ABC Bldg. Corp. v. Ropolo Family, LLC.

179 A.3d 701

ABC BUILDING CORPORATION d/b/a Advanced Building Concepts

v.ROPOLO FAMILY, LLC.

No. 2016–343–Appeal. (NC 16–215)

Supreme Court of Rhode Island.

March 14, 2018

Joseph J. Reale, Jr., Esq., for Plaintiff.

Michael A. Kelly, Esq., for Defendant.

Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

Justice Flaherty, for the Court.

The defendant, Ropolo Family, LLC, appeals from an order of the Superior Court that confirmed an arbitration award in favor of the plaintiff, ABC Building Corporation, and from a corresponding judgment of the Superior Court in favor of ABC and against Ropolo in the amount of $72,415, plus statutory interest in the amount of $7,086.24 through the date of the arbitration award, and post-award interest thereafter. Ropolo contends on appeal that the arbitrator exceeded his authority by (1) manifestly disregarding clear and unambiguous contractual language that should have precluded any award in favor of ABC, and (2) manifestly disregarding well-settled law by awarding ABC recovery in quasi-contract when a valid and enforceable contract was in existence. This case came before the Supreme Court pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After considering the parties' written and oral arguments, and after reviewing the record, we conclude that cause has not been shown and that this case may be decided without further briefing or argument. For the reasons set forth below, we affirm the order and judgment of the Superior Court.

IFacts and Travel

ABC and Ropolo entered into a contract for the construction of a restaurant in Newport. Sometime thereafter, a dispute arose regarding payment that Ropolo owed to ABC. It is uncontroverted that, when it failed to receive full payment on the bills it submitted to Ropolo, ABC ceased work on the project.¹ The contract provided that the parties would submit their dispute to binding arbitration. They did, and, after significant discovery and protracted hearings, the arbitrator awarded $72,415 to ABC, plus $7,086.24 in interest. The arbitrator predicated his award on the following pertinent findings:

"3. I find that under the factual circumstances of this matter, the Agreement and its General Conditions require payment by [Ropolo] to [ABC] of the fair and reasonable value of labor and materials supplied on the project.

"4. I find that [ABC's] testimony, taken as a whole, was sufficient and credible as to the fair and reasonable cost of work, the reasonable necessity of the work, payment by [ABC] for the work, and [ABC's] communication of the same to [Ropolo].

" * * *

"8. I find that [ABC] did not materially breach the Agreement."

In rendering his award, the arbitrator decided that "[ABC] is entitled to recover from [Ropolo] under the contract and alternatively in quantum meruit * * *."

ABC moved to confirm the arbitration award in the Superior Court. Ropolo objected to ABC's motion to confirm and simultaneously moved to vacate the arbitration award. Ropolo argued that the arbitrator manifestly disregarded clear and unambiguous contractual language—specifically, § 7.1.4:

"With each Application for Payment, the Construction Manager shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Construction Manager on account of the Cost of the Work equal or exceed progress payments already received by the Construction Manager, less that portion of those payments attributable to the Construction Manager's Fee, plus payrolls for the period covered by the present Application for Payment."

This language, according to Ropolo, "required that ABC submit specific items with each [a]pplication for [p]ayment to substantiate each line item billed[,]" including documentation of payroll, receipted invoices, and evidence of prior payments made by the owner. This, Ropolo claimed, ABC failed to do. Ropolo asserted that much of the work for which ABC was seeking compensation related to intangible supervisory and management labor and that, because ABC had not submitted time sheets or other documentation, it was impossible for Ropolo to know if the work had actually been performed. Ropolo further averred that it had not received the requisite backup documentation for that work from ABC until after ABC initiated arbitration, and thus Ropolo considered itself justified in withholding payment to ABC. Furthermore, Ropolo argued, the arbitrator manifestly disregarded applicable law when he awarded ABC recovery in quantum meruit despite the existence of a valid, legally enforceable contract. Subsequently, ABC filed an objection to Ropolo's motion to vacate the arbitration award, maintaining that it had provided sufficient substantiation for the bills it submitted to Ropolo, and that the arbitrator had so found.

