Opinion
No. CV 06-5003609
August 6, 2008
In addition, the $44,929.30 plus interest of $11,602.00 are awarded on the foreclosure of mechanics liens.
MEMORANDUM OF DECISION
This is an action brought by the plaintiff, (hereinafter also known as "Double C") against Advanced Home Builders, LLC (hereinafter also known as "Advanced"), Creative Building Corporation, (hereinafter also known as "Creative"), Robert A. Chiulli, Sr., (hereinafter also known as "Robert") and Laura Chiulli (hereinafter also known as "Laura") claiming money damages for an alleged breach of contract for work allegedly performed at the request of the defendants on a subdivision development known as "Old Dividend Crossing" in Rocky Hill, Connecticut for which the plaintiff claims it has not been paid. The plaintiff has also claimed, inter alia, "unjust enrichment," a violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), as well as Count Eight which was added by amendment dated February 6, 2008 against the individual defendants on the basis of piercing the corporate veil, that said individual defendants were the alter egos of Advanced and that Advanced was a mere instrumentality and/or agent of the individual defendants. The plaintiff also claims that it filed a mechanics lien on the land in the subdivision. The plaintiff seeks in addition to money damages, punitive damages, attorneys fees, interest, a foreclosure of the mechanics lien and possession of the lien premises.
The defendants, by answer dated July 26, 2006, left the plaintiff to its proof as to all counts and filed a counterclaim of the same date alleging that the plaintiff breached its agreement with the defendants and negligently performed the work under the agreement, seeking monetary damages, punitive damages and attorneys fees.
L. Suzio Concrete Company, Inc. and York Hill Trap Rock Quarry Company were listed as defendants because of having filed their own mechanics liens. However, their matters were apparently settled, and they were withdrawn as defendants.
This was a court trial commencing on January 23, 2008 and concluding on February 15, 2008 covering eight (8) days. There are sixty-seven (67) exhibits for the plaintiff and twenty-three (23) exhibits for the defendants. The parties were given forty-five days from receipt of transcripts to file their original briefs, and fifteen days thereafter to file reply briefs. The briefing schedule was amended to July 25, 2008, with which the parties have complied.
STANDARD OF REVIEW
"The plaintiff in a civil case (and a defendant in a counterclaim) sustain their burden of proof as to any essential element in their cause of action if the evidence, considered fairly and impartially, induces in the mind of the trier a reasonable belief that it is more probable than otherwise that the facts involved in that element are true." Busker v. United Illuminating Co., 156 Conn. 456, 458 (1968). This is also known as proof by a preponderance of the evidence.
In addition, this Court evaluates the credibility of the witnesses based upon their appearance and demeanor on the witness stand, the consistency or inconsistency of their testimony, their memory or lack thereof of certain events, whether they were candid and forthright or evasive and incomplete, their manner in responding to questions and their interest or lack of interest in the case as well as the exhibits in this case.
In addition, the Court evaluates general credibility on the basis of other testimony in this case as well as documents and evidence as to their consistency or inconsistency with other evidence.
ISSUES AND FINDINGS Credibility
The Court finds the plaintiff's witnesses to be more credible than the defendants' witnesses, for the following reasons:
1. Laura, at times, was hesitant and somewhat contradictory in her testimony. Because she was admittedly with little experience in developing a subdivision, the Court concludes that she was often repeating what she had been told by her father, Robert.
2. Both Laura and Robert claimed that the plaintiff had not done much of the work that it claimed to have done. However, in rebuttal, the plaintiff's owner, Chris Chiulli (hereinafter also known as "Chris"), submitted daily work sheets to show that the work was indeed done. There was no indication that the work had been done negligently or in any way was inferior. Despite a vigorous cross-examination, the defendants were unable to invalidate these documents, and, thus, the Court believes that the work described was completed in a satisfactory manner. In addition, the Town of Rocky Hill, through its engineers, approved the work done. Despite the defendants' claims, they did not submit bills or documents from other contractors to show that the work had to be redone or that it had to be corrected. In addition, other witnesses testified that when they came to look at the work that had been done, they believed it to be satisfactory.
3. Chris testified in the plaintiff's case in chief that he had separate agreements, some in writing which were submitted into evidence and some orally with Robert in which Robert directed the plaintiff or agreed to have the plaintiff do certain other work. Despite this testimony, Robert did not cover this issue in his testimony.
4. What the Court finds particularly troubling are the actions of Attorney James Ripper and Robert. The paving contractor who paved the roadways which were prepared by the plaintiff was J.S.L. Asphalt, Inc. of Westfield, Massachusetts. Ken Begin of that company testified that he insisted when his proposal was accepted for the final paving of the roads, etc. that he had had difficulty in the past in being paid by Robert so he insisted on a letter from Attorney Ripper who was to hold monies in escrow to cover the bid proposal. This is plaintiff's Exhibit 20 and reads, in pertinent part: "This office is holding the funds in excess of $80,000.00 which covers your bid proposal of $59,540.00 and estimated additional work. This escrow is to be disbursed as directed by the Town of Rocky Hill Engineer as work is completed on the Old Dividend Road subdivision." The letter is dated October 18, 2005. According to Mr. Begin, whom the Court believes, when he sought payment from Attorney Ripper, Attorney Ripper refused to pay him money out of the escrow account stating that Robert had instructed Attorney Ripper not to pay J.S.L. out of the escrow even though the Town of Rocky Hill Engineer had advised Attorney Ripper that the work to be done by J.S.L. had been satisfactorily completed. Not only is this an apparent conflict of interest on the part of Attorney Ripper who generally represents the defendants, but based upon this letter of October 18, 2005, Robert had no right to refuse payment.
