Universal Dev. Corp. v. Dellinger

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Universal Development Corporation v. Robbie Dellinger

Hatti Group RE, LLC, and Harsha Hatti v. Robbie Dellinger

Hatti Group RE, LLC, and Harsha Hatti v. Robbie Dellinger

Nos. SC-2023-0645, SC-2023-0666, SC-2023-0705

Supreme Court of Alabama

September 20, 2024

Appeal from Jefferson Circuit Court (CV-20-903743, CV-20-141)

MENDHEIM, JUSTICE

Hatti Group RE, LLC ("Hatti Group"), and Harsha Hatti and Universal Development Corporation ("Universal") separately appeal from the judgments entered by the Jefferson Circuit Court against them and in favor of Robbie Dellinger following a jury trial of consolidated cases that involved claims asserted by Hatti, the Hatti Group, and Dellinger. We dismiss the appeals of Hatti Group and Hatti, but we reverse the judgment and render a judgment in favor of Universal in its appeal.

I. Facts

Universal is a licensed general contractor that has been in business for over 50 years. Universal originally was owned and operated by Bobby Ward. Bobby Ward died in late 2017; shortly before his death, Bobby's wife became Universal's owner and Bobby's son, Scott Ward, became the president of Universal.

Dellinger is an experienced construction worker who was directly employed by Universal from 2005 to around 2016. After that in addition to doing work on his own, Dellinger performed work for Universal as a subcontractor or whenever Universal asked him to work on a job. In fact, even after Dellinger stopped working as a direct employee of Universal, he was entrusted with using Universal's business credit cards at Home Depot and Lowe's stores for projects that Universal asked him to do. Dellinger testified that he and Scott Ward "were as close as brothers." Ward testified that they "were friendly and we trusted each other to the best of my knowledge" and that Bobby Ward had "trusted Mr. Dellinger and Mr. Dellinger's work."

In early 2017, Dellinger became engaged in a constructionrenovation project known as "The Foundry" in Alabaster ("the Foundry project"). On the Foundry project, Charles Zanaty of Zanaty Consulting, LLC, served as a consultant, Universal agreed to serve as the general contractor and to obtain the permits required for the project, and Dellinger both supervised and performed the renovation work. Dellinger described the setup of the Foundry project as follows:

"The first project was the Foundry project in Alabaster. It was originally a grocery store. A barber company was on the property. The Foundry leased it and it had -- they wanted to turn it into a drugstore, and so I went to Scott [Ward] and Bobby [Ward] and I told them, you know, the opportunity that I had and they agreed to pull the permits and me work, you know, on site as a supervisor and that I would pay them [Universal] $5,000 for the permit and then they would -- In other words, basically I would be paid from either the owner or the lender, and in that case, it was the owner that I was paid directly from. I was paid every 30 days. Never had a minute's trouble in any kind of way. Everything went smooth."

The Foundry project was completed in mid-2017.

In 2017, Hatti Group was the owner of property consisting of four buildings located at 212 to 218 20th Street North in downtown Birmingham. The buildings were collectively known as the "Iron Age" buildings. In the fall of 2017, Harsha Hatti, Hatti Group's principal, began obtaining bids for renovating the Iron Age buildings ("the Iron Age project"). According to Zanaty, the bids Hatti had received were not in his budget, and so he asked Zanaty to find other options. Zanaty submitted Hatti's initial architectural plans for the renovation to a company to get an estimate of the cost involved.^[1] The initial estimate was for around $1 million. In order to offer Hatti a different option that potentially could be within his planned budget for the Iron Age project, Zanaty told Hatti about his involvement with the Foundry project and how that had worked. Hatti expressed interest in the arrangement, and Zanaty introduced Hatti to Dellinger at Zanaty's office in October or November 2017. Zanaty testified that Hatti and Dellinger "hit it off and seemed like a good fit, and so they wanted to proceed."

Hatti and Dellinger agreed to organize the Iron Age project in a manner similar to the Foundry project: Hatti would obtain the financing, Universal would serve as the general contractor and to obtain the required permits, and Dellinger would supervise the work at the job site. Both Zanaty and Dellinger testified that at no time during their meeting with Hatti did they represent that Dellinger had a general contractor's license or that Dellinger would serve as the general contractor for the Iron Age project. In his trial testimony, Hatti admitted that "Universal was the GC [general contractor] on the job."

