Opinion
FSTCV176033023S
06-05-2019
330 RAILROAD AVENUE, LLC v. JCS CONSTRUCTION GROUP, INC., et al.
UNPUBLISHED OPINION
OPINION
HON. A. WILLIAM MOTTOLESE, JUDGE TRIAL REFEREE
This case began as a suit by New England Masonry and Roofing Company (New England) against the named plaintiff (330) to foreclose a mechanic’s lien which grew out of work performed as a subcontractor in the reconstruction of an office building known as 330 Railroad Avenue, Greenwich. The complaint also contained a count in breach of contract against the named defendant, JCS Construction Group, Inc. (JCS), the general contractor who hired New England to work on the project. During the pendency of the litigation, specifically February 7, 2018, 330 entered into a settlement agreement with New England pursuant to which it paid New England the sum of $70,000.00 in satisfaction of its claim. Thereafter, New England withdrew its complaint against 330, on April 6, 2018 330 was substituted as the sole party plaintiff and on April 30, 2018 Justin Shaw (Shaw), the principal of JCS, was added as a party defendant. On May 30, 2018, 330 amended its complaint to allege breach of contract, noncompliance with G.S. § 42-158j against JCS and a CUTPA violation, conversion and statutory theft (G.S. § 52-564) against JCS and Shaw. The plaintiff in this proceeding seeks a prejudgment remedy in the amount of $179,673.62 in compensatory damages, punitive damages pursuant to CUTPA (G.S. § 42-110g) and triple damages pursuant to G.S. § 52-564 for a total of $539,020.86. Neither JCS nor Shaw has yet filed an answer or special defenses.
The settlement agreement contains the following provision:
"3. N.E. Masonry herby assigns, conveys and transfers to RR Ave all of N.E. Masonry’s legal rights, title and interest in the claims plead within the Lawsuit against JCS (the "JCS Claims") and any and all other claims N.E. Masonry may have against JCS and/or Justin Shaw (the principal of JCS) with respect to the Project. Further, N.E. Masonry hereby assigns, conveys and transfers to RR Ave all of N.E. Masonry’s right, title and interests in any claims against JCS (and its respective insurers and Justin Shaw) for damages on account of, or costs incurred in pursuing the JCS Claims against JCS and/or Justin Shaw, as asserted against JCS in the operative Complaint filed in the Lawsuit or otherwise. All of the claims assigned under this paragraph are hereinafter referred to as the "Assigned Claims." Attached hereto as Exhibit A is a schedule of all losses, costs and damages incurred by N.E. Masonry. RR Ave shall prosecute the Assigned Claims either by intervening in the Lawsuit or by asserting such claims in a separate action as it determines to do so in its unilateral discretion. RR Ave agrees that it shall indemnify and hold N.E. Masonry free and harmless from any and all liability, claims, losses, damages or expense, including counsels’ fees and costs, arising by reason of any counterclaims asserted by JCS against N.E. Masonry in any litigation involving the Assigned Claims."330 predicates its compensatory damages claim on this assignment, arguing that it stands in the shoes of New England and by the assignment acquired all of New England’s rights to pursue JCS for the $179,673.62 which is the claimed unpaid balance due New England for the work that it subcontracted with JCS. Although not yet framed as a filed special defense, JCS argued at trial that 330 is limited in its PJR demand to the $70,000.00 it paid to New England pursuant to the settlement agreement.
It is well settled that an assignee stands in the shoes of its assignor and may assert any claim which the assignor could have asserted. Second Exeter Corp. v. Epstein, 5 Conn.App. 427, 430 (1985). Moreover, a party may purchase a claim and bring suit on it thereby making a gain. Rogers v. Hendrick, 85 Conn. 260, 265-66 (1912), cited with approval in Mall v. LaBow, 33 Conn.App. 359, 362 (1993). Therefore, there is probable cause to sustain the validity of 330’s claim that it is not limited to the $70,000 consideration which it paid to New England.
The plaintiff asserts and the evidence supports the contention that the $179,673.62 which 330 seeks was actually paid by 330 pursuant to a pay application in which JCS certified that the work covered by the application had been completed by New England in accordance with the contract documents. Kimberly Nardone testified for the plaintiff as ‘a certified public accountant. She stated that pursuant to a requirement contained in the contract between 330 and JCS she conducted an audit of JCS’s books and records and learned that 330 had paid JCS $355,630.39 earmarked for payment to New England. She further found that out of this sum JCS only paid New England $182,118.45. The difference therefore is $173,511.94 (see Ex. 15). In addition, 330 paid JCS $6,161.68 in preconstruction costs earmarked for New England which is not reflected on Exhibit 15 and which remains unaccounted for. The total comprises the compensatory damages for which the PJA is sought.
