Court: APPEALS COURT OF MASSACHUSETTS
Citation: 35 Mass. App. Ct. 228
Parties: PDM MECHANICAL CONTRACTORS, INC. vs. SUFFOLK CONSTRUCTION
COMPANY, INC., & another.1
Docket No.: No. 91-P-1440.
County: Suffolk
Hearing Date: April 8, 1993
Decision Date: August 25, 1993
Judges: PERRETTA, SMITH, & PORADA, JJ.
In an action in which counterclaims for breach of contract were asserted, where the jury found the plaintiff in breach of contract, the judge correctly dismissed the plaintiff's claim for contract damages and entered judgment on the plaintiff's claim in quantum meruit for the amount determined by the jury to be the fair value of materials and labor provided by the plaintiff. [230-232] The judge in a civil action involving breach of a construction contract correctly denied the defendants' motion for judgment notwithstanding the verdict on the plaintiff's quantum meruit claim where the jury's verdict, on correct jury instructions, was supported by the evidence. [232-234] In a civil action, the judge properly denied the defendants' motion for a new trial based on alleged misinformation provided by the plaintiff, where the defendants did not show any surprise, mistake, or excusable neglect in explanation of why that allegation could not have been raised or explored before or during trial. [234] On a civil claim seeking damages under G. L. c. 93A for a construction company's unfair act in demanding a contractor obtain a multi-million dollar performance bond within a two day period over a weekend, the judge properly placed the burden on the contractor to prove that it could have obtained such a bond within a reasonable time and correctly concluded that the contractor had not sustained its burden of proof. [237-238] At the trial of a claim brought under G. L. c. 93A, in which the judge ruled that the defendant committed an unfair act but that the plaintiff did not establish any entitlement to damages on that account, the plaintiff's failure to plead expressly the specific act the judge found to be unfair did not prejudice the defendant. [238]
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1 Seaboard Surety Company.
Page 229
CIVIL ACTION commenced in the Superior Court Department on July 5, 1988.
The case was tried before Margot Botsford, J.
Peter J. Gagne for the plaintiff.
Deborah L. Thaxter for Suffolk Construction Company, Inc.
Walter R. May, Jr., for Seaboard Surety Company.
PERRETTA, J. These cross appeals arise out of a contract under which PDM
Mechanical Contractors, Inc. (PDM), was to install plumbing and mechanical
systems for Suffolk Construction Company, Inc. (Suffolk), in its construction
of a multi-building apartment complex known as the Arboretum Project. After
about six months and while work was in progress, Suffolk terminated PDM's
involvement with the project. PDM brought this action against Suffolk and its
surety, Seaboard Surety Company (Seaboard), asserting claims for breach of
contract, quantum meruit, and unfair acts under G. L. c. 93A, Section 11.
Suffolk counterclaimed, alleging a breach of contract by PDM. Because the jury
found for both PDM and Suffolk on their breach of contract claims, the judge
entered judgment for PDM on the quantum meruit recovery. Having reserved
decision on the c. 93A claim for herself, the judge found that Suffolk's unfair
act caused PDM harm, but not money damages, and awarded PDM counsel fees and
costs. We affirm.
1. Background. There was evidence to show that, in September of 1987, Suffolk
and PDM exchanged letters of intent memorializing their agreement that PDM
would engineer, prefabricate, and install interior plumbing and HVAC systems
for Suffolk at the Arboretum project for an agreed price of $2,470,000. The
parties also agreed that they would negotiate a formal contract and that PDM
would provide a performance bond in a form acceptable to Suffolk. Although work
began on the project, Suffolk did not submit a formal contract to PDM for
execution until early February, 1988. Shortly after receiving the contract and
while it was under review, PDM complained of Suffolk's untimeliness in
returning approved drawings and its failure to prepare the
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buildings adequately for installation of the internal plumbing systems. On
March 10, 1988, Suffolk terminated PDM's involvement with the project, accusing
it of poor workmanship, unsatisfactory design work, and failure to execute the
contract and to provide a bond. Although communication concerning PDM's work
continued, Suffolk, on March 18, 1988, a Friday, notified PDM that it was to
execute and deliver, by Monday, 11:00 A.M., the contract and the performance
bond. When PDM could not meet the deadline for providing the performance bond,
Suffolk terminated the contract and hired another subcontractor. Suffolk
produced evidence to show that it was required to pay the new subcontractor
$29,000 to correct some of PDM's work.
