Morphy, Makofsky & Masson, Inc. v. Canal Place 2000

• Court: Louisiana Supreme Court
• Writing for the Court: CALOGERO; PER CURIAM
• Citation: Morphy, Makofsky & Masson, Inc. v. Canal Place 2000, 538 So.2d 569 (La. 1989)
• Decision Date: 30 January 1989
• Docket Number: No. 88-C-0844,88-C-0844
• Parties: MORPHY, MAKOFSKY & MASSON, INC. v. CANAL PLACE 2000, et al.

Page 569

538 So.2d 569

MORPHY, MAKOFSKY & MASSON, INC. v. CANAL PLACE 2000, et al.

No. 88-C-0844.

Supreme Court of Louisiana.

Jan. 30, 1989.

Rehearing Denied March 2, 1989.

A.D. Freeman, Jr., Satterlee, Mestayer & Freeman, New Orleans, for applicants.

Wayne Lee, C. Lawrence Orlansky, Stone, Pigman, Walther, Wittman & Hutchinson, Gordon Wilson, Jr., Friend, Wilson & Draper, Victor Stilwell, Jr., Terrence Brennan, Deutsch, Kerrigan & Stiles, New Orleans, for respondent.

CALOGERO, Justice.

Canal Place, as owner, entered into an architectural contract with RTKL, A Professional Architectural Corporation, which obligated RTKL to provide all necessary architectural, engineering, and consulting services required by Canal Place in connection with the construction of Canal Place Phase II, a retail mall and hotel complex located in downtown New Orleans. RTKL thereafter negotiated a subcontract agreement with CBM Engineers, Inc. (CBM) which obligated CBM to perform all structural engineering services, including foundation engineering and design services for the Canal Place project. As indicated by letters from CBM to RTKL dated September 8, 1980 and September 25, 1980 respectively, CBM agreed to perform the structural engineering services subject to a "cap" of $297,511. CBM and RTKL entered into a formal subcontract agreement on November 16, 1981 which included this $297,511 "cap".

CBM, responsive to the wishes of the owner, Canal Place, agreed to have the plaintiff in this case, Morphy, Makofsky and Masson, Inc. (hereinafter referred to as Morphy), design and perform engineering services for the foundation and first floor of the structure.

The matter before this court concerns the claim of Morphy (the sub-subcontractor) against CBM (the subcontractor) for $78,613.00, per invoices calculated on an hourly basis for engineering services admittedly performed by Morphy. ¹

While CBM and Morphy verbally agreed that Morphy should do part of the work CBM had obligated itself to perform for RTKL--and indeed Morphy did ably perform all such services--CBM and Morphy did not execute a written contract in advance of performance, or otherwise, specifically agreeing to the method or terms of payment for such engineering services.

The Civil District Court Commissioner, consistent with the views of all parties, ascertained that Morphy was a "subcontractor" to CBM, although working without a "contract." [Morphy had not responded to CBM's letters requesting that they submit a proposal for their services and negotiate a written contract. Morphy "simply proceeded ... to perform the work."] Finding no contractual theory of recovery, the Commissioner further ascertained that an equitable award "under quasi-contract or de in rem verso, an action in unjust enrichment" was in order, and determined that plaintiff should be awarded against CBM only $45,000, rather than the $78,613.00 Morphy had invoiced, by apportioning the RTKL-CBM "cap" as regards the work Morphy performed. ²

The district court judgment, over plaintiff's exception to the report, adopted the commissioner's recommendation and cast CBM for only $45,000.00 in favor of Morphy.

The court of appeal affirmed, 522 So.2d 1223 (La.App.1988), concluding that "without a contract ... Morphy can only be compensated under a theory of unjust enrichment or quantum meruit." The court applied the principles governing actio de in rem verso, finding an enrichment of CBM, an impoverishment to Morphy, connection between the enrichment and the impoverishment, an absence of justification or cause (no legal cause supports the enrichment), and no other remedy at law (subsidiarity). Minyard v. Curtis Products, Inc., 251 La. 624, 205 So.2d 422 (1967), Brignac v. Boisdore, 288 So.2d 31 (La.1974), Edmonston v. A-Second Mortgage Co., 289 So.2d 116 (La.1974).

