C.A. No.: PC
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
PROVIDENCE, SC.
Filed August 8, 2007
RAYMOND LABELLE
v.
MALRY L.P., alias
d/b/a the HI-HAT
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SUPERIOR COURT
C.A. No.: PC 04-4077
DECISION
GIBNEY, J. Plaintiff Raymond LaBelle (“LaBelle”) seeks a money judgment from Defendant
Malry L.P. d/b/a the Hi-Hat (“the Hi-Hat”) for breach of contract. The Hi-Hat defends this
action on grounds of failure of consideration, unclean hands, and payment. The Defendant has
also filed a three count counterclaim—breach of contract, misrepresentation, and unjust
enrichment—for which it seeks compensatory damages, consequential damages, attorney’s
fees, interest, and costs. Jurisdiction is pursuant to G.L. 1956 §§ 8-2-13 and 8-2-14.
`Travel of the Case
This Court, sitting without a jury, heard this breach of contract action. LaBelle, Larry
Friedlander (“Friedlander”), the general partner of the Hi-Hat, and an expert witness retained
by the Hi-Hat provided testimony.
The Hi-Hat, by and through its general partner, Friedlander, and LaBelle entered into a
contract for the exchange of the performance of services for money.1 Specifically, LaBelle,
who owns and operates PC Pro Systems, agreed to design and install a point-of-sale (“POS”)
computer network system to outfit Friedlander’s new entertainment venue, the Hi-Hat, for
1
Malry, L.P. d/b/a the Hi-Hat is the only named defendant in this action. Larry Friedlander was not sued in his
individual capacity; however, for purposes of convenience, the facts include his actions as the general partner of
the Hi-Hat.
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business operations. In return, Friedlander agreed to compensate LaBelle for his services by
remitting payment of approximately $38,000. Although each side had his or its own version of
events, the parties agreed on the terms of the oral contract.
LaBelle installed the computer system in September of 2003, just after the Hi-Hat’s
grand opening on Labor Day weekend. Friedlander made a down payment of $17,000, with
payment in full to be made upon completion of the performance. However, Friedlander failed
to pay the full balance on the contract.
Soon thereafter, the computer system began to
experience regular failures, and LaBelle refused to service the system until he was paid in full.
Sometime during the end of September and early October, Friedlander maintains, he
informed LaBelle that he could not afford to pay him in one lump sum as promised.
Friedlander testified that he spent 33% over budget for the opening of the Hi-Hat and had
outstanding bills with a number of vendors. To cope with the situation, Friedlander reasons, he
made small payments, as he could afford, to each of the vendors, including Labelle.
Specifically, Friedlander testified that after his initial $17,000 payment, he sent payments,
generally in $1000 increments, to Labelle every couple of weeks. Enclosed with each payment
was a note indicating that more payments would be forthcoming.
Soon after its installation, the computer system began to malfunction periodically.
From October to December 2003, LaBelle serviced the system and accepted the small
payments made by the Defendant. LaBelle even included finance charges on each of the four
invoices to account for the Defendant’s overdue payment. By the end of December 2003,
however, LaBelle sent Friedlander a letter demanding immediate payment on the balance of the
contract and he further refused to continue servicing the system until he received payment. In
January of 2004, the POS software system was malfunctioning, which Friedlander claims
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slowed down the entire operation of the restaurant, and LaBelle still refused to assist. LaBelle
admits that he spoke to the company which had manufactured the software he used for the HiHat’s system and advised it that Friedlander had not paid him for his work. As a result, the
software company refused to provide technical support to the Hi-Hat, and Friedlander hired
Fred Medeiros of Ocean State Business Solutions, Inc. (“Ocean State”) to repair the system. In
response to LaBelle’s actions, Friedlander stopped making payments on the contract in mid2004.
By that time, Labelle had received approximately $10,500 in payments from
Friedlander, in addition to the $17,000 down payment, for a total of $30,500 on the
approximately $38,000 contract not including finance charges.
At trial, Friedlander called Mr. Medeiros to testify regarding his repair work to the POS
system.
Mr. Medeiros’ sixteen years of experience in the field of computer hardware
technology and his last twelve years as the owner of Ocean State qualified him to testify.
Based on his extensive repair work to the system, Mr. Medeiros was of the opinion that
Plaintiff had not used quality brand hardware to outfit the system. He attributed the frequent
failures to the inferior quality components of the system, in particular, the motherboard and the
driver.
