Opinion
NO. 2011-CA-001993-MR
06-07-2013
LCH PROPERTIES, LLC; LUNSFORD CUSTOM HOMES APPELLANTS v. MARCUS FANNIN CYNTHIA FANNIN APPELLEES
BRIEFS FOR APPELLANTS: Jack S. Gatlin Covington, Kentucky BRIEF FOR APPELLEES: Steven N. Howe Dry Ridge, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM GRANT CIRCUIT COURT
HONORABLE STEPHEN L. BATES, JUDGE
ACTION NO. 10-CI-00387
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; CLAYTON AND MAZE, JUDGES. MAZE, JUDGE: This appeal arises from an August 2011 bench trial in a suit brought by Appellants, LCH Properties, LLC (hereinafter "LCH") against Appellees, Marcus and Cynthia Fannin, for breach of a construction contract. LCH argues on appeal that the trial court erred in finding against it and in granting Appellees an award for needed repairs to their home totaling $26,835.00. LCH also argues that the trial court erroneously denied its request for attorney's fees. As evidence of substance existed on the record supporting the trial court's verdict, we affirm.
In August of 2009, the Fannins and LCH entered into a contract in which the latter agreed to build a home for $235,856 on the Fannins' lot in Corinth, Kentucky. The parties agreed to a warranty provision covering all defects, workmanship and construction of the house for a period of one year. The contract provided a list of allowances for certain costs and stated that the Fannins were to be credited for any materials or services which they purchased or performed themselves and charged for any "extras" added later. Under the contract, these changes were to be agreed to in writing.
During construction, several events occurred, some of which are contested, but all of which led to the disintegration of the business relationship between the Fannins and LCH. The incorrect color roof was installed, nevertheless resulting in a savings of $1,400 on the contract's roofing allowance. A dispute also arose regarding the lack of quality and integrity of retaining walls on the property, the cause of which was contested. The Fannins paid to repair one of these walls at their own expense.
Finally, as construction was winding down and after the Fannins had moved into the home, LCH conducted a walk-through with the Fannins and, as a result, a list of needed repairs (a "punch list") was drafted. The day after the walk-through, after LCH had begun work on these repairs, the Fannins found that LCH employees had tracked mud throughout the home, causing damage to the home's new carpeting and flooring. As a result, the Fannins refused LCH's entry back into the home to complete the required repairs. In February 2010, LCH took out a lien on the property due to the Fannins' failure to pay in full the remaining balance on the contract. The Fannins later acknowledged the debt, but they disputed the amount of said debt. Following the lien, the Fannins offered to place payment for the required repairs in escrow until LCH could complete them. However, LCH refused and began the present foreclosure action.
LCH acknowledged that the Fannins had paid a total of $215,800.00 and were due a credit of an additional $11,642.46 in unspent or saved allowances under the contract. In LCH's calculation, the resulting total of $227,442.46 paid or credited left an unpaid balance of $8,848.54, which included "extras" requested by the Fannins and provided by LCH. At trial, LCH presented these numbers, and argued that, pursuant to the contract, the Fannins were required to let LCH make the necessary repairs to the home, not another contractor. LCH claimed that the Fannins had breached the construction contract and were responsible for LCH's attorney's fees. At trial, the Fannins called two experts who testified to the remaining defects in the home. One expert, Mike Martin, also testified to the cost of repairing the defects in LCH's work. Martin estimated that those defects covered under the warranty provision of the contract would cost $26,835.00 to remedy.
In its Findings of Fact and Conclusions of Law, the trial court found that the Fannins were actually due $18,244.78 in credits due to savings on various allowances made under the contract. These included a less expensive roof, as well as work which was contracted for but not completed or for which the Fannins paid another contractor to complete. In total, the trial court's calculations led it to conclude that, including the extras which the Fannins requested after the contract had been executed, the Fannins owed $4,796.22 on the contract - almost half what LCH argued the they owed.
The trial court also adopted Mr. Martin's estimate in its findings in awarding the Fannins damages of $26,835.00, minus what they owed LCH, for a total of $22,038.78 in net damages. In addition, the court held that it would be "inequitable" to award LCH attorney's fees as provided for under the contract due to the circumstances of the case as well as the fact that LCH's claim of breach by the Fannins arose, not out of the written contract, but out of oral agreements made after the contract was signed. This appeal follows from the trial court's findings.
I. Preservation of LCH's Insufficiency Claim
As required under Kentucky Rules of Civil Procedure ("CR") 76.12(4)(c)(v), LCH states in its brief that, "[t]his issue was preserved for review by the Trial Court's October 5, 2011, Findings of Fact, Conclusions of Law, and Judgment and Order." As we are permitted to do sua sponte, we wish to discuss briefly whether LCH's argument is truly preserved for appeal.
