KVS Information Systems, Inc. v. Town of Tisbury

• Decision Date: 17 December 1990
• Docket Number: Civ. A. No. 89-2999-C.
• Citation: 753 F. Supp. 1020
• Parties: KVS INFORMATION SYSTEMS, INC., Plaintiff, v. TOWN OF TISBURY, Defendant.
• Court: U.S. District Court — District of Massachusetts

753 F. Supp. 1020

KVS INFORMATION SYSTEMS, INC., Plaintiff, v. TOWN OF TISBURY, Defendant.

Civ. A. No. 89-2999-C.

United States District Court, D. Massachusetts.

December 17, 1990.

Chris W. Wert, Bowditch & Dewey, Worcester, Mass., for plaintiff.

William M. Healy, Roche, Carens & DeGiacomo, Vineyard Haven, Mass., for defendant.

MEMORANDUM

CAFFREY, Senior District Judge.

This case is before the Court on the plaintiff's, KVS Information Systems, Inc. ("KVS"), motion for summary judgment and the defendant's, Town of Tisbury ("Town"), motion for judgment on the pleadings. This action arises out of a contract dispute between KVS and the Town involving the sale of a computer system. Jurisdiction is founded upon diversity of citizenship, and the amount in controversy exceeds $50,000. Pursuant to the terms of the contract, KVS argues that it delivered the computer hardware and software to the Town, and thereafter the Town refused to honor its remaining obligations under the contract. KVS then brought this action alleging breach of contract and restitution. KVS also seeks declaratory relief. KVS now moves for summary judgment on the claims of breach of contract and restitution. The Town also moves for judgment on the pleadings.¹ For the reasons stated below, both motions should be denied.

I.

For the purpose of these motions, the relevant undisputed facts are as follows. In the Spring of 1987, the Town at its annual town meeting, approved an appropriation of $120,000 for the purchase of an unspecified "town-wide" computer system. The Massachusetts Municipal Association Consulting Group then prepared a Request for Proposal ("RFP") which detailed the specifications of the computer system that would meet the needs of the Town. The Town placed the RFP in the appropriate newspapers and received several proposals, including one from KVS.

After review of the various bids submitted, the Town chose KVS to provide the system and related computer services at a cost of approximately $205,000, an amount in excess of the funds originally appropriated in 1987. In May, 1989 at the annual town meeting, the residents voted whether or not to appropriate $77,021 to fund KVS's proposal. The Town's voters rejected the $77,021 appropriation for the purchase of the computer system.

The Town, through its Selectmen, then decided to acquire a smaller computer system that could be purchased with the $120,000 that was originally appropriated in 1987. In August, 1989, KVS and the Town entered into a contract for the purchase and sale of a computer system, the total price of which was less than $120,000. The terms of the contract provided that after delivery of the system, the Town would then be obligated to pay approximately $61,000. The contract also contained a provision that allowed the Town to terminate the contract if, prior to payment, the Town failed to appropriate funds sufficient to "operate and maintain" the system.²

After delivery in September and October, KVS invoiced the Town for the system. The Town refused to make the required payments. Then on October 24, 1989 the Town residents voted to terminate the computer contract with KVS. The Town then informed KVS of the Town's vote and that it was terminating the contract. As a result of the notice of termination and the Town's failure to make payments pursuant to the terms of the contract, KVS filed this lawsuit. KVS asserts three claims in its complaint against the Town: breach of contract; restitution; and declaratory relief. KVS alleges damages totaling approximately $62,000.

II.

KVS has moved for summary judgment as to its claims for breach of contract and restitution. The Town has also moved for a judgment on the pleadings which will be reviewed under the summary judgment standard pursuant to Fed.R.Civ.P. 12(c). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The moving party may satisfy this burden by showing that there is an absence of evidence to support the non-moving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. at 2553. Only after the moving party has met its burden of coming forward with proof of the absence of any genuine issue of material fact does the party opposing the motion bear the burden of responding. Id. at 321, 106 S.Ct. at 2551; Adickes, 398 U.S. at 159-60, 90 S.Ct. at 1609. The opposing party may not rest upon the mere allegations or denials in its pleading, but must respond with affidavits or otherwise to show the existence of a genuine issue for trial. Fed.R.Civ.P. 56(e); Adickes, 398 U.S. at 159-60, 90 S.Ct. at 1609. A dispute about a material fact is a "genuine issue" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). On summary judgment, the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). In light of this standard, this Court shall examine the cross motions for summary judgment.

