Emerson–Swan, Inc. v. Harrington Engineering, Inc. et al. (2011)

RULING ON MOTIONS FOR SUMMARY JUDGMENT (# 108.00 & 115.00)

Emerson–Swan, Inc., (“E–S”) commenced this action against the defendants Harrington Engineering, Inc. (“Harrington”) and Western Surety Company (“Western”) in a six-count complaint dated September 7, 2010, seeking payment for fire protection work E–S performed, and materials it supplied, to a construction project known as the Fairfield Hills–Newtown Town Offices–Bridgeport Hall–Phase II Project (“project”) in Newtown.   There is no dispute that E–S successfully delivered and installed the fire pump and that it has not been paid its sub-subcontract amount of $129,500.   Counts one and two of the complaint allege breach of contract and CUTPA violations against Harrington, the subcontractor under whom E–S performed its work.   Harrington has been defaulted for its failure to appear.   In count three, E–S makes a claim against the payment bond, as a private bond, issued by Western, as surety to Harrington, to guarantee payment for labor and materials furnished to the project in furtherance of Harrington's obligations under its subcontract with the construction manager, O & G Industries, Inc. (“O & G”).  Counts four and five allege that Western breached the covenant of good faith and fair dealing by refusing to honor its obligations under the bond, and also violated the Connecticut Unfair Insurance Practices Act, General Statutes § 38a–816 et seq.  (“CUIPA”) and the Connecticut Unfair Trade Practices Act, General Statutes § 42–110a et seq.  (“CUTPA”).  In count six, E–S alleges, in the alternative to count three, a statutory bond claim against Western pursuant to General Statutes § 49–41 et seq.

On November 17, 2010, Western moved for summary judgment.   Western argues that the labor and material payment bond was issued under § 49–41a, et seq., the Connecticut Little Miller Act (“act”) and that the plaintiff failed to give the bond principal timely notice, depriving E–S of the right to pursue the remedy statutorily created and codified in the act.   As for the claims made in counts four and five, Western argues that all communications with the claimant reserved the surety's rights, and concerns about the deficiencies in the claim were made clear in the denial letter of April 15, 2010.   There were no misrepresentations made, and none have been specifically alleged.

On February 25, 2011, E–S filed an objection as well as its own motion for summary judgment.   E–S argues that Harrington's bond is not a statutory bond under General Statutes § 49–41 and that it complied with the requirements for making a claim against the bond as dictated by the terms and conditions of the bond issued by Western.   In the alternative, E–S argues that, even if Harrington's bond is deemed to be a statutory bond, it satisfied the notice requirements of General Statutes § 49–42.   In addition, E–S argues that Western's baseless failures to honor its obligations under the bond constitute bad faith and violations of the CUIPA and the CUTPA.

FACTS

The facts underlying this dispute are not contested.   At the request of the court, the parties have provided the following stipulation of facts.

Plaintiff, Emerson–Swan, Inc. (“E–S”), and Defendant, Western Surety Company (“Western”), by and through their attorneys, hereby stipulate to the following undisputed facts:

1. Plaintiff, E–S initiated the above-captioned action against Defendants, Harrington Engineering, Inc. (“Harrington”) and Western in a six-count Complaint dated September 7, 2010, seeking payment for the fire protection work E–S performed, and materials it supplied, to a construction project known as the Fairfield Hills–Newtown Town Offices–Bridgeport Hall–Phase II project (“Project”) in Newtown, Connecticut.

2. E–S successfully delivered and installed the fire pump and has not been paid its sub-subcontract amount of $129,500.00.

3. Harrington has been defaulted for its failure to appear.

4. In Count Three, E–S makes a claim against the payment bond issued by Western, as surety to Harrington, to guarantee payment for labor and materials furnished to the Project in furtherance of Harrington's obligations under its subcontract with O & G Industries, Inc. (“O & G”).  E–S contends this is a “private” bond wherein the language contained therein controls the obligations of the parties.

