LLC v. John J. Geary et al. (2011)

MEMORANDUM OF DECISION

This case is an action for foreclosure of a mechanic's lien.   The plaintiff, Dehm Drywall, LLC, alleged that in 2007 it installed drywall at a new home in Pomfret, CT, being built for the defendants, John and Julie Geary.   Dehm Drywall was never paid.   Nor were many other subcontractors working on the house due to the fact that the general contractor, New England Home Partners, LLC, stopped work in the middle of the project and filed for bankruptcy without paying many of its subcontractors.   Dehm Drywall filed a mechanic's lien.   Its right to foreclose on that lien depends on whether there is a sufficient “lienable fund” against which it can proceed.   For the following reasons, the court finds that there is not a sufficient lienable fund.   Therefore, judgment is rendered in favor of the defendants on the complaint.   Regarding the defendants' special defenses, counterclaims and set-off, the court rules in favor of the plaintiff, except as noted herein.

I

Under the Connecticut mechanic's lien statutes, a contractor can put a lien on real estate for claims of more than ten dollars for materials furnished or services rendered in making repairs or improvements to the real estate affected.  General Statutes § 49–33.   The lien can be foreclosed on in the same manner as a mortgage.  General Statutes § 43–33(i).   It is an unusually powerful lien because it generally takes effect from the date of commencement of the services, rather than from the date it was filed, and thus it may take precedence over even later filed encumbrances, provided that it is filed within ninety days after the work is finished, and an action is commenced to foreclose on it within one year of filing.  General Statutes §§ 49–33(b);  49–34 and 49–39.   If it is not foreclosed, it becomes invalid and it is discharged as a matter of law.  General Statutes § 49–39.

Lienors are protected if they have a claim either (1) by virtue of an agreement with or the consent of the owner of the land, or (2) by the consent of some person having authority from or rightfully acting for such owner in procuring labor or materials.  General Statutes § 49–33;  Seaman v. Climate Control Corp., 181 Conn. 592, 595, 436 A.2d 271 (1980).

Although it is a very powerful lien, it is also a very limited lien.   Pertinent to the instant case is the fact that the lien can only be enforced to the extent that there is a “lienable fund” available against which it can be applied.   In this case, the pertinent lienable fund rules are set forth in General Statute §§ 49–33(e) and (f) and 49–36(a) and (c).  General Statutes § 49–33(e) and (f) provide:

(e) A mechanic's lien shall not attach to any such building or its appurtenances or to the land on which the same stands or to any lot or to any plot of land, in favor of any subcontractor to a greater extent in the whole than the amount which the owner has agreed to pay to any person through whom the subcontractor claims subject to the provisions of section 49–36.

(f) Any such subcontractor shall be subrogated to the right of the person through whom the subcontractor claims, except that the subcontractor shall have a mechanic's lien or right to claim a mechanic's lien in the event of any default by that person subject to the provisions of sections 49–34, 49–35 and 49–36, provided the total of such lien or liens shall not attach to any building or its appurtenances, or to the land on which the same stands or to any lot or to any plot of land, to a greater amount in the whole than the amount by which the contract price between the owner and the person through whom the subcontractor claims exceeds the reasonable cost, either estimated or actual, as the case may be, of satisfactory completion of the contract plus any damages resulting from such default for which that person might be held liable to the owner and all bona fide payments, as defined by section 49–36, made by the owner before receiving notice of such lien or liens.

General Statutes §§ 49–33(e) and (f).

General Statutes § 49–36(a) and (c) provide:

(a) No mechanic's lien may attach to any building or its appurtenances, or to the land on which the same stands, or any lot, or any plot of land, in favor of any person, to a greater amount in the whole than the price which the owner agreed to pay for the building and its appurtenances or the development of any such lot, or the development of any such plot of land.

* * * *

(c) In determining the amount to which any lien or liens may attach upon any land or building, or lot or plot of land, the owner of the land or building or plot of land shall be allowed whatever payments he has made, in good faith, to the original contractor or contractors, before receiving notice of the lien or liens.   No payments made in advance of the time stipulated in the original contract may be considered as made in good faith, unless notice of intention to make the payment has been given in writing to each person known to have furnished materials or rendered services at least five days before the payment is made.

General Statutes §§ 49–36(a) and (c).

