Opinion
Case No. 01-2477-JAR
March 26, 2003
MEMORANDUM AND ORDER DENYING SUMMARY JUDGMENT
This matter is before the Court on the parties' cross motions for summary judgment (Doc. 61 and Doc. 62). Lindsey Masonry Co. ("Plaintiff") seeks summary judgment on all counts of its First Amended Petition. Count I seeks recovery against Defendant Danis Environmental Industries, Inc. ("Danis") for breach of contract. Count II seeks recovery against Danis based on promissory estoppel. Count III seeks recovery against Danis in quantum meruit. Count IV seeks recovery against Defendant Seaboard Surety ("Surety") on its bond. Defendants Danis and Surety (collectively referred to as "Defendants") seek summary judgment on the entirety of Plaintiffs First Amended Petition. Defendant Danis also seeks summary judgment on its counterclaim based on promissory estoppel.
UNCONTROVERTED FACTS
For purposes of these motions, the following relevant facts are uncontroverted.
THE PROPOSAL
On or about June 19, 2000, Defendant Danis faxed an invitation to bid ("Invitation") to Plaintiff, a masonry and stone subcontractor, inviting Plaintiff to submit a bid regarding Danis' preparation of a bid to be general contractor for a construction project known as the Lawrence Wastewater Treatment Plant Project in Lawrence, Kansas ("Project"). The Invitation requested that Plaintiff submit a bid and a scope of work. The Invitation did not specify that a particular form of contract would be required from Plaintiff if its bid was accepted for use on the Project.
On or about June 23, 2000, Jon Lindsey, Plaintiffs President, prepared and faxed a Scope Letter ("Scope Letter") to Danis, identifying the scope of masonry work which Plaintiff would consider in forming and submitting its bid for the masonry work on the Project. Plaintiffs Scope Letter specifically excluded certain items from Plaintiffs proposed scope of work on the Project.
James Thompson had responsibility at Danis to review subcontractor proposals to ensure that the proposals complied with the Project plans and specifications. Thompson reviewed Plaintiffs Scope Letter; and in a letter to Plaintiff sent on or about June 25, 2000, Danis responded to Plaintiffs scope letter, noting two items that Plaintiff should consider regarding materials for the Project.
On or about June 27, 2000, Plaintiff faxed to Danis its bid, which it called its "Proposal." In the Proposal, Plaintiff offered to complete the masonry work on the Project for the total contract price of $1,049,997.00. Plaintiffs Proposal provided in relevant part that:
If the proposal is accepted the parties will enter into an AIA Document A-401
Standard Form of Agreement between Contractor and Subcontractor, modified only to incorporate and attach the proposal and to incorporate the following terms. . . .
That same day, Danis submitted its general contractor bid to the project owner, in the amount of $38,950,000. In submitting this bid, Danis utilized Plaintiff's Proposal. Although Danis was low bidder, no contract was awarded to Danis at the time of its bid. Under the prime contract, the owner had the right to accept or reject any proposed subcontractors. On June 30, 2000, in anticipation of receiving a contract from the owner, Danis asked Plaintiff to submit its references, and advised Plaintiff of its need for certain information. Danis also advised that it would soon forward a letter of intent to Plaintiff, contingent upon receiving a contract from the owner. On or about September 5, 2000, Danis entered into a prime contract with the owner for construction of the Project.
SUBMITTAL WORK
The initial work for a masonry contractor on the Project would be submitting sample materials for consideration by the owner. Danis was aware that Plaintiff was procuring and submitting sample materials for the Project. The material submittals provided to Danis by Plaintiff were reviewed by Danis and forwarded to the Project engineer for approval. After the Project engineer had reviewed Plaintiffs submittals for the Project, Danis would then forward the Project engineer's comments to Plaintiff and advise Plaintiff whether such materials were accepted or rejected for the Project. There was ongoing communication between Danis and Plaintiff regarding a variety of masonry materials for the Project. Various materials provided to Danis by Plaintiff were approved by the Project engineer for use on the Project. In July 2000, at Danis' request, Plaintiff submitted a revised proposal for masonry work. Throughout the next year, Plaintiff and Danis had multiple communications about: the status of the Project; change orders; Plaintiffs communications with material suppliers; availability of materials and samples; and additional material specifications.
Beginning in September 2000, at Danis' request, Plaintiff began submitting material samples to Danis. Periodically, Plaintiff would advise Danis of its need to select certain materials by a given date, to avoid a delay in obtaining the materials from the supplier. In addition to arranging for Danis to receive samples, and monitoring availability of materials with respect to the progress of the construction project, Plaintiff also provided Danis with test reports, gradation reports, and certifications on the materials.
