Opinion
CV176030620S
10-29-2018
M. Silva Construction, LLC v. Young Men’s Christian Association of Greenwich
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh):Lee, Charles T., J.
MEMORANDUM OF DECISION FOLLOWING TRIAL
Hon. Charles T. Lee, Judge.
Plaintiff M. Silva Construction, LLC ("Silva") commenced this suit against the defendant Young Men’s Christian Association of Greenwich ("YMCA") seeking, in the first count of its complaint, to foreclose a mechanic’s lien filed in the amount of $55,190 against the YMCA’s property located at 50 East Putnam Avenue in Greenwich. The second count and third count, sounding in quantum meruit or unjust enrichment, respectively, each seek recovery of $81,569. The plaintiff alleges that it has not been paid for its labor and materials in connection with its work as a subcontractor repairing, regrouting and otherwise improving the YMCA’s swimming pool during the months of August and September 2016.
The action was commenced on or about December 14, 2016. The YMCA filed its answer with special defenses on February 7, 2017. Its second special defense provides, "Plaintiff’s claims, and each of them, are barred because there is no lienable fund by virtue of GMYCA’s payment in full to the general contractor." The case was tried before the court on April 18, 2016. The plaintiff called as witnesses Mr. Richard Demora, the project manager of general contractor, Brock Enterprises; Charles Leigh, the chief financial officer of the YMCA; and Mr. Moises Silva, the plaintiff’s principal. The defendant YMCA recalled Mr. Leigh and also called Mr. Robert DeAngelo, the YMCA’s chief executive officer. After plaintiff rested, the YMCA advised the court that it would withdraw its reciprocal lawsuit, Young Men’s Christian Association of Greenwich v. M. Silva Construction LLC, judicial district of Stamford/Norwalk, Docket No. 176034275, which sought damages for slander of title arising out of the filing of the mechanic’s lien and a lis pendens on the YMCA’s land title. The parties submitted post-trial briefs on June 18, 2018 and reply briefs on June 29, 2018. As explained below, the court directs judgment for the defendant YMCA because it finds that the YMCA made full payment of the contract price to the original contractor, Brock Enterprises, in good faith and before notice of Silva’s lien, within the meaning of General Statutes Section 49-36(c).
Findings of Fact
After hearing the testimony at trial and reviewing the pleadings, exhibits and memoranda submitted by the parties, the court makes the following findings of material facts:
1. The YMCA owns and operates a facility in Greenwich, which contains a swimming pool that is actively used by the community. In 2016, the YMCA determined that areas of the pool needed grouting replaced. The YMCA retained Brock Enterprises ("Brock") to perform the work, and Brock retained Silva as its subcontractor to actually perform all the work.
2. Brock is a general contractor that was located in Hamden, CT. It had done work for the YMCA previously.
3. Silva is a small contracting firm headed by Moises Silva. It had done many jobs with Brock in the past.
4. In August 2016, the YMCA’s pool was drained during the YMCA’s annual shutdown. It was cleaned by Silva and inspected by Brock and Silva in the presence of YMCA personnel. It was agreed by the YMCA and Brock that the pool needed an entire regrouting, as well as new ladders and certain other services. Silva prepared two proposals, which were submitted with a mark-up by Brock to the YMCA, in the amounts of $55,769.00 and $73,800.00.
5. On or about August 16, 2016, the YMCA accepted the proposals, and issued checks to Brock as deposits in the amounts of $22,769.00 on