In explaining the meaning and effect of these provisions, it has been observed that, “[u]nder Connecticut law, a subcontractor's right to enforce a mechanic's lien against a property owner is based on the doctrine of subrogation.”   (Citation omitted.)  W.G. Glenney Co. v. Bianco, 27 Conn.App. 199, 201, 604 A.2d 1345 (1992).   In other words, “a subcontractor's right to a mechanic's lien is said to flow from his equitable entitlement to the lien which would otherwise attach in favor of the general contractor.”  (Citations omitted.)   Seaman v. Climate Control Corp., supra, 181 Conn. 601.  “General Statutes 49–33 and 49–36 ․ define and delimit the fund to which a properly noticed mechanic's lien may attach.   Both of these sections start with the proposition that no mechanic's lien may attach to any building or land in an amount greater than the price which the owner has agreed to pay the general contractor for the building being erected or improved.   This amount may be diminished to the extent that it exceeds the reasonable cost ․ of satisfactory completion of the contract plus damages resulting from ․ default for which [the general contractor] might be held liable to the owner.   The amount may be diminished further by bona fide payments, as defined in section 49–36, made by the owner ․ before receiving notice of [the mechanic's] lien or liens.”   (Citation omitted;  internal quotation marks omitted.)  Rene Dry Wall Co. v. Strawberry Hill Associates, 182 Conn. 568, 571–72, 438 A.2d 774 (1980).   In other words, “[s]ection 49–33(f) allows the court to diminish the amount secured by a mechanic's lien in favor of a subcontractor by (1) the reasonable cost of satisfactory completion of the contract, (2) any damages for which the general contractor might be liable to the owner, and (3) any bona fide payments that were made by the owner before it received notice of the lien.”  (Citations omitted;  internal quotation marks omitted.)  W.G. Glenney Co. v. Bianco, supra, 27 Conn.App. 205.   Those statutes, therefore, limit the totality of mechanic's liens to the unpaid contract debt owed by the owner to the general contractor.   See, Seaman v. Climate Control Corp., Id. at 602.   “Accordingly, in a situation where the builder defaults on his contract ․ if the owner spends more to complete his home than the contract price he had with the builder, there is no lienable fund to satisfy the subcontractor's foreclosure action.”   Richmond Ready Mix, Inc. v. Coney, Superior Court, judicial district of New London, Doc. No. 550000 (October 1, 2001, Hurley, J.T.R.) citing W.G. Glenney Co. v. Bianco, supra, 27 Conn.App. 201.

In sum, to calculate whether there is a lienable fund to satisfy the mechanic's lien in this type of case, the court must first determine the contractual debt owed to the general contractor by the homeowners.   The homeowners' bona fide payments, plus reasonable costs to complete the project, plus any damages sustained for which the general contractor would be liable may then be subtracted from the contractual debt to determine the lienable fund.

II

The case was tried to the court.   The court heard evidence on September 15, 16 and 17;  October 26;  November 4, 5, and 24;  December 23, 2010 and January 20, 2011.   Counsel for the parties subsequently filed briefs and reply briefs.   The court heard testimony from Valerie Sandberg, a real estate appraiser;  Neil Dehm of Dehm Drywall, LLC, plaintiff;  Lee Post, Building Official, Town of Pomfret;  Karl Kuhn, another contractor on the project;  Charles Elias, a civil engineer with George Torello Engineers;  Julie Geary, defendant;  John DeSantis, another contractor on the project;  Robert Cote of Connecticut Light & Power Co.;   Gianna Bradford of Home Design Services;  John Geary, defendant;  James Booth of J. Booth Construction, LLC, another contractor on the project;  Alfred John Caraganis of Accent Stairs & Millwork, LLC, another contractor on the project;  Michael Toutant of Dalmik Well Drilling Co., another contractor on the project;  Zbigniew Zera of EZ Way Plumbing & Heating, LLC, another contractor on the project;  Lee Feder of Hearth Home Works, LLC, another contractor on the project;  Gpigniew Nowak of Now Mechanical, LLC, another contractor on the project;  William Uhlan of New England Home Partners, LLC, the general contractor on the project.   The court also reviewed over 60 exhibits.

On the first day of trial, the defendants filed a motion to dismiss purportedly raising subject matter jurisdiction issues and also purporting to request a discharge of the mechanic's lien pursuant to General Statutes § 49–35a(c).  Inasmuch as the motion to dismiss and request for discharge involved the same disputed issues of fact and law involved in the trial on the plaintiff's complaint and the defendants' answer, special defenses, counterclaims and set-off, the court heard all matters together for the sake of judicial efficiency and to permit one trial to resolve all issues.

III

The first issue, before reaching the merits, is whether the mechanic's lien was filed within the time limited by statute.   As noted above, the mechanic's lien statutes require that the lien be filed within ninety days after work is finished.  “A mechanic's lien is not valid unless the person performing the services or furnishing the materials (1) within ninety days after he has ceased to do so, lodges with the town clerk of the town in which the building, lot or plot of land is situated a certificate in writing, which shall be recorded by the town clerk with deeds of land ․” General Statutes § 49–34.

The mechanic's lien document, signed under oath by the plaintiff's officer in this case, states that the work ended on August 26, 2007.   The lien was filed on the land records on October 29, 2007.   If that is true, then the lien was filed within the deadline.   However, the Gearys argue that it is not true.   They point to plaintiff's invoice for the work done in this case.   That invoice was dated and signed July 26, 2007.   Measuring from July 26, 2007, the lien was filed too late.

Plaintiff argues that the Gearys cannot raise this issue because they were defaulted in this case in 2009 for failure to respond to discovery requests.   See Order, Doc. No. 115.00.   That default, they argue, precludes the Gearys from challenging the validity of the lien.   Indeed, it has been held that “[a] default admits the material facts that constitute a cause of action ․ entry of default ․ conclusively determines the liability of the defendant.”   (Citation omitted;  internal quotation marks omitted.)  Skyler Ltd. Partnership v. S.P. Douthett & Co., 18 Conn.App. 245, 253, 557 A.2d 927, cert. denied, 212 Conn. 802, 560 A.2d 984 (1989).   Nevertheless, the Gearys counter that this issue affects the subject matter jurisdiction of the court;  and, therefore, the issue is never precluded.  Practice Book § 10–33 (subject matter jurisdiction issues never waived).