5. Counts Four and Five allege that Western breached the covenant of good faith and fair dealing by refusing to honor its obligations under the bond, and also violated the CUIPA and CUTPA.

6. In Count Six, E–S alleges, in the alternative, a statutory bond claim against Western pursuant to Conn. Gen.Stat. § 49–42.   Western contends this bond was issued pursuant to the statute.

7. The parties agree that the Court should refer to undisputed facts that have been properly presented through affidavits and exhibits.

8. The document attached as “Exhibit A” to Jortner Affidavit at Exhibit 2 of Western's Memorandum of Law) (“Jortner Affidavit”) (hereinafter “Payment Bond”) is the labor and material payment bond that is relevant to this matter.   Western Surety agrees that the bond is valid and enforceable.

9. On or about February 20, 2007, O & G Industries, Inc. (“O & G”) entered into a contract with the Town of Newtown, CT, to provide design build services in connection with the construction project known as Fairfield Hills–Newtown Town Offices–Bridgeport Hall–Phase II (hereinafter “Project”) for the sum of $10,783,642.00.  (Ex. A, Affidavit of John Cross (“hereinafter Cross Aff.”), ¶ 1 to Plaintiff's Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment dated February 25, 2011 (hereinafter “Pl. Opp. Mem.”)).

10. O & G did not provide a bond naming it as principal and Newtown as Obligee for this project as required by Conn. Gen.Stat. § 49–41.

11. On or about September 17, 2008, O & G subcontracted with Harrington Engineering, Inc. (Harrington) for Harrington to provide the fire protection system for the Project that was required by the contract between O & G and the Town. The original subcontract price for the fire protection system was $341,000.00.  (See Harrington Subcontract, attached as “Exhibit B” to John Cross Affidavit at Exhibit 1 of Western's Memorandum of Law) (hereinafter “Harrington Subcontract”).

12. The subcontract was executed by Harrington and O & G;  the Project owner, the Town of Newtown, was neither a signatory nor a party to the subcontract.   (See Harrington Subcontract.)

13. Pursuant to the subcontract terms, O & G required Harrington to provide a labor and materials payment bond to cover Harrington's work on the project.   There is no reference in the Harrington Subcontract that the payment bond was or was not issued pursuant to Conn. Gen.Stat. § 49–41.  (See Harrington Subcontract, § 2.)

14. On or about March 3, 2009, Harrington, as principal, and Western Surety Company (“Western”), as surety, provided a Payment Bond, # 929462910 in the amount of $341,000.00 (hereinafter “the Payment Bond”), naming Harrington as principal and the Town of Newtown as Owner and O & G as Construction Manager as dual obligees.   The Construction Contract Project is identified as Fire Sprinkler Package # 1.13 Project No 08–FP0025 Fairfield Hills.

15. The Payment Bond does not state that it was or was not being provided by Harrington to satisfy any obligations assumed by O & G to the Town of Newtown per Conn. Gen.Stat. § 49–41.   The bond does include generic language in paragraph 13 that states:  When this Bond has been furnished to comply with a statutory or other legal requirement in the location where the construction was to be performed, any provision in this Bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein.

16. For claimants with a direct contractual relationship with Harrington, there is no specified time frame or limitation provided in the language of the Payment Bond for filing a “notice of claim” against the bond.   Per the Payment Bond, notice of claim is to be sent to the surety, Western, with a copy to O & G, the Construction Manager, and also to the Town. (Payment Bond, ¶ 5.1.) If this is a bond supplied to satisfy C.G.S. § 49–41, then notice must be given to the principal and surety within 180 days from when work was last performed by claimant.

17. By Change Order 1 dated April 20, 2009 (but not executed until July and August by Harrington and O & G), a diesel powered fire pump was added to the Harrington O & G contract.

18. On or about May 22, 2009, Harrington issued a Purchase Order to E–S whereby E–S agreed to furnish and install the Fire Pump House for the Project.  (Exhibit B, Affidavit of Glenn Wilson (“hereinafter Wilson Aff.”), ¶ 2 to Pl. Opp. Mem.)

