The opinion
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
April 8, 2003 Session
HAREN CONSTRUCTION COMPANY, INC. v. THE METROPOLITAN
GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY
Appeal from the Chancery Court for Davidson County
No. 01-1053-III Ellen Hobbs Lyle, Chancellor
No. M2002-01135-COA-R3-CV - Filed July 9, 2003
This appeal involves a contract between the Appellant Haren Construction Company, Inc. (HCCI)
and the Appellee Metropolitan Government (Metro). The construction company brought suit
claiming Metro breached its contract with HCCI in “constructive suspension” of work. In addition
the construction company claimed that Metro interfered with the company’s contract for equipment
supply from a third party. The trial court granted Metro’s two motions for summary judgment, the
first concerning Metro’s alleged liability under the Governmental Tort Liability Act, the second
concerning the action for breach of contract. HCCI appeals the grant of summary judgment. We
affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
WILLIAM B. CAIN , J., delivered the opinion of the court, in which BEN H. CANTRELL , P.J., M.S., and
ROYCE TAYLOR, SP . J., joined.
Philip E. Beck and William L. Barrett, Jr., Atlanta, Georgia, for the appellant, Haren Construction
Company, Inc.
Thomas G. Cross and Jennifer C. Surber, Nashville, Tennessee, for the appellee, The Metropolitan
Government of Nashville and Davidson County.
OPINION
On May 28, 1998, Haren Construction Company, Inc. (HCCI) and the Metropolitan
Government of Nashville and Davidson County (Metro) executed a contract for the construction of
the Bonnafair Sewage Pumping Station. This contract contained the following two paragraphs,
which are of particular interest in this appeal:
17. CLAIMS BY THE CONTRACTOR
Claims by the Contractor against the Metropolitan Government are subject to the
following terms and conditions:
(F) In the event the Contractor should be delayed in performing any task which
at the time of the delay is then critical, or which during the delay becomes critical,
as the sole result of any act or omission of the Metropolitan Government or someone
acting in the Metropolitan Government’s behalf, or by Metropolitan Government-
authorized Change Orders, unusually bad weather not reasonably anticipated, fire or
other Acts of God, the date for achieving Substantial Completion, or, as applicable,
Final Completion, shall be appropriately adjusted by the Metropolitan Government
upon the written claim of the Contractor to the Metropolitan Government and the
Architect/Engineer. A task is critical within the meaning of this Subparagraph 17(F)
if, and only if, said task is on the critical path of the Project Schedule so that a delay
in performing such task will delay the ultimate completion of the Project. Any claim
for an extension of time by the Contractor shall strictly comply with the requirements
of Subparagraph 17(A) above. If the Contractor fails to make such claim as required
in this Subparagraph 17(F), any claim for an extension of time shall be waived.
Further, extensions of time shall be Contractor’s sole remedy for any and all delays.
No payment or compensation of any kind shall be made to Contractor for damages
because of hindrance in the orderly progress of the Work or delay from any cause in
the progress of the Work, whether such hindrances or delays be avoidable or
unavoidable. Contractor expressly agrees not to make, and hereby waives, any claim
for damages on account of any delay, obstruction or hindrance attributable to any
cause whatsoever and agrees that Contractor’s sole right and remedy in the case of
any delay, obstruction or hindrance, shall be an extension of the time fixed for
completion of the Contract.
...
23. TERMINATION BY THE CONTRACTOR
(A) The Metropolitan Government shall have the right at any time to direct the
Contractor to suspend the performance, or any designated part thereof, for any reason
whatsoever, or without reason. If any such suspension is directed by the
Metropolitan Government, the Contractor shall immediately comply with same and
shall demobilize as directed by the Metropolitan Government.
(B) In the event the Metropolitan Government directs a suspension of
performance under this Paragraph 23, through no fault of the Contractor, the
Metropolitan Government shall pay the Contractor as full compensation for such
suspension the Contractor’s reasonable costs, actually incurred and paid, of:
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(1) demobilization and remobilization, including such costs paid to
subcontractors,
(2) preserving and protecting work in place,
(3) storage of materials or equipment purchased for the Project, including
insurance thereon; and,
(4) performing in a later or during a longer, time frame than that
contemplated by this Contract.
