LLC v. W. Hudson Connery et al. (2011)

MEMORANDUM OF DECISION

The plaintiff is Raymond Weiner, LLC doing business as All Phase Construction (“All Phase”).   The plaintiff is engaged in the construction of residential and commercial properties.

In April 2006, the defendant Ann Moore (“Moore”) and the plaintiff All Phase entered into an agreement for the renovation and expansion of an existing single-family residence located at 11 Soundview Place in the town of Milford and owned by Moore and defendant W. Hudson Connery, Jr. (“Connery”).

Moore engaged an architect, James McElroy, to draw up plans to renovate the house including the construction of an addition.

The agreement between All Phase and Moore provided that All Phase would provide supervision of site work, excavation, concrete, exterior sheathing, house wrap, exterior trim including rakes, fascia board, crown molding and soffit board, framing, window installation, electrical, mechanical, masonry, roofing, insulation, dry wall and taping of three coats ready for painting and to provide site protection and shoring to keep all existing conditions free from damage due to weather.

It also called for framing a second floor and third floor attic space, roofing and the construction of an addition from the foundation up.

The “guaranteed maximum price” for the project was $284,654.60, including cost of $249,686.00, profit and overhead of $24,968.60 and contingency of $10,000.00.   It was understood and agreed that work change orders properly submitted and approved could change the ultimate cost of the project.   Proposed work change orders were to be submitted by the construction manager.   The homeowner had an “open book” right to see all invoices and monies charged by subcontractors and suppliers regarding both contract work and change order work.

All Phase was required to maintain a daily project log containing a record of the weather, subcontractors working on the site, number of workers, work accomplished, problems encountered and other similar relevant data.   It was also required to provide monthly written reports to the homeowner and architect on the progress of the entire work.

Work began in the fall of 2006 and continued into 2007.   Moore and Connery approved and signed various change orders and paid invoices as they were submitted and periodically asked project manager Robin McCready for an accounting of project manager hours, subcontractor billing and how deposit monies were being used.

In early 2007 Moore and Connery were concerned about the progress of the job and the quality of the work which had been done to that time.   They consulted the Roger Ferris architectural firm with the intent of making changes to the house as set out in the McElroy plans.   Rob Marx, an architect with Ferris made an inspection of the site on January 10, 2007.   He made the assessment that a considerable amount of work which All Phase claims to have completed was, in fact, not completed or was not done in a manner consistent with the McElroy plans.   Despite representations made by project manager Robin McCready, the roof, soffits, fascia and trim had not been completed.   The new room above the garage was not yet started, openings for windows and doors were not cut and windows were not installed.

Marx became the architect and after a meeting with Moore and McCready and changes were made by All Phase to the original McElroy plans.   Moore was charged a drafting fee for the changes.

It is at this point the claims of the parties part company.   All Phase offered testimony that the new plans required substantial changes to the work which it had already performed by that point in time.   The defendants offered evidence and testimony to the effect that a considerable amount of the changes were to areas where, contrary to All Phase's testimony, very little work, if any had actually been done pursuant to the McElroy plans.   It is their claim that All Phase was making a claim for payment for having to rip out or alter work which it never performed in the first place.   While there was agreement by the defendants that some windows and doors had to be relocated and that the layout was reconfigured, they claim that most of those were paper changes to areas in which All Phase had not yet done the work pursuant to the McElroy plans.

Marx testified that the changes he introduced, which required the relocation of interior walls and closets, were comparatively minor because rough plumbing, HVAC and electricals were not yet installed in those areas.   While the upstairs bedroom (“Cala's room”) and the master bedroom and its balcony did represent a substantial amount of work, Marx testified that no work had been done yet pursuant to the McElroy plans.   McCready testified that he had no personal knowledge of the extent of the work done prior to the introduction of the Ferris plans and was basing his testimony on a comparison of the two sets of drawings.   He testified that he did not have any idea how many hours it took to implement the changes made by Marx and that if he did keep a daily journal of work progress he didn't know where it was.   Photographs taken as late as February 2007 submitted into evidence by the defendants supported their version of the facts.