19. The amount of this Purchase Order, which constituted the Harrington/E–S sub-subcontract, was $129,500.00.  (Exhibit C, Affidavit of Joseph Kijowski (“hereinafter Kijowski Aff.”), ¶ 6 to Pl. Opp. Mem.)

20. On September 23, 2009, the E–S project manager, Joe Kijowski, conducted a “flow test” procedure for the Fire Pump. John Cross of O & G and Harrington's project manager, Glenn Wilson, were present.   At that time, John Cross requested Glenn Wilson and Joe Kijowski to make a change to the Fire Pump system by replacing a device called a “low fuel level switch,” which was the specified and installed type switch for the system, with a “high and low fuel level switch.”   The Town had requested O & G to make this change.   This request was an upgrade of equipment and a change in the scope of the Fire Pump work, requiring the ordering of a new, different type of fuel monitoring switch, as well as additional wiring and the labor to install the new switch and wiring.   (Cross Aff., ¶¶ 4–7;  Wilson Aff., ¶¶ 3–4;  Kijowski Aff., ¶ 8 to Pl. Opp. Mem.)

21. The requested work was performed by E–S (after the new part was ordered and received) on November 3, 2009.   E–S's project manager, Joe Kijowski did the work.   It took approximately four (4) hours to perform.  (Cross Aff., ¶ 5;  Wilson Aff., ¶ 4;  Kijowski Aff., ¶¶ 9–10, Exhibits 1 & 2 to Pl. Opp. Mem.)

22. O & G did not issue a formal written change order to Harrington or E–S for this work.   Instead, an agreement was negotiated between O & G, Harrington and E–S to the effect that E–S would perform the additional work and absorb the extra labor and material costs in exchange for E–S not having to furnish and install a certain rain hood for a louver elsewhere on the Project.  (Cross Aff., ¶ 7;  Wilson Aff., ¶ 4;  Kijowski Aff., ¶ 11 to Pl. Opp. Mem.)

23. At all times, E–S met its contractual obligations under its sub-subcontract with Harrington, and its work was accepted by the Town, which paid O & G for the work performed by E–S. O & G then paid Harrington for E–S's work, but Harrington failed to pay E–S. (See John Cross Affidavit at Exhibit 1 of Western's Memorandum of Law, ¶¶ 11–12.)

24. The Town did not withhold payment to O & G for E–S's base contract work because of the Town's requested change to the “high and low fuel level switch.”

25. On February 17, 2010, Joe Kijowski, E–S project manager sent an e-mail to Don Miller and Glen Wilson at Harrington, which attached among other invoices outstanding, E–S's outstanding invoice for work performed in the amount of $129,500.00 and indicated that if payment was not forthcoming, then he had been instructed to “pull” the bonds.   The invoices named the specific projects and the amounts owed by Harrington.  (Kijowski Aff., ¶ 13, Exhibit 3 to Pl. Opp. Mem.)

26. By letter dated February 24, 2010, E–S served by certified mail, Western, O & G and the Town of Newtown with written notice of its claim for payment under the Western Payment Bond of $129,500.00 for the contract balance due from Harrington.  (Jortner Affidavit, ¶ 2, Exhibit B.)

27. By letter dated March 3, 2010, Western confirmed receipt of E–S's notice of claim and requested additional information and documentation from E–S. Western indicated by “cc” that it was sending Harrington a copy of this letter.   Western also stated that upon receipt of the requested documentation from E–S, it would forward copies to Harrington and request its position as to the E–S claim.  (Jortner Affidavit, Exhibit C.) By a separate letter dated March 3, 2010, addressed directly to Harrington, Western enclosed a copy of E–S's notice of claim and requested Harrington's response to the claim.  (Jortner Affidavit, Exhibit D.) In addition, on March 3rd, Western telephoned Harrington seeking information regarding the E–S claim.  (Jortner Affidavit ¶ 3.)

