D.J. Painting, Inc. v. Baraw Enterprises, Inc.
Annotate this Case
D.J, Painting, Inc. v. Baraw Enterprises, Inc. (99-401); 172 Vt. 239;
776 A.2d 413
[Filed 11-May-2001]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
No. 1999-401
D.J. Painting, Inc. Supreme Court
On Appeal from
v. Lamoille Superior Court
Baraw Enterprises, Inc. and November Term, 2000
E.F. Wall and Associates, Inc.
Ben W. Joseph, J.
William L. Durrell of Barr & Associates, Stowe, for Plaintiff-Appellant.
J. Scott Cameron of Zalinger Cameron & Lambek, P.C., Montpelier, for
Defendants-Appellees.
PRESENT: Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.
JOHNSON, J. Plaintiff DJ Painting, Inc. appeals three orders of the
superior court in favor of defendants Baraw Enterprises, Inc. (Baraw) and
E.F. Wall & Associates, Inc (Wall). On appeal, plaintiff argues that the
trial court erred in (1) dismissing plaintiff's motion for a writ of
attachment to perfect a mechanic's lien; (2) granting defendants' motion
for summary judgment on plaintiff's contract claims; and (3) awarding
attorneys' fees to defendants. We affirm the dismissal of plaintiff's
motion for a writ of attachment, the granting of defendants' motion for
summary judgment and the award of attorneys' fees to defendant Wall. We
reverse the award of attorneys' fees to defendant Baraw because the court
erred in awarding fees based on plaintiff's bad faith.
In September 1997, defendant Wall entered into a contract to serve as
a general contractor for improvements to defendant Baraw's property, the
Stoweflake Resort, in Stowe, Vermont. The total value of the contract was
approximately $3.2 million. Wall then engaged plaintiff DJ Painting in a
standard subcontract agreement to provide taping, painting and vinyl wall
covering services for the project. At the time it was executed, the
subcontract anticipated paying plaintiff approximately $110,500 for
plaintiff's materials, labor and equipment. All of plaintiff's work was
subject to the approval of the project architect. Plaintiff did not enter
into any contract with Baraw.
Relevant clauses from the standard subcontract are as follows. First,
the subcontractor agrees that all work is "subject to the final approval
of the Architect/Engineer or other specified representative of the Owner."
If the subcontractor fails to perform the specified work, then with notice
and opportunity to cure, the general contractor may "terminate the
Subcontractor's employment." All claims "arising out of, or relating to,
this Subcontract or the breach thereof shall be decided by Arbitration."
As the project progressed, Wall notified plaintiff that its work did
not meet the standards set forth in the subcontract. For instance, a
letter dated May 7, 1998, from Joseph Bordas, president of Wall, to
plaintiff states "the workmanship fails to meet the specified standards."
The record contains evidence that plaintiff was notified several more
times of this problem and given an opportunity to cure. In June 1998,
Wall terminated plaintiff and directed plaintiff to "remove your tools,
equipment and personnel from the Stoweflake site." Although plaintiff
submitted requisitions totaling $112,925, Wall paid plaintiff $72,925 for
the work performed that was approved by the project architect.
Subsequently, Wall credited Baraw $40,000 towards the total contract price
owed by Baraw to Wall.
Plaintiff filed a lien against Baraw's property in October 1998
pursuant to 9 V.S.A. § 1921, and simultaneously filed suit against both
defendants in superior court. In its five count complaint, plaintiff
sought (1) to perfect the lien by attaching Baraw's property pursuant to 9
V.S.A. § 1924; (2) to recover for unjust enrichment against Baraw; (3) to
recover in quantum meruit against Baraw; (4) to recover for breach of
contract against Wall; and (5) to recover for wrongful termination against
Wall. In response, Wall posted a bond of $40,000, which was later
increased to $50,000 at the court's suggestion to cover any interest or
costs should full damages be awarded to plaintiff. In December 1998,
because of the bond posted by Wall, the court dismissed plaintiff's motion
for a writ of attachment against Baraw's property. Wall also filed a
counterclaim against plaintiff alleging breach of contract.
