Thomas O'Connor & Co., Inc. v. City of Medford

• Citation: 448 N.E.2d 1276,16 Mass.App.Ct. 10
• Court: Appeals Court of Massachusetts
• Decision Date: 01 July 1983
• Parties: , 40 A.L.R.4th 988 THOMAS O'CONNOR & CO., INC. v. CITY OF MEDFORD.

Page 1276

448 N.E.2d 1276

16 Mass.App.Ct. 10, 40 A.L.R.4th 988

THOMAS O'CONNOR & CO., INC. v. CITY OF MEDFORD.

Appeals Court of Massachusetts Suffolk.

Argued Jan. 12, 1983.

Decided May 13, 1983.

Further Appellate Review Denied July 1, 1983.

Robert W. Blakeney, Boston, for defendant.

Steven J. Comen, Boston, for plaintiff.

Before GREANEY, KAPLAN and DREBEN, JJ.

DREBEN, Judge.

In 1967, the plaintiff, a general contractor, entered into a contract with the city of Medford (city) for the construction of a high school. The project took longer than anticipated, and the plaintiff claimed that deficiencies in the plans and other actions by the city disrupted the plaintiff's construction schedule, thereby causing the plaintiff substantial additional costs. The city urges several grounds for reversal of a judgment, based in large part on the findings of a master, awarding $1,658,317.36 in damages to the plaintiff.

The most significant issue raised by the city is the claim that damages may not be awarded in excess of the amount appropriated for the contract under G.L. c. 44, § 31. We hold that the statute does not apply to this action and that, with the exception of an item of damages relating to the plaintiff's profits, the judgment is to be affirmed.

1. Applicability of G.L. c. 44, § 31. Pointing to the fact that the damage award, when added to previous payments to the contractor, was in excess of the sums appropriated for the entire project, the city argues that the plaintiff's claim is barred. The following language of c. 44, § 31, as appearing in St.1946, c. 358, § 23, is relied upon: "No department financed by municipal revenue, or in whole or in part by taxation, of any city or town, except Boston, shall incur a liability in excess of the appropriation made for the use of such department, each item recommended by the mayor and voted by the council in cities ... being considered as a separate appropriation ..." (emphasis supplied).

The question here is whether an award of damages against the city for a breach of contract is a "liability incur[red]" within the meaning of the statute. We have found no Massachusetts authority dealing directly with this question. In two cases alluding to the problem, a Federal court and this court indicated some doubt as to whether appropriation statutes would apply to an award for a breach of contract or to a compromise of an alleged breach. See County of Middlesex v. Gevyn Constr. Corp., 450 F.2d 53, 54-55 (1st Cir.1971), cert. denied, 405 U.S. 955, 92 S.Ct. 1176, 31 L.Ed.2d 232 (1972) (discussing G.L. c. 34, § 14 and c. 35, § 32); Northgate Constr. Corp. v. Fall River, --- Mass.App. ---, ---, Mass.App.Ct.Adv.Sh. (1981) 1052, 1054, 421 N.E.2d 94 (discussing G.L. c. 44, § 31C).

Other cases construing § 31 (and a similar statute applying to the city of Boston) make clear that its "purpose ... is to provide central municipal control over irresponsible municipal spending," Lawrence v. Falzarano, 380 Mass. 18, 24, 402 N.E.2d 1017 (1980), and to "limit the powers of public officials in making contracts," Dyer v. Boston, 272 Mass. 265, 274, 172 N.E. 235 (1930). A contractor with a municipality is bound by these limitations and must make his contracts with reference thereto. Ibid. Lawrence v. Falzarano, supra, 380 Mass. at 24, 402 N.E.2d 1017, and cases cited. The statute applies to additional work under a contract, and it is not enough that the initial contract meets the statutory requirements. Dyer v. Boston, supra, 272 Mass. at 274, 172 N.E. 235. Duff v. Southbridge, 325 Mass. 224, 227-229, 90 N.E.2d 12 (1950). See also G.L. c. 44, § 31C (certification that there is an appropriation applies not only to contracts but also to changes in or addition to the work to be performed under a contract). A contractor may proceed no further than the work "covered by an appropriation." Arthur R. Murphy, A.I.A., & Associates, Inc. v. Brockton, 364 Mass. 377, 380, 305 N.E.2d 103 (1973). Marlborough v. Cybulski, Ohnemus & Associates, Inc., 370 Mass. 157, 160, 346 N.E.2d 716 (1976).