In December 2000, Plaintiff submitted five (5) purchase orders to various material suppliers. Plaintiff has since received invoices from some of these material suppliers for materials they supplied; and other material suppliers have informed Plaintiff to expect their invoices after Plaintiff is paid for its work on the Project.
In January 2001, Plaintiff requested that Danis provide it with a sales tax exemption certificate, which allows a subcontractor to acquire materials without paying sales tax. That same day, Danis faxed a sales tax Exemption Certificate to Plaintiff. The next day, Plaintiff faxed a copy of the exemption certificate to five material providers, asking them to note Plaintiff's sales tax exemption number on their invoices.
On or about July 20, 2001, Plaintiff faxed to Danis its first request for payment, in the amount of $25,990.00, for work that included work associated with its submittals. On the same day, Danis responded, faxing to Plaintiff a copy of a letter addressed to Danis' counsel stating "How should this be addressed?" Danis never paid Plaintiff on this, and never informed Plaintiff that it would not pay for Plaintiffs submittal work, although Danis' practice is to not pay subcontractors for submittal work.
Yet on the same day, Danis, without informing Plaintiff that Danis would not pay Plaintiffs payment request, informed Plaintiff that Plaintiff was responsible for unloading and inventorying its materials delivered to the Project; and requested Plaintiff to continue working on the Project. The point of Danis' July 20, 2001 correspondence was to keep Plaintiff working on the Project. And, Plaintiff kept working on the Project; Plaintiff and Danis communicated several times over the next two weeks about on-site testing of sample materials.
Meanwhile, Danis' counsel and Plaintiffs counsel corresponded about Danis' position that it had never authorized Plaintiff to proceed with work on the Project, and Plaintiffs position that it had performed substantial work over the last nine months, foregoing other work to do so.
Plaintiffs counsel's July 27, 2001 correspondence stated that Plaintiff had no intention of terminating its work on the Project and that Plaintiff planned to continue its work on the Project; and in correspondence dated August 3, 2001, Plaintiffs counsel advised Danis' counsel that Plaintiff planned to continue its work on the Project and was in the process of delivering materials to the Project.
ALLEGED CONTRACT/TERMINATION
On July 5, 2000, Plaintiff sent a letter to Danis thanking it "for using and accepting Lindsey Masonry's Proposal of June 27th, 2000, in preparing and obtaining the low bid for the above named project."
On August 3, 2000, Danis issued its Letter of Intent to Plaintiff, and on September 26, 2000, provided Plaintiff with Danis' standard form subcontract.
The letter provides in relevant part that:
Per our telephone discussions Danis will issue a subcontract to Lindsey Masonry Company, Inc., for masonry, per the following sections and all related sections:Division I General Requirements — As Applicable
Specification Section 04200 — Building Masonry — Complete
for the total lump sum price of $1,049,997.00. Coordination between trades and subcontractors, all material, unloading of material, furnishing consumable supplies and personal safety equipment, are included in this subcontract. It is expressly understood this commitment is based on Danis receiving an executed contract from the City of Lawrence, for the above referenced project.
If accepted by the Owner, the following adds and deducts may apply:
1. Eliminate all masonry work at the Vehicle and Equipment Storage Building.
DEDUCT: $10,097.00
Danis' Standard and Special terms and conditions will apply. Subcontractors will abide by all OSHA safety standards and Danis safety policies. Payment terms shall be 90% net 30 days, 10% upon owner's approval.
A subcontract will be forthcoming once Danis has received the executed contract from the owner.
On February 9, 2001, Plaintiff informed Danis that its subcontract agreement did not reflect Plaintiffs Proposal and forwarded to Danis a copy of the AIA Document A-401 Standard Form of Agreement between Contractor and Subcontractor, modified only to incorporate Plaintiffs Proposal.
On February 12, 2001, Danis informed Plaintiff that it had not accepted Plaintiffs proposal to use the AIA subcontract form, and requested notification of Plaintiffs specific concerns with Danis' subcontract form. On or about May 1, 2001, Plaintiff forwarded a signed form AIA A-401 to Danis.