Justin Shaw, the principal and sole owner of JCS defends on the grounds that 330 owes JCS roughly $718,000 for the work completed on its contract with 330 and more specifically, that it did not receive the amount earmarked for New England which auditor Nardone claims it did. On the other hand, Shaw later testified that he "held" the money that would have gone to New England. The court infers from this testimony that JCS utilized this money to pay other subcontractors and/or suppliers on the project. The court credits Shaw’s testimony that he did not divert these funds to his own personal use and only benefitted to the extent that JCS was able to meet obligations due other job creditors by use of those funds. 330 offered no evidence to support the claim that the funds were redirected to Shaw’s personal use and yet 330 asks that the court infer such a conclusion. Moreover, 330 claims that diversion for the purpose of paying other job creditors constitutes conversion and/or statutory theft in and of itself.
The court’s task is to determine whether there is probable cause that judgment will be rendered for the plaintiff in the amount requested, taking into account the defenses which JCS and Shaw presented orally at the PJR hearing, absent a pleading asserting such special defenses. Bearing in mind the definition of probable cause as set forth in Dufraine v. CHRO, 236 Conn. 250, 267 (1996), the court finds that there is probable cause that a judgment in the amount of $179,673.62 will be rendered against JCS and therefore orders a prejudgment remedy against JCS in that amount. This leaves the CUTPA, conversion and statutory theft counts.
CUTPA
330’s base claims as set forth in its amended complaint derive from a breach of contract and a G.S. § 42-158j violation by a general contractor who utilized the owner’s payments for purposes not strictly permitted by the contract documents to the owner’s detriment. The evidence showed that these payments were used in an unauthorized manner but nevertheless for purposes of the construction project. There was no evidence that they were used for either Shaw’s personal use or by JCS for some non-job related purpose. Bearing in mind the essential elements of a CUTPA claim predicated on the cigarette rule, the evidence does not rise to a level where probable cause can be found to support a likelihood of the plaintiff’s success on the merits of its CUTPA claim. Not every breach of contract or G.S. § 42-158j violation is a CUTPA violation. A.Secondino & Sons, Inc. v. L.D. Company, 13 Conn.L.Rptr. No. 7, 232 (February 13, 1995).
Conversion
Conversion occurs when one, without authorization, assumes and exercises the right of ownership over property belonging to another to the exclusion of the owner’s rights. Epstein v. Automatic Enterprises, 6 Conn.App. 484, 488 (1986). Whether or not the plaintiff’s claim can succeed as a matter of law (see, Deming v. Nationwide Mutual Insurance Co., 279 Conn. 745, 770-72 (2006)) need not be decided in this proceeding because damages for the tort of conversion are compensatory in nature (see, Epstein v. Automatic Enterprises, supra at 490) and unlike CUTPA or statutory theft damages are not exemplary or punitive in nature. It is well established in this jurisdiction that a plaintiff can be compensated only once for his just damages for the same injury. Gianfriddo v. Gartenhaus Café, 211 Conn. 67, 71 (1989).
Statutory Theft: "No Connecticut case holds that money owed by a debtor is the property of the creditor and allows for a cause of action in statutory theft when the debt is not paid." Mystic Color Lab v. Auction Worldwide, 284 Conn. 408, 419 (2007). Where an owner sues a construction contractor for sums due under their written contract, the parties are in a debtor/creditor relationship. In Herbert S. Newman Partners v. CFC Construction, Ltd. Partnership, 236 Conn. 750, 764 (1996) an architect sued a general contractor in breach of contract to recover for services rendered under a construction project. The court characterized a good faith dispute about the existence of a debt between the two as a debtor/creditor relationship. The fact that in the present case the dispute is between an owner and a general contractor does not change the result. Therefore, the plaintiff has failed to establish probable cause to support the validity of its statutory theft claim under G.S. § 52-564.
Moreover, the evidence is insufficient to show that Shaw’s act was synonymous with larceny, Rana v. Terdjanian, 136 Conn.App. 99, 114 (2012), since evidence of diversion of funds to satisfy a different subcontractor or material supplier on the same construction project does not support probable cause that 330 will prevail on this issue by clear and convincing evidence. ASPIC, LLC v. Potier, 179 Conn.App. 631 (2018) (trial court should consider the requisite burden of proof in determining whether the plaintiff has demonstrated probable cause).
Finally, it is noted that 330’s motion for disclosure of assets was not taken up at the prejudgment remedy hearing. The plaintiff may reclaim the motion for adjudication. The court has also carefully examined the cases cited by each side and concludes that they are inapplicable to the facts of the present case. To summarize, a prejudgment remedy may issue against JCS in the amount $179,673.62. The application for a prejudgment remedy against Justin Shaw is denied.