Opinion
No. CV03-0519565S
January 13, 2004
MEMORANDUM OF DECISION
The plaintiff, Acoustics, Inc. (Acoustics) brought suit under the Connecticut payment bond statute, General Statutes § 49-42, and has also alleged a violation of the implied contract of good faith and fair dealing and the Connecticut Unfair Trade Practices Act (CUTPA), against the defendant, Travelers Insurance Company, a surety for the general contractor, Trataros Construction, Inc. The parties have each moved for summary judgment. At oral argument, on December 22, 2003, the parties agreed to have the court review the statute of limitations and notice issues raised by the cross-motions for summary judgment. Other issues raised by the parties' motions were reserved for future proceedings before the court.
The facts necessary for resolution of the case under these agreed circumstances are as follows. In 1998, Trataros Construction, Inc. (Trataros) entered into construction contracts with the city of Bristol (city) for "code" upgrades of the two Bristol high schools, Bristol Eastern and Bristol Central. The general conditions to these contracts authorized the city to issue progress payments to Trataros based on the value of the work performed and to hold back retainage in the amount of 10 percent of the approved work. Trataros arranged for a payment bond to be issued in connection with the projects; the responsible surety is now the defendant, as administrator of the failed Reliance Insurance Company.
The court has made use of the amended complaint dated April 23, 2003, the joint stipulation of facts dated October 21, 2003, and the uncontested representations made at oral argument on December 22, 2003.
On or about August 14, 1998, Trataros entered into a subcontract with Acoustics to perform work and furnish materials for the acoustical ceilings at the two high schools. After beginning its work, Acoustics periodically submitted payment applications to Trataros, and Trataros submitted these and other subcontractor requisitions to the city. The city then transferred payment to Trataros, and Trataros would disburse an amount to Acoustics as well as to the other subcontractors. This procedure continued until Acoustics completed its work under the subcontract in March 2001 and submitted another payment application to Trataros.
In April 2001, Trataros submitted Acoustics' application to the city along with other subcontractor requisitions, and subsequently, on May 2, 2001, the city transferred an amount to Trataros. In addition to the city's May payment to Trataros relating to Acoustic's work, in June and September the city made partial payments to Trataros for the retainage amount due to Acoustics. Acoustics submitted a "final" bill with adjustments to Trataros in September 2001 showing that approximately $64,000 had not been paid by Trataros from the amount the city had paid to Trataros in May 2001 and there was still a retainage of $11,000 being held by the city under its contract with Trataros.
The materials submitted by the parties refer to a 10 percent retainage under the subcontract between Acoustics and Trataros and this is the source of the $64,000 non-payment. The city is also withholding 2 percent from Trataros that has yet to be paid and this is the source of the $11,000 non-payment.
On February 19, 2002, Acoustics submitted a claim under the payment bond to the defendant. On February 21, 2002, the defendant acknowledged in writing its receipt of Acoustics' claim letter and requested additional information from Acoustics, stating that it would "correspond with Trataros Construction, Inc. to gain an understanding of their position." The defendant did not further respond to Acoustics in 2002. Acoustics wrote to the defendant in December 2002, and January 2003, which triggered correspondence between the defendant and Trataros.
By letter dated January 20, 2003, the defendant denied Acoustics' claims on the stated grounds that Acoustics had last performed work on the project on March 7, 2001, and that the claim was barred by the applicable statute of limitations. Acoustics thereupon commenced this action by delivering the complaint to the state marshal for service on January 27, 2003, and service was made on January 31, 2003.
The parties have agreed that there are no genuine issues of fact on the issues of the statute of limitations and notice. Therefore, the court must decide which party, if any, is entitled to judgment as a matter of law. Practice Book § 17-49. Turning to the statute of limitations, General Statutes § 49-42(b) provides in relevant part as follows: "[N]o such suit may be commenced after the expiration of one year after the applicable payment date provided for in subsection (a) of section 49-41a . . ."
There is a second statute of limitations in § 49-42(b), that both parties stated at oral argument was not applicable, which reads: "[I]n the case of a person supplying materials or performing subcontracting work not included on a requisition or estimate, no such suit may be commenced after the expiration of one year after the date such materials were supplied or such work was performed."