2. PDM's contract claim. In response to special questions, the jury found that
the parties had entered into a contract, that each was in breach of the
contract, that Suffolk's damages were $29,000, that PDM's damages were
$1,272,866, that PDM had tried in good faith to fully perform its work, that it
had substantially performed its work, and that the fair value of the labor and
materials provided by PDM was $248,160. Because of the jury's finding that PDM
was in breach of contract, the judge dismissed its count for contract damages
and entered judgment on PDM's claim in quantum meruit for the amount determined
by the jury to be the fair value of the labor and materials provided to
Suffolk.
PDM argues that, because the jury responded affirmatively to the special
question on the quantum meruit claim, whether it "[did] try in good faith
to fully perform its work . . . and did substantially perform its work,"
they also implicitly found that PDM's breach was "de minimis" and not
wilful. PDM contends that such a breach does not preclude a recovery for
contract damages. This argument finds no support in either the law or the
jury's answers to the special questions. "The law has long been settled in
this Commonwealth, in relation to building contracts, that a contractor cannot
recover on the contract itself without showing complete and strict performance
of all its terms, but that, failing in such complete performance of the
contract, he may recover on a<
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quantum meruit, if he can prove both substantial performance of the contract
and an endeavor on his part in good faith to perform fully, and the burden is
upon him to prove both." (Emphasis in original). Andre v. Maguire, 305
Mass. 515, 516 (1940). See also Hayeck Bldg. & Realty Co. v. Turcotte, 361
Mass. 785, 789 (1972).
As explained in J. A. Sullivan Corp. v. Commonwealth, 397 Mass. 789, 793
(1986): "Quantum meruit is a theory of recovery, not a cause of action. It
is a claim independent of an assertion for damages under the contract, although
both claims have as a common basis the contract itself. Recovery under this
theory is derived from the principles of equity and fairness and is allowed
where there is substantial performance but not full completion of the contract.
See generally 5 S. Williston, Contracts Section 805 (3d ed. 1961)."
(Emphasis in original). This theory of recovery is particularly applicable in
actions involving building contracts in order to avoid the harsh result of the
long established rule that there can be no recovery on a building contract in
the absence of complete performance. See Bowen v. Kimbell, 203 Mass. 364,
370-371 (1909); Divito v. Uto, 253 Mass. 239, 242-243 (1925); Hayeck Bldg.
& Realty Co. v. Turcotte, 361 Mass. at 789; J. A. Sullivan Corp. v.
Commonwealth, 397 Mass. at 796.
Neither instructions nor special questions were put to the jury concerning the
issues whether PDM's breach was wilful or "de minimis." It does not
appear that any of the parties lodged an objection to the judge's failure to
include these issues in either her instructions or the special questions. See
Service Publications, Inc. v. Goverman, 396 Mass. 567, 573 (1986). Moreover,
and contrary to PDM's argument, there is nothing in Service Publications,
supra, which suggests that any finding of a "de minimis," nonwilful
breach by PDM would entitle it to contract damages rather than quantum meruit
recovery. Rather, a "de minimis" breach would not necessarily
preclude a finding of substantial performance of the contract and, therefore,
recovery in quantum meruit. See Andre v. Maguire, 305 Mass. at 516; Albre
Marble & Tile Co. v. Goverman, 353 Mass. 546, 550 (1968); J. A.
Sullivan
Page 232
Corp. v. Commonwealth, 397 Mass. at 797. We see no error in the judge's refusal
to enter judgment for PDM on its count for damages for breach of contract.
