Gsb Contractors, Inc. v. Hess

• Decision Date: 31 October 2005
• Parties: GSB CONTRACTORS, INC. v. Harry F. HESS, Jr. and Connie Hess.
• Court: Tennessee Supreme Court

179 S.W.3d 535

GSB CONTRACTORS, INC. v. Harry F. HESS, Jr. and Connie Hess.

Court of Appeals of Tennessee, Western Section, at Jackson.

November 17, 2004 Session.

April 15, 2005.

Application for Permission to Appeal Denied by Supreme Court October 31, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael R. Tucker, Memphis, TN, for Appellant.

Anthony C. Pietrangelo, Memphis, TN, for Appellees.

OPINION

ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and DAVID R. FARMER, J., joined.

Following a hail storm which severely damaged the Appellees' home, the Appellee contracted with the Appellant, a construction contractor, to repair the damage. The Appellees' insurance policy covered the damage done to the home by the hail storm, but the Appellees entered into a collateral agreement with the Appellant to do additional work to the home. The insurance company paid for all work done by the Appellant in repairing the damage from the storm, but the Appellees refused to pay the balance due on work completed under the collateral agreement citing poor workmanship by the Appellant's subcontractors. The Appellant subsequently filed suit against the Appellees in general sessions court seeking to recover the balance owed. Following a judgment in favor of the Appellant, the Appellees appealed to the circuit court and filed a counterclaim against the Appellant. Following a trial, the circuit court ruled in favor of the Appellees. In proving their damages, the Appellees presented the testimony of two expert witnesses at trial. The circuit court ruled that the proper measure of damages was the cost of repairing the defective work. The Appellant filed an appeal to this Court contesting the trial court's selection of "cost of repair" as the appropriate measure of damages in this case, as well as the trial court's evidentiary rulings regarding certain testimony. We affirm.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Harry F. Hess ("Mr.Hess") and Connie Hess (collectively with Mr. Hess, the "Homeowners" or "Appellees") purchased their present home, which was constructed in 1982 and is located in Lakeland, Tennessee, in March of 1989 for $285,000.00. In May of 1998, a severe hail storm caused damage to the home, particularly to the roof, chimney, skylights, windows, screen doors, cedar siding, decks, and awning. The Homeowners' insurance policy, held with West American Insurance Company ("West American"), covered the damage to their home. Accordingly, the Homeowners filed a claim with West American for the hail damage. The Homeowners, dissatisfied with the first contractor selected to repair the damage to their home, selected GSB Contractors, Inc. ("GSB" or "Appellant"), a Tennessee corporation based in Memphis, Tennessee, to perform the repair work.

By letter dated June 30, 1998, GSB provided the Homeowners with an itemized estimate totaling $58,040.41, which represented the cost of repairing the home. GSB and the Homeowners entered into an agreement that same month, and GSB began working on the home several weeks later. Around December 30, 1998, GSB presented the Homeowners with an invoice in the amount of $44,129.63 for repairs done to the home up to that point in time. West American issued a check designated for "partial draw for hail damage restoration to dwelling," paying the invoice in full.

Around January of 1999, the Homeowners and GSB entered into a collateral agreement calling for GSB to perform additional work on the Homeowners' home at the Homeowners' own expense. Apparently West American had agreed only to fix the damage done to two sides of the Homeowners' home. In addition to other projects, the Homeowners asked GSB to replace the siding on the other two sides of the home so the entire house would have a uniform appearance. On January 5, 1999, GSB submitted another invoice to the Homeowners in the amount of $20,111.52 for the additional work done to the home. That same month, the Homeowners issued a check drawn on their personal account to GSB in the amount of $12,000.00. On August 16, 1999, West American submitted another check to GSB in the amount of $21,351.65 designated for "final draw for hail damage restoration to dwelling."

