Jerri S. Bryant, Chancellor
No. E2019-00905-COA-R3-CV
This appeal concerns an alleged breach of contract. Greg Calfee (“Mr. Calfee”), on
behalf of Greg Calfee Builders LLC (“GCB”), and Neill MaGee (“Mr. MaGee”) signed
an agreement (“the Contract”) whereby GCB would custom-build a home for Mr. MaGee
and his wife, Diane MaGee (“the MaGees,” collectively). Mr. MaGee, citing a number
of construction defects, later terminated GCB from the job and told Mr. Calfee that GCB
could not come back despite GCB’s willingness and offer to correct the defects. GCB
sued the MaGees in the Chancery Court for Bradley County (“the Trial Court”) seeking
to recover money it alleged was still owed to it. Mr. MaGee filed a counterclaim. GCB
filed a motion for summary judgment, which the Trial Court granted. The MaGees
appeal. We find and hold, inter alia, that under both Tennessee caselaw and the
Contract, Mr. MaGee was required to give GCB notice and a reasonable opportunity to
cure the defects, yet he failed to do so. GCB is entitled to judgment as a matter of law.
We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.
W. Lewis Jenkins, Jr., Dyersburg, Tennessee, for the appellants, Neill MaGee and Diane
MaGee.
Stuart F. James, Chattanooga, Tennessee, and, Michael E. Jenne, Cleveland, Tennessee,
for the appellee, Greg Calfee Builders LLC.
OPINION
Background
In 2014, Mr. Calfee of GCB and Mr. MaGee signed the Contract. Under the
Contract, GCB was to build a home for the MaGees in Bradley County, Tennessee for
$694,175. The home was to be custom-built with a number of highly particularized
features such as floors made from reclaimed cypress wood. The Contract provided for an
initial down payment by the MaGees to be followed by “progress payments” as GCB
completed work. The Contract also provided for final payment prior to occupancy after
final walkthrough and corrections. As pertinent to the issues on appeal, the Contract
provided these additional terms:
10. Contractor Warranties: . . . . (d) . . . If a defect appears which Owner
believes is covered by the Contractor’s duty of quality workmanship,
Owner shall notify Contractor in writing describing such defect, also stating
the times during the day Owner will be available at the improvements so
Contractor can schedule service calls appropriately. Upon receipt of
Owner’s written report of a defect, if the defective item is covered by the
Contractor’s duty and quality workmanship, Contractor shall repair or
replace it at no charge to Owner within thirty (3)1 days (unless due to
delays caused by weather conditions, labor problems or material shortages).
Notwithstanding the foregoing Contractor and Owner expressly waive the
statutory limitations on actions for defective improvements of real estate, as
provided by TCA 28-3-201 et. seq., and in lieu thereof covenant and agree
that all actions recoverable under the statutory provision shall be brought
within one (1) year after substantial completion of the improvements.
***
19. Termination by Owner: If the Contractor materially defaults or
materially neglects to carry out the work in accordance with the contract
documents, Owner may, after five (5) days written notice to the Contractor
and without prejudice to any other remedy they may have, make good such
deficiencies and may deduct the cost thereof from the payment then or
thereafter due the Contractor, or, at their option, may terminate the contract
and take possession of the site and of all materials, and may finish the work
by whatever method they may deem expedient, and if the unpaid balance of
the contract price exceeds the expense of finishing the work, such excess
1
This discrepancy between “thirty” and “(3)” is contained within the Contract.
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shall be paid to the Contractor, but if such expense exceeds such unpaid
balance, the Contractor shall pay the difference to the Owner.
20. Litigation Fees: The parties agree that in the event either party breaches
this agreement, the non-defaulting party as additional damages shall be
entitled to the cost of litigation, including reasonable attorney’s fees to
enforce this agreement.
Work began on the home, and time passed. In late July 2015, Mr. MaGee sent Mr.
Calfee a “punch list” via email of items he felt needed correcting. On July 31, 2015, Mr.
Calfee met Mr. MaGee at the home and went through the punch list items room by room.
