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E Solutions for Buildings, LLC v. Knestrick Contractor, Inc.

Court of Appeals of Tennessee, Nashville

October 30, 2019

E SOLUTIONS FOR BUILDINGS, LLC
v.
KNESTRICK CONTRACTOR, INC., ET AL.

          Session August 13, 2019

          Appeal from the Chancery Court for Davidson County No. 15-62-IV Russell T. Perkins, Chancellor.

         This appeal involves payment disputes arising out of a public construction project. Among other things, the case involves claims made by an equipment supplier against a subcontractor, the project's general contractor, and the general contractor's bonding company, and claims made by the same subcontractor against the general contractor. Following a trial, the trial court granted the supplier a judgment against the subcontractor and granted the subcontractor a judgment against the general contractor. The supplier's claim against the general contractor and its bonding company was denied. The propriety of these rulings and numerous other issues are now before this Court. Having reviewed the record transmitted to us on appeal, we affirm in part, affirm in part as modified, reverse in part, and remand the case for such further proceedings as are necessary and consistent with this Opinion.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in Part; Modified in Part; Reversed in Part and Remanded

          Paul T. Housch, Nashville, Tennessee, for the appellant, Air Comfort Heating and Cooling, LLC.

          Timothy H. Nichols, Nashville, Tennessee, for the appellee, E Solutions for Buildings, LLC.

          Adam G. LaFevor, Nashville, Tennessee, for the appellees, Knestrick Contractor, Inc., and Berkley Regional Insurance Company.

          Arnold B. Goldin, J., delivered the opinion of the Court, in which J. Steven Stafford, P.J., W.S., and Carma Dennis McGee, J., joined.

          OPINION

          ARNOLD B. GOLDIN, JUDGE.

         BACKGROUND AND PROCEDURAL HISTORY

         This case stems from the construction of the Centennial Sportsplex Indoor Fitness Expansion Building by the Metropolitan Government of Nashville and Davidson County ("Metro"). In April 2013, Metro entered into a contract with Knestrick Contractor Inc. ("Knestrick"), pursuant to which Knestrick agreed to construct the Centennial Sportsplex expansion. Under the contract, Knestrick was obligated to accomplish substantial completion of the project by December 2, 2013, [1] and if it failed to do so, Metro was entitled to assess "the sum of $1, 000.00 for each calendar day of delay until the Project is Substantially Complete." Knestrick, as principal, and Berkley Regional Insurance Company ("Berkley"), as surety, provided a payment bond in connection with the project.

         Following its agreement to serve as a general contractor for the Centennial Sportsplex expansion, Knestrick entered into a subcontract with Air Comfort Heating & Cooling, LLC ("Air Comfort") with respect to the HVAC work required for the project. This subcontract, which was entered into in July 2013, specifically provided that the work must be performed on or before November 27, 2013. Moreover, similar to the prime contract between Metro and Knestrick, the subcontract involving Air Comfort provided that $1, 000.00 in liquidated damages could be assessed "for each day that the work remains uncompleted beyond the specified date period."

         In furtherance of its required work under the subcontract, Air Comfort sought to purchase certain HVAC equipment. To this end, Air Comfort engaged in negotiations with E Solutions for Buildings, LLC ("E Solutions"). E Solutions sent Air Comfort a proposal regarding the needed HVAC equipment on November 11, 2013, and on November 13, 2013, Air Comfort submitted a purchase order for the equipment. The purchase order recited December 13, 2013 as the delivery date, but in the terms and conditions attached to the purchase order, the following was provided: "Shipment dates are estimates only. No valid contract may be made to ship within or at a specified time unless in writing, signed by an authorized signatory of Seller." There was no liquidated damages provision provided for in the contract between Air Comfort and E Solutions, and the attached terms and conditions further stated that the seller, E Solutions, would "IN NO EVENT . . . BE LIABLE FOR ANY INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES." Moreover, the terms and conditions provided that E Solutions' duty to perform was subject to, among other things, the "inability to procure materials from the usual sources of supply" and other causes beyond its "reasonable control."

