The Manor Homes, LLC v. . Ashby Communities, LLC

08/10/2018

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

June 6, 2018 Session

THE MANOR HOMES, LLC V. ASHBY COMMUNITIES, LLC, ET AL.

Appeal from the Chancery Court for Williamson County

No. 41081 Deanna B. Johnson, Chancellor

No. M2017-01369-COA-R3-CV

This is a contract dispute between the developer and the builder of a residential property.

The developer claimed that the builder was not in compliance with the terms of the

contract and removed the builder from the project. The trial court found that the

developer breached the contract first by removing the builder from the property without

providing it with an opportunity to cure the problems the developer identified and

awarded damages to the builder. The developer appeals the decision by the trial court,

and we affirm the trial court’s judgment.

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

ANDY D. BENNETT, J., delivered the opinion of the Court, in which FRANK G. CLEMENT,

JR., P.J., M.S., and RICHARD H. DINKINS, J., joined.

Phillip Byron Jones, Nashville, Tennessee, for the appellants, Ashby Communities, LLC

and John Powell.

Casey Adam Long, Franklin, Tennessee, for the appellee, The Manor Homes, LLC.

OPINION

I. FACTUAL AND PROCEDURAL BACKGROUND

This case involves the construction of a house in Arrington, Tennessee. Ashby

Communities, LLC (“Ashby Communities”) was the developer and owner of a piece of

property referred to as Lot 239, and John Powell was its sole member and manager.

Michael Cude was the builder on Lot 239, and disagreements that arose between Mr.

Powell/Ashby Communities and Mr. Cude form the basis of this lawsuit.

Mr. Cude was a long-time friend of Mr. Powell’s brother, JP Powell (“JP”). Mr.

Cude had built his own house with the help of Paul Brown, who had a general

contractor’s license, and Mr. Powell learned from JP that Mr. Cude was interested in

building the house on Lot 239. Mr. Cude’s wife at the time, Tracy Lytle, set up a

company called The Manor Homes, LLC (“Manor Homes”) in April 2010, and Mr. Cude

treated Manor Homes as his company for purposes of working as a builder in the

construction industry. Mr. Powell met with Mr. Cude at different times in 2010 and

2011, and the two men ultimately agreed that Mr. Cude, with the help of Mr. Brown,

would build the house on Lot 239 starting in the spring of 2011.

Mr. Powell prepared an agreement titled “Profit Sharing Agreement – Kings’

Chapel Subdivision” (“the PSA” or “the agreement”) that the parties signed on March 23,

2011. Mr. Powell testified that he revised another document he had to create the PSA.

The record contains no evidence that anyone other than Mr. Powell participated in the

drafting of the PSA. The signatories to the agreement included Mr. Cude, on behalf of

Manor Homes, and John Powell, in his personal capacity and on behalf of Ashby

Communities.

In the section of the PSA called “Profit Sharing Understanding,” the parties agreed

to use a software program called Lodis to track expenses of the project and to pay

invoices relating to the construction of the house. Ashby Communities and Mr. Powell

agreed to open a checking account at Synergy Bank, with checks to “be titled as ‘The

Manor Homes, LLC’ so that all vendors recognize payments.” Manor Homes agreed to

deposit $20,000 in this account, “which funds shall be returned to Builder when house

has obtained a C.O.[1] or Developer is satisfied with completed house.”

Ashby Communities, Mr. Powell, and Manor Homes also agreed in this section of

the agreement to a “non-equity net profit sharing agreement on the sale of the house

based upon a 50/50 division of net profits between Builder and Developer.” Ashby

Communities and Mr. Powell had “sole discretion” to determine the price at which the

house would be sold, and Manor Homes “specifically waive[d] any rights to impede, lien,

impair or delay any closings of the property described herein and/or to attach the

proceeds thereof.”

Mr. Cude started on the project to build the house on Lot 239 in May 2011. He

testified that he and Mr. Powell had some disagreements at the beginning of the project

regarding (1) whether the topsoil had to be removed before the footings were poured and

(2) which lumber supplier to use. Once they resolved those issues, Mr. Cude testified

that the project moved ahead smoothly until January 2012. Mr. Powell agreed that he did

not express any concerns about the house after these initial two issues were resolved until

January 2012.

1

As used in the PSA, “C.O.” refers to a certificate of occupancy.

-2-

In late January 2012, Mr. Brown informed Mr. Cude that “there was a lot of

activity surrounding the trim out at our house on lot 239.” By this time, the house on Lot

239 was in the final stages of construction, with tile, bathtubs, and appliances being

installed, walls being painted, and fixtures being hung. Mr. Cude was not aware of any

third parties who were or should be involved in the project, so he sent Mr. Powell an e-

mail to find out what was going on. Mr. Powell responded to Mr. Cude by e-mail, and he

explained that he had hired two independent designers who told him “there are problems

with the house.” Mr. Powell specified that “[e]lements of design and colors are just not

working . . . .” Mr. Powell continued:

I have asked Paul [Brown] to halt ALL tile work [--] this includes laundry

room, all bathrooms, and fireplaces. Please do not have any other paint

continue anywhere upstairs, if they are not done removing tape putting

doors back etc. stop them – [w]e feel almost the entire 2nd floor needs [to

be] repainted.

Mr. Cude testified that this was the first he had heard of any concerns Mr. Powell

had with the house since the initial hiccups regarding the topsoil and lumber supplier.

Mr. Cude asked for a meeting, and the two met at the house on January 29, 2012, at

which time Mr. Powell pointed out his concerns. Mr. Cude testified that he was then

“separated from the project.” Mr. Cude explained that he wanted to know specifically

what Mr. Powell believed was wrong with the house so he could fix it, but Mr. Powell

did not return Mr. Cude’s phone calls or e-mails, and Mr. Cude was not able to resume

working on the house. Mr. Powell also failed to approve for payment the last batch of

invoices Mr. Cude submitted, which included subcontractors’ work and other project-

related expenses. Mr. Cude paid from his own funds outstanding invoices that exceeded

$20,000 when he realized Mr. Powell was not going to approve these payments.