Mr. Calfee told Mr. MaGee that he would correct these problems. Mr. MaGee agreed
that Mr. Calfee could return on August 3, 2015 to begin making the corrections.
However, when Mr. Calfee returned on August 3, 2015, Mr. MaGee told him “I
don’t want you back into my home. I don’t want your subcontractors back in the home.”
Mr. Calfee left. Later that day, Mr. Calfee sent Mr. MaGee an email stating that he still
wanted to make the corrections. Mr. MaGee responded with an email confirming that
“Neill and Diane do not want Greg Calfee or his subcontractors to work on the punch list
items in the home.” On August 24, 2015, counsel for Mr. Calfee and GCB sent a letter to
the MaGees stating that Mr. Calfee stood ready, willing and able to complete the items on
the punch list at their earliest convenience.
Meanwhile, Robert Thompson, an attorney and mutual friend of the parties, tried
to help resolve the dispute. Mr. Thompson wrote a letter to both parties dated August 10,
2015 containing these key points:
--the balance owed to GCB was $163,770.22;
--the MaGees would pay $138,351.71 in exchange for GCB executing a
Contractor’s affidavit reflecting that all bills had been paid and there were
no materialmen’s liens;
--the only issue that remained was the floor repair; and,
--the MaGees would initially retain $25,418.51 for the floor repairs.
A follow-up letter from Mr. Thompson dated August 11, 2015 reflected that the
matter had not been fully settled. Mr. Thompson updated where things stood:
--the parties were at an impasse regarding the remaining balance of
$25,418.51;
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--per Mr. MaGee’s instruction, Robert Thompson had delivered the
$138,351.71 check to GCB and was now providing the executed
Contractor’s Affidavit to the MaGees; and,
--the outstanding balance of $25,418.51 remained in dispute.
In the August 11 letter, Mr. Thompson wrote also: “Both of you have reserved all
of your rights to pursue whatever action you deem appropriate with respect to this
dispute. I regret that I was unable to assist you in reaching a complete resolution.
Therefore, neither of you owe me anything for my services.”
Some three months after Mr. Calfee and GCB were told unequivocally that they
were not allowed to come back, the MaGees finally relented. In a letter to GCB’s
counsel dated November 23, 2015, counsel for the MaGees wrote:
I have had lengthy conversations with Mr. & Mrs. MaGee concerning the
numerous problems with their home. Based on those conversations they
are willing to have Mr. Calfee and his subcontractors return and perform
corrective work to bring the entire house into compliance with the plans,
specifications and contract documents. . . .
However, GCB did not return. Instead, in March 2016, GCB sued the MaGees in
the Trial Court “for enforcement of lien, breach of Contract and/or quantum meruit.” The
MaGees filed an answer. Mr. MaGee, for his part, filed a counterclaim seeking an
accounting of funds paid under the Contract. Mr. MaGee later filed an amended
counterclaim seeking no less than $600,000 in damages for the “defective and negligent
work performed by Contractor and its subcontractors.”
In May 2018, GCB filed a motion for summary judgment asserting that Mr.
MaGee had denied it an opportunity to cure the defects. GCB sought $25,418.51 it
alleged was still owed to it. As part of their response, the MaGees filed the affidavit of
custom-building contractor and construction expert Charles Alexander, who detailed the
alleged deficiencies in GCB’s work. The following is but a portion of Mr. Alexander’s
lengthy affidavit:
4. I observed that the finishes in the MaGee home did not meet the
standards applicable to a custom house of this type. Any experienced
custom home builder knows that the finishes are a critical part of the
construction to meet the owner’s expectations. There were extreme
variations in the quality of the workmanship in the finishes at the MaGee
home. These variations reflect a lack of supervision by the contractor and
its subcontractors and/or a lack of knowledge of what was required by the
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particular trades. The variations in the quality of finishes showed some
tradesmen had the skill to do the work correctly, but simply did not apply
that skill in a consistent manner. There were also finishes that indicated
particular trades lacked adequate training and skill or failed to take
sufficient time and apply sufficient effort to do the work correctly.