         When the original deadline for completion of the project proved untenable, Metro and Knestrick entered into an amendment whereby the substantial completion date was extended to January 26, 2014. Although no corresponding amendment was formally made regarding the completion date of Air Comfort's work under its subcontract with Knestrick, a Knestrick officer testified that an extension was also passed on to subcontractors. Nonetheless, the ultimate delay accompanying the project's completion has engendered substantial controversy among the parties concerning their respective claims for payment. The project was eventually certified as substantially complete on May 8, 2014.

         Litigation subsequently ensued as a result of the construction project. The initiating complaint in this matter, which was filed by E Solutions in the Davidson County Chancery Court ("the trial court") on January 15, 2015, alleged that E Solutions had not been paid for the materials, equipment, and services it provided on the project. In addition to asserting a bond claim against Knestrick and Berkley, E Solutions sued Air Comfort for breach of contract. Further, E Solutions pled an unjust enrichment/quantum meruit claim against Air Comfort and Knestrick.

         On February 20, 2015, Air Comfort filed an answer to E Solutions' complaint and also asserted a counterclaim and cross-claim. In its defense to E Solutions' action, Air Comfort asserted, among other things, that E Solutions had materially breached the purchase order with Air Comfort by delaying delivery of the specified HVAC equipment. Air Comfort claimed that it had been damaged by E Solutions' alleged failure to timely deliver the ordered equipment, and it asserted several theories of liability in its cross-claim against Knestrick. Air Comfort alleged that Knestrick was liable for breach of contract by failing to pay it sums owed under the subcontract, and according to Air Comfort, Knestrick should also be held liable for conversion and in violation of the Prompt Pay Act. A bond claim, a claim for unjust enrichment/quantum meruit, and a claim for contribution were also asserted against Knestrick.[2]

         On February 24, 2015, Knestrick and Berkley filed an answer to E Solutions' complaint, wherein they prayed that the claims against them be dismissed, and within the same filing, Knestrick separately asserted a cross-claim against Air Comfort. In the cross-claim, Knestrick averred it was entitled to recover $72, 000.00 in liquidated damages and alleged that it was entitled to indemnification regarding the action filed against it by E Solutions. Answers to the cross-claims and counterclaim were thereafter filed, and a bench trial was held in the fall of 2016.

         On March 17, 2017, the trial court entered its "Memorandum and Final Judgment," wherein it determined that Air Comfort was entitled to a judgment for breach of contract against Knestrick in the amount of $15, 000.00. According to the trial court, this was the full extent of Knestrick's liability, and the court declined to award Air Comfort prejudgment interest. Further, the trial court dismissed Air Comfort's claims against E Solutions and E Solutions' claims against Knestrick and Berkley. As for E Solutions' requested relief against Air Comfort, the court awarded it a judgment in the amount of $42, 847.98, plus prejudgment interest. Notably, the court's order stated that it was reserving any determination about attorney's fees, expenses, and discretionary costs until appeals in the case concluded.

         Several post-trial motions were thereafter filed, and on July 7, 2017, the trial court entered an order addressing them. The court noted that, notwithstanding its previous reservation of certain issues, it had decided to entertain previously stayed issues "[a]t the urging of certain of the parties." In addition to addressing the parties' requests for discretionary costs, the trial court denied Air Comfort's request for attorney's fees. Further, regarding attorney's fees sought by E Solutions, Knestrick, and Berkley, the court held that:

E Solutions is a prevailing party and is entitled to an award of reasonable attorneys' fees under the contract entered with Air Comfort. The Court, however, hereby DENIES E Solutions application for attorneys' fees, without prejudice, because it is not accompanied by a sworn detailed itemization of the services rendered and the time expended for those particular services as required under Local Rule § 5.05 and Tenn. Sup. Ct. R. 8, RPC 1.5(a)(1). This denial is without prejudice. E Solutions may renew its request for attorneys' fees in this Court after all appeals are exhausted.
Knestrick and Berkley are prevailing parties. Knestrick is generally entitled to attorneys' fees under the indemnification provisions[] of the parties' subcontract due to Air Comfort's decision to withhold payment to E Solutions when Air Comfort had no contractual right to do so. The Court, however, hereby DENIES, without prejudice, Knestrick and Berkley's application for attorneys' fees because it lacks the specific itemization required by Local Rule Sec. 5.05 and Tenn. Sup. Ct. R. 8, RPC 1.5, pending the outcome of the appeals.