On or about August 6, 2001, Plaintiff informed Danis that Plaintiff had been told that Danis was soliciting bids from other masonry contractors for the masonry work on the Project, and requested that Danis advise Plaintiff regarding such information at once. Prior to Plaintiffs August 6, 2001 correspondence, Danis had been soliciting other masonry subcontractors to "[C]ome look at the plans, come look at the project, and give us a bid on it." Even while Danis was soliciting other subcontractors to complete the Project, Danis was asking Plaintiff to keep working on the Project, and did not inform Plaintiff that Danis was seeking other masonry subcontractors to complete the masonry work.
On August 9, 2001, Danis provided Plaintiff with an AIA A-401 subcontract form, modified to incorporate terms and conditions critical to the work and to delete the standard form A201 General Conditions incorporated into the A-401 form. On August 16, 2001, Plaintiff advised Danis that it would not accept the modified A-401 subcontract form and that it would only accept an unmodified form.
On August 17, 2001, Danis advised Plaintiff that it would not agree to an unmodified A-401 form subcontract, and that Danis' efforts to negotiate a subcontract with Plaintiff were terminated. Danis informed Plaintiff that Danis was terminating Plaintiff from the Project, and that Danis would proceed to complete the masonry work on the Project. Danis then entered into a contract with Diaz Construction, Inc., for completion of the masonry portion of the Project.
DAMAGES
Plaintiff realizes varying profit margins on projects depending upon the nature of the particular project. On previous wastewater and freshwater construction projects where the firm Black Veatch was acting as the project engineer, Plaintiff realized a profit margin of at least 25% of the total cost of construction. On this Project, Black Veatch was the project engineer. Plaintiff calculated its total costs for its scope of work as $847,397.00, and its final profit as $202,600.00, approximately 24% of Plaintiffs projected total costs for its work on the Project. Plaintiff performed all offsite mobilization, material submittals, material certifications and material sample submittals regarding the Project. Plaintiff claims that the reasonable value of Plaintiffs offsite mobilization, material submittals, material certifications and material sample submittals regarding the Project is $36,750.00. Plaintiff claims that its total damages related to Danis' breach of the Contract is $239,350.00, plus accrued interest at the legal rate of the State of Kansas. Danis has not paid Plaintiff any sums for its work on the Project.
CONCLUSIONS OF LAW
Summary Judgment:
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In applying this standard, the Court must "view the factual record and draw all reasonable inferences therefrom most favorably to the nonmovant." An issue of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." A factual dispute is "material" only if "under the substantive law it is essential to the proper disposition of the claim." If the party bearing the burden of persuasion at trial fails to come forward with sufficient evidence on an essential element of its prima facie case, all issues concerning all other elements of the claim and any defenses become immaterial.
Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir. 1993).
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citations omitted).
Id. (citation omitted).
Id. (citation omitted).
Id. (citation omitted).
The moving party "bears the initial burden of making a prima facie demonstration of the absence of a genuine issue of material fact and entitlement to judgment as a matter of law." A movant that does not bear the burden of persuasion at trial need not negate the nonmovant's claim, and may make its prima facie demonstration by simply pointing out the lack of evidence for the nonmovant on an essential element of the nonmovant's claim."
Id. at 670-71 (citation omitted).
Id. at 671 (citation omitted).
If the movant meets this initial burden, "the nonmovant that would bear the burden of persuasion at trial may not simply rest upon its pleadings; the burden shifts to the nonmovant to go beyond the pleadings and `set forth specific facts' that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant." In order to do this, "the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein." I. Breach of Contract
Id. (citations omitted); see also Fed.R.Civ.P. 56(e).
Id.(citation omitted).
Under Kansas law, the essential elements of an action for breach of contract are: 1) the existence of a contract between the parties; 2) sufficient consideration to support the contact; 3) plaintiffs performance or willingness to perform in compliance with the contract; 4) defendant's breach of the contract; and 5) damages to plaintiff caused by the breach.
The parties agree that Kansas law controls. Pretrial Order (Doc. 70), at p. 2.
See Commercial Credit Corp. v. Harris, 212 Kan. 310, 313, 510 P.2d 1322, 1325 (1973).
The burden of proof is on Plaintiff to show the existence of the alleged contract. It is fundamental that in order to have a valid and enforceable contract there must be an offer and an acceptance. An offer has been described as "the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." Plaintiff claims that it clearly intended for its Proposal to be considered an offer to Danis to enter into a contract for the masonry work on the Project and that Plaintiff communicated the offer for the purpose that Danis would accept the Proposal and employ Plaintiff on the Project.
Steele v. Harrison, 552 P.2d 957, 963, 220 Kan. 422, 428 (1976) (citation omitted).
