Opinion
CV196084487S
09-06-2019
Robert Dunbar et al. v. Gulick Construction, LLC
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Welch, Thomas J., J.
MEMORANDUM OF DECISION
WELCH, J.
On March 22, 2019, the plaintiffs, Robert Dunbar and Mary Dunbar, filed an application to discharge a mechanic’s lien, which was filed by the defendant, Gulick Construction, LLC, against property owned by the plaintiffs pursuant to General Statutes § 49-35a. The plaintiffs contend that there is no probable cause to sustain the validity of the lien because the contract between the parties failed to comply with the requirements of the Connecticut Home Improvement Act (HIA) set forth in General Statutes § 20-418 et seq. Specifically, the plaintiff asserts that the contract failed to contain a cancellation clause, a requirement under General Statute § 20-429(a)(6), which renders the contract unenforceable and precludes the lienor from seeking any equitable relief pursuant to § 20-429(f). In addition, the plaintiffs argue that the 1993 amendment to the HIA abrogated the judicially created equitable remedy based upon "bad faith."
The defendant, in opposition, asserts that there is probable cause to sustain the mechanic’s lien because even when a contract fails to comply with the requirements of the HIA, a contractor may still recover in quantum meruit for the value of work performed where, as here, the homeowner asserting the HIA has acted in bad faith.
The plaintiffs filed a memorandum of law in support of the application on May 21, 2019. The matter was heard by the court on May 22, 2019, June 4, 2019, and June 14, 2019. At the hearings, the court heard testimony from Kenneth Lametta (excavating contractor), Ellen Nixon (interior designer), Michael Gulick (general contractor/supervisor for the defendant), Michele Dunbar and Robert Dunbar. The court finds the testimony of all the witnesses to be credible. Additionally, post-hearing briefs were submitted by the defendant on July 10, 2019, and by the plaintiffs on July 26, 2019.
Based upon the testimony and the exhibits entered into evidence, the court finds the following facts. On or about March 2017, the defendant, a licensed home improvement contractor in Connecticut, and the plaintiffs commenced discussions relative to the defendant performing renovations to the plaintiffs’ property. The renovation project (project) included but was not limited to renovation to the existing residence, conversion of the existing three-car garage to an in-law suite and construction of a new three-car garage. The plaintiffs originally wanted to spend approximately $800,000 on the project. On June 10, 2017, the defendant, Robert Dunbar and Michele Dunbar executed a contract which provided that the defendant would be paid the cost of all invoices associated with the work performed by the defendant at the property, plus a 10% fee for the defendant’s overhead and a 10% fee for profit equating to cost plus 21%. On June 12, 2017, a budget for the renovation project in the total amount of $1,425,527 was attached to the contract. The plaintiffs believed that the budget included all of the costs necessary to complete the project, including the fee for the defendant’s overhead and profit of 21%. The defendant, by its representative, Gulick, believed that the budget was a "rough based estimate," "best estimating," "best estimate," "historical estimating" and that "a budget was used as a guideline." The defendant believed that the budget did not include the fee for overhead and profit of 21%. Gulick credibly testified that when the contract was signed the price of the project was not included, the budget was not attached and that the contract did not provide a cancellation clause.
Further, the contract provided that work under the contract would commence immediately upon the signing of the contract and that the defendant would use his best efforts to complete the project on or before February 1, 2018. The contract also required that change orders would be issued on major changes to the specifications as set forth on the agreed-upon plans. Specifically, the contract provided that "[i]f change order is not signed and returned within said 24-hr period said change order will be assumed null and void."
The parties do not contest that the home improvement project was subject to the requirements of the HIA as set forth in § 20-418 et seq. Additionally, the parties do not contest that the contract did not include a cancellation clause as required pursuant to § 20-429(a)(6).
As a result of delays in the permitting process, as well as financing and finalizing the plans for the renovation project, construction on the project did not begin until October 23, 2017. The defendant provided monthly invoices to the plaintiffs commencing on November 14, 2017. The invoices only included amounts expended plus the 21% for overhead and profit. The invoices did not include the total amount expended to date or any reference to the overall budget.
