John H. Patty v. Ray Lane

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

May 14, 2013 Session

JOHN H. PATTY V. RAY LANE, ET. AL.

Appeal from the Chancery Court for Knox County

No. 1777712 Hon. Daryl R. Fansler, Chancellor

No. E2012-01787-COA-R3-CV - Filed July 3, 2013

This appeal involves the breach of an oral contract. Defendants approached Plaintiff about

utilizing fill dirt on Plaintiff’s property. Plaintiff agreed. Defendants subsequently executed

a plan to control the sediment as they excavated the property. Over the course of the next

three years, the City of Knoxville sent Plaintiff two notices of violation, one of which carried

a fine, for improper sediment control, illegal dumping and discharge, and failure to obtain

a city permit. Defendants paid the fine, applied for a city permit as required, and attempted

to stabilize the property. Two years later, Plaintiff received two more notices of violation,

one of which carried a fine. Plaintiff paid the fine and hired an engineer to properly stabilize

the property after Defendants refused to respond to his request for assistance. Plaintiff then

filed suit for breach of contract, seeking reimbursement for his payment of the second fine

and for the cost of professionally stabilizing the property. Defendants denied liability and

asserted that a contract had never been formed. The trial court found that a contract existed,

that Defendants breached the contract, and that Plaintiff was entitled to damages in the

amount of $29,249.02. Defendants appeal. We affirm the decision of the trial court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which D. M ICHAEL S WINEY

and T HOMAS R. F RIERSON, II, JJ. joined.

Darren V. Berg and Brett D. Stokes, Knoxville, Tennessee, for the appellants, Ray Lane and

Rob Gregory.

Daniel V. Parish, Knoxville, Tennessee, for the appellee, John H. Patty.

OPINION

I. BACKGROUND

John H. Patty (“Plaintiff”) owned approximately 2.3 acres of undeveloped property

in Knoxville, Tennessee on Callahan Road. In 2003, Ray Lane and Rob Gregory

(collectively “Defendants”) sought permission from Plaintiff to use the property as a “borrow

pit” for several construction projects they each had in the area. Plaintiff agreed. In 2004,

Defendants learned that Tennessee required them to obtain a state permit and institute a plan

for erosion control if they desired to continue excavating the property. Defendants hired an

engineering company to prepare a Stormwater Pollution Prevention Plan (“the Plan”) and

obtain a state permit. The Plan outlined their responsibilities for erosion and sediment

control as they removed dirt from the property. In May 2006, the City of Knoxville issued

a notice of violation for inadequate erosion or sediment controls and for grading or filling

without a city permit. In May 2007, the City of Knoxville issued a second notice of violation

for inadequate erosion or sediment controls, for grading or filling without a city permit, and

for illegal dumping or discharge. The 2007 notice carried a fine of $5,000. Mr. Lane paid

the fine and procured a city permit. It was at that point that Mr. Lane informed Plaintiff that

he no longer intended to use the property. Likewise, Mr. Gregory had ceased his use of the

property sometime prior to Mr. Lane’s declaration of non-use.

Years passed without communication or further development of the property until

2009, when Plaintiff’s son, John P. Patty (“Son”), learned that the property had not been

stabilized to the City of Knoxville’s satisfaction. Son informed Mr. Lane of that fact, and

Mr. Lane returned to the property in an attempt to remedy the problem. Mr. Lane’s efforts

were unsuccessful. The City of Knoxville issued two subsequent violations, one in March

2009 and the other in July 2009. The second violation carried a fine of $5,000. After losing

his appeal of the second violation, Plaintiff paid the fine. Plaintiff also hired an engineer,

J.B. Turnmire, to professionally stabilize the property and subsequently paid Mr. Turnmire

$24,249.02 when the work was completed.

Thereafter, Plaintiff filed suit against Defendants for breach of contract based upon

their failure to properly stabilize the property. Plaintiff sought reimbursement for the July

2009 fine and for the work performed by Mr. Turnmire. Defendants denied wrongdoing,

contended that a contract never existed, and filed a counter-complaint for damages for having

to defend against a frivolous complaint.