Although the plaintiff did not receive a similar letter from Attorney Ripper, the plaintiff wrote a letter to Attorney Ripper dated January 16, 2005, plaintiff's Exhibit 23, setting forth that Attorney Ripper had guaranteed immediate payment of the work to be done by the plaintiff upon approval by the Town Engineer of the work and invoice. The plaintiff, through Chris, states, in pertinent part, as follows: "After having this discussion with you, and agreeing to do the work based on our discussion, you can only imagine my surprise that you are now refusing to release the funds because Robert Chiulli is disputing invoices previously paid by other funds which have nothing to do with this work. I find myself in a precarious situation begging for payment months after completion of work and Town Engineer approval from the very Attorney who guaranteed me immediate payment." The Court has no doubt that Attorney Ripper made this commitment based upon Chris' testimony and that the only response Attorney Ripper gave him was "I don't see it the way you do," and based upon the fact that the same situation took place with J.S.L. as previously mentioned.
The amount held in escrow by Attorney Ripper was $130,000.00.
Robert did not challenge these allegations and failed to challenge several more allegations.
5. According to the testimony, the plaintiff was responsible for repairing the binder on the roads to be paved. There is no question that the plaintiff did this. Leveling is the next step, and there is a dispute between the plaintiff and the defendants as to who was obligated to do the leveling. Plaintiff claims that it was not its responsibility and defendants claim it was. This Court has reviewed the Residential Site Development Agreement ("RSDA") (Plaintiff's Exhibit No. 1) executed by Advanced and the plaintiff as of September 28, 2005 and can find nowhere in this agreement, including a review of paragraphs 1 and 6, that places any responsibility for leveling upon the plaintiff. Further, there was the testimony of John Rice representing Tilcon, a major road work and pavement contractor in Connecticut, who testified in response to a question from the Court that it was customary for the paver, the company that did the final pavement of the road, to do the leveling. As noted in the proposal of J.S.L. Asphalt, Inc., the leveling was part of the final accepted proposal of J.S.L. which did perform the leveling.
LIABILITY
The Court reiterates that it finds Chris more credible than the defendants for the reasons, inter alia, stated above and the manner in which they testified. Believing the plaintiff as the Court does, the Court finds that the defendants have breached their contract with the plaintiff and that they have been unjustly enriched. The Court has come to this conclusion by a preponderance of the evidence. The plaintiff performed the work required of it and fulfilled its obligations under the RSDA and the various oral and additional written contracts between the parties and has not been fully compensated for same by the defendants.
Are Robert Chiulli, Sr. and Laura Chiulli Personally Liable Under Count 8, Under the Principle of Piercing the Corporate Veil?
The short answer is Yes.
In United Electrical Contractors, Inc. v. Progress Builders, Inc., 26 Conn.App. 749, 755-76 (1992), the Court stated that "the corporate veil will be pierced when `the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor.'" The Court stated that the corporate veil may be pierced under the "instrumentality rule" upon proof of three elements:
Robert and Laura were the sole members of the defendant, Advanced Home Builders, LLC.
The same piercing of the corporate veil and alter ego principles apply as well to an LLC (Limited Liability Company).
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;
(2) that such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights; and
(3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
Citations omitted.
The Court finds that, under the totality of the evidence, all three elements have been proven by clear, unequivocal, precise and convincing evidence:
(1) Robert and Laura Chiulli conspired to and did exercise complete domination of the defendant LLC with respect to finances, policy and business practice with respect to the defendant LLC's relationship and transactions with the plaintiff so that the defendant corporations as to such transactions had at the time no separate mind will or existence of its own.
(2) Robert and Laura Chiulli conspired to and did use such control to commit a wrong (i.e. not pay the monies due to the plaintiff), to perpetrate a violation of a positive legal duty (breaching the contract with the plaintiff) which was in contravention of plaintiff's legal rights; and
(3) The control and breach of contract and the aforesaid duties proximately caused, actually solely caused, the unjust loss or injury complained of; i.e. non-payment of a fair and reasonable value of the plaintiff's services and breach of the contract and agreements with the plaintiff.
Additionally, Robert and Laura Chiulli were the alter egos of the defendant corporations and are, therefore, personally liable. "When the corporation is the mere alter ego, or business conduit of a person, it may be disregarded." DeLeonardis v. Subway Sandwich Shops, Inc., 35 Conn.App. 353, 358 (1994); see DeSantis v. Piccadilly Land Corporation, 3 Conn.App. 310, 314 (1985).