The Gearys' claim, in this regard, is based on an alleged non-compliance with General Statutes § 49–34.   It has been held that those kinds of issues do not affect the subject matter jurisdiction of the court.  Louis Gherlone Excavating, Inc. v. McLean Construction Co., 88 Conn.App. 775, 779–82, 871 A.2d 1057, cert. granted, 274 Conn. 909, 876 A.2d 1201 (2005), appeal withdrawn (2006).   Thus, the Gearys are precluded from raising the issue due to their default.

Even if they could raise the issue, the court would not rule in their favor on this point.   Neil Dehm, the owner of Dehm Drywall, LLC, testified credibly that the work was not finished until August 26, 2007.   The invoice was dated earlier so that it could be given to New England Home Partners and then forwarded to the Gearys' bank so that the bank would release a draw from the construction loan so that Dehm Drywall could get paid at the time work was completed.¹  Thus, the court finds that the mechanic's lien was filed within ninety days of completion of work.   It was filed within the time limitation.   It complies with the statute.   The Gearys' motion to dismiss, their request to discharge the lien, and their request for judgment in their favor on this point are denied.

Other issues raised in the motion to dismiss and in the request to discharge the lien are intertwined with the merits of the case concerning the existence of a lienable fund.   Those issues concern the standing of the plaintiff, i.e. whether the plaintiff comes within the zone of interest protected by the statute.   Those are subject matter jurisdiction issues.  Gill v. Diorio, 51 Conn.App. 140, 145–46, 720 A.2d 526 (1998).   The Gearys are not precluded from raising those issues.   Those issues are discussed seriatim.

IV

Another preliminary issue requires the court to resolve the status of the parties.   Particularly with respect to the lienable fund issue, the mechanic's lien statutes prescribe lien rights with respect to certain specific parties:  owners, general contractors and subcontractors.   The statutes do not define those terms.   In the instant case, there is no dispute over the fact that the Gearys were owners.   There is a dispute over whether Dehm Drywall was a subcontractor and whether New England Home Partners was the general contractor.²  Both parties, at various times, re-characterize the various actors whenever it suits their particular argument with respect to the issue at hand, regardless of the inconsistency.   Pertinent to the present issue, Dehm Drywall contends that it was not a subcontractor for purposes of the lienable fund issue.   It contends that its work was done directly for the Gearys.   If it was not a subcontractor, then the limitations of the lienable fund rules do not apply to it.

A subcontractor is “one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contact.”   American Masons' Supply Co. v. F.W. Brown Co., 174 Conn. 219, 226, 384 A.2d 378 (1978).   In this context, the term prime contractor is synonymous with the term general contractor.  Id. at 220.   Thus, where an owner hires a contractor to oversee a project and find other contractors, and those other contractors submit proposals to the first contractor for the owner's approval, but the first contractor remains responsible for overall project oversight and supervision, the first contractor is the general contractor and the others are subcontractors.   See MJM Landscaping v. Lorant, 268 Conn. 429, 437–38, 845 A.2d 382 (2004).

In the instant case, the court finds that the Gearys entered into a contract with New England Home Partners for the construction of a new home.   New England Home Partners helped them choose plans, materials and various other contractors to do the work.   New England Home Partners supervised the project and assumed responsibility for coordinating the work and paying the contractors from the Gearys' construction loan.   Dehm Drywall submitted proposals and its bills to New England Home Partners and New England Home Partners was to pay them from the Gearys' construction loan when they finished.   Dehm Drywall had no contract with the Gearys during the project.   In fact, Gary Dehm never met them until after his work was done, after New England Home Partners had defaulted in payment, and when he was trying to collect on the debt.   Considering all of the evidence, much of which was conflicting and contradictory, and considering the credibility of witnesses and evidence of business practices in context, the court finds that the status of the parties for the purposes of this case and the particular issues herein is that New England Home Partners was the general contractor and Dehm Drywall was a subcontractor.   The court finds that Dehm Drywall has filed a mechanic's lien as a subcontractor.   Thus, the limitations of the lienable fund rules apply to Dehm Drywall.

