Opinion
No. M2001-01230-COA-R3-CV
Filed June 13, 2002
Appeal from the Chancery Court for Wilson County; No. 97321; C. K. Smith, Chancellor.
Affirmed.
Todd E. Panther, Nashville, Tennessee, for appellant, Martin Door Window Company, Inc.
Gary M. Eisenberg, Clarksville, Tennessee, for appellee, Wallace Cornett, Jr.
William H. Inman, Sr. J., delivered the opinion of the court. William C. Koch, Jr. and Patricia J. Cottrell, J.J., filed concurring opinions.
Notwithstanding that plaintiff, a materialman, was aware that a general contractor was constructing a residence for the owner, upon non-payment of invoices submitted to the contractor, the plaintiff filed a lien against the owner's property, claiming a right by separate contract. The Chancellor disagreed, holding that only a contractor may file a lien and, further, that the plaintiff did not contract with the owner as alleged. We affirm.
OPINION
This is a complaint to enforce a materialman's lien. Alternatively, the plaintiff seeks damages for breach of contract or a recovery under quantum meruit.
The plaintiff alleged that on February 14, 1996, it contracted with Mr. Cornett to supply building materials for improvements to property owned by Mr. Cornett, and on June 18, 1996 it contracted with The Construction Team to supply materials for improvements to the property of Mr. Cornett.
On November 20, 1996, the date of the last delivery of materials, there remained owing to the plaintiff the sum of $7,824.47 plus service charges and attorney fees, according to the allegations of the complaint. A notice of lien was filed on March 19, 1997.
Mr. Cornett, the owner, denied that he contracted with the plaintiff as alleged. He counter-claimed against the plaintiff for damages allegedly incurred on account of the filing of a meritless lien; he cross-claimed against The Construction Team alleging that on February 28, 1996, he and The Construction Team entered into a contract to build a single family dwelling, and that the funds he paid the contractor included the amount claimed by the plaintiff to be owing. He sought a recovery from The Construction Team "in an amount equal to that to which the original plaintiff may be entitled to recover from this defendant."
The plaintiff, as counter-defendant, denied any liability to Mr. Cornett on account of the filing of the lien.
The Evidence
An official of the plaintiff, Ms. Henley, testified that Mr. Cornett signed a credit application because "he wanted to buy the materials that we supplied for his house when he built it," and, later, that The Construction Team, whom Mr. Cornett had `hired' to build his house, also signed a credit application.
Any contract between Cornett and The Construction Team is not in the record.
Delivery of building materials began soon after the credit applications were executed. According to Ms. Henley, Mr. Cornett would come in from time to time "to pick things up and he was aware that we weren't getting our money." The invoices which accompanied the materials were made out to The Construction Team, even when the materials were picked up by Mr. Cornett.
More than windows and doors, apparently.
On occasion, Mr. Cornett, or his father, would pay for the materials either of them picked up.
Ms. Henley became concerned about the account balance. She discussed the problem with Mr. Cornett "and he would pay us sometimes," and "sometimes The Construction Team would pay us." She testified that once they would get caught up "we would release more material but toward the end, when Mr. Cornett came in, I suggested to him that he knew that we were not getting our money. Rather than for him to continue to pay The Construction Team, would it probably be a good idea just to pay us directly and we wouldn't have to worry about it and Mr. Cornett agreed that was a good idea." The record does not reveal whether the matter went beyond the "good idea" stage.
Mr. Cornett testified that he `hired' The Construction Team to build the house. He said materials that "had my invoice name on them, we picked them up, and paid for them."
He testified that The Construction Team caused problems "throughout the whole job," because of misapplications of funds, and toward the end "I released them enough money . . . and they promised me that they would pay Martin Door and Window and they didn't." Still later, Mr. Cornett made another payment to The Construction Team and "they promised me they were going to pay them and they didn't."
On cross-examination, he testified that he consulted several suppliers of materials from whom he sought bids, and that the bid from the plaintiff was lowest. He reported this fact to The Construction Team who approved it, and then informed the plaintiff that "we wanted to accept the bid." He emphasized that he was not the contractor.
