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Jenkins, Inc. v. Walsh Bros., Inc.
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MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2001 ME 98
Docket: Yor-00-447
Argued: January 10, 2001
Decided: June 29, 2001
Panel:WATHEN, C.J., and CLIFFORD,{1} RUDMAN, SAUFLEY, ALEXANDER, and CALKINS,
JJ.
JENKINS, INC.
v.
WALSH BROTHERS, INC.
SAUFLEY, J.
[¶1] Walsh Brothers, Inc., the general contractor for the construction
of a new facility at the University of New England, appeals from a judgment
entered in the Superior Court (York County, Brennan, J.) following a jury-
waived trial in which the court determined that Walsh was responsible to
Jenkins, Inc., a drywall subcontractor, for additional payments related to the
project. Jenkins cross appeals, contending that the court erred in its
damage calculation and that it is entitled to additional remedies. We affirm
in part and vacate and remand in part.
I. BACKGROUND
[¶2] Early in 1995, Walsh was awarded the general contractor job for
the construction of the Center for Health Sciences at the University of New
England in Biddeford. Shortly thereafter, Jenkins submitted a bid to Walsh
for the drywall portion of the project. The Jenkins bid totalled
approximately $479,000,{1} and both parties understood that Walsh accepted
Jenkins's proposal.
[¶3] Although Walsh sent a contract in the A.I.A. standard form to
Jenkins, Jenkins never signed the contract. Nevertheless, Jenkins began
work on the project in October 1995. The court found that the parties had
in fact entered into an agreement and that Walsh had agreed to provide
Jenkins with: "1) a reasonably complete design, 2) proper working
conditions for drywall work, 3) proper management of the sequence of work
by various trades, and 4) reasonably large and uncluttered work areas so that
Jenkins could work productively."
[¶4] The drywall work was originally scheduled to be finished in the
spring of 1996; however, difficulties due to design flaws, site excavation, and
weather conditions caused the project to fall behind schedule. In an
attempt to finish the project on time, Walsh altered the work schedule, and
Jenkins performed services at the project that had not been contemplated
in the original agreement. Because of concerns with delays, UNE agreed to
use "premium pay" as compensation to accelerate the work, and Jenkins
agreed to participate in the program. In addition, as changes from the
original plan occurred, Jenkins submitted change orders to be authorized
for reimbursement of the costs attributed to the changes.{2}
[¶5] The court described the ensuing events as follows:
As September approached, the great bulk of Jenkins' work
had been completed. Some aspects . . . remained incomplete
because other trades had not yet finished the work necessary to
permit the drywall work to go forward. Further, punch-lists had
not been finalized. Jenkins reduced the size of its workforce on
site waiting for an opportunity to finish its work. At this time
the disputes giving rise to this trial came to the forefront.
Jenkins claimed that it was entitled to significant payments for
overtime and change order work. Walsh disputed these claims
and refused further payment to Jenkins. The parties came to an
impasse: Walsh decided against further payment and Jenkins
ceased work on the project.
Jenkins then filed suit against Walsh and others, seeking inter alia recovery
under theories of breach of contract (count II), quantum meruit (count III),
and the Construction Contracts Statute,{3} 10 M.R.S.A. §§ 1111-1118 (1997)
(count IV).{4} Walsh filed a counterclaim asserting claims of unjust
enrichment and promissory estoppel.
[¶6] After a nonjury trial, in a decision and order in anticipation of
judgment, the court concluded that: "[A]lthough the parties agreed to a
lump-sum contract at the outset, Walsh, although not through its fault alone,
breached the contract." The breach occurred "no later than January or
February, 1996" due to Walsh's failure "to comply with its contractual
obligations to Jenkins concerning working conditions at the project." After
the breach, the court determined that: "Walsh requested Jenkins to
continue its work and Jenkins agreed. This was a quasi-contractual
relationship and Jenkins is entitled to recover the fair value of the services
provided, including overtime, according to industry customs." Regarding
Walsh's counterclaim, the court concluded that "Jenkins substantially
completed its work and would have fully completed the work had not this
unfortunate dispute erupted." Thus, "Jenkins did not breach by walking off
the job and Walsh's counterclaims fail because Jenkins was ready, willing
and able to complete the work had Walsh not unreasonably denied any
further payment to Jenkins."
[¶7] The court calculated the damages due Jenkins in several steps.
