A utilities contractor, Portland Utilities Construction Company, LLC, sued subdivision developer Chase Creek, LLC for payment for infrastructure work valued at $313,829. The court upheld the developer's obligation to pay but granted an offset of $55,955 for damages due to defects in the contractor’s work. Chase Creek appealed, seeking additional offsets, but the appellate court affirmed the trial court's ruling. The case originated from a May 14, 1997 contract between Chase Creek and Portland, which involved removing barns, filling a pond, and installing utilities for a residential subdivision. The contract stipulated a lump-sum price for site preparation but included unit pricing for certain tasks due to unpredictability in quantities. Payment was to occur biweekly, and the contract did not include a liquidated damages clause or a completion date. Following approval of the project plans by the State of Tennessee in July 1997, work commenced but soon faced challenges, including issues with the initial subcontractor, Kepley Sons, which led to its replacement by Portland's own employees. Chase Creek cited the contractor's failure to perform correctly as the cause of delays and increased costs, while Portland attributed the problems to external factors. Construction of residential homes began in April 1998, coinciding with the ongoing infrastructure work.
Portland experienced significant erosion and delays in infrastructure work due to unusually wet weather and heavy construction traffic on unpaved roads, necessitating multiple regradings. Despite the completion of storm sewers, water lines, and drains by June 1998, additional road work and electrical conduit installation were still pending, leading to Portland's ongoing work until May 1999. Chase Creek, the developer, ceased payments to Portland after August 1998, despite a final bill of over $300,000 submitted by the contractor. Following a notice of non-payment and the filing of mechanics and materialmen’s liens in June 1999, Portland initiated legal action in Davidson County Chancery Court on August 30, 1999, seeking payment for materials and completed work. Chase Creek countered, alleging that Portland's claims included undocumented materials and unnecessary corrective work, as well as seeking compensation for additional expenses incurred due to Portland’s delays. The trial, which began on May 6, 2002, featured testimony from Portland's owner and supervisors about the need for repeated work due to plan errors and damages from other contractors. Chase Creek's primary witness, Patrick Malone, acknowledged that other contractors' errors contributed to the issues faced by Portland, including discrepancies in road width specifications and delayed provision of electrical installation plans, which resulted in further excavation work for Portland.
Contention arose regarding the quantity of crushed stone used for backfill in a project. The contractor initially estimated 8,000 tons would suffice, but over 17,000 tons were actually billed and used. Mr. Woodcock testified that OSHA regulations necessitated trench boxes due to trench depth, requiring wider trenches and the use of stone for filling under roadway engineering standards. Expert witness Bernie Auld, a civil engineer, estimated that according to 'Metro Specifications,' 11,636 tons should have been used. However, he admitted to a potential miscalculation of up to 3,000 tons regarding storm sewers and failed to account for additional complexities such as lateral lines and electrical conduits.
After hearing the evidence, the chancellor requested proposed findings of fact and law from both parties instead of closing arguments. The developer claimed over $245,000 in offsets against Portland’s claim, while Portland argued for offsets of $55,955. The court ultimately sided with Portland, finding that it completed its contract reasonably and attributing delays to heavy rainfall, surveyor errors, and other contractors' actions. The court affirmed Portland’s entitlement to payment for all crushed stone used, citing site conditions and regulations as justification for the excess.
The court granted the developer offsets totaling $55,955 against the $313,829 contract price, including compensation for extra site work, cleanup, and the improper grading of a cul-de-sac. Chase Creek appealed, challenging the trial court's findings and seeking additional offsets for costs related to the paving contractor, expenses paid to other contractors for work Portland was responsible for, claims for extra work billed by Portland, and damages for delays due to perceived unreasonable project completion time. Each claim will be reviewed individually on appeal.
The witnesses outlined the standard road paving process, which begins with grading the earth, followed by pouring concrete curbs to prevent erosion. After curbing, pug mix (gravel or crushed stone) is added, with concerns that heavy rains prior to the final asphalt layer could wash it away, necessitating prompt action from the contractor. Chase Creek faced delays in finding a contractor to lay the pug mix, ultimately having Portland undertake the task. When the paving contractor began work, he found low spots and added $7,094 worth of pug mix to achieve subgrade levels. The developer argued for an offset for this expense, but evidence did not support their claim, as Mr. Woodcock stated the roads were ready by November 1998, while work did not start until March 1999. Mr. Malone criticized Portland for not preventing erosion during the delay, but testimony indicated that erosion was likely unavoidable given the circumstances.