In cases involving a jury's verdict, an appellant can only prevail on an insufficiency of the evidence claim "if preserved through a motion for a [Judgment Notwithstanding the Verdict ("JNOV")], which in turn must be predicated on a directed verdict motion at the close of all the proof." Steel Technologies, Inc. v. Congleton, 234 S.W.3d 920, 926 (Ky. 2007) (overruled on other grounds). However, following a bench trial, "if the [court's] findings are objectionable on grounds other than insufficiency of evidence, an objection or appropriate motion should be made to identify the defect." Osborne v. Boarman, 2007-CA-001340-MR, 2009 WL 484972 (Ky. App. 2009) (emphasis added).
This Court has further held that a motion for directed verdict is inappropriate in the context of a bench trial. Rather, the appropriate motion is made under CR 41.02. See Brown v. Shelton, 156 S.W.3d 319, 321 (Ky. App. 2004). Again, however, neither motion is required to preserve a claim of insufficiency of the evidence.
The case before us takes issue solely with the sufficiency of the evidence supporting the trial court's conclusions following a bench trial. Authority in our Commonwealth is split on whether, at a bench trial, a motion for directed verdict is necessary or even appropriate. See Tokovic v. Commonwealth, 2004-CA-002618, 2006 WL 140664 (Ky. App. 2006) (reviewing claim of insufficiency of the evidence under palpable error standard because appellant failed to move for a directed verdict at any point during or after the close of proof.); Popplewell v. Hooe, 2010-CA-001627-MR, 2012 WL 592276 (Ky. App. 2012) (holding that, pursuant to Congleton, supra, a claim of insufficiency of evidence supporting a damages award is unpreserved unless preceded by motions for directed verdict and JNOV.); Brown v. Shelton, 156 S.W.3d 319 (Ky. App. 2004) ("[A] directed verdict is clearly improper without a jury . . ..").
We believe CR 52.03 ultimately resolves the above conflict in the caselaw. The rule states
When findings of fact are made in actions tried by the court without a jury, the question of the sufficiency of the evidence to support the findings may thereafter be raised whether or not the party raising the question has made in the trial court an objection to such findings or has made a motion to amend them or a motion for judgment or a motion for a new trial.With this rule in mind, we reaffirm our holding in C.E. Pennington Co. v. B & H Elec. Contractors, Inc., 2001-CA-001242-MR, 2003 WL 22461515 (Ky. App. 2003). Because the nature of a bench trial is that litigants cannot possibly know to object to the court's findings until after the trial, motions for directed verdict or JNOV are, by their very nature, inappropriate and unnecessary to preserve a claim of sufficiency of the evidence. In addition, CR 52.03 also forms the basis for our conclusion that a litigant's argument regarding sufficiency of the evidence need not be presented to the trial court for reconsideration of any kind in order to preserve it for appellate review.
While CR 52.03 sufficiently resolves the issue, we also feel our conclusion is consistent with recent caselaw involving failure of a trial court to make essential findings pursuant to CR 52.04. See Anderson v. Johnson, 350 S.W.3d 453 (Ky. 2011) (holding that, reading CR 52 as a whole, it was not necessary, for preservation purposes, for counsel to bring such a failure to the attention of the court unless expressly stated otherwise in the rule).
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Therefore, while LCH could have done more to demonstrate how and why this issue was preserved for appeal, the issue is nonetheless preserved and we proceed to its consideration on the merits.
II. Sufficiency of the Evidence to Support the Court's Damage Award
On appeal, LCH contends that there was insufficient evidence presented at trial to justify the trial court's award in favor of the Fannins. At a bench trial, the factual findings of the trial court shall not be set aside unless they are clearly erroneous; that is, not supported by substantial evidence. Patmon v. Hobbs, 280 S.W.3d 589, 593 (Ky. App. 2009) (citing Cole v. Gilvin, 59 S.W.3d 468, 472 (Ky. App. 2001)). If not clearly erroneous, the findings shall not be set aside. Id. (citing CR 52.01). Additionally, any questions of law that are resolved at trial are reviewed de novo. Id. (citing Gosney v. Glenn, 163 S.W.3d 894 (Ky. App. 2005)). With these standards of review in mind, we turn to the trial court's findings of fact and conclusion of law in the present case.
