Carvel Co. v. Spencer Press
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	1998 ME   74
Docket:	Cum-97-248
Argued:	December 4, 1997
Decided:	April 8, 1998

Panel:WATHEN, C.J., and ROBERTS, CLIFFORD, RUDMAN, DANA, and SAUFLEY, JJ.

THE CARVEL COMPANY

v.

SPENCER PRESS, INC.

ROBERTS, J.

	[¶1]  Spencer Press, Inc., appeals from the judgment of the Superior
Court (Cumberland County, Calkins, J.) awarding The Carvel Company
damages for breach of contract as well as attorney fees, a late payment
penalty, and interest.  Carvel cross-appeals, contesting the court's
computation of damages and the interest award.  Because we conclude that
Carvel was not entitled to damages, we vacate the judgment.  

I.

	[¶2]  Spencer Press is a printing company that prints third class mail. 
When Spencer's Wells facility was constructed in 1980, Carvel did the
mechanical work.  Between 1980 and 1994, Spencer employed Carvel
almost exclusively to serve its mechanical and plumbing needs.  However,
Spencer did put out to bid "significant repair[s] or addition[s] to the
mechanical facility at the plant"; they were not automatically awarded to
Carvel.  
	[¶3]  In 1993 Spencer discussed with Carvel the plumbing and
mechanical aspects of a proposed expansion of its manufacturing and office
facilities.  Although Spencer had selected Berry & Son to be the
construction manager for the expansion, Spencer chose to withhold the
mechanicals from Berry & Son because "[it] had dealt with Carvel since [it]
had built the original building."  Steven Carvel, the president and majority
stockholder of Carvel, understood that Carvel was to complete the expansion
on a "design build" basis.  A design build contract is one in which the owner
selects a contractor to both design and build the installation.  Steven Carvel
acknowledged that only three of the approximately five hundred contracts
that Carvel has performed in the last twenty years were design build
contracts.  In contrast to Carvel's understanding, Ron Spenlinhauer, chief
executive officer of Spencer, understood that Carvel was only to prepare
engineering designs for the mechanicals portion of the plant and office
additions.  Spenlinhauer intended to use the designs to solicit bids from
mechanical contractors or, alternatively, to employ Carvel to construct the
expansion if its prices were competitive.  Spenlinhauer denied ever using
the term "design build" during his discussions with Carvel.  
	[¶4]  On January 7, 1994, Carvel sent a purchase order request to
Spencer that stated:
  
We request a purchase order for the mechanical design work
for the office and plant additions.  

We request that you allocate $25,000 for this work.  Once we
can finalize the exact scope of work, we can adjust this
estimate up or down.  We will invoice you monthly against this
budget.  

Spencer issued the purchase order, which constitutes the entire contract
between the parties.  
	[¶5]  On March 25, Carvel submitted cost proposals for the office
expansion to Spencer.  Spencer subsequently asked Carvel to break down its
cost projections.  On April 25, Spencer informed Steven Carvel that the
mechanical work for the expansion project would be put out to bid.  On
April 28, Spencer instructed Berry & Son to solicit bids for the mechanical
aspect of the expansion project.  
	[¶6]  On May 6, Carvel delivered to Spencer the mechanical
specifications and drawings for the office addition.  The delivery did not
include any final design work of its consulting engineer.  Also on this date,
Carvel wrote a letter to Spencer stating: 
 
We offered our services as a design build contractor which is
a team approach working directly with you as the owner.  We
are not a consulting engineering firm ... that produces plans
and specifications for competitive bidding purposes.  

It has always been my understanding that our design services
would be for our internal use not intended to be distributed
for our competitors to use in the preparation of their bids.  

