Dye v. Precision Found. Specialties & Flow Rite Drainage Solutions, Inc.
| Decision Date | 11 May 2022 |
| Docket Number | CV-19-499 |
| Citation | 2022 Ark. App. 220,646 S.W.3d 168 |
| Parties | John Ray DYE and Bobby Jo Dye, Appellants/Cross-Appellees v. PRECISION FOUNDATION SPECIALTIES & FLOW RITE DRAINAGE SOLUTIONS, INC., Appellee/Cross-Appellant |
| Court | Arkansas Court of Appeals |
Kezhaya Law PLC, Bentonville, by: Matthew A. Kezhaya, for appellants/cross-appellees.
The Law Offices of Watson and Watson, PLLC, Fayetteville, by: Tim Watson Jr., for appellee/cross-appellant.
This appeal arises from an order and judgment awarding the appellee/cross-appellant, Precision Foundation Specialties & Flow Rite Drainage Solution, Inc. ("PFS"), damages for breach of contract against the appellants/cross-appellees, John Ray Dye and Bobby Jo Dye (collectively the "Dyes") for a cause of action arising from a residential-construction repair. The Dyes argue that (1) PFS failed to strictly comply with the statutory notice requirement in Ark. Code Ann. § 18-44-115 (Supp. 2021), which precluded a judgment in its favor; (2) the contract is usurious, which voids the contract; and (3) the jury's viewing of the residence in question deprived them of a fair trial because the deficiencies in PFS's work product were concealed. PFS cross-appeals, arguing that it should have been awarded attorney's fees as a matter of law and contract. We affirm on appeal, but we reverse and remand on cross-appeal.
The Dyes own a residence in Pea Ridge, Arkansas. The two-story residence was constructed approximately thirty years ago. The floors in some areas of the residence were uneven or sagging. The Dyes contacted PFS to inspect the floors and the crawl space to determine the cause of the problem.
PFS, a contractor, inspected the residence, including the floors and the crawl space. PFS found that the residence was built using a pier and beam construction method. Upon inspection, PFS found that some of the trusses supporting the residence were sagging or twisting between piers or pedestals and that some of the shims on top of the pedestals had compressed, causing the floors to be uneven.
The Dyes entered into a contract with PFS for construction services on the Dyes’ single-family residence (the "Contract") on November 21, 2016. Pertinent to this appeal, the scope of services and schedule of pricing included:
Removal of existing compressed shims on all existing pedestals in between existing pedestals in crawl space to include 4" 5000 psi base pads, CMU block and TIVAR shims, installation of new 14 feet of auxiliary beam under kitchen area to include pedestals. Total sum of the project of $7,500.00 with a security deposit in the amount of $3,750.00 to be paid at the contract signing. Balance to be paid in full upon completion in the amount of $3,750.00.
And the Contract provided the following regarding costs of collection:
Section 3.6: Client [the Dyes] will reimburse PFS, Inc. for all time spent and expenses (including fees of any attorney, collection agency, and/or court costs) incurred in connection with collecting any delinquent account.
The Dyes paid $3,750 to PFS when they entered into the Contract. The work commenced a few weeks later, and PFS submitted an invoice on December 20, 2016, stating that the work was complete and that payment was due upon receipt in accordance with the payment provision in the Contract. Mr. Dye responded to the request for payment via email and requested further documentation, including photographs of the repair work. On December 21, 2016, PFS sent Mr. Dye photographs of the repairs as requested. Subsequently, the parties engaged in further email communications regarding final payment; however, despite Mr. Dye's acknowledgment that he owed PFS money, the Dyes never paid the balance of the invoice.
On January 10, 2017, PFS sent the Dyes a notice of intent to file a mechanics’ and materialmen's lien. On January 20, 2017, PFS filed the lien against the Dyes’ residence alleging an outstanding balance, including late fees pursuant to the Contract, in the amount of $6,114.27. PFS filed its complaint against the Dyes on August 25, 2017, for breach of contract and to enforce the lien on the property. The Dyes filed an answer wherein they denied that they were in breach of contract. The Dyes also filed a counterclaim alleging PFS was in breach of contract for PFS's failure to provide construction services that met the implied warranty of workmanlike construction as well as a violation of the Arkansas Deceptive Trade Practices Act (ADTPA) claiming that PFS's contract was usurious. Additionally, the Dyes protested the lien filed on their residence and sought a declaration from the circuit court that PFS had failed to comply with the statutory notice provisions of Ark. Code Ann. § 18-44-115.1
On February 23, 2018, the Dyes filed a motion for partial summary judgment alleging that as a matter of law, PFS's contract was unenforceable for its failure to comply with the notice requirements of Ark. Code Ann. § 18-44-115, and because the late fees included in the Contract are usurious. PFS responded, arguing that it qualified for the "direct sale" exemption to the notice requirements of the statute and that the Contract was not usurious in that the late fees were a permissible penalty for the Dyes’ failure to pay. The Dyes filed a reply contending that (1) PFS did not qualify for the "direct sale" exemption because the exemption had been subsequently clarified by our legislature to preclude contractors like PFS and that the clarification should be applied retroactively to this contract, and (2) the charges were a mere cloak for usury because they were recurring in nature rather than a one-time penalty.