***
8. I understand from my investigation that the general contractor
understood the owners were going to use reclaimed cypress wood for the
flooring throughout the house. I further understand that the supplier of the
reclaimed cypress wood had telephone conversations with the general
contractor in which he reviewed the culling and selecting procedures that
would be necessary. Finally, I understand that as the work progressed, the
supplier made a trip to the MaGee home to review these procedures for
culling and selecting boards with the general contractor.
9. Based on my observations, the resulting floors at the MaGee home
show that these instructions were not followed by the general contractor.
Boards were used that had gaps and openings at joints and places in the
boards that should have been cut out prior to installation, which displays a
lack of attention to the culling and selection process. This is what results
when the installer is inexperienced or in a rush to perform without taking
the time and care demanded by the nature of the materials he is working
with. It also shows a lack of knowledge, experience and/or supervision by
the contractor to be sure the proper care and precautions were taken.
10. Because the cypress wood flooring was installed incorrectly, the
subcontractor hired to finish the floors had a much more challenging job.
The incorrect installation made it far more difficult for the finisher. I
understand that in spite of this, the subcontractor assured the owner that
with extra work, and extra compensation for that work, the subcontractor
could produce the floors expected by the owner.
11. I understand that the owner raised issues with the general
contractor and the flooring subcontractor about the condition of the floor
before the finished coat was applied. I understand that the owner was
assured these conditions would be corrected in a satisfactory manner.
However, my personal observation showed areas where the floors were
damaged, apparently by efforts to remove and substitute some of the boards
and where gaps, joint openings remain. See, Ex.
12. The result was a floor surface that required remedial action. The
only way to produce a finished floor that meets the owner’s intention and
expectation is to move out of the house, remove the interior trim, such as
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the baseboards, remove all built-in cabinetry and all appliances, (remove
the existing floor system and replace it).
13. I understand that the floor finisher tried to remove paint and
plaster from the unfinished floors and charged extra for it. I understand the
floor boards arrived before the plastering work was begun and the
contractor stored the boards in the dining room thereby subjecting the
boards to moisture gain and swelling. After the flooring was installed,
plaster repair and painting was done which allowed plaster and paint to
penetrate the flooring before it was sealed.
14. I understand that records have been furnished that show the
flooring finish subcontractor charged extra in a failed attempt to remove
plaster and paint that had fallen on the sanded, reclaimed cypress floors.
This is a wholly improper sequence in the work and not only exposed the
boards to damage, but would create open gaps as the swollen flooring,
which had been incorrectly stored at the job site by the contractor, became
exposed to conditioned air as the building was closed in. This indicates a
failure to properly schedule the work and resulted in damage to the
reclaimed cypress. The result is the finisher improperly sealed in the
paint/plaster splatters in the finished floor.
***
24. The flaws in the floor installation, trim, staircase, ceramic tile,
paint and plaster are such that they should have been seen and corrected
before the owner ever did a punch list. Based on my investigation and
overall evaluation of the project, and my experience as a general contractor
who constructs custom homes, it is understandable that an owner would
refuse to let the same contractor and subcontractors attempt to correct the
defective work when the project is supposed to be substantially complete.
In September 2018, the Trial Court entered an order denying GCB’s motion for
summary judgment. The Trial Court stated, in part:
[T]he Court finds that first, identifying the party who committed the first
material breach is a question of fact and that there are disputed issues of
fact in the record, and second, the reasonableness of Mr. MaGee’s conduct
on August 3, 2015 and thereafter in refusing Plaintiff access to the property
to make repairs and/or correct defects is also a question of fact and that
there are disputed issues of fact in the record, the Motion is hereby denied.
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GCB filed a motion to alter or amend. In October 2018, the Trial Court entered
another order, this time granting GCB’s motion for summary judgment. The Trial Court
stated:
This cause came to be heard on the 26th day of September 2018 upon
Plaintiff’s motion to alter or amend and notice of hearing. The Court treats
this motion to alter or amend its previous denial of the motion for summary
judgment as a re-argument of the motion for summary judgment based on
the case law that was released by the Court of Appeals on August 10, 2018,
after the hearing on the original motion for summary judgment.