Regarding the cost of repairs, Mr. Medeiros explained that some of the faulty
equipment was replaced altogether, despite the fact that it was under warranty, because Plaintiff
refused to assist with the warranties registered in his name. Plaintiff likewise failed to release
the access codes for the computer system. As such, the repairs were further delayed when Mr.
Medeiros was unable to bypass a security system installed by Plaintiff.
Mr. Medeiros
explained that he recommended that Mr. Friedlander hire another company, POS Technologies,
Inc., to handle the POS software system, since it is an area beyond his expertise. Friedlander
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and Mr. Medeiros both testified concerning the unusual breakdown of five out of the eleven
hard drives, as well as the system hub, in less than eight months after installation, all of which
ultimately had to be replaced.
LaBelle refuted Mr. Medeiros’ testimony by noting that the system he installed is still in
operation today, over three and one-half years later. Moreover, LaBelle points out that Mr.
Medeiros has never installed a POS system in his business; therefore, he cannot accurately
assess the system’s quality. LaBelle also testified that he warned Friedlander and the general
manager to provide ventilation for the system components—the hard drives located in
cabinets—which ultimately overheated and crashed.
To date, the Hi-Hat has paid $30,500 to Plaintiff. The balance of $7434.36 remains
outstanding. Plaintiff contends that $7434.36 is owed on the contract; however, he seeks
$9416.52, which includes $1982.16 in finance charges for nonpayment. Friedlander provided
the Court with the invoices from Mr. Medeiros’ company, Ocean State Business Solutions, and
the software company, POS Technologies, Inc. Friedlander submits and the invoices reflect
that the Hi-Hat paid and/or owes $9505.12 to Ocean State Business Solutions and POS
Technologies, Inc. for repairs to the POS computer system originally installed by LaBelle.
Standard of Review
In a non-jury trial, the trial justice acts as the trier of fact and law. Hood v. Hawkins,
478 A.2d 181, 184 (R.I. 1984).
The trial justice balances and considers the evidence,
determines the credibility of the witnesses, and draws appropriate inferences. Id. “The task of
determining the credibility of witnesses is peculiarly the function of the trial justice when
sitting without a jury.” Walton v. Baird, 433 A.2d 963, 964 (R.I. 1981). It is, after all, “the
judicial officer who actually observe[s] the human drama that is part and parcel of every trial
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and who has had the opportunity to appraise witness demeanor and to take into account other
realities that cannot be grasped from a reading of a cold record.” In the Matter of the
Dissolution of Anderson, Zangari & Bossian, 888 A.2d 973, 975 (R.I. 2006).
Analysis
The parties agree that they entered into an oral contract, pursuant to which services
were to be performed in exchange for monetary consideration. “‘A contract is an agreement
which creates an obligation. Its essentials are competent parties, subject matter, a legal
consideration, mutuality of agreement, and mutuality of obligation.’” Lamoureux v. Burrillville
Racing Ass'n., 91 R.I. 94, 98, 161 A.2d 213, 215 (R.I. 1960) (quoting 17 C.J.S. Contracts § 1 at
310). Because the instant contract called for Plaintiff to install a POS system that could be and
was completed within the span of one year, the contract for services does not fall within the
statute of frauds and is enforceable without a writing.
See R.I. Gen. Laws § 9-1-4.
Accordingly, said contract is a legally binding agreement, replete with consideration on both
sides.
A.
Varying of Payment Terms
With respect to this agreement, Plaintiff asserts that Defendant breached the contract by
failing to remit full payment upon completion of performance. Citing the financial woes
associated with the opening of a business, the Defendant admits that it was unable to tender the
balance in accordance with the contract terms. Mr. Friedlander testified that he paid almost
half of the contract price in his down payment, and continued to make installment payments of
$1000, up to the point where Plaintiff ceased to continue servicing the system, and the software
company refused to provide technical support based on comments made by the Plaintiff.
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“Where one furnishes services under a contract at the request of another and with the
expectation that he will be paid for his services[,] he is entitled to payment in accordance with
the terms of the contract.” First Hartford Realty Corp. v. Ellis, 181 Conn. 25, 36 (Conn. 1980).
