Independent Mechanical Contractors, Inc. v. Gordon T. Burke & Sons, Inc.

• Decision Date: 23 December 1993
• Docket Number: No. 92-306,92-306
• Citation: 138 N.H. 110,635 A.2d 487
• Parties: INDEPENDENT MECHANICAL CONTRACTORS, INC. v. GORDON T. BURKE & SONS, INC.
• Court: New Hampshire Supreme Court

Page 487

635 A.2d 487

138 N.H. 110

INDEPENDENT MECHANICAL CONTRACTORS, INC. v. GORDON T. BURKE & SONS, INC.

No. 92-306.

Supreme Court of New Hampshire.

Dec. 23, 1993.

Hastings Law Office, P.A., Fryeburg, Maine (Peter G. Hastings on the brief and orally), for plaintiff.

McLane, Graf, Raulerson & Middleton, P.A., Manchester (Arthur G. Greene and Ellen L. Arnold on the brief, and Mr. Greene orally), for defendant.

JOHNSON, Justice.

The defendant, Gordon T. Burke & Sons, Inc. (Burke), a general contractor, appeals from a jury's award of damages in Superior Court (Mohl, J.) to the plaintiff, Independent Mechanical Contractors, Inc. (IMC), for breach of contract and defamation. We affirm the award for breach of contract because IMC's injuries were a reasonably foreseeable consequence of Burke's breach and because lost profits were proved with reasonable certainty. We reverse the verdict against Burke for defamation.

On April 11, 1980, the Bartlett School District engaged Burke as a general contractor at a cost of almost $900,000 to make additions and alterations to the Josiah Bartlett Elementary School. Burke subcontracted the project's plumbing, heating, and ventilation requirements to IMC. The contract between IMC and Burke targeted December 1, 1980, for completion and required Burke to supervise the project to prevent conflicts and delays. Burke, however, never devised a schedule allotting time for the work of the different trades on the job. Delays caused by other trades stalled IMC's progress for approximately one month during the summer of 1980 and compressed the already short period for its work. Despite this delay, IMC substantially completed its work and received "punch list" assignments from Burke in the early spring of 1981. IMC notified Burke that certain items on the punch list were not within the scope of its contract. Burke nonetheless ordered IMC to work on the items. IMC refused, and school district officials ordered IMC off the site in February 1982. The record supports an inference that the officials acted according to Burke's direction.

Litigation between the parties began in June 1981, when Burke filed a petition for declaratory judgment. IMC filed counterclaims seeking damages for loss of reputation, lost profits, and other economic hardships allegedly caused by Burke's breach of the contractual duty of supervision and by Burke's defamation of IMC. The trial court denied Burke's motion to dismiss, and a jury awarded IMC $100,000 for breach of contract and $150,000 for defamation. The trial court denied Burke's motions to set aside the verdict for judgment notwithstanding the verdict, and for remittitur. Burke appealed.

I. Breach of Contract

Burke does not deny that a breach occurred but contends there was insufficient proof that the breach was a proximate cause of IMC's injuries, or that these injuries were reasonably foreseeable. Because the test of proximate cause is foreseeability, 5 A. Corbin, Contracts § 1006, at 70 (1964), we address these two contentions together. Burke also argues that IMC's proof of lost profits was speculative. We view the evidence in a light most favorable to IMC and affirm the jury's verdict if there is sufficient evidence in the record to support it. See Petrie-Clemons v. Butterfield, 122 N.H. 120, 124, 441 A.2d 1167, 1170 (1982).

The breach for which the jury awarded damages was Burke's failure to supervise the project. The construction project manual, which was incorporated into the parties' contract, provided that Burke "shall coordinate and supervise the work performed by Subcontractors to the end that the work is carried out without conflict between trades and so that no trade, at any time, causes delay to the general progress of the work." A reasonable jury could find a breach of this provision in Burke's failure to schedule the job and to coordinate the work of different trades, resulting in a month-long delay during the summer of 1980. A reasonable jury could also determine that Burke misassigned punch list items to IMC and that this misassignment was a breach of Burke's duty of supervision.

At trial, IMC alleged that this breach caused it injuries, including loss of reputation, lost profits, and other economic harms. According to IMC, the delay during the summer of 1980 forced it to lay off employees. Moreover, IMC argued, it suffered a loss of reputation and a sudden drop in income coinciding with its involvement in the Bartlett school project. Finally, IMC stated that it subsequently lost its ability to obtain a line of credit and bonding, and failed to garner certain jobs, although its bids were competitive.