First, it found that Jenkins was entitled to the originally agreed upon
compensation in the amount of $479,000. It next concluded that Jenkins
was entitled to additional labor costs attributed to premium pay and change
orders. The court determined the increased cost of labor by accepting
Jenkins's total claimed labor costs and subtracting from that the amount of
labor the court found to have been factored into the original bid price.{5} It
then reduced those remaining labor costs of $348,100, based on its
determination that those costs were obtained through the application of an
inflated premium pay rate. Instead of Jenkins's rate of $38 per hour, the
court calculated premium pay "according to customary industry standards
using 'certified payrolls'" and determined that Jenkins could "recover a
maximum of 58% of the labor costs claimed above the original bid." Thus,
the court found the total labor costs (beyond the contract price) to be
$201,900. To this number, the court added a profit and overhead factor of
30%, or $60,600. The total of those calculations, $262,500, plus the
original bid price, constituted the reasonable value of the work performed.
[¶8] The combined contract and quantum meruit damages totalled
$741,500. From that amount the court deducted the amount that Walsh had
previously paid Jenkins, as well as the amount that Walsh had paid to clear a
lien filed against Jenkins, a total of $541,200, yielding an amount still due of
$200,300.
[¶9] Next, the court concluded that Jenkins was entitled to relief
pursuant to the prompt payment statute, 10 M.R.S.A. §§ 1111-1118.
Pursuant to section 1118(4), and considering the factors articulated in
Poussard v. Commercial Credit Plan, Inc. of Lewiston, 479 A.2d 881 (Me.
1984), the court awarded Jenkins attorney fees in the amount of $125,000.
Finding the precise calculation of the interest and penalties to be awarded
pursuant to the prompt payment statute to be complex, the court requested
that the parties submit further briefs to address these issues.
[¶10] During the hearing on interest and penalties, the court found
that Walsh violated the "spirit" of the prompt payment statute, but, because
the court could not determine what had been billed or invoiced at what
time, it declined to apply the stepped up interest rate required by the
prompt payment statute. Instead, the court determined that the "normal
pre and post judgment [interest] remedies" should be applied pursuant to
14 M.R.S.A. §§ 1602(1)(B), 1602-A(2) (Supp. 2000), except that as a penalty
the prejudgment interest should run from October 1, 1996, (date the court
determined that Walsh had an obligation to make payment to Jenkins)
rather than from the date that the complaint was served.
[¶11] Additionally, in accordance with section 1118(2) of the prompt
payment statute, the court attached a one percent penalty per month on the
$200,300 owed to Jenkins, beginning on October 1, 1996.{6} The court then
entered a judgment in favor of Jenkins and denied Walsh's counterclaims.{7}
Walsh filed a timely notice of appeal pursuant to M.R. Civ. P. 73 and 14
M.R.S.A. § 1851 (1980).
II. DISCUSSION
A. Existence of the Contract and Breach
[¶12] The parties agree that they began the project pursuant to an
express agreement, notwithstanding their failure to enter into a final
written contract.{8} Walsh does not dispute the factual findings regarding the
breach; rather, it asserts, in essence, that the parties' entire relationship
was controlled by the contract because any breach on its part was not
material to the contract.
[¶13] "A material breach 'is a non-performance of' a 'duty that is so
material and important as to justify the injured party in regarding the whole
transaction as at an end.'" Associated Builders, Inc. v. Coggins, 1999 ME 12,
¶ 6, 722 A.2d 1278, 1280 (quoting Down East Energy Corp. v. RMR, Inc.,
1997 ME 148, ¶ 10, 697 A.2d 417, 421). Whether a material breach has
occurred is a question of fact that we review for clear error. Forrest Assocs.
v. Passamaquoddy Tribe, 2000 ME 195, ¶ 9, 760 A.2d 1041, 1044. "A trial
court's factual finding is clearly erroneous if there is no competent evidence
in the record to support it." VanVoorhees v. Dodge, 679 A.2d 1077, 1080
(Me. 1996) (internal quotation marks omitted).
[¶14] The record supports the trial court's findings regarding the
materiality of Walsh's breach. There was evidence that the drawings for the
project were often incorrect and lacked sufficient information; the project
conditions were not proper for installing drywall; and the drywall work
began before there was a "tight roof" on the building. Because there is
competent evidence to support the court's determination that Walsh
materially breached the express agreement by failing to maintain the
necessary working conditions at the project, Jenkins was justified in
"regarding the whole transaction as at an end" and was not required to
continue to perform pursuant to the terms of the express agreement. See
Associated Builders, Inc., 1999 ME 12, ¶ 6, 722 A.2d at 1280.
