DJ PAINTING v. Baraw Enterprises, 99-401.

• Decision Date: 11 May 2001
• Docket Number: No. 99-401.,99-401.
• Citation: 776 A.2d 413
• Court: Vermont Supreme Court
• Parties: DJ PAINTING, INC. v. BARAW ENTERPRISES, INC. and E.F. Wall and Associates, Inc.

776 A.2d 413

DJ PAINTING, INC. v. BARAW ENTERPRISES, INC. and E.F. Wall and Associates, Inc.

No. 99-401.

Supreme Court of Vermont.

May 11, 2001.

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 and 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.¹ 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.² 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 (1998) (mem.) (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...