Beacon4, LLC v. I & L Investments, LLC
2016 Tenn. App. LEXIS 637
Tenn. Ct. App.2016Background
- I&L Investments hired Beacon4 (via Altera relationship) to build a Fireworks Over America store in Blountville under two written contracts (Building: $1,097,115; Site: $795,486). Beacon4 obtained a Tennessee contractor’s license limited to $1,100,000 + 10% before the contracts were executed.
- Subcontractor Vic Davis Construction (VDC) performed substantial site work; disagreements arose over additional grading tied to a four-foot raise in finished floor elevation and a hand-drawn Revised Grading Plan (Exhibit H) prepared by the architect/project manager, Geoffrey Butler (not a civil engineer).
- I&L withheld $46,942.75 retainage and disputed numerous contractor change order requests (CORs); Beacon4 filed suit asserting a mechanics’ lien, Prompt Pay Act (PPA) violations, and breach of the Site Contract. I&L counterclaimed (including TCPA and TCLA theories).
- After a five-day bench trial the chancery court found: Beacon4 did not violate the TCLA; I&L violated the PPA and breached the Site Contract; Beacon4 was owed $150,390.04 plus 6% interest, reasonable attorney’s fees and out-of-pocket expenses; mechanics’ lien granted. The court found I&L (through Butler) acted in bad faith.
- On appeal this Court affirmed in all material respects, corrected a $1,000 typographical error in the interest award, and remanded to determine reasonable appellate attorney’s fees for Beacon4 under the PPA.
Issues
| Issue | Beacon4 (Plaintiff) Argument | I&L (Defendant) Argument | Held |
|---|---|---|---|
| 1. Violation of Tennessee Contractor’s Licensing Act (TCLA) by Beacon4 | Beacon4: licensed at contract time; if any over-limit occurred it did not forfeit rights and Beacon4 acted in good faith | I&L: Beacon4 split the project into two contracts (and may have acted before licensure) to evade monetary limit and so is unlicensed and limited to actual documented expenses | Court: I&L waived the pre-licensure argument; evidence does not preponderate against trial court’s finding Beacon4 did not violate TCLA; contract-splitting not a basis to void recovery here |
| 2. Willful and gross exaggeration of lien claim | Beacon4: amended lien at trial to conform to evidence; original excess was reasonable/innocent | I&L: initial lien overstated by $45,000 = willful exaggeration under Tenn. Code §66-11-139; owner entitled to expenses | Court: Beacon4’s voluntary amendment and lack of proof of harm mean no willful/gross exaggeration finding; lien enforcement allowed |
| 3. Whether disputed CORs were within Site Contract scope | Beacon4: Site Contract ambiguous; parol evidence, conduct, expert survey show extra grading outside contract scope — CORs payable | I&L: Grading Subcontract scope differed; Exhibit H attached to Site Contract so extra work was within Beacon4’s responsibility | Court: Contract ambiguous; credited civil-engineer expert and subcontractor testimony; awarded $103,447.29 for CORs (plus retainage) — trial court’s findings affirmed |
| 4. Timeliness (21-day claims) and dispute-resolution preconditions | Beacon4: provided proper Notice of Claim and attempted mediation; claims not time-barred because initial decisions are subject to mediation and litigation | I&L: Beacon4 failed to timely initiate claims under AIA §15.1.2; many CORs time-barred | Court: Even if architect’s initial decisions were final, §15.2.5 preserves mediation/litigation; Beacon4’s October 17, 2011 notice and follow-up satisfied condition precedent; claims not barred |
| 5. Prompt Pay Act (PPA) liability and bad faith fees | Beacon4: I&L’s refusal to release retainage beyond 90 days after certificate of occupancy violated PPA; I&L acted in bad faith so attorney’s fees and expenses recoverable | I&L: Lawful withholding due to unresolved CORs and contractual rights; no bad faith | Court: Certificate of occupancy/use triggered 90-day release requirement; I&L failed to timely pay; trial court’s bad-faith findings (Butler’s partiality, unilateral rescissions, refusal to mediate) supported award of attorney’s fees and expenses; affirmed |
| 6. Statutory $3,000/day penalty and appellate fees | Beacon4: seeks statutory daily penalty under §66-34-103(e) and attorney’s fees on appeal | I&L: §66-34-103(e) is criminal/fine only; appellate fees not authorized by statute | Court: §66-34-103(e) imposes criminal fine (Class A misdemeanor) — not a civil remedy; PPA’s fee provision is remedial and authorizes appellate attorney’s fees where bad faith shown; remanded to calculate appellate fees |
Key Cases Cited
- Rogers v. Louisville Land Co., 367 S.W.3d 196 (Tenn. 2012) (standard of review for bench trial findings; de novo review of conclusions of law)
- Helton v. Angelopoulos, 629 S.W.2d 15 (Tenn. 1982) (distinguishes unlicensed contractors from licensed contractors exceeding monetary limits; monetary limit purpose explained)
- Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406 (Tenn. 2006) (civil-fee statutes with remedial aims permit appellate attorney’s fees if pleaded)
- Madden Phillips Constr., Inc. v. GGAT Dev. Corp., 315 S.W.3d 800 (Tenn. Ct. App. 2009) (PPA bad-faith standard; attorney’s-fee award review for abuse of discretion)
- Silverman v. Gossett, 553 S.W.2d 581 (Tenn. 1977) (mechanics’ lien statute and disallowance for willful/gross exaggeration)
- Standard Glass & Supply Co. v. Sheley, 604 S.W.2d 36 (Tenn. 1980) (owner must trace payments to subcontractors before invoking statutory defense to lien enforcement)
- Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885 (Tenn. 2002) (principles for contract ambiguity and interpretation)
- Jones v. Garrett, 92 S.W.3d 835 (Tenn. 2002) (credibility findings by trial court entitled to great weight)