The defendants offered testimony to establish that they paid All Phase approximately $221,870.00.   They claim that All Phase only spent $195,641.00 on the project at the point in time when it stopped work on the project.

All Phase offered evidence and testimony at trial that it is owed $92,974.15 for work which it performed and materials it furnished.   The plaintiff characterizes that amount as being its damages resulting from the defendants' breach of contract.

“The determination of [w]hether a building contract has been substantially performed is ordinarily a question of fact for the trier to determine ․” Dubaldo Elec., LLC v. Montagno Const.   Inc., 149 Conn.App. 423, 429 (2010), citing Pisani Construction, Inc. v. Krueger, 68 Conn.App. 361, 364 (2002).

The plaintiff has the burden of proving what “additional” work was necessitated by the adoption of the Ferris plans.   The court cannot determine, from the evidence the plaintiff offered, which invoices apply to the original work and which apply to the “extra” work.   The evidence offered by both sides allows the court to find that a substantial amount of the “additional” work was never actually performed by the plaintiff.

The Court finds that the more competent evidence supports the defendants' claim that the plaintiff did not have to tear out substantial portions of work it claims to have put into the house.

In this case there were several hundred exhibits marked into evidence including photographs, drawings, blueprints, change orders, invoices, and receipts for goods and services dealing with the work done by All Phase pursuant to its agreement with the defendants and work done after All Phase was discharged by the defendants in May 2007.

The defendants offered testimony from Jeff Carter and Jim Lively, contractors and home builders who assessed and supervised the repairs and re-dos which they found to have been necessitated by the poor workmanship performed under the direction of All Phase.

The list of problems contained in their testimony was substantial and included such things as the walls and floors not being square to the extent that floors and walls were so crooked that the main stairs were slanted, windows could not be properly installed, the bathtub and floor did not meet, walls and doorways had to be plumbed and made square.   Most significantly, the frame of the house did not sit squarely on the new foundation installed by All Phase.   Photographs offered into evidence depicted a wall of the house actually hanging off the foundation unsupported.   The soffits on the roof did not sit flush with the roof allowing precipitation to enter causing mold and rot.   Photographs showed that the areas in question were so gaping that birds built nests between the soffit and roof.   A vent pipe was improperly installed allowing roof leakage and damage to walls on the second and third floor.   Exterior problems included a missing door header, front porch and doorway defects, and the improper pitching of the sidewalk causing water runoff problems.

In addition to the shoddy work which was performed, the plaintiff's omissions also contributed to the homeowners' damage and losses.   Inadequate design or maintenance of storm rainwater barriers resulted in water flooding the basement ruining the sump pump and the basement water management system which had to be repaired.   Tarps or other rain barriers placed on the roof and upper floors were installed improperly and actually blew off during one particularly bad storm allowing rain to enter the building and severely damage floors and walls.

On August 6, 2006, All Phase filed a mechanic's lien on the subject property in the amount of $117,154.00.   That lien was released by All Phase on June 5, 2009 and an escrow account in the amount of $45,000.00 was created in order for the defendants to obtain refinancing.   Both the plaintiff and the defendants seek an order from this court awarding them the $45,000.00 in escrowed funds.

VIOLATIONS OF HOME IMPROVEMENT ACT

As a special defense to the plaintiff's complaint, the defendants have alleged that the plaintiff is in violation of the Home Improvement Act General Statutes § 20–418, et seq., and for that reason All Phase should be precluded from seeking any damages arising from performance.

The Home Improvement Act (HIA) provides, in relevant part, “No home improvement contract shall be valid or enforceable against an owner unless it:  (1) Is in writing, (2) is signed by the owner and the contractor, (3) contains the entire agreement between the owner and the contractor, (4) contains the date of the transaction, (5) contains the name and address of the contractor and the contractor's registration number, (6) contains a notice of the owner's cancellation rights in accordance with the provisions of chapter 740, (7) contains a starting date and a completion date, (8) is entered into by a registered salesman or registered contractor ․” General Statute § 20–429(a).