28. E–S sent Western the requested documentation by letter dated March 24, 2010.  (Jortner Aff., ¶ 5.)

29. In a letter dated April 9, 2010, Western informed E–S that it was reviewing E–S's additional documentation “independently” and had forwarded E–S's claim and documentation to Harrington for its review.   Nonetheless, Western stated that it must formally and fully dispute E–S's claim;  the only basis it provided for this position was that its principal, Harrington, had allegedly, and without any specificity or documentation, “cited problems” with E–S's product on some other, unrelated project.  (Jortner Affidavit ¶¶ 7 & 9 and Kijowski Affidavit ¶ 15, Exhibit 4 to Pl. Opp. Mem.)

30. The following week, by letter dated April 15, 2010, Western, through Mr. Laurence Jortner, authorized representative for Western Surety, acknowledged that O & G had confirmed that the fire pump installed by E–S at the Project had been completed and was working satisfactorily.   O & G also confirmed that most, if not all, of the sums owed to E–S had previously been paid to Harrington.   Despite these facts, Western continued to deny the claim stating, in part, “there appear to be some serious issues as to whether proper and timely written notice was provided pursuant to C.G.S. § 49–42.”  (Jortner Aff., ¶ 9, Exhibit H.)

31. E–S served another notice of its claim against the Payment Bond to both Western and Harrington on April 20, 2010 with copies to O & G and the Town. (Jortner Aff., ¶ 10, Exhibit I.)

32. On December 23, 2010, after suit and its Motion for Summary Judgment was filed, Western's counsel was provided the Affidavits of John Cross and Glenn Wilson which confirmed that E–S' last day of work on the Project was November 3, 2009 by virtue of the extra work requested by the Owner, O & G, and Harrington.  (Kijowski Affidavit ¶ 17, Exhibit 5 Pl. Opp. Mem.)

33. Specifically, Mr. Cross, the O & G employee, stated in his Affidavit:  “I do not consider the replacement of the low level fuel switch with the high-low level fuel switch to be a warranty call.   It is a change in the scope of work, i.e., an upgrade to originally specified equipment.”  (Cross Aff., ¶ 9, Pl. Opp. Mem.)

DISCUSSION

“Summary judgment is a method of resolving litigation when pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law ․ The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried.”  (Citations omitted.)  Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).   The parties agree that the resolution of this matter will turn upon this court's determination of whether the bond provided by Western is found to be a private or public bond pursuant to the provisions of § 49–41 et seq. and, if found to be a public bond, whether the notice provisions of the statute have been complied with.   If the bond is found to be a private bond, or if the bond is found to be a public bond and the notice provisions have been complied with, summary judgment will lie in favor of the plaintiff, E–S. Summary judgment will only lie in favor of the defendant, Western, if the bond is found to be a public bond and the notice provisions have not been complied with.

I

Under Connecticut law, a municipality contracting for work in excess of $100,000 is required to obtain a labor and material bond.   The statutory framework adopted by Connecticut models the federal Miller Act and is often referred to as the “Little Miller Act.” “General Statutes §§ 49–41 through 49–43, which provide for the furnishing of bonds guaranteeing payment (payment bonds) on public works construction projects, were enacted to protect workers and materials suppliers on public works projects who cannot avail themselves of otherwise available remedies such as mechanic's liens ․ Section 49–41 requires that the general contractor provide a payment bond with surety to the state or governmental subdivision, which bond shall guarantee payment to those who supply labor and materials on a public works project ․ Section 49–42 provides that any person who has performed work or supplied materials on a public works project, but who has not received full payment for such materials or work, may enforce his right to payment under the payment bond.   This legislation, known as the ‘Little Miller Act’ ․ was patterned after federal legislation popularly known as the Miller Act;  40 U.S.C. § 270a through 270d ․” (Citations omitted, internal quotation marks omitted.)  Blakeslee Arpaia Chapman, Inc. v. El Constructors, Inc., 239 Conn. 708, 714–16, 687 A.2d 506 (1997).