Accordingly, the Court finds that the corporate veil (LLC veil) is pierced, Robert and Laura Chiulli were alter egos of the defendant LLC and that Robert and Laura Chiulli are individually liable as well as the defendant LLC for all of the plaintiff's claims.
Laura admitted at trial on January 29, 2008 that Advanced owns no equipment and has never had employees; further, that she and her father, Robert, had complete control of Advanced.
Are the defendants, Advanced, Robert and Laura Liable in Breach of Contract and in the Claim for Unjust Enrichment?
The short answer is yes.
As indicated above, the said defendants breached their contract (RSDA) and other agreements with the plaintiff. After charges and payments, it is clear to this Court that the plaintiff furnished labor and materials in the reasonable amount of $153,863.00. Thus, the amount due to the plaintiff from all three defendants was $153,863.00 against which $108,933.70 was paid, leaving a balance due and owing to the plaintiff from the three defendants in the amount of $44,929.30.
Accordingly, the Court enters judgment against all three defendants, Advanced, Robert and Laura as follows:
1. Count One of the Amended Complaint of February 6, 2008 in the amount of $44,929.30 in foreclosure of the mechanic's lien referenced in said count.
Law dates or sale date will be scheduled after a hearing.
2. Judgment is entered against the defendants, Advanced, Robert, Laura, and Creative Building Corporation a/k/a Contemporary Building Design, LLC in the amount of $44,929.30 in foreclosure of the mechanic's lien described in Count Two. (See fn 6.)
3. Count Three, judgment is entered in the amount of $44,929.30 in foreclosure of the mechanic's lien described in said count. (See fn. 6.)
4. As to Count Four, judgment is entered in the amount of $44,929.30 against the defendants Advanced, Robert and Laura for unjust enrichment plus interest as hereinafter described.
5. As to Count Five, breach of contract by Advanced Home Builders, LLC judgment is entered against said LLC in the amount of $44,929.30 for the reasons aforementioned based upon breach of contract which the Court finds plus interest and attorneys fees as hereinafter described.
6. As to Count Six, in breach of contract against Robert A. Chiulli, Sr. (Robert), judgment is entered, based upon piercing the veil of the LLC and his being an alter ego of the LLC in the amount of $44,929.30 plus interest and attorneys fees as hereinafter described.
7. Count Eight, breach of contract against Robert A. Chiulli, Sr. and Laura Chiulli, judgment is entered against said defendants in favor of the plaintiff for breach of contract based upon said defendants being the alter egos of Advanced and having pierced the veil of Advanced in the amount of $44,929.30 plus interest and attorneys fees as hereinafter described.
8. As for Count Seven, violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), judgment is entered against the defendant Robert A. Chiulli, Sr., only because of his order to Attorney James Ripper not to pay the plaintiff from monies held in escrow by Attorney Ripper despite the fact that there was an escrow agreement, the conditions of which had been fulfilled, but Robert Chiulli, Sr., nevertheless ordered Attorney Ripper not to comply with said escrow agreement. The Court finds that the said defendant engaged in unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce. This is based upon the following:
i. The conduct of Robert offends public policy as it has been established by the common law;
ii. The conduct of Robert was unethical and unscrupulous;
iii. The conduct caused substantial injury. The ascertainable loss suffered by the plaintiff is $44,920.30. The Court, under CUTPA, hereby awards reasonable attorneys fees pursuant to Conn. Gen. Stat. § 42-110g as hereinafter described and awards punitive damages in the amount of $5,000.00.
Is the Plaintiff Entitled to Attorneys Fees Under the RSDA and CUTPA?
The short answer is Yes.
Under paragraph 11 of the RSDA, the owner, Advanced, is liable for "all court and attorneys fees resulting from a dispute to be paid by the prevailing party." As to the defendants, Advanced, Robert and Laura, liable as described above, the Court awards $29,137.50 based upon the affidavit of the plaintiff's attorney (Pl. Exh. 67). As for the CUTPA claim for which the Court has entered judgment against Robert A. Chiulli, Sr., attorneys fees in the amount of $29,137.50 is hereby assessed against said individual defendant.
Additional attorneys fees and costs will be considered upon submission of further affidavits by the plaintiff's attorney. If there is no objection, the Court will take it under advisement. If there is objection, a hearing will be held at the request of any party.
Is the Plaintiff Entitled to Interest on the $44,929.30 on Monies Wrongfully Withheld Pursuant to Conn. Gen. Stat. § 37-3a?
The short answer is Yes.
Interest is awarded at 10% per annum under said statute on the $44,929.30 from December 8, 2005 to the date hereof in the amount of $11,602.00. Said amount is assessed against the defendants, Advanced, Robert and Laura.
CONCLUSION
As for money damages, the following judgments are entered against the following:
ADVANCED ROBERT LAURA 1) Breach of Contract $44,929.30 $44,929.30 $44,929.30 2) Unjust Enrichment 44,929.30 44,929.30 44,929.30 3) Piercing the LLC Veil, Etc. 44,929.30 44,929.30 4) Attorneys fees 29,137.50 29,137.50 29,137.50 5) Interest 11,602.00 11,602.00 11,602.00 6) CUTPA 5,000.00