Bennett v. Emerson Elec. Co., 186 F. Supp.2d 1168, 1171 (2002) (citing Restatement (Second) Contracts, § 24 and noting that the "meeting of the minds" subjective theory has been rejected and the prevailing approach is an objective theory).
The bid of a tradesman, such as Plaintiff, is merely an offer. A contract is formed only if the prime contractor accepts it. In Sutter Bros. Constr Co. v. City of Leavenworth, the Kansas Supreme Court held that "[a] bid in response to a solicitation constitutes no more than an offer and, until its acceptance, a contract does not exist." Furthermore, the owner's award of the prime contract to a prime contractor does not automatically constitute acceptance by the prime contractor of the various tradesmen's bids, even if the prime contractor relied on the tradesmen's bids to calculate its winning bid to the owner.
238 Kan. 85, 708 P.2d 190 (1985).
Id. at 92.
See, e.g., Finney Co., Inc. v. Monarch Constrt Co., Inc., 670 S.W.2d 857, 859 (Ky. 1984) (holding that the incorporation of the name and amount of bid of a subcontractor by a general or prime contractor in its bid to the owner does not constitute an acceptance which would create a contractual relationship between the general contractor and the subcontractor should the general contractor become the successful bidder); see also Merritt-Chapman and Scott Corp. v. Gunderfson Bros. Eng'g Corp., 305 F.2d 659 (9th Cir. 1962); Williams v. Favret, 161 F.2d 822 (5th Cir. 1947); Central Coast Constr. v. Lincoln-Way Corp., 404 F.2d 1039 (10th Cir. 1968).
Plaintiff acknowledges that a general contractor's mere use of a subcontractor's bid in submitting its bid to the owner does not form a contract between the general contractor and the subcontractor. However, Plaintiff argues that this rule does not pertain to a situation where the general contractor "accepts" the subcontractor's bid. Thus, Plaintiff must show that Danis accepted its offer. In determining acceptance of an offer, if the offer does not specify the mode of acceptance, the acceptance may be given "in any manner and by any medium reasonable in the circumstances." A communicated offer creates a power to accept that offer only. "Any expression of assent that changes the terms of the offer in any material respect may be operative as a counter-offer, but it is not an acceptance and constitutes no contract."
Restatement (Second) of Contracts, § 30(2) (1981).
Steele v. Harrison, 220 Kan. 422, 428, 552 P.2d 957, 962 (1976).
Plaintiff alleges that on or about July 5, 2000, James Thompson informed Jon Lindsey that Danis was the low bidder on the Project, that Danis had utilized Plaintiffs Proposal in Danis' bid, and that Danis had accepted Plaintiffs Proposal and would in fact be using Plaintiff for the masonry portion of the Project. A July 5th letter from Plaintiff purports to confirm Danis' acceptance of Plaintiffs Proposal, stating: "[p]ursuant to our telephone conversation, I want to thank Danis Environmental Industries for using and accepting Lindsey Masonry's Proposal of June 27th, 2000, in preparing and obtaining the low bid for the above named project." Plaintiff argues that Danis never discussed nor refuted the statement in the letter that Danis had "accepted" its Proposal. Yet Jim Thompson testified that he interpreted "using and accepting" not as Danis' acceptance of the Proposal, but as Danis' use or consideration of the Proposal only for purposes of calculating its bid. Furthermore, Thompson denies ever telling Lindsey or anyone else that Danis was accepting or agreeing to Plaintiffs Proposal.
Lindsey Aff. ¶ 18; Lindsey Dep. at 34, In 10-21.
Memorandum in Support of Plaintiff's Motion for Summary Judgment, Ex. 7.
The Court finds that there is a genuine issue as to whether Danis accepted the offer. Therefore, summary judgment must be denied on Plaintiffs breach of contract claim.
See Steele v. Harrison, 220 Kan. 422, 429, 552 P.2d 957, 963 (1976) (stating that the existence or nonexistence of an agreement or contract is in its very nature a question of fact) (citation omitted); Continental Western Ins. Co. v. KFS, Inc., 59 P.3d 1, 5 (Kan.App. 2002) (stating that when the evidence pertaining to the existence of a contract or the meaning of the terms of the contract is in dispute, or the evidence pertaining to the existence of a contract or the terms of the contract admit to more than one inference, a question is presented for the trier of facts) (citation omitted).