3. PDM's quantum meruit recovery. On their cross appeals, Suffolk and Seaboard
argue that it cannot be said on any view of the evidence that PDM sustained its
burden of showing that it had substantially performed its work and had tried in
good faith to complete the contract. We see no error in the judge's denial of
their motion for judgment notwithstanding the verdict on PDM's quantum meruit
claim. There was evidence from which the jury could have found that some of
PDM's faulty workmanship was due to the plans and information it received from
Suffolk, that PDM remained on the job site trying to correct its work even
after Suffolk's notice of termination of the contract, that prior to
terminating the contract, Suffolk had paid $111,092 to PDM, and that it cost
Suffolk $29,000 to redo some of the work which PDM had done. Further, and as
noted by the judge in her memorandum accompanying the denial of the defendants'
motion, it is implicit in the award of $29,000 to Suffolk that the jury found
that PDM's breach occurred prior to Suffolk's termination of the
contract.2
Because it was PDM's position at trial that its good faith intention to perform
the contract fully was prevented by Suffolk's termination of the contract, the
instructions and special questions put to the jury correctly focused upon PDM's
substantial performance up to the time of any wrongful termination by Suffolk.
"The fact that a plaintiff has been unjustifiably ordered off the job
excuses him from proving substantial performance of the entire contract, as was
held in Frank Fitzgerald, Inc. v. Pacella Bros., Inc., 2 Mass. App. Ct. 240
(1974), but there is nothing in that case which suggests that a plaintiff is
excused from proving substantial performance and an intention completely to
perform up to the date that further performance is prevented by the
termination." C.C.
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2 Suffolk makes no argument on appeal
concerning the jury's determination of PDM's breach of contract or the damages
awarded to Suffolk on account of that breach.
Page 233
& T. Constr. Co. v. Coleman Bros., 3 Mass. App. Ct. 372, 375 (1975).
In arguing that PDM did not, as matter of law, substantially perform the
contract up to the time of the termination, the defendants have structured a
formula which arguably demonstrates that a high percentage of PDM's work was
poor.3 Specifically declining to give
decisive weight to "work completion percentages," the judge, instead,
looked to the jury's finding of substantial completion by PDM, the evidence,
and her jury instructions. Expressed as a percentage, the jury found that
ninety-two percent of the work done by PDM was successfully completed.4 Because it "was not beyond the province of
a jury" to find that such a ratio constituted "substantial
completion," the judge refused to set the verdict aside.
Moreover, there is nothing in the record appendix which reflects that the
defendants raised, by their motions for a directed verdict, proposed jury
instructions, or special questions, the right to have substantial performance
established in terms of a percentage. See Service Publications, Inc. v.
Goverman, 396 Mass. at 573; Bonofiglio v. Commercial Union Ins. Co., 411 Mass.
31, 34-36 (1991). The judge's conclusion that there was a reasonable basis for
the jury's
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3 PDM had completed the first phase of
its work in seven of the sixteen buildings and was performing the second phase
in building eleven when the contract was terminated. On appeal, the defendants
formulate the following: "The dollar amount of damages the jury awarded
Suffolk for PDM's breach, $29,000, related to the evidence of the actual cost
($29,685) of ripping out and replacing PDM's defective second phase work at
building 11. A comparison of the $29,000 of defective work to the $109,000
average per building cost for all of PDM's plumbing (total job cost of
$1,743,668 . . . divided by 16) illustrates that PDM's poor workmanship
constituted a substantial amount (27%) of the total work to be completed on
building 11."
4 In her instructions on the quantum
meruit claim, the judge told the jury to reduce the amount of any quantum
meruit recovery to which they might find PDM entitled by $111,092, the amount
of payments previously made by Suffolk to PDM. The amount of the previous
payments plus the jury's award, $248,160, was an implicit determination by them
that PDM's labor and materials had a fair value of $359,252. The extrapolation
of that value and the cost of the corrective work, $29,000, is a ninety-two
percent success ratio.
Page 234
finding on the quantum meruit claim is firmly supported by the evidence and the
jury instructions.