We first address whether there is a sufficient causal connection between Burke's breach and IMC's injuries to warrant holding Burke responsible for them; that is, whether IMC's losses were a reasonably foreseeable consequence of the breach. See 5 Corbin, supra §§ 997-98, 1006-07. Damages are available only if the harm was a reasonably foreseeable result at the time the parties entered into the contract. See Salem Engineering & Const. Corp. v. Londonderry School Dist., 122 N.H. 379, 383, 445 A.2d 1091, 1094 (1982). One way a plaintiff may satisfy this requirement is by specifically proving that the defendant "had reason to know the facts" at the time the parties contracted and to foresee that the injury would be a probable consequence of a breach. Petrie-Clemons v. Butterfield, 122 N.H. at 124, 441 A.2d at 1170 (quotation omitted). IMC satisfied this test.

We observe that when Burke engaged IMC in April 1980, construction work was scarce. The Bartlett school project promised to be high-profile work, especially because its progress would be discussed at local school board meetings. IMC, a family-run business, had been in business for less than a year. A jury could infer Burke was familiar with IMC's size and brief history at the time of contracting because Burke had previously worked with the father of IMC's principals and because a bidder's references, history, and qualifications are generally reviewed before a bid is accepted. Moreover, Burke should have known that an outsider might assume the punch list items were correctly assigned to IMC, thus making IMC's refusal to complete those items look like an unwillingness to perform its duties. Considering all these factors, we conclude that the record supports a finding that Burke had reason to foresee that misassigning punch list items would probably harm IMC's reputation and economic prospects.

Similarly, the record reveals a significant causal connection between Burke's failure to coordinate the work of trades on the project and IMC's diminished profits. Given the paucity of construction work at the time of contracting and the relatively tight time schedule Burke demanded of IMC, it was likely that such a failure to supervise the project adequately would delay IMC's work, thus damaging its reputation, thereby lowering its profits. The evidence sustains a finding that Burke had reason to foresee that IMC's injuries would be a probable consequence of its breach.

These facts differ materially from those influencing our decision in Salem Engineering, on which Burke heavily relies. We reversed an award of consequential damages in that case in part because the defendant could not have reasonably foreseen at the time of contracting that the plaintiff general contractor would suffer a loss of reputation and a deterioration in its ability to remain a going concern if a fraction of the contract price were wrongfully withheld. Salem Engineering, 122 N.H. at 384, 445 A.2d at 1094. The contractor's business had existed for years, employed forty to fifty people, had a value of approximately three million dollars, and had obtained projects worth more than five million dollars. Id. at 384, 445 A.2d at 1094. That contractor, unlike IMC, thus appeared well-established and immune from the losses alleged. In this case, the evidence indicates that Burke had reason to know of IMC's vulnerability.

Burke apparently argues that its breach did not justify the jury's award of damages because other events may have contributed to IMC's injuries. While we recognize the plausibility of Burke's premise, we point out that no one event is the sole cause of another. "In all cases involving problems of causation and responsibility for harm, a good many factors have united in producing the result...." 5 Corbin, supra § 999, at 24. "In order to establish liability the plaintiff must [merely] show that the defendant's breach was 'a substantial factor' in causing the injury." 5 Corbin, supra § 999, at 25. IMC has done this. After carefully reviewing the transcripts and exhibits, we find no merit in Burke's suggestion that the jury's finding lacked a sufficient evidentiary basis.

We next consider whether the record contains reasonably certain proof of IMC's lost profits to support the jury's award of $100,000 for the breach of contract. "While the law does not require absolute certainty for recovery of damages, we will uphold an award of damages for lost profits only if sufficient relevant data support[ ] a finding that profits were reasonably certain to result" in the absence of the breach. Great Lakes Aircraft Co. v. City of Claremont, 135 N.H. 270, 296, 608 A.2d 840, 857 (1992) (citation omitted).

IMC's evidence on lost profits consisted of the expert testimony of Arthur Kennison. Kennison, an economics professor experienced in evaluating future profits, explained that he used a standard methodology to project IMC's lost profits from 1980 through 1985. He took into account IMC's revenues and operating costs for labor, materials, and subcontractors during the company's first year. His figures, drawn from cash revenue and expense reports, reveal that IMC had profits for its first year of operation, May 1979 through April 1980, of $2,839, while its profits for the first four months of 1980 were $4,930. The...