FORTNEY & WEYGANDT, INC. v. LEWISTON DMEP IX, LLC, et al.
BCD-18-358
MAINE SUPREME JUDICIAL COURT
December 30, 2019
2019 ME 175
Decision: 2019 ME 175
Argued: October 7, 2019
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
Reporter of Decisions
FORTNEY & WEYGANDT, INC.
v.
LEWISTON DMEP IX, LLC, et al.
HJELM, J.
[¶1]
I. BACKGROUND
[¶2] We draw the following account of this case from the procedural record and from the facts as found by the trial court, which are supported by competent evidence in the record. See Vt. Mut. Ins. Co. v. Ben-Ami, 2018 ME 125, ¶ 2, 193 A.3d 178.
[¶3] In 2014, GBT, a commercial real estate developer based in Tennessee, entered into a contract with F&W, a general contractor based in Ohio, for F&W to construct five retail-store buildings in Maine. The terms of the parties’ agreement included a date by which each building project would reach “substantial completion,” a term defined in the agreement as “sufficiently complete in accordance with the Contract Documents so that the Owner may occupy or utilize the Project . . . for the use for which it is intended, without unscheduled disruption.” According to the contract documents, if a project had not reached substantial completion by the contracted date, F&W would owe GBT liquidated damages calculated at a specific rate.
[¶4] For a number of reasons, including unusually harsh winter weather conditions and delays caused by GBT‘s own conduct, none of the five projects reached substantial completion by the contracted dates. As delays arose, F&W employees notified GBT and requested extensions of the substantial completion dates. At the same time, throughout the construction process, F&W employees also submitted a succession of revised schedules to GBT for each project, often indicating substantial completion dates that were later than the contracted dates. Frequently, GBT did not respond to these notifications and updated schedules.2 In some of its communications with F&W, however, GBT signaled its acknowledgement that the substantial completion dates had been extended.3 In addition, several times, GBT‘s vice president of construction told F&W representatives that time extensions would be addressed after the projects were complete, with GBT to issue a final, no-cost change order that would extend the contracted substantial completion dates for all five projects.4
[¶5] Even after the contracted substantial completion dates had passed and continuing as late as August of 2015, GBT issued dozens of change orders for the projects, expanding the scope of F&W‘s work for a number of reasons, including unforeseen site issues, weather conditions, and changes to landscaping plans.
[¶6] Previously, GBT had entered into contracts for F&W to construct nine stores in Pennsylvania and Ohio, which would be used by the same third-party retailer that was to occupy the Maine stores. The contract documents for those out-of-state projects
[¶7] As the result of GBT‘s apparent acquiescence to time extensions as manifested by a combination of its statements, conduct, and silence, F&W employees believed that GBT had agreed to the updated timelines and that GBT would not seek liquidated damages if the projects reached substantial completion after the originally-contracted dates. Because F&W relied on its belief that GBT was agreeing to these extensions, F&W continued to work until August of 2015 even though GBT had stopped making progress payments in June. For the same reason, F&W did not insist that GBT issue change orders extending the contracted substantial completion dates as delays arose. The court concluded that, given the totality of the circumstances, F&W‘s belief that GBT had agreed to the extended dates was reasonable and justified, as was F&W‘s reliance on those changes.
[¶8] Although GBT stopped paying F&W in June, it actually had decided to discontinue payments two months earlier. GBT did not, however, notify F&W of its decision at that time. When F&W‘s president contacted GBT and asked why the payments had stopped and whether they would resume, he received no response. Because of GBT‘s nonpayment, F&W stopped working on the projects on August 7, 2015, after notifying GBT, but it remained ready and able to resume work if GBT were to pay the overdue invoices and issue change orders. Instead of doing that, GBT sent letters to F&W attempting to impose liquidated damages calculated on a per diem basis from the original contracted substantial completion dates.