Plaintiff is heavily relying on the case of Manor Homes LLC v.
Ashby Communities LLC, 218 WL 3814981 (Tenn. Ct. App. Aug. 10,
2018). Plaintiff argues that the Manor Homes case is on point with this
case and this Court’s previous ruling that “identifying the party who
committed the first material breach as a question of fact” is an incorrect
statement of this Court’s initial duty. According to Manor Homes, this
Court is to first determine what the contract required of the parties (Manor
at p. 5).
In this case, it is clear that in 2014 the Plaintiff agreed to construct a
residence for Defendant in Bradley County, Tennessee. A Construction
Contract was entered into between the parties. The construction contract
contained a notice and opportunity to cure provision which provided in
relevant part:
“if a defect appears, which owner believes is covered by
contractor’s duty of quality workmanship, owner shall notify
contractor, in writing, describing such defect, also stating the
times during the day Owner will be available at the
improvements so contractor can schedule service calls
appropriately. Upon receipt of Owner’s written report of a
defect, if the defective item is covered by the contractor’s
duty and quality of workmanship, contractor shall repair or
replace it, at no charge to Owner, within three (3) days
(unless due to delays caused by weather conditions, labor
problems or material shortages…)”
The Construction Contract also provided for “final payment prior to
occupancy after final walk through and corrections”. On July 28, 2015
Defendant submitted a “punch list” of items he felt needed correction via
email to Plaintiff. On July 31, 2015 Defendant and Plaintiff met at the
residence/home and went through the punch list items, room by room. At
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the end of that process, Defendant agreed for Plaintiff to come back to the
residence on August 3, 2015 to make repairs. Plaintiff returned to the
residence on August 3, 2015 and was told by Defendant “I do not want you
back into my home. I do not want your sub-contractors back in the home”.
In response, Plaintiff left the premises and sent the Defendant an email
stating he wanted to perform the punch list corrections. On August 24,
2015 attorney for Plaintiff wrote Defendant stating that “Mr. Calfee stands
ready, willing, and able to complete the items on your punch list at your
earliest convenience”.
The contract between Plaintiff and Defendant is clear. Defendant
had a contractual obligation to allow Plaintiff the opportunity to cure. The
right to cure alleged defects is clear in the contract. (See Statement of
Material Facts #6) It is admitted, by the Defendant, that on July 27, 2015
Defendant submitted a “punch list” of items he felt needed corrections via
email to the Plaintiff. It is further admitted that on July 31, 2015, Plaintiff
met with Defendant at the residence/home and went through the “punch
list” items room by room. It is further admitted that on July 31, 2015
Plaintiff stated to Defendant that Plaintiff would fix the problems noted and
Defendant would be happy when Plaintiff was finished. It is further
admitted Defendant agreed for Plaintiff to come back to the residence on
August 3, 2015 to make those repairs. It is further admitted that when
Plaintiff returned to the residence on August 3, 2015, Defendant told him “I
don’t want you back in my home. I don’t want your sub-contractors back
in the home.” It is further admitted Plaintiff left the premises and sent an
email to Defendant on August 3, 2015 stating he wanted to perform the
punch list of corrections. It is further admitted that Defendant answered the
email and confirmed he did not want Plaintiff to make those corrections. It
is further admitted that on August 24, 2015 attorney M. Jenne wrote a letter
on behalf of Plaintiff to Defendant stating “Mr. Calfee stands ready, willing
and able to complete the items on your punch list at your earliest
convenience”. It is further admitted Defendant never communicated a
response to that letter that Plaintiff would be allowed to complete the punch
list.
The Court finds the contract as well as case law requires the owner
to give the opportunity to cure any defects in workmanship. By failing to
do so, Defendant was in material breach of the contract.
It is therefore, ORDERED, ADJUDGED and DECREED that the
Motion for Summary Judgment is GRANTED on both the Plaintiff’s
contract claim and dismissing Defendant’s counter-claim.
