Beacon4, LLC v. I & L Invs., LLC

• Decision Date: 30 August 2016
• Docket Number: No. E2015–01298–COA–R3–CV,E2015–01298–COA–R3–CV
• Citation: 514 S.W.3d 153
• Parties: BEACON4, LLC v. I & L INVESTMENTS, LLC
• Court: Tennessee Court of Appeals

514 S.W.3d 153

BEACON4, LLC

v.I & L INVESTMENTS, LLC

No. E2015–01298–COA–R3–CV

Court of Appeals of Tennessee, AT KNOXVILLE.

April 21, 2016 Session

Filed August 30, 2016

Application for Permission to Appeal Denied by Supreme Court December 15, 2016

Rick J. Bearfield, Johnson City, Tennessee, for the appellant, I & L Investments, LLC.

Mark S. Dessauer, Kingsport, Tennessee, for the appellee, Beacon4, LLC.

Thomas R. Frierson, II, J., delivered the opinion of the court, in which Charles D. Susano, Jr., and John W. McClarty, JJ., joined.

OPINION

Thomas R. Frierson, II, J.

This case involves a contract dispute over the construction of a "Fireworks Over America" retail store in Blountville, Tennessee ("FOA Project"). The defendant company, I & L Investments, LLC ("I & L"), sought to build the store on an 11.71–acre tract of undeveloped property that it had acquired in November 2010. A contracting and development corporation, Altera Development, Inc. ("Altera"), submitted a bid to complete the site work and building construction for the FOA Project.¹ At this time, the plaintiff contractor, Beacon4, LLC ("Beacon4"), had been entering into a relationship with Altera in which Altera would market and secure construction work to be performed by Beacon4. Upon I & L's acceptance of Altera's bid, Beacon4 eventually became the designated contractor for both the building and site portions of the FOA project, which was divided into two contracts. On January 28, 2011, Beacon4 obtained its Tennessee general contractor's license with a monetary limit of $1,100,000.00 plus ten percent. On February 7, 2011, I & L and Beacon4 entered into a site contract, valued at $795,486.00, and a building contract, valued at $1,097,115.00. A certificate of occupancy was granted for the FOA store on May 17, 2011. One year later, Beacon4 filed a complaint alleging that I & L had violated the Prompt Pay Act of 1991, see Tenn. Code Ann. §§ 66–34–101 to –602, and breached the parties' site contract. Beacon4 sought, inter alia , enforcement of a mechanics' and materialmen's lien in the amount of $212,856.02 allegedly owed under the site contract. I & L conceded that it had withheld a retainage of $46,942.75 but otherwise asserted affirmative defenses, including, inter alia , that Beacon4 had willfully and grossly exaggerated the lien claim and had violated the Tennessee Contractor's Licensing Act of 1994, see Tenn. Code Ann. §§ 62–6–101 to 62–6–521, by dividing the Project into two contracts in order to circumvent its monetary licensing limit. I & L also filed a counterclaim, alleging that Beacon4 had violated the Tennessee Consumer Protection Act of 1977, pursuant to Tennessee Code Annotated § 47–18–104(b)(35). Following a five-day bench trial, the trial court dismissed I & L's counterclaim and entered a judgment in favor of Beacon4, finding that I & L had violated the Prompt Pay Act and breached the parties' site contract. The court awarded to Beacon4 $150,390.04 plus six-percent interest per annum, reasonable attorney's fees, and, upon a post-trial motion, out-of-pocket expenses. The court also granted a lien in favor of Beacon4 on the title to I & L's Blountville FOA store property. I & L has appealed the trial court's judgment, and Beacon4 has raised an issue regarding the statutory penalty provided in the Prompt Pay Act and has requested attorney's fees on appeal. Having determined that the trial court made a typographical error in entering the final award of interest to Beacon4, we modify the award of interest from $32,715.76 to $31,715.76. We affirm the judgment in all other respects. Having also determined that an award to Beacon4 of reasonable attorney's fees on appeal is appropriate under the PPA, we remand for the trial court to determine reasonable attorney's fees incurred by Beacon4 during the appellate process.

I. Factual and Procedural Background

I & L is registered as a Tennessee limited liability company and has principal offices located in Springfield, Missouri. At the time of the subject contracts' execution, I & L was owned one-half by Phil Lloyd and one-half by Mike Ingram. Mr. Ingram testified at trial that I & L is primarily a real estate investment company but that he and Mr. Lloyd also own companies that are in the retail fireworks business. In November 2010, I & L purchased an 11.71–acre tract of unimproved real property in Blountville, Tennessee, at the intersection of Interstate 81 and State Route 394, with the intention of building the FOA Project on a portion of the property. I & L recorded a special warranty deed for the property with the Sullivan County Register's Office on November 16, 2010. I & L subsequently retained the services of Benchmark Designs, PLC ("Benchmark") to prepare site development plans for the FOA Project, consisting of a retail store building, a parking lot, and an access road connecting State Route 394 to the proposed parking lot. The Sullivan County Planning Commission approved the site development plans on November 23, 2010.

