Harakas Constr., Inc. v. Metro. Gov't of Nashville & Davidson Cnty.
| Decision Date | 29 January 2018 |
| Docket Number | No. M2016–01540–COA–R3–CV,M2016–01540–COA–R3–CV |
| Citation | 561 S.W.3d 910 |
| Parties | HARAKAS CONSTRUCTION, INC. v. METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, et al. |
| Court | Tennessee Court of Appeals |
J. Brad Scarbrough and Chris Holleman, Brentwood, Tennessee, for the appellant, Harakas Construction, Inc.
Jon Cooper and J. Brooks Fox, Nashville, Tennessee, for the appellee, Metropolitan Government of Nashville and Davidson County.
David N. Garst, J. Wallace Irvin, and Brian S. Faughnan, Nashville, Tennessee, for the appellee, Dale and Associates, Inc.
D. Michael Swiney, C.J., delivered the opinion of the court, in which Frank G. Clement, JR., P.J., M.S., and John W. McClarty, J., joined.
Harakas Construction, Inc. appeals the judgment of the Chancery Court for Davidson County ("the Trial Court") granting summary judgment to Metropolitan Government of Nashville and Davidson County ("Metro") and Dale and Associates, Inc. ("Dale"). We find and hold that the Trial Court correctly granted summary judgment to Metro based upon sovereign immunity and that the Trial Court correctly granted summary judgment to Dale because Dale had negated essential elements of Harakas’s claim.
In 2007, BK Partners, LLC ("BK Partners") owned undeveloped real property located in Davidson County, Tennessee ("the Property") upon which it planned to construct a high-rise condominium. In order for the Property to be developed, the existing public sewer service had to be upgraded. The sewer system that services the Property also services an area known as the Holiday Travel Park area. In August of 2007, BK Partners submitted an application to upgrade the public sanitary sewer to Metro Water, the department of Metro which manages the water and sewer services in Davidson County, Tennessee. The application was approved.
BK Partners and Metro entered in to a Participation Agreement wherein Metro agreed to fund $200,000 toward the cost of the sewer improvement. Pursuant to Metro’s policies, BK Partners was responsible for paying capacity fees based upon the anticipated impact that the new development would have on the existing sewer system. The capacity fees for the development of the Property were approximately $275,000. Subject to the passage of an authorizing ordinance, Metro agreed to waive $200,000 of the capacity fees since BK Partners was funding a portion of the sewer improvement costs, and BK Partners was to pay the balance. Metro also waived the requirement for BK Partners to post a payment and performance bond as security for the project.
In December of 2007, a Metro ordinance was approved which authorized Metro to pay an amount not to exceed $200,000 toward the sewer improvements being made by BK Partners. The ordinance, Ordinance No. BL2007-67, provided, in pertinent part:
The Participation Agreement For Sewer Services incorporated into Ordinance No. BL2007-67 by reference provided, in pertinent part:
BK Partners hired Dale to prepare plans for the sewer improvements, which consisted of installing approximately 5,000 linear feet of sewer pipe on adjacent land and removing an existing pump station ("the Project"). The Project was delayed for a time due to economic factors.
In January of 2012, BK Partners entered into a contract ("the Service Agreement") with Harakas Construction, Inc. ("Harakas") for work on the Project. Metro was not a party to the Service Agreement and had no input into the hiring of Harakas or the terms of the Service Agreement. The Service Agreement called for Harakas to install sewer pipe and remove the pump station. Work on the Project began in March of 2012. During construction, Harakas encountered unforeseen soil conditions, and Harakas and BK Partners agreed to two change orders, which increased the amount of the Service Agreement. Metro was involved in discussions regarding the unforeseen conditions and the change orders.
Harakas performed the extra work and mostly completed the Project on June 21, 2012, with the exception of reconstruction of a fence. On that date, Harakas tied the new sewer system into the existing sewer system, and Metro began using the new sewer system. Around this same time period it was discovered that the new sewer system was not the proper elevation because it was too high to connect sewer outfall from adjacent property owned by Kampgrounds of America ("KOA"). Due to the elevation, the sewer system required a pump station to connect KOA’s outfall and could not be a gravity fed system as originally designed. Because of the issue with the KOA line, Metro refused to fund any more of the Project. Metro, however, continued to use the sewer system.
BK Partners defaulted on its obligation to pay Harakas both the original balance pursuant to the Service Agreement and the change order balance. Allegedly, BK Partners owed Harakas over $235,000. BK Partners also defaulted on repayment of its loan to Wilson Bank & Trust, and the Property was sold at foreclosure in 2013. Wilson Bank & Trust purchased the Property at the foreclosure sale. The Property later was dedicated to parks and conveyed to Metro.
Harakas sued Metro, BK Partners, and Wilson Bank & Trust1 . Harakas later was granted leave to amend its complaint to add claims for negligence and negligent misrepresentation against Dale. In September of 2014, Dale filed a Suggestion of Bankruptcy alleging that BK Partners had filed a petition for bankruptcy. Dale also filed a motion for stay pending the outcome of the bankruptcy. An order was entered staying the instant case pending the outcome of the bankruptcy. In January of 2015, Harakas filed a notice of filing an order from the bankruptcy court granting relief from the automatic stay. In July of 2016, Harakas filed a Notice of Voluntary Nonsuit taking a nonsuit against BK Partners in the instant case.
Metro filed a motion for summary judgment alleging sovereign immunity. Dale filed a motion for summary judgment alleging that it did not breach the standard of care required of civil engineers, that it properly performed all services required by its contract with BK Partners, that Harakas had failed to produce any evidence that it justifiably relied upon false or faulty information provided by Dale or that Dale failed to exercise reasonable care in obtaining information provided in the plans, and that Dale did nothing to prevent BK Partners from making payment in full to Harakas.
Nicholas Curtis Harakas was deposed, and he testified that Harakas entered into the labor-only Service Agreement with BK Partners to "construct underground utility services," or in other words, to lay pipe. He testified that Harakas was to lay pipe only, not remove the pump station. Mr. Harakas testified that the Project called for the installation of approximately 4,600 linear feet of sewer pipe. He further testified that the Service Agreement provided no provisions for dealing with stone outcroppings or bedrock, and provided that all instances of rock would be handled on a case-by-case time and materials basis. Mr. Harakas admitted that the majority of the Service Agreement was drafted by Harakas.
Mr. Harakas testified that Metro was to provide materials for the Project. Albert McKee of Metro was on-site to oversee work on the Project and report back to Metro. Mr. Harakas explained that the Service Agreement was for labor and materials not provided by Metro such as gravel for pipe bedding. Mr. Harakas stated that he was supposed to be paid for labor and materials not provided by Metro. He understood that Metro would not be providing gravel.
Mr. Harakas testified that he also understood that the cost of the Project was to be split equally between Metro and BK Partners. Mr. Harakas expected to receive a check from BK Partners for its share and a check from Metro made jointly to Harakas and BK Partners for Metro’s share. Mr. Harakas testified that BK Partners did not pay Harakas for the work performed under the Service Agreement. He further stated that Harakas never received any checks from Metro.
The high-rise condo project that BK Partners intended to construct on the Property never was completed. Mr. Harakas testified...
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