Preston McNees Specialty Woodworking, Inc. v. The Daniel Co. (Danco), Inc. ( 2015 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
November 24, 2014 Session
PRESTON MCNEES SPECIALTY WOODWORKING, INC. ET AL. v.
THE DANIEL CO. (DANCO), INC.
Appeal from the Circuit Court for Washington County
No. 30781 Thomas J. Seeley, Jr., Judge
No. E2014-01004-COA-R3-CV - Filed February 13, 2015
This case involves the proper interpretation of a contract between a general contractor and
a subcontractor. The trial court determined that the subcontractor was entitled to recover
additional sums above the original contract price based on the doctrine of equitable estoppel.
The general contractor timely appealed. Having determined that the scope of the parties’
contract covered the work in question and that the doctrine of equitable estoppel does not
apply in this matter, we vacate the trial court’s judgment.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Vacated; Case Remanded
T HOMAS R. F RIERSON, II, J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.
Bill W. Petty and Micha Buffington, Knoxville, Tennessee, for the appellant, The Daniel Co.
(DANCO), Inc.
Thomas D. Dossett, Kingsport, Tennessee, for the appellee, Preston McNees Specialty
Woodworking, Inc. d/b/a Preston Woodworking.
OPINION
I. Factual and Procedural Background
The plaintiff, Preston McNees Specialty Woodworking, Inc. d/b/a Preston
Woodworking (“Preston”), filed the present action against The Daniel Co. (DANCO), Inc.
(“DANCO”), seeking compensation for work that Preston performed on a construction
project wherein DANCO was the general contractor and Preston was a subcontractor. In
2010, Preston submitted a bid to supply certain woodwork regarding a project for the College
of Medicine Student Center at East Tennessee State University. When preparing its bid,
Preston relied in part upon the project manual (“Manual”) that had been prepared by Fisher
+ Associates (“Fisher”), the project architect and designer.
The Manual expressly provided for “[s]hop finishing of all natural finish interior
woodwork” and stated that “fabrication, including assembly, finishing, and hardware
application” should be complete before shipment to the project site. In a section entitled
“Shop Finishing,” the Manual provided in pertinent part:
B. General: Finish architectural woodwork at fabrication shop as
specified in this Section. Defer only final touchup, cleaning, and
polishing until after installation.
C. General: Shop finish transparent-finished interior architectural
woodwork at fabrication shop as specified in this Section.
***
E. Transparent Finish: Comply with requirements indicated below for
grade, finish system, staining, and sheen, with sheen measured on 60-
degree gloss meter per ASTM D 523.
***
4. Staining: Match Architect’s sample.
Preston prepared and submitted its bid, which consisted of a base amount of $82,961,
with an additional $12,605 to be added for three bays of study rooms. Preston’s bid stated
that “All wood items are sent to field unfinished, ready to stain by others prior to
installation.” DANCO selected Preston as the subcontractor for the aforementioned work.
On November 22, 2010, Preston and DANCO executed a “Standard Form of
Agreement Between Contractor and Subcontractor,” otherwise identified as AIA 1 Document
A401-1997 (“Subcontract”). This Subcontract provides that Preston will perform the
casework and millwork for the project for a total price of $95,566. The Subcontract also
provides that the work will be performed “as specified in the Project Manual dated June 18,
2010, Drawings, and addenda thereto, prepared by Fisher + Associates . . . .” The
1
American Institute of Architects.
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Subcontract further states:
1.1 The Subcontract Documents consist of (1) this Agreement; (2) the
Prime Contract, consisting of the Agreement between the Owner and
Contractor and the other Contract Documents enumerated therein; (3)
Modifications issued subsequent to the execution of the Agreement
between the Owner and Contractor, whether before or after the
execution of this Agreement; (4) other documents listed in Article 16
of this Agreement; and (5) Modifications to this Subcontract issued
after execution of this Agreement. These form the Subcontract, and are
as fully a part of the Subcontract as if attached to this Agreement or
repeated herein. The Subcontract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration
of the Subcontract Documents, other than Modifications issued
subsequent to the execution of this Agreement, appears in Article 16.
Article 16 lists no additional documents.
Following execution of the Subcontract, Preston prepared shop drawings, which set
out the details regarding the work Preston was to perform. The front page of the shop
drawings contains a typed statement by Preston that “trim and plywood to be stained as per
provided sample. (Stain sample to follow).” This front page additionally bears the approval
stamp of DANCO as well as the approval stamp of Fisher. There also appears a handwritten
note, signed by Mr. Fisher, which states: “Wood stain to match approved door sample.”