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GCB filed an application for attorney’s fees, and the MaGees filed a motion to
alter or amend. In January 2019, the Trial Court entered an order awarding GCB
$62,844.96 in attorney’s fees to be assessed against Mr. MaGee. In May 2019, the Trial
Court entered its final order, wherein it ruled on the MaGees’ motion to alter or amend.
The Trial Court stated:
This cause came to be heard on the 28th day of February, 2019 upon
the Defendants’ Motion to Alter or Amend the previous order entered in this
matter. Defendant asked this Court to review its prior ruling on several
bases. After review of each of those, the Court hereby grants the motion in
part and denies the motion in part.
Defendants asked this Court to clarify its previous order that Diane
Magee was not a party to any contract in this case. On June 20, 2018 this
Court previously reserved ruling on the motion to dismiss the breach of
contract claim against Diane Magee. After review of the previous order in
this matter, it appears there is no dispute that Ms. Magee was not a party to
any contract with the Plaintiff in this case and therefore any breach of
contract claim against her is dismissed.
Next, Defendant has asked this Court to reconsider the October 2018
order granting summary judgment and dismissing the Counter-complaint.
Defendant takes the position there were two parts to the counter-claim: (1)
a claim for damages for defective work; and (2) a claim for accounting
under the contract. It is the Defendant’s position that the Motion for
Summary Judgment did not address the accounting part of the claim.
After review of the motion, this Court agrees in part. The Court did
not address the accounting issue specifically. However, prior to suit being
filed, the parties agreed to a partial settlement of the issues between them.
This settlement obviated the need for an accounting.
The only issue left between the parties was embodied in the
agreement. Defendant admitted the amount owed per Exhibit 8 to Calfee
Statement of Facts. The only issue remaining was the floor repair which
Defendant refused to allow Plaintiff the opportunity to cure per the
contract.
Therefore, the motion to alter is denied. The motion to amend is
granted to specifically reflect that the complaint for an accounting is
dismissed.
The MaGees timely appealed.2
2
In his reply brief on appeal, Mr. MaGee states: “Greg Calfee Builders, LLC does not appear to have
appealed the determination by the trial court that Diane MaGee should be dismissed as a defendant, since
she had never executed the contract with Greg Calfee Builders, LLC . . . Consequently, this reply brief is
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Discussion
The MaGees raise five issues on appeal. We restate and consolidate these five
into the following two dispositive issues: 1) whether the Trial Court erred in granting
GCB’s motion for summary judgment; and, 2) whether the Trial Court erred in declining
to find that Mr. MaGee is entitled to an accounting of funds paid to GCB. Although not
stated exactly as such, GCB raises the following separate issue: whether GCB is entitled,
under the Contract, to an award of attorney’s fees incurred since the Trial Court entered
its January 2019 order on attorney’s fees.
As our Supreme Court has instructed regarding the standard of review on motions
for summary judgment:
Summary judgment is appropriate when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.”
Tenn. R. Civ. P. 56.04. We review a trial court’s ruling on a motion for
summary judgment de novo, without a presumption of correctness. Bain v.
Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist
Healthcare–Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing
so, we make a fresh determination of whether the requirements of Rule 56
of the Tennessee Rules of Civil Procedure have been satisfied. Estate of
Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev.
Corp., 387 S.W.3d 453, 471 (Tenn. 2012)).
***
[I]n Tennessee, as in the federal system, when the moving party does not
bear the burden of proof at trial, the moving party may satisfy its burden of
production either (1) by affirmatively negating an essential element of the
nonmoving party’s claim or (2) by demonstrating that the nonmoving
party’s evidence at the summary judgment stage is insufficient to establish
the nonmoving party’s claim or defense. We reiterate that a moving party
seeking summary judgment by attacking the nonmoving party’s evidence
must do more than make a conclusory assertion that summary judgment is
appropriate on this basis. Rather, Tennessee Rule 56.03 requires the
submitted for Neill MaGee.” Indeed, GCB has not appealed Ms. MaGee’s dismissal, nor has it made any
argument regarding Ms. MaGee. We leave the Trial Court’s dismissal of Ms. MaGee undisturbed.