According to Dellinger, after his meeting with Hatti, he told Bobby Ward and Scott Ward about the Iron Age project; Dellinger testified that Universal agreed to be the general contractor for the Iron Age project in the manner it had been for the Foundry project, i.e., it would obtain the required permits while Dellinger would supervise the work at the job site. Dellinger testified that he had paid Universal $5,000 for every permit it had obtained for the project. However, Scott Ward disagreed, stating that Universal had been paid a $5,000 flat fee for its part in the Iron Age project. Regardless, Zanaty testified that he had had a telephone conversation with Bobby Ward in which Bobby had told him to "handle" getting a contract done between Hatti and Universal in which "Universal was willing to serve as the general contractor on the project." Zanaty stated that Bobby had told him to sign the contract on behalf of Universal.

Dellinger picked up a form contract produced by the American Institute of Architects ("the AIA") that Zanaty then filled out. On January 17, 2018, Hatti and Zanaty executed an "AIA Standard Form of Agreement Between Owner and Contractor" ("the AIA contract"). The AIA contract designated "Harsha Hatti and Hatti Group RE" as the "Owner" and "Universal Development General Contractors C/O Zanaty Consulting, LLC" as the "Contractor" "for the following project: 218 20th Street No. Birmingham, AL. 35203." The AIA contract was signed by Hatti as "Owner" and by "Charles [Zanaty] as agent for" Universal. Hatti testified that, after its execution, "Universal remained at all times obligated under the AIA agreement."^[2]

The key terms of the AIA contract included:

"ARTICLE 2 THE WORK OF THIS CONTRACT

"[Universal] shall fully execute the Work described in the Contract Documents, except as specifically indicated in the Contract Documents to be the responsibility of others.

"ARTICLE 3 RELATIONSHIP OF THE PARTIES

"[Universal] accepts the relationship of trust and confidence established by this Agreement and covenants with [Hatti] to cooperate with the Architect and exercise [Universal's] skill and judgment in furthering the interests of [Hatti]; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with [Hatti's] interests. [Hatti] agrees to furnish and approve, in a timely manner, information required by [Universal] and to make payments to [Universal] in accordance with the requirements of the Contract Documents."

Also, § 4.3 of the AIA contract stated that "[Universal] shall achieve Substantial Completion of the entire Work: ... Not later than one hundred and ninety ... (190) calendar days from the date of commencement of the Work." The executed AIA contract was sent to the bank from which Hatti had obtained financing, Southern States Bank ("SSA"), which approved the initial loan amount of $988,000 for the Iron Age project.^[3] SSA commercial-loan officer Mason Morris testified about the way draws on the loan worked. He stated that (1) a pay application would be filled out by Dellinger for costs incurred during the work, (2) the pay application would then be reviewed for approval by Hatti, (3) the pay application would then be given to third-party bank inspector John Davis -- a general contractor who would go to the job site and review the work being performed -- and (4) a draw on the loan would then be approved by SSA. Morris testified that the draws were wired to a bank account owned by Dellinger, because that was the wiring information that had been provided to SSA by Hatti, and that Dellinger would use the money in that account to pay the subcontractors and vendors who were working on the Iron Age project with him. Thus, despite the language in the AIA contract, Dellinger, not Universal, received the payments for work on the Iron Age project, and he distributed payments to subcontractors and vendors. Morris testified as follows with respect to his understanding of who served in various capacities for the Iron Age project:

"Q. [Dellinger's counsel:] Who to the bank's knowledge was the general contractor on the project?

"A. Universal Development.

"Q. Okay. What was Robbie Dellinger's role in the project?

"A. As far as I was concerned, he was their foreman or however you want to -- "Q. Supervisor?

"A. Superintendent.

"Q. Was he the day-to-day supervisor on the job?

"A. Yes.

"Q. And he was there on behalf of Universal?

"A. Yes."

"Q. [Dellinger's counsel:] To your knowledge, who was controlling the construction activities of the project?

"A. Mr. Hatti.

"Q. Is that based upon what he told you or based upon what you observed?

"A. Based upon what I observed. He was there a lot of the time.

"Q. Okay. And you saw that he had decision-making authority for everything going on construction-related.

"A. Yes. Every

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