The house on Lot 239 was ultimately completed by a third-party contractor. A

purchase and sale agreement for the house was signed on September 5, 2012, and the

agreed-upon price was $574,500. A certificate of occupancy was obtained on October

26, 2012, and the house closed some time thereafter.

Manor Homes initially filed a complaint in June 2012, which it amended in

August 2012 and again in May 2013. The second amended complaint named John

Powell and Ashby Communities as defendants. Manor Homes claimed the defendants

“constructively ejected and excluded” Manor Homes from the construction project in

January 2012 and that they breached the PSA by interfering with Manor Homes’

performance of its responsibilities under the agreement. Manor Homes asserted that the

PSA constituted a partnership. Manor Homes sought the following relief: (1) the

appointment of a receiver to secure and marshal the assets of the project; (2) an

accounting by the defendants of all money they have had or that is related to the project

or the appointment of a special master for this purpose; (3) an impoundment of all

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proceeds from the sale of Lot 239; (4) a declaration of the rights, responsibilities, and

status of the parties, including the parties’ respective interests in the net proceeds of the

project; (5) an award of damages resulting from the defendants’ breach of the PSA; and

(6) an award of Manor Homes’ attorney fees and costs.

Ashby Communities and John Powell filed an answer and counterclaim, which

they later amended. Ashby Communities and Mr. Powell added Mr. Cude as a counter-

defendant and asserted in their amended counterclaim that (1) Manor Homes and Mr.

Cude committed fraud by knowingly representing and warranting that Manor Homes was

a licensed general contractor in Tennessee, when it was not so licensed; (2) Manor

Homes breached the PSA by misrepresenting itself as a licensed general contractor,

failing to complete the home on Lot 239, and failing to perform the work actually

completed in a workmanlike manner; (3) Manor Homes and Mr. Cude engaged in

conspiracy and malicious interference with Ashby Communities and Mr. Powell’s

contract to sell the house by filing a lis pendens against the property; (4) Manor Homes

and Mr. Cude engaged in slander of title by filing a lis pendens against the property; and

(5) Manor Homes and Mr. Cude violated the Tennessee Consumer Protection Act by

misrepresenting themselves as licensed general contractors.2

This case was tried over a period of three days in December 2016. The trial court

issued a Memorandum and Order in June 2017 that included twenty-two pages of

findings of fact. The court’s findings of fact include the following, inter alia:

Paul Brown (“Brown”) specializes as a framing subcontractor and

has occasionally worked as a general contractor on several residences

including the former home of Cude and Lytle. At the time of trial, Brown

had worked in construction for 37 years and had been the general contractor

on six houses.

The purpose of Manor Homes was to hire and direct subcontractors

to build homes with the assistance of an associated general contractor.

Cude, in conjunction with Brown and Lytle, developed the idea for Manor

Homes as a means for supporting Cude during retirement. . . . Lytle, who

had a personal interest in home decoration, would be the sole member, and

Cude would help direct Manor Homes’ day-to-day operations, including

hiring subcontractors as well as managing Manor Homes’ financial

obligations.

2

Ashby Communities and Mr. Powell also named Paul Brown as a defendant in their counter-claim and

asserted additional claims against him. Mr. Brown is not involved in this appeal, however, so we will not

address the claims made against him or the trial court’s resolution of those claims.

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Cude believed that Manor Homes could not construct a home

without a general contractor. Cude knew that Brown had a general

contractor’s license based on prior conversations between the two during

construction of Cude’s home. Cude contacted Brown to gauge Brown’s

interest in serving as the general contractor for Manor Homes in this

opportunity with Ashby.

....

Powell, Cude, Brown, JD Powell, and a financial consultant for Powell

and/or Ashby met at a hotel to discuss the potential business opportunity of

constructing a home in King’s Chapel under the authority of Ashby. Cude,

Brown, and Defendant Powell agreed that Manor Homes, Brown, and

Ashby could act in a tripartite manner to construct a home on Lot 239, a lot

that Ashby had the ability to purchase in King’s Chapel. Manor Homes

would hire the subcontractors, purchase the building materials, and make

decorative selections. Brown would be the day-to-day building

superintendent and general contractor in charge of directing the

subcontractors on building the home. Finally, Powell and/or Ashby would

make the lot accessible to . . . Manor Homes, Brown, and their

subcontractors. Additionally, Powell and/or Ashby would put up the money

to purchase Lot 239, secure bank loan financing to fund the project, and

authorize disbursements for payments to Manor Homes to be withdrawn

from Ashby’s bank account. The end goal would be for both Ashby and

Manor Homes to share equal profits from the sale of the completed home

on Lot 239.

Initially, the discussion of a potential budget was for a targeted

amount less than $400,000. However, Brown stated that this amount was

impossibly low. Brown countered instead that he could do the project for

$415,000. Powell indicated that this amount would be acceptable and that

the budget would be $415,000 as offered by Brown. However, it became

apparent during this meeting at the hotel that Brown did not have the

necessary monetary limits, as his were only $1[62],000. Powell stated that

Brown’s limits would have to be raised and verbally directed Brown to do

so. Brown assured Powell that he would take whatever steps necessary to

raise his monetary limits.

Following this meeting at the hotel, Cude and Brown set out to get

Brown’s monetary limits raised. Brown told Cude the ways to accomplish

this limit raise. One way Brown proposed this could be accomplished

would be to expedite the process by sending a “hardship letter” to the

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TBLC.[3] Cude placed money in an account with Brown to support his

“hardship” request. Sometime thereafter, the TBLC authorized a limits

increase on Brown’s license.

....

Finally, on March 23, 2011, Manor Homes and Ashby signed a

document titled “Profit Sharing Agreement” (“PSA”) with the intention of

memorializing the agreement to build a home on Lot 239. Powell drafted

the PSA by editing an agreement from another project. The PSA amounts

to nine total pages.

....

Once the project finally got started, things were fine for the next six

months. Powell had always said the budget and the time line were

important, but Powell stated that the budget was most important. According

to Cude, JD Powell, and Brown, the time was never a huge concern with

Powell. Every two weeks, on Sunday afternoon, Cude processed all of the

outstanding subcontractor invoices for labor and materials and uploaded the

information into Lodis. Afterwards, Ms. Lytle would go to Lodis, ensure

the expenses contained in the spreadsheets got processed, and then would

give the checks to Powell to be signed.