A trial was held at which Plaintiff, Son, and Mr. Lane testified. In lieu of trial

testimony, Mr. Gregory’s deposition was entered into the record for review by the trial court.

Plaintiff testified that he owned nine lots of property on Callahan Road. He stated that in

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2003, Defendants requested permission to use dirt from the undeveloped property at issue

in this case. He gave permission in the hope that the property would appreciate or become

easier to develop as dirt was removed.1 He conceded that Defendants never removed enough

dirt to assist in future development efforts and that he did not know whether the property

appreciated as a result of the excavation. In addition to giving permission to remove the dirt,

he asked Mr. Lane how the sediment would be controlled as dirt was removed. He claimed

that Mr. Lane hired an engineering company to issue a proposal on the way in which to

control the sediment. He recalled that he later received a copy of the Plan from Defendants.

Plaintiff testified that prior to the excavation of the property, he had never received

a notice of violation from the City of Knoxville regarding the property at issue. He stated

that he received his first notice of violation in May 2006 and the second in May 2007. He

claimed that the 2007 violation carried a fine, which Mr. Lane paid. He received a third

violation in March 2009 and a fourth in July 2009. He claimed that the fourth violation

carried a fine, which he paid after he lost an appeal against the fine. He insisted that

Defendants and their associates were the only people with permission to excavate the

property prior to his hiring of Mr. Turnmire.

Plaintiff testified that at some point, Son helped him with issues pertaining to the

property because his health had deteriorated. He claimed that Defendants never remedied

the situation in 2009 and that he was ultimately forced to hire Mr. Turnmire to work with the

City of Knoxville in professionally stabilizing the property. He could not remember the exact

date that he hired Mr. Turnmire, but he produced invoices documenting the total cost of

$24,249.02 to stabilize the property. He related that he had not received any additional

violations from the City of Knoxville since Mr. Turnmire stabilized the property.

Son testified that he first assisted Plaintiff in 2007. He related that he rode with Mr.

Lane to pay the $5,000 fine for the 2007 violation. He claimed that at some point, Mr. Lane

also paid $600 for a city permit. He acknowledged that Defendants never removed any

additional dirt after Mr. Lane paid the fine.

Son testified that he spoke with Mr. Lane in 2009 regarding the property’s lack of

stabilization and claimed that Mr. Lane went to the property in an attempt to help with

stabilization efforts. He applied for a permit on Mr. Lane’s behalf, but Mr. Lane eventually

became uncooperative and unresponsive to additional requests for assistance after he

informed Mr. Lane that the work was inadequate. He related that Plaintiff finally hired Mr.

Turnmire to properly stabilize the property after receiving the fourth violation. He sent

1

He conceded that he did not know how much the property was worth prior to or after the removal of dirt.

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Defendants copies of the receipts for the stabilization and also informed them of the outcome

of the appeal.

Mr. Lane did not know whether he asked Plaintiff about removing dirt from the

property or whether Plaintiff asked him to remove dirt. He claimed that “another outfit” was

also removing dirt from the property and that he observed others dumping concrete or asphalt

on the property. He acknowledged that at some point, he, Mr. Gregory, and Plaintiff came

to an agreement regarding the removal of dirt. He related that from time to time, he

temporarily stabilized the property with seed, straw, and rock but conceded that he had never

stabilized commercial property prior to his involvement with the property at issue. He

admitted that he did not comply with all of the terms contained in the Plan. He admitted that

pursuant to the Plan, it was his responsibility to ensure that the property was stabilized. He

claimed that in 2007, he paid $5,350 for the city violation and $600 for a city permit. He

agreed that he was responsible for sediment and erosion control at that time.

Mr. Lane testified that he did not remove additional dirt after paying the 2007 fine.

Although he told Plaintiff that he did not need additional dirt, he never gave Plaintiff or the

City of Knoxville written notice of that fact in 2007. He also never contacted an engineer

to ensure that the property was properly stabilized. He claimed that Plaintiff asked him to

continue removing dirt or find others who would remove dirt. At Plaintiff’s request, he

returned to the property to perform some additional stabilization work sometime in 2009.

He finally filed a notice of termination of permit coverage in October 2009.