Parenthetically, it is worth noting that Mr. Cornett did not explain — nor was he asked to explain — in light of his testimony that he `hired' The Construction Team to build his house, apparently for a fixed amount, why he undertook to purchase, or arrange for the purchase of doors and windows and possibly other materials. He was acting either on his own behalf or as agent for The Construction Team. For instance, he testified that he met Harry Howland, another official of the plaintiff, and told him that "I was building a house," and that Martin Windows and Door Inc. had "given me a bid." He said, "I've talked it over with The Construction Team and they said you could ship the windows to us." According to Mr. Cornett, Howland agreed and said, "would you mind filling out a credit application? This is all it is. I said, sure."
Mr. Cornett further testified that he never paid for materials invoiced to The Construction Team, but only for "invoices that had my name on it. That was the door locks."
The Findings and Judgment
The trial judge initially expressed doubt that the Application for Credit was a contract, because the proof indicated it was intended by the parties to be only an application for credit although portions of it used contractual language, such as "the undersigned hereby agrees to terms of sale which are stated on each invoice." But because the plaintiff required The Construction Team to execute an Application for Credit which included an additional page that clearly constituted a contract to purchase and pay for materials used in the construction of the dwelling, the trial judge concluded that Mr. Cornett did not contract with the plaintiff as alleged. He further held that only a general contractor may file a lien as provided by Tennessee Code Annotated § 66-11-146 which "overrides Tennessee Code Annotated § 66-11-102." The suit of the plaintiff was accordingly dismissed. Mr. Cornett was awarded damages on his counterclaim. The plaintiff appeals.
The award of damages to Mr. Cornett is not an issue presented for review.
The Issues
The plaintiff presents for review two issues: (1) Whether the evidence preponderates against the finding that the plaintiff did not contract with Mr. Cornett as alleged, and (2) Whether the conclusion of the Chancellor that Tennessee Code Annotated § 66-11-146 "overrides" Tennessee Code Annotated § 66-11-102. Our review is de novo on the record with a presumption, as to factual findings, that the judgment is correct. Rule 13(d), Tenn.R.App.P., Tennessee Farmers Mutual Insurance Company v. Moore , 958 S.W.2d (Tenn.Ct.App. 1997). There is no presumption of correctness with respect to questions of law.
Analysis
Mr. Cornett never explained — nor was he requested to explain — why he, as owner, solicited bids from ten (10) suppliers of doors and windows, and settled on the bid submitted by the plaintiff, since he had contracted with a general contractor to build his house. If he did not intend to be personally bound by his actions, the conclusion seems reasonable that he was acting merely as agent for the general contractor, although the submission by him, as owner, of an application for credit is somewhat supportive of the insistence of the plaintiff that it contracted with the plaintiff. Arrayed against this argument is the undisputed fact that the contractor was required to submit an Application for Credit which, on account of a third page, clearly constituted a contract with the plaintiff, superimposed upon the acknowledgment of the plaintiff that Mr. Cornett had "hired" a general contractor.
The plaintiff relies upon Tennessee Code Annotated § 66-11-102 which provides:
66-11-102. Lien for work and materials. — (a) There shall be a lien upon any lot of ground or tract of land upon which a house or structure has been erected, demolished, altered, or repaired, or fixtures or machinery furnished or erected, or improvements made, by special contract with the owner or the owner's agent, in favor of the contractor, mechanic, laborer, founder or machinist, who does the work or any part of the work, or furnishes the materials or any part of the materials, or puts thereon any fixtures, machinery, or material, and in favor of all persons who do any portion of the work or furnish any portion of the materials for such building; provided, that the subcontractor, laborer or materialman satisfies all of the requirements set forth in § 66-11-145, if applicable.
The lien statutes should be considered in pari materia. Tennessee Code Annotated § 66-11-146 provides:
66-11-146. Residential real property — Right of lien. — (a)(1) As used in this subsection, "residential real property" means a building consisting of one (1) dwelling unit in which the owner of the real property intends to reside or resides as the owner's principal place of residence, including improvements to or on the parcel of property where such residential building is located, and also means a building consisting of two (2), three (3) or four (4) dwelling units where the owner of the real property intends to reside or resides in one (1) of the units as the owner's principal place of residence, including improvements to or on the parcel of property where such residential building is located.