B. Quantum Meruit
[¶15] After finding a material breach, the court concluded that the
parties "continued to work together to try to complete the project on
schedule" in a quasi-contractual relationship. "Quantum meruit describes
the extent of liability under a quasi-contract theory . . . ." Forrest Assocs.,
2000 ME 195, ¶ 11, 760 A.2d at 1045. "To sustain a claim in quantum
meruit, a plaintiff must establish that '(1) services were rendered to the
defendant by the plaintiff; (2) with the knowledge and consent of the
defendant; and (3) under circumstances that make it reasonable for the
plaintiff to expect payment.'" Id. (quoting Carvel Co. v. Spencer Press, Inc.,
1998 ME 74, ¶ 12, 708 A.2d 1033, 1036). "Determinations concerning
these factors are questions of fact and are reviewed for clear error." Id.
[¶16] The court found that "Jenkins rendered services to Walsh at
Walsh's request and with its knowledge and consent under circumstances
making it reasonable for Jenkins to expect payment." The record reflects
that after the breach in January or February of 1996, Jenkins continued to
do drywall work for Walsh, Walsh knew of the drywall work that Jenkins was
performing and consented, and it was reasonable for Jenkins to expect
payment for the drywall work. Thus, there is ample evidence in the record
to support the court's finding regarding Jenkins's entitlement to recover in
quantum meruit.
C. Damages
[¶17] The court awarded Jenkins the $479,000 agreed to when
Walsh accepted Jenkins's original proposal, plus an amount representing
the reasonable value of the additional services Jenkins rendered that went
beyond the scope of the parties' original expectations. "The measure of
recovery in quantum meruit cases is the reasonable value of the services
provided." Paffhausen v. Balano, 1999 ME 169, ¶ 9, 740 A.2d 981, 983
(internal quotation marks omitted). Both parties challenge the court's
determination of the reasonable value of the work performed after the court
declared a breach of the contract.{9}
[¶18] An award of damages will not be disturbed "unless there is no
basis in the record to support it." Putnam v. Albee, 1999 ME 44, ¶ 10, 726
A.2d 217, 219-20. "[R]easonableness, not mathematical certainty, is the
criteria for determining whether damages were awarded appropriately."
Down East Energy Corp., 1997 ME 148, ¶ 7, 697 A.2d at 420. Furthermore,
[T]he triers of facts are allowed to act upon probable and
inferential as well as direct and positive proof. They are
permitted to make the most intelligible and probable estimate
which the nature of the case will permit, given all the facts and
circumstances having relevancy to show the probable amount of
damages suffered. A monetary award based on a judgmental
approximation is proper, provided the evidence establishes facts
from which the amount of damages may be determined to a
probability.
Id. (citing Merrill Trust Co. v. State, 417 A.2d 435, 440-41 (Me. 1980)).
[¶19] Determining the reasonable value of the work performed after
the point of the breach was not an easy task. The difficulty in following the
evidence presented by the parties was articulated by the court as follows:
"Frankly, I have struggled to sort through the enormous volume of complex
and often contradictory evidence. While perhaps unsatisfactory to all, it
represents my view of a fair and reasonable result."
[¶20] Although Jenkins agrees with most of the court's
determinations related to damages, it asserts that the court erred in one
aspect of the damages determination. Specifically, Jenkins argues that the
court misapprehended its method of calculating labor costs and therefore
erred in reducing the labor costs to account for its conclusion that Jenkins's
numbers were inflated.
[¶21] Jenkins had the burden of proving the value of its services. See
id. It therefore bore the risk of failing to provide the court with clear and
concise evidence in support of its position. The evidence presented to the
court was often contradictory and unclear. The court was not compelled to
accept Jenkins's analysis or representations regarding its claim for
premium pay or its calculation of its labor costs. See id. ¶ 8, 697 A.2d at
420. The court's calculation of the reasonable value of the services provided
by Jenkins, though not mathematically certain, was reasonable and
supported by the record. See id. ¶¶ 7-8, 697 A.2d at 420; see also
Paffhausen, 1999 ME 169, ¶ 11, 740 A.2d at 983.
[¶22] Moreover, although Walsh challenges the court's findings and
its reliance on the testimony of Jenkins's representatives, the record
supports the findings.{10} The court acted well within the bounds of its
discretion in crediting, in part, the testimony of Jenkins's representatives
and in relying on that testimony in calculating the additional labor costs the
court attributed to premium pay and change orders. The fact-finder "has
the prerogative to selectively accept or reject testimony and to combine
such testimony in any way." State v. Ricky G., 2000 ME 190, ¶ 5, 760 A.2d
1065, 1067 (internal quotation marks omitted); accord VanVoorhees, 679
A.2d at 1080 (stating that "[t]he determination of the credibility of the
witnesses is a matter solely within the province of a presiding judge acting
as the finder of fact"). We do not disturb the court's award of contract and
quantum meruit damages.
on to the rest of this opinion
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