Reynolds Bros., Inc. v. Town of Norwood

• Decision Date: 16 February 1993
• Citation: 414 Mass. 295,609 N.E.2d 58
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: REYNOLDS BROTHERS, INC., & another 1 v. TOWN OF NORWOOD & another. 2

Page 58

609 N.E.2d 58

414 Mass. 295

REYNOLDS BROTHERS, INC., & another ¹ v. TOWN OF NORWOOD & another. ²

Supreme Judicial Court of Massachusetts,

Norfolk.

Argued April 8, 1992.

Decided Feb. 16, 1993.

Dennis M. Ryan, for plaintiffs.

David A. DeLuca (Sharon De Louchrey with him), for defendants.

Before LIACOS, C.J., and WILKINS, ABRAMS, NOLAN and O'CONNOR, JJ. O'CONNOR, Justice.

The plaintiffs, whom we shall refer to collectively as "Reynolds," are construction companies operating as a joint venture enterprise. Reynolds claims that, under G.L. c. 30, § 39G (1990 ed.), it is entitled to interest on amounts paid to it by the defendant town, Norwood, for construction work at Norwood Municipal Airport. Reynolds and the defendants filed motions for summary judgment with supporting materials. A Superior Court judge allowed the defendants' motion and denied that of Reynolds. Reynolds appealed both of the judge's actions, and the Appeals Court reversed and remanded the case to the Superior Court for the entry of judgment for the plaintiffs on liability and assessment of damages in the amount of interest due. Reynolds Bros. v. Norwood, 32 Mass.App.Ct. 901, 584 N.E.2d 1142 (1992). We granted the defendants' application for further appellate review. We agree with the Appeals Court that the defendants are not entitled to summary judgment. However, we do not agree with the Appeals Court's conclusion that, on the present record, Reynolds is entitled to summary judgment on liability. Therefore, we reverse the judgment for the defendants, we affirm the denial of the plaintiffs' motion for summary judgment, and we remand this case to the Superior Court for further proceedings consistent with this opinion.

The material facts are as follows. Reynolds and the Norwood airport commission (airport commission) executed a written agreement for a public construction project at Norwood Municipal Airport. The town of Norwood is responsible for the contractual obligations of the airport commission. The contract price was $1,874,530. Nothing on the face of the agreement shows that the auditor, accountant, or other Norwood officer certified that an appropriation in the amount of the contract price was available for the agreed sum. During the course of construction, Norwood requested extra work as a result of which the total principal sum due Reynolds was $1,933,073.02. Reynolds satisfactorily performed all services required by the contract including the requested extra work. The defendants entered into a funding agreement with the Federal Aviation Administration (FAA) which provided that the FAA would fund ninety per cent of the cost of the project. The defendants also entered into a funding agreement with the Massachusetts Aeronautics Commission (MAC) calling for the State to pay seven and one-half per cent of the project's cost. The town funded the remaining two and one-half per cent. Eventually the town voted to appropriate $48,700 for the project. During the course of the project, Reynolds submitted twelve requisitions to Norwood for periodic, substantial completion, and final payments. All the requisitions were paid, but there were delays from the times Norwood approved the requisitions to the times Reynolds received payments ranging from eight to 829 days.

General Laws c. 30, § 39G, on which Reynolds's claim of entitlement to interest rests, provides in relevant part as follows: "Upon substantial completion of the work required by a contract with the commonwealth, or any ... political subdivision thereof, for the construction, reconstruction, alteration, remodeling, repair or improvement of ... airports ... the contractor shall present in writing to the awarding authority its certification that the work has been substantially completed. Within twenty-one days thereafter, the awarding authority shall present to the contractor either a written declaration that the work has been substantially completed or an itemized list of incomplete or unsatisfactory work items required by the contract sufficient to demonstrate that the work has not been substantially completed....

"Within sixty-five days after the effective date of a declaration of a substantial completion, the awarding authority shall prepare and forthwith send to the contractor for acceptance a substantial completion estimate for the quantity and price of the work done....

"...

"Within thirty days after receipt by the awarding authority of a notice from the contractor stating that all the work required by the contract has been completed, the awarding authority shall prepare and send to the contractor for acceptance a final estimate for the quantity and price of the work done....

"The awarding authority shall pay the amount due pursuant to any periodic, substantial completion or final estimate within thirty-five days after receipt of written acceptance for such estimate from the contractor and shall pay interest on the amount due pursuant to such estimate ... from the thirty-fifth day to the date of payment...."

The defendants contend that they are entitled to summary judgment in their favor because G.L. 30, § 39G, on which Reynolds relies, does not apply to the contract between Reynolds and Norwood. The defendants point to G.L. c. 44, § 31 (1990 Ed.), which provides that "[n]o department financed by municipal revenue, or in whole or in part by taxation, of any ... town ... shall incur a liability in excess of the appropriation made for the use of such department, each item ... voted by the town meeting ... being considered as a separate appropriation...." We assume without deciding that the airport commission is a town "department" within the meaning of the statute.

General Laws c. 44, § 31, establishes a general rule forbidding municipal contract liability in excess of appropriation. See Lawrence v. Falzarano, 380 Mass. 18, 24, 402 N.E.2d 1017 (1980). Marlborough v. Cybulski, Ohnemus & Assocs., 370 Mass. 157, 159-161, 346 N.E.2d 716 (1976). Ordinarily, a contractor may not recover from a town for work not covered by an appropriation. However, a contractor that does work pursuant to a contract that is covered by an appropriation and suffers damages, not contemplated or covered by the appropriation, due to the municipality's breach of the contract, such as the loss of use of money, as alleged here, is not barred from recovery. As the Appeals Court reasoned in Thomas O'Connor & Co. v. Medford, 16 Mass.App.Ct. 10, 13, 448 N.E.2d 1276 (1983), "[t]here is ... a distinction between claims under a contract and damages for breach of that contract.... [Chapter 44, § 31,] is not ... intended to extend the doctrine of municipal immunity so as to leave contractors entirely without remedy for breach of contract in the absence of an appropriation." Consistent with that reasoning, the Appeals Court in that case affirmed an award of interest under G.L. c. 30, § 39K, which contains provisions relative to interest on late payments to contractors similar to those of c. 30, § 39G. Therefore, if Norwood appropriated the necessary funds to cover the construction contract here, as we conclude it did, G.L. c. 44, § 31, does not present an obstacle to Reynolds's recovery of interest under G.L. c. 30, § 39G.

The defendants also argue that Norwood only appropriated enough money to cover its two and one-half per cent portion of the cost of the airport project, and that therefore they cannot be liable for interest due to late payment of the other ninety-seven and one-half per cent. We think that G.L. c. 90, § 51K, defeats that argument. The relevant provisions of § 51K are as follows: "After approval has been given [by the Massachusetts Aeronautics Commission], said airport commission may award such contracts; provided, that the liability incurred shall not exceed the funds available therefor, including the appropriation voted ... together with the amount or amounts stated in any existing agreements for the allotment or...