The court of appeal then found plaintiff entitled to the reasonable value of the engineering services, subject to the equitable limitation which attends the actio de in rem verso, (i.e., no more to plaintiff than his impoverishment--the actual value of materials and labor furnished including general overhead and reasonable profits--and in no event more than defendant's enrichment.) ³ Then, deciding that CBM by virtue of its contractual "cap" with RTKL was not enriched by the full $78,613.00 of services, because CBM was not fully recompensated by RTKL for the services performed by Morphy, they blessed the equitable remedy forged for the parties by the district court. ⁴

We granted writs at the behest of plaintiff, prompted in some measure by the dissent in the court of appeal which argued that CBM's "enrichment" in the actio de in rem verso entailed not merely the $45,000.00 regarding plaintiff's work which CBM recouped from RTKL, but the entire $78,613.00 of Morphy's work. The dissent reasoned that CBM's "enrichment" in the actio de in rem verso relief to which Morphy was entitled, included not only the value of Morphy's services which CBM recouped from RTKL, but also the amount by which CBM's losses were reduced because Morphy performed services for which CBM was obligated under the RTKL-CBM contract.

On closer examination it is not at all clear that CBM was enriched to a full $78,613.00, even under the dissent's analysis, for, as CBM's attorney in supplemental brief points out, had CBM performed the services that Morphy performed (and CBM had the ability to do the foundation engineering work) the cost to CBM would have been less than the $78,613.00 charged by Morphy, although the precise amount of such cost is not evident from this record. Two factors which would have prompted a lesser cost to CBM are these: (1) Morphy's $78,613 in charges includes a reasonable sum for profit, which would not have been a "cost" to CBM; and (2) CBM's personnel would not have cost CBM the comparable hourly charges in Morphy's invoices because CBM had salaried personnel already on staff (and not otherwise completely occupied) capable of doing the foundation design and engineering work.

We need not resolve this latter problem, however, for after reviewing the record and the law, we conclude that actio de in rem verso does not apply in this situation.

Morphy has a substantive claim in contract, and the existence of a claim on an express or implied contract precludes application of actio de in rem verso, for there does not exist one of the latter's requirements, that there be no other remedy available at law (subidiarity).

For the reasons which follow, we conclude that Morphy is entitled to recover the full $78,613.00 for the foundation design and engineering services, a reasonable value for the services Morphy performed for CBM under contract.

EXISTENCE OF A CONTRACT

This cause of action arose prior to the effective date of the 1984 revision of the Civil Code articles on Obligations. For this reason, we apply the articles in effect prior to January 1, 1985. ⁵

La.Civ.Code Art. 1779 sets forth the requisites for a valid contract: (1) parties legally capable of contracting; (2) their consent legally given; (3) a certain object, which forms the matter of agreement; and (4) a lawful purpose. All of these requisites were met in the present case. Note also that La.Civ.Code art. 1761 defines a "contract" as "an agreement, by which one person obligates himself to another, to give, to do or permit, or not to do something, expressed or implied by such agreement."

As already mentioned, Canal Place contracted with the architectural firm, RTKL. RTKL subcontracted with CBM, the defendant in this case, in September of 1980, as a consequence of which CBM was obligated to perform all structural engineering services within a $278,511 "cap", although a formal subcontract between RTKL and CBM was not signed until November of 1981. During the week of October 27, 1980 Canal Place informed Mr. Edward Morphy that his firm was to be involved in the foundation design of Canal Place Phase II. The Morphy firm thereupon contacted CBM, informing CBM that they had been told they would be in CBM's employ and requesting confirmation of the firm's involvement, as well as information regarding the "capacity" and "arrangements" concerning that involvement. By letter dated December 2, 1980, CBM acknowledged Morphy's involvement and proposed certain foundation services for Morphy to perform. Six specific services were proposed in this letter. The letter suggested that Morphy bill CBM "on an hourly basis" and requested an "estimate of maximum billings." The record does not evidence a response by Morphy. CBM again contacted Morphy by letter dated December 24 1980 and informed Morphy that Canal Place and RTKL had instructed CBM that Morphy's work on the project should be expanded. This letter asked Morphy "to consider doing all the phases that I discussed in my previous letter with one added phase." CBM requested that Morphy "send me your proposal to furnish these services as soon as you are able." The record indicates that Morphy did not respond to either of CBM's letters, but that Morphy performed the requested services and kept a record of the hours that the firm worked (the concluding invoices indicate that Morphy's work was completed in August of 1983).

On February 6, 1981, RTKL informed Canal Place of its concern that Morphy had not responded to CBM's contract proposal and requested Canal Place's help in expediting Morphy's involvement as it would "directly affect the forthcoming pricing package." However, CBM did not make any further attempts to get Morphy to sign a contract, nor did CBM request that Morphy cease work on the project until a formal contract was signed. CBM was in need of the services performed by Morphy, and Morphy was performing those services. In fact, CBM was communicating with Morphy while the latter was performing the services, including on the job site.

The contract proceeds received by CBM from RTKL included compensation for the foundation services performed...