As General Contractor, Brown obtained building permits, took

invoices from the subcontractors, and delivered the invoices to Cude. Also,

Brown made sure the subcontractors had the materials they needed. If they

did not, Brown would tell Cude. Brown supervised the subcontractors and

made sure they did their jobs.

Ms. Lytle was making the design decisions. Powell directed Ms.

Lytle as to with whom she should work. Cude understood that the design

decisions were up to him and Ms. Lytle. Cude considered those decisions to

be part of Manor Homes’ job. Decisions about appliances and fixtures were

up to Manor Homes.

Between late June of 2011 and late January of 2012, Powell did not

express any concerns about the way the house was being built.

According to JD Powell, Cude, and Brown, Powell’s attitude took an

abrupt about-face in January of 2012. At trial, there was much disagreement

3

“TBLC” refers to the Tennessee Board for Licensing Contractors.

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between Powell, Cude, JD Powell, and Brown as to the level of completion

in the home at the time of this dispute. According to JD Powell, Cude, and

Brown, the home was about $8,000 under budget according to the Lodis

spreadsheets at that time, and the home was 90-95% complete. Cude and

Brown admitted that the front door was incomplete, and a handrail

remained uninstalled. Additionally, some of the cabinets remained

uninstalled. However, light fixtures, plumbing, toilets, and most other items

were complete. The Court finds JD Powell, Cude and Brown to be credible

and accepts these facts.

....

In January of 2012, Cude became aware that there was activity at the

house that Cude had not authorized. In response, Cude e-mailed Powell to

find out what was going on. Powell replied that he brought a couple interior

design specialists into the home. Powell’s actions in this regard had not

been previously discussed and this was the first Cude had heard about

Powell’s actions and supposed powers under the contract. On Wednesday,

January 25, 2012, Cude e-mailed Powell regarding Powell bringing several

interior designers into the house to critique how the house was being

finished. Powell claimed he had serious concerns about how the house was

being finished.

When asked what Powell found to be such serious missteps by

Manor Homes, Powell stated that he did not like the tile Cude’s wife had

chosen for the master bathroom or the coffee bar Cude had put in the

master bathroom. In addition, Powell believed the corners on one of the

bathtubs were too sharp, and the tub would not fit because the drain and the

wall were incompatible. Furthermore, Powell did not like the black tile on

the two fireplaces because he felt it looked cheap. Powell eventually

requested to have all of this work re-done. Powell felt that the house was a

mess: he stated that the workers left trash “everywhere;” the vanities in the

master bathroom were pre-fabricated wood, molded and purchased at The

Home Depot or Lowe’s; the master bedroom door was not set right; the

interior doors were painted and there were paint streaks and paint running

down them; the staircase from the driveway into the house at the two

garages was allegedly “improper” in terms of measurement; there was a

problem with the stairs in the interior of the home; the stairs going to the

back of the house had problems as well; the bathtub that was in the garage

was still in the box and the other bathtub did not fit; and Manor Homes’

placement of the wine cooler in the kitchen was “inappropriate.”

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Cude and Brown disagreed that the above were done incorrectly as a

matter of objective building standards. Additionally, Cude asserted that

many of the problems Powell complained about at trial were of his own

making after taking over the project and hiring a new general contractor

and subcontractors. For example, with respect to the bathtub motors, Cude

stated that the tub supports were originally constructed with carve-outs for

the tub motors. However, after Powell rebuilt them, the carve-outs were

tiled in, and there was no longer access to the tub motor, which resulted in

some of the issues Powell identified.

....

Powell did not return the $20,000 Builder Deposit to Manor Homes. Cude

paid subcontractors for their work and, after he sold the home, Powell

failed to reimburse Cude for these payments to sub-contractors. The . . .

amounts Cude paid to the sub-contractors and for which he seeks

reimbursement from Powell . . . total $2[0],997.57.

(Footnotes omitted.)

The trial court’s conclusions of law include the following, inter alia:

[T]he Court makes the following conclusions of law: (1) no Partnership

was formed between Ashby and Manor Homes; (2) Ashby and/or Powell

committed the first material breach of the PSA and are thereby required to

return the Builder Deposit under the PSA in full and pay compensatory

damages in accordance with this Order; (3) accounting, appointment of

receiver, or collection of proceeds is improper and unnecessary; and (4) this

litigation has extinguished the Parties’ obligations or liabilities under the

PSA.

Manor Homes is entitled to damages for breach of contract because

Ashby and Powell materially breached the PSA when they improperly

terminated the same after failing to give Manor Homes proper notice and an

opportunity to cure.

....

Manor Homes asserts that Ashby and/or Powell were the first to

materially breach the contract because Ashby and/or Powell improperly

terminated the PSA by removing Manor Homes from the project, refusing

to allow Manor Homes to continue performance, and hiring a different

builder. Ashby and Powell allege that Manor Homes, Cude, and Brown

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were the first to materially breach the contract because Manor Homes,

Cude, and Brown allegedly failed to perform various obligations under the

contract and eventually abandoned the worksite.

In order to determine which party was the first to materially breach a

contract, the Court must first determine what the contract required of the

parties, which is a question of law. . . . The PSA explicitly states that any

contractor performing work on the home must build the home in

compliance with the details contained in Exhibit H to the PSA, which

requires rigid, custom specifications for builders who operate in Kings’

Chapel and Ashby Communities. Among the items listed in Exhibit H are

the following: requirements that fences are accompanied by gates, that the

decks use stained wood, that the front door be a metal castle door, that there

be key locksets on each exterior door, that granite countertops be used in

the powder rooms, that custom cabinets be installed in every room, and that

wood spindles meet certain detailed specifications. Ashby and Powell

allege that Manor Homes failed to meet each and every one of these

aforementioned specific details, and that Manor Homes’ failure to do so

constituted a material breach of the PSA thereby excusing Ashby and

Powell from any of their obligations to perform (i.e., pay subcontractors

hired by Manor Homes and/or Cude). However, none of these

specifications were cited by Ashby and/or Powell as things to be corrected

prior to Ashby and/or Powell’s termination of the contract and/or removal

of Manor Homes from the job site.