After the entry of the original judgment, the defendants brought a motion
seeking a new trial "with respect to all issues." The motion was
accompanied by an affidavit from PDM's former controller and vice president of
finance in which he states that he had been instructed to understate costs on a
job-cost report which he had prepared in anticipation of the litigation and
which was admitted in evidence. As explained in the affidavit, costs were
deflated for the purpose of inflating PDM's claim for lost profits on the count
for damages for breach of contract. The defendants argue on appeal from the
denial of the motion that, because of PDM's "fraud, misrepresentation and
chicanery," they are entitled to a new trial on the quantum meruit claim.
In denying the motion, the judge observed that the result of any
"deletion of cost items from PDM's report would reduce its recovery under
a quantum meruit theory." Aside from this observation, the judge found
that the defendants had not shown any surprise, mistake, or excusable neglect
in explanation of "why this claim could not have been raised and explored
before or during trial." The defendants' answer, that the judge abused her
discretion in expecting them "to depose all present and former management
employees of PDM," requires no discussion.
3. PDM's c. 93A claim. Soon after the jury returned their verdicts, the judge
took up PDM's numerous claims of unfair acts by Suffolk. The judge found for
Suffolk on all but one: its demand that PDM execute a formal contract and
obtain payment and performance bonds within two days, a weekend. Although the
judge concluded that Suffolk would have the right to terminate the contract if
PDM did not timely produce the bonds, she found that on the existing
circumstances, created in part by Suffolk, "it would have been impossible
for PDM to deliver the requisite bonds" within the time period set by
Suffolk. Those circumstances were that the surety company with which PDM did
business, United States Fidelity and Guaranty Co. (Fidelity), required an
executed contract
Page 235
before it would agree to provide any bonds. There was undisputed evidence that
because the contract was executed five months after work had started, Fidelity
"was certain to ask questions and review the contract very
carefully."
The judge initially did not accept Suffolk's argument that, irrespective of its
time demands, PDM's financial difficulties presented an independent and
insurmountable obstacle to its providing the bond to Suffolk. She found that
the "evidence strongly suggested" that PDM would not have had a
problem in obtaining bonds from Fidelity had the contract been timely executed
in the fall of 1987, or at least by the end of that year. Moreover, even if
Fidelity would not have provided the bond in March, 1988, "it may well
have been possible for PDM to obtain bonds from another company" had more
time been allowed by Suffolk. Concluding that Suffolk's time frame was
commerically unreasonable, oppressive, and a breach of its implied contractual
covenant of good faith and fair dealing, the judge awarded PDM damages (the
contract price less deductions for its cost of performance, its quantum meruit
recovery, the amount of previous payments by Suffolk, and the jury's award to
Suffolk for the cost of redoing some of PDM's work), counsel fees and
costs.
Suffolk responded to the judge's decision with a motion to vacate the award and
amend the findings on the ground, among others, that PDM had failed to prove
that it could have obtained the bond within a reasonable time after the
expiration of the deadline imposed by Suffolk. Because the judge had decided
the c. 93A claim soon after the jury's verdicts and without the benefit of a
trial transcript, she determined that it would be helpful to schedule an
additional hearing "where each party can present its view on what the
evidence in the record shows." Subsequent to that hearing and after having
been provided with pertinent portions of the trial transcript, the judge
concluded that PDM had not "established the necessary causal link between
the lost profits and related damages it claims and the unfair or deceptive acts
of Suffolk." She vacated her damage award, leaving counsel fees and costs
in place, and entered an amended
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judgment from which PDM, Suffolk, and Seaboard Surety Company appeal.
In vacating her previous award, the judge relied upon the following evidence.
Fidelity had declined to write three bonds for other PDM projects in December,
1987. It reversed this decision only after PDM's principal agreed to provide an
approved personal financial statement. This statement was made a requirement
for all further bond applications from PDM because the capital by which it was
meeting its obligations and performing its contract work was being provided by
contributions and loans from PDM's principal.
PDM never applied to Fidelity, its sole surety since 1973, for the bond on
Suffolk's project. The judge identified early May, 1988, as the period during
which PDM would have been seeking the Suffolk bond had it been given a
reasonable opportunity to do so. About this same time, however, Fidelity had
declined to bond PDM on another project because of the principal's failure to
provide the required personal financial statement. Moreover, it appeared to
Fidelity that PDM was having problems on several of its projects. The judge
concluded that the evidence was insufficient to show that PDM could have
obtained the bond from Fidelity even had Suffolk given PDM a reasonable time in
which to do so.