V

As for the merits, the mechanic's lien statutes permit foreclosure of a lien on a building and land by any person with a claim of more than ten dollars for materials furnished or services rendered in the construction of that building where the claim is by virtue of an agreement with some person having authority from or rightfully acting for the owner in the procuring of labor or materials.  General Statutes § 49–33(a);  Connecticut Carpenters Benefits Funds v. Burkhard Hotel Partners, II, LLC, 83 Conn.App. 352, 356, 849 A.2d 922 (2004).   In the instant case, the facts showed that Gary Dehm of Dehm Drywall was contacted by William Uhlan of New England Home Partners in 2007 and was asked to submit a proposal for drywall work at the home being constructed for the Gearys at 13 Longmeadow Road, Pomfret, CT. Dehm Drywall submitted a proposal to New England Home Partners on July 14, 2007 to sheetrock and tape the house for $14,700.00, to put durarock in the master shower for $400.00, to sheetrock a bonus room over the garage for $1,300.00, and to prime and paint the walls for $1,800.00.   The proposal was accepted for the sheet rocking and taping in the house and for painting the walls, only.   Dehm Drywall sent its invoice for a total of $16,500.00 to New England Home Partners on July 26, 2007 in advance so it could get paid when it finished the work.   It finished the work on August 26, 2007.   Dehm Drywall did not get paid by New England Home Partners or anyone else because New England Home Partners defaulted in the middle to the project and filed for bankruptcy, leaving the house unfinished and many subcontractors unpaid.   Dehm Drywall filed its mechanic's lien on the land records on October 29, 2007, and commenced suit to foreclose on it on October 9, 2008.   Its lien and foreclosure action were timely.   It is entitled to foreclose on the lien, provided there is a lienable fund against which to proceed.

As to how to calculate the lienable fund, the statutes, as cited earlier, require the court to first determine (A) the contractual debt with the general contractor and then subtract (B) bona fide payments made by the owners, (C) reasonable costs of satisfactory completion of the project, and (D) any damages for which the general contractor might be liable to the owner.   If there is anything remaining in the fund after subtractions, the plaintiff can foreclose upon it.   Each category is discussed below:

A

In regard to the contractual debt portion of the lienable fund calculus, the court finds that the Gearys purchased land in Pomfret and embarked on a plan to build their own home in 2006.   Mrs. Geary saw a newspaper advertisement by Barden Homes, a New York company that sold pre-engineered homes.   She communicated with them and obtained drawings and plans from Barden Homes.   She liked their plans.   She communicated with them about building a home for her and her family and was told to contact their local representative, New England Home Partners, LLC, of Windsor, CT. She discussed what she wanted with Bill Uhlan, who operated New England Home Partners with his daughter.   Mrs. Geary gave Uhlan the plans.   Uhlan did not have his own construction crew, but he had contacts with all the necessary persons with expertise to build a home:  designers, contractors and material suppliers.   By documents dated June 6, 2006, the Gearys entered into a contract with New England Home Partners.

The contract, drafted by New England Home Partners, was in two parts.   One part was called the project management contract under which New England Home Partners functioned as a project manager:  finding and engaging subcontractors, vendors, and suppliers and paying them from the Geary's construction loan.   In fact, as work was completed, New England Home Partners would provide documentation to the bank of work completed and materials purchased, the bank usually would issue a check to the Gearys and New England Home Partners, the payees would endorse the check, and New England Home Partners would cash the check and pay the outstanding bills from the funds.   The other part of the contract was called a materials and service package which set forth the items to be purchased for construction of the home.   This part included a “base package” of items or categories of items amounting to $173,415.21.   New England Home Partners earned its commission from the sale of this base package.   That price included its commission.   Under the contract, New England Home Partners would also help the Gearys find other materials and subcontractors necessary or preferred by the Gearys for completion of the project.   The estimated total project budget was $355,375.96.   Concurrent with the signing of the contract, the Gearys gave New England Home Partners a deposit of $1,000.00, and took out a construction loan from M & T Bank of New York for $387,000.00, just in case there were overruns.

Problems developed.   The contract did not specify a completion date.   It was expected that the house would take four or five months to build.   The Gearys expected to be in their new home by Christmas, 2006.   That did not occur.   In fact, due to permitting delays and weather, ground was not broken until December 2006 and work on the structure did not even begin until the end of February or beginning of March of 2007.   This was a source of stress for the Gearys because they sold their old home February 2007 and were living in various places temporarily waiting to move into their new home.   Moreover, their construction loan was expiring in June 2007, and the bank was threatening extension penalties.

Another problem involved ambiguities in the contract.   Despite the efforts of the parties to describe what was to be included, there were many aspects that lacked specificity, leaving many choices to the Gearys as to what items to include and what to exclude and what quality and quantity of materials to use as the project progressed.   Another ambiguity involved the plans.   The Barden Homes plans were too expensive to follow, and were redrawn by Home Design Service to make the project achievable under the agreed contract price.   The redrawn plans contained many inconsistencies with the budget and written specifications in the contract.   Another problem was that, during construction, Mrs. Geary often chose materials that were of higher quality than specified in the contract and she wanted additional items not included in the contract or budget.   In other instances, she chose not to proceed with certain items called for in the contract or plans.   Many decisions and changes were made on the spot during discussions between Mrs. Geary, the various subcontractors and New England Home Partners.   Despite the contract language requiring written change orders, no such agreements to make changes were made in writing.   This informality and modification and ambiguity eventually resulted in many disagreements over what was included in the contract, and what was not included.

New England Home Partners prepared documents and billings describing credits for work covered by the contract but not done, and overages for work done but not covered by the contract.   The parties, however, did not agree.   Meanwhile, the house was still unfinished and the Gearys needed a place to live.   Finally, the Gearys drafted, and the parties signed, an addendum to the contract on September 12, 2007, to resolve the issues.   It provided as follows:

The Agreement made on June 6, 2006 ․ [i]s amended as follows:

Builder will complete all work in order to schedule the final M and T Bank inspection by no later than 10/01/2007.   This is to avoid a further request for a loan extension on the part of the owners and the possibility of a foreclosure if the bank requires the loan to be paid in full.