DANCO returned the shop drawings to Preston on June 6, 2011, with a transmittal sheet
stating, “Wood stain to match enclosed door sample.”
Sam Preston, President of Preston Woodworking, testified that when the shop
drawings were returned with the notations regarding stain color, he contacted Tom Daniel
at DANCO and reminded him that Preston’s bid was for unfinished wood. According to Mr.
Preston, Mr. Daniel explained that the architect required the woodwork to be shop-finished;
Mr. Preston claimed he was previously unaware of this fact. Mr. Preston related that he
subsequently submitted a price for this finish work of $13,994, with no negative response
from Mr. Daniel. Mr. Preston stated that Preston had not yet begun finishing of the
woodwork, such that Mr. Daniel could have opted to accept the additional cost or allow the
woodwork to be delivered unfinished for the original contract price.
Preston sent a change request to DANCO on August 21, 2011, wherein Mr. Preston
detailed the additional cost of $13,994 to stain and finish the woodwork. Mr. Preston
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explained that he discussed this additional cost with Mr. Daniel in great detail. He admitted,
however, that the change order was never signed by anyone at DANCO. Preston submitted
a stain sample to the architect and received approval for same. Although Preston was
instructed to begin installation on August 22, 2011, it was unable to comply due to conditions
at the job site. Eventually, Preston’s on-site work began on August 29, 2011.
Preston submitted a pay application on August 25, 2011, which included the original
contract price of $95,556, plus an addition of $13,994 for the submitted change order.2 As
such, the pay application reflected a total revised contract price of $109,550. Through that
pay application, Preston requested a partial payment for its work, which Preston indicated
was thirty-eight percent complete. Preston submitted a subsequent pay application on
September 23, 2011, demonstrating the original contract price plus additional costs of
$21,639 and claiming a total revised contract price in the amount of $117,195. Two
subsequent pay applications were sent on October 25, 2011, and November 8, 2011, also
reflecting the “revised” contract sum of $117,195. Mr. Preston testified that DANCO was
slow in making payments and never questioned the extra charges until approximately
November 8, 2011, after Preston’s work was substantially complete. Consequently, Mr.
Preston sent a memo to DANCO and Mr. Fisher on that date, explaining the additional
charges in detail.
Subsequently, on November 15, 2011, Mr. Daniel sent a letter to Mr. Preston, which
states:
This letter is in response to your November 7th letter.
As you are aware, none of the change orders you are requesting was approved
either verbally or in writing by anyone from our company. The items listed are
all within the scope of the work specified in your contract. Therefore, no
additional payment beyond the original contract amount will be approved.
DANCO ultimately paid Preston the original contract price. Preston then filed the instant
action on August 23, 2012, seeking to recover the unpaid sum of $21,639.
The trial court conducted a hearing on the merits on January 31, 2014, wherein Mr.
Preston and Mr. Daniel were the only witnesses to testify. At trial, Mr. Daniel maintained
that he orally informed Mr. Preston on several occasions that Preston would not be paid any
sums in excess of the contract price. Mr. Daniel therefore did not feel the need to deny the
2
Preston erroneously listed the original contract price as $95,556 rather than $95,566 on all pay
applications.
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charges in writing. According to Mr. Daniel, all of the work requested of Preston was
included in the Manual and was part of the original contract. Mr. Daniel pointed to specific
provisions in the Manual that included stain as a part of the transparent finish and stated that
the stain sample referenced therein was to match the wood doors at the job site. Mr. Daniel
indicated that he told Mr. Preston as early as December 2010 that if Preston did not shop-
finish the woodwork, Preston would not keep the job and DANCO would hire someone else.
Mr. Preston denied ever being told by Mr. Daniel that the additional charges would
not be paid. According to Mr. Preston, he understood transparent finish to be without any
stain. He also maintained that there was no stain sample attached to the project manual.
At the conclusion of the trial, the court rendered its opinion from the bench, finding
that Mr. Daniel’s letter dated November 15, 2011, denying the additional charges, was sent
two months after the first change order on August 21, 2011. The court noted that although
Mr. Daniel testified he did not feel the need to document DANCO’s denial of the change
orders in writing because he had conveyed this denial to Preston orally, “the best proof is
always documentation . . . .” The court invoked the equitable doctrine of estoppel, finding
that it was unfair for DANCO to wait until the work was completed to provide notice that the
extra charges would be denied. The trial court accordingly granted judgment to Preston in
the amount of $21,639. DANCO timely appealed.