General Statute § 49–41 provides in relevant part that “[e]ach contract exceeding one hundred thousand dollars in amount for the construction ․ of any public building or public work ․ of ․ a municipality shall include a provision that the person to perform the contract shall furnish to the ․ municipality on or before the award date, a bond in the amount of the contract which shall be binding upon the award of the contract to that person, with a surety ․ for the protection of persons supplying labor or materials in the prosecution of the work provided for in the contract for the use of each such person ․ provided no such bond shall be required to be furnished ․ (3) in relation to any general bid ․ submitted by a consultant, as defined in section 4b–55 ․” General Statute § 4b–55(b) defines “consultant” as “any architect, professional engineer, landscape architect, and surveyor, accountant, interior designer, environmental professional or construction administrator, who is registered or licensed to practice such person's profession ․” It is noteworthy that the statute was amended in 2003 by Public Act 03–215 by the deletion of “construction managers” and “construction management” from the definition of “consultant.”

O & G in its contract with the Town of Newtown refers to itself as the “design-builder.”   Whether O & G believes that no bond was required of it because it was operating as a “construction administrator” or was simply ignoring its obligations under the statute, it is clear that O & G was passing along the obligation to furnish bond to its subcontractors, one of which was Harrington.   In that regard, the contract between O & G and Harrington required a bond in the amount of the contract between them.   The provision in the contract does not refer to the bond specifically as a statutory bond, however the bond procured by Harrington and on which Harrington was principal designates O & G and the Town of Newtown as dual obligees.   The bond specifically provided, “[w]hen this bond has been furnished to comply with a statutory or other legal requirement in the location where the construction was to be performed, any provision in this bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory of other legal requirement shall be deemed incorporated herein.”   The bond issued by Western was clearly intended to serve either as a private bond or public bond as the circumstances required.

E–S, in its objection to Western's motion for summary judgment and in its own motion for summary judgment argues that the bond in the instant case is a private bond, not a public bond, and asserts that our Supreme Court has definitively stated that “[s]ection 49–41 is clear and unambiguous:  the general contractor is solely responsible for furnishing the payment bond.”   O And G Industries, Inc. v. New Milford, 229 Conn. 303, 306–07 640 A.2d 110 (1994).   In O And G Industries, Inc. v. New Milford, O & G as a subcontractor had supplied materials to the general contractor who was performing a paving project for the town of New Milford.   The general contractor had failed to provide a bond as required by the statute and went bankrupt after receiving payment from New Milford and without ever having paid O & G. O & G sued New Milford on a theory that New Milford had breached the requirements of the statute by not requiring the bond from the general contractor.   When the Supreme Court stated that “the general contractor is solely responsible for furnishing the payment bond” it did so in the context of ruling that there was no obligation on the part of the municipality to secure the bond.   Nothing in the decision prohibits a subcontractor from furnishing a bond that complies with the provision of the statute.

The court finds that in considering the bond and the circumstances under which it was furnished by Harrington in the instant case as a public bond in compliance with the provisions of General Statutes § 49–41 there is nothing, either in the bond itself or in the circumstances under which it was provided that is contrary to the provisions of the statute.

The contract was for a price in excess of one hundred thousand dollars for the construction of a public building.   The statute does not require the municipality to be a party to the contractor.   As between O & G and Harrington, Harrington was the “person to perform the contract.”   The amount of the bond covers the contract amount and names the Town of Newtown as an obligee.   The bond complies in all respects with the statute as a public bond.

As a practical matter, the difference between the bond as a private bond and as a public bond are the additional obligations and rights which the statute imposes on, and grants to, the parties as contractors, subcontractors and sureties to an underlying transaction which involves a state or municipal building or work.  “The Connecticut surety statute itself, Conn. Gen.Stat. § 49–41, manifests a legislative solicitude for materialmen and a public policy that those who contribute labor and material under a public contract should be compensated for their services.”  Royal School Laboratories, Inc. v. Town of Watertown, 358 F.2d 813, 816 (2d Cir.1966).   In that regard it would seem that the legislature intended to require that bond furnished in projects involving public buildings and works such as the instant case should be subject to the heightened requirements of the statute.   To deny the additional statutory protections to the parties to a bond furnished in connection with a public project would frustrate the clear public policy embodied in the act.   See Blakeslee Arpaia Chapman, Inc. v. El Constructors, Inc., Supra.   For the foregoing reasons the court finds that the bond in the instant case provided to Harrington by Western fully complies with the provisions of § 49–41 and is deemed to be a public bond.

