Peabody N.E., Inc. v. Town of Marshfield

• Decision Date: 13 January 1998
• Parties: PEABODY N.E., INC. v. TOWN OF MARSHFIELD.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 774

689 N.E.2d 774

426 Mass. 436

PEABODY N.E., INC. v. TOWN OF MARSHFIELD.

Supreme Judicial Court of Massachusetts,

Bristol.

Argued Nov. 6, 1997.

Decided Jan. 13, 1998.

Richard K. Allen (Michael B. Donahue, with him), Boston, for plaintiff.

Philip M. Cronin (Robert A. McCall, with him), Boston, for defendant.

Before WILKINS, C.J., and ABRAMS, LYNCH, GREANEY, MARSHALL and IRELAND, JJ.

LYNCH, Justice.

This matter arose from a contract dispute involving the plaintiff's construction of a grit, septage, ¹ and grease handling facility for the defendant town of Marshfield (town). Pursuant to an order of a Superior Court judge, the matter was initially referred to a master for findings of fact and recommended conclusions of law. See Mass. R. Civ. P. 53(h)(1), as appearing in 386 Mass. 1237 (1982). After receiving the master's final report, the judge ruled that: (1) the plaintiff's breach of contract precluded it from recovering on the contract; (2) the plaintiff's breach also precluded an award of prejudgment interest pursuant to G.L. c. 30, § 39K; and (3) the plaintiff could not recover under G.L. c. 93A, because the town was not engaged in "trade or commerce." The judge also recommitted the matter to the master to make further findings regarding the plaintiff's possible recovery in quantum meruit. The master did so in his supplemental report. Based in part on these findings, the judge then ruled that: (1) the plaintiff was entitled to recover $266,692 in quantum meruit; (2) the plaintiff's quantum meruit recovery should not include overhead costs; (3) the town was not entitled to liquidated damages stemming from the plaintiff's delay in completing the project; and (4) the plaintiff was entitled, pursuant to G.L. c. 231, § 6C, to prejudgment interest in the amount of 12%, beginning January 1, 1992. We granted the town's application for direct appellate review.

Both parties claim error. The plaintiff primarily contends that the judge erred in (1) rejecting its G.L. c. 93A claim; (2) concluding that it could not recover on the contract; and (3) denying its claim for overhead expenses. The town contends the judge erred in (1) failing to enter judgment in its favor; (2) awarding the plaintiff's recovery in quantum meruit; and (3) denying the town's claim for liquidated damages. Both parties claim that the judge's calculation of prejudgment interest was erroneous. We affirm the judgment except for the interest award, which we vacate and remand for further calculations.

1. Facts. In December, 1987, the Department of Environmental Quality Engineering (DEQE) (now known as the Department of Environmental Protection) ordered the town to close its landfill septage lagoons and to construct a new treatment facility for septage and grease wastes. Pursuant to this order, the town contracted with an engineering firm, Metcalf & Eddy (M & E), to plan and to design these facilities. In October, 1989, it contracted with the plaintiff to act as general contractor for the project. The contract called for the plaintiff to complete its work by January 27, 1991, but included provisions for extending the deadline. ² The agreement also provided that, absent an excused extension, the plaintiff would pay liquidated damages in the amount of $400 for each day after January 27, 1991, that the work remained incomplete.

Deemed "primarily an equipment procurement job," the project required the plaintiff first to submit proposed drawings and then, pending M & E's approval, to procure several pieces of equipment for the facility. One such piece of equipment was a vertical progressive cavity pump (pump). The contract between the plaintiff and the town permitted the plaintiff to select any pump model from one of the manufacturers identified in the project specifications. The plaintiff chose a pump made by Robbins & Myers and subsequently submitted several drawings of the pump to M & E. ³ M & E repeatedly rejected the drawings, claiming, among other things, that the Robbins & Myers pump was too tall and contained a platform for which there was no space at the facility. These requirements, however, were not included in the original contract or project specifications. Ultimately, the plaintiff was forced to select another manufacturer's pump, to submit drawings, and to install it at the facility. According to M & E's initial analysis, this installation (when combined with the plaintiff's other work under the contract) made the project 99.87% complete as of August 30, 1991, 215 days after the scheduled completion date. At the town's request M & E then switched methodologies for determining substantial completion, and concluded that the plaintiff had completed less than 99% of the project as of that time. Consequently, the town ordered the plaintiff to perform additional work, which the plaintiff refused to do. ⁴ Finally, on April 23, 1992, 451 days after the scheduled date of completion, M & E deemed the project substantially complete for purposes of the contract. Because the plaintiff failed to comply with the agreement's time extension provisions, the town assessed liquidated damages in the amount of $180,400 against the plaintiff.