II. Issue Presented
DANCO presents a single issue for our review:
Whether the trial court erred by applying the doctrine of equitable
estoppel to modify a fully integrated contract.
III. Standard of Review
Our standard of review is de novo with a presumption of correctness as to the trial
court’s findings of fact unless the preponderance of the evidence is otherwise. Tenn. R. App.
P. 13(d); McCarty v. McCarty, 863 S.W.2d 716, 719 (Tenn. Ct. App. 1992). No presumption
of correctness attaches to the trial court’s legal conclusions. Union Carbide Corp. v.
Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).
We review issues of contract interpretation de novo. See Dick Broad. Co., Inc. of
Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 659 (Tenn. 2013). As this Court has
previously explained:
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In resolving a dispute concerning contract interpretation, our task is to
ascertain the intention of the parties based upon the usual, natural, and
ordinary meaning of the contract language. Planters Gin Co. v. Fed.
Compress & Warehouse Co., Inc., 78 S.W.3d 885, 889-90 (Tenn. 2002) (citing
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999)). A 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.”
Planters Gin Co., 78 S.W.3d at 890 (citing 5 Joseph M. Perillo, Corbin on
Contracts, § 24.30 (rev. ed. 1998); Doe v. HCA Health Servs. of Tenn., Inc.,
46 S.W.3d 191, 196 (Tenn. 2001)). The central tenet of contract construction
is that the intent of the contracting parties at the time of executing the
agreement should govern. Planters Gin Co., 78 S.W.3d at 890. The parties’
intent is presumed to be that specifically expressed in the body of the contract.
“In other words, the object to be attained in construing a contract is to
ascertain the meaning and intent of the parties as expressed in the language
used and to give effect to such intent if it does not conflict with any rule of
law, good morals, or public policy.” Id. (quoting 17 Am.Jur.2d, Contracts, §
245).
Kafozi v. Windward Cove, LLC, 184 S.W.3d 693, 698 (Tenn. Ct. App. 2005). “Courts must
look at the plain meaning of the words in a contract to determine the parties’ intent. If the
contractual language is clear and unambiguous, the literal meaning controls . . . .” Allmand
v. Pavletic, 292 S.W.3d 618, 630 (Tenn. 2009) (internal citation omitted).
IV. The Subcontract
DANCO contends that the trial court erred by applying the doctrine of equitable
estoppel to modify this fully integrated Subcontract. As noted above, the Subcontract does
provide that it contains the entire agreement between the parties and that it is comprised of
certain specific documents. Preston’s bid is not one of the documents listed in the
Subcontract. Further, the Subcontract expressly provides that it “supersedes prior
negotiations, representations or agreements, either written or oral.” Thus, the bid submitted
by Preston prior to execution of the Subcontract, which states that the woodwork would be
sent to the job site unfinished, is not part of the Subcontract.
When interpreting a contract, our “initial task is to determine whether the language
in the contract is ambiguous.” Ray Bell Cons’t Co., Inc. v. Tenn. Dep’t of Transp., 356
S.W.3d 384, 386-87 (Tenn. 2011) (citing Planters Gin Co. v. Fed. Compress & Warehouse
Co., 78 S.W.3d 885, 890 (Tenn. 2002)). “If the contract language is unambiguous, then the
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parties’ intent is determined from the four corners of the contract.” Ray Bell, 356 S.W.3d at
387 (citing Whitehaven Cmty. Baptist Church v. Holloway, 973 S.W.2d 592, 596 (Tenn.
1998)). This Court has explained the principles applied to determine whether the contract
language is clear or ambiguous as follows:
The language in dispute must be examined in the context of the entire
agreement. Cocke County Bd. of Highway Commrs. v. Newport Utils. Bd., 690
S.W.2d 231, 237 (Tenn. 1985). The language of a contract is ambiguous when
its meaning is uncertain and when it can be fairly construed in more than one
way. Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn. 1975).
“A strained construction may not be placed on the language used to find
ambiguity where none exists.” Id.
Vanbebber v. Roach, 252 S.W.3d 279, 284 (Tenn. Ct. App. 2007). “The parol evidence rule
does not permit contracting parties to ‘use extraneous evidence to alter, vary, or qualify the
plain meaning of an unambiguous written contract.’” Staubach Retail Servs.-Se., LLC v. H.G.