Defendants argue that they are nevertheless entitled to summary judgment on Plaintiffs breach of contract claim, because even if Danis had accepted Plaintiffs offer, the Proposal is legally insufficient to constitute a contract. The Kansas Supreme Court has held that:
As a general rule, in order for a written agreement to be binding it must be sufficiently definite in its terms and requirements as to enable a court to determine what acts are to be performed and when performance is complete. . . . Where a purported contract is so vague and indefinite that the intention of the parties cannot be ascertained therefrom it is unenforceable; but absolute certainty is not required — only reasonable certainty is necessary. A contract may contain some formal imperfections or be lacking in detail, but it will not fail for uncertainty if the court can ascertain the terms and conditions by which the parties intended to be bound, and thus carry their intentions into effect.
Edwards Assocs., Inc. v. Black Veatch, L.L.P., 84 F. Supp.2d 1182, 1200 (D. Kan. 2000) (quoting Jack Richards Aircraft Sales, Inc. v. Vaughn, 203 Kan. 967, 971, 457 P.2d 691 (1969)).
Plaintiffs Proposal sets forth the work to be done, work that is excluded, the brick allowances, and the contract price. The Proposal also provides that:
Memorandum in Support of Plaintiff's Motion for Summary Judgment, Ex. 4.
If the proposal is accepted the parties will enter into an AIA Document A-401 Standard Form of Agreement between Contractor and Subcontractor, modified only to incorporate and attach the proposal and to incorporate the following terms: Payment is due thirty (30) days after application with no retention greater than the amount being retained by the Owner for Masonry and final payment is due thirty (30) days after application and acceptance of Masonry work by the Owner, interest shall accrue on any monies past due at the legal rate of the State where the project is located and Contractor shall pay any and all costs of collection that the Masonry Subcontractor incurs in enforcing the terms of this agreement. Any Addendum's [sic] and/or Alternates not mentioned herein will be excluded. The proposal will be firm for ten (10) days from the date of the proposal.
Id.
The Court finds that if Plaintiff's Proposal was in fact accepted, it is legally sufficient to constitute a contract. The terms set forth in the Proposal are reasonably certain such that the Court can ascertain what acts are to be performed and when performance is complete. The fact that the parties may have contemplated the subsequent execution of a formal instrument does not imply that they have not already been bound to a definite and enforceable contract. Two parties "may fully agree upon the terms of a contract, knowing that there are other matters on which they have not agreed and on which they expect further negotiation. Such an expectation does not prevent the agreement already made from being an enforceable contract." Furthermore, the fact that the parties have rendered some substantial performance or taken other material action in reliance upon their existing expressions of agreement bears upon the question of completeness of their agreement. Therefore, summary judgment on this basis is denied.
See Edwards, 84 F. Supp.2d at 1182.
Storts v. Martin K. Eby Constr. Co., 217 Kan. 34, 40, 535 P.2d 908, 913 (1975) (citation omitted); see also Farmers Equity Co-op Creamery Ass'n v. United States, 132 F.2d 738, 739-40 (10th Cir. 1943) (stating that offers and acceptances by letters and telegrams may constitute an enforceable contract even though they refer to the future execution of a more formal contract).
Storts, 217 Kan. at 40 (citing 1 Corbin on Contracts, § 29).
Id. at 41 (citation omitted).
Defendants argue that even assuming there exists a contract between Plaintiff and Danis, Plaintiffs alleged damages are too speculative to allow any recovery. In this case, Plaintiff seeks to recover costs incurred and lost profits on the alleged contract. Plaintiff alleges that at the time Danis terminated Plaintiff Plaintiff had performed all of the necessary mobilization, sample preparation and submittal of samples that Danis had requested. Plaintiff claims that the value of this work performed by Plaintiff was $36,750.00. Plaintiff also alleges that if it had been allowed to complete the work, it would have realized $202,600.00 in profit. Plaintiff claims total damages of $239,350.00.
Breach of contract damages "are limited to those damages which may fairly be considered as arising in the usual course of things, from the breach itself or as may reasonably be assumed to have been within the contemplation of both parties as the probable result of the breach." With respect to a building contract, the court in McGrew v. Ide Estate Inv. Co., held that:
MLK, Inc. v. University of Kansas, 23 Kan. App. 2d 876, 886, 940 P.2d 1158, 1164 (1997) (citing Kansas State Bank it Overseas Motosport, Inc., 222 Kan. 26, 27, 563 P.2d 414 (1977)).