The first claim asserted against the Town is for breach of contract. Under Massachusetts law, to recover for breach of contract against a municipality it must first be established that a valid contract existed between the parties. Massachusetts Gen. Hosp. v. Revere, 385 Mass. 772, 774, 434 N.E.2d 185 (1982), rev'd on other grounds, 463 U.S. 239, 103 S.Ct. 2979, 77 L.Ed.2d 605 (1983); Lord v. Winchester, 355 Mass. 788, 789, 244 N.E.2d 730 (1969). Several prerequisites must be met before a municipality can be said to have entered into a valid contract. Massachusetts Gen. Hosp., 385 Mass. at 774, 434 N.E.2d 185. A contract with a municipality is not valid until all the necessary statutory requirements are fulfilled. Richard D. Kimball Co. v. Medford, 340 Mass. 727, 729, 166 N.E.2d 708 (1960); Dos Santos v. Peabody, 327 Mass. 519, 520-21, 99 N.E.2d 852 (1951). First, the municipality must have authority to make the contract. Id. There is no dispute as to the power of a city or town to make contracts for the purchase of a computer system. See Mass.Gen.L. ch. 40, § 5. It is also undisputed that the Selectmen are duly authorized agents of the town, with the power to enter into contracts on behalf of the town if all the statutory requirements are met. Massachusetts Gen. Hosp., 385 Mass. at 775, 434 N.E.2d 185; Lord v. Winchester, 355 Mass. at 789, 244 N.E.2d 730; Dos Santos v. Peabody, 327 Mass. 519, 521, 99 N.E.2d 852 (1951). The issue here is whether such power was legally exercised.

Assuming these are met, the second prerequisite is that the plaintiff must establish compliance with all the relevant state municipal statutes and the Town's charter. Lawrence v. Falzarano, 380 Mass. 18, 24, 402 N.E.2d 1017 (1980); Central Tow Co. v. Boston, 371 Mass. 341, 344-35, 357 N.E.2d 310 (1976); Kimball, 340 Mass. at 729, 166 N.E.2d 708; Dos Santos, 327 Mass. at 520-21, 99 N.E.2d 852; Lynch v. Somerville, 326 Mass. 68, 71, 93 N.E.2d 249 (1950); Adalian Bros., Inc. v. Boston, 323 Mass. 629, 631, 84 N.E.2d 35 (1949). Furthermore, persons dealing with a city or town "must take notice of the limitation on the contracting power of the municipality and are bound by them and cannot recover upon contracts made in violation of them." Massachusetts Gen. Hosp., 385 Mass. at 775, 434 N.E.2d 185 (quoting Duff v. Town of Southbridge, 325 Mass. 224, 228, 90 N.E.2d 12 (1950)).

One such state statutory requirement is that, except in an emergency, a town may not incur liabilities in excess of its appropriations. Mass.Gen.L. ch. 44, § 31.³ The purpose of this statute is to provide central control over municipal spending and to limit the power of public officials to make contracts. Lawrence v. Falzarano, 380 Mass. at 24, 402 N.E.2d 1017 (Section 31 sets "rigid barriers against expenditures in excess of appropriations"). Thus, when a municipality enters into a contract that involves the expenditure of funds in excess of appropriations the contract will be void and unenforceable.

Both parties acknowledge the limitation imposed on municipal expenditures by Section 31. KVS contends, however, that all the necessary requirements were met to form a valid contract, including appropriations sufficient to cover the Town's obligations under the contract. KVS relies on the general appropriation of $120,000 made by the Town at the 1987 annual town meeting. The Town admits that this appropriation was made in 1987 for the acquisition of a "town-wide" computer system.

In response, the Town presents two arguments in support of its position that the contract was invalid. First, the Town argues that the Town's refusal to appropriate additional funds in May, 1989 suggests that the Town did not intend the prior appropriation of $120,000 to be used for a contract with KVS, even if the amount of contract was less than the amount originally appropriated in 1987. In other words, the May, 1989 vote acted to revoke the original appropriation of $120,000 so that the funds were not available to the Selectmen when they entered into the August, 1989 contract with KVS.

Based on the record before this Court, there is a genuine issue of material fact as to whether the $120,000 appropriated in 1987 was available in August, 1989 when the contract was signed. The copy of the...