It is clear from the evidence and testimony that the written contract between the parties (Plaintiff's Ex 2) fails in several important ways to comply with the requirements of the HIA. Specifically, the contract contains no start or completion dates, does not contain a notice of cancellation provision and does not contain the license number of the plaintiff.   For those reasons the Court can and does find that the contract was not in compliance with the HIA.

The plaintiff argues that, regardless of whether the contract does or does not comport with the HIA, the defendants are not entitled to use the HIA to defeat its claim for payment because they are guilty of bad faith in their dealings with the plaintiff and bad faith is a bar to homeowners who seek to use the HIA as a sword rather than a shield.

In a somewhat similar case, MacMillan v. Higgins, 76 Conn.App. 261 (2003), our Appellate Court dealt with the concept of bad faith as a defense to the HIA. In MacMillan, as in the instant case, there was a complete absence of one or more statutorily required provisions in the contract.

The only issue before the court in MacMillan was whether or not the defendants should be entitled to raise the violations of the HIA or did they forego that right by having acting with bad faith in their dealings with the contractor.

In the instant case, one basis of the plaintiff's bad faith claim is the fact that Moore is an attorney who is or should be familiar with the provisions of the HIA and, after the plaintiff's investment of considerable time, materials and labor on the project, she seeks to hide behind the act and refuses to pay for the work done having intended to use that defense from the outset.

Additionally, the plaintiff has made the claim that the defendants are not entitled to rely on the HIA for the reason that the HIA is not applicable to the project because the work was being done on a commercial property rather than a private residence.   In support of that argument, the plaintiff maintains that the real reason the defendants contracted for his services was to make improvements on the house as an investment for resale rather than as their own residence.   The plaintiff claimed that to further that objective the defendants created “Nashmill, LLC” and opened a checking account which was dedicated exclusively to the expenses related to the costs of the construction and other improvements of the property.   The defendants offered evidence and testimony to refute the plaintiff's claim that the defendants' true intent was to create a commercial venture.

Testimony was offered by a plaintiff's witness, James McElroy, that he was told by Moore that the house would be resold when the work was completed.   Moore testified that he made no such statement.   The Court finds Moore's testimony on that point to be more credible.

The defendants offered evidence and testimony to prove their claim that the house was to be their residence and not an investment property.   They testified that the “Nashmill, LLC” checking account was set up to deal exclusively with the costs of construction, but not for a commercial venture and that the name was based on the names of the cities where each one of them lived at that time—Nashville and Milford.

The defendants also offered evidence and testimony to show that one day after entering into the contract with the plaintiff, Moore put her Milford residence—her only residence—up for sale, intending to make the subject property at 11 Soundview Place her new home.   The defendants have resided there since the certificate of occupancy was obtained in November 2008.

The Court finds that the plaintiff has failed to prove that the defendants' purpose in renovating the property was as a commercial venture to flip or resell the house for profit and that the renovation project deals with a residential property and the HIA is applicable to the contract in question.

The court finds that the contract of Moore and All Phase is not in conformity with the provisions of the Home Improvement Act.

In MacMillan, it was noted that, “Our Supreme Court, in interpreting the act, has established the general rule that a contractor who fails to comply with the act is prohibited from recovery under either a breach of contract claim or quasi contractual methods of recovery, such as unjust enrichment of quantum meruit.”  MacMillan, supra, p. 270 (emphasis added).