The cost of the project increased as a result of changes to the project which included, but were not limited to, the Dunbar family living at the property during construction, designing a rain detention system, changes to the geothermal heating system, changes to the master bedroom, changes to the kitchen, heating of a cottage located on the property, tree clearing, adding an additional well, removal of an in-ground oil tank, adding landscaping, patios, walkways and discovering substantial rotting wood around the windows, doors, exterior porches and the living room. Some of the changes were performed at the request of the plaintiffs, some were completed to satisfy local municipal requirements and some were as the result of unforeseen conditions. There were no written change orders regarding the changes or modifications that took place.
Additionally, although the defendant prepared a change order resulting from the rotted wood around the windows, Gulick testified that he "really didn’t expect a signature because I hadn’t- it wasn’t that kind of document." Gulick further acknowledged that the change in the design and location of the geothermal heating system was a major change from the original plan but no change order was prepared. Gulick testified that the changes were "done on a handshake."
Gulick, Lametta and Nixon each credibly testified that discussions of the increased cost of the project took place with Robert Dunbar and he indicated that he had the funds necessary to complete the project.
On March 15, 2018, the defendant prepared a revised budget which indicated that the total cost of completion was $1,889,082 plus the 21% for overhead and profit for a total of $2,285,789.22. Robert Dunbar testified that there were no substantial changes to the plans or specifications after January 2018, and that as of March 15, 2018, the issue relative to the rotting wood around the windows had been discovered.
On October 15, 2018, the defendant prepared another revised budget which revealed the total cost of completion to be $2,356,032 plus the 21% for overhead and profit for a total of $2,850,798.72. Then, in mid-November 2018, the defendant acknowledged that the project was "in the range of 70% over budget." As a result, Michele Dunbar, who had not previously been involved with the project on a day to day basis, requested that work on the project stop in order to obtain a clear understanding of the cost to complete the project. In response, on December 13, 2018, the defendant provided a revised budget, for the completion of the interior of the project only, in the amount of $808,128.35.
During December 2018, and January 2019, the parties had discussions and correspondence relative to the project including trying to reduce the cost by making less expensive selections, a request from Michele Dunbar to the defendant regarding the defendant reducing its fee and an email from Robert Dunbar stating that the "bank is finalizing their review and the first money released will be for outstanding bills."
As of January 15, 2019, the defendant had invoiced the plaintiff for the amount of $2,095,285 and estimated the total cost to complete the interior was $808,128, equaling a total amount of $2,903,413.00. Additionally, the defendant acknowledged that significant amount of exterior work was necessary to complete the project.
On January 30, 2019, Michele Dunbar sent an email to the defendant indicating "I’m shutting the job down because I discovered that it was grossly over budget and far from finished." Further, on January 30, 2019, Attorney Stephen P. Fogarty, on behalf of the plaintiffs, advised the defendant that "to the extent there was ever a contract, the contract is cancelled, and Gulick Construction, LLC is terminated."
On February 14, 2019, the defendant filed a mechanic’ lien in the amount of $375,988.27 against the property. A lien was recorded in Volume 2028 at Page 205 of the Monroe Land Records. The evidence presented indicates that the defendant is claiming a lien in the amount of $325,988.27 which represents the total invoices of $2,095,285.59, less a geothermal credit of $134,379.64 and payments made by the plaintiffs in the amount of $1,634,917.68.
The mechanic’s lien that was filed in the amount of $375,988.27 incorrectly included the sum of $50,000, which was the deposit that was never paid by the plaintiffs as set forth in the contract.