106 Kan. 348, 187 P. 887 (1920).
The measure of damages for the breach of a building contract where the plaintiff has been wrongfully prevented from fully performing is the difference between what it would cost to complete the entire work according to the contract and the contract price. The same result may be reached by allowing the plaintiff as damages for the work done such proportion of the entire price as the fair cost of that work bears to the fair cost of the whole work, and in respect to the work not done such profits as the evidence shows he would have realized by doing it.
Id. at Syllabus.
The Kansas courts "emphasize the importance of making an injured party whole and use a `rather liberal approach to what evidence is required to do so.'" "Where the cause and existence of damages are established with requisite certainty, recovery will not be denied because the damages are difficult to ascertain. In such cases, evidence which establishes the extent of damages as a matter of just and reasonable inference is sufficient." Loss of profits may be recovered when "proved with reasonable certainty, and when they may reasonably be considered to have been within the contemplation of the parties."
Biocore, Inc. v. Khosrowshahi, 1999 WL 156050, *4 (D. Kan. 1999) ( citing Zenda Grain Supply Co. v. Farmland Indus., Inc., 20 Kan. App. 2d 728, 749, 894 P.2d 881, 896 (1995)).
Id. (citing New Dimensions Prod., Inc. v. Flambeau Corp., 17 Kan. App. 2d 852, 859, 844 P.2d 768, 774 (1993)).
Vickers v. Wichita Sate Univ., 213 Kan. 614, 618, 518 P.2d 512, 515 (1974) (citations omitted).
The Court finds that summary judgment would be premature on this issue of damages. With regard to Plaintiffs claim for lost profits, it is uncontroverted that Plaintiff realizes varying profit margins on projects depending upon the nature of the particular project. On previous wastewater and freshwater construction projects where Black Veatch acted as project engineer, Plaintiff realized a profit margin of at least 25% of the total cost of construction. On this wastewater project with Black Veatch as project engineer, Plaintiff calculated its profit on the Project as $202,600.00. This profit margin of approximately 24% is commensurate with Plaintiffs historical profits.
The Court notes that Defendants did not specifically controvert paragraphs 109 to 137 of Plaintffs Uncontroverted Contentions of Fact. D. Kan. Rule 56.1(a) provides that all material facts set forth in the statement of the movant shall be deemed admitted for the purpose of summary judgment unless specifically controverted by the statement of the opposing party.
Defendants further challenge Plaintiffs claims for lost profits, because they are based on numbers in Plaintiffs president's head and are unsupported by financial performance documentation on any prior construction project. Plaintiff responds that it has agreed to provide Defendants with this documentation and the issue is currently the subject of the Court's order to show cause. Plaintiff was granted an extension until July 12, 2002, to comply with the order to show cause. Although Defendants' Reply Memorandum in Support of Motion for Summary Judgment (Doc. 80) was filed after that deadline, it is not clear whether this information was provided. Defendants merely assert in their reply that "as of the dispositive motion cut-off date" Plaintiff had not provided evidence with respect to any other project. Because the Court is unaware of what documentation was provided, if any, the Court cannot rule on this issue.
Defendants have also filed a Motion in Limine (Doc. 65) seeking to prohibit Plaintiff from introducing Plaintiffs financial records or presenting testimony regarding Plaintiffs financial performance on projects other than the Project at issue in this case.
Plaintiffs claim for actual damages is similarly not ripe for summary judgment. Plaintiff refers to its "Schedule of Values" as showing that the value of the work it performed was $36,750.00. However, Plaintiffs Exhibit 25 consists of only a fax cover sheet and does not include a schedule of values. Defendants allege that Plaintiff failed to produce the schedule of values during discovery, until near the end of Plaintiff's May 29, 2002 deposition; and that Danis never would have agreed with the schedule of values, because in this industry, subcontractors are not paid for office work, such as preparing submittals at the beginning of the construction project. Thus, the Court denies summary judgment, because of these genuine issues.
II. Promissory Estoppel:
To prove a case of promissory estoppel, a party must show: "(1) The promisor reasonably expected the promisee to act in reliance on the promise, (2) the promisee acted as could reasonably be expected in relying on the promise, and (3) a refusal of the court to enforce the promise would sanction the perpetration of fraud or result in other injustice."
Templeton v. Kansas Parole Board, 27 Kan. App. 2d 471, 474-75, 6 P.3d 910 (2000) ( citing Mohr v. State Bank of Stanley, 244 Kan. 555, 574, 770 P.2d 466 (1989)).