In addition to these provisions, the contract also included the following integration clause:
6. INTENT AND INTERPRETATION
With respect to the intent and interpretation of this Contract, the Metropolitan
Government and the Contractor agree as follows:
(A) This Contract, which includes the documents listed in Paragraph 1
(Documents Incorporated By Reference), constitutes the entire and exclusive
agreement between the parties with reference to the Project, and said Contact
supersedes any and all prior discussions, communications, representations,
understandings, negotiations or agreements. This Contract also supersedes
any bid documents (unless incorporated herein in Paragraph 1);
The original bid, which was incorporated by reference in page 1 of the contract, provided that
substantial completion of the construction project was to be achieved within 240 days of the issuance
of the Notice to Proceed, and final completion within thirty days after that substantial completion
date. Throughout the time of construction, Metro made several design changes, some with HCCI’s
approval, some without. Initial surveys were corrected. Certain pump motor specifications were
changed in a meeting between Metro, the project architect Hart-Freeland-Roberts, Inc. (HFR), and
HCCI’s major supplier on the project, Southern Sales Company, Inc. (Southern), and in the absence
of representatives of HCCI. As a result, the project which was originally to take 270 days from the
Notice to Proceed was finally complete on May 13, 2000, 713 calendar days after inception. It is
undisputed in the record that throughout this period HCCI submitted 18 written applications for
payment during and after completion of the Bonnafair Sewage Pump Station in which it stated
“contractor waives all claims and the right to make any future claims for additional compensation
relating in any way to work performed or delays, hindrances or difficulties experienced to date.”
On April 4, 2001, HCCI filed its Complaint for Breach of Contract alleging “constructive
suspension” in violation of paragraph 23 of the contract, and seeking damages for that breach. In
addition, HCCI sought damages for Metro’s alleged tortious interference with its contractual
relationship with Southern. Metro answered and on January 10, 2002, filed its Motion for Summary
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Judgment as to Plaintiffs’ claims in their entirety. As grounds therefor, Metro argued that it was
immune from suit for inducement to breach and HCCI’s claim was essentially a claim for delay
damages, barred as a result of the plain language of paragraph 17 of the contract as interpreted
pursuant to Tennessee Code Annotated section 47-50-112. That statute provides the appropriate
method for interpreting written contracts.
(a) All contracts, including, but not limited to, notes, security agreements, deeds of
trust, and installment sales contracts, in writing and signed by the party to be bound,
including endorsements thereon, shall be prima facie evidence that the contract
contains the true intention of the parties, and shall be enforced as written; provided,
that nothing herein shall limit the right of any party to contest the agreement on the
basis it was procured by fraud or limit the right of any party to assert any other rights
or defense provided by common law or statutory law in regard to contracts.
Tenn. Code Ann. § 47-50-112(a).
On March 5, 2002, the trial court granted Metro’s Motion for Summary Judgment on the
claim for interference with contractual rights, taking under advisement the defendant’s Motion for
Summary Judgment on the “no damages for delay” clause in the contract. On April 9, 2002, the
court entered its Memorandum and Order granting the remainder of Metro’s Motion for Summary
Judgment. From those orders HCCI appeals, arguing first that the trial court erred as a matter of law
in determining that paragraph 17 governs the actions of the parties rather than paragraph 23, and that
the trial court erred in holding that the claim of inducement to breach is barred by Tennessee Code
Annotated section 29-20-205.
I. The Breach of Contract Claim
HCCI claims that Metro, by changing the design requirements, failure to timely provide a
construction permit, and otherwise delaying construction, on the project “constructively suspended”
work causing damage to HCCI. HCCI argues that the delays thus caused were so lengthy as to be
outside the contemplation of the parties. Nonetheless, HCCI finished its performance and was paid
its contract price of one million, one hundred thousand, twenty three dollars.