STANDARD
The standards for deciding an application to discharge or reduce a mechanic’s lien are set forth in General Statutes § 49-35b(a) and provides in relevant part that "upon the hearing held on the application or motion set forth in section 49-35a, the lienor shall first be required to establish that there is probable cause to sustain the validity of his lien. Any person entitled to notice under section 49-35a may appear, be heard and prove by clear and convincing evidence that the validity of the lien should not be sustained or the amount of the lien claimed is excessive and should be reduced." Further, § 49a-35b(b) provides in relevant part that "upon consideration of the facts before it, the court or judge may: (1) deny the application or motion if probable cause to sustain the validity of the lien is established; or (2) order the lien discharged if (a) probable cause to sustain its validity is not established, or (b) by clear and convincing evidence its invalidity is established; or (3) reduce the amount of the lien if the amount is found to be excessive by clear and convincing evidence; or (4) order the lien discharged or reduce the amount of the lien conditioned upon the posting of a bond, with surety, in a sum deemed sufficient by the judge to indemnify the lienor for any damage which may occur by the discharge or the reduction of amount."
In applying § 49-35b, the court "must remain cognizant of the remedial purpose of our mechanic’s lien statutes, i.e., to give one who furnishes materials or services the security of the building and land for the payment of his claim by making such claim a lien thereon ... and [must also consider] the oft-stated directive that those provisions should be liberally construed in order to implement [their] remedial purpose ..." (Citation omitted; internal quotation marks omitted.) 36 DeForest Avenue, LLC v. Creadore, 99 Conn.App. 690, 695, 915 A.2d 916 (2007).
"For a lien to be upheld, a lienor must establish only that there is probable cause to sustain the validity of the lien. Proof of probable cause is not as demanding as proof by a fair preponderance of the evidence ... It is important to remember that the [lienor] does not have to establish that he will prevail, only that there is probable cause to sustain the validity of the claim ... The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it ... Probable cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true than false." (Citation omitted; internal quotation marks omitted.) Id., 694-95. Additionally, "[u]nder General Statutes § 49-35b(a), in a hearing on an application to reduce or discharge a mechanic’s lien, the lienor shall first be required to establish that there is probable cause [to sustain the validity of his lien]. Thereafter, the applicant is required to prove by clear and convincing evidence that the validity of the lien should not be sustained or that the amount claimed as excessive should be reduced." Pizzolato v. Murphy, Superior Court, judicial district of Middlesex, Docket No. CV-07-5001705-S (March 29, 2007, Dubay, J.).
DISCUSSION
The court finds the decisions of the Supreme Court in Walpole Woodworkers, Inc. v. Manning, 307 Conn. 582, 57 A.3d 730 (2012) and Burns v. Adler, 325 Conn. 14, 155 A.3d 1223 (2017) to be instructive to the facts presented in this case.
Section 20-429(a) provides that no home improvement contract shall be valid or enforceable against a homeowner unless it contains certain enumerated criteria. "The aim of the [act] is to promote understanding on the part of consumers with respect to the terms of home improvement contracts and their right to cancel such contracts so as to allow them to make informed decisions when purchasing home improvement services." Wright Bros. Builders, Inc. v. Dowling, 247 Conn. 218, 231, 720 A.2d 235 (1998).
