Midland Fire v Clancy & Theys, (05-214) 01/03/2006

    Clancy & Theys was hired in early 2001 to oversee the construction of a Belk's Department Store at the Streets at Southpoint Mall in Durham, North Carolina. Though Clancy was a licensed general contractor, it did not have a license to perform fire sprinkler work associated with the project. Midland Fire Protection placed a bid in which it agreed to perform the sprinklerwork for $239,346.00. Clancy accepted this offer in February of 2001 and sent a letter of intent to award Midland the fire sprinkler work at the quoted price. On 14 February 2001, Clancy sent Midland the subcontract documenting the agreement. Subsequently, in March of 2001, Midland received the requisite North Carolina license to act as a fire sprinkler contractor. Clancy directed Midland to begin working on the Belk's project on 24 April 2001, and Midland actually began working on 29 May 2001.     Midland had initially estimated that an area of the department store containing a shoe rack mezzanine would contain approximately forty sprinkler heads, which would take a total of approximately fifty hours to install. However, the design of the shoe rack area was changed, and completion of it was delayed such that Midland could not complete the related sprinkler work as initially anticipated by the parties. The mezzanine was not installed until December 2001, by which time the store had been carpeted, furnished, and painted, and the sprinkler system had been installed everywhere except the shoe rack area.
    Between October and December 2001, Midland notified Clancy several times that the changes and delays related to the shoe rack area would result in additional expenses and work for Midland. Specifically, Midland mentioned that it would have to install additional sprinkler heads and refabricate its pipes to meet the changed design. Further, Midland expressed concerns that, given the state of completion of the department store, it would be forcedto perform cutting and fabrication tasks outside, which would be much more time-consuming, difficult, and expensive than performing these tasks in the building during an earlier stage of the construction. In response, Clancy requested that Midland submit an estimate for the additional work. Midland submitted a bid in the amount of $36,000.00. Clancy expressed concern as to the amount of the bid and, in December 2001, directed Midland to proceed with the additional work on a time and materials basis. Clancy advised Midland to instead keep records of its additional costs.
    Accordingly, Midland purchased additional material, and expended approximately 293 hours of labor to install the sprinkler system in the shoe rack area. Thereafter, Midland submitted a time and materials invoice to Clancy for $20,878.80. Clancy accepted this invoice, added a surcharge, signed the invoice, and presented the bill to the owner of the building, who ultimately refused to make payment for the additional work.
    Pursuant to the parties' February 2001 agreement, Clancy paid Midland $239,346.00. Clancy also made payment for some additional work performed. However, Clancy did not pay the $20,878.80 bill submitted by Midland for additional materials used and time expended installing the sprinkler system in the shoe rack area of the store.
    Midland brought suit against Clancy in Wake County Superior Court for, inter alia, breach of contract. Following a benchtrial, the superior court entered a judgment in Midland's favor. The court made the following findings of fact:
        22.    On 14 December 2001, [Clancy] . . . specifically directed Midland to proceed with the additional work and to monitor and compile its actual additional costs and expenses associated with the additional work with full knowledge of the circumstances of the timing of the shoe rack installation and damages to Midland and with the express representation to Midland to monitor and compile its actual additional costs and submit the actual additional costs to [Clancy] for payment . . . .

        23.    Midland proceeded with the additional work at [Clancy's] direction and with the reasonable expectation and reliance upon [Clancy's] direction and representation that it would be compensated for its actual additional costs and expenses to complete the work in the shoe rack area.