....

The PSA, including all of its corollary agreements, exhibits, and

attachments, imposed very rigid requirements on Manor Homes to be

followed throughout the entirety of the construction of the home on Lot

239. However, the PSA did not require Manor Homes to submit to every

request made by Ashby regarding interior finishes. Additionally, nothing in

the PSA permitted Ashby to terminate the PSA for dissatisfaction with the

work without first providing Manor Homes notice and a reasonable

opportunity to cure the alleged breaches of the PSA. Manor Homes did not

by any provision in the PSA waive its right to notice of its breaches and did

not agree to permit Ashby to terminate the PSA without cause.

Ashby and Powell were the first to materially breach the PSA

because they improperly terminated the PSA by removing Manor Homes

from the project on Lot 239 and refusing to pay Manor Homes’

subcontractors without first giving Manor Homes notice of its alleged

material breaches and a reasonable opportunity to cure.

-9-

....

The trial testimony of JD Powell, Cude, and Brown preponderate in

favor of a finding that Ashby and/or Powell became upset with Manor

Homes’ work on the interior of the home on Lot 239. Ashby and/or Powell

expressed great anger and frustration with the finishing work Manor Homes

had conducted. Powell identified the specific objects of his frustration in his

March 1, 2012, email to Manor Homes and/or Cude as follows: (1) “trim

work” on the exterior, (2) a fireplace with “metal on the face” that was

allegedly not “to code,” (3) light fixtures that were allegedly “not to code,”

(4) a wine cooler, (5) “a house of this nature deserved double ovens,” (6)

the lack of a 36-inch range, (7) Brown’s speed of completion, (8) interior

trim and painting, (9) Manor Homes’ and/or Cude’s scheduling decisions,

(10) the vanities in the home, (11) plumbing, and (12) finishing in general.

However, the testimony of the Parties at trial provided that this email and

the alleged dissatisfaction with the items listed were not provided to Manor

Homes, Cude, and/or Brown prior to Ashby and/or Powell’s decision to

remove them from the project on Lot 239.

The Court did not find Powell to be credible during his testimony as

to breach. Although at trial counsel for Ashby and Powell identified several

items from Exhibit H that Manor Homes had failed to properly include in

the construction of the home, there was no proof offered to establish that

Ashby and/or Powell identified these items to Manor Homes, Cude, and/or

Brown prior to removing them from the construction project. The Court

finds that Ashby and Powell materially breached the PSA because they did

not properly give notice and a reasonable opportunity to cure prior to

removing Manor Homes from the project.

The trial court next addressed the issue of damages:

The existence and amount of damages are disputed by both Ashby

and Powell. Manor Homes alleges that Ashby and Powell are liable for

damages arising out of breach of contract because Ashby and Powell

improperly removed Manor Homes from its role as builder and refused to

reimburse the subcontractors hired by Manor Homes to perform work on

Lot 239. Manor Homes also alleges that, but for Ashby and Powell’s

needless expenditures and demolition work that followed the improper

termination, there would have been profits on the sale of the house to which

Manor Homes would have been entitled.

....

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Ashby and Powell reject any notion that they could be liable for

breach of contract because, as they allege, Manor Homes was the first to

materially breach by failing to build the home in conformity with the PSA

and the details outlined in the exhibits thereto, specifically Exhibit H.

However, as stated above, the Court finds that Ashby and Powell were the

first to materially breach the PSA. Therefore, Ashby and Powell are

required to refund the $20,000 builder deposit, as a specified remedy for the

builder under the terms of the PSA, see (Profit Sharing Agreement, § 9, ¶

(b)) and to pay Manor Homes compensatory damages for unpaid

subcontractors that Manor Homes and/or Cude paid personally.

Although Section 9, Paragraph (b) of the PSA limits Manor Homes’

recovery for breach of the PSA to a refund of the $20,000 deposit, Manor

Homes proved by clear and convincing evidence that it suffered damages

by not being compensated for its unpaid subcontractors. The Court does not

interpret Section 9, Paragraph (b) to be an exculpatory clause enforceable to

permit Ashby and/or Powell to escape liability for these compensatory

damages it owes to Manor Homes.

The trial court awarded Manor Homes the return of the initial $20,000 deposit it

paid when the PSA was signed as well as $20,997.57 to reimburse Manor Homes for the

money Mr. Cude paid his subcontractors for the work they performed prior to Manor

Homes’ termination from the project. The court also awarded Manor Homes its attorney

fees in accordance with the PSA.

Mr. Powell and Ashby Communities filed a notice of appeal. They raise the

following issues: (1) whether the trial court erred in ruling that Manor Homes was

entitled to recover on its breach of contract claim after finding that Manor Homes

misrepresented its licensing status and violated the Consumer Protection Act; and (2)

whether the trial court erred in finding Manor Homes had standing to recover damages in

light of the fact that the company was controlled by Mr. Cude’s ex-wife and was

dissolved prior to trial.

II. ANALYSIS

A. Standard of Review

We review a trial court’s judgment following a non-jury trial de novo on the

record, presuming the correctness of the trial court’s findings of fact unless the evidence

preponderates otherwise. TENN. R. APP. P. 13(d); Beacon4, LLC v. I & L Invs., LLC, 514

S.W.3d 153, 168 (Tenn. Ct. App. 2016). Evidence preponderates against a trial court’s

findings of fact if it supports a different ‘“finding of fact with greater convincing effect.’”

Beacon4, 514 S.W.3d at 168-69 (quoting Wood v. Starko, 197 S.W.3d 255, 257 (Tenn.

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Ct. App. 2006)). Contract interpretation involves a question of law. West v. Shelby Cnty.

Healthcare Corp., 459 S.W.3d 33, 42 (Tenn. 2014); Forrest Constr. Co., LLC v.

Laughlin, 337 S.W.3d 211, 220 (Tenn. Ct. App. 2009) (citing Guiliano v. Cleo, Inc., 995

S.W.2d 88, 95 (Tenn. 1999)). We review questions of law de novo, affording the trial

court’s determinations no presumption of correctness. Forrest Constr., 337 S.W.3d at

220 (citing Guiliano, 995 S.W.2d at 95).