In his deposition, Mr. Gregory testified that he and his wife created R.C.G.,

Incorporated2 in 2003 or 2004. He stated that he had acquired two or three different grading

projects for his company when he sought permission to remove dirt from the property. He

related that he generally spoke to Mr. Lane about the property and that his involvement with

Plaintiff was limited. He said that agreements like the one at issue usually consisted of a

simple handshake but asserted that as requirements for excavation and grading changed, he

was required to obtain permits and other documentation.

Mr. Gregory testified that he and Mr. Lane obtained the Plan and an accompanying

permit because it was required to continue excavating the property. He stated that he and Mr.

Lane removed dirt for completely different projects but that they always kept the property

“in good enough shape.” He said that he was finished with the property in 2006 but that Mr.

Lane continued to excavate and comply with the erosion control measures. He admitted that

he may have returned to the property at some point to visit Mr. Lane but insisted that he

discontinued his excavation of the property in 2006. He claimed that he passed the property

2

R.C.G., Incorporated had been dissolved at the time of the trial.

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approximately once a week and opined that the property appeared stable to him. He could

not remember if he submitted any money to Mr. Lane to pay the fine or apply for the requisite

city permit in 2007. He was in Kentucky at the time of the 2009 violation and admittedly

never responded to Son’s request for assistance. He did not file a notice to terminate his

permit until October 2009. He explained that it simply “slipped [his] mind” because he had

not removed dirt from the property in three years. He finally filed the notice of termination

when he learned that Plaintiff had allowed other contractors to use his permit.

Following the presentation of the above evidence, the trial court dismissed the

counter-complaint filed by Defendants and stated,

Defendants entered into an oral contract with [] Plaintiff to use his property as

a “borrow pit”. Defendants would remove dirt from Plaintiff’s property and

haul it to another location to be used as fill. Plaintiff benefitted by having his

property leveled for possible future development[,] and Defendants got dirt

they needed elsewhere.

The court further found that Defendants admitted liability for the soil and erosion problems

by paying the first fine and that their failure to remedy the problem resulted in subsequent

violations. Despite acknowledging that Defendants breached the contract, the court held that

Plaintiff failed to prove any amount of damages beyond that of the $5,000 fine for the 2009

violation. The court noted that Plaintiff had failed to offer any proof as to the reasonable

market value of the property prior to or after the injury to the property and had failed to offer

testimony as to the reasonableness and necessity of the work performed by Mr. Turnmire.

Plaintiff filed a motion to alter or amend, alleging that the court erred in determining

the measure of damages. He contended that the proper measure of damages was the lesser

of the cost of correction of the injury to the property or the diminution in market value of the

property. He argued that Defendants bore the burden of establishing that the cost of repairs

was unreasonable as compared to the diminution in the market value of the property. He

noted that he offered sufficient proof of the cost of repairs and that Defendants did not object

to the cost or offer any proof as to the diminution in the market value of the property.

Defendants responded by asserting that Plaintiff never offered any evidence regarding

the market value of the property. Defendants also asserted that Plaintiff failed to prove that

they caused the alleged loss to the property or that the loss was directly related to the alleged

breach of the contract. They noted that a substantial period of time elapsed between the first

fine and the subsequent fine and that Son accepted complete and sole responsibility for the

property by obtaining a new city permit in 2009. They asserted that the judgment should be

amended to reflect that Plaintiff did not suffer any damages.

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In consideration of Plaintiff’s motion, the court amended its judgment to reflect an

award of $29,249.02 to Plaintiff. The court held that the statements contained in the

invoices, which were admitted into evidence without objection, established that the work

performed by Mr. Turnmire was reasonable and necessary. This timely appeal followed.

II. ISSUES

We consolidate and restate the issues raised on appeal as follows:

A. Whether a contract existed that required Defendants to control the erosion

and sediment on the property.

B. Whether Defendants breached the contract, causing damage to Plaintiff.

C. Whether the trial court erred in amending its judgment to award Plaintiff

damages in the amount of $29,249.02.