In a subsequent order, the court granted defendants summary judgment
on plaintiff's remaining claims. As to the two claims against Wall, the
court ruled that the subcontract specifically provides that all claims
arising out of the agreement shall be submitted to binding arbitration. As
to the two claims against Baraw, the court ruled that it is not equitable
for plaintiff to assert these claims against Baraw when plaintiff had a
contractually agreed upon recourse against Wall. Two weeks later, upon
defendants' petition, the court awarded attorneys' fees to defendants
pursuant to V.R.C.P. 54.
Following the trial court's disposition, plaintiff filed an
arbitration claim against Wall for the remaining $40,000 on the contract
price. After a one day hearing, the arbitrator awarded plaintiff $14,700,
plus $2,500 interest on its claim. Neither party appealed the arbitration
decision, and Wall paid plaintiff the full amount of the award. That
finalized plaintiff's actions against Wall.
Plaintiff appeals the court's decision regarding the writ of
attachment, the claims against Baraw, and the award of attorneys' fees.
Plaintiff raises three issue on appeal. First, plaintiff argues that
Wall's bond does not adequately substitute for a writ of attachment to
perfect the lien. (FN1) Second, plaintiff contends that summary judgment
was inappropriate on its quantum meruit and unjust enrichment claims.
According to plaintiff, whether or not plaintiff performed its work
adequately is an issue of fact that should have survived summary judgment.
Otherwise, Baraw received a benefit-the painting-for which it paid no
compensation. Furthermore, plaintiff argues, it ought to be able to
recover for the fair value of the services rendered, regardless of the
benefit conferred on Baraw. Because this value was not determined,
plaintiff contends summary judgment was error. Finally, plaintiff claims
that the court improperly awarded attorneys' fees to defendants by relying
on a bad faith standard.
I. Contract Claims
Plaintiff acknowledges that it has no written contract with Baraw.
Therefore, plaintiff relies on the equitable doctrines of unjust
enrichment and quantum meruit for recovery. Because plaintiff disputes
that its work was substandard, it claims that Baraw received the benefit of
$40,000 worth of services for which it did not have to pay. At the very
least, plaintiff contends that it expended
money on labor and equipment on the job and it should be compensated.
Under either of these theories, plaintiff seeks to impose a quasi-contract
obligation on Baraw to make plaintiff whole. (FN2)
Claims for quasi-contract are based on an implied promise to pay when
a party receives a benefit and the retention of the benefit would be
inequitable. In re Estate of Elliott, 149 Vt. 248, 252, 542 A.2d 282, 285
(1988). The questions before the Court are whether plaintiff has alleged
sufficient facts to prove that a benefit was conferred upon defendant
Baraw, whether Baraw accepted the benefit, and whether it would be
inequitable for Baraw not to compensate plaintiff for its value. Center
v. Mad River Corp., 151 Vt. 408, 412, 561 A.2d 90, 93 (1989). The parties
dispute the degree to which plaintiff's work met the architect's
standards, and actually conferred a benefit on Baraw. For the purpose of
our discussion, however, we assume that plaintiff did confer a benefit on
Baraw through the taping and painting services, and that Baraw did accept
this benefit. See Rubin v. Town of Poultney, 168 Vt. 624, 625, 721 A.2d 504, 506 (mem.) (1998) (on summary judgment we take all allegations made
by the nonmoving party as true). Even assuming that plaintiff's work was
at least partially acceptable, to survive summary judgment, plaintiff, as
the nonmoving party, must still demonstrate sufficient evidence to support
the equity prong of the prima facie case. Id.
In analogous cases, we have established that "[t]he most significant
requirement for a recovery on quasi contract is that the enrichment to the
defendant be unjust." Ray Reilly's Tire Mart,
Inc. v. F. P. Elnicki, Inc., 149 Vt. 37, 40, 537 A.2d 994, 995 (1987). See
also Center, 151 Vt. at 413, 561 A.2d at 94 (where there is no evidence of
inequity there can be no damages on quasi-contract theory); Harman v.
