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J & K Tile Co. v. Wright & Morrissey, Inc.

Supreme Court of Vermont

October 25, 2019

J & K Tile Company
v.
Wright & Morrissey, Inc.

          On Appeal from Superior Court, Chittenden Unit, Civil Division Robert A. Mello, J.

          Mark G. Hall of Paul Frank Collins P.C., Burlington, for Plaintiff-Appellee/Cross-Appellant.

          Michael B. Clapp, Middlebury, for Defendant-Appellant.

          PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.

          REIBER, C.J.

         ¶ 1. This is a contractual dispute between J & K Tile Co., a subcontractor, and Wright & Morrissey, a general contractor. After a bench trial, the court issued a judgment and order on February 23, 2018, which held, among other things, that Wright & Morrissey owed J & K Tile Co. $42, 000 plus interest under a Memorandum of Understanding (MOU) between the parties, and that Wright & Morrissey unlawfully withheld J & K Tile Co.'s retainage[1] check in violation of the Vermont Prompt Pay Act. Following this decision, on May 31, 2018, the court further held that each party was the prevailing party in a portion of the litigation and should be awarded attorney's fees regarding that portion. Wright & Morrissey appeals, and J & K Tile Co. cross-appeals. We affirm in part and reverse and remand in part.

         ¶ 2. The general factual background is as follows. The parties entered a contract for Texas-based J & K Tile Co. to install flooring for Wright & Morrissey's construction project in Vermont. J & K Tile Co. began work, expecting to complete its job within two months. Soon afterward, anticipating there might be general delays in construction, the parties agreed to an MOU providing that Wright & Morrissey would make additional payments to J & K Tile Co. if delays arose that were beyond J & K Tile Co.'s control. The anticipated delay occurred, and J & K Tile Co. requested three payments under the MOU. Wright & Morrissey denied two of these requests. After construction was completed, Wright & Morrissey sent the subcontractor a retainage check as its final payment.

         ¶ 3. Three disputes are raised in this appeal: (1) J & K Tile Co.'s claim that it is owed $42, 000 under the MOU; (2) a dispute about the retainage check; and (3) a dispute about attorney's fees under the Prompt Pay Act. We discuss each in turn and recount additional facts as needed. I. Claim for $42, 000

         ¶ 4. The first dispute addresses whether Wright & Morrissey breached its contract by failing to pay J & K Tile Co. $42, 000 under the MOU.

         A. Facts

         ¶ 5. The parties entered into a construction contract in December 2014; following discussions about anticipated delays, the parties agreed to an MOU in April 2015, outside the amendment process set forth in the contract. The MOU provided that the general contractor would pay two additional costs. One was the "cost for travel and downtime" if Wright & Morrissey suspended the project. After Wright & Morrissey suspended the subcontractor's work and J & K Tile Co. returned to Texas, the subcontractor requested additional payment, pursuant to the MOU, for leaving and returning to the job site. The general contractor approved this payment.

         ¶ 6. The other was a daily additional cost, provided by the MOU as follows: "If J & K Tile is delayed beyond May 21, 2015 through no fault of its own, Wright & Morrissey agrees to pay not to exceed documented daily costs of $2, 000.00 per day." The subcontractor worked twenty-one days past May 21, 2015, due to delays it did not cause. It documented that each day resulted in more than $2000 in labor and fixed costs. On September 23, 2015, the subcontractor requested a $42, 000 payment based on the MOU for the twenty-one days that it worked past May 21. Wright & Morrissey denied the payment. J & K Tile Co. sued, alleging in its complaint that Wright & Morrissey had breached its contract by failing to approve the September 23 request. The complaint did not specifically identify the MOU, although it did identify the September 23 request, which in turn identified the MOU.

         ¶ 7. In the litigation that ensued, both parties, as well as the trial court, acknowledged that J & K Tile Co.'s claim regarding the $42, 000 was based on the MOU. However, the parties contested whether the MOU was part of the contract. Wright & Morrissey argued in its summary-judgment briefing that the MOU was not an amendment, and therefore not part of the contract; thus, when the subcontractor alleged in its complaint that Wright & Morrissey had breached the "contract," it had not alleged a breach of the MOU. J & K Tile Co. countered that the MOU was an amendment and also that it did not matter; in whatever way they characterized the document, Wright & Morrissey's actions constituted a breach of contract. Later, at trial, Wright & Morrisey's witness testified that the MOU was a "standalone understanding," rather than an "agreement" or an amendment to the contract.

         ¶ 8. In J & K Tile Co.'s post-trial proposed findings of fact and conclusions of law, it adopted the view, raised by Wright & Morrissey's witness, that the MOU was a standalone document. It concluded that the MOU was an independently enforceable contract. Wright & Morrissey disagreed, stating in its proposed findings of fact and conclusions of law that the MOU was not a standalone contract and that the question was irrelevant because J & K Tile Co. never alleged breach of the MOU in its complaint. Wright & Morrissey then filed a motion for clarification requesting that the court rule the original complaint did not allege a breach of the MOU. J & K Tile Co. responded with motions to clarify and to amend the complaint, arguing that the original complaint sufficiently notified Wright & Morrissey of its claim, but, in the alternative, asking the court to amend the complaint to conform to the evidence pursuant to Vermont Rule of Civil Procedure 15(b).

