LLC v. LLC (2012)

MEMORANDUM OF DECISION RE APPLICATION FOR DISCHARGE OF MECHANIC'S LIEN

This case comes to this court on an application to discharge a mechanic's lien.   At the hearing on the application, the lienor must first establish that there is probable cause to sustain the validity of its lien.   The owner must then prove by clear and convincing evidence that the validity of the lien should not be sustained.  Connecticut General Statutes § 49–35b(a).   Therefore, the lienor's standard of proof is probable cause, and the owner's standard of proof is clear and convincing evidence.

In this matter, the court stated on the record after the presentation of defendant's evidence at the hearing that it was persuaded that Germano Drywall, LLC (hereinafter “Germano Drywall”) had established probable cause to sustain the validity of its lien.   The plaintiff Reservoir Hills, LLC (hereinafter “Reservoir Hills”) now asserts that it has proven by clear and convincing evidence that the lien should be discharged because Germano Drywall has been paid in full for the work performed and there are no amounts due from the plaintiff to the defendant.

“[C]lear and convincing proof denotes a degree of belief that lies between the belief that is required to find the truth or existence of the [fact in issue] in an ordinary civil action and the belief that is required to find guilt in a criminal prosecution ․ [The burden] is sustained if evidence induces in the mind of the trier a reasonable belief that the facts asserted are highly probably true, that the probability that they are true or exist is substantially greater than the probability that they are false or do not exist.”  O'Connor v. Larocque, 302 Conn. 562, 576, 31 A.3d 1 (2011).

The evidence showed that Germano Drywall initially proposed to do the work in question (installation and finishing of drywall in a newly constructed home) at 26 Gianni Lane—also known as “Lot 24–9”—for $12,300 (Plaintiff's Exhibit 2).   At the time, there was an ongoing relationship between Germano Drywall and the principals of Reservoir Hills.¹  Germano Drywall had performed work for them at other projects around the state and was apparently owed a substantial sum for that work.   Salvatore Germano was pressing for payment of those past due amounts, and he prepared a handwritten accounting (plaintiff's Exhibit C) for purposes of discussion.   It appears from the document that Germano Drywall proposed a payment plan of five monthly installments ² toward the arrearage (it is unclear as to whether the parties ever agreed to this, much less carried it out) and, more importantly, a “pay as you go” arrangement going forward.   Salvatore Germano wrote “ALSO WILL DO SHEETROCK AT OTHER HOUSE ON GIANNI W. WILL KEEP PAYMENT SEPARATE” (plaintiff's Exhibit C).  Germano testified that “the other house on Gianni W.” was a reference to the 26 Gianni Lane property.³  The parties also negotiated an arrangement where the owner would provide the materials, and Germano Drywall would bill only for labor.   The agreed amount for the labor only was $8,800.   Reservoir Hills provided documentary evidence of the purchase and delivery of the materials to the site (Plaintiff's Exhibit 6) and there does not appear to be any real dispute that the agreed work was substantially performed by Germano Drywall.

Reservoir Hills issued a series of checks payable to Germano Drywall during the period from September 26 to October 25.   Defendant's Exhibit D is copies of those checks.   The checks total $8,450.   On the face of each check, in the lower left corner, is a notation “24–9.”   Thomas Coccomo testified that the notation was made to indicate that the payment was for the work performed on the 26 Gianni Lane property, also known as Lot 24–9.   Reservoir Hills maintains that the checks represent payment in full for the work performed at 26 Gianni Lane.⁴

Salvatore Germano testified that he did not consider the payments reflected in Exhibit D to be payments for the work on 26 Gianni Lane. Germano Drywall disregarded the “24–9” notation and applied the payments against the past due accounts and therefore, as far as it is concerned, it has never been paid the $8,800 for the work at 26 Gianni Lane.

Examining the totality of the evidence, the court is not persuaded that it was logical or reasonable for Germano Drywall to consider the checks in Exhibit D as payments against the past due balance.   First, by the defendant's own testimony, there were two distinct “separate” debts owed to Germano Drywall:  the past due balance on work performed at other sites, and the $8,800 for drywall work at 26 Gianni Lane. The payments were to be kept “separate.”   Given that arrangement, it is perfectly reasonable for Reservoir Hills to note the payment for Lot 24–9, and unreasonable for Germano Drywall to ignore that and apply the payments as it wished.   Second, although there was no testimony as to any express agreement regarding repayment of the past due debt, Exhibit C indicates Germano Drywall was expecting to be paid in five monthly installments of at least $5,000 each.   Neither the amounts nor the timing of the payments in shown in Exhibit D bears any resemblance to the proposed plan for eliminating the past due arrearage in Exhibit C. Third, the timing of the checks shown in Exhibit D roughly coincides with the timeframe that the parties testified to for the commencement and completion of drywall work at 26 Gianni Lane. Finally, the court does not find credible Salvatore Germano's testimony that he “never heard” of Lot 24–9 before the filing of the mechanic's lien and therefore had “no idea” what it meant.   His measurements in Exhibit B use “26–9”in reference to the same lot.   To suggest that repeated notations of “24–9” on a checks were completely meaningless to him strains credulity.