III. STANDARD OF REVIEW

On appeal, the factual findings of the trial court are accorded a presumption of

correctness and will not be overturned unless the evidence preponderates against them. See

Tenn. R. App. P. 13(d). The trial court’s conclusions of law are subject to a de novo review

with no presumption of correctness. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn.

2008); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). Mixed

questions of law and fact are reviewed de novo with no presumption of correctness; however,

appellate courts have “great latitude to determine whether findings as to mixed questions of

fact and law made by the trial court are sustained by probative evidence on appeal.” Aaron

v. Aaron, 909 S.W.2d 408, 410 (Tenn. 1995).

This court reviews a trial court’s decision to grant or deny a motion to alter or amend

a judgment under an abuse of discretion standard. Stovall v. Clarke, 113 S.W.3d 715, 721

(Tenn. 2003). “A trial court abuses its discretion only when it ‘applie[s] an incorrect legal

standard or reache[s] a decision which is against logic or reasoning that cause[s] an injustice

to the party complaining.”’ Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001) (quoting

State v. Shirley, 6 S.W.3d 243, 247 (Tenn. 1999)). If a discretionary decision is within a

range of acceptable alternatives, we will not substitute our judgment for that of the trial court

simply because we may have chosen a different alternative. White v. Vanderbilt Univ., 21

S.W.3d 215, 223 (Tenn. Ct. App. 1999).

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IV. DISCUSSION

In Tennessee, a breach of contract claim includes the following elements:

(1) the existence of an enforceable contract;

(2) nonperformance amounting to a breach of the contract, and

(3) damages caused by the breach.

ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005)

(citations omitted).

A.

Defendants assert that Plaintiff cannot recover on his breach of contract claim because

a contract with sufficient consideration never existed. They contend that Plaintiff’s mere

hope that the property would appreciate was insufficient to establish consideration for their

use of the property; therefore, Plaintiff never mutually assented to any terms that could serve

to form a contract. They claim that their obligation to ensure erosion and sediment control

was simply a necessity after they started excavating. Plaintiff responds that the initial

contract was formed in 2003 when he gave Defendants permission to excavate. He asserts

that the contract was modified in 2004 when Defendants encountered unforeseen difficulties

and subsequently accepted an additional obligation to control the property’s erosion and

sediment in order to continue excavating the property.

A contract, either written or oral, “must result from a meeting of the minds of the

parties in mutual assent to the terms, must be based upon a sufficient consideration, free from

fraud or undue influence, not against public policy and sufficiently definite to be enforced.”

Higgins v. Oil, Chem. and Atomic Workers Int’l Union, 811 S.W.2d 875, 879 (Tenn. 1991)

(internal quotation and citation omitted). Tennessee courts have also defined a contract more

simply as “‘an agreement, upon sufficient consideration, to do or not to do a particular

thing.’” Calabro v. Calabro, 15 S.W.3d 873, 876 (Tenn. Ct. App. 1999) (quoting Smith v.

Pickwick Elec. Coop., 367 S.W.2d 775, 780 (Tenn. 1963) (internal citation omitted)). “‘For

there to be consideration in a contract between parties to the contract it is not necessary that

something concrete and tangible move from one to the other. Any benefit to one and

detriment to the other may be a sufficient consideration.”’ GuestHouse Intern., LLC v.

Shoney’s North America Corp., 330 S.W.3d 166, 189 (Tenn. Ct. App. 2010) (quoting Walker

v. First State Bank, 849 S.W.2d 337, 342 (Tenn. Ct. App. 1992)). Indeed, “‘[a]ny

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consideration, however small, will support a promise.” Id. (quoting Smith v. Riley, No.

E2001-00828-COA-R3-CV, 2002 WL 122917, at *3 (Tenn. Ct. App. Jan. 30, 2002)).

Generally, once a contract is formed it cannot be modified without consent and

additional consideration for the new terms. Id. at 190. An exception to the general rule

requiring consideration for the modification of a contract “arises in the common situation in

which a party to a contract encounters unforeseen difficulties in performing its obligations

under the contract.” Id. at 190-91. In such cases, “a modification of an existing contract

need not be supported by new consideration so long as it is agreed upon by the parties in light

of unforeseen difficulties, and the modification is fair and equitable under the

circumstances.” Id. at 191 (citation and footnote omitted).