Subsequently, on May 9, Steven Carvel called officials at Spencer to reiterate
that his designs were not intended to be put out to competitive bid. 
Spencer then forwarded Carvel's plans to Berry & Son, requesting that
Berry & Son determine whether "they are complete enough and contain
sufficient information to put this job out to bid."  On May 19, Spencer
instructed Berry & Son to design the mechanicals for the expansion.  
	[¶7]  Sometime before June 3, Spencer decided to postpone the
office addition because of the rising costs of the expansion project.  On
June 3, Carvel forwarded its consulting engineer's plant and office designs
to Spencer.  These designs did not bear an engineer's seal or signature.  To
the contrary, each design bore the disclaimer:  "This drawing is for the
exclusive use of the Carvel Company for a design/build project at Spencer
Press, Wells, Maine.  This is a progress working drawing in the design/build
process, for installation only depicting a system concept, not a final design." 
The lack of an engineer's seal and signature and the presence of the
disclaimer prevented Spencer from using Carvel's designs to put the plant
expansion out to bid.  Due to time constraints, Spencer then put the plant
expansion out to bid as a design build project; Carvel's bid exceeded all
other bids received by approximately $80,000 to $90,000.  
	[¶8]  Carvel ultimately submitted to Spencer four invoices totaling
$36,896.22, but Spencer made no payment to Carvel.  Carvel initiated this
action, alleging that it is entitled to recover $36,896.22 for breach of
contract, or the reasonable value of its labor and materials in quantum
meruit, or the unjust enrichment conferred on Spencer in the form of its
labor and materials.  Carvel also sought statutory interest, penalties, and
reasonable attorney fees pursuant to the Construction Contracts Act, 10
M.R.S.A. §§ 1111-1120 (1997).  
	[¶9]  The court concluded that the contract between the parties
called "for Carvel to do 'the mechanical design work for the office and plant
additions,'" not a design build.  The court found that Carvel's May 6 delivery
of office plans fulfilled the "portion of the contract requiring it to design the
office addition."  The court also found that Carvel's failure to obtain an
engineer's seal for the plant designs delivered on June 3 and its decision to
impose a disclaimer on those designs constituted a failure to fulfill the plant
expansion "portion of the contract."  The court determined that Spencer
"has shown no damages from Carvel's breach.  It did not pay Carvel and
simply paid someone else to do the work."  The court concluded that Carvel
was entitled to recover for its work on the office expansion, pursuant to
either of two theories:  (1) breach of a divisible contract and (2) quantum
meruit.  The court determined that pursuant to either theory, Carvel is
entitled to $15,000, or sixty percent of the $25,000 contract price.  The
court additionally concluded that the Construction Contracts Act applies to
Carvel's claim, and it awarded attorney fees, a 1%-per-month penalty, and
interest.  This appeal and cross-appeal followed.  

II.

	[¶10]  The court erroneously concluded that the contract between the
parties is a divisible contract.  "[T]he severability or entirety of a contract
depends upon the intent of the contracting parties, and that intent is a
question of fact" that we review for clear error.  Belanger v. Haverlock, 537
A.2d 604, 606 (Me. 1988).  We will reverse a finding of fact if the record
does not contain competent evidence to support it or if "it is based upon a
clear misapprehension by the trial court of the meaning of the evidence." 
Harmon v. Emerson, 425 A.2d 978, 982 (Me. 1981).  
	[¶11]  The court found that "[t]he actual behavior of the parties"
evinced an intent to enter into a divisible contract, reasoning:  "Carvel did
the design in two parts, doing the office specifications first; Spencer
decided to go ahead only with the plant expansion, putting off the office for
another year."  The parties' testimony, however, fails to demonstrate any
intent to enter into a divisible contract.  Steven Carvel testified that he
intended to design and to construct both parts of the expansion. 
Spenlinhauer testified that he intended "to get a set of design plans."  None
of the evidence suggests that Spencer considered hiring one contractor to
perform the plant design and another contractor to perform the office
design.  Cf. Belanger, 537 A.2d at 606 (upholding determination that
installment construction contract was not severable, in part because "it is
unlikely that the parties would have negotiated for anything less than the
complete construction of the house").  The contract requires Spencer to
allocate $25,000 "for this work"; the parties did not agree to budget the
plant design and the office design separately.  Moreover, because Carvel and
Spencer entered into the purchase order agreement in January of 1994,
Spencer's decision in May of 1994 to postpone the office expansion due to
unanticipated costs does not shed any light on what its intentions were
when it contracted with Carvel.  In sum, neither the contract language nor
the testimony of the parties supports a finding that the parties intended to
enter into a divisible contract.  