(2) Notwithstanding any other provision of law to the contrary . . . on individual contracts to improve residential real property, a lien or right of lien upon such property shall exist only in favor of the general contractor who enters into such contract with the owner of such property or the owner's agent. No lien, except the general contractor's lien shall exist upon such property under such contract in favor of a subcontractor, materialman, mechanic, laborer, founder, machinist, or any other person who does the work or any part of the work, or furnishes the materials or any part of the materials, or puts thereon any fixtures, machinery or materials, ordered by or through such persons.
"Contractor" is defined as a "person other than a materialman or laborer who enters into a contract with the owner of real property for improving it . . ." Tenn. Code Ann. § 66-11-101. It is not disputed that The Construction Team: (1) was the general contractor, (2) on the individual contract, (3) to improve residential real estate. It is further undisputed that the plaintiff was only a materialman.
Tennessee Code Annotated § 66-11-102 is broadly applicable to a "house or structure, fixtures or machinery," while Tennessee Code Annotated § 66-11-146 has limited application to residential real property described as a building where the owner intends to reside. Therefore, Tennessee Code Annotated § 66-11-146 is applicable to this case. The language is imperative: No lien, except the general contractor's lien, shall exist upon residential real property.
The Chancellor found that Mr. Cornett did not contract with the plaintiff as alleged, and that he paid for whatever materials he personally purchased. This finding is relevant to the issue of whether Mr. Cornett incurred liability for materials, notwithstanding, the plaintiff could not assert a lien. We conclude that the evidence does not preponderate against this finding. Rule 13(d), Tenn.R.App.P.
The alternate grounds of recovery alleged by the plaintiff, breach of contract and according to quantum meruit, were not addressed by the trial judge — other than the finding that Mr. Cornett did not contract as alleged — and are not presented as issues for our consideration.
Finally, we again note that the award of damages for the wrongful filing of the lien is not an issue.
The judgment is affirmed at the costs of the appellant, Martin Door and Window Company, Inc.
I concur with the results reached by the court in this case only because Martin Door Window Company has failed to prove that its separate contract with Wallace Cornett, Jr. included the doors and windows installed in Mr. Cornett's new house, as well as the other materials Mr. Cornett purchased. I find it necessary to write separately because the court has failed to address the correctness of the trial court's legal conclusion that Tenn. Code Ann. § 66-11-146 (1993) "overrides" Tenn. Code Ann. § 66-11-102 (1993). This interpretation of Tenn. Code Ann. § 66-11-146 is much too broad and, if left unchallenged, will cause widespread mischief in the residential construction and remodeling business.
I.
Tenn. Code Ann. § 66-11-146 was the culmination of a ten-year effort by Memphis-area legislators to respond to constituent complaints about the practices of unscrupulous home repair contractors. These contractors performed the work (generally substandard and overpriced), collected their money, and then disappeared without paying their material suppliers. When the material suppliers were not paid, they invoked their rights under Tenn. Code Ann. § 66-11-102 to place a lien on the homeowner's property. These liens understandably upset the homeowners because they had already paid for the work and were required to pay again to have the lien removed.
The General Assembly enacted Tenn. Code Ann. § 66-11-146 to protect property owners from materialman's liens if they could demonstrate that they had paid completely for the repairs to their home. The language of Tenn. Code Ann. § 66-11-146 is broad enough to cover property owners building a new home. The operative language in Tenn. Code Ann. § 66-11-146(a)(2) limits the application of the statute to "individual contracts to improve residential real property." This language, apparently overlooked by the trial court, is extremely important because it reflects the General Assembly's understanding that property owners can and do enter into other contracts that can and should fall under Tenn. Code Ann. § 66-11-102.