2. General Laws c. 93A, § 2. The plaintiff first contends that the judge erred in denying its G.L. c. 93A claim. In his final report, the master concluded that the town was engaged in "trade or commerce" when it contracted with the plaintiff, and that its refusal to declare the project substantially complete on August 30, 1991, constituted an unfair and deceptive trade practice in violation of G.L. c. 93A, § 2. The judge disagreed in part, ruling that c. 93A was inapplicable because the town was not engaged in trade or commerce when it contracted with the plaintiff. We agree with the judge. ⁵

Chapter 93A proscribes "unfair or deceptive acts or practices in the conduct of any trade or commerce." G.L. c. 93A, § 2(a ). A party is engaging in "trade or commerce," as required under c. 93A, when it acts "in a business context." ⁶ Lantner v. Carson, 374 Mass. 606, 611, 373 N.E.2d 973 (1978). The statute contains no explicit indication that government entities like the town are subject to its provisions. United States Leasing Corp. v. Chicopee, 402 Mass. 228, 232, 521 N.E.2d 741 (1988). This court, however, has repeatedly held that c. 93A does not apply to parties motivated by "legislative mandate, not business or personal reasons." Poznik v. Massachusetts Medical Professional Ins. Ass'n, 417 Mass. 48, 52, 628 N.E.2d 1 (1994), quoting Barrett v. Massachusetts Insurers Insolvency Fund, 412 Mass. 774, 777, 592 N.E.2d 1317 (1992). Cf. Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 25, 679 N.E.2d 191 (1997) (defendant university engaged in trade or commerce in part because it "did not operate under any legislative constraints"). Although not "dispositive of the issue whether c. 93A applies," Linkage Corp., supra at 23, 679 N.E.2d 191, a party's status as a nonprofit operation has similarly influenced our analysis, Poznik, supra at 53, 628 N.E.2d 1; All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 271, 620 N.E.2d 778 (1993); Barrett, supra at 776, 592 N.E.2d 1317, even where the wrongful behavior related to "an ordinary commercial contract." United States Leasing Corp., supra at 231, 521 N.E.2d 741.

In the present case, the town is a government entity that contracted with the plaintiff pursuant to an administrative order imposed by the DEQE. Such orders are enforced with the same power as statutes and, indeed, are the creations of a legislative enactment. G.L. c. 111, §§ 160, 162, 164. 310 Code Mass. Regs. §§ 22.00 et seq. (1994). The threat of a civil administrative penalty or other punishment for violation of the order only underscores the fact that compliance with the order is indeed mandatory.

Furthermore, the town's waste treatment facility is not a profit-making operation. ⁷ Rather, it merely sustains itself financially through a combination of subsidies from the town itself and "tipping fees" charged to the facility's users. Contrary to the plaintiff's assertions, these fees are designed not to generate profits for the facilities or the town in general, but only to "defray[ ] the cost of constructing, operating and maintaining" the facility. G.L. c. 111, § 31D. Compare Linkage Corp. v. Trustees of Boston Univ., supra at 25, 679 N.E.2d 191 (defendant deemed to have engaged in trade or commerce when contracting with plaintiff in part because it was "motivated by a strong desire to benefit" financially from its contract with plaintiff). Given the predominantly public motivation for both the construction of the facility and the charging of fees, we conclude that the town was not acting "in a business context" when it contracted with the plaintiff and thus was not engaged in "trade or commerce" as required by G.L. c. 93A. For this reason, we affirm the denial of the plaintiff's c. 93A claim.

3. Recovery on the contract. The plaintiff next claims that the judge erred in denying it any recovery on the contract. In his final report, the master recommended that the judge award the plaintiff such recovery. The judge declined to follow this recommendation, concluding instead that the plaintiff's own breach barred recovery on the contract. On appeal, the plaintiff contends that its breach was excused because it was caused exclusively by the town's wrongful conduct. We disagree and affirm the denial of the plaintiff's recovery on the contract.

Contractors like the plaintiff "cannot recover on the contract itself without showing complete and strict performance of all its terms." Andre v. Maguire, 305 Mass. 515, 516, 26 N.E.2d 347 (1940). Cf. J.A. Sullivan Corp. v. Commonwealth, 397 Mass. 789, 794, 494 N.E.2d 374 (1986). The plaintiff did not satisfy the strict terms of the contract when it failed substantially to complete its performance by January 27, 1991. Moreover, ...