Rogers, 147 Vt. 11, 18, 510 A.2d 161, 165 (1986) (implied contract claim
fails where plaintiff failed to sustain burden of showing mutual
expectation of payment). The proper inquiry is "whether, in light of the
totality of circumstances, it is against equity and good conscience to
allow defendant to retain what is sought to be recovered." Legault v.
Legault, 142 Vt. 525, 531, 459 A.2d 980, 984 (1983). Therefore, plaintiff
must demonstrate that it would be unfair for Baraw not to pay plaintiff
additional money above and beyond what plaintiff received from the contract
with Wall and the arbitration award against Wall.
When we look at the "totality of circumstances," we find that this is
not the ordinary quasi-contract case in which one party has performed work
for another party without the formality of a contract, that the party
benefitted has accepted the services, and therefore ought to be required to
pay for them. Cf. Hedges v. Schinazi, 144 Vt. 605, 481 A.2d 1046 (1984).
The specific work for which payment is requested here was covered by a
contract with a third party, the general contractor, Wall, which in turn
contracted with defendant. Although the existence of the contract with
Wall does not necessarily preclude a remedy against defendant, the terms
of the contract and the remedies exercised under it become highly relevant
in determining whether denying further payment to plaintiff is unjust,
such that we should imply a contract where there is none.
Under the terms of the contract with Wall, plaintiff agreed that its
work would be subject to the approval of the architect. The architect did
not fully approve, and payment was withheld. Eventually, as outlined
above, plaintiff submitted under the contractual terms to arbitration,
where the quality of plaintiff's work was at issue. The dispute was
resolved in arbitration, and an
additional $17,200 was paid to plaintiff over and above the initial
payments made, under the contract, of approximately two-thirds of the
contract price. The arbitration award was not appealed. Baraw, through
its general contract with Wall, paid plaintiff for the full benefit of
plaintiff's work as determined by the arbitrator, performed on Baraw's
property.
Plaintiff brought forward no other facts in response to summary
judgment that would suggest that plaintiff's fully utilized contractual
remedies with Wall unfairly resulted in an unjust enrichment of Baraw.
Plaintiff did not rely to its detriment on a promise to pay by Baraw, nor
did plaintiff rely on Baraw's ability to pay when it contracted with Wall.
See Frank W. Whitcomb Constr. Corp. v. Cedar Constr. Co., 142 Vt. 541,
546, 459 A.2d 985, 988-89 (1983). Plaintiff has not identified any reason
why it would be just for plaintiff to receive additional compensation, such
as collusion between the architect and Wall, or Wall and Baraw.
Plaintiff's claim is simply an avoidance of the contract with Wall. In
reality, plaintiff is seeking in quasi-contract the remainder of the
contract price with Wall, or as plaintiff states in its brief, "[i]f the
work met the standards required by the contract, then equity and good
conscience demand that the Plaintiff be compensated for its work. If the
work was deficient, the Plaintiff is entitled to something less and
possibly nothing at all." In other words, plaintiff is attempting to
relitigate its claim against Wall by pursuing Baraw. At this point, to
require Baraw to pay plaintiff above the amount it paid Wall would force
Baraw to pay twice for the same service. Morrisville Lumber Co. v.
Okcuoglu, 148 Vt. 180, 184, 531 A.2d 887, 889 (1987) ("The retention of a
benefit is not unjust where defendants have paid for it. . . . To allow
plaintiff to recover in these circumstances would be to require defendants
to pay twice.").
In Morrisville, the plaintiff subcontractor supplied lumber to a
general contractor who was building a vacation home for the defendant
owner. After the owner terminated the general because
of a contract dispute, the plaintiff sued the general to recover for the
materials and supplies it had provided before the general was terminated,
and the plaintiff won a judgment by default. When plaintiff's judgment
against the general was not satisfied, the plaintiff looked to the owner
for recovery. Id. at 182, 531 A.2d at 888. The relationship between the
parties in that case and the present litigants are nearly identical. The
Court in Morrisville denied the plaintiff's unjust enrichment claim
because, like the case at bar, the defendant owner had already fully paid
the general contractor for the all the benefits the owner had received.