There are essentially four ways that materials may be purchased during a residential construction or improvement project. First, the general contractor can select and purchase all the materials. Second, the contractor can include an allowance in its contract that permits the owner to select the materials which are then paid for by the contractor. Third, the owner can purchase some or all of the materials and then supply the materials to the contractor. Fourth, the owner can select and pay for the materials in the contractor's name to take advantage of the contractor's trade discount with the supplier or manufacturer.
These sorts of materials are commonly referred to as "owner-furnished" items.
Tenn. Code Ann. § 66-11-146 "overrides," to use the trial court's term, Tenn. Code Ann. § 66-11-102 only with regard to scenarios one and two because in both of those scenarios, the only contract for the sale of goods is between the supplier and the contractor. The owner's contract is one for the improvement of residential property. The statute, by its own terms, cannot apply to scenarios three and four because in both of these scenarios, the owner has not just entered into a contract to improve residential property. In scenarios three and four, the owner has also entered into a contract with the supplier to purchase goods. It should be obvious that contracts to purchase goods are not "individual contracts to improve residential property" for the purpose of Tenn. Code Ann. § 66-11-146. Thus, Tenn. Code Ann. § 66-11-146 should not be stretched to cover contracts for owner-furnished items. When a supplier who has contracted directly with the owner has not been paid for the items covered by the contract, Tenn. Code Ann. § 66-11-102 should permit the supplier to place a lien on the owner's property.
II.
There is a remaining question. Can a material supplier avoid the effect of Tenn. Code Ann. § 66-11-146 by contracting for materials with both the owner and the contractor? While this practice may not be common, I find nothing in the language of Tenn. Code Ann. § 66-11-146 nor in its legislative history that would prevent a material supplier from protecting itself by contracting with both the owner and the contractor using either joint or separate contracts. In this scenario, the material supplier has entered into two contracts (or contracted with two parties) to supply goods that will be used for the project. It has not entered into a contract "to improve residential property." Because the supplier has not entered into a contract to improve residential property, there is no basis to deny the supplier its right to assert the lien rights available in Tenn. Code Ann. § 66-11-102. However, the lien can cover only the cost of the goods the owner contracted to purchase. It cannot cover the cost of goods furnished to the contractor that are not within the scope of the contract with the owner.
III.
Mr. Cornett exposed himself to liability by inserting himself into the construction of his new house without fully appreciating the potential legal consequences of his actions. The courts should be hesitant to extricate him from this self-created debacle simply because his actions turned out to be unwise or burdensome. Atkins v. Kirkpatrick, 823 S.W.2d 547, 553 (Tenn.Ct.App. 1991); Ballard v. North Am. Life Cas. Co., 667 S.W.2d 79, 82 (Tenn.Ct.App. 1983); Carrington v. W. A. Soefker Son., Inc., 624 S.W.2d 894, 897 (Tenn.Ct.App. 1981). However, applying neutral principles of law, Mr. Cornett should be entitled to relief if Martin Door Window Company has failed to prove all the elements of its cause of action.
Even though this appeal focuses on Martin Door Window Company's claimed lien remedy, the gravamen of the claim is breach of contract. Thus, in order for Martin Door Window Company to prevail, it must prove that it had a contract with Mr. Cornett to supply the doors and windows for his new house, that it supplied the contracted-for doors and windows, and that it had not been paid for all or part of the doors and windows it provided.
The trial court, apparently unimpressed with Martin Door Window Company's "application for credit," concluded that "Martin has failed to prove there was a contract between Martin and Cornett" and that "Cornett has no liability to Martin under contract." This conclusion is incorrect as a matter of fact and law. Mr. Cornett clearly had a contract with Martin Door Window Company. The operative question is whether this contract covered the windows and doors Martin Door Window Company supplied for Mr. Cornett's house. Based on my review of the record in this case, I would find that Martin Door Window Company has not proved that the contract it had with Mr. Cornett covered the doors and windows.