In this case, Defendants desired to excavate the property for use in their various

construction projects. The evidence reflects that Plaintiff had a corresponding desire to

remove dirt from his property in the hope that the removal of dirt would likely result in the

appreciation of the property or in the increased ability to further develop the property.

Defendants admitted that Plaintiff even asked them to find others to excavate the property

when they declared they had ceased their excavation efforts. In consideration of these facts,

we conclude that the “handshake agreement” to remove dirt from the property was supported

by reciprocal consideration, namely that Defendants recovered dirt they needed elsewhere

and that Plaintiff disposed of dirt he no longer needed. While Defendants never removed

enough dirt to affect the ease of the future development of property, Plaintiff still retained

a small benefit from the agreement because dirt that he no longer needed was removed from

his property. The parties also mutually assented to the terms, namely that Defendants would

remove dirt from the property and that Plaintiff allowed Defendants access to his property

in order to remove dirt. Accordingly, we further conclude that a valid oral contract had been

formed between Defendants and Plaintiff at that time.

Once the initial contract was formed, Defendants learned that they were required to

obtain a permit and a Stormwater Pollution Prevention Plan to continue the excavation of the

property. Likewise, Plaintiff discovered that a plan needed to be put in place in order to

control the erosion and sediment on the property. When Plaintiff asked Defendants about

their intentions regarding erosion and sediment, Defendants responded that they would take

responsibility and had already obtained the Plan, which provided guidance on the erosion and

sediment issues. We hold that the procurement of the Plan and agreement to control the

erosion and sediment on the property was a subsequent modification of the contract that was

agreed upon in light of unforeseen difficulties and was fair and equitable under the

circumstances. Accordingly, we conclude that the initial contract was properly modified in

that Defendants were responsible for controlling the erosion and sediment on the property

and for eventually stabilizing the property.

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B.

Defendants assert that Plaintiff failed to prove that any action or inaction by either of

them caused the fine to be levied or the need for remediation three years after they ceased

their excavation efforts. They assert that the alleged damages did not occur when they were

removing dirt from the property and that “any number of individuals . . . could have caused

the fine to be levied and the need for the remediation plan and attendant costs.” They

contend that Mr. Lane’s payment of the 2007 fine should not have been viewed as an

admittance of liability and note that Son filed an application for a permit shortly before the

City of Knoxville levied the 2009 fine. Plaintiff responds that he effectively established that

Defendants breached the contract, causing damages.

The evidence reflects that Defendants specifically agreed to control the erosion and

sediment issue caused by their excavation and to properly stabilize the property once they

left. Mr. Lane even paid the 2007 fine in recognition that he was responsible for

stabilization. Citing Williams v. Brown, 860 S.W.2d 854 (Tenn. 1993), Defendants ask this

court to ignore Mr. Lane’s payment of the 2007 fine as admittance of liability. In Williams,

the Court held that defendant’s payment of a traffic fine for improper passing was

inadmissible as evidence of guilt in a wrongful death action based upon the same occurrence.

860 S.W.2d at 855-57. The decision in Williams is simply inapposite to the facts of this case

when Mr. Lane freely admitted at trial that he paid the fine on Plaintiff’s behalf because he

was responsible for the erosion and sediment controls on the property at that time.

Defendants attempt to shift blame by asserting that others could have caused the issue

after their departure in 2007. Plaintiff maintained at trial that Defendants were the only

parties given permission to excavate the property prior to his hiring of Mr. Turnmire.

Defendants confirmed at trial that they were asked to find others to remove dirt in their stead

but never asserted that they identified any excavators to take their place. Indeed, Mr. Lane

further attempted to stabilize the property when he returned in 2009. As evidenced by the

numerous violations and fines levied against Plaintiff for the improper stabilization of the

property, the property was not properly stabilized by Defendants in 2007 or in 2009. Son’s

application for a permit two days before the second fine was levied did not remove the

responsibility held by Defendants pursuant to the oral contract when Son was simply

attempting to mitigate the damages caused by the breach of the oral contract. Accordingly,

we hold that Defendants caused Plaintiff’s damages because their failure to stabilize the

property as required in the oral contract resulted in the levying of the fine and the need for

proper stabilization before further fines could be levied.