(2) A contract for repair, remediation or mitigation as set forth in section 38a-313a shall conform to the requirements set forth in subparagraph (A) of subdivision (1) of this subsection and section 38a-313a. (b) No home improvement contract shall be valid if it includes any provision obligating the owner to instruct the home improvement contractor, by a date determined by such contractor, that periodic home improvements are not to be performed unless it also includes a provision requiring the contractor to remind the owner of that obligation by means of a card or letter mailed to the owner and postmarked not earlier than twenty days, and not later than ten days, prior to such date. (c) The contractor shall provide and deliver to the owner, without charge, a completed copy of the home improvement contract at the time such contract is executed. (d) The commissioner may, by regulation, require the inclusion of additional contractual provisions. (e) Each home improvement contract entered into shall be considered a home solicitation sale pursuant to chapter 740 and shall be subject to the requirements of said chapter regardless of the location of the transaction or of the signing of the contract. Each home improvement contract in which the owner agrees to repay the contractor an amount loaned or advanced to the owner by the contractor for the purposes of paying for the goods and services provided in such contract, or which contains a finance charge, (1) shall set forth the information required to be disclosed pursuant to the Truth-in-Lending Act, sections 36a-675 to 36a-685, inclusive, (2) shall allow the owner to pay off in advance the full amount due and obtain a partial refund of any unearned finance charge, and (3) may contain a finance charge set at a rate of not more than the rate allowed for loans pursuant to section 37-4. As used in this subsection, "finance charge" means the amount in excess of the cash price for goods and services under the home improvement contract to be paid by the owner for the privilege of paying the contract price in installments over a period of time. (f) Nothing in this section shall preclude a contractor who has complied with subparagraphs (A)(i), (ii), (vi), (vii) and (viii) of subdivision (1) 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." General Statutes § 20-429(a) provides in relevant part that "no home improvement contract shall be valid or enforceable against an owner unless it: (i) Is in writing, (ii) is signed by the owner and the contractor, (iii) contains the entire agreement between the owner and the contractor, (iv) contains the date of the transaction, (v) contains the name and address of the contractor and the contractor’s registration number, (vi) contains a notice of the owner’s cancellation rights in accordance with the provisions of chapter 740, (vii) contains a starting date and completion date, (viii) is entered into by a registered salesman or registered contractor, and (ix) includes a provision disclosing each corporation, limited liability company, partnership, sole proprietorship or other legal entity, which is or has been a home improvement contractor pursuant to the provisions of this chapter or a new home construction contractor pursuant to the provisions of chapter 399a, in which the owner or owners of the home improvement contractor are or have been a shareholder, member, partner, or owner during the previous five years. (B) Each change in the terms and conditions of a contract shall be in writing and shall be signed by the owner and contractor, except that the commissioner may, by regulation, dispense with the necessity for complying with the requirement that each change in a home improvement contract shall be in writing and signed by the owner and contractor.
In Barrett Builders v. Miller, 215 Conn. 316, 328, 576 A.2d 455 (1990), the court held that a contractor who did not comply with the written contract requirement of the act could not recover in restitution. The court’s holding was later modified by one common-law and one statutory exception. First, in Habetz v. Condon, 224 Conn. 231, 240, 618 A.2d 501 (1992), the court held that a contractor may recover in restitution, despite noncompliance with § 20-429(a), if a homeowner invokes the protections of the HIA in bad faith. "Additionally, the legislature enacted No. 93-215, § 1, of the 1993 Public Acts, now codified as § 20-429(f), which allows recovery of payment for work performed based on the reasonable value of services which were requested by the owner for partial noncompliance with certain requirements of the act when the court determines that it would be inequitable to deny such recovery." (Internal quotation marks omitted.) Walpole Woodworkers, Inc. v. Manning, supra, 307 Conn. 585. "Thus, both the holding in Habetz and § 20-429(f) provide for recovery in quantum meruit despite a contractor’s noncompliance with certain statutory requirements." Id.
A
Section 20-429(f) provides in relevant part that "[n]othing 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." "Thus, if a court determines that the requirements of subsection (f) are met, it may award damages under a theory of unjust enrichment even if all of the requirements of the [act] are not met." (Citations omitted; internal quotation marks omitted.) Newtown Pool Construction, LLC v. Errico, 103 Conn.App. 566, 570, 930 A.2d 50 (2007).
Subsection (f) was added to § 20-429 when the legislature enacted No. 93-215, § 1, of the 1993 Public Acts, in order to address what it considered to be the harsh result of Barrett Builders v. Miller, 215 Conn. 316, 576 A.2d 455 (1990). Additionally, subsection (f) allows quantum meruit recovery in certain cases of partial noncompliance with subsection (a). See, Newtown Pool Construction, LLC v. Errico, 103 Conn.App. 566, 569-70, 930 A.2d 50 (2007).
In the present case, the evidence presented to the court, including the testimony of Gulick, provides that the contract between the parties failed to comply with Section 20-429(a)(6) of the HIA. Accordingly, the remedy provided in § 20-429(f) is not available to the defendant. Further, the court notes that the HIA provides that "[e]ach change in the terms and conditions of a contract shall be in writing and shall be signed by the owner and contractor." Therefore, because the changes in terms and conditions were not signed by the plaintiff and defendant, this provision of the HIA was not satisfied.