On July 1, 2016, a hearing was held on the parties' cross-motions to confirm and vacate the arbitration award. ABC explained that it was a general contractor hired by Ropolo "to do a construction build-out of a new restaurant location in Newport." However, ABC posited, a disagreement arose between the parties because Ropolo "was complaining about the progress and was disputing the invoices"; in response, ABC notified Ropolo that it was terminating their agreement. Thereafter, according to ABC, the arbitrator found that the documentation provided by ABC to Ropolo with the applications for payment was sufficient to substantiate those invoices, and, as such, ABC had not breached the contract by stopping work.

ABC next addressed the two arguments that had been raised by Ropolo as grounds for vacating the arbitration award. First, with respect to whether the arbitrator had disregarded the contract, ABC emphasized that the arbitrator, who had significant experience in this area of the law, had held multiple days of hearings, heard from witnesses involved in the dispute, and accepted lengthy post-arbitration memoranda from the parties addressing the very issues Ropolo was raising before the Superior Court. According to ABC, the arbitrator conducted a thorough review of the evidence before him and "clearly found that there [were] clear and unambiguous terms of the contract that supported [ABC's] claim for breach of contract, that [ABC] had supplied sufficient evidence of those damages and was entitled to recover." Second, with respect to whether the arbitrator had disregarded the law when providing for recovery in quantum meruit as an alternative to a contract-based recovery, ABC asserted that the arbitrator did not misapply the law or make a mistake of law. But even if he had ruled that the elements of quasi-contract were satisfied, ABC argued, mere error of law is an insufficient basis for vacating an arbitration award. In light of the Superior Court's limited review of arbitration awards pursuant to G.L. 1956 § 10–3–12, and given that the arbitrator had already examined and rejected the arguments raised by Ropolo, ABC maintained that the award should be confirmed.

Ropolo disagreed. It first recognized the heavy burden it had to overcome in asking the Superior Court to vacate the arbitrator's award. Nonetheless, Ropolo argued—as it had at arbitration—that ABC had not complied with § 7.1.4 of the contract by failing to submit backup documentation, in the form of payrolls or receipts, with its invoices to Ropolo. According to Ropolo, the arbitrator did not find that, under the contract, ABC had submitted sufficient documentation to Ropolo with each application for payment; in fact, the arbitrator did not find that substantiating documentation had been submitted to Ropolo at all. Rather, as Ropolo saw it, the arbitrator simply found "that [ABC's] testimony, * * * taken as a whole, was sufficient and credible as to the fair and reasonable cost of the work"—language Ropolo characterized as sounding in quantum meruit. Ropolo thus maintained that the arbitrator based his award solely on the testimony at arbitration, and not on a finding that ABC had complied with § 7.1.4 before terminating the contract and initiating arbitration.²

ABC countered that, in fact, the arbitrator had based his decision on the applications for payment and the corresponding time sheets, which ABC introduced into evidence at arbitration and which Ropolo had exhaustively examined. ABC conceded that the actual time sheets had not been submitted to Ropolo with the applications for payment during the course of the project.³ Nevertheless, according to ABC, the applications for payment did indeed include summaries of the time spent on the project. Moreover, according to ABC, during the course of the project, Ropolo never once asked for the supporting time sheets; Ropolo simply began selectively paying ABC for some charges and not for others. It was not until ABC terminated the contract for such selective payments that Ropolo complained of a lack of substantiating documentation accompanying each application.

Following the parties' arguments, the hearing justice rendered his decision. He, too, was impressed by the experience of the arbitrator in the field of contract law, and the hearing justice noted that it was the parties who selected that arbitrator to perform that role. The hearing justice expressed his reluctance to set aside the arbitrator's award, especially where it had not been shown to be "clearly ambiguous, totally arbitrary, [or] otherwise unreasonable." In addition, the hearing justice found that the arbitrator had performed his function by making findings of fact, "and based on that [the hearing justice would] sustain the arbitrator[']s award." Accordingly, the hearing justice confirmed the arbitration award and entered a judgment for the awarded amount of $72,415, plus statutory interest in the amount of $7,086.24 through the date of the arbitration...