        24.    Midland did in fact complete the work in the shoe rack area on a timely basis and to the satisfaction of [Clancy] . . . . Between 24 December 2001 and 25 January 2002, at the request of [Clancy], [Midland] purchased and installed additional materials in the shoe rack area and expended exactly two hundred and ninety three . . . (293) man hours in accomplishing the additional work in the shoe rack area. During this time period, Midland installed an additional six (6) sprinkler heads in the shoe rack area. Midland completed its work on time and within its schedule and the Owner was able to meet its schedule for occupancy of the building. [The additional work] included, without limitation, the following: sifting through piles of rusted pipes outside of the building because [Clancy] had put these pipes outside of the building to make way for a finished building; locating the pipes outside which were 500 feet from [the] building; cleaning pipes removed outside by [Clancy]; salvaging pipes if salvageable; wire brushing pipes to get rust off; rethreading pipes; going to supply house for supplies; buying additional supplies; re- working the piping system [due] to shoe rack[] re- configurations and performing such work outside the building and walking across carpet to get to [the] shoe rack areas. [The employees who did this work] kept detailed and accurate records of [their] time in the shoe rack area[]. These additional services and materials wererendered to [Clancy] and were not given gratuitously by Midland.

        25.    Midland's original bid on the Project provided for fifty (50) man hours in accomplishing the work in the shoe rack area[], however, Midland actually incurred two hundred and ninety three . . . (293) man hours in performing the additional work in the shoe rack area. Midland incurred two hundred and forty three . . . (243) additional man hours in performing the additional work in the shoe rack area.

        . . . .

        27.    Per the agreement between Midland and [Clancy], Midland submitted its invoice for the additional time and materials expended in the shoe rack area[] in the amount of twenty thousand eight hundred and seventy eight dollars and eighty cents ($20,878.80) to [Clancy] on 2 May 2002. The invoice for the additional time and materials expended in the shoe rack area[] was submitted on a form that was previously used by Midland in obtaining additional funds from [Clancy] and on a form that was previously acknowledged and honored by [Clancy].

        28.    [Clancy] knowingly and voluntarily accepted the additional services and materials provided by Midland. [Clancy] has not paid any amount of the twenty thousand eight hundred and seventy eight dollars and eighty cents ($20,878.80) to date. The reasonable value of the additional materials and services rendered by Midland is twenty thousand eight hundred and seventy eight dollars and eighty cents ($20,878.80).

        29.    [Clancy] did pay all two hundred and thirty nine thousand three hundred and forty six dollars ($239,346.00) to Midland plus all amounts for the undisputed change orders, which change orders were signed by both parties after the additional work giving rise to the change order was accomplished by Midland.

The court made the following conclusions of law:
        3.    [Clancy] and Midland entered into a contract on or about 14 December 2001 whereby Midland agreed to perform additional piping and sprinkler installation services in the shoe rack area of the Belk's Project. Midland agreed to perform such services on a time and materials basis. The parties agreed that Midland would monitor the additional hours and materials worked andprovided in the shoe rack area, bill [Clancy] for such additional hours and materials and [that Clancy] would compensate Midland for such material and services upon receipt of the bill from Midland.

        4.    Midland duly performed its contractual duties to [Clancy] by providing additional labor, material, and equipment for the shoe rack area[] of the Project. Midland kept detailed records of the hours expended and the materials installed in the shoe rack area and quantified the time and materials for its extra work in the shoe rack area in a reasonable manner.

        5.    [Clancy] breached the contract by failing to compensate Midland for its additional actual costs, materials and expenses associated with the additional work in the shoe rack area of the Project.

        6.    As a direct, proximate and foreseeable result of [Clancy]'s breach, Midland has sustained damages in the amount of twenty thousand eight hundred and seventy eight dollars and eighty cents ($20,878.80). The additional expenses incurred and time expended by Midland [were] directly and foreseeably tied to the timing of the installation of the shoe racks. Midland's bid for the Belk's project included fifty hours (50) for the work in the shoe rack area and . . . this estimate was a reasonable estimate of hours for its bid for this work. The actual additional costs and the hours incurred by Midland in the shoe rack area were reasonable and Midland was not in any way responsible for the added costs in the shoe rack area.

        . . . .

        10.    Midland's licensure status on 14 February 2001 with the North Carolina State Board of Examiners of Plumbing, Heating & Fire Sprinkler Contractors is not a bar to Midland's recovery from [Clancy] . . . .

The trial court ordered Clancy to pay damages, plus interest, to Midland. From this judgment, Clancy now appeals.