"The provision of [§] 49-42 . . . which sets forth the time limitation within which suit must be commenced under the statute . . . is not to be treated as an ordinary statute of limitation, but as a jurisdictional requirement establishing a condition precedent to maintaining an action under that section." American Masons' Supply Co. v. F.W Brown Co., 174 Conn. 219, 224, 384 A.2d 378 (1978). Acoustics contends that it met this jurisdictional prerequisite. According to Acoustics, the statute began to run after the submission of its final bill in September 2001, or a reasonable time thereafter, considering that there is still an outstanding balance. The defendant contests this interpretation, and the court agrees.
The Miller Act, 40 U.S.C. § 270b, retains the concept that the statute of limitations runs from the final or last day on which an event occurred at the job site. See 7 Am.Jur. Trials § 34. The state statutes, known as "little Miller Acts," are not consistent on when statutes of limitation for suits on public contractor's bonds begin to run. The versions of state statutes include: commencement on the day on which the last labor or materials is furnished; the date on which the public work is completed; the date of the final settlement, that is the date on which a public official determines that the contract is complete; and the date of final payment to the general contractor. See 17 Am.Jur.2d, Contractors' Bonds, §§ 206-10.
The case of Tucker Paving Corp. v. Armco Steel Corp., 242 Ark. 49, 411 S.W.2d 888 (Ark. 1967), is illustrative of a statute of limitations based on the final payment to the general contractor. There ninety-five percent of the payment due had been made by the owner in January and February 1965, while five percent was held back for possible work errors. This five percent amount was paid in June 1965. Plaintiff's suit for materials furnished to the job site was brought in August 1965. The bonding company contended that the statute of limitations ("six months from the date final payment is made") ran from the January or February payment, but the court disagreed. The term "final payment" meant the "last payment" — to argue otherwise was to simply to say that "black" was the same as "white." Tucker Paving Corp. v. Armco Steel Corp., supra, 242 Ark. 53. See also Argonaut Ins. Co. v. MP Equipment Co., 269 Ark. 302, 601 S.W.2d 824 (1980).
The General Assembly, in revising the applicable Connecticut statute, § 49-42(b), in 1994 chose to rely on a payment date to commence the running of the statute of limitations; but unlike the Arkansas statute discussed above, § 49-42(b), does not include the "final payment" language. Rather, as quoted above, the statute runs from "the applicable payment date provided for in subsection (a) of Section 49-41a . . ." Section 49-41a(a) provides as follows: "When any public work is awarded by a contract for which a payment bond is required by section 49-41, the contract for the public work shall contain the following provisions: (1) A requirement that the general contractor, within thirty days after payment to the contractor by the state or a municipality, pay any amounts due any subcontractor, whether for labor performed or materials furnished, when the labor or materials have been included in a requisition submitted by the contractor and paid by the state or a municipality . . ."
Judge Aurigemma has observed: "Section 49-42 was amended by Public Act 94-188, Sec. 16. That amendment changed the time in which to commence suit from one year after labor was last performed or; materials were last supplied to one year `after the applicable payment date provided for in subsection (a) of section 49-41a.'" B.W Dexter II v. A. Prete Son Construction Co., Superior Court, judicial district of Hartford/New Britain at Hartford, Docket No. CV 96 0557033 (August 23, 1996, Aurigemma, J.) ( 17 Conn. L. Rptr. 464). The Office of Legislative Research (OLR) report accompanying the 1994 amendment states: "The bill also bases the current one-year limitation for initiating a lawsuit arising from a surety's denial of liability for a claim on the general contractor's payment date instead of the last day work is performed."
In an insightful article in the February 2003, Connecticut Lawyer, entitled "Connecticut's Little Miller Act: A Primer," Attorney Richard C. Robinson makes the following points on the 1994 revision. One purpose of the change was to integrate more fully the provisions of § 49-42 with the "prompt payment" provisions of § 49-41a, requiring the contractor to pay its subcontractors within thirty days of his own payment. The effect of the change is "[e]very interim bill from a supplier and every monthly subcontractor requisition can be an occasion for the exercise of enforcement rights, even though the supplier is still supplying and the subcontractor is still working." February 2003, Connecticut Lawyer at 21. Robinson concludes: "Clearly, a claimant need not wait until performing the last of his or her labor or supplying the last of his or her materials before the bond rights accrue." Id.
Accepting this reading of §§ 49-41a and 49-42(b), the statute of limitations in this matter commenced running thirty days after the city made its payment on May 2, 2001. Acoustics raises objections to this interpretation of the applicable Connecticut statutes. It states that setting the statute of limitations commencement date in this way would lead to a new statutory period commencing at each payment to the general contractor. According to Acoustics, this would mean that at each of the forty-five payments to Trataros, a new statute of limitations would commence. Rather, Acoustics would not have the statute of limitations commence as early as June 2001 because, even now, there is still a balance due on its contracts with Trataros.