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C.

While not explicitly stated as such, Defendants also take issue with the trial court’s

award of damages in the amended judgment. Plaintiff responds that the amended award was

appropriate because the cost of repairs were reasonable.

A party may file a motion to alter or amend a judgment within 30 days after the entry

of the judgment. Tenn. R. Civ. P. 59.04. “The purpose of a Rule 59.04 motion to alter or

amend a judgment is to provide the trial court with an opportunity to correct errors before the

judgment becomes final.” In re M.L.D., 182 S.W.3d 890, 895 (Tenn. Ct. App. 2005). These

motions should “be granted when the controlling law changes before the judgment becomes

final; when previously unavailable evidence becomes available; or to correct a clear error of

law or to prevent injustice.” Id. These motions “should not be used to present new,

previously untried or unasserted theories or legal arguments.” Id.

“The purpose of assessing damages in a breach of contract suit is to place the plaintiff,

as nearly as possible, in the same position he would have had if the contract had been

performed.” Wilhite v. Brownsville Concrete Co., 798 S.W.2d 772, 775 (Tenn. Ct. App.

1990). “While the amount of damages to be awarded in a given case is not controlled by

fixed rules of law or mathematical formulas, [] the evidence upon which a party relies to

prove damages must be sufficiently certain to enable the trier of fact, using its discretion, to

make a fair and reasonable assessment of damages[.]” BankcorpSouth Bank, Inc. v. Hatchel,

223 S.W.3d 223, 230 (Tenn. Ct. App. 2006) (citing Overstreet v. Shoney’s, 4 S.W.3d 694,

703 (Tenn. Ct. App. 1999); Wilson v. Farmers Chemical Ass’n, 444 S.W.2d 185, 189 (Tenn.

Ct. App. 1969)). This court has held that “‘[d]eterminations concerning the amount of

damages are factually driven. Thus, the amount of damages to be awarded in a particular

case is essentially a fact question. However, the choice of the proper measure of damages

is a question of law to be decided by the court.”’ Hatchel, 223 S.W.3d at 228 (quoting Beaty

v. McGraw, 15 S.W.3d 819, 827 (Tenn. Ct. App. 1998)).

Here, the trial court applied the measure of damages appropriate for injury to real

estate, requiring an award of damages for the lesser of the cost of repair or diminution in

market value. We believe that this case was more analogous to a breach of construction

contract case. Thus, the appropriate measure of damages would be the reasonable cost of

repair unless evidence was presented to establish that the cost of repair was disproportionate

when compared with the diminution in value. See generally GSB Contractors, Inc. v. Hess,

179 S.W.3d 535, 541-44 (Tenn. Ct. App. 2005) (discussing the appropriate measure of

damages in a breach of a residential construction contract action). Additionally, the purpose

in all breach of contract actions is to place Plaintiff in the same position he would have been

in had the contract been performed. Wilhite, 798 S.W.2d at 775.

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Had Defendants properly stabilized the property in 2007, the City of Knoxville would

not have levied the second fine against Plaintiff. Plaintiff also would not have hired Mr.

Turnmire to stabilize the property in an effort to avoid future fines. No evidence was

presented as to a less expensive way in which to stabilize the property in compliance with

state and local regulations or as to the diminution in market value of the property. Like the

trial court noted, Defendants did not object to the invoices presented by Plaintiff in support

of his claim for damages. Accordingly, we conclude that the trial court did not abuse its

discretion in amending its judgement to award $29,249.02 in damages, representing the fine

and the cost to properly stabilize the property. See generally In re Estate of Jones, 183

S.W.3d 372, 378 n. 4 (Tenn. Ct. App. 2005) (acknowledging that this court may affirm a

judgment on different grounds than those relied upon by the trial court when the trial court

reached the correct result).

V. CONCLUSION

The judgment of the trial court is affirmed, and the case is remanded for such further

proceedings as may be necessary. Costs of the appeal are taxed equally to the appellants, Ray

Lane and Rob Gregory.

______________________________________

JOHN W. McCLARTY, JUDGE

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