[¶9] In September and October of 2015, F&W commenced three separate actions against GBT in the Superior Court (Kennebec, Androscoggin, and Oxford Counties), alleging breach of contract and violation of the prompt payment statutes, and seeking enforcement of mechanic‘s liens. GBT filed counterclaims seeking liquidated damages and damages for breach of contract based on allegations that some of F&W‘s work was incomplete or defective.5 The three matters were transferred in the interim to the Business and Consumer Docket.
[¶10] GBT and F&W each filed multiple motions for summary judgment. After a hearing, the court (Murphy, J.) entered summary judgments in favor of F&W on its claims for breach of contract, concluding as a matter of law that F&W was entitled to payment on all of its unpaid invoices.6 The court also entered summary judgments in favor of F&W on portions of GBT‘s counterclaims that alleged defective or incomplete work by F&W. The court denied the portion of F&W‘s motions seeking judgments on GBT‘s counterclaims for liquidated damages, which F&W asserted were barred by waiver and equitable estoppel, because the court concluded that there were issues of material fact concerning
[¶11] In November of 2017 and January of 2018, the court held a nine-day consolidated jury-waived trial on the remaining issues. After being presented with the testimony of many witnesses and a mountain of documentary exhibits, the court issued a fifty-eight-page combined judgment containing detailed findings. The court determined that F&W was entitled to a judgment on GBT‘s counterclaims for liquidated damages because, through its statements, conduct, and silence, GBT had waived and was equitably estopped from asserting such claims; and that F&W was entitled to penalties, interest, and attorney fees, all pursuant to the prompt payment statutes.7
[¶12] GBT did not file a motion for amended or additional findings, see
[¶13] GBT appeals to us from the combined judgment.
II. DISCUSSION
[¶14] GBT asserts that the trial court erred in three of its determinations: that the doctrines of equitable estoppel and waiver barred its claims against F&W for liquidated damages; that F&W was entitled to prompt payment remedies; and that the terms of the parties’ contract allowed F&W to recover attorney fees and costs. We address each of those arguments in turn.
A. Equitable Estoppel8
[¶15] GBT challenges the sufficiency of the evidence supporting the court‘s findings on the elements of equitable estoppel. We review a judgment entered on equitable estoppel grounds “for clear error as to factual findings and for abuse of discretion as to the application of principles of equity to those facts.” Dep‘t of Health & Human Servs. v. Pelletier, 2009 ME 11, ¶ 15, 964 A.2d 630. “An abuse of discretion may be found where an appellant demonstrates that the decisionmaker
[¶16] Equitable estoppel is an affirmative defense predicated on the principle that “[o]ne who has induced another to believe what is untrue may not later assert the truth.” City of Auburn v. Desgrosseilliers, 578 A.2d 712, 714 (Me. 1990) (quotation marks omitted); see
[¶17] The court‘s decision in this case was based on a combination of all three forms of misrepresentations—statements, conduct, and silence—and each element of the court‘s analysis, described below, was supported by the record and consistent with the law.
[¶18] First, GBT made misleading statements. For example, the court found that a GBT employee expressly told F&W employees that, once the projects were complete, GBT would issue a final change order updating the substantial completion dates. Further, the court found that on the third of the five contracted substantial completion dates, another GBT employee communicated a set of “new dates” to F&W, listing dates that were well beyond the contracted dates.
[¶19] Second, GBT‘s conduct was misleading. As the court found, in almost all of the parties’ nine similar out-of-state projects that were governed by identical contracts, F&W did not meet the substantial completion dates, and GBT did not seek to assess liquidated damages. Additionally, on the Maine projects, GBT issued many change orders calling for different or additional work that F&W was to perform after the contracted dates had passed.