    We first consider whether the trial court erred by determining that the parties entered into a second contract in December 2001. Clancy challenges the finding that a second contract was formed and, therefore, the ruling that a second contract was breached. This contention lacks merit.
    In its brief, Clancy advances two separate rationales for its position that there was no second contact. First, Clancy argues that Midland had already agreed to install the fire protection system in the shoe rack area for a fixed price, and “the only thing that changed was the amount of effort Midland had to expend to perform its obligations.” Thus, according to Clancy, “there was no 'additional work'” to be the subject matter of a new contract, and the trial court erred by determining otherwise.
    Under the pre-existing duty rule, “'a promise to perform an act which [the] promisor is already bound to perform is insufficient consideration for a promise by the adverse party.'” Sinclair v. Travis, 231 N.C. 345, 354, 57 S.E.2d 394, 400 (1950) (citation omitted). If a return promise is given in return for apromise to perform a pre-existing duty, “there is . . . no new consideration, and no new agreement.” Id.
    In the instant case, the trial court was not required to find that Midland's obligation under the February 2001 contract precluded the formation of a new agreement in December 2001. Midland presented evidence that changes to the design of the shoe rack area required installation of additional sprinkler heads and refabrication of pipes. Further, Midland's evidence tended to show that the parties' original agreement presupposed that Midland would be able to perform cutting and fabrication tasks inside the building near the installation site as opposed to outside of the building, where this work would be far more time-consuming, difficult, and expensive. This evidence permitted inferences that the amount of Midland's work increased, that additional, unanticipated labor from Midland was required, and that these increases in required output served as sufficient consideration for a new contract. Therefore, lack of consideration did not preclude the trial court from determining that the parties entered into a second contract.
    Clancy also argues that, even if there was sufficient consideration upon which to premise a new agreement, a second contract could not have been formed because the terms of any such agreement were too indefinite. In particular, Clancy insists that the parties reached no agreement concerning price or payment terms.    “In the making of a contract[,] it is essential that the parties thereto assent to the same thing in the same sense, and their minds must meet as to all terms.” Sides v. Tidwell, 216 N.C. 480, 483, 5 S.E.2d 316, 318 (1939). Therefore, “'“[i]n order to constitute a valid . . . agreement, the parties must express themselves in such terms that it can be ascertained to a reasonable degree of certainty what they mean. And if an agreement [is] so vague and indefinite that it is not possible to collect from it the full intent of the parties[,] it is void[.]”'” Holder v. Mortgage Co., 214 N.C. 128, 133, 198 S.E. 589, 591-92 (1938) (citation omitted). The essential terms of a contract include the subject matter of the agreement and the price to be paid under it. See Yaggy v. B.V.D. Co., 7 N.C. App. 590, 600, 173 S.E.2d 496, 503 (holding that “the vendor, the vendee, the purchase price, and . . . the property sold . . . [were] the essential elements of [a] contract”), cert. denied, 276 N.C. 728 (1970).
    In the instant case, the evidence tended to show that in response to a request by Clancy, Midland submitted an estimate in which it projected that additional work in the shoe rack area would require 360 man-hours billed at $60 per hour and 162 “premium time” man-hours billed at $90 per hour. Likewise, Midland noted that additional materials would be needed to complete the shoe rack area. Though Clancy did not accept Midland's bid, it directed Midland “to proceed on a time-and-material basis to install the [sprinklers for the] shoe rack.” This evidence permits aninference that Clancy agreed to pay Midland for labor according to its hourly rates and agreed to reimburse Midland for necessary materials. Therefore, the price and payment terms of the parties' agreement were not so indefinite as to preclude the trial court from determining that the parties entered into a second contract.
    The corresponding assignments of error are overruled.