         ¶ 9. In the trial court's February 23 judgment and order, it held that the MOU was an enforceable contract and granted J & K Tile Co.'s motion to amend. It further determined that Wright & Morrissey breached the MOU by failing to pay J & K Tile Co. $2000 per day for twenty-one days, and it accordingly awarded the subcontractor $42, 000 plus interest.

         ¶ 10. On appeal, Wright & Morrissey challenges this judgment with three legal arguments: (1) the MOU is an "interpretive gloss" on the original contract, not an independent contract, and therefore the timing and waiver provisions of the original contract bar the claim; (2) the court erred in allowing J & K Tile Co. to amend the complaint to expressly cite the MOU as the basis for J & K Tile Co.'s claims; and (3) the $2000-per-day cost outlined in the MOU does not include labor costs. We do not address the third argument because it was not raised below. State v. Ovitt, 2005 VT 74, ¶ 13, 178 Vt. 605, 878 A.2d 314 (mem.) ("An issue is not preserved for appeal unless a party raises it with specificity and clarity below, thereby ensuring that the trial court will have an opportunity to fully develop the relevant facts and to reach considered legal conclusions.").

         B. Independent Contract

         ¶ 11. First, we address Wright & Morrissey's argument that the MOU was not an independent contract, and therefore the timing and waiver provisions of the original contract bar the $42, 000 claim. The question is whether the MOU is an amendment, an independent contract, or some other category of agreement. "[T]he existence of an agreement is ordinarily a question of fact," but the "legal interpretation" of an agreement-such as whether it constitutes an enforceable contract-is a question of law. Kellogg v. Shushereba, 2013 VT 76, ¶ 17, 194 Vt. 446, 82 A.3d 1121 (quotation omitted). "We review questions of law de novo without deference to the trial court." Doe v. Vt. Office of Health Access, 2012 VT 15A, ¶ 12, 191 Vt. 517, 54 A.3d 474; see also Kellogg, 2013 VT 76, ¶ 17 (reviewing de novo whether agreement constituted rental agreement as matter of law); Prue v. Royer, 2013 VT 12, ¶ 18, 193 Vt. 267, 67 A.3d 895 ("Our review of the trial court's interpretation of the parties' agreement is nondeferential."). Insofar as this issue requires review of the court's factual findings, we review for clear error. Quenneville v. Buttolph, 2003 VT 82, ¶ 11, 175 Vt. 444, 833 A.2d 1263. "We will overturn a factual finding of the trial court only where there is no credible evidence to support it . . . ." Id. ¶ 17.

         ¶ 12. To be an enforceable contract, the agreement must manifest the parties' intention to be bound and its terms must be sufficiently definite. Miller v. Flegenheimer, 2016 VT 125, ¶ 13, 203 Vt. 620, 161 A.3d 524 (addressing whether exchange of emails constituted enforceable contract). Intent is "a question of fact to be determined by examining the objective words and deeds of the parties." Quenneville, 2003 VT 82, ¶ 17 (addressing whether oral agreement constituted enforceable contract). Partial performance of the contract can indicate intent to be bound. Miller, 2016 VT 125, ¶ 17. As for the terms, "a binding agreement need not contain each and every contractual term," but "it must contain all of the material and essential terms." Quenneville, 2003 VT 82, ¶ 16; see also Miller, 2016 VT 125, ¶ 17 (stating that "whether all of the terms of the alleged contract have been agreed upon" can indicate whether parties intended to be bound (quotation omitted)). The agreement must leave no "material term . . . left for future negotiations." Miller, 2016 VT 125, ¶ 21 (quotation omitted).

         ¶ 13. The trial court here found that the parties intended to be bound by the MOU, and the record supports that finding. The parties reduced to writing an oral agreement to manage delays, and at no time did either party express an intent not to be bound. Additionally, Wright & Morrissey partially performed the MOU by authorizing a payment for the removal and return of J & K Tile Co.'s workers, which was also provided by the MOU; this demonstrates its intent to be bound. See id. ¶ 17. Furthermore, as the trial court found, the MOU "contains all the terms needed for a complete understanding of the parties' rights and obligations in the event of a suspension, and those terms are clear and definite." Given these facts, the court did not err in concluding that the MOU is an enforceable contract. Nor did the court err in finding that the MOU was not an amendment to the original contract, given that the parties did not follow the amendment process set forth in the contract when adopting the MOU.

         ¶ 14. Because the MOU is an independent contract, the timing and waiver provisions of the original contract do not apply to the MOU.[2] J & K Tile Co.'s breach-of-contract claim ...


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