In the case of Barrett Builders v. Miller, 215 Conn. 316, our Supreme Court noted that the Court's decision to impose the sanctions available under the HIA, “may lead to a harsh result where a contractor in good faith but in ignorance of the law performs valuable home improvements without complying with [the act].”  Barrett, supra, at 275.   It went on to note, however, that such was the legislative intent when the act was written.  “Clearly, the legislature is entitled, in the first instance, to impose a burden of compliance with the statute on the professional contractor, rather than on the nonprofessional, the consumer.   Viewing the continued incidence of complaints about home improvement contractors, the legislature could legitimately view as more urgent the need to protect consumers from unscrupulous contractors than the need to protect innocent contractors from manipulative consumers.”  Id., 326–27.

Under the facts in the instant case, the court finds that in regard to the extent and quality of the work it claims to have performed, the plaintiff, All Phase, was neither acting in good faith nor did it perform all of the valuable home improvements which it has alleged in its complaint.

In its post trial brief, the plaintiff argues that under certain circumstances a plaintiff may be awarded damages for unjust enrichment and quantum meruit even if it is found to have violated the HIA. The authority cited is Economos v. Liljedahl Brothers, Inc., 279 Conn. 300 (2006).

Our courts are aware of the draconian consequences which may result by the imposition of the sanctions available under the Home Improvement Act.

In Economos, the Appellate Court referenced General Statute § 20–429(f) and noted that it had been promulgated by the legislature in order to address what it considered to be the harsh result of Barrett Builders v. Miller, 215 Conn. 316, 322–23, in which this court denied a contractor recovery for work performed because the court concluded that the Home Improvement Act was intended to abrogate common-law remedies, including quasi-contract claims.

General Statute § 20–429(f) provides in relevant part, “Nothing in this section shall preclude a contractor who has complied with subdivisions (1), (2), (6), (7) and (8) of subsection (a) of this section from the recovery of payment for work performed based on the reasonable value of services which were requested by the owner, provided the court determines that it would be inequitable to deny such recovery.”   The plaintiff, as previously noted, is not in compliance with subsections (6), (7) or (8) of that statute.   The court finds the provisions of § 20–429(f) are of no benefit to the plaintiff in its claim that not withstanding the violation of HIA it is entitled to damages under the remaining counts of its complaint alleging breach of contract, unjust enrichment and quantum meruit.   The statute goes on to provide that if a contractor did comply with (only) subsections (1), (2), (6), (7) and (8), he could seek the reasonable value of his services, but only if the court determined that it would be inequitable to deny such recovery.   Under the facts in this case, even if the plaintiff had made such compliance—which he didn't—the court would not have made such a finding in view of the quality of the work performed.

DEFENDANTS' COUNTERCLAIMS

The defendants have raised counterclaims alleging that as a result of the poor and shoddy workmanship by All Phase, they were obligated to pay of the aforementioned problems and defects form the basis of the defendants' counterclaims.   As with any such claims, the proponent has the burden of proving them by a fair preponderance of the evidence.   Having considered the evidence and testimony offered at trial, the Court finds that the defendants have met their burden.

The court finds for the defendants and against the plaintiff as to the following counterclaims:

Count One—breach of contract;  Count Two—negligence;  Count Three—negligent hiring and supervision of subcontractors;  Count Four—violations of Home Improvement Act (General Statutes § 20–418, et seq.);   Count Five—CUTPA violations (General Statutes § 42–110b and 20–427c);  Count Six—CUTPA violations.

As for damages, the court notes the defendants' claim for total damages in the amount of $145,773.44 which they allegedly incurred for the repair of the plaintiff's poor workmanship and unfinished work.

In assessing such damages, the court is required to determine what portion of the claim is for work which the All Phase did incompetently or not at all, and which portion is attributable to new work by those other than New Phase which was done to complete the project.   The homeowners are not entitled to have the cost of the entire project saddled on All Phase.

Jeff Nelson testified that under his supervision repairs were done to a variety of different projects to address incompetent work performed by All Phase or billed by All Phase and not performed.   Such projects included structural repairs, cost of lumber and building supplies for such repairs, patio repairs and masonry, fascia repair and rework and window reinstallation.   Total cost of such labor and materials was:  $58,876.83.

