LVI v. Yale University et al. (2010)

MEMORANDUM OF DECISION RE YALE UNIVERSITY'S MOTION TO STRIKE THE SECOND COUNT OF SRI'S REVISED CROSS-COMPLAINT (# 122)

This action involves a series of claims of non-payment on a construction project involving Yale University's Jonathan Edwards College (hereinafter “the Project”).   SRI Fire Sprinkler, LLC (hereinafter “SRI”), a subcontractor on the Project hired by general contractor William A. Berry & Sons, Inc., filed a Revised Cross-Complaint dated March 10, 2010 against Yale, the owner of the Project.   There is no direct contractual relationship between Yale and SRI.

By Motion dated March 24, 2010, Yale seeks to strike the Second Count of SRI's Revised Cross-Complaint, which alleges that Yale's failure to place disputed funds in an interest-bearing escrow account upon receiving notice of SRI's non-payment claim violated Connecticut General Statutes § 42-158j.   Yale argues that the statute only requires the escrowing of disputed funds when there is a direct contractual relationship between the project owner and the claimant and, as a result, the Second Count of SRI's Revised Complaint is insufficient as a matter of law.   SRI filed an Objection dated May 3, 2010 and the parties presented oral argument before the court on June 6, 2010.

“A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court.”  Bernhard-Thomas Building Systems, LLC v. Dunican, 286 Conn. 548, 552-53 (2008).  “The allegations of the pleading involved are entitled to the same favorable construction a trier would be required to give in admitting evidence under them and if the facts provable under its allegations would support a defense or a cause of action, the motion to strike must fail.”  Mingachos v. CBS, Inc., 196 Conn. 91, 108-09 (1985).

The question of the legal sufficiency of SRI's claim that Yale was required to escrow the funds is purely one of statutory construction.   Pursuant to § 42-158j(c)(4), when an owner on a project receives notice from a contractor, subcontractor, or supplier that it has not been paid, the owner is required to place the funds in at issue in an “interest-bearing escrow account ․” Standing alone, this language clearly supports the legal sufficiency of SRI's claim that Yale should have escrowed the disputed funds.   However, Yale claims that because it did not have a direct contractual relationship with SRI, it was not required to escrow the funds.   Yale argues that the scope of the escrow requirement contained in subdivision (c)(4) is limited by the language in § 42-158j(a)(1) that requires each construction contract to contain “[a] requirement that the owner pay any amounts due any contractor, subcontractor or supplier in a direct contractual relationship with the owner” within thirty days after a written request for payment has been made.

SRI counters that subdivision (a)(1) does not serve to limit the scope of the (c)(4) escrow requirement only to owners in direct contractual relationships with claimants.   Rather, SRI argues that the two subdivisions of the statute should be read independently;  that the language contained in (a)(1) referring to “a direct contractual relationship” bears no relationship to the escrow requirement contained in (c)(4), but rather only applies to terms that must be contained in a construction contract.   SRI's argument might be availing were it not for the language in Section 42-158j(c)(1) that links (a)(1) with (c)(4).   Specifically, subdivision (c)(1) requires that the notice of non-payment triggering the escrow requirement may only be sent “if payment is not made by an owner in accordance with the requirements of subdivision (1) of subsection (a).”   Given that (a)(1) requires a direct contractual relationship between the owner and the claimant, it follows the escrow-triggering notice may only be sent in instances where such a relationship exists.   This result is also supported by the rule of statutory construction that different sections of a statute are to read in concert:  “We are obligated to search for a construction of the statute that makes a harmonious whole of its constituent parts.”  International Brotherhood of Police Officers Local v. Jewett City, 234 Conn. 123, 126 (1995).

As a result, the court finds that SRI's claim that Yale's failure to escrow funds constituted a violation of § 42-158j is legally insufficient.   Yale's Motion to Strike the Second Count of SRI's Revised Complaint is hereby granted.

James W. Abrams, Judge

Abrams, James W., J.