To justify the application of payments, the defendant invokes a well-established rule set out in American Woolen Co. v. Maaget, 86 Conn. 234, 243–44, 85 A.3d 383 (1912), where our Supreme Court stated:

In the absence of evidence of a contrary intention and of any other controlling circumstances, the law presumes that the entry of payments generally as credits upon an open, running merchant's account, indicates the intention of the creditor to apply the payments to the earliest items of the account.   The rule, although general, is, by no means, universal.   It is not an artificial or arbitrary principle, but one founded merely on the presumed intention of the parties;  and is applicable only where there is no evidence sufficient to show a contrary intention.  (Emphasis added;  internal quotation marks omitted.)  Id., 247–48.

The defendant's reliance on the rule in American Woolen is misplaced because it does not apply when, as here, there are separate debts and when, as here, there is evidence of a “contrary intention” that the payment be applied to a particular debt.   It is generally accepted that a debtor owing more than one debt has the right to designate the particular debt to which a payment shall be applied.   90 Am.Jur 2d, Payment, §§ 62–63 (2003);  60 Corpus Juris Secundum, Payment § 44.   The debtor may direct the application of the payment to a particular debt by a notation on the face of the check.   90 Am.Jur 2d, § 64 (2003).

The evidence leads this court to believe that defendant's assertion that the payments in Exhibit D were, in fact, for the work performed at 26 Gianni Lane is highly probably true.   The court finds by clear and convincing evidence that the defendant was fully paid for the work performed and there are no amounts due from the plaintiffs to the defendant.   Therefore, the validity of the mechanic's lien cannot be sustained.   The Application to Discharge Mechanic's Lien is GRANTED, and the lien is hereby discharged.

BY THE COURT,

David M. Sheridan

FOOTNOTES

FN1. As is common in the industry, Reservoir Hills, LLC was a business entity formed by Thomas Coccomo and other family members specifically for the construction and sale of homes in a particular subdivision.   Salvatore Germano testified that it was his impression that he performed the work for Coccomo Brothers, LLC, a separate business entity.   But the Certificate of Mechanic's Lien states unequivocally that Germano Drywall, LLC performed the work “by virtue of a certain agreement with or by consent of Reservoir Hills, LLC.”.  FN1. As is common in the industry, Reservoir Hills, LLC was a business entity formed by Thomas Coccomo and other family members specifically for the construction and sale of homes in a particular subdivision.   Salvatore Germano testified that it was his impression that he performed the work for Coccomo Brothers, LLC, a separate business entity.   But the Certificate of Mechanic's Lien states unequivocally that Germano Drywall, LLC performed the work “by virtue of a certain agreement with or by consent of Reservoir Hills, LLC.”

FN2. Exhibit C proposed that a $33,500 past due balance be paid by an initial payment in August of 2011 of $13,500, followed by four monthly installments of $5,000 each..  FN2. Exhibit C proposed that a $33,500 past due balance be paid by an initial payment in August of 2011 of $13,500, followed by four monthly installments of $5,000 each.

FN3. There were conflicting references throughout the evidence to the subject street as “Gianni Way” or “Gianni Lane.” Gianni Lane appears to be the correct designation, and the court has used that designation throughout to avoid confusion..  FN3. There were conflicting references throughout the evidence to the subject street as “Gianni Way” or “Gianni Lane.” Gianni Lane appears to be the correct designation, and the court has used that designation throughout to avoid confusion.

FN4. There was testimony from Thomas Coccomo to the effect that not all of the drywall work was completed.   The stairwell and some “touch up and repair” work remained, and Reservoir Hills completed that with in-house labor.   Although neither party expressly argued it, the court presumes that explains the $350 discrepancy between the agreed price of $8,800 and the check total of $8,450..  FN4. There was testimony from Thomas Coccomo to the effect that not all of the drywall work was completed.   The stairwell and some “touch up and repair” work remained, and Reservoir Hills completed that with in-house labor.   Although neither party expressly argued it, the court presumes that explains the $350 discrepancy between the agreed price of $8,800 and the check total of $8,450.

Sheridan, David M., J.