B. The Agreement

“A cardinal rule of contractual interpretation is to ascertain and give effect to the

intent of the parties.” Allmand v. Pavletic, 292 S.W.3d 618, 630 (Tenn. 2009); see also

West, 459 S.W.3d at 41-42; Allstate Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn.

2006). The parties’ intent is determined by considering “the plain meaning of the words”

used in the contract. Allmand, 292 S.W.3d at 630; Allstate Ins. Co., 195 S.W.3d at 611.

If the words used are clear, unambiguous, and not susceptible to more than one

reasonable interpretation, courts are to rely on the literal language used in the contract to

determine the parties’ intent. Allmand, 292 S.W.3d at 630; Allstate Ins. Co., 195 S.W.3d

at 611.

When a contract contains different sections, a court is not to read the sections in

isolation; rather, it is to read the sections together to determine the meaning of the

document as a whole. Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 705 (Tenn.

2008); S. Trust Ins. Co. v. Phillips, 474 S.W.3d 660, 668 (Tenn. Ct. App. 2015). ‘“All

provisions of the contract should be construed in harmony with each other to promote

consistency and avoid repugnancy among the various contract provisions.’” Adkins v.

Bluegrass Estates, Inc., 360 S.W.3d 404, 411 (Tenn. Ct. App. 2011) (quoting

Shuttleworth, Williams, Harper, Waring & Derrick, PLLC v. Smith, No. W2007-02295-

COA-R3-CV, 2010 WL 744375, at *3 (Tenn. Ct. App. Mar. 5, 2010)); see also Forrest

Constr., 337 S.W.3d at 220; Wager v. Life Care Ctrs. of Am., Inc., No. E2006-01054-

COA-R3-CV, 2007 WL 4224723, at *10 (Tenn. Ct. App. Nov. 30, 2007); Rainey v.

Stansell, 836 S.W.2d 117, 119 (Tenn. Ct. App. 1992). Additionally, “[w]here an

executed agreement refers to the other documents, all of the documents must be

construed together as the contract of the parties.” Williams v. Larry Stovesand Lincoln

Mercury, Inc., No. M2014-00004-COA-R3-CV, 2014 WL 5308634, at *5 (Tenn. Ct.

App. Oct. 15, 2014); see also Real Estate Mgmt. v. Giles, 293 S.W.2d 596, 599 (Tenn.

Ct. App. 1956) (stating where several documents are executed as part of the same

agreement, the court reads them together and interprets them with reference to one other).

A contract is ambiguous when the language used may reasonably be understood in

more than one way. Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78

S.W.3d 885, 890 (Tenn. 2002); Allstate Ins. Co., 195 S.W.3d at 611 (citing Farmers-

Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn. 1975)). If the contract contains

an ambiguity, the courts look to parol evidence, “including the contracting parties’

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conduct and statements regarding the disputed provision, to guide the court in construing

and enforcing the contract.” Allstate Ins. Co., 195 S.W.3d at 612; see Allstar Consulting

Grp. v. Trinity Church & Christian Ctr., No. W2006-00272-COA-R3-CV, 2007 WL

120046, at *4 (Tenn. Ct. App. Jan. 18, 2007) (explaining parol evidence guides court to

discern parties’ intent when contract contains ambiguity); see also Adkins, 360 S.W.3d at

412 (citing Smith, 2010 WL 744375, at *3). Ambiguous provisions are generally

construed against the party that drafted them. Allstate Ins. Co., 195 S.W.3d at 612 (citing

Hanover Ins. Co. v. Haney, 425 S.W.2d 590, 592 (Tenn. 1968)).

A thorough review of the PSA and the attachments referenced therein reveals that

the term “Builder” is used to refer to Manor Homes in some places, and that the term is

used to refer to Manor Homes and Mr. Brown in other places. The opening paragraph of

the PSA defines Manor Homes as “Builder.” Then, a few “WHEREAS” clauses

immediately follow the opening paragraph. One of these clauses states:

WHEREAS, the Builder has employed Paul Brown as the general

contractor for Builder and they desire to be included in the Developer’s

“list of approved general contractors” subject to the terms of this

Agreement and continued consent of the Developer.

The pronoun “they” seems to refer to both Manor Homes and Mr. Brown.

Another WHEREAS clause states:

WHEREAS, in order to ensure adherence to the highest standards of

construction, to enhance the quality of architectural control and design, and

to ensure that the homes built within the project conform to the size and

square footage requirements as determined by the Developer, in its sole and

absolute discretion for each section, the Developer has maintained the right

to establish a list of approved general contractors who shall have the right

to build residential dwellings within the Project subject to the Developer’s

right to reserve rights set forth herein and in the “Agreement for Approved

Builder Group” which is attached to and made a part hereof (see “Exhibit

B”)[.]

The Agreement for Approved Builder Group that is referenced in this WHEREAS clause

is appended to the PSA as “Exhibit B,” and it states:

THIS AGREEMENT (the “Agreement”) is made and entered into this ___

day of ______ 2011, by and between Ashby Communities a Tennessee

Limited Liability Co. . . . and The Manor Homes LLC, . . . , a Tennessee

Limited Liability Corporation. Along with Paul Brown Contractor

(hereinafter referred to as “Builder”).

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Exhibit B thus defines “Builder” to include both Manor Homes and “Paul Brown

Contractor.”4

The second page of the PSA has a section 2 that is titled “Profit Sharing

Understanding.” Paragraph (k) of this section provides that:

Builder agrees and understands that Lodis will be used to pay all

construction expenses of the house including any payments to Anton or

Powell, or Builder. Builder, Anton, & Powell will have ongoing access to

the Lodis web site to review progress of construction in comparison to

construction budget and payments to Vendors. A copy of the Lodis

Contract is attached as Exhibit F.

Exhibit F is titled “Builder/Contractor Construction Funds Accountability Agreement,”

and the opening sentence of this document states that “THIS AGREEMENT

(‘Agreement’) is made and entered into among Lodis Solutions, Inc. (‘Lodis’), and The

Manor Homes, LLC [and] Paul Brown (the ‘Builder’).” Again, the term “Builder” is

defined to include both Manor Homes and Mr. Brown.