III.

	[¶12]  We recently discussed the elements of quantum meruit, stating
that "[a] valid claim in quantum meruit requires:  'that (1) services were
rendered to the defendant by the plaintiff; (2) with the knowledge and
consent of the defendant; and (3) under circumstances that make it
reasonable for the plaintiff to expect payment.'"  Paffhausen v. Balano, 1998
ME 47, ¶ 8, --- A.2d --- (quoting Bowden v. Grindle, 651 A.2d 347, 351 (Me.
1994)).  The damages in quantum meruit are computed according to the
value of the services provided by the plaintiff.  See id. at ¶ 7, --- A.2d at ---.{1}  
	[¶13]  The court concluded that Carvel was entitled to recover in
quantum meruit because "Carvel rendered the service of completing the
office design work, and both parties anticipated that Carvel would be paid
for such service."  That conclusion is erroneous.  The mechanical
specifications and drawings for the office expansion that Carvel forwarded to
Spencer on May 6 did not consist of the final design work of its consulting
engineer.  The only evidence in the record concerning the May 6 delivery
indicates that the designs were twenty-five percent incomplete and thus
could not be used by Spencer to solicit bids for the expansion project. 
Carvel did not carry its burden of establishing that the incomplete designs
had any value.  
	[¶14]  Similarly, although Carvel furnished its consulting engineer's
completed designs for both the office expansion and the plant expansion on
June 3, those designs lacked an engineer's seal and signature.  Instead, each
of them bore the disclaimer stating that the drawings were only a "system
concept" for a design/build project at Spencer Press. The lack of an
engineer's seal and signature, by itself, would have precluded Spencer from
using the designs to put the expansion project out to bid without first
employing an engineer to recheck, sign, and seal them.  The addition of the
disclaimer, however, precluded Spencer from using the designs to solicit
bids from other contractors altogether.  The court specifically found that the
June 3 designs had no value.  Because Carvel did not establish that the
services it rendered to Spencer had any fair market value, the trial court
erroneously awarded Carvel recovery in quantum meruit.{2}  Consequently, we
need not address the cross-appeal.  
	The entry is:
				Judgment vacated.  Remanded for
				the entry of a judgment for the
				defendant. 
                                                                                       

Attorney for plaintiff:	

Martin J. Foley, Esq., (orally)	
Wilson, Fernald & Foley	
P O Box 15337	
Portland, ME 04112-5337	

Attorney for defendant:

Gordon C. Ayer, Esq., (orally)
Spencer Press, Inc.
90 Spencer Drive
Wells, ME 04090

FOOTNOTES******************************** {1}. Quantum meruit must be distinguished from unjust enrichment, which permits "recovery for the value of the benefit retained when there is no contractual relationship, but when, on the grounds of fairness and justice, the law compels performance of a legal and moral duty to pay." Aladdin Elec. Assocs. v. Town of Old Orchard Beach, 645 A.2d 1142, 1145 (Me. 1994) (quotation omitted). {2}. Moreover, Carvel's decision to print a disclaimer on all of its engineer's design work constitutes a willful breach of the contract. Carvel intended the disclaimer to prevent Spencer from using the designs to solicit bids from other mechanical contractors. Carvel's failure to perform in good faith bars it from recovering in quantum meruit. See Levine v. Reynolds, 143 Me. 15, 19, 54 A.2d 514, 517 (1947).