The circuit court held a hearing on the Dyes’ motion for partial summary judgment, and on May 23, 2018, entered an order denying the motion. Specifically, the court held that PFS was entitled to the "direct sale" exemption; therefore, the statutory notice was not required. The court further found, contrary to the contention of retroactivity by the Dyes, that the effective date of Act 808 of 2017, which amended Ark. Code Ann. § 18-44-115 to explicitly require residential contractors to provide the important notice, was August 1, 2017, and should not be applied retroactively. Regarding late fees, the circuit court cited supreme court precedent in Hayes v. First National Bank of Memphis , 256 Ark. 328, 507 S.W.2d 701 (1974), which held that penalties to induce prompt payment are free from usury; therefore, the Contract was not void. The court, however, did find that the late fees imposed by the Contract were unconscionable and dismissed the portion of PFS's complaint attempting to collect the late fees.
The case proceeded to a two-day jury trial on October 29–30, 2018. In a pretrial motion, the Dyes requested that the jury be transported to their residence for a visual inspection, which the circuit court granted. Therefore, after the close of testimony from two experts as well as Mr. Dye and a representative of PFS, the circuit judge led the jury, silently and in a single-file line, through the residence at the Dyes’ request. Ultimately, the jury returned a verdict favor of PFS and awarded damages in the amount of $3,750. Thereafter, the Dyes filed a motion for judgment notwithstanding the verdict and motion for a new trial as well as a notice of appeal. The circuit court entered a judgment pursuant to the verdict in favor of PFS on November 20, 2018. The circuit court did not enter an order on the Dyes’ posttrial motions; therefore, they were deemed denied. Accordingly, the Dyes amended their notice of appeal to include the deemed denial of both posttrial motions.
On November 30, 2018, PFS filed a motion for attorney's fees, interest, and costs in the amount of $24,646.50. The motion contained an affidavit of expert witness, Justin Hall, wherein he described the fee agreement and invoice for his expert testimony for PFS; and an affidavit of Barrett Moore in support of the attorney's fees requested by PFS's counsel. The Dyes responded and alleged deficiencies in PFS's motion and also filed a counterclaim for their own attorney's fees expended to discharge the lien on their property. Subsequently, PFS filed an amended motion for attorney's fees, interest, and costs in the amount of $26,851.50.2 After a hearing on the motions, the circuit court entered an order denying each party's motion for attorney's fees. However, the circuit court granted PFS costs in the amount of $50 for the service fee and $165 for the filing fee; awarded PFS prejudgment interest in the amount of $431.50 and 6 percent postjudgment interest; and denied PFS's request for expenses related to its expert witness. PFS filed a motion for reconsideration on February 18, 2019, arguing that the circuit court should have enforced the Contract as written and held the Dyes liable for all the expenses PFS incurred in collecting the delinquent amount, including attorney's fees and expenses related to their expert witness. The circuit court denied the motion for reconsideration on March 8, 2019, and PFS filed a timely notice of cross-appeal on March 11, 2019.
On appeal, the Dyes argue the following: (1) PFS's failure to strictly comply with statutory notice requirements precludes a judgment in its favor; therefore, the circuit court should have entered judgment notwithstanding the verdict; (2) PFS's contract is usurious because it provides for recurring late fees in the amount of 22.5 percent per week, rendering the agreement void; and (3) the jury viewing deprived them of a fair trial because the deficiencies in PFS's work product were concealed, rather than highlighted; thus, the circuit court should have ordered a new trial.
On cross-appeal, PFS contends the circuit court erred by not enforcing the terms of the Contract by ordering the Dyes to reimburse PFS for all expenses it incurred to collect the delinquent payments,...
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