The current loan allotment for the entire project is $387,000.00, which includes $18,000.00 of extra money for overruns.   This loan is not to be exceeded for the remaining work.   The current loan monies will cover the necessary items to obtain a Certificate of Occupancy (CO) issued by the town of Pomfret, CT.

The builder accepts all responsibility for any further delays including bank fines due to another approval loan extension, construction rate increases, and living expenses incurred by owners.

Addendum

New England Home Partners expected that it could finish the house by the new deadline for that price.   Thus, for purposes of calculating the lienable fund, the court finds that the contractual debt with the general contractor was $387,000.00.   All other claims are denied for lack of persuasive proof.

This addendum did not solve the problems.   Shortly after signing, New England Home Partners stopped work and filed for bankruptcy.   The house was left unfinished and many subcontractors, including Dehm Drywall, were left unpaid.   Consequently, the court finds that New England Home Partners breached its contract with the Gearys in this regard.

B

With regard to the bona fide payments portion of the lienable fund calculus, the court finds that after New England Home Partners breached the contract, the Gearys directed their bank to stop making payments to New England Home Partners.   Also, by necessity, Mrs. Geary assumed the responsibility to get the job finished.   The last check disbursed by the bank for New England Home Partners had been issued on August 29, 2007.   After reviewing the checks in evidence and other documentation, and for the purposes of calculating the value of bona fide payments made by the owners under the lienable fund formula, the court finds that a total of $294,690.15 was paid to New England Home Partners.   This consists of draws from the construction loan payable to New England Home Partners and the Gearys and cashed by New England Home Partners.   There was no evidence of any other disbursements by that bank from the construction loan for contractors.   Also, the $1,000.00 deposit paid by the Gearys to New England Home Partners on the signing of the contract can be included in the amount paid.   Additionally, the Gearys voluntarily made two partial payments to subcontractors who came to their door lamenting that they had not been paid by New England Home Partners:  they paid $2,000.00 to the subcontractor who installed stairs, and $3,500.00 to the subcontractor who provided topsoil.   The amounts were far less than what was owed to those subcontractors.   Dehm Drywall and other subcontractors who did work or supplied materials were never paid by New England Home Partners or the Gearys.   Thus, for purposes of calculating the lienable fund, the court finds that a total of $301,190.15 of bona fide payments were made by the owners.   All other claims are denied for lack of persuasive proof.

C

With regard to the costs to complete portion of the lienable fund calculus, the court finds that Mrs. Geary left her job at a local Indian casino and spent nearly every day trying to get the project finished.   She shopped for materials and supplies and fixtures and attended to the work site to get contractors to finish the work.   The Gearys finally finished enough work to receive a certificate of occupancy from the town for their home on October 31, 2007.   Due to the many ambiguities in the contract and plans, there was much conflicting evidence during trial as to what was required by the contract and left undone, what the Gearys legitimately did to complete the project, and what they did that was never required by the contract in the first place.   Also, many proffers of evidence of costs and estimated future costs were disallowed by the court for various reasons of record.   Nevertheless, the court finds that to satisfactorily complete the project, the Gearys incurred at least the following costs:  $10,500.00 paid to Karl Kuhn for construction;  $10,650.63 payments to Chace Building Supply for door and interior trim and other materials;  $1,318.89 to Home Depot and $2,605.08 to Lowe's for materials and fixtures;  $315.00 to Nutall Electric for smoke detectors;  $4,000.00 plus $1,700.00 plus $6,700.00 to Pyramisa Marble and Granite;  $270.47 plus $194.19 for kitchen cabinets;  $3,975.00 for tile work;  $7,700.00 for painters;  $4,186.96 for appliances from Sears;  $3,599.05 for tile and lighting;  and $2,426.21 for columns.   Thus, for purposes of calculating the lienable fund, the court finds that the proven costs to complete the project totaled $60,141.48.   All other claims are denied for lack of persuasive proof.

D

The lienable fund statutes further permit reductions to the lienable fund for any damages for which the general contractor might be liable to the owner.   In this category, the court finds that the Gearys proved that they incurred $3,300.00 in bank charges for loan extensions caused by delays due to New England Home Partners quitting in the middle of the project, plus $5,000.00 in living expenses incurred by the Gearys between September 12, 2007 and October 31, 2007, all appropriate to categorize as damages under New England Home Partners' promised to pay for those costs pursuant to the September 12, 2007 addendum to the contract.

The Gearys also seek an assessment for litigation costs.   That they incurred many litigation costs due to this project cannot be doubted.   The Gearys were sued and/or mechanics liens were filed against their home by New England Home Partners, Dehm Drywall, and other subcontractors alleging that the Gearys owed them money for work done on the house.   The suit by New England Home Partners was nonsuited on May 23, 2010, resulting in a judgment in favor the Gearys.   See New England Home Partners, LLC v. Geary, et al., Superior Court, judicial district of Windham, Doc. No. CV 07–5002154.   The mechanic's liens filed by subcontractors, other than Dehm Drywall, were not prosecuted.   Many subcontractors who were never paid did not even file mechanic's liens.

