Precon, Inc. v. JRS Realty Trust
| Decision Date | 28 February 1985 |
| Docket Number | Civ. No. 84-0085-P. |
| Citation | 47 BR 432 |
| Court | U.S. District Court — District of Maine |
| Parties | PRECON, INC., Plaintiff/Appellee, v. JRS REALTY TRUST, Defendant/Appellant. |
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U. Charles Remmel, II, Kelly, Remmel & Zimmerman, Portland, Me., for plaintiff/appellee.
Walter R. May, Jr., Peabody & Arnold, Boston, Mass., Jeffrey T. Edwards, Preti, Flaherty & Beliveau, Peter Greanleaf, U.S. Trustee, Portland, Me., for defendant/appellant.
Appellant, Precon, Inc., was a Chapter 11 Debtor which brought an action against Appellee, JRS Realty Trust, to recover the balance due on a contract. JRS is the owner of a building housing the Spencer Press printing facility in Wells, Maine, which was constructed in 1980 and 1981. Precon was engaged by JRS to supply insulated precast concrete panels that form the exterior skin of the building. At trial, the parties disagreed as to the terms of their agreement. The bankruptcy court found, and it is not disputed on this appeal, that the relationship between the parties was governed by a contract signed by both parties on September 26, 1980. After deducting certain amounts for nonconformities in Precon's performance and for outstanding mechanic's liens filed against the project, the bankruptcy court ordered judgment in favor of Precon in the amount of $75,622.06 plus interest and costs. JRS has appealed the judgment.1
JRS argues on appeal that the bankruptcy court erred in awarding Precon damages on the contract on the basis that Precon did not substantially perform under the contract and the question of recovery in quantum meruit was neither pleaded nor tried. Second, JRS contends that the bankruptcy court erred in calculating the amount of damages for which Precon was responsible due to nonconformities in Precon's performance. Third, JRS claims that the bankruptcy court erred in dismissing its counterclaims for deceit and abuse of process.
JRS' assignments of error are directed primarily at the findings of fact by the bankruptcy court. On appeal from the bankruptcy court, "findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." Fed.R. Bankr.P. 8013. A finding of fact is clearly erroneous when it is against the clear weight of the evidence. Holmes v. Bateson, 583 F.2d 542, 552 (1st Cir.1978). A finding will be found erroneous and require reversal only if the court is left with the definitive and firm conviction that a mistake has been committed. Id.; Evans v. United States, 319 F.2d 751, 753 (1st Cir. 1963).
A careful review of the nine volumes of transcripts of trial testimony and the many exhibits contained in this record discloses that factual determinations in this case depend upon a thorough understanding of many technical aspects of the construction of the Spencer Press printing facility. The bankruptcy judge created a complete record for purposes of appeal. A court conducting an appellate review of such a record is at a recognized disadvantage, however, in comparison to the trial judge in examining the evidence and assigning weight to its various parts. The trial judge had the benefit of direct observation of witnesses' explanations of and physical references to drawings and other exhibits, a personal view of the job site, and personal observation of the demeanor of witnesses to aid his understanding of the evidence. Thus, this Court's duty not to disturb findings of fact by the trial court unless clearly erroneous weighs especially heavily in this case.
JRS argues at length that the bankruptcy court should not have permitted Precon to recover in quantum meruit since the theory was not pleaded or tried. This question need not be reached, however, if the bankruptcy court correctly found that Precon substantially performed its obligations under the contract.
In its Memorandum Decision, the bankruptcy court did not expressly state the theory it adopted in support of Precon's recovery. The bankruptcy court stated quite explicitly, however, that "the proceeding is governed by the contract of September 26, 1980." The bankruptcy court then proceeded to deduct from the balance due on the contract amounts attributable to defects in Precon's performance. Precon was to receive a total of $369,558 under the contract. The bankruptcy court deducted a total of approximately $51,000 from this amount for nonconforming work by Precon.