B
Next, the court will review the defendant’s claim of "bad faith." The purpose of the HIA is "to preclude a contractor’s recovery on the various restitutionary doctrines so as to effectuate the legislative purpose: to require that contractors comply with the act. Clearly, the legislature is entitled, in the first instance, to impose the burden of compliance with the statute on the professional, the contractor, rather than on the nonprofessional, the consumer. The objective of the act is to promote understanding by the consumer, to ensure his ability to make an informed decision and to protect him from substantial work by an unscrupulous contractor." (Internal quotation marks omitted.) Burns v. Adler, supra, 325 Conn. 36. The act did not "override the general principle embodied in the bad faith exception: that an individual should not profit from his own deceptive and unscrupulous conduct. Thus, proof of bad faith serves to preclude the homeowner from hiding behind the protection of the act." (Internal quotation marks omitted.) Id. "[B]ad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive. Bad faith means more than mere negligence; it involves a dishonest purpose." (Internal quotation marks omitted.) Id., 34-35.
Additionally, "the bad faith exception to the bar on a contractor’s recovery under contracts that do not comply with § 20-429 does not apply when a homeowner receives goods and services from a contractor in the belief that they ultimately will have to be paid for, but then repudiates the contract because the contractor’s noncompliance with the act gave rise to a genuine, good faith dispute about the scope of the work or the contract price ... [T]he very purpose of the act is to place the burden on the contractor to provide written documentation, signed by both parties, for each change in the terms and conditions of a contract." (Emphasis in original.) Id., 36.
"When a contractor fails to meet this burden and, as a result, a genuine, good faith dispute about the authorized scope of the work or the contract price arises, the homeowner’s refusal to pay the amounts claimed by the contractor is not in bad faith. Rather, under these circumstances, the inability of a contractor to enforce the homeowner’s payment obligation is exactly what the act contemplates, even as to work that the contractor actually performed. Indeed, it would completely nullify the core purpose of the act to conclude that, if the contractor ultimately is able to establish the value of the work that he actually performed, it is in bad faith for a homeowner to refuse to pay the contractor, even though the contractor failed to document the work and any concomitant change in price in a writing, signed by both parties, and even though his failure to comply with § 20-429 initially gave rise to a genuine dispute about the authorized scope or actual value of the work." Id., 37; see also Habetz v. Condon, supra, 239 ("the objective of the act is to promote understanding by the consumer, to ensure his ability to make an informed decision and to protect him from substantial work by an unscrupulous contractor").
In the present case, the court concludes that the plaintiffs’ repudiation of the contract was not in bad faith. Implicit in the factual findings set forth above, the defendant’s noncompliance with the act gave rise to a genuine, good faith disagreement between the parties. The defendants’ failure to comply with the act, including but not limited to not requiring any changes to be in writing and signed by all parties, deprived the plaintiffs of the opportunity to make informed decisions during the course of the renovation project, which is the core purpose of the act. Additionally, the evidence does not support a finding that the plaintiffs received goods and services from the defendant with the intent of invoking § 20-429 to avoid paying for them, and the court finds that the defendant’s failure to comply with the requirements of § 20-429 gave rise to a genuine dispute between the parties. Further, the defendant has not established, under any theory, that the plaintiffs’ repudiation of the contract was in bad faith. Therefore, the court concludes that the plaintiffs did not act in bad faith invoking the HIA as a bar to the defendant’s claims. "Although [the court] recognizes[s] that this is a harsh result for the [defendant], [the court’s] role is to implement the intent of the legislature as embodied in the act, not to impose our own notion of justice." Burns v. Adler, supra, 325 Conn. 36 n.16.
CONCLUSION
For all of the foregoing reasons, the court finds that the defendant has not shown probable cause to sustain the validity of the mechanic’s lien. Accordingly, the plaintiffs’ application to discharge the mechanic’s lien is granted.