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moving party to support its motion with “a separate concise statement of
material facts as to which the moving party contends there is no genuine
issue for trial.” Tenn. R. Civ. P. 56.03. “Each fact is to be set forth in a
separate, numbered paragraph and supported by a specific citation to the
record.” Id. When such a motion is made, any party opposing summary
judgment must file a response to each fact set forth by the movant in the
manner provided in Tennessee Rule 56.03. “[W]hen a motion for summary
judgment is made [and] . . . supported as provided in [Tennessee Rule 56],”
to survive summary judgment, the nonmoving party “may not rest upon the
mere allegations or denials of [its] pleading,” but must respond, and by
affidavits or one of the other means provided in Tennessee Rule 56, “set
forth specific facts” at the summary judgment stage “showing that there is a
genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party
“must do more than simply show that there is some metaphysical doubt as
to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.
Ct. 1348. The nonmoving party must demonstrate the existence of specific
facts in the record which could lead a rational trier of fact to find in favor of
the nonmoving party. If a summary judgment motion is filed before
adequate time for discovery has been provided, the nonmoving party may
seek a continuance to engage in additional discovery as provided in
Tennessee Rule 56.07. However, after adequate time for discovery has
been provided, summary judgment should be granted if the nonmoving
party’s evidence at the summary judgment stage is insufficient to establish
the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P.
56.04, 56.06. The focus is on the evidence the nonmoving party comes
forward with at the summary judgment stage, not on hypothetical evidence
that theoretically could be adduced, despite the passage of discovery
deadlines, at a future trial.
Rye v. Women’s Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.
2015).
Regarding contract interpretation, our Supreme Court has stated:
When we interpret a contract, our role is to ascertain the intention of
the parties. The intention of the parties is based on the ordinary meaning of
the language contained within the four corners of the contract. The
interpretation of a contract is a matter of law, which we review de novo
with no presumption of correctness.
84 Lumber Co. v. Smith, 356 S.W.3d 380, 383 (Tenn. 2011) (citations omitted).
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We first address whether the Trial Court erred in granting GCB’s motion for
summary judgment. The MaGees, arguing that the Trial Court erred, assert the
following: (1) there is no duty to provide notice and opportunity to cure when the
contractor has superior knowledge of deficiencies, is aware of these deficiencies in his or
her own work, and/or continuously fails to meet the contract specifications during
construction; (2) under the Contract, Mr. MaGee was permitted to terminate, without
notice or opportunity to cure, for material neglect or a material breach; (3) even if Mr.
MaGee was required to provide GCB notice and opportunity to cure, he did so; and, (4)
genuine issues of material fact as to which party breached the Contract first preclude
summary judgment. The MaGees argue further that paragraph 19 of the Contract
concerning termination is operative here rather than paragraph 10 concerning warranties,
including the language about the opportunity to cure.
In granting summary judgment to GCB, the Trial Court relied on Manor Homes,
LLC v. Ashby Communities, LLC, No. M2017-01369-COA-R3-CV, 2018 WL 3814981
(Tenn. Ct. App. Aug. 10, 2018), no appl. perm. appeal filed. The parties dispute the
significance and application of Manor Homes to this case. In Manor Homes, we
discussed the requirement to give notice and a reasonable opportunity to cure
construction defects as follows:
With respect to the guidelines set forth in Exhibit H of the PSA [the
contract], Mr. Cude admitted at trial that Manor Homes [the builder] was
not in compliance with some of these guidelines. However, the trial court
found, and Ashby Communities and Mr. Powell do not dispute, that Mr.
Powell never mentioned any concerns he had with the work Manor Homes
was doing on the house (after the initial disagreements at the beginning of
the project) until shortly before Mr. Powell separated Manor Homes from
the project. Mr. Cude wanted to know what Mr. Powell’s concerns were so
he could address them and correct anything that might have been wrong,
but Mr. Powell did not respond to Mr. Cude’s phone calls or e-mails. As
stated above, the trial court did not find Mr. Powell’s testimony as to the
breach of the PSA to be credible, and the court found that Ashby
Communities and Mr. Powell committed the first material breach of the
PSA by removing Manor Homes from the project and failing to give it a
chance to cure the problems Mr. Powell identified before removing Manor
Homes from the construction project.