Id. at 184, 531 A.2d at 889. Where an owner has fulfilled its financial
obligation to a general contractor, a subcontractor cannot rely on the
owner to satisfy the relationship between the subcontractor and the
general. See DCB Constr. Co. v. Central City Dev. Co., 940 P.2d 958, 963
(Colo. Ct. App. 1996) (absent special circumstances, benefit conferred
upon owner by performance of contract with a third party cannot form the
basis of claim of unjust enrichment); Henning v. Security Bank, 564 N.W.2d 398, 403 (Iowa 1997) (absent contractual privity with a homeowner,
a subcontractor has no valid quasi-contract claim against the homeowner);
Commerce P'ship 8098 Ltd. P'ship v. Equity Contracting Co., 695 So. 2d 383,
390 (Fla. Dist. Ct. App. 1997) (where owner has given consideration for
subcontractor's work by paying general the contract price, subcontract
cannot claim unjust enrichment against the owner); Kujawa v. Billboard
Cafe at Lucas Plaza, Inc., 10 S.W.3d 584, 589 (Mo. Ct. App. 2000)
(ordinarily, landlord not liable on quantum meruit theory for value of
services provided at request of tenant); Peace River Elec. Coop. v. Ward
Transformer Co., 449 S.E.2d 202, 213-14 (N.C. Ct. App. 1994) (owner not
unjustly enriched by subcontractor's performance when general was fully
paid by owner, despite ongoing dispute over payment between general and
subcontractor).
As we stated in Morrisville, "[t]he success of a claim for unjust
enrichment depends on the particular facts and circumstances of each
case." 148 Vt. at 184, 531 A.2d at 889. We find no inequity here because
plaintiff has alleged none. Failure to receive the contract price under
the circumstances of this case is not enough to prove that Baraw has been
unjustly enriched. Moreover, it can hardly be equitable to impose a
contract on the parties that completely undermines the contractual
relationships that the parties themselves have created. The point of
hiring a general contractor for a construction job is for the general to
manage the job and hire the subcontractors. The owner does not deal
directly with the subcontractors, and often is unaware of the identity of
the subcontractors. See id. at 183-84, 531 A.2d at 889; Whitcomb, 142 Vt.
at 542, 459 A.2d at 986. The owner pays the general contractor, but if
the general does not pay the subcontractors, the subcontractors have the
statutory lien mechanism to attach money as yet unpaid to the general
contractor. 9 V.S.A. § 1921. That was not the case here, as the general's
failure to pay the subcontractor arose out of a dispute over the work,
which was fully resolved under the contract between general and
subcontractor. The contract between the general, Wall, and the
subcontractor, plaintiff, sufficiently protected the rights of the
parties. No equitable relief is warranted and summary judgment was
appropriate on this issue.
II. Attorneys' Fees
The trial court awarded defendants attorneys' fees on the basis of two
theories. The first is bad faith. The court held that plaintiff acted in
bad faith when it filed suit against Baraw and Wall despite the
arbitration clause in the subcontract agreement. By suing both Wall and
Baraw without first seeking arbitration, plaintiff disregarded contract
obligations and imposed litigation costs on defendants. The second theory
under which the court imposed attorneys' fees is statutory. The court
used 9 V.S.A. § 4007(c), which states "the substantially prevailing party
in any proceeding to recover any payment within the scope of this chapter
shall be awarded reasonable attorneys' fees," as additional support for
the award to Wall only. The court found that Wall was a substantially
prevailing party because it won summary judgment on plaintiff's claims.
The court erred in awarding attorneys' fees based on plaintiff's bad
faith. We apply the 'American Rule' with regard to attorneys' fees, which
means that parties must bear their own attorneys' fees absent a statutory
or contractual exception. Myers v. Ambassador Ins. Co., 146 Vt. 552, 558,
508 A.2d 689, 692 (1986). This Court has, however, recognized the ability
of courts to use their equity power to award fees "as the needs of justice
dictate." In re appeal of Gadhue, 149 Vt. 322, 327, 544 A.2d 1151, 1154
(1988). This power may be invoked "only in exceptional cases and for
dominating reasons of justice." Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 167 (1939). In Gadhue, we quoted the New Hampshire Supreme Court in
explaining the type of conduct that would justify an award of attorneys'
fees.