In fact, as a general rule “[i]t is a material breach of a contract to fail to pay any substantial
amount of the consideration owing under the contract” Williston on Contracts, Vol. 23 § 63:16
(4th ed. 2000); see generally Iannuccillo v. Material Sand and Stone Corp., 713 A.2d 1234,
1239-1240 (R.I. 1998) (In a construction contract context, “the failure of a party to pay
installment payments on a construction contract is a material breach of the contract and excuses
further performance by the nonbreaching party.”) Extenuating circumstances, however, may
preclude the application of this rule. For example, the parties’ failure to strictly enforce the
terms of the contract during the course of performance prohibits either party from maintaining
an action for breach for lack of compliance with those terms. 17A Am Jur. 2D CONTRACTS §
635.
Friedlander maintains that he sent partial payments to Plaintiff—as evidenced by the
notes he sent with each payment indicating that more payments were forthcoming—with the
hopes that Plaintiff would give the Hi-Hat an extension of time due to its precarious financial
situation. Friedlander reasonably believed he reached an understanding with Plaintiff as his
payments were negotiated, Plaintiff continued to provide technical support, and Plaintiff and
his wife ate and drank at the Hi-Hat free of charge.
Our Supreme Court has previously held that a party to a contract may waive his or her
right to enforce the payment terms on a contract by accepting an alternate payment method,
although the entire amount remains due. See Mackenzie v. Desautels, 62 R.I. 135, 3 A.2d 660
(1939) (plaintiff allowed the defendants to make “reasonable efforts” to pay the monthly
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payments on a note, thereby, waiving her right to enforce the payment terms). The Mackenzie
Court acknowledged that “[t]here is merely the averment of a promise by the plaintiff to waive
the payment of the note according to its tenor, if the defendants would make a reasonable effort
to pay the interest and monthly installments in such sums and manner as their circumstances
would permit, and no averment of any corresponding new promise on the part of the defendants
which would be any detriment to them.” Id. at 140, 3 A.2d at 663.
Although here there was no averment of a promise by plaintiff to forego the payment
terms, Plaintiff, in fact, impliedly waived his right to enforce the payment terms by accepting
the Defendant’s $1000 payments.
“An implied waiver exists when there is either an
unexpressed intention to waive, which may be clearly inferred from the circumstances, or no
such intention in fact to waive, but conduct that misleads one of the parties into a reasonable
belief that a provision of the contract has been waived.” 17A Am Jur. 2D CONTRACTS § 636.
Plaintiff accepted the modified payment arrangement, as indicated by his negotiation of the
payment checks and continued technical support on the system from October to December
2003. Additionally, Plaintiff unilaterally applied interest charges to the Defendant’s account.
Here, Plaintiff “‘pursued such a course of conduct as to sufficiently evidence an intention to
waive a right.’” Sturbridge Home Builders, Inc. v. Downing Seaport, Inc., 890 A.2d 58, 65
(R.I. 2005) (quoting Ryder v. Bank of Hickory Hills, 146 Ill. 2d 98, 585 N.E.2d 46, 49 (Ill.
1991)); see also 17A Am Jur. 2D CONTRACTS § 636 (“An unexplained delay in enforcing a
contract may constitute evidence of waiver and acquiescence in the manner of the other party’s
performance.”) By repeatedly accepting the Defendant’s payments instead of filing a cause of
action within a reasonable time after he was informed that the Defendant could not pay for the
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services in accordance with the contract terms, Plaintiff waived his right to demand the full
balance according to the contract terms.
Insofar as the Defendant breached the contract by deviating from the payment terms,
“[a] contracting party who, with knowledge of a breach by the other party, receives money in
the performance of the contract, waives the breach.” 17A Am Jur 2D CONTRACTS § 639. As
such, the contract survived the waiver of payment terms. By the time Plaintiff demanded the
full balance on the contract by letter to the Defendant in December 2003, the Defendant had
already called on the Plaintiff numerous times to make repairs to the system. The Defendant
was not compensating Plaintiff for these visits, as the Defendant testified that he expected that
Plaintiff would “stand behind the equipment.” Further testimony revealed that the parties had
not made any agreements regarding repairs to the system or warranty work. As a result, the
parties reached an impasse as the Defendant expected the frequent repairs to the system to be
included in the contract price, which was already due and owing, and Plaintiff refused to repair
any further defects until the balance was paid in full. The within breach of contract claim and
counterclaim followed.
B.
Substantial Performance
With respect to the breach of contract action, the Court must determine “whether
[plaintiff] has substantially performed or materially breached its contractual obligations.”