[¶20] Finally, GBT‘s silence in response to F&W‘s multiple requests for time extensions was misleading, especially in the context of GBT‘s direction that F&W should not be concerned with the timeline.9
[¶21] These findings are supported by competent evidence in the record and, contrary to GBT‘s argument, are not insufficient as a matter of law to support the court‘s determination that, in various ways, GBT misrepresented its intentions with regard to liquidated damages. Competent record evidence, which we describe above, see supra ¶ 7, also supports the court‘s findings that F&W relied on GBT‘s misrepresentational
[¶22] GBT also contends that the court could not properly apply the doctrine of equitable estoppel absent evidence that GBT explicitly told F&W that liquidated damages would not be assessed. We are unpersuaded. As the trial court found, liquidated damages were inextricably linked to the substantial completion dates, so the combination of GBT‘s misleading statements and its silence regarding those dates amounted to misrepresentations about its intent to assess liquidated damages. See Pelletier, 2009 ME 11, ¶ 18, 964 A.2d 630 (“A misrepresentation need not consist solely of an affirmative statement . . . .“).
[¶23] The court‘s findings do not contain clear error, and its ultimate determination that equitable estoppel barred GBT‘s claim for liquidated damages was well within its discretion.
B. Prompt Payment Remedies
[¶24] GBT next argues that the trial court erred by awarding F&W any remedies pursuant to Maine‘s prompt payment statutes,
[¶25] It was undisputed that GBT withheld payment on several invoices for progress payments and retainage beyond the twenty-day limit prescribed by the prompt payment statutes. In total, those unpaid amounts approached $1.5 million. Through the combination of the summary judgment and determinations reached after the trial, the court concluded that F&W was entitled to be paid for all of those invoiced amounts and that GBT did not have a good faith basis to withhold payments based on any contention that F&W‘s work was incomplete or defective. Although, for that reason, the court committed no error in determining that F&W was entitled generally to remedies created by the prompt payment statutes, including on the retainage payment withheld, we conclude that the court did err in a different aspect of its analysis. The error arises because the court failed to consider the mitigating effect
[¶26] The prompt payment statutes are a collection of rules governing payment between or among parties to construction contracts in a way that “augment[s] damages that are traditionally available for contract or quantum meruit claims.” Jenkins, Inc. v. Walsh Bros., Inc., 2001 ME 98, ¶ 24, 776 A.2d 1229. The statutory remedies can comprise interest, penalties, and attorney fees. See
[¶27] Section 1113 governs payments by “owner[s]” to “contractor[s].”11 Here, GBT was the owner of the properties, and F&W was a contractor. See
[¶28] In some circumstances, however, an owner-obligor is statutorily entitled to withhold payments without incurring liability pursuant to the
prompt payment statutes. “A payment is not deemed to be wrongfully withheld if it bears a reasonable relation to the value of any claim held in good faith by the owner, contractor or subcontractor against which an invoicing contractor, subcontractor or material supplier is seeking to recover payment.”
[¶29] We are unpersuaded by GBT‘s arguments that the trial court should not have imposed any prompt payment statute remedies, or that the court should have excluded the unpaid retainage invoice from the amount subject to prompt payment remedies. Even if we were persuaded by GBT‘s argument that F&W was required to have performed in accordance with the contract in order to be entitled to prompt payment remedies pursuant to section 1113, the court found that F&W did so perform—a finding that was not clearly erroneous.12 Additionally, in its summary
[¶30] This leaves GBT‘s assertion that the court erred by imposing prompt payment remedies on the entire amount that GBT withheld when the court found that some of that amount was withheld based on GBT‘s good-faith belief that it was entitled to recover liquidated damages from F&W. More specifically, the court found that, even though GBT was ultimately unsuccessful on the merits, GBT withheld $498,000 as liquidated damages in good faith.13
Despite that finding, the court ultimately concluded that F&W was entitled to prompt payment remedies calculated on the basis of all payments that GBT withheld—including the amount withheld in good faith as liquidated damages—because the total “amount withheld far exceed[ed] the [value] of [GBT‘s] potential liquidated damages [claims].”