Finally, the PSA includes a section 6 titled “Party Representations,” and paragraph

(a) of this section states:

Builder represents and warrants to Developer that Builder is a duly licensed

Tennessee General Contractor in the business of building residences.

Tennessee License attached as (Exhibit I). Builder further represents that

he/she/it has the current and continued financial capability of fulfilling the

Builder’s obligations herein. . . .

Although not marked as Exhibit I, a document that immediately follows Exhibit H

appears to be a printout from the Tennessee Department of Commerce and Insurance and

reflects that Paul Brown had an active contractor license beginning in June 2008,

extending to June 2012, and that his monetary limit was $456,000. It is reasonable to

assume that this document is the “Exhibit I” that the PSA references in paragraph 6(a),

quoted above. The only way to interpret paragraph 6(a) consistently with Exhibit I is to

include Mr. Brown within the definition of “Builder” as that term is used in paragraph

6(a).

Ashby Communities and Mr. Powell’s contention that Manor Homes

misrepresented itself as having a general contractor’s license is based on paragraph 6(a),

4

The PSA that Manor Homes attached to its initial complaint does not include the exhibits that the

agreement references. However, Mr. Powell identified a collection of documents at trial that were part of

the PSA, and the exhibits discussed herein were included in that collection of documents.

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quoted above. Because the term “Builder” is defined to include Manor Homes in at least

one part of the PSA, whereas it is defined to include both Manor Homes and Mr. Brown

in some of the PSA’s exhibits, we conclude that the PSA contains an ambiguity.

Therefore, we must consider the parol evidence to determine the meaning the parties

ascribed to the term “Builder” as that term is used in paragraph 6(a) of the PSA. See

Allstate Ins. Co., 195 S.W.3d at 612 (explaining that court considers parol evidence to

determine parties’ intent when contract contains ambiguity); Planters Gin Co., 78 S.W.3d

at 890 (stating that contract is ambiguous when its language can reasonably be

understood in more than one way).

Mr. Cude, Mr. Powell, Mr. Brown, and JD all testified at the trial about the

circumstances surrounding the PSA and their understanding of who was licensed as a

general contractor. Mr. Cude testified that he did not have a general contractor’s license,

and he understood that someone with a general contractor’s license would have to be

involved with the construction of the house on Lot 239. Mr. Brown had helped Mr. Cude

build his home, and Mr. Cude testified that he asked Mr. Brown if he would be interested

in working with him on the project to build the house on Lot 239.

Mr. Brown testified that he attended a meeting with Mr. Cude, Mr. Powell, and JD

to discuss the project before any papers were drawn up. Mr. Brown testified that he was

licensed as a general contractor and that the parties discussed his monetary limits:

Q: Okay. What was discussed during the meeting?

A: It was all discussed about, you know, aspects of building a house. It

was asked what my monetary limit was. And they talked about when they

were kids growing up and stuff like that.

Q: Okay. Now, when you say you were asked what your monetary limit

was, who asked you?

A: John did.

Q: All right. And did he discuss that with you beyond just asking you?

A: No - - yes. Yes.

Q: Okay. So he asked you what your monetary limit was. Did you tell

him?

A: Yeah.

Q: Okay. What was his response?

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A: He told me that I’d have to have it raised in order to build the house that

we were planning on building.

Q: Okay. And did he suggest a range for you to raise it to?

....

A: Yeah. Half a million.

Mr. Brown further testified that his role in the project was to be the general contractor

and the superintendent.

Mr. Cude testified that he met several times with Mr. Powell to discuss the

construction project; some meetings included just Mr. Cude and Mr. Powell, and some

meetings included Mr. Powell, JD, and Mr. Brown. Mr. Cude testified that the four of

them met as a group “to discuss the logistics of moving this forward where Paul was

going to be represented as the contractor on the project for me as the builder, and that’s

where the monetary limits were discussed.” Mr. Cude’s testimony included the

following:

Q: Okay. And what was discussed at that meeting?

A: In general, the - - because that meeting was - - that meeting was in the

summer of 2010, and so we were getting closer. . . . So there were specific

conversations about the house, the value of the house. . . . So the

conversation and the question about the monetary limit came up because

we needed to know what the monetary limit was going to need to be in

order for Paul’s license to be able to manage, you know, the build of the

house.

Q: Okay. So were there discussions about Mr. Brown’s monetary limits?

A: There were. That’s how we decided - - John made a comment to the

effect that it needed to approach a half a million based on the level of the

house that we were looking to build.

Q: Okay. And was Mr. Powell made aware of what Paul Brown’s

monetary limits were at the time of the meeting?

A: He was. There were conversations about Mr. Brown’s monetary limit,

and the conversation around that it would need to be raised.

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Q: Okay. Did you and Mr. Brown then set about trying to get his limits

raised?

A: We did.

In response to a question about whether it was ever represented that he was going to be

the general contractor for the project, Mr. Cude replied: “It never was.”

JD was asked whether his brother (John Powell) “understood that Paul [Brown]

was the general contractor for this project.” JD responded: “He always understood that.”

JD testified further as follows:

Q: Did [John Powell] ever ask Mike Cude about his contractor’s license or

his monetary limits?

A: No.

Q: Okay. He directly asked Paul Brown?

A: Yes.

Q: Did he even ask Mike Cude if he had a contractor’s license?

A: If Mike had one or Paul had one?

Q: If Mike had one.

A: I think it’s - - I recall that Mike has always told me he never had a

contractor’s license.

Q: Okay. And did he express at any of these meetings to your brother,

John Powell - -

A: It was clearly understood from day one that Paul was the contractor, he

had the license. And at that meeting, there’s another thing I remember.

They were going to have to increase the limits on his contractor’s license . .

..

Mr. Powell testified that he “understood Paul Brown was going to be employed by

Manor Homes or as the general contractor” on the project. He did not testify that he

believed Mr. Cude had a general contractor’s license.

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As revealed by the testimony at trial, no one involved in the construction project

believed Mr. Cude had a general contractor’s license, and everyone understood that Mr.