Bad faith conduct held to justify the award of counsel fees has
been found where one party has acted in bad faith, vexatiously,
wantonly, or for oppressive reasons where the litigant's conduct
can be characterized as unreasonably obdurate or obstinate, and
where it should have been unnecessary for the successful party to
have brought the action.
Gadhue, 149 Vt. at 329, 544 A.2d at 1155 (quoting Harkeem v. Adams, 377 A.2d 617, 619 (1977)). Applying this standard, in both Gadue and Harkeem
attorneys' fees were awarded when a litigant was compelled to appear more
than once in the state supreme court before obtaining relief.
Plaintiff's conduct is not so outrageous as to warrant an award of
attorneys' fees on this ground. Defendants have won on the merits at the
trial court and before this Court. Multiple trips through the state court
system were not required. Nor is there any indication that plaintiff acted
obdurately or obstinately in conducting the litigation. The trial court
correctly points out that a reasonable reading of the subcontract
agreement might foreclose the action prosecuted by the plaintiff here. We
cannot find, however, that plaintiff's conduct is such that "dominating
reasons of justice" require an award of attorneys' fees. Thus, we reverse
the award of fees for defendant Baraw.
As for defendant Wall, however, we agree with the trial court that
under 9 V.S.A. § 4007(c) attorneys' fees are appropriate. Our paramount
goal in statutory construction is to give effect to the Legislature's
intent, Burlington Elec. Dep't v. Vermont Dep't of Taxes, 154 Vt. 332, 335,
576 A.2d 450, 452 (1990), and thus we apply the plain meaning of a statute
where the language is clear and unambiguous, Reed v. Glynn, 168 Vt. 504,
506, 724 A.2d 464, 465 (1998). Section 4007 is part of Chapter 102 of
Title 9, which explicitly governs construction contracts. It is clear
that Wall is the "substantially prevailing party" in a "proceeding to
recover any payment" due under a construction contract. Plaintiff's
arguments to the contrary are without merit. Defendant Wall was sued for
breach of contract and wrongful termination. Because there was an
arbitration clause in the contract between Wall and plaintiff, plaintiff's
claims were dismissed on summary judgment. The counterclaims brought by
Wall were raised simply to preserve its rights, should Wall not succeeded
to dismiss the case against it. The dismissal of those counterclaims on
summary judgment can hardly be seen as a victory for plaintiff.
Affirmed in part, reversed in part.
FOR THE COURT:
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Footnotes
FN1. Plaintiff, in its brief, argued that posting of the $50,000 bond by
defendants does not substitute for plaintiff's right to attach the
property. It contends that nowhere in the statutory scheme outlining the
lien procedure is there a mention of bond substitution. At oral argument,
however, plaintiff conceded that the attachment issue is moot because, in
effect, the posted bond protects plaintiff's potential recovery. Thus, we
need not reach the merits of this issue. Cf. Newport Sand & Gravel Co. v.
Miller Concrete Constr. Inc., 159 Vt. 66, 68, 614 A.2d 395, 396 (1992)
(noting in dicta that bond posted by general contractor obviated the need
for a writ of attachment to enforce lien filed under 9 V.S.A. § 1921).
FN2. Plaintiff argues that its claims for unjust enrichment and quantum
meruit are distinct causes of action. In fact, the distinction between
the two lies not in the alleged wrong committed by the defendant but
rather in the measure of recovery for that wrong. "Unjust enrichment
focuses on the value of the benefit actually conferred upon the defendant.
Quantum meruit, on the other hand, is determined by the reasonable value
of plaintiff's services regardless of their value to defendant." In re
Estate of Elliott, 149 Vt. 248, 253 n.2, 542 A.2d 282, 285-86 n.2 (1988).
Although we need not decide the issue because of our disposition of this
case, it would appear that plaintiff cannot recover on both equitable
claims. To do so would allow plaintiff recovery twice for the same harm,
just applying a different measure of damages.
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