The document signed by Mr. Cornett on February 14, 1996, does not specifically identify the goods Mr. Cornett agreed to purchase. Thus, we must look elsewhere for evidence regarding the subject matter of the party's contract. Martin Door Window Company, relying on the principle of integration, claims that Mr. Cornett confirmed the subject matter of the contract when he informed the company that "we have accepted your bid." Because its bid covered the windows and doors for Mr. Cornett's house, Martin Door Window Company deduces that Mr. Cornett's statement is enough to obligate him to pay for the windows and doors. I do not agree. It is equally plausible that Mr. Cornett was acting as his contractor's agent when he accepted Martin Door Window Company's bid. In that circumstance, he would never have been personally liable to pay for the windows and doors.
The principle of integration embodies the rule that all prior statements or negotiations are merged into a written contract intended by the parties to be a complete expression of their agreement. Magnolia Group v. Metropolitan Dev. Hous. Agency, 783 S.W.2d 563, 566 (Tenn.Ct.App. 1989); Bringhurst v. Tual, 598 S.W.2d 620, 622 (Tenn.Ct.App. 1980).
Ambiguous contractual provisions will be construed against the party responsible for drafting them. Hanover Ins. Co. v. Haney, 221 Tenn. 148, 153-54, 425 S.W.2d 590, 592-93 (1968); Marshall v. Jackson Jones Oils, Inc., 20 S.W.3d 678, 682 (Tenn.Ct.App. 1999). Thus, the document Mr. Cornett signed on February 14, 1996 should be construed against Martin Door Window Company to the extent it is ambiguous. I find that the document is ambiguous with regard to the subject matter of the contract. It could cover the windows and doors as well as the other items purchased and paid for by Mr. Cornett, or it could cover just the items invoiced to Mr. Cornett personally. Construing the agreement against Martin Door Window Company, I would find that Martin Door Window Company has failed to prove that the February 14, 1996 document signed by Mr. Cornett covered anything other than the goods personally invoiced to Mr. Cornett.
In light of the undisputed evidence that Mr. Cornett paid for all the items invoiced directly to him, Martin Door Window Company has failed to prove that Mr. Cornett has breached his contract. Therefore, it is not entitled to assert lien rights under Tenn. Code Ann. § 66-11-102. To the extent that Martin Door Window Company has not been paid for the windows and doors furnished to Mr. Cornett's general contractor, it is barred from asserting lien rights by Tenn. Code Ann. § 66-11-146 because Mr. Cornett had a contract with the general contractor to "improve residential property."
I concur with the results reached in this case and concur in part with the separate concurring opinion. I write separately to explain my position.
I concur that Tenn. Code Ann. § 66-11-146 prevents Martin Door Window from placing a suppliers' lien on Mr. Cornett's property. Martin Door Window was aware that Mr. Cornett had hired a general contractor and, in fact, Martin Door Window entered into a contract with that general contractor. Contrary to the view expressed in Part II of the separate concurring opinion, I do not believe a supplier can avoid the clear prohibition that "No lien, except the general contractor's lien, shall exist upon residential real property" by executing separate contracts with both the homeowner and the general contractor for the same materials. Consequently, even if the "credit application" signed by Mr. Cornett were construed as a contract, Martin Window Door would not be entitled to a lien on his property.
That is not to say, however, that a supplier in those circumstances is precluded from seeking remedies for breach of contract against a homeowner who clearly obligates himself to pay for materials delivered to his property for use in improvements to his home. However, as in all contract cases, the supplier would have to prove the existence of the contract and a breach of its obligations. Martin Door Window simply failed in that regard.
Even if the "Application for Credit" signed by Mr. Cornett can be construed as a contract, the only obligation he undertook, if any, was "to the terms of sale which are stated on each invoice." That language must be construed as applicable only to invoices directed to Mr. Cornett, especially since the credit application includes no description of the type, amount, or cost of materials to be purchased under that document. The Trial court found that Mr. Cornett had paid for everything he purchased directly, and Mr. Cornett testified he had paid for items invoiced directly to him. Although Martin Window Door argues that the name on the invoice is irrelevant, the language of the document Martin Window Door relies on to establish the nature and scope of Mr. Cornett's obligation invokes reference to the invoices.
In summary, I concur in the holding that Martin Window Door was precluded from filing a lien and, with the holding that Martin Window Door failed to establish a breach of contract.