During the course of their relationship, the Homeowners expressed their dissatisfaction with the work being done by GSB. In some instances, GSB, at the request of Mr. Hess, had its subcontractors re-install or redo some of the work already completed on the home. The Homeowners, dissatisfied with the work performed by GSB, refused to pay the remaining balance owed for the additional work they requested. In March of 2002, GSB filed suit in the General Sessions Court of Shelby County seeking to recover the outstanding balance in the amount of $8,461.62. The general sessions court ruled in favor of GSB, and the Homeowners filed an appeal to the Circuit Court of Shelby County. In the circuit court, the Homeowners filed a counterclaim against GSB alleging breach of contract, negligence, and misrepresentation. Additionally, the Homeowners filed a third-party complaint against West American alleging causes of action for breach of contract, indemnity, and promissory estoppel. After answering the third-party complaint, West American subsequently filed a motion to amend its answer to add a cross-claim against GSB for indemnity. Shortly thereafter, the Homeowners entered a voluntary non-suit against West American.¹

During the course of the four day trial, the Homeowners presented evidence to prove that the work performed by GSB was unworkmanlike, necessitating the need for corrective work to the home. Conversely, GSB contended that all of the work performed by subcontractors working for GSB was performed in a workmanlike manner, and, in an attempt to satisfy the Homeowners, some of the work had been redone. The trial court, sitting without a jury, entered its judgment on November 14, 2003, in favor of the Homeowners, finding:

The plaintiff has been paid, either by Defendant's insurance company or by Defendants, all but $8,461.62 of the contract figures. Defendants, on the other hand, offer evidence that it will cost $137,717.45 to correct the defective workmanship performed by the plaintiff. They deny, therefore, that they owe the plaintiff any amount, and seek the aforesaid sum as their damages.

Although Defendants mention that part of their action is based upon allegations of negligence, in addition to breach of contract, the Court is of the opinion that, no matter how this case is viewed, it is one for breach of contract and not negligence. Where a contractor fails to perform in a workmanlike manner, the cost of repairing the deficient work is the proper measure of damages, since the owner of the building is entitled to proper performance of the contract. Repair of deficient work may involve both additional activities necessitated by the deficient work and activities previously omitted, to proper performance in a workmanlike manner. McCray vs. Clinton County, 125 Ohio App.3d 521, 708 N.E.2d 1075 (1998). Similarly, the plaintiffs' action is one for breach of contract to pay for the work which was performed. The evidence shows that the plaintiff made several attempts to satisfy the defendants when presented with complaints about the workmanship performed by the plaintiff's subcontractors. It further shows, that the plaintiffs, especially Mr. Hess, were very particular about their house being properly repaired. There is a strong undercurrent in the evidence suggesting that the plaintiff regarded the defendant, Mr. Hess, as a chronic complainer, seeking more than he was entitled to. On the other hand, the evidence also shows that he had a nice home and was concerned that it be properly repaired.

Although there was conflicting evidence on most questions, the Court finds that the preponderance of the evidence is that the plaintiffs' subcontractors, (and, therefore, the plaintiff) did not perform most of their work in a good and workmanlike manner. . . . There are a number of particulars, however, in which the defendants and counter-plaintiffs have failed to carry the burden of proof in order to entitle them to damages.

. . . .

From the foregoing, therefore, the Court finds that the damages estimate by the Defendant's proposed contractor is excessive by $61,246.18, resulting in damages to the defendants of $76,471.27, which they are entitled to recover.

The trial court went on to provide that GSB should recover nothing in this case.

GSB subsequently filed an appeal to this Court. After reviewing the briefs submitted by the parties and hearing oral argument, we are of the opinion that all of the issues presented by the Appellant in this appeal fall into one of the following categories:

I. Whether the trial court erred in determining the proper measure of damages to be the cost of repairing the deficient work performed by the Appellant; and

II. Whether the trial court erred in either admitting or excluding certain evidence related to proving the Appellees' damages.

For the reasons set forth more fully herein, we affirm the trial court's ruling.

II. LAW AND ANALYSIS

On appeal, GSB argues that the trial court erred in using the cost of repairing the Homeowners' home as the proper measure of damages in this case. In related sub-issues, GSB argues that the trial court erred in admitting, or failing to admit, certain evidence relating to the damages issue. We begin our analysis with the appropriate measure of damages in this case and address the sub-issues raised by the parties as they arise. In addition, the Homeowners are seeking their costs and attorney's fees associated with defending this appeal.

A. Measure of Damages

GSB contends the trial court erred by applying the "cost of repair" as the appropriate measure of damages when a residential construction contractor fails to perform in a workmanlike manner. The trial...