If a party to a construction contract endeavors in good faith to perform and does substantially perform an agreement, he is entitled to recover the contract price, less any amounts attributable to imperfections in his performance under the contract. Hattin v. Chase, 88 Me. 237, 240, 33 A. 989 (1895); see also, Lawrence v. Cunningham, 160 Me. 89, 92-93, 197 A.2d 767 (1964). The critical issue with respect to substantial performance of construction projects is whether the owner obtains that which is necessary to accomplish the purposes of the contract. Klug & Smith Co. v. Sommer, 265 N.W.2d 269, 272, 83 Wis. 378 (1978); 13 Am.Jur.2d, Building and Construction Contracts, § 43 (1964). The defects must not be so serious as to deprive the property of its value for its intended use; the deduction of damages for defects from the contract price must provide fair compensation. Dittmer v. Nokleberg, 219 N.W.2d 201 (N.D.1974). The question whether a party has substantially performed a contract is to be decided by the trier of fact. Edens v. Kole Construction Co., 450 A.2d 1161, 1164, 188 Conn. 489 (1982); Dittmer, 219 N.W.2d at 201.
The contract in this case describes "the work" to be performed by Precon as "the production of delivery to and storage at the project of all precast concrete." This description was elaborated upon in several documents incorporated into the contract by reference. The bankruptcy court found that Precon's performance was nonconforming in several respects. It found that Precon was delinquent in producing and submitting shop drawings for approval, and that the lack of adequate shop drawings was in part responsible for misplaced hardware imbedded in the concrete panels and panels which exceeded tolerances prescribed by the manual for quality control. It also found that there were defects in the exterior surface appearance of the panels and that Precon had failed to seal all the panels as required by their agreement.
The extensive record in this case amply supports these findings. The Court's finding that each of these instances of nonconforming performance were compensable in damages was also amply supported by the evidence. Despite these defects in performance, there was no evidence indicating that Precon failed to fulfill its primary obligation under the contract, that is, to produce and deliver all precast concrete for the project. Nor is there any evidence of record indicating that the precast panels provided by Precon have failed to serve their intended purpose. Finally, there is no evidence that Precon did not in good faith endeavor to perform its obligations under the contract. Therefore, the finding, implicit in the bankruptcy court's Memorandum Decision, that Precon had substantially performed under the contract is not clearly erroneous.
JRS quarrels with several of the bankruptcy court's findings with respect to damages caused by defects in Precon's performance under the contract. A brief review of the factual background is essential to an understanding of the damage issues raised by JRS.
The principals in this case each had the understanding that construction of the Spencer Press printing facility was to be a "fast-track job." In other words, normal procedures for bidding, awarding contracts, design and planning were deliberately accelerated with the aim that the facility might be fully enclosed before the winter of 1980-81. Precon first heard about the job in May of 1980. Dana Turner, one of the two stockholders in Precon, was told on or before June 7, 1980, that Precon had been awarded the contract for production of precast concrete panels. However, Precon's formal bid was not submitted until July 14, 1980. JRS subsequently notified Precon to begin work on the project. The contract which governed the relationship between Precon and JRS was not signed until September 26, 1980, more than a month after Precon delivered the first panel to the job. The contract provided that Precon's work should be substantially completed by October 22, 1980. Precon did not cast the final panel, however, until December 1, 1980.
In addition to Precon, several other contractors signed direct contracts with JRS, the owner. JRS also entered a general contract with Rocca Construction, who in turn employed numerous subcontractors to do much of the work on the job. Initial design of the facility was done by Enertech, a Chicago engineering firm. JRS also employed on an hourly basis, as structural engineer, Signal Engineering, also of Chicago. James Somes, an architect who initially was a member of the firm of Wright Pierce Associates, and who later formed his own firm, JAS Associates of Portsmouth, New Hampshire, was employed to oversee certain aspects of the project. The architect was also paid on an hourly basis.
The record indicates that a number of problems that had some relationship to production and erection of the precast concrete panels arose on the job site. JRS here challenges several findings related to allocation of responsibility for those problems.
First, JRS contends that the bankruptcy court's finding that many of the problems that occurred could have been anticipated and solved by a competent and experienced project manager was clearly erroneous. This finding was the basis of the bankruptcy court's allocation of responsibility for "back charges" submitted...
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