Although Plaintiff does not specifically identify Danis' alleged "promise," Plaintiff apparently refers to Danis' alleged acceptance of Plaintiffs Proposal. Given the genuine issues on Danis' alleged acceptance of the Proposal, summary judgment is denied on Plaintiffs promissory estoppel claim.
See Memorandum in Support of Plaintiff's Motion for Summary Judgment at 38-39, 42 (stating that Danis should have reasonably expected Plaintiff to rely on Danis' promise that it had accepted Plaintiffs Proposal and that the parties had a valid, binding agreement, and that Plaintiff reasonably relied on the promise of Danis that Plaintiff's Proposal had been accepted and that Danis would perform its obligations under the contract).
III. Quantum Meruit:
The phrase " quantum meruit," meaning "as much as he deserves," was often used in older cases to describe an equitable doctrine premised on the theories of unjust enrichment and restitution. Under this theory, recovery was allowed "when a benefit had been received by a party and it would be inequitable to allow the party to retain it." Quantum meruit and restitution are recognized as equivalent theories in Kansas, and courts today speak in terms of restitution.
Hope's Architectural Prods., Inc. v. Lundy's Constr., Inc., 781 F. Supp. 711, 717 (D. Kan. 1991) (citation omitted).
Id. (citation omitted).
James M. Caplinger, Chrtd. v. Lundgren, 905 F. Supp. 876, 882 (D. Kan. 1995) (citation omitted).
Hope, 781 F. Supp. at 717.
Compensation based on this doctrine is allowable for partial performance, where a contract is terminated or abandoned after such partial performance so as to prevent complete performance. The Court finds that in the present case it would be inequitable to allow Danis to retain any benefit that Plaintiff conferred on it.
Sherman v. Webber Supply Co., 201 Kan. 507 (1968); see also Fusion, Inc. v. Nebraska Aluminum Castings, Inc., 934 F. Supp. 1270, 1275 (D. Kan. 1996) (citations omitted) (stating that under Kansas law, "quantum meruit and restitution are not available theories of recovery when a valid, written contract addressing the issue exists").
Defendant focuses on the fact that Plaintiff "did no actual construction work," and only arranged for submittals and samples, mainly by forwarding paperwork from suppliers. Defendant argues that even if Plaintiff would be entitled to some nominal compensation for the time Mr. Lindsey spent arranging for submittals, Plaintiff incurred no actual cost because the samples were provided by the suppliers, Plaintiff paid nothing for the materials, and there is no evidence that any of the materials that it alleges it supplied were actually delivered to the project or incorporated into the work. Furthermore, Lindsey's time is salary, an uncompensable overhead expense. Therefore, Plaintiff can demonstrate no actual damage associated with this work.
Defendants' Memorandum in Opposition to Plaintiff's Motion for Summary Judgment (Doc. 72), at p. 12.
The Court finds that Defendants' argument is without merit. The proper measure is the benefit conferred on Danis, not Plaintiffs expenses. This may be measured by: "(a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or (b) the extent to which the other party's property has been increased in value or his other interests advanced." This "reasonable value" is ordinarily less than the cost to the party seeking restitution, because his expenditures are excluded to the extent that they confer no benefit on the other party.
The Court also notes that Defendants' argument regarding "overhead expenses" would not apply to Plaintiffs claim for lost profits. "Fixed expenses or overhead are not deducted when computing lost profits." Jetz Service Co. v. Salina Properties, 19 Kan. App. 2d 144, 153, 865 P.2d 1051, 1058 (1993) (citation omitted).
See Restatement (Second) of Contract, § 373 (1981).
Id. at § 371.
Id. at comment b.
Plaintiff claims that the reasonable value of the work performed by Plaintiff and not paid for by Danis is $36,750.00. Defendant argues that Plaintiff failed to submit any evidence other than a naked statement in an affidavit that Mr. Lindsey's time was worth $36,750. However, "[w]here a party is suing on a basis of quantum meruit to recover compensation for services rendered, he is permitted to testify as to the reasonable value of his services."
Bethany Medical Center v. Wallace, Saunders, Austin, Brown and Enochs, Chrtd, 23 Kan App.2d 120, 127, 928 P.2d 97, 103 (1996) ( citing Brakensiek v. Shaffer, 203 Kan. 817, Syl. ¶ 3, 457 P.2d 511 (1969)).