Women’s Development Corp. v. City of Central Falls, 764 A.2d 151, 158 (R.I. 2001) (citing
National Chain Co. v. Campbell, 487 A.2d 132, 135 (R.I. 1985)). To prevail on his breach of
contract claim, Plaintiff must first show that he substantially performed his obligations under
the contract. Williston on Contracts, Vol. 15 § 44:52; see also VRT, Inc. v. Dutton-Lainson
Co., 530 N.W. 2d 619, 623 (Neb. 1995); Wasserburger v. American Scientific Chemical, Inc.,
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514 P.2d 1097, 1099 (Ore. 1973). “Thus, to establish substantial performance under a contract,
any deviation from the contract must be relatively minor and unimportant.” Williston on
Contracts, Vol. 15 § 44:54. The Court, as fact-finder, must determine whether a party has
substantially performed after considering the totality of the evidence, the credibility of the
parties’ testimony, and the purpose of the contract. See National Chain Co. v. Campbell, 487
A.2d 132, 135 (R.I. 1985). Upon a showing of substantial performance, Plaintiff is entitled “to
recover the contract price less the amount needed by the party benefiting from that performance
to remedy any defects in the work.” Butera v. Boucher, 798 A.2d 340, 346 (R.I. 2002).
“[A]s a general rule, there is implied in every contract for work or services a duty to
perform it skillfully, carefully, and diligently and in a workman-like manner.” Davis v. New
England Pest Control Co., 576 A.2d 1240, 1242 (R.I. 1990). Plaintiff agreed to install a POS
computer system and provide technical support to the Hi-Hat.
The system, which was
operating by the end of September 2005, experienced failures within several months. In
December 2005, Plaintiff refused to further remedy the problems as more than $8000 remained
outstanding on the $38,881 contract.
Frederick Medeiros credibly testified regarding the repair work to the system. Mr.
Medeiros testified that he replaced a number of the hard drives and the system hub, and
completed other repair work on the system from January through May 2006. He blamed the
poor quality of the hardware components for the system failures. Mr. Medeiros also serviced
the software system, and urged the Defendant to hire a company specializing in that particular
software, POS Technologies, Inc. to make repairs to the software system. Regarding the impact
on the business’ day to day operations, Mr. Friedlander testified that the problems with the
system often slowed down their operations and were a constant nuisance to his employees. The
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Defendant admitted, however, that the POS system, though problematic, was never completely
replaced, and remains in use today.
Considering the totality of the evidence before it, the Court finds sufficient evidence to
conclude that Plaintiff substantially performed on the contract. Accordingly, Plaintiff is entitled
to partial recovery, subject to a diminution in value for the defects repaired by the Defendant.
As such, both parties have partially prevailed on their claims. Therefore, the Defendant’s
remaining counterclaims for misrepresentation and unjust enrichment fail and need not be
addressed by the Court.
C.
Measure of Damages
Given the unique circumstances of each breach of contract case, the trial justice is given
wide latitude to determine damages based on the particular facts in each cause of action.
Beverly Hills Concepts v. Schatz & Schatz, 717 A.2d 724, 735 (Conn. 1998). “The amount of
damages sustained from a breach of contract must be proven with a reasonable degree of
certainty, and the [prevailing party] must establish reasonably precise figures and cannot rely
upon speculation.” Nat’l Chain Co. v. Campbell, 487 A.2d 132, 134-135 (R.I. 1985).
Regarding Plaintiff’s underlying action for breach of contract, the measure of damages
is calculated to reflect that Plaintiff substantially performed, albeit with reservations, his part of
the agreement. The contract amount totaled approximately $38,000. Plaintiff admits that the
Defendant remitted payment totaling $30,500. Plaintiff submits that the Defendant owes him
$9416.52 on the unpaid invoices, which includes $1982.16 in finance charge fees.
There is no evidence that the parties’ oral agreement encompassed the imposition of
finance charges in the event that the Defendant failed to make timely payments. The Court
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finds that Plaintiff is not entitled to finance charges that were never agreed upon by the parties.
Thus, the balance due on the contract after Defendant’s total payments is $7434.36.
Notwithstanding said sum, there were defects in Plaintiff’s work. “It is well settled that
when a [party] has substantially performed, he can recover the contract price less the amount
needed by the owner to remedy the defect.” National Chain Co. v. Campbell, 487 A.2d 132,
135 (R.I. 1985); Butera v. Boucher, 798 A.2d at 346. The price the Hi-Hat paid to remedy
those defects must be deducted from the balance on the contract. Friedlander provided this
Court with invoices from all of the repair work conducted on the system from February 2004 to
July 2006, totaling $8,347.62 to Ocean State Business Solutions, Inc. and $1,157.50 to POS
Technologies, Inc. (total $9,505.12).