The Gearys' contract with New England Home Partners allowed for attorneys fees and costs and expenses incurred by the Gearys if the project resulted in litigation and if the Gearys prevailed.³  They did prevail in the suit brought against them by New England Home Partners when that suit was dismissed in 2010.   As of September 2010, the Gearys have incurred at least $39,000.00 in attorneys fees and $8,000.00 in expenses that can be attributed to expenses incurred in defending itself against New England Home Partners,⁴ and/or in proving their claims of harms caused by New England Home Partners' poor performance and default, and/or concerning fees, costs and expenses due to litigation concerning the project.   All of those fees, costs and expenses can be chargeable to New England Home Partners under the contract.   They can be counted as damages for purposes of the lienable fund calculus.

The Gearys also claim that their damages under the lienable fund calculus should include an award reflecting New England Home Partners' liability to them for damages for breach of contract and for violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a, et seq.   Concerning breach of contact, the elements for that cause of action are:  the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.  Rosato v. Mascardo, 82 Conn.App. 396, 411, 844 A.2d 893 (2004);  16 Conn. Practice Series, Connecticut Elements of an Action (2007–0 Ed.) § 4:1.   As for breach of contract, the court finds that New England Home Partners did breach its contract with the Gearys by abandoning the job without completing it and by receiving but failing to disburse loan funds to numerous subcontractors.   However, the Gearys have failed to prove pecuniary damages for that breach.   The Gearys believe that many items of work that New England Home Partners had promised were not done and they claim an assessment of damages for these items.   However, as to many items, they did not complete them either, or failed in proof of what the costs to complete would be due to various rulings of the court on record.   They also claim the work was not done in a workmanlike manner and claim an assessment of damages for those items.   An expert inspection conducted after the home was built revealed many construction errors and defects committed by the workers, some of which are threats to health and safety.   However, again, the Gearys did not make repairs or failed in proof of what the costs to correct the defects would be due to various rulings of the court on record.   They also complain that New England Home Partners left many bills unpaid, but they failed to prove that they have incurred liability or expense for many such unpaid bills.  “In an action for damages for breach of contract, the general rule is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as he would have been had the contract been performed.”  (Citation omitted;  internal quotation marks omitted.)  Flater v. Grace, 291 Conn. 410, 426 n.11, 969 A.2d 157 (2009).   In that type of case, the correct measure of damages is the “actual cost of completing the project ․ less the amount due under the contract for completion.”  Id.;  see also Dion v. Hossack, Superior Court, judicial district of Tolland, Doc. No. TTD CV 07–5001489 (May 13, 2009, Sferrazza, J.) (“The proper measure of damages is the difference between the contract price and the actual cost”).   The Gearys have alleged, but have failed to prove, that their costs to complete the project or correct the errors exceeded the contract price stipulated in the Addendum of 2007.   While they did pay New England Home Partners and others to complete the house, as the above chronicle of payments showed, those proven payments did not exceed the $387,000.00 contract price.   While the actual cost was no doubt higher, the Gearys failed to show it cost them more.   This is because, as the evidence showed, the Gearys' home was built with many materials and supplies that were never paid for by anyone due to New England Home Partners defaulting and filing for bankruptcy.   In such a situation, the Gearys are entitled to only nominal damages of $1.00 on their breach of contract claim.   See Lydall, Inc. v. Ruschmeyer, 282 Conn. 208, 254, 919 A.2d 421 (2007).

With respect to the CUTPA claim, the criteria for a CUTPA action are well settled.   It is “remedial in character ․ and must be liberally construed in favor of those whom the legislature intended to benefit.”  (Citations omitted;  internal quotation marks omitted.)  Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 379, 880 A.2d 138 (2005).  “CUTPA, by its own terms, applies to a broad spectrum of commercial activity.   The operative provisions of the Act, General Statutes § 42–110b(a), states merely that “[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”   Trade or commerce, in turn, is broadly defined as “the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state.”  General Statutes § 42–110a(4);  Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 492, 656 A.2d 1009 (1995).   The purpose of CUTPA is to protect the public from unfair practices in the conduct of any trade or commerce, and “whether a practice is unfair depends upon the finding of a violation of an identifiable public policy.”  Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 257, 550 A.2d 1061 (1988).   A CUTPA claim may be brought in the Superior Court by “[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42–110b ․” General Statutes § 42–110g(a).  “It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair:  (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers ․ All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.”  (Citation omitted;  internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 19, 938 A.2d 576 (2008).  “This language has been the foundation of the analysis defining the meaning of ‘unfair acts or practices' under CUTPA and has been cited repeatedly by the Connecticut Supreme Court.”   R. Langer, J. Morgan and D. Belt, Unfair Trade Practices (12 Conn. Practice Series, 2003) § 2.2. “A breach of contract claim can make out a legally sufficient CUTPA claim [only] as long as there are substantial aggravating circumstances.”  (Emphasis added;  citations omitted;  internal quotation marks omitted.)   Hoydic v. B & E Juices, Inc., Superior Court, judicial district of Stamford–Norwalk, Docket No. CV 03–4010104 (February 27, 2008, Jennings, J.);   accord Tyson Roller Bearing, Inc. v. Accuride Corp., Superior Court, judicial district of Hartford, Docket No. CV 06–5009721 (May 7, 2008, Langenbach, J.).   Based on these standards, the court finds no justification for a CUTPA violation in this case against New England Home Partners.   While this case certainly involved a business failure and breach of contract by New England Home Partners, the court does not find unfair or deceptive trade practices or any aggravating circumstances necessary for a CUTPA claim or any other justification for finding a CUTPA violation against New England Home Partners.