Jim Lively testified that under his supervision, considerable work and materials went into the repair of defective work or deficiencies resulting from the performance by All Phase.   He was careful to distinguish remedial or repair work from new construction as evidenced by time sheets (Ex. 000).   He testified that under his supervision, $40,839.61 labor and materials were dedicated to correction of the defective or unfinished work which All Phase had billed the defendants.

As part of their counterclaim, the defendant is seeking reimbursement from the plaintiff for monies advanced to the plaintiff for deposits to be paid by All Phase to subcontractors.   That amount is $69,872.00 which the defendants paid to All Phase by check on December 30, 2006.   It represented funds to be paid by All Phase to various subcontractors for framing, HVAC, stone plumbing and electrical work.   When asked about those payments, Ray Weiner testified that only a small portion of those funds was paid by him to the various subcontractors for whom they were purportedly intended.   The court finds that the defendants are entitled to reimbursement for those deposits they paid to All Phase for work that was never performed by the unpaid subcontractors.

The total damages sought by the defendants by way of counterclaims is $145,773.44.

All Phase claims that even if it were to be barred from recovery of its claims by application of the HIA, it is entitled, under case law, to be credited with various set-offs against the plaintiff's counterclaims.   It cites Hees v. Burke Construction, 209 Conn 1 (2008), for the proposition that the HIA may not “serve as a tool for [homeowners] to enhance their own interests at the expense of contractors.”   Hees, p. 12.   The court's concern in that case was that a contractor who discovers that the contract is in violation of HIA and who immediately terminates the contract should not find itself in a situation where the homeowner hires a successor contractor to complete the job and then sues the original contractor for the entire cost of the construction.   Those are definitely not the facts of this case.   Here the contractor worked on the project for approximately nine months (August 2006 to May 2007) and was paid almost $222,000.00 for its performance.   That amount included almost $70,000.00 for subcontractor deposits which were never paid to anyone.   A considerable amount of the work was either done in a shoddy and unprofessional manner or not at all.   The counterclaims by the defendants are found to be amounts expended by the homeowners to repair the unacceptable work performed by the contractor or to complete the work never performed by the contractor yet billed for.   This is not a case where the homeowners are looking for the contractor to pay for the entire cost of the construction, but rather to have it pay for what it failed to do yet billed for.   It is also a case where the homeowner seeks compensation for violations of the HIA including billing the homeowners for products of cheaper quality such as pine trim rather than cedar, products that were never delivered to the site such as copper roofing and flitch plates, and expenses which were not supposed to be assessed against the homeowner such as the rental of a backhoe and the additional charge for labor for the installation of the fascia and soffits which were already included in the cost of the contract.

Not only does that conduct take this case out of the line of cases which properly permit a setoff on the part of the contractor, they permit the court to find for the homeowners on their claim that the contractor is in violation of CUTPA.

As in most cases the court has the responsibility of assessing the credibility of the witness and of deciding what the true facts are in this case.   In this case the court has had the benefit of an extraordinary number of photographs and illustrations which corroborate the homeowners' claim as to how much work claimed by the contractor was not done and the lack of quality of that which was done.

For the foregoing reasons the court finds for the defendants, Ann Moore and W. Hudson Connery, Jr. on Counts One, Two, Three and Four of the complaint of the plaintiff, Ray Weiner, LLC, D/B/A.

The court finds for the defendants on their Counterclaims in the amount of $145,773.44 and directs that as part of that award the escrowed funds in the amount of $45,000.00 be distributed to the defendants.

Judgment is to enter for the defendants, Ann Moore and W. Hudson Connery, Jr. on all counts of the complaint of the plaintiff, Ray Weiner, LLC, D/B/A and on each of the defendants' counterclaims as more specifically set forth herein above.

BY THE COURT,

JOSEPH W. DOHERTY, JUDGE

Doherty, Joseph W., J.