Opinion ID: 1918123
Heading Depth: 2
Heading Rank: 2

Heading: Prompt Payment Statute

Text: [¶ 17] The prompt payment statute, 10 M.R.S. §§ 1111-1120, imposes penalties against owners, as well as contractors, who do not make payments in a timely fashion. See Jenkins, 2001 ME 98, ¶ 23, 776 A.2d at 1237. These statutory penalties act as disincentives to withholding amounts due, and are intended to augment damages that are traditionally available for contract or quantum meruit claims. Id. ¶¶ 24, 31, 776 A.2d at 1237, 1239. In determining whether the District Court properly imposed prompt payment interest and penalties, we review whether the factual findings bearing on this issue are supported by competent evidence. See Jenkins, 2002 ME 168, ¶¶ 5, 11, 810 A.2d at 932, 934. [¶ 18] A finding that an owner breached a construction contract does not necessarily entitle a contractor to the remedies provided by the prompt payment statute. See Jenkins, 2001 ME 98, ¶ 31, 776 A.2d at 1239. Instead, the availability of prompt payment remedies depends upon whether payment has been wrongfully withheld. See 10 M.R.S. § 1118(3). Guiding this determination is 10 M.R.S. § 1113, which sets forth several principles governing the payment obligations between owners and contractors. [7] First, payment must be made strictly in accordance with the terms of the construction contract. 10 M.R.S. § 1113(1). Second, the contractor may invoice the owner for progress payments at the end of the billing period, provided that the parties' contract does not include a provision governing the terms of payment. [8] 10 M.R.S. § 1113(2). Finally, except as otherwise agreed, payment is due from the owner 20 days after the end of the billing period or 20 days after delivery of the invoice, whichever is later. 10 M.R.S. § 1113(3). Unless an owner has a valid excuse for nonpayment, see 10 M.R.S. § 1118(1), (3), payments not rendered within this time frame are considered wrongfully withheld. [¶ 19] If payment has been wrongfully withheld, available remedies include prejudgment interest, a one percent monthly penalty on amounts wrongfully withheld, and attorney fees. See 10 M.R.S. §§ 1113(4), 1118(2), 1118(4). Regarding interest, if an owner fails to pay within the time period specified by section 1113(3), the owner shall pay the contractor interest on any unpaid balance due beginning on the 21st day, at an interest rate equal to that specified in Title 14, section 1602-C. 10 M.R.S. § 1113(4). With regard to penalties, the amount to be awarded is equal to 1% per month of all sums for which payment has wrongfully been withheld. 10 M.R.S. § 1118(2). As these provisions make clear, in order to properly calculate interest and penalties, reference must be made to the specific amounts owed and the dates by which they should have been paid. Jenkins, 2001 ME 98, ¶ 27, 776 A.2d at 1238. [¶ 20] Applying this framework, the District Court's findings, which are supported by competent evidence, justify the imposition of penalties and interest on the amount due pursuant to the Vacuum Contract. Cellar Dwellers completed the work and invoiced D'Alessio $2478.35 on January 29, 2007, meaning that payment was due twenty days later, on February 18, 2007. [9] See 10 M.R.S. § 1113(3), (4). Although penalties may not be imposed on any amount withheld that bears a reasonable relation to the value of any claim held in good faith, 10 M.R.S. § 1118(3), competent evidence supports the court's finding that D'Alessio held no such good faith claim. [¶ 21] However, the remaining penalties and interest are not justified by the court's findings. Because the Heating and Plumbing Contracts included specific provisions governing the terms of payment, D'Alessio's payment obligations were determined by those terms, and his alleged failure to promptly pay must also be considered in light of those terms. See 10 M.R.S. § 1113(1), (2). As the court found, the first and second Plumbing Contract installments were timely paid, as was the first installment in accordance with the Heating Contract. Although the second Heating Contract installment was paid late, the court found that this installment was fully paid by late January 2007, and thus did not factor into the $2995 balance owed on the Heating Contract. [¶ 22] The remaining payments contemplated by the Heating and Plumbing Contracts were the final installment payments, due at the completion of [Cellar Dwellers'] work. Significantly, the court found that Cellar Dwellers did not complete the plumbing or heating service in [D'Alessio]'s basement before it withdrew from the worksite. Therefore, although Cellar Dwellers' departure was warranted, because Cellar Dwellers never completed the work, the final installment payments were never triggered. Though invoiced, the balances were not due, [10] and, although Cellar Dwellers can collect general contract damages and interest, prompt payment penalties and interest may not be imposed on these amounts. See Jenkins, 2001 ME 98, ¶¶ 23-29, 776 A.2d at 1237-39. Consequently, we vacate the award of prejudgment interest and penalties on these amounts. [¶ 23] Given our conclusion regarding penalties and interest, we must also vacate the award of attorney fees. The only authority for the award of attorney fees in this matter is found in the prompt payment statute. See id. ¶ 30, 776 A.2d at 1239. Title 10 M.R.S. § 1118(4) provides that the substantially prevailing party in any proceeding to recover any payment within the scope of this chapter must be awarded reasonable attorney's fees in an amount to be determined by the court or arbitrator, together with expenses. The District Court's award of $10,000 in attorney fees was based upon its mistaken conclusion that D'Alessio's breach of the Plumbing and Heating Contracts constituted a violation of the prompt payment statute. Because we conclude that only the $2478.35 due pursuant to the Vacuum Contract was wrongfully withheld, on remand, the court must determine reasonable attorney fees based upon Cellar Dwellers' entitlement to prompt payment remedies for this amount. The entry is: That portion of the court's judgment awarding penalties and prejudgment interest on amounts due pursuant to the Plumbing and Heating Contracts is vacated. That portion of the court's judgment awarding penalties and prejudgment interest on amounts due pursuant to the Vacuum Contract is amended to begin accrual on February 19, 2007. The award of attorney fees is vacated and remanded for further proceedings consistent with this opinion. In all other respects, the judgment is affirmed.