It seeks recovery of what it claims is owed under paragraph 23 if the actions of Metro can
be construed as a suspension of work pursuant to that paragraph. In arguing its point HCCI claims
that its intent was not expressed in the contract. The company relies upon the general rule posited
by the Court in Real Estate Management, Inc. v. Giles, 41 Tenn. App. 347, 293 S.W.2d 596 (1956).
This case concerned three offers to purchase real estate, which were contingent upon the purchaser’s
“being able to purchase” three contiguous tracts of real property. The offers were drawn by Real
Estate Management, Inc. at the purchaser’s behest and were submitted to the three different real
estate owners on Real Estate Management, Inc.’s letterhead. In finding that the trial court placed a
strained construction upon the contingency, the court stated two general rules regarding the
construction of contracts:
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Generally, in construing contracts the Courts not only look to the language
of the instrument, but must ascertain, if possible, the intention of the parties, and the
construction which is fair and reasonable will prevail. Scott v. McReynolds, 36
Tenn.App. 289, 255 S.W.2d 401; Couch v. Couch, 35 Tenn.App. 464, 248 S.W.2d
327; Commerce Street Co., Inc. v. Goodyear Tire & Rubber Co., Inc., 31 Tenn.App.
314, 215 S.W.2d 4; Nashville Terminal Co. v. Tennessee Central Ry. Co., 2
Tenn.App. 646. And where several instruments are made as part of one transaction,
they will be read together and each will be construed with reference to the other.
Great American Indemnity Co. v. Utility contractors, Inc., 21 Tenn.App. 463, 111
S.W.2d 901; 17 C.J.S., Contracts, § 298, p. 714.
Applying the foregoing rules of construction to the offer made to Miss Giles, did
Freeman, a successful business man, by using the words ‘able to purchase,’ have
reference to his financial ability? Did he intend to unconditionally obligate himself
to purchase the Dubrow and Callier tracts at prices he might consider excessive, as
insisted on behalf of Miss Giles. Or, on the other hand, is it not reasonably apparent
that Freeman, by using the words in question, had reference to his being able to
acquire the tracts at prices designated in his offers or at prices acceptable to him. The
latter appears to be not only the more logical and reasonable construction, but the
undisputed proof shows that such was Freeman’s intention prior to and when the
offers were signed by him.
Real Estate Management, Inc. v. Giles, 41 Tenn.App. at 352-53, 293 S.W.2d at 599.
The agreement between the parties in the case at bar, unlike the offers in Giles, consisted of
a single unambiguous writing which contained provisions governing suspension of work and delay.
This unambiguous writing is accompanied by subsequent memoranda which, rather than create any
ambiguity, further support the obvious intent at the time of contract, and reasonable construction of
the waiver language in paragraph 17 of the parties’ agreement. Simply put, HCCI argues that Metro
“constructively suspended” work pursuant to paragraph 23. HCCI argues that the delay it incurred
in performance was so severe as to be outside the contemplation of the parties for paragraph 17's
purposes, yet within contemplation so as to constitute the suspension of work described in paragraph
23. One of the well settled rules in contract construction is that all the provisions of a contract
should be construed in harmony with each other, if such construction can be reasonably made. See
Bank of Commerce and Trust Co. v. Northwestern National Life Ins. Co., 160 Tenn. 551, 26 S.W.2d
135, 138, 68 ALR 1380 (1930).
The Supreme Court in Planters Gin Company v. Federal Compress & Warehouse Company,
Inc., et al., 78 S.W.3d 885 (Tenn. 2002) held:
[T]he outcome of this case rests on a contractual interpretation of the leasing
agreement between Federal Compress and Planters Gin. In “resolving disputes
concerning contract interpretation, our task is to ascertain the intention of the parties
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based upon the usual, natural, and ordinary meaning of the contractual language.”