LCH specifically challenges the trial court's ruling denying its right to make all necessary repairs. LCH argues that, under the contract, it "had an exclusive right to repair any warranty issues or defects the Fannins raised within the warranty period" and that it was prevented from making said repairs by the Fannins' demand that LCH's representatives stay off the property. Additionally, LCH argues that the trial court ultimately erred in awarding the Fannins damages which "far exceeded the punch list items . . . identified at the initial walk-through."
We find that there was substantial evidence in the record to support the trial court's award of damages to the Fannins. LCH's claim that the Fannins were required to permit it to complete necessary repairs of defects is unpersuasive. Firstly, no exclusive right to repair was bestowed on LCH under the construction contract. Pursuant to Kentucky Revised Statutes (KRS) 411.260, such a right must be expressly stated in the contract between the builder and the homeowner. No such right was expressed in the contract between LCH and the Fannins, which LCH drafted. Accordingly, although the Fannins initially seemed willing to do the work, LCH did not enjoy an exclusive right to repair the defects and the Fannins were entitled to have others complete the work. At the very worst, it could be said that the absence of such a clause in the contract created an ambiguity; however, basic contract law tells us that such ambiguity must be resolved in favor of the party who did not draft the contract, the Fannins. See McMullin v. McMullin, 338 S.W.3d 315 (Ky. App. 2011).
Secondly, in arguing its case, LCH seems hesitant to acknowledge the severe deterioration in relations between itself and the Fannins which preceded its being told not to return to the home. This fact rightfully played a role in the trial court's decision. Testimony from both the Fannins and LCH representatives established that, following LCH's visit to the home to complete the agreed upon repairs, little work was completed and damage was done to the inside of the home. The parties exchanged angry phone calls regarding both issues, culminating in a curse-laden and threatening response from LCH. Only days later, LCH filed its lien against the Fannins' property, the sole purpose of which, LCH admitted, was to "jam up" the closing on their mortgage.
All of these facts establish that a toxic relationship quickly developed between the Fannins and LCH. Despite LCH's initial willingness to repair the defects in its work following the walk-through, its conduct in causing damage to the home and in response to the Fannin's legitimate complaints regarding this damage - including its apparently vindictive decision to file a lien against the property - were substantial enough to justify the Fannin's decision to prohibit LCH from re-entering the property. Hence, we find that the testimony of both LCH and the Fannins constituted substantial evidence to support the trial court's conclusions. The trial court was justified in its conclusion that the Fannins were owed damages for LCH's ultimate failure to abide by the contract.
Furthermore, we find that the amount of the trial court's award of these damages was in line with, and supported by, the testimony on the record of what the necessary repairs would cost. The Fannins' expert, Mr. Martin, provided specific testimony regarding the cost of repair which LCH conceded fell under the warranty provision of the contract. That LCH also provided proof of what it believed the repairs would cost does not change the fact that the trial court was within its discretion to adopt Mr. Martin's estimate or that substantial evidence existed on the record to support the court's decision to do so.
Finally, LCH argues that, because the Fannins breached the contract, the express terms of the contract require that the trial court order them to reimburse LCH for its attorney's fees in the present action. We disagree. "Under our law, attorney's fees are not allowable as costs in absence of statute or contract expressly providing therefor." Holsclaw v. Stephens, 507 S.W.2d 462, 480 (Ky. 1973); Commonwealth of Kentucky, Dep't of Transp., Bureau of Highways v. Knieriem, 707 S.W.2d 340 (Ky. 1986). LCH contends the contract it wrote is the requisite authority for an award of attorney's fees in this case. However, our courts have also held that equity demands that an award of attorney's fees "largely be within the discretion of the court depending on the circumstances of each particular case." Kentucky Ret. Sys. v. Foster, 338 S.W.3d 788, 803 (Ky. App. 2010) (citing Dorman v. Baumlisberger, 113 S.W.2d 432 (Ky. 1938) (internal quotations omitted)).
In light of the facts of this case, as they were testified and pled to on the record, we find that the trial court acted within its discretion in denying LCH's motion for attorney's fees under the contract. Indeed, the Fannins owed money on the contract. The Fannins acknowledged as much, although the amount owed was at issue in this case. It is also true that the contract contained an otherwise enforceable provision regarding the award of attorney's fees to LCH in case of a breach by the Fannins. Nevertheless, the trial court was entitled under the law to consider the circumstances surrounding the case. In doing so, given LCH's unprofessional, and at times threatening, conduct, in response to the Fannins' debt, the trial court was within its discretion, and did not err, in concluding that equity forbade an award of attorney's fees to LCH.
For these reasons, the judgment and award of the Grant Circuit Court is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANTS: Jack S. Gatlin
Covington, Kentucky
BRIEF FOR APPELLEES: Steven N. Howe
Dry Ridge, Kentucky