Costa v. Brait Builders Corp.

• Decision Date: 01 August 2012
• Docket Number: SJC–11011.
• Citation: Costa v. Brait Builders Corp., 463 Mass. 65, 972 N.E.2d 449 (Mass. 2012)
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: John J. COSTA v. BRAIT BUILDERS CORPORATION & another.

463 Mass. 65

972 N.E.2d 449

John J. COSTA

v.BRAIT BUILDERS CORPORATION & another.¹

SJC–11011.

Supreme Judicial Court of Massachusetts, Plymouth.

Submitted April 3, 2012.

Decided Aug. 1, 2012.

Stephen Schultz for Brait Builders Corporation.

Danielle Andrews Long, Boston, for Arch Insurance Company.

Eric S. Kupperstein for the plaintiff.

Carolyn M. Francisco & Michael T. Mullaly, Boston, for Associated Subcontractors of Massachusetts, Inc., amicus curiae, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

SPINA, J.

This case raises the question whether a subcontractor providing labor or materials to a public construction project for which a payment bond has been obtained by the general contractor pursuant to G.L. c. 149, § 29, may by private agreement forgo its right to pursue payment under the bond.In 2004 and early 2005, the plaintiff, John J. Costa, doing business as Costa & Son Construction (Costa or subcontractor), performed site work for the defendantBrait Builders Corporation(Brait or general contractor) on such a project in the town of Bridgewater(town).The relationship was not a happy one, and on January 28, 2005, Brait terminated Costa.Costa brought this suit alleging, inter alia, breach of contract and violations of G.L. c. 93A.Costa sought to recover damages under a payment bond obtained by Brait from the defendantArch Insurance Company(Arch).SeeG.L. c. 149, § 29.Brait asserted similar counterclaims against Costa.Arch, for its part, defended by arguing that Costa had relinquished his right to claim against the bond pursuant to a provision of his subcontract with Brait.The matter went to trial.At the close of the plaintiff's case, a judge in the Superior Court, answering the question posed above in the affirmative, granted Brait and Arch's motion for a directed verdict and entered judgment with respect to Costa's claims seeking relief under the bond.²The trial eventually resulted in a jury verdict for Costa, against Brait.We granted Costa's application for direct appellate review to address the question of the validity of a subcontractor's waiver of claims against the general contractor's bond under G.L. c. 149, § 29,³ and we now reverse the judgment granting the motion for a directed verdict.We also vacate the portion of the amended judgment granting consequential damages to Costa.We affirm the amended judgment in all other respects.

1.Background.We begin by reciting the basic facts of the case; we reserve other facts for our discussion of particular issues.Brait placed a successful bid with the town to build an addition to an elementary school.On June 3, 2004, Brait entered into a general contract with the town for $18,689,000 to build the addition (general contract).In accordance with G.L. c. 149, § 29, Brait obtained from Arch two bonds ⁴—one securing payment on the projectand one securing performance ⁵—each worth the full amount of the contract.

On June 25, 2004, Brait entered into a subcontract to pay Costa $900,000 to perform site work on the project (subcontract).Site work refers to excavation and other preparation of the project site, such as digging tunnels for the placement of underground utilities and diverting surface water.

Costa began work on the project in mid–2004.Beginning in early 2005, the relationship between the parties began to unravel.On January 3, 2005, Brait sent Costa a letter alleging “under-manning and missed days” and stating it would “vigorously pursue[ ] all legal means available.”Costa replied with a letter of his own claiming that as early as June, 2004, various scheduling and logistical mishaps by Brait—delayed building demolition,the unexpected presence of steel erectors, lack of a tarp and proper heating—had delayed and added expenses to Costa's performance of the contract work.On January 12, 2005, Brait wrote to Costa alleging that the subcontractor's absence from the site had caused water to accumulate on the project site.Costa replied alleging that his efforts to remove the water had been hampered by Brait.

On January 28, 2005, Costa sent Brait a letter announcing that he was “discontinuing all site work ... due to ... extreme weather conditions,” and stating that he would return when the ground thawed.On the same day, Brait announced in a letter that it was terminating Costa due to “[u]nacceptable performance,” and that Costa was barred from further accessing the project site without Brait's written consent.

On May 3, 2005, Costa initiated the present action.In his complaint, Costa alleged that Brait had committed a breach of the subcontract by obstructing Costa's performance, failing to pay him the balance under the subcontract owed, and barring him from the project site.Costa further claimed that he was owed money under a quantum meruit theory and that Brait had violated G.L. c. 93A, § 11, the section of our consumer protection law protecting persons engaged in business from unfair or deceptive acts or practices.The complaint sought relief under the bond issued by Arch, and Arch was named as a defendant.Arch and Brait answered, denying the allegations, and Brait alleged similar counterclaims against Costa.⁶

After some five years of litigation, the matter went to trial in August, 2010.On August 16, at the close of the plaintiff's case, Brait and Arch sought and were granted a directed verdict on the bond claims.Arch was thereby dismissed as a party, see note 2, supra, and the case proceeded against Brait.