         Although the order was certified as final pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure and an appeal was thereafter pursued in this Court, a different panel of this Court dismissed the previous appeal for lack of subject matter jurisdiction, stating in relevant part as follows:

Here, the trial court resolved the parties' breach of contract claims and found that E Solutions, Knestrick, and Berkley are contractually entitled to recover their attorney's fees, but the court granted in part and denied in part the request for contractual attorney's fees, without prejudice, directing the parties to re-submit their requests after this appeal. This order was improvidently certified as final. Rule 54.02 "does not allow a trial court to certify an order[ ] that disposes of only some, but not all, elements of damages, as final and appealable." Cooper v. Powers, No. E2011- 01065-COA-R9-CV, 2011 WL 5925062, at *6 (Tenn. Ct. App. Nov. 29, 2011). "Notably absent from Rule 54.02 is any mention of allowing the certification as final of an order which disposes of certain elements of a claim for damages but leaves the claim pending as to other elements." Id. See, e.g., Johnson v. Tanner-Peck, L.L.C., No. W2009-02454-COA-R3- CV, 2011 WL 1330777, at *6 n.8 (Tenn. Ct. App. Apr. 8, 2011) (explaining that an order was not appropriate for certification as final under Rule 54.02 because it did not dispose of a request for treble damages, punitive damages, attorney's fees and the like arising out of the same claim); Cates, 1991 WL 168620, at *4 ("Bifurcation of damages is fatal to a 54.02 certification.... While it is proper for the trial court to bifurcate the eviden[t]iary hearings on these damages, it cannot bifurcate the appeal of it."). An award as to only one facet of the total damages is not properly certifiable. Cates, 1991 WL 168620, at *4.
We reached the same conclusion on facts similar to those before us in Toyos v. Hammock, No. W2011-01649-COA-R3-JV, 2013 WL 177417, at *16-17 (Tenn. Ct. App. Jan. 17, 2013). The trial court had certified its judgment as final pursuant to Rule 54.02 in "an attempt to finalize the judgment" even though the issue of attorney's fees had not been resolved. This Court entered a per curiam opinion finding that we lacked jurisdiction in the matter because the trial court's order failed to adjudicate the request for attorney fees. We likewise find that this Court lacks jurisdiction over the appeal in this matter.

E Sols. for Bldgs., LLC v. Knestrick Contractor, Inc., No. M2017-00732-COA-R3-CV, 2018 WL 1831116, at *4 (Tenn. Ct. App. Apr. 17, 2018) (footnote omitted), perm. app. denied (Tenn. Aug. 9, 2018).

         Following the remand of the case, the trial court addressed the outstanding issues. In an order entered on October 16, 2018, the trial court ruled on the amount of attorney's fees, discretionary costs, and prejudgment interest owed to E Solutions and awarded Knestrick and Berkley attorneys' fees and discretionary costs against Air Comfort. A timely notice of appeal was filed by Air Comfort on November 8, 2018, leading to the present appeal.

         ISSUES PRESENTED

         This appeal concerns a variety of issues by both Air Comfort and E Solutions. In Air Comfort's brief, the issues presented for our review are as follows:

1. Whether the trial court erred in dismissing Air Comfort's claim of conversion of construction proceeds and Prompt Pay Act claim against Knestrick.
2. Whether the trial court erred in finding that Knestrick was entitled to assess liquidated damages against Air Comfort and only awarding Air Comfort a judgment for $15, 000.00 against Knestrick for breach of contract.
3. Whether the trial court erred in awarding E Solutions a judgment for $42, 847.98 against Air Comfort.
4. Whether the trial court erred in denying Air Comfort attorney fees under the Prompt Pay Act against Knestrick for withholding a contract payment and retainage payment.
5. Whether the trial court erred in denying Air Comfort discretionary costs against Knestrick.
6. Whether the trial court erred in denying Air Comfort prejudgment interest against Knestrick.
7. Whether the trial court erred in awarding E Solutions Attorney Fees, and Prejudgment interest against Air Comfort.
8. Whether the trial court erred in awarding Knestrick attorney fees and discretionary costs against Air Comfort.

         For its part, E Solutions raises the following issues in its appellate brief:

1. Whether the trial court erred in awarding E Solutions a judgment for [only] $42, 847.98 against Air Comfort.
2. Whether the trial court erred in awarding E Solutions attorney's fees and prejudgment interest ...

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