Chase Creek also sought offsets for $20,500 paid to Wilson Construction and $25,160 paid to Mike Bowers for additional work. However, the court found a lack of proof supporting these claims. Malone testified that Wilson's work was for tasks that Portland was contractually obligated to perform, referencing a vague work order; however, the contract did not cover work on the lots. Malone’s testimony suggested the site was messy partly due to homebuilder activities. Wilson did not testify, leaving uncertainty about the applicability of his work to Portland’s contract. Regarding Bowers, six statements indicated he performed work totaling $25,160, but the court did not find adequate justification for the offsets claimed by Chase Creek.
Portland asserts liability only for work completed by May 1999, as all road and utility work was accepted by the Metropolitan Government by that date, marking the completion of its contract. The trial court found that Chase Creek is entitled to a credit of $20,160 against amounts owed to Portland Utilities for excavation claims, despite Portland's objection. Chase Creek seems to seek a duplicate award for damages already compensated. The contractor, Mr. Bowers, also completed work on the cul-de-sac, which led to a $12,400 setoff for Chase Creek. The $5,000 in disputed charges listed as "Site Work" lack clarity regarding the specific work performed and are primarily based on hourly equipment usage.
While Portland may not be protected from claims for work done by other contractors post-May 1999, Chase Creek failed to prove that the disputed charges fell under Portland's contractual obligations. The court noted unchallenged testimony that debris and damage from other contractors contributed to the site issues, leading to the conclusion that Chase Creek did not meet its burden of proof to justify additional reimbursement claims.
Regarding extra work, the appellant contended that the trial court erred in awarding Portland $17,803 for tasks the developer claimed were part of the initial contract. This work included seeding, mulching, raising fire hydrants, and adjusting meter boxes and catch basins. Mr. Malone admitted seeding and mulching were not explicitly included in the original contract, and Chase Creek’s assertion that these were standard contractor responsibilities lacked supporting evidence. Conversely, the installation of fire hydrants and related items was contractually specified. However, damages caused by other contractors necessitated repairs without additional payment, and staking errors, for which the owner was responsible, led to further adjustments. The trial court's ruling that these adjustments were "extra" work eligible for reimbursement was not found to be against the preponderance of the evidence.
In matters of delay damages, a contract lacking a specific completion date implies that completion must occur within a reasonable time, with what constitutes "reasonable" depending on the contract's subject, the parties' situations, their intentions, and the surrounding circumstances.
The trial court found that Portland completed its construction work within a reasonable timeframe, despite delays often caused by other contractors on large projects. Key factors contributing to the delays included severe weather, unexpected excavation challenges, and damage from traffic. The court established that even if Portland had not completed the work timely, Chase Creek had to prove it suffered damages due to the delay, a burden which it failed to meet. Chase Creek sought a $65,661 offset for loan interest payments, claiming that poor road conditions hindered lot sales necessary to pay off the loan. However, evidence indicated that lot sales still occurred during the delay, undermining Chase Creek's claims. Additionally, Chase Creek did not notify Portland about potential liability for interest payments until after Portland filed its complaint. The court referenced a precedent where interest on unpaid contract funds was deemed special damages, not contemplated by the parties. The developer's assertion that no sales occurred during a specified period was countered by the recognition that the delays were influenced by multiple factors, including the actions of other contractors, thus any damages could not be solely attributed to Portland.
Progress on the subdivision project was hindered by inadequate coordination among various contractors and adverse weather conditions. The developer attributed all damages solely to one contractor, despite evidence implicating multiple parties, including itself. The trial court found the utilities contractor responsible for certain extra expenses incurred by the developer, reducing the contract amount accordingly. On appeal, the developer contended that the trial court should have allowed additional offsets against the utilities contractor. However, the appellate court affirmed the trial court's decision, stating the developer did not demonstrate that the contractor was liable for the additional damages. The case is remanded to the Chancery Court of Davidson County for further proceedings, with costs taxed to the appellant, Chase Creek, L.L.C.