The law in Tennessee is that “a party alleging defects in the
performance of a contract is required to give notice and a reasonable
opportunity to cure the defects.” Forrest Constr., 337 S.W.3d at 229
(citing Carter v. Krueger, 916 S.W.2d 932, 935 (Tenn. Ct. App. 1995)).
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The reason for this requirement is to encourage contracting parties to settle
their disputes and avoid litigation by allowing the defaulting party the
chance to repair defective work, reduce damages, and avoid additional
problems. Id. (citing Custom Built Homes by Ed Harris v. McNamara, No.
M2004-02703-COA-R3-CV, 2006 WL 3613583, at *5 (Tenn. Ct. App.
Dec. 11, 2006)). In addition, the party that commits the first breach of a
contract is precluded from recovering damages based on the other party’s
later breach of the same contract. Id. at 226 (citing United Brake Sys., Inc.
v. Am. Envtl. Prot., Inc., 963 S.W.2d 749, 756 (Tenn. Ct. App. 1997), and
McClain v. Kimbrough Constr. Co., Inc., 806 S.W.2d 194, 199 (Tenn. Ct.
App. 1990)); see also Madden Phillips Constr., Inc. v. GGAT Dev. Corp.,
315 S.W.3d 800, 812 (Tenn. Ct. App. 2009). Because Ashby Communities
and Mr. Powell did not give Manor Homes notice and an opportunity to
cure any defects in the house prior to removing it from the project, we
affirm the trial court’s conclusion that Ashby Communities and Mr. Powell
were the first to breach the PSA and are, therefore, not entitled to recover
damages as a result of Manor Homes’ failure to comply with the
specifications set out in Exhibit H to the PSA.
Manor Homes, 2018 WL 3814981, at *12.
Thus, Manor Homes bolsters GCB’s position that it was entitled to notice and a
reasonable opportunity to cure defects. The MaGees, however, point out a number of
cases standing for the proposition that notice and opportunity to cure may be excused in
some circumstances. In Forrest Const. Co., LLC v. Laughlin, this Court discussed as
follows:
We believe that the cases of Custom Built, Eastbourne, Salley, and
Vaccaro support the finding that Forrest Construction’s material breach of
the contract by failing to adhere to the contract’s terms, and the substantial
number of defects in the construction excused the Laughlins from the
requirement to give notice and an opportunity to cure. While Forrest
Construction seems to argue that the duty to give notice and an opportunity
to cure is an unyielding requirement, the aforementioned cases indicate that
the surrounding circumstances must be taken into account to determine
what was reasonable under the circumstances. The Laughlins sought
damages only for the defects that they discovered after moving into the
residence in January of 2005. By this time, Forrest Construction had
materially breached the contract by abandoning the job site, and did not
return the phone call of Mr. Laughlin regarding this abandonment.
Therefore, we affirm the trial court’s ruling that the Laughlins were
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excused from the requirement to give notice and an opportunity to cure the
alleged defects.
Forrest Const. Co., LLC v. Laughlin, 337 S.W.3d 211, 231 (Tenn. Ct. App. 2009)
(emphasis in original, footnote omitted).
We see no necessary contradiction between Manor Homes and Forrest Const. Co.,
LLC. Tennessee caselaw requires notice and an opportunity to cure construction defects.
This requirement is not absolute, however. If, for instance, a contractor simply walks off
a job, or is entirely incompetent, the requirement may be excused. In those
circumstances, the builder has not merely been deficient in one detail or another on a
project, but has demonstrated an unwillingness or complete inability to do the job. In that
case, an opportunity to cure would be futile. That is distinct from scenarios involving
defects that are amenable to cure. As reflected by paragraph 10 of the Contract, a
construction project is almost certain to feature some imperfections along the way, and a
builder almost always will be in a position to have superior knowledge about them. To
excuse the requirement to give notice and a reasonable opportunity to cure any defects
discovered because the builder had superior knowledge about them would effectively
nullify the requirement. Here, it would be contrary to the language of paragraph 10 of the
Contract, as well.