On August 19, the jury rendered a verdict in favor of Costa, awarding general damages (breach of contract and quantum meruit) in the amount of $199,228.14, consequential and incidental damages in the amount of $133,648, and damages for unfair or deceptive acts or practices under G.L. c. 93A in the amount of $167,123.86—a total award of $500,000.Costa then moved for attorney's fees pursuant to G.L. c. 93A, § 11.An amended judgment ⁷ on the verdict followed, ordering Brait also to pay Costa interest from the date the action was filed and attorney's fees in the amount of $300,693.75.The total amount of the amended judgment against Brait, including attorney's fees and interest, was $1,124,039.05.Both Brait and Costa appealed.

2.Relinquishment of bond claims.We first consider Costa's appeal of the directed verdict in favor of Brait and Arch, which foreclosed Costa's ability to seek payment from the bond.Article 7 of the subcontract (article 7) provided in relevant part:

“In the event that the subcontractor does not provide performance and payment bonds on a form acceptable to the Contractor, then the subcontractor waives its right to claim against the Contractor's performance and payment bonds as provided to the Awarding Authority.”

Brait subsequently asked Costa to provide performance and payment bonds each in the full amount of the subcontract, $900,000.Costa, however, was unable to do so.⁸During trial, after the plaintiff rested his case, Brait and Arch sought a directed verdict based on the plain language of article 7.SeeMass. R. Civ. P. 50(a), 365 Mass. 814(1974).Finding that “article 7 is applicable and ... quite clear,” the judge allowed the motion.

On appeal, Costa argues that article 7 violates the public policy of the Commonwealth and cannot be enforced.See generally, e.g., Beacon Hill Civic Ass'n v. Ristorante Toscano, Inc.,422 Mass. 318, 662 N.E.2d 1015(1996).He argues that the requirement under G.L. c. 149, § 29 (§ 29), of a bond on certain public construction projects reflects a strong public policy of encouraging competitive bidding for, and swift completion of, such projects, seePeters v. Hartford Acc. & Indem. Co.,377 Mass. 863, 872, 389 N.E.2d 63(1979);Manganaro Drywall, Inc. v. White Constr. Co.,372 Mass. 661, 663–664, 363 N.E.2d 669(1977), rendering a waiver by private agreement unenforceable.

Arch responds by arguing that the bond requirement serves primarily a private purpose: to place laborers and materialmen who work on public construction projects—for which mechanic's liens are disallowed, Lessard v. Revere,171 Mass. 294, 294–295, 50 N.E. 533(1898)—on the same footing as those who work on private construction projects, for which mechanic's liens are allowed under G.L. c. 254.Stated otherwise, § 29 provides a direct benefit to laborers and materialmen—security against nonpayment—not to the public.Any benefit the statute may provide to the public is only incidental, Arch argues, and not sufficient to override freedom of contract and mutual risk-taking.⁹SeeCanal Elec. Co.v. Westinghouse Elec. Corp.,406 Mass. 369, 377–378, 548 N.E.2d 182(1990)(permitting waiver of G.L. c. 93A, § 11, claim by business plaintiff).

Because Costa raises this public policy argument for the first time on appeal, we would generally consider it waived.SeeCarey v. New England Organ Bank,446 Mass. 270, 285, 843 N.E.2d 1070(2006).Because the question has been “fully briefed,” is of public importance, and may arise again, however, we think it an appropriate exercise of our discretion to address it.¹⁰See, e.g., Police Dep't of Salem v. Sullivan,460 Mass. 637, 640, 953 N.E.2d 188(2011).

We begin, as always, with the statutory text.Adams v. Boston,461 Mass. 602, 609, 963 N.E.2d 694(2012).The version of § 29 in effect at the time provided that on public construction projects where the amount of the contract is more than $2,000, contracting authorities “shall obtain security by bond in an amount not less than one half of the total contract price, for payment by the contractor and subcontractors for labor performed or furnished and materials used or employed therein.”¹¹

The statutory text says nothing of waiver.The parties draw opposing inferences from this silence.Noting that § 29 is based on the mechanic's lien statute, G.L. c. 254, under which waiver is explicitly prohibited, seeG.L. c. 254, § 32, Arch infers from the statutory...