Brown had a general contractor’s license. As Mr. Cude, Mr. Brown, and JD all testified,

Mr. Powell participated in at least one meeting where Mr. Brown’s monetary limits were

discussed, and Mr. Powell informed Mr. Brown that he would have to increase the limits

on his contractor’s license. The trial court found Mr. Cude, Mr. Brown, and JD were

credible, and the defendants point to nothing in the record to suggest that any of these

witnesses’ testimony should be questioned.

Construing the different parts of the PSA in harmony with one another, taking into

account the testimony of the witnesses regarding the project participants’ understanding

that Mr. Brown was the only one with a general contractor’s license, and construing the

PSA against its drafter, Mr. Powell, we conclude that the term “Builder” as used in

paragraph 6(a) of the PSA refers to both Manor Homes and Mr. Brown. A result of this

interpretation of the PSA is that Manor Homes did not misrepresent its licensing status,

as Ashby Communities and Mr. Powell contend.5

Ashby Communities and Mr. Powell argue that Manor Homes breached the PSA

because it failed to complete the construction of the home on Lot 239 and obtain a

certificate of occupancy (1) within the time frame set forth in the agreement, (2) within

the stated budget, and (3) according to the guidelines set forth in Exhibit H of the PSA.

Mr. Cude and Mr. Brown testified that Mr. Powell caused some early delays when he

raised concerns about the topsoil in the crawlspace and the lumber supplier and that they

believed they were going to complete the house in a timely fashion after accounting for

these delays. The trial court believed Mr. Cude’s and Mr. Brown’s testimony with regard

to this issue and found the following facts:

Powell and/or Ashby caused several delays that affected Manor

Homes’ timely construction of the home on Lot 239, including: changing

the lumber package from Huskey to Builder’s First Source, which delayed

the project about six weeks; pinning the lot, which delayed work about two

weeks; and Powell’s stop work order relating to the crawl space, resulting

in yet another delay of an additional two weeks. In all, Ashby caused

delays amounting to a period of about ten weeks.

The record shows that Manor Homes began construction in May 2011 and was separated

from the project in January 2012. Subtracting ten weeks from this eight- to nine-month

period, Manor Homes had another month or so to finish the project within the prescribed

5

Ashby Communities and Mr. Powell complain that Mr. Brown’s general contractor’s license did not

have a sufficiently high monetary limit when the PSA was signed. However, Exhibit I to the PSA reveals

that Mr. Brown’s monetary limit was $456,000, which exceeds the $415,000 budget to which the parties

agreed.

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seven-and-a-half month time frame set forth in the PSA when it was separated from the

project.

Mr. Cude and Mr. Brown also testified that they were about $8,000 under the

budget limit when Mr. Powell separated Manor Homes from the project. The trial court

found Mr. Cude and Mr. Brown’s testimony regarding the budget credible, and Ashby

Communities and Mr. Powell have failed to show the evidence preponderates otherwise.

With respect to the guidelines set forth in Exhibit H of the PSA, Mr. Cude

admitted at trial that Manor Homes was not in compliance with some of these guidelines.

However, the trial court found, and Ashby Communities and Mr. Powell do not dispute,

that Mr. Powell never mentioned any concerns he had with the work Manor Homes was

doing on the house (after the initial disagreements at the beginning of the project) until

shortly before Mr. Powell separated Manor Homes from the project. Mr. Cude wanted to

know what Mr. Powell’s concerns were so he could address them and correct anything

that might have been wrong, but Mr. Powell did not respond to Mr. Cude’s phone calls or

e-mails. As stated above, the trial court did not find Mr. Powell’s testimony as to the

breach of the PSA to be credible, and the court found that Ashby Communities and Mr.

Powell committed the first material breach of the PSA by removing Manor Homes from

the project and failing to give it a chance to cure the problems Mr. Powell identified

before removing Manor Homes from the construction project.

The law in Tennessee is that “a party alleging defects in the performance of a

contract is required to give notice and a reasonable opportunity to cure the defects.”

Forrest Constr., 337 S.W.3d at 229 (citing Carter v. Krueger, 916 S.W.2d 932, 935

(Tenn. Ct. App. 1995)). The reason for this requirement is to encourage contracting

parties to settle their disputes and avoid litigation by allowing the defaulting party the

chance to repair defective work, reduce damages, and avoid additional problems. Id.

(citing Custom Built Homes by Ed Harris v. McNamara, No. M2004-02703-COA-R3-

CV, 2006 WL 3613583, at *5 (Tenn. Ct. App. Dec. 11, 2006)). In addition, the party that

commits the first breach of a contract is precluded from recovering damages based on the

other party’s later breach of the same contract. Id. at 226 (citing United Brake Sys., Inc.

v. Am. Envtl. Prot., Inc., 963 S.W.2d 749, 756 (Tenn. Ct. App. 1997), and McClain v.

Kimbrough Constr. Co., Inc., 806 S.W.2d 194, 199 (Tenn. Ct. App. 1990)); see also

Madden Phillips Constr., Inc. v. GGAT Dev. Corp., 315 S.W.3d 800, 812 (Tenn. Ct. App.

2009). Because Ashby Communities and Mr. Powell did not give Manor Homes notice

and an opportunity to cure any defects in the house prior to removing it from the project,

we affirm the trial court’s conclusion that Ashby Communities and Mr. Powell were the

first to breach the PSA and are, therefore, not entitled to recover damages as a result of

Manor Homes’ failure to comply with the specifications set out in Exhibit H to the PSA.

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C. Tennessee Consumer Protection Act and Intentional Misrepresentation

The Tennessee Consumer Protection Act (“TCPA”) includes a list of unfair or

deceptive acts or practices affecting the conduct of any trade or commerce that are

unlawful and constitute violations of the statute. Tenn. Code Ann. § 47-18-104(b).

Section 47-18-104(b)(35) identifies “[r]epresenting that a person is a licensed contractor

when such person has not been licensed” as unfair or deceptive. The trial court found

that (1) Manor Homes misrepresented that it was a licensed general contractor and that

(2) Manor Homes and/or Mr. Brown misrepresented that they had the financial capability

to fulfill all of their obligations under the PSA. The court found that one or both of these

misrepresentations constituted a technical violation of the TCPA but that “this technical

violation of the Act did not proximately cause any damages to Ashby and Powell” and

denied relief to the defendants for these claims. Ashby Communities and Mr. Powell

assert that the trial court erred in so ruling.