    We next consider Clancy's contention that the trial court erred by permitting Midland to recover contract damages even though Midland was not properly licensed to perform fire sprinkler work when the parties entered into their February 2001 contract. This contention lacks merit.
    In this state, “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor. It cannot be validated by the contractor's subsequent procurement of a license.” Brady v. Fulghum, 309 N.C. 580, 586, 308 S.E.2d 327, 331 (1983). This rule is premised upon the recognition that licensing schemes are enacted to promote safe and workmanlike construction for the protection of the public. Id. at 584-85, 308 S.E.2d at 330-31. However, “[t]he licensing statutes have no application to the rights and liabilities of contractors and subcontractors inter se where the public interest is not involved.” Vogel v. Supply Co., 277 N.C. 119, 133, 177 S.E.2d 273, 282 (1970). Specifically, our Supreme Court has held that an unlicensed general contractor may nevertheless enforce a contractagainst a subcontractor where “no injury to the public is apparent from enforcement of the subcontract between the parties to it.” Id. at 134, 177 S.E.2d at 282. We note that, in the case in which this holding was issued, the particular subcontractor was not required to be licensed. Id. at 133, 177 S.E.2d at 282.
    The General Statutes provide that “a license shall be obtained . . . before any person, firm or corporation shall engage in, or offer to engage in, the business of plumbing, heating, or fire sprinkler contracting, or any combination thereof.” N.C. Gen. Stat. § 87-21(b)(3) (2003). This licensing scheme exists “to protect the public health, comfort and safety.” N.C. Gen. Stat. § 87-21(b)(1) (2003). Accordingly, Midland was required to be properly licensed before contracting to perform any fire sprinkler work.
    However, the facts of the present case do not require us to resolve the issue of whether a contract for fire sprinkler work may be enforced against a general contractor by a subcontractor who was not licensed to perform such work at the time the subcontract was entered into. In the instant case, there is no dispute about the work performed by Midland under the parties' original agreement, which was entered into in February of 2001. As such, the status of Midland's license in February of 2001 is inconsequential to the present litigation. Furthermore, Midland did hold an appropriate license in December 2001, when the parties entered into a secondcontract for Midland to perform the additional work related to the shoe rack area on a time and materials basis.
    Therefore, the trial court did not err by permitting Midland to recover on its breach of contract claim. The corresponding assignment of error is overruled.

    We next consider Clancy's argument that the trial court erred by awarding damages in violation of this Court's decision in Biemann & Rowell Co. v. Donohoe Cos., 147 N.C. App. 239, 556 S.E.2d 1 (2001). This contention lacks merit.
    In Biemann, we held that the method of computing damages known as the “total cost method” may only be used “where no other way to compute damages is feasible.” Id. at 245, 556 S.E.2d at 5. “Under the total cost method, a contractor seeks the difference between its total costs incurred in performance of the contract and its bid price.” Id. This method is disfavored “'because it blandly assumes--that every penny of the plaintiff's costs are prima facie reasonable, that the bid was accurately and reasonably computed, and that the plaintiff is not responsible for any increases in cost.'” Id. (citation omitted). Biemann involved claims between multi-prime contractors which did not have a contract with each other.
    In the instant case, the evidence tended to show that Clancy agreed to pay Midland on a time and materials basis for additional fire sprinkler installation work in the shoe rack area. By itsnature, this agreement contemplated that Midland would be compensated for the total cost of performing the additional work. Under this arrangement, the only feasible way of calculating the amount owed was to reduce the total amount due Midland for the additional work by the amount which Midland had already been paid for work in the shoe rack area. Pursuant to the parties' original understanding about the time and materials necessary to install fire sprinklers in the shoe rack area, Midland budgeted fifty hours of labor and a certain amount of materials, and the original bid reflected these calculations. Clancy made payment for these hours and materials when it made payment under the parties' February 2001 agreement. Thus, in this particular situation, Midland's actual damages for Clancy's breach of the December 2001 contract was the remaining amount of time and materials spent. There was no other way to calculate damages.
    The trial court found, based on competent evidence, that Midland's original bid was accurately and reasonably computed, that its additional costs were reasonable, and that Midland was not responsible for any increases in the cost of installing fire sprinklers in the shoe rack area. The trial court then calculated damages by subtracting the amount Midland had already been paid for its work in the shoe rack area from the total value of the time and materials which went into completing the fire sprinkler system in the shoe rack area. As this calculation was appropriate, the damages award must be affirmed.    The corresponding assignment of error is overruled.