[¶31] This conclusion is affected by an erroneous application of sections 1118(1) and 1118(3). Those statutory provisions do not provide for the court to simply weigh the value of a claim held in good faith against the total amount withheld and then, where the two are not in some measure of balance, impose prompt pay remedies based on the total amount withheld. Further, there need not be a direct connection between the contractor‘s charges for goods and services set out in the invoices and the reason why the obligor withheld payment. See
[¶32] Instead, pursuant to the statutes, “[p]enalties may not be imposed . . . on any amount withheld that bears a reasonable relation to the value of any claim held in good faith.” Jenkins, 2001 ME 98, ¶ 24, 776 A.2d 1229 (emphases added) (quotation marks omitted); see
[¶33] For these reasons, we vacate the portion of the judgment denying GBT any statutory accommodation based on the amount it withheld in good faith in the court‘s determination of damages to which F&W is entitled pursuant to the prompt payment statutes, and we remand for the court to reconsider and recalculate that portion of the award.
C. Attorney Fees Pursuant to the Contract
[¶34] Finally, GBT argues that the court erred when it concluded that, apart
[¶35] The contract documents provided for a tiered approach to “dispute mitigation or resolution.” The first of the dispute resolution mechanisms was for the parties to engage in “good faith direct discussions.” If a dispute remained unresolved after those discussions, the parties were to engage in mediation. The contract went on to provide that, if the issue was still unresolved, the parties then were to submit the matter to a “binding dispute resolution procedure,” prescribed specifically as arbitration.15 The arbitration provisions of the parties’ contract stated:
12.4 BINDING DISPUTE RESOLUTION If the matter is unresolved after submission of the matter to a mitigation procedure or to mediation, the Parties shall submit the matter to the binding dispute resolution procedure selected below.
Arbitration using the current Construction Industry Arbitration Rules of the AAA or the Parties may mutually agree to select another set of arbitration rules. The administration of the arbitration shall be as mutually agreed by the Parties. If the Parties cannot agree, then it shall be administered by AAA.
12.4.1 The costs of any binding dispute resolution procedures and reasonable attorneys’ fees shall be borne by the non-prevailing Party, as determined by the adjudicator of the dispute.
12.4.2. VENUE The venue of any binding dispute resolution procedure shall be the location of the Project, unless the Parties agree on a mutually convenient location.
(Emphases added.)
[¶36] The contract therefore unambiguously states that the nonprevailing party will bear attorney fees and costs related to “binding dispute resolution procedures,” with “the binding dispute resolution procedure” contractually specified to be arbitration. The attorney fees provision contained in this “binding dispute resolution” section of the contract plainly does not contemplate an award of attorney fees outside the context of arbitration, and the trial court therefore erred when it concluded otherwise.16 This, however, does not affect the court‘s determination that F&W‘s is entitled to its attorney fees and costs pursuant to separate authority, namely, the prompt payment statutes.
III. CONCLUSION
[¶37] In its thorough analysis, the court did not err or abuse its discretion by concluding that GBT was equitably estopped from recovering liquidated damages against F&W. We therefore affirm, in full, the judgment in F&W‘s favor
on GBT‘s counterclaims for liquidated damages. We affirm the judgment awarding F&W prompt payment remedies except to the extent that the remedy ordered by the court failed to account for the value of GBT‘s liquidated damages claims that the court found GBT withheld in good faith. We remand for reconsideration of that aspect of the judgment. Finally, we vacate the portion of the judgment awarding attorney fees and costs to F&W pursuant to the terms of the parties’ contract, leaving the court to assess attorney fees and costs only as allowed by the prompt payment statutes.
The entry is:
Judgment affirmed in part and vacated in part. Remanded for further proceedings as described herein.
Michael R. Bosse, Esq., and Conor M. Shankman, Esq. (orally), Bernstein Shur, Portland, for appellant Lewiston DMEP IX, LLC, et al.
David P. Very, Esq., Norman, Hanson & Detroy, LLC, Portland, Gavin G. McCarthy, Esq., Pierce Atwood LLP, Portland, and Michael L. Fortney, Esq. (orally), Stark & Knoll, Akron, Ohio, for appellee Fortney & Weygandt, Inc.
Business and Consumer Docket docket numbers RE-2015-06, RE-2015-11, and CV-2015-74 FOR CLERK REFERENCE ONLY