Hill Realty Co., 160 S.W.3d 521, 525 (Tenn. 2005) (quoting GRW Enters. v. Davis, 797
S.W.2d 606, 610 (Tenn. Ct. App. 1990)).
In the case at bar, the Subcontract expressly states that the work would be performed
by Preston “as specified in the Project Manual dated June 18, 2010, Drawings, and addenda
thereto, prepared by Fisher + Associates . . . .” Multiple provisions within the Manual
declared that the woodwork would be finished in the shop before being delivered to the job
site. The Manual further explicitly provided that this finish would include stain to be
selected by the architect. Based upon these clear and unambiguous provisions, we determine
that the Subcontract provided that Preston would finish the woodwork in the shop before
delivering it to the job site. We further determine that such finish was to include stain as
specified by the architect. Any parol evidence to the contrary should not have been
considered by the trial court.
Having determined that the finishing of the woodwork was addressed and covered by
the Subcontract, we conclude that the trial court lacked sufficient basis upon which to employ
the doctrine of equitable estoppel. As our Supreme Court has explained:
The doctrine of equitable estoppel requires evidence of the following elements
with respect to the party against whom estoppel is asserted:
(1) Conduct which amounts to a false representation or
concealment of material facts, or, at least, which is calculated to
convey the impression that the facts are otherwise than, and
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inconsistent with, those which the party subsequently attempts
to assert; (2) Intention, or at least expectation that such conduct
shall be acted upon by the other party; (3) Knowledge, actual or
constructive of the real facts.
Consumer Credit Union v. Hite, 801 S.W.2d 822, 825 (Tenn. Ct. App. 1990)
(quoting Callahan v. Town of Middleton, 41 Tenn. App. 21, 292 S.W.2d 501,
508 (1954) (citation omitted)). Equitable estoppel also requires the following
elements with respect to the party asserting estoppel:
(1) Lack of knowledge and of the means of knowledge of the
truth as to the facts in question; (2) Reliance upon the conduct
of the party estopped; and (3) Action based thereon of such a
character as to change his position prejudicially.
Id.
Osborne v. Mountain Life Ins. Co., 130 S.W.3d 769, 774 (Tenn. 2004). We determine that
several of the above-listed elements are absent in this case. There was no showing that
DANCO falsely represented or concealed any material facts, and there was also no showing
that Preston lacked the means of knowledge of the truth or acted in reliance upon DANCO’s
conduct to its detriment. Mr. Preston admitted that Preston had been provided with the
Manual when its bid was prepared, and the Manual expressly required that the woodwork be
finished in the shop before delivery. Preston should not be permitted to complain of surprise
or the alleged necessity of additional costs when this provision was known to it from the
inception of this transaction.
Further, to the extent that the trial court found the additional sums sought by Preston
to be the result of a change in the scope of the original work required, we note that the
Subcontract provides as follow:
The Subcontractor may be ordered in writing by the Contractor, without
invalidating this Subcontract, to make changes in the Work within the general
scope of this Subcontract consisting of additions, deletions or other revisions,
including those required by Modifications to the Prime Contract issued
subsequent to the execution of this Agreement, the Subcontract Sum and the
Subcontract Time being adjusted accordingly. The Subcontractor, prior to the
commencement of such changed or revised Work, shall submit promptly to the
Contractor written copies of a claim for adjustment to the Subcontract Sum
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and Subcontract Time for such revised Work in a manner consistent with the
requirements of the Subcontract Documents.
It is undisputed that DANCO did not order in writing any changes to the Subcontract.
Therefore, the trial court’s reliance upon a change order submitted by Preston, which
purported to increase the contracted amount, was improper as it was not preceded by the
requisite written order from DANCO.
We conclude that the trial court erred in applying the doctrine of equitable estoppel
in this situation. The trial court should have enforced the Subcontract according to its plain
terms. See Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580
(Tenn. 1975) (holding that it is the court’s duty to enforce contracts according to their plain
terms). Because the finish work was required of Preston by the Subcontract, we determine
that there was no basis for an award of additional monies to Preston.
V. Conclusion
For the foregoing reasons, we vacate the trial court’s judgment. Costs on appeal are
taxed to the appellee, Preston McNees Specialty Woodworking, Inc. d/b/a Preston
Woodworking. This case is remanded to the trial court for the collection of costs assessed
below.
________________________________
THOMAS R. FRIERSON, II, JUDGE
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