With respect to the repair of the alleged defects, Plaintiff argued, however, that a
majority of the work done to the system in the two and a half years after its installation
constituted routine service calls and system upgrades rather than repair work. Plaintiff asserts
that such work is not included in the original contract price, and that the Defendant would have
paid for that work regardless of whether Plaintiff himself, or Mr. Medeiros completed the work.
On the evidence before it, the Court finds that Plaintiff has not met his burden of demonstrating
that the majority of the work was repair work.
Furthermore, the Court finds that Plaintiff frustrated all efforts by the Defendant to
mitigate the cost of repairs. In this respect, the Plaintiff cannot satisfy the burden of proving
that the Hi-Hat has failed to mitigate the cost of the repair work. Riley v. St. Germain, 723
A.2d 1120, 1123 (R.I. 1999); Bibby's Refrigeration, Heating & Air Conditioning, Inc. v.
Salisbury, 603 A.2d 726, 729 (R.I. 1992) (the burden of proof falls on the party claiming that
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the opposing party failed to mitigate damages). As such, the Plaintiff is not entitled to a
reduction in price of the repair work.
In determining damages, the Court notes Plaintiff’s actions after his December 2003
demand for payment was not met. Mr. Medeiros testified that with respect to the failed
equipment, Plaintiff refused to allow him to access the warranties which were registered in
Plaintiff’s name. As a result, the Hi-Hat was forced to incur additional and redundant charges
to replace equipment which was under warranty. Moreover, Plaintiff’s failure to release the
administrative access codes for the computer system delayed progress and also resulted in
higher repair fees. Particularly troubling to this Court is Plaintiff’s own admission that he
advised the software company that the Hi-Hat did not pay him for his services. Beyond
tarnishing the Hi-Hat’s reputation, LaBelle’s actions increased expenses when Friedlander was
unable to get technical support from the software company. LaBelle’s tactics only stymied
Friedlander’s attempts to mitigate the cost of repairs. Thus, by refusing to service the defects
in the system, and by essentially “bad-mouthing” the Defendant to the software company,
Plaintiff aggravated what may have been only minor problems.
Finding that Plaintiff failed to mitigate his damages, the Court finds that the Defendant
is entitled to the full amount of the repair work. It was conceded in the testimony that the color
printer was not a replacement or repair to the original system, but rather an addition which will
be deducted from the invoices. The Court is satisfied with Mr. Medeiros’ representations to the
Court that the remaining items on the itemized invoices were necessary and cost-effective. See
DeChristofaro v. Machala, 685 A.2d 258, 268 (R.I. 1996). Thus, this Court finds that the actual
cost of the repairs totals $9073.06.
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The Hi-Hat also requests consequential damages, or “such damages ‘that do not flow
directly and immediately from an injurious act but that result indirectly from the act.’” Riley v.
Stafford, 896 A.2d 701, 703 (R.I. 2006) (quoting Black's Law Dictionary 416 (8th ed. 2004)).
However, “consequential damages must be ‘capable of ascertainment with reasonable, or
sufficient, certainty, or there must be some basis on which a reasonable estimate of the amount
of the [damages] can be made.’” Goolesby v. Koch Farms, LLC, 955 So. 2d 422, 428 (Ala.
2006) (quoting Med Plus Props. v. Colcock Constr. Group, Inc., 628 So. 2d 370, 376-77 (Ala.
1993)). The Court denies Defendant’s request for consequential damages, finding that the
evidence was too speculative to suggest a concrete loss of profits entitling the Hi-Hat to such
damages. Thus, Plaintiff owes Defendant $1638.70.
Additionally, both parties request attorney’s fees, costs, and interest. “The court may
award a reasonable attorney's fee to the prevailing party in any civil action arising from a breach
of contract in which the court: (1) [f]inds that there was a complete absence of a justiciable
issue of either law or fact raised by the losing party.” R.I. Gen. Laws § 9-1-45. Finding that
both parties’ claims were granted in part and denied in part, the Court denies each party’s
request for attorney’s fees, interest, and costs.
Conclusion
Finding both parties partially prevailed, the Court finds that each party is entitled to
damages. Accordingly, judgment shall enter in favor of Plaintiff on his action for breach of
contract for $7434.36. Judgment shall enter in favor of Defendant on his counterclaim for
breach of contract for $9073.06. Counsel shall prepare an appropriate order for entry.
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