Therefore, for the purposes of calculating the lienable fund, the court finds that the Gearys have been able to prove a total of $55,301.00 in damages due to them from the general contractor.   That amount can be subtracted from the lienable fund.   All other claims are denied for lack of persuasive proof.

E

In sum, adding the $55,301.00 for damages, plus the $60,141.48 for costs to complete, and plus $301,190.15 for payments, and subtracting that sub-total from the $387,000.00 contract price, the result is no lienable fund.   Absent a lienable fund, Dehm Drywall cannot enforce its mechanic's lien.

Accordingly, judgment shall enter in favor of the Gearys on Dehm Drywall's complaint for foreclosure of its mechanic's lien.   Likewise, the motion to discharge is granted for lack of probable cause to sustain the validity of the lien, and the motion to dismiss is granted because the court finds there is no lienable fund.

VI

The Gearys filed numerous special defenses, counterclaims and setoffs to this lawsuit.   They are discussed seriatim:

A

The Gearys filed four special defenses:  Payment, Failure to State a Claim, Lack of Privity and Lack of a Lienable Fund. On the subject of special defenses, it is well settled that “[t]he purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action.”   (Citation omitted;  internal quotation marks omitted) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 718, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002);  see also Practice Book § 10–50.   Having concluded that the plaintiff has failed to prevail in its prima facie case on its cause of action, it is unnecessary to decide any special defenses.  Connecticut Light and Power Co. v. Huschke, 35 Conn.Sup. 303, 305 n.1, 409 A.2d 153 (1979).   Alternatively, and assuming, arguendo, that the lienable fund requirement is a special defense on which the defendants have the burden of proof, the defendants raised that defense, inter alia, in their Fourth Special Defense.   The court finds that they have carried their burden of proof on that point and have proven by a preponderance of the evidence that there is no lienable fund.   Indeed, they have proven that there is no lienable fund by the stricter clear and convincing evidence standard required by General Statutes § 49–35b(b) for discharge of a lien in cases were there was probable cause to sustain its validity.

B

The Gearys filed three counterclaims against Dehm Drywall.   The court finds in favor of Dehm Drywall and renders judgment for Dehm Drywall on each.

The first counterclaim alleges unjust enrichment.  “Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract ․ A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another ․ With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard ․ Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy ․ Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment.”  (Citations omitted;  internal quotation marks omitted.)   Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006);  Laser Contracting, LLC v. Torrance Family Ltd. Partnership, 108 Conn.App. 222, 230, 947 A.2d 989 (2008).

The Gearys' argument in this case is that “if ” Dehm Drywall is permitted to enforce its mechanic's lien, it would be unjustly enriched because the Gearys already paid for their work.   Defendants' Answer, Counterclaim, Count One, para. 2 (emphasis added).   To the extent that the counterclaim is conditional on Dehm Drywall prevailing in its cause of action, that condition has not been met because the court has ruled that Dehm Drywall cannot prevail.   Thus, that counterclaim is moot.   Even if Dehm Drywall had prevailed, the court would have ruled in favor of Dehm Drywall on this counterclaim.   The evidence showed that Dehm Drywall was never paid.   New England Home Partners received money sufficient to pay for Dehm Drywall, but New England Home Partners never paid Dehm Drywall's bill, nor did anyone else.   Dehm Drywall was a subcontractor.   The mechanic's lien statutes give subcontractors who are not paid a remedy against the owner regardless of whether the owner is innocent, if there is a lienable fund.   There is no injustice in following the statutes.   Moreover, the statutes do not render the Gearys liable for double payment.  “The defendants will not be subject to double payment because their payments will decrease the fund established for the benefit of subcontractors.”  W.G. Glenney Co. v. Bianco, supra, 27 Conn.App. 205.   Thus, Dehm Drywall is not unjustly enriched in this case, either factually or legally.   All other claims under this counterclaim are unpersuasive.

The second counterclaim alleges that Dehm Drywall should be jointly liable to the Gearys for all damages, losses and expenses caused by New England Home Partners because Dehm Dywall was in a joint venture with New England Home Partners to build their home.   The Gearys cannot prevail on this point.   Assuming, arguendo, that it states a cause of action for, inter alia, breach of contract and tortuous interference with the Gearys' relationship with their lender, there was no evidence in the case of a joint venture between Dehm Drywall and New England Home Partners.  “A joint venture is a special combination of two or more persons who combine their property, money, effects, skill, and knowledge to seek a profit jointly in a single business enterprise without any actual partnership or corporate designation ․ The relationship between contracting parties cannot amount to a joint venture unless the parties so intend.”  (Citations omitted.)  Electronic Associates, Inc. v. Automatic Equip.   Development Corp., 185 Conn. 31, 35, 440 A.2d 249 (1981).   There was no evidence, direct or circumstantial, of intent to form a joint venture in this case between Dehm Drywall and New England Home Partners.   Their relationship was subcontractor to general contractor for some drywall work on a home under construction.   All other claims under this counterclaim are unpersuasive.