II

General Statutes § 49–42(a) provides in relevant part that “[a]ny person who performed work or supplied materials for which a requisition was submitted to ․ the awarding authority and who does not receive full payment for such work or materials within sixty days of the applicable payment date ․ may enforce such person's right to payment under the bond by serving a notice of claim on the surety that issued the bond and a copy of such notice to the contractor named as principal in the bond not later than one hundred eighty days after the last date any such materials were supplied or any such work was performed by the claimant.”

On May 22, 2009, E–S entered into an agreement with Harrington to provide a pump house for a contract price of $129,500.   E–S provided the work, and a flow test was conducted on September 23, 2009.   At that time, E–S was requested make a change to the fire pump system by replacing a “low fuel level switch” with a “high and low fuel level switch.”   The request came from the Town of Newtown and was an upgrade of equipment and a change in the scope of the fire pump, requiring a different type of fuel monitoring switch as well as additional wiring and labor for the installation.   The requested work was performed by E–S on November 3, 2009.   There was no formal change order or additional charge.   Instead, an agreement was negotiated between O & G, Harrington and E–S to the effect that E–S would perform the additional work and absorb the extra labor and material costs in exchange for E–S not having to furnish and install a certain rain hood for a louver elsewhere on the project.

“[S]upplying labor or materials to correct defects or make repairs after completion of the work does not toll the time period under the Miller Act.” Wickes Mfg. Co. v. Currier Electric Co., 25 Conn.App. 751, 759, 596 A.2d 1331 (1991).   The court finds that the work performed by E–S on November 3, 2009, was neither the correction of a defect nor a repair but an upgrade and a change in the scope of the work, requiring both new and different hardware as well as additional labor.   Further the change was mandated by the Town of Newtown at a time when the function of the pump as initially delivered and installed was being tested.   For these reasons the court finds that November 3, 2009, was the last date that materials were supplied or work was performed within the definition of such date pursuant to the terms of General Statutes § 49–42(a) and is the effective date for the calculation of notices required under the provisions of the statute.

By letter dated February 24, 2010, E–S served by certified mail notice of its claim against the payment bond on Western, O & G and the Town of Newtown.   By letter dated April 20, 2010, E–S again served notice of its claim against the payment bond this time on Harrington and on Western.   The court finds that E–S timely filed notice of its claim against the payment bond on the surety, Western, and the contractor, Harrington, in compliance with the provisions of General Statutes § 49–42(a).

III

As to counts four and five of the plaintiff's complaint which sound in breach of good faith and fair dealing and violations of CUTPA and CUIPA respectively, E–S asserts that Western conducted a sham investigation, denied the claim despite the proper receipt of notice under General Statutes § 49–42(a) and was motivated by its own self interest and dishonest purpose.   The court finds that E–S's assertions are long on conclusions and short on undisputed facts necessary to support those conclusions.

CONCLUSION

For the foregoing reasons, the court finds the following:  1) as to count six of the plaintiff's complaint (claim pursuant to General Statutes § 49–42), the court finds that no genuine issues as to material facts exist and orders that summary judgment in favor of the plaintiff as to liability is GRANTED;  2) as to count three of the plaintiff's complaint (action on private bond) because the court finds that this action has been pleaded in the alternative to count six plaintiff's complaint, the court takes no action;  3) as to counts four and five of the plaintiff's complaint (good faith and fair dealing, CUIPA and CUTPA), the court finds that genuine issues as to material facts exist and that summary judgment is therefore DENIED;  and 4) as to the defendant's motion for summary judgment, DENIED.

Michael G. Maronich, Judge

Maronich, Michael G., J.