Further, the judge was not persuaded on the evidence that PDM could have
obtained the bond from alternative sources. After Fidelity refused PDM's
request for bonds in May, PDM's bonding agent attempted, without success, to
secure other bonds from three or four different surety companies. After Suffolk
terminated its contract, PDM did not place any bonds until October. At that
time, a new agency gave PDM bonding authority in a limited amount. These bonds,
provided seven months after Suffolk's demand in March, were in amounts smaller
than that required for Suffolk's project. PDM made no showing that its limited
ability to place bonds was due to its relationship with Suffolk. The judge
concluded that PDM failed to show that it could have obtained the necessary
bonds from Fidelity or another source within a reasonable amount of time.
Page 237
PDM relies upon the judge's original decision, wherein she concluded that PDM
might have been able to obtain the bonds but for Suffolk's imposition of an
unfair time restraint, and argues that her subsequent conclusion is based upon
an erroneous placement of the burden of proof on PDM to show that it would have
been able to obtain the bonds within a reasonable period of time. PDM claims
that the judge's conclusion may well have been different had she correctly
placed the "burden on Suffolk to prove the negative."
We begin with the proposition that "[i]n the absence of a causal
relationship between the alleged unfair acts and the claimed loss, there can be
no recovery." Massachusetts Farm Bureau Fedn., Inc. v. Blue Cross of
Mass., Inc., 403 Mass. 722, 730 (1989), citing International Fid. Ins. Co. v.
Wilson, 387 Mass. 841, 850 (1983), and Kohl v. Silver Lake Motors, Inc., 369
Mass. 795, 800 (1976). The only act by Suffolk which the judge found to be
unfair was its demand that PDM obtain the required bond over a weekend, rather
than within a reasonable period of time. Having received the value of its labor
and materials on its quantum meruit count, PDM sought to recover its lost
contract profits on its c. 93A claim.
PDM does not, and cannot, quarrel with the judge's premise that, because of the
size of the Arboretum project, failure of PDM to procure the bond within a
reasonable time after executing the formal contract would have entitled Suffolk
to terminate PDM's services on the project. In view of the nature of the act
found by the judge to be unfair, we see no error in her conclusion that PDM's
ability to obtain a bond within a reasonable period of time was material to its
right to recover damages in the amount of its lost contract profits under c.
93A. In these circumstances, we think the judge correctly placed the burden
upon PDM to show that it could have met the conditions of the contract, rather
than requiring Suffolk to prove that PDM lacked the ability to obtain the bond.
Cf. Kanavos v. Hancock Bank & Trust Co., 395 Mass. 199, 203-205 (1985).
Finding no error in the judge's conclusion that PDM did not sustain its burden
of
Page 238
proof, we need not discuss PDM's claim that it was entitled to multiple
damages.
There is no argument by Suffolk on its cross appeal that the "absence of
an entitlement to money damages precluded an award of attorneys' fees and costs
under c. 93A, and we do not consider that issue." Rex Lumber Co. v. Acton
Block Co., 29 Mass. App. Ct. 510, 520 (1990), citing Jet Line Servs., Inc. v.
American Employers Ins. Co., 404 Mass. 706, 717-718 (1989). Suffolk's only
allegation is that it was prejudiced by PDM's failure to plead expressly the
specific act found by the judge to be unfair, the imposition of a commercially
oppressive time restraint in which to secure the required bond. As explained by
the judge in considering this contention of "unfair surprise" on
Suffolk's motion to amend her original findings, the claim of prejudice had
substance only in respect to its ability to meet PDM's evidence of lost
profits. Potential liability under c. 93A by reason of the circumstances of the
termination of the contract, however, was known from the outset. We agree with
the judge that any possible prejudice to Suffolk was cured by her ultimate
conclusion on damages.
Amended judgment affirmed.
Page 239
END OF DECISION