We begin by recognizing that we have already determined that the term “Builder,”

as that term is used in paragraph 6(a) of the PSA, includes both Manor Homes and Mr.

Brown. In light of this determination, we find that the evidence preponderates against the

trial court’s factual finding that Manor Homes misrepresented itself as a licensed general

contractor in paragraph 6(a) of the PSA. With regard to whether Mr. Brown’s general

contractor’s license had a sufficiently high monetary limit, the record is unclear about

when Mr. Brown’s monetary limits were raised to $456,000, as Exhibit I reflects. The

trial court found that Mr. Brown’s monetary limits were not “sufficiently high” when the

PSA was signed. However, Mr. Powell drafted the PSA, and the record shows that Mr.

Powell knew before the PSA was signed that Mr. Brown was going to have to have the

monetary limits of his general contractor’s license raised. Because of this knowledge,

Ashby Communities and Mr. Powell cannot recover for intentional misrepresentation as a

matter of law. See Hodge v. Craig, 382 S.W.3d 325, 343 (Tenn. 2012) (party asserting

misrepresentation must prove he did not know representation was false when made and

that he was justified in relying on truth of representation).

Moreover, there is no evidence that before the TBLC raised Mr. Brown’s

monetary limit, the lower limit of Mr. Brown’s license resulted in any delay in the project

or caused Ashby Communities or Mr. Powell to suffer any damages or harm. In TCPA

cases, the party alleging a misrepresentation must show that the misrepresentation

proximately caused an injury or loss. Johnson v. Dattilo, No. M2010-01967-COA-R3-

CV, 2011 WL 2739643, at *7 (Tenn. Ct. App. July 14, 2011) (citing White v. Early, 211

S.W.3d 723, 741 (Tenn. Ct. App. 2006)); Steamfitters Local Union No. 614 Health &

Welfare Fund v. Philip Morris, Inc., No. W1999-01061-COA-R9-CV, 2000 WL

1390171, at *7 (Tenn. Ct. App. Sept. 26, 2000); see also Hodge, 382 S.W.3d at 343

(stating that party asserting misrepresentation must show he sustained damages resulting

from misrepresentation); Harrogate Corp. v. Sys. Sales Corp., 915 S.W.2d 812, 817

(Tenn. Ct. App. 1995) (same). Ashby Communities and Mr. Powell have failed to show

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any alleged misrepresentation by Manor Homes or Mr. Brown proximately caused it to

suffer harm. As a result, we affirm the trial court’s conclusion that neither Manor Homes

nor Mr. Cude is liable for any misrepresentation pursuant to the TCPA or under common

law. 6

Ashby Communities and Mr. Powell also argue that Manor Homes should be

precluded from recovering on its claims because it had “unclean hands.” However, the

defendants base this claim on the assertion that Manor Homes represented itself as a

licensed general contractor, an allegation which we have found to be inaccurate. Thus,

there is no need to consider further Ashby Communities and Mr. Powell’s argument that

Manor Homes should be barred from recovering on its claims due to unclean hands.

D. Standing of Manor Homes to Pursue Recovery

Ashby Communities and Mr. Powell’s final argument on appeal is that Manor

Homes lacked standing to pursue a recovery of civil damages because the entity was

dissolved two years prior to trial; Mr. Cude, who pursued this case on behalf of Manor

Homes, was not an officer or owner of the company; and by the time of trial, Mr. Cude

was no longer married to Tracy Lytle, who was the sole member of the limited liability

company.

As Manor Homes points out, Ashby Communities and Mr. Powell did not raise the

issue of Manor Homes’ standing at trial until their closing argument. An argument based

on standing is properly raised:

by a specific denial or defense (but not an affirmative defense under Rule

8.03) in the answer or responsive pleading, or by a motion to dismiss under

Rule 12.02(6) or in proper cases by a motion for judgment on the pleadings

under Rule 12.03, or a motion to strike under Rule 12.06.

Knierim v. Leatherwood, 542 S.W.2d 806, 808 (Tenn. 1976). By waiting until closing

argument to raise this issue, the defendants did not give Manor Homes an opportunity to

present evidence to counter this assertion. A party that fails to raise the issue of standing

at trial is precluded from raising the issue on appeal. In re Estate of Smallman, 398

S.W.3d 134, 148 (Tenn. 2013) (citing Correll v. E.I. DuPont de Nemours & Co., 207

S.W.3d 751, 757 (Tenn. 2006)); State ex rel. Wolfenbarger v. Moore, No. E2008-02545-

COA-R3-CV, 2010 WL 520995, at *3 (Tenn. Ct. App. Feb. 12, 2010). We find Ashby

Communities and Mr. Powell effectively failed to raise the issue of standing at trial

6

Because we find Ashby Communities and Mr. Powell cannot recover for intentional misrepresentation,

we need not address Manor Homes’ and Mr. Cude’s assertion that the TCPA does not apply to this

transaction for the reason that neither Mr. Powell nor Ashby Communities are “consumers.” See

Ganzevoort v. Russell, 949 S.W.2d 293, 297 (Tenn. 1997) (explaining that TCPA was enacted to protect

consumers and to promote fair consumer practices).

- 21 -

because they waited until closing arguments to raise it. The trial court did not address

this issue in its Memorandum and Order, and the defendants did not file a motion

following the trial asking for a ruling on this issue. Accordingly, we conclude that Ashby

Communities and Mr. Powell have waived the issue of standing on appeal.7

III. CONCLUSION

The judgment of the trial court is affirmed, and this matter is remanded with costs

of appeal assessed against the appellants, John Powell and Ashby Communities, LLC, for

which execution may issue if necessary.

________________________________

ANDY D. BENNETT, JUDGE

7

The record shows that Manor Homes was not dissolved until 2014, which was after the litigation was

commenced but before the defendants filed their amended counterclaim. The defendants are unable to

argue, therefore, that they were unable to raise the issue of standing when they filed their amended

counterclaim.

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