Our inquiry, then, centers on whether the defects alleged in the present case are of
the sort that are amenable to cure. The MaGees contend that there are material facts in
dispute regarding the severity of the defects and whether Mr. MaGee’s initial refusal to
allow GCB back was reasonable. Specifically, the MaGees point to Charles Alexander’s
affidavit detailing numerous defects in the home’s construction. At this, the summary
judgment stage, we must discern whether there is a dispute of material fact necessitating
determination by the trier-of-fact. The crux of the Alexander affidavit is that GCB did a
badly rushed job. Taking that assessment as completely true, this was not enough to
excuse Mr. MaGee from giving GCB notice and a reasonable opportunity to cure as he
originally agreed to do before changing his mind.
Nevertheless, the MaGees assert that Paragraph 19 of the Contract, set forth in the
Background section of this Opinion, provides a right to terminate. Indeed, the Owner
may terminate in instances where the Contractor “materially defaults or materially
neglects to carry out the work in accordance with the contract documents.” However,
another provision of the Contract, Paragraph 10, provides for an opportunity to cure
defects. These provisions are not at odds. Paragraph 19 obviates neither Tennessee
caselaw on the opportunity to cure nor the terms of Paragraph 10 of the Contract.
Paragraph 10 states, in part, that “[u]pon receipt of Owner’s written report of a defect, if
the defective item is covered by the Contractor’s duty and quality workmanship,
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Contractor shall repair or replace it at no charge to Owner within thirty (3) days.” We
note the discrepancy in the Contract as to the amount of time the Contractor has to makes
repairs or replacements. However, we need not decide whether the Contract provided for
three days or thirty days because Mr. MaGee went back on his initial assent and told
GCB unequivocally that it could not return to cure the defects. The MaGees did not
budge for three months until their counsel sent GCB a letter stating it could return, which
leads us to consider whether this late change of mind constituted a reasonable opportunity
to cure.
The MaGees assert that their allowing GCB back—albeit after three months had
passed—reflects that GCB was, in fact, given a reasonable opportunity to cure.
According to the MaGees, “the trial court appears to have taken no account of the
undisputed fact that Mr. MaGee made the effort to have GCB cure its construction
defects in November 2015,” and “[t]he trial court’s failure to give credit to the
opportunity to cure provided by Mr. MaGee warrants reversal of the summary judgment
granted in favor of GCB. . . .” What the MaGees overlook is that Mr. MaGee told GCB,
unequivocally, that it could not return to the jobsite. Mr. MaGee later confirmed this.
Mr. MaGee’s tardy reversal after three months passed was in no sense a reasonable
opportunity to cure for GCB. We find, as did the Trial Court, that Mr. MaGee committed
a material breach of the Contract.
We next address whether the Trial Court erred in declining to find that Mr. MaGee
is entitled to an accounting of funds paid to GCB. The MaGees contend that there was no
formal settlement of the non-flooring issues, and that they retained their rights under the
Contract. According to the MaGees, the Trial Court found an accord and satisfaction that
does not exist. However, the record is clear that the parties settled their non-flooring
issues. All that remained was the $25,418.51 in dispute related to the flooring. In view
of the partial settlement, we agree with the Trial Court that an accounting of all funds
paid is neither appropriate nor necessary. We affirm the Trial Court in its dismissal of
Mr. MaGee’s request for an accounting.
The final issue we address is whether GCB is entitled, under the Contract, to an
award of attorney’s fees incurred since the Trial Court entered its January 2019 order on
attorney’s fees. To recap, the Trial Court already has awarded GCB $62,844.96 in
attorney’s fees incurred in a lawsuit over approximately $25,000, notwithstanding Mr.
MaGee’s counterclaim. Moreover, it does not appear that all of the awarded attorney’s
fees were related to the flooring issue. Under these circumstances, GCB is entitled to no
additional attorney’s fees under the Contract. GCB already has received a reasonable fee.
We affirm the judgment of the Trial Court in all respects.
Conclusion
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The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
Appellant, Neill MaGee, and his surety, if any.
_____________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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