The court disagrees. First, there is no reason why the statute of limitations could not run each time the subcontractor failed to receive its "applicable" payment. The subcontractor would not have to bring a multitude of suits, but could bring one suit for certain of the breaches and then amend to add the additional counts. See Ariadne Financial Services Pty. Ltd. v. United States, 133 F.3d 874, 879 (Fed. Cir. 1998), discussing the "continuing claims doctrine" and statute of limitations.
Secondly, there is no reason to read both §§ 49-41a and 49-42(b) to intend that the subcontractor may wait to contest a breach of the "prompt payment" provisions merely because there is still a deficit in payment due to retainage. The concept of "finality" was not employed by the General Assembly in the 1994 revisions. The court may only rely on the statute as written. "It is a basic tenet of statutory construction that the legislature did not intend to enact meaningless provisions . . . [S]tatutes must be construed, if possible, such that no clause, sentence or word shall be superfluous, void or insignificant . . ." Southern New England Telephone Co. v. Dept. of Public Utility Control, 261 Conn. 1, 25, 803 A.2d 879 (2002), quoting State v. Gibbs, 254 Conn. 578, 602, 738 A.2d 327 (2000).
The plaintiff has relied on the case of RL Acoustics v. Liberty Mutual Insurance Co., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 00 0380506 (September 27, 2001, Rush, J.). The court finds this case inapplicable to the resolution of the statute of limitations issue. In RL Acoustics, the court did refer to a "count two," an action against the surety under Connecticut's little Miller Act, but the plaintiff had moved for summary judgment, and summary judgment was granted, only on other counts. RL Acoustics does not discuss the statute of limitations defense.
Acoustics' suit as it relates to the $64,000 balance due from the May 2, 2001, payment by the city to Trataros is therefore time-barred. When filed in January 2003, the suit was beyond one year and thirty days after the payment by the city to Trataros.
As to the remaining $11,000, this figure is the outstanding arrearage on the city's retention amount. Since the city has not made payment for this amount, the statute of limitations has not expired "because it never commenced to run." J.J. Landerman Roofing Co. v. Orlando Annulli Sons, Inc., Superior Court, judicial district of Tolland at Rockville, Docket No. CV 97 64108 (March 9, 1998, Sullivan, J.). The court further concludes that while. § 49-42(a) permits notice to be given the surety after sixty days from the applicable payment date, a suit over the retainage amount may be brought even though payment to the general contractor has not been made. See Blakeslee Arpaia Chapman, Inc. v. El Constructors, Inc., 239 Conn. 708, 716, 687 A.2d 994 (1997) (act is "highly remedial"); Liberty Glass Metal Industries, Inc., Superior Court, judicial district of Tolland at Rockville, Docket No. CV 97 64098 (December 17, 1998, Klaczak, J.) (rejecting prematurity argument).
The defendant also contests whether notice was properly given within 180 days of the "applicable payment period" of § 49-41a. The court relies on, and sees no reason to differ with, the case of Barreira Landscaping Masonry v. Frontier Insurance Co., 47 Conn. Sup. 99, 779 A.2d 244, 29 Conn. L. Rptr. 188 (2000). In Barreira, the court held, "[t]he surety's failure to act within the prescribed ninety day period was equally illegal and the plaintiff is entitled to the relief sought in its notice of claim." Id., 111. Likewise, since the defendant did not, as required, respond to Acoustics' February 19, 2002, letter within ninety days, such notice issues are not available as a defense. Also based upon Barreira, Acoustics is entitled to judgment in the amount of $11,000.
The court has disposed of the issues of the statute of limitations and notice, as are raised by counts one and two of Acoustics' complaint. Summary judgment is appropriate for the defendant, except to the extent of the $11,000. There are, however, issues arising from counts three and four as relate to the alleged violations of the covenant of good faith and fair dealing and CUTPA. The court directs the parties to contact the caseflow coordinator to schedule a status conference on these issues. So ordered.
See, e.g., RL Acoustics v. Liberty Mutual Insurance Co., supra (discussing good faith) and Barreira Landscaping Masonry v. Frontier Insurance Co., supra, 47 Conn. Sup. 110 (discussing CUTPA).
HENRY S. COHN, JUDGE.