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999) This determination of the
intention of the parties is generally treated as a question of law because the words of
the contract are definite and undisputed, and in deciding the legal effect of the words,
there is no genuine factual issue left for a jury to decide. 5 Joseph M. Perillo, Corbin
on Contracts, § 24.30 (rev. ed. 1998). Doe v. HCA Health Services of Tenn, Inc., 46
S.W.3d 191, 196 (Tenn. 2001).
A court’s initial task in construing a contract is to determine whether the
language of the contract is ambiguous. Once found to be ambiguous, a court applies
established rules of construction to determine the parties’ intent. “Only if ambiguity
remains after the court applies the pertinent rules of construction does [the legal
meaning of the contract] become a question of fact” appropriate for a jury. Finding
no such ambiguity in the contract between Federal Compress and Planters Gin, the
issues presented to this Court are suitable for determination by summary judgment.
Planters Gin Company, 78 S.W.3d at 889-90.
Paragraphs 17 and 23 of the contract are neither inconsistent or irreconcilable one with the
other. There is simply no evidence in the record of any “suspension” of performance within the
meaning of paragraph 23. In reconciling these two paragraphs and correctly applying paragraph 17
as controlling in the case, the trial court held:
The premise of the defendant’s motion for summary judgment on the breach
of contract claim is that the foregoing facts do not entitle the plaintiff to recovery.
The defendant argues that the facts constitute a claim of delay and that monetary
recovery for delay is barred by a “no damages for delay” provision contained in
paragraph 17 of the contract.
In support of its motion, the [defendant] relies upon Brown Brothers v.
Metropolitan Government, 877 S.W.2d 745 (Tenn. App. 1993) for the proposition
that no [damages for delay clauses] are enforceable under Tennessee law. In
enforcing the no damages for delay clause, the court explained in Brown Brothers
that parties to a contract are “free to allocate risks and burdens between themselves
as they see fit.” Id. at 749. “The contract at issue clearly places with the contractor
the risk of delay due to utility adjustment, and the burden of coordinating its
operations with the affected utilities.” Id. The court alluded to several exceptions
to the no damage for delay clause recognized by other courts: if the delay was of the
kind not contemplated by the parties, if the delay amounts to an abandonment of the
contact, if the delay was caused by bad faith, or if the delay was caused by active
interference. The court in Brown found that the facts of the case fit within none of
the exceptions.
The plaintiff’s primary opposition to the motion for summary judgment on
the breach of contract claim is that paragraph 17, the no damages for delay clause, is
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not the applicable contract provision. The plaintiff asserts that the facts of this case
and the recovery it seeks come under paragraph 23 of the contract. That contract
provision requires the defendant to pay the plaintiff where there has been a
suspension of performance.
Paragraph 23 provides that a suspension of the contract occurs when Metro
directs the contractor to suspend performance of the contract: “The Metropolitan
Government shall have the right at any time to direct the Contractor to suspend the
performance . . . .” It is undisputed in this case that Metro never directly or explicitly
issued a suspension of performance.
The plaintiff’s argument with respect to paragraph 23 is that while Metro may
not have declared a suspension, it nevertheless “constructively” suspended the
contract by “unreasonably delaying the progress of the contractor’s work.” This
constructive suspension qualifies, the plaintiff argues, as a suspension so as to entitle
the plaintiff to relief under paragraph 23 of the contract.
By providing two separate numbered paragraphs – one to deal with delay and
one to deal with suspension – the contract differentiates that suspension and delay are
different occurrences.
The text of paragraph 23 of the contract indicates that a suspension of work
is more than an unreasonable delay. A review of paragraph 23 reveals that
suspension occurs when the contractor is taken off the job, work stops, materials are
stored and the job site is secured. In the case at bar the summary judgment record is
that these acts constituting suspension, constructive or explicit, did not occur. The
facts of this case do not trigger the provisions of paragraph 23.
Another indication that paragraph 23 on suspension does not apply is the
plaintiff’s characterization of its damages. The plaintiff characterizes its damages as
“extended overhead” including delayed time, daily contract overhead, and the cost
of idle equipment. These are all delay type damages.
The Court therefore concludes that the facts of this case do not state a claim
for suspension of the work and that the plaintiff’s claim is one to recover for delay.