Nevertheless, summary judgment must be denied because there are factual disputes regarding what materials were ultimately used on the Project. Until this issue is resolved, the Court cannot determine the extent of any benefit conferred on Danis. It is undisputed that Plaintiff submitted five (5) purchase orders to various material providers regarding material for the Project; but what materials were actually used in the construction of the Project is disputed. On the other hand, it is undisputed that Plaintiff has received invoices from some of these material suppliers, and other material providers have advised that they will invoice Plaintiff when Plaintiff is paid for its work on the Project.
Thus, it appears that at least some of the materials were ultimately used, although the amount or value is unclear. The Court is not suggesting that there would only be a benefit conferred on Danis if the materials were in fact used. Rather, a benefit would also be conferred on Danis by going through the process of deciding what to use. Although a party's expenditures in preparation for performance are not compensable when they fail to confer a benefit on the other party, such preparation work may in fact confer a benefit. In Sharman v. Webber Supply Co., recovery was allowed for efforts that ultimately aided the replacement contractor that was hired after the parties' contract was terminated. The court stated that:
Restatement (Second) of Contracts, § 370, comment a. (1981).
201 Kan. 507, 441 P.2d 867 (1968).
While Juel failed to produce an acceptable well . . ., nevertheless [the owner] derived benefits from the drilling of Juel and Gepner. The site of well No. 1 was eliminated because of sand, that of No. 2 because of subterranean formation, which caused caving in, and that of No. 3 because of insufficient water. These efforts must have aided in locating the site of the well subsequently drilled by [another driller].IV. Danis's Counterclaim:
Id. at 873. Cf. Hope's Architectural Prods., Inc. v. Lundy's Constr., 781 F. Supp. 711, 717 (D. Kan. 1991) (denying recovery for preliminary consultation work where the advice became moot when an alternate supplier with a different product was used).
Danis moves for summary judgment on its counterclaim. Danis claims that the doctrine of promissory estoppel applies because a prime contractor, in submitting its bid for a prime contract with the owner, is entitled to rely upon a bid submitted by a prospective subcontractor.
See John Price Assoc., Inc. v. Warner Elec., Inc., 723 F.2d 755, 757-58 (10th Cir. 1983) (holding that a subcontractor should have expected a general contractor to rely on the subcontractor's bid in making its own bid, and that promissory estoppel precluded the subcontractor from withdrawing its bid as a result of this reliance); Meade Assoc., Inc. v. Scottsbluff Sash Door Co., 856 P.2d 40 (Colo.App. 1993) (stating that "[u]nder the doctrine of promissory estoppel, as applied to construction contracts, a material supplier's bid is binding and cannot be revoked if the bidder should reasonably expect that a general contractor would rely upon that bid in submitting its own bid on a project") (citations omitted); Haselden-Langley Constructors, Inc. v. D.E. Farr Assocs., Inc., 676 P.2d 709, 711 (Colo.App. 1983) (stating that "the bid of a subcontractor is binding and cannot be revoked if the subcontractor should reasonably expect that a general contractor would rely upon the bid in submitting its prime bid on the project and the general contractor in fact does so").
Danis used Plaintiffs bid, along with those of other tradesmen, in calculating its own bid to the owner for the prime contract. Danis argues that it was forced to cover Plaintiffs bid by hiring Diaz Construction Company to do the masonry work at a price of $1,215,000. Plaintiffs bid (originally $1,049,997), reduced by change orders, was $1,042,109. Thus, Danis alleges it cost Danis $165,003 to cover Plaintiffs obligation. In addition, Danis argues it was forced to credit the Owner $63,600 in liquidated delay damages, expend $7,557.81 for weather protection, as well as the cost of installing the winter protection, $7,168.00. Danis therefore seeks judgment in the total amount of $243,328.81.
But, Danis counterclaim for promissory estoppel fails as a matter of law. As the cases cited by Danis illustrate, promissory estoppel may apply to a subcontractor that revokes its bid. But, Plaintiff did not revoke its bid, and remained willing to perform the work in accordance with its bid. Although Plaintiff would not agree to Defendant's standard terms, or the modified A-401, that was not a revocation of Plaintiffs offer to perform the masonry work, as set forth in the Proposal, under the very specific terms and conditions contained in the Proposal. The Court is denying summary judgment on Plaintiffs breach of contract claim because there is a genuine issue of fact as to whether Danis accepted the offer. In any event, Plaintiff did not revoke its bid as set forth in its Proposal. Summary judgment on Defendants' counterclaim must be denied.
IT IS THEREFORE ORDERED BY THE COURT that the cross motions for summary judgment (Doc. 61 and Doc. 62) are DENIED.
IT IS SO ORDERED.