There is, however, a distinction between claims under a contract and damages for a wrongful breach of that contract. While the contractor on a public construction contract must follow the procedures spelled out in the contract and cannot by labeling his claims a breach of contract unilaterally accrue expenses, Glynn v. Gloucester, 9 Mass.App. 454, 460, 401 N.E.2d 886 (1980), some claims do fall outside the contract, and because of the municipality's conduct constitute a "true breach." Id. at 461, 401 N.E.2d 886. United States v. Utah Constr. & Mining Co., 384 U.S. 394, 404-405, 412-413, 86 S.Ct. 1545, 1551-1552, 1555-1556, 16 L.Ed.2d 642 (1966). Where that occurs, we do not think the term "incur a liability" was intended to shield a municipality from liability for its wrongful actions. Cf. Dealtry v. Selectmen of Watertown, 279 Mass. 22, 28, 180 N.E. 621 (1932) (construing G.L. c. 40, § 53).

Once the conditions of G.L. c. 44, § 31, and other statutes relating to municipal contracts have in good faith been met and complied with, we think the "well settled" rule "that a city which is a party to a contract may be held liable to respond in damages," Lawrence v. Falzarano, 380 Mass. at 28, 402 N.E.2d 1017, should apply. General Laws c. 44, § 31, relates to municipal finance and is not, we think, 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. ¹

The few authorities that we have found elsewhere which address statutory and constitutional appropriation and revenue provisions lend support to our conclusion. See, e.g., Houston v. United Compost Serv. Inc., 477 S.W.2d 349, 356 (Tex.Civ.App.1972) (constitutional requirement that no debt be created without provision for a tax therefor applies to an obligation imposed by contract but not to one imposed by law for breach of a valid contract); DeKalb County v. Georgia Paperstock Co., 226 Ga. 369, 371, 174 S.E.2d 884 (1970) (obligation for breach of contract not "debt" within meaning of constitutional provision); Bates & Rogers Constr. Co. v. Board of Commrs., 274 F. 659, 663-665 (N.D.Ohio 1920) (statutes requiring preliminary estimates and certification of funds not applicable to actions for breach of contract); Spitcaufsky v. State Highway Commn., 349 Mo. 117, 122-127, 159 S.W.2d 647 (1941) (constitutional and statutory requirements for municipal contracts do not protect commission from breach of its own valid contract). But see Lindekugel & Sons v. S.D. St. Highway Commn., 87 S.D. 32, 35, 39, 202 N.W.2d 125 (1972), where under a constitutional provision that "[n]o indebtedness shall be incurred ... and no warrant shall be drawn ... except in pursuance of an appropriation for the specific purpose first made" (emphasis supplied), an action for breach of contract was dismissed because there was no appropriation for such a claim.

We hold, accordingly, that the absence of an appropriation does not relieve a municipality from an award for breach of a valid contract. We turn now to the city's other claims.

2. Challenge to the findings of the master. The city filed numerous objections to the master's report and moved for recommittal. We agree with the trial judge that the city failed to raise properly the issue whether the master's findings were supported by the evidence. ² After the city had filed its objections and its request for summaries, the master, citing Miller v. Winshall, 9 Mass.App. 312, 316, 400 N.E.2d 1306 (1980), declined to prepare summaries, asserting that the 751 subsidiary findings and sixty-six general findings in his original 189 page report were themselves so particularized that they, in effect, constituted a summary of the evidence. In Miller v. Winshall, at 316, 400 N.E.2d 1306, we indicated the procedure to be followed when a master declines to make summaries. "At that juncture it would have been open to the [city] to move that the court order the master to summarize the evidence, but such a motion would have to have been accompanied by an affidavit of the defendant's counsel setting forth a summary of the evidence as the defendant thinks the master ought to have prepared it, relating each portion of summary to the finding it purportedly contradicts." Ibid. This the defendant's counsel failed to do.

In cases involving masters, where the evidence is not to be reported, the filing of exhibits (other than those incorporated by reference in the master's report) or transcripts does not require the judge to examine such material. Peters v. Wallach, 366 Mass. 622, 626, 321 N.E.2d 806 (1975). Glynn v. Gloucester, 9 Mass.App. at 458-459 n. 6, 400 N.E.2d 1306. Despite the master's specific reference to Miller v. Winshall, the city, as the judge correctly noted, did not lay "a sufficient foundation to make the purported absence of evidentiary support for the findings apparent."

Except as to profits, discussed in 5(b) infra, the same flaw applies to the city's arguments that damages were improperly computed and that there was no basis on which to distinguish between disruption damages for which the city was responsible and delay damages caused by numerous factors not attributable to the city. Having failed to supply summaries of the evidence on these issues, the city has not properly provided the Superior Court judge or this court with a means to review its claims.

The city, for like reason, has not properly preserved for judicial review its claims that expert testimony was needed to determine the damages for which the city was responsible and that the plaintiff's witness did not properly compute the damages. See Poti Holding Co. v. Piggott, 15 Mass.App. 275, 276, 444 N.E.2d 1311 (1983).

On its face, the master's report carefully distinguishes between damages caused by reason of the plaintiff's inability to perform work in the sequence...