I & L also retained a Missouri-based architectural firm, Butler, Rosenbury & Partners ("the Butler Firm"). The president of the Butler Firm, Geoffrey Butler, entered into an oral agreement with Mr. Ingram to provide construction management services for the FOA Project. Mr. Butler testified at trial that although he was an architect licensed in eighteen states, he was not licensed in Tennessee. Mr. Butler stated that personally he had designed "somewhere over a dozen" retail and wholesale fireworks facilities across the United States for Mr. Ingram, either for I & L or for other companies with which Mr. Ingram was associated. He testified that the plans and specifications for the FOA building were "sealed" by an architect employed by the Butler Firm, Bruce Adib–Yazdi, who was licensed in Tennessee.

Mr. Butler further testified that the contract for the FOA Project was "put out to bid" to two contractors, one of which was Altera. In December 2010, Van Gladney, a partner in Altera, submitted to I & L a site construction quote in the amount of $1,110,430.00 and a shell, or building, construction quote in the amount of $452,700.00. In an undated cover letter to Mr. Ingram concerning Altera's quote, Mr. Gladney stated: "For ease of understanding, we have clearly separated our quote into two separate sections: Site and Building Shell." According to a "Schedule Overview" attached to Altera's quote, the anticipated date of completion for the FOA Project would be no later than April 30, 2011. Testimony demonstrated that on December 23, 2010, Mr. Ingram and Mr. Butler participated in a conference call with Mr. Gladney during which Mr. Ingram told Mr. Gladney that I & L would be awarding the overall contract to Altera but needed to negotiate a lower price for the site construction. After reviewing the plans and specifications, Mr. Gladney reduced the quote to complete the site construction to $795,486.00.

At the time the subject negotiations were taking place, Beacon4 had entered into a relationship with Altera wherein Altera was to act in a marketing role to secure construction contracts for work that Beacon4 would perform. Beacon4 is a limited liability company registered in Tennessee but with principal offices located in Alabama. In December 2010, Beacon4 had four principal owners: James Rolfe Russell, Morton Carl, Steve Bartek, and Jonathan Gulledge. Mr. Russell, who testified that he was a construction consultant with a mechanical engineering degree, explained that Beacon4 was originally formed in 2005 as a property development company and had evolved into a construction company by 2007.

Mr. Russell further testified that Mr. Gladney initially contacted Beacon4 on December 7, 2010, requesting pricing to construct a metal building for a fireworks store according to a set of tentative plans provided to Beacon4 by Altera. Beacon4 provided estimated pricing to Altera. However, according to Mr. Russell, Beacon4 was not otherwise involved in developing Altera's quote to I & L for the FOA Project. Mr. Russell stated that Beacon4's preliminary understanding with Altera was that if Altera secured contracts for construction of a fireworks store, Beacon4 would construct the building while Altera completed the site work.

It is undisputed that Mr. Butler drafted two contracts concerning the FOA Project: one for construction of the building that would become the FOA store ("Building Contract") and one for development of the site on which the FOA store would be located ("Site Contract"). Undisputed testimony by Mr. Russell and Mr. Butler indicated that Altera encountered obstacles in its attempt to obtain a Tennessee contractor's license. According to Mr. Russell, at some point in December 2010, Mr. Gladney requested that Beacon4 act as the general contractor for the Site Contract as well as the Building Contract. Mr. Russell had achieved a passing score on the TN BC–B Business and Law Management examination on October 14, 2010, and had subsequently submitted an application on behalf of Beacon4 for a Tennessee contractor's license.

On January 28, 2011, the State of Tennessee issued to Beacon4 a contractor's license, authorizing it to complete commercial construction contracts valued up to $1,100,000.00 with a tolerance level of ten percent over the monetary limitation. See Tenn. Comp. R. & Regs. 0680–01–.13(3) ("A tolerance of ten percent (10%) will be allowed on the monetary limitation placed on any classification of a license other than a Limited Residential license."). While this license was still pending in late December 2010 or early January 2011, Mr. Russell informed Mr. Gladney that Beacon4 would be willing to undertake completion of the Site Contract as well as the Building Contract. Mr. Russell testified that he believed the Site Contract and Building Contract would be considered two separate contracts for purposes of the monetary limit on Beacon4's contractor's license. According to Mr. Russell, Mr....