Accordingly, the Court rejects the plaintiff’s argument that summary judgment
should be denied because the plaintiff’s claim comes within the provisions of
paragraph 23 of the contract.
This holding by the trial court which is in conformity with Brown Brothers v. Metropolitan
Government, 877 S.W.2d 745 (Tenn.Ct.App. 1993) is mandated under the undisputed facts of the
case. If the result is harsh, it is not the prerogative of the court to intervene on behalf of either party
to the contract. “The courts may not make a new contract for parties who have spoken for
themselves, see Petty v. Sloan, 197 Tenn. 630, 640, 277 S.W.2d 355, 359 (1955), and may not
relieve parties of the contractual obligations simply because these obligations later prove to be
burdensome or unwise.” See Atkins v. Kirkpatrick, 823 S.W.2d 547, 553 (Tenn.Ct.App. 1991);
Marshall v. Jackson and Jones Oils, Inc., 20 S.W.3d 678, 682 (Tenn.Ct.App. 1999).
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II. Inducement to Breach
In addition to its claim for breach of contract, HCCI also alleged that Metro induced Southern
to breach its supply agreement with HCCI. In its Complaint, HCCI sought treble damages pursuant
to Tennessee Code Annotated section 47-50-109. HCCI argues that the statutory action for
inducement to breach sounds in negligence. To the contrary, our Supreme Court has held, that the
statutory and common law actions for inducement to breach both require a showing of intent. The
actions are identical with the exception of the available remedy. Said the Court:
Tennessee recognizes both a statutory and common law action for inducement to
breach a contract, see Tenn.Code Ann. § 47-50-109 (2001); Polk & Sullivan, Inc. v.
United Cities Gas Co., 783 S.W.2d 538, 543 (Tenn.1989), and both forms of the
action protect “contracts implied in fact, as well as formal, expressed contracts,”
Mefford v. City of Dupontonia, 49 Tenn.App. 349, 355, 354 S.W.2d 823, 826 (1961).
Importantly, the elements for both forms of the action are identical, except that a
plaintiff asserting a common law action may recover punitive damages, instead of the
treble damages mandated by the statute. See Buddy Lee Attractions, Inc. v. William
Morris Agency, Inc., 13 S.W.3d 343, 360-61 (Tenn.Ct.App.1999). In order to
recover on a theory of inducement to breach a contract, a plaintiff must allege and
prove seven elements: (1) that a legal contract existed; (2) that the defendant was
aware of the contract; (3) that the defendant intended to induce a breach of that
contract; (4) that the defendant acted with malice; (5) that a breach of the contract
occurred; (6) that the breach was a proximate result of the defendant’s conduct; and
(7) that the breach injured the plaintiff. See Quality Auto Parts Co. v. Bluff City
Buick Co., 876 S.W.2d 818, 822 (Tenn.1994); Baker v. Hooper, 50 S.W.3d 463, 468
(Tenn.Ct.App.2001).
Givens v. Mullikin, 75 S.W.3d 383, 405 (Tenn. 2002).
The Governmental Tort Liability Act section concerning public officers and employees
enumerates the exceptions to that act’s removal of immunity:
Immunity from suit of all governmental entities is removed for injury proximately
caused by a negligent act or omission of any employee within the scope of his
employment except if the injury arises out of:
....
(2) false imprisonment pursuant to a mittimus from a court, false arrest, malicious
prosecution, intentional trespass, abuse of process, libel, slander, deceit, interference
with contract rights, infliction of mental anguish, invasion of right of privacy, or civil
rights;
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....
Tenn.Code Ann. §29-20-205 (2002)(emphasis added).
Thus under the plain language of the statute, the action for inducement to breach is barred, and the
government is immune.
As a result, for the reasons and under the authorities enumerated, the action of the trial court
is affirmed in all respects. The cause is remanded for other proceedings as necessary in the trial
court; the costs on appeal are assessed against Appellant HCCI.
___________________________________
WILLIAM B. CAIN, JUDGE
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