The third counterclaim alleges that Dehm Drywall violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a, et seq.   Here, the Gearys restate their factual claims in the second counterclaim and assert that those acts were designed to damage and exert economic pressure on them, thus establishing a cause of action under CUTPA.   Defendants' Answer, Counterclaim, Count Three.   The criteria for a CUTPA claim were described earlier.   In the instant case, there was no evidence of the business practices of Dehm Drywall, nor any evidence of any unfair or deceptive acts or any substantial aggravating circumstances justifying a remedy under CUTPA.   In this case, Dehm Drywall did work on the Geary's house, but did not get paid.   Its effort to enforce its mechanic's lien rights was unsuccessful, but not unfair.   All other claims under this counterclaim are unpersuasive.

C

The Gearys also filed a claim for a set-off against Dehm Drywall.   A set-off is a statutory remedy, available in some cases, where there are mutual debts between the plaintiff and defendant.   It permits judgment for the balance due after the offset.  General Statutes § 52–139.   A set-off is not to be claimed unless and until the plaintiff obtains judgment in the main action.   R. Bollier, N. Cioffi, K. Emmett, J. Kavanewsky and L. Murphy, Vol. 1 Stephenson's Connecticut Civil Procedure (Third Ed., 1997), § 85(c).  In the instant case, plaintiff has not obtained such a judgment.   Moreover, the court finds no debt owed by Dehm Drywall to the Gearys to which an offset could be applied.   All other claims under this setoff are unpersuasive.   Accordingly, the court rules in favor of Dehm Drywall on this point.

VII

For all of the foregoing reasons, judgment is rendered in favor of the defendants on the complaint.   Regarding the defendants' special defenses, counterclaims and set-off, the court rules in favor of the plaintiff, except as noted herein.

THE COURT

Robert F. Vacchelli

Judge, Superior Court

FOOTNOTES

FN1. Unfortunately, the facts showed that the bank did issue a check, inter alia, to pay for the drywall work.   The bank issued it to New England Home Partners and the Gearys.   The check was cashed by New England Home Partners.   But, Dehm Drywall was never paid.   New England Home Partners should have paid, but it did not pay, Dehm Drywall's bill.   New England Home Partners filed for bankruptcy, instead..  FN1. Unfortunately, the facts showed that the bank did issue a check, inter alia, to pay for the drywall work.   The bank issued it to New England Home Partners and the Gearys.   The check was cashed by New England Home Partners.   But, Dehm Drywall was never paid.   New England Home Partners should have paid, but it did not pay, Dehm Drywall's bill.   New England Home Partners filed for bankruptcy, instead.

FN2. Dehm Drywall originally alleged in its complaint that New England Home Partners was the builder.   In an effort to avoid any admission of applicability of the lienable fund rules, after trial, Dehm Drywall filed a request to amend its complaint on March 1, 2011, to change its allegations to describe New England Home Partners as “project manager” rather than as “builder” as in the original complaint.   No objection was filed against that request within 15 days, so it became effective automatically.   Practice Book § 10–60(a)(3).   Defendants filed an objection on April 8, 2011.   It is overruled as too late.   The allegation change does not change the facts or the factual findings of the court..  FN2. Dehm Drywall originally alleged in its complaint that New England Home Partners was the builder.   In an effort to avoid any admission of applicability of the lienable fund rules, after trial, Dehm Drywall filed a request to amend its complaint on March 1, 2011, to change its allegations to describe New England Home Partners as “project manager” rather than as “builder” as in the original complaint.   No objection was filed against that request within 15 days, so it became effective automatically.   Practice Book § 10–60(a)(3).   Defendants filed an objection on April 8, 2011.   It is overruled as too late.   The allegation change does not change the facts or the factual findings of the court.

FN3. The contract provided:  “In the event of any arbitration or litigation relating to the project, project performance, or this contract, the prevailing party shall be entitled to reasonable attorneys fees, costs and expenses.”.  FN3. The contract provided:  “In the event of any arbitration or litigation relating to the project, project performance, or this contract, the prevailing party shall be entitled to reasonable attorneys fees, costs and expenses.”

FN4. Defendants attribute $26,677.57 in attorneys fees due to defense of the case of New England Home Partners, LLC v. Geary et al. alone.   If necessary, any further disputes over these and any other attorneys fees and costs and expenses in issue may be resolved in a post-trial proceeding.   Practice Book § 11–21.   The parties should file appropriate and timely post-trial motions to address those issues, if necessary..  FN4. Defendants attribute $26,677.57 in attorneys fees due to defense of the case of New England Home Partners, LLC v. Geary et al. alone.   If necessary, any further disputes over these and any other attorneys fees and costs and expenses in issue may be resolved in a post-trial proceeding.   Practice Book § 11–21.   The parties should file appropriate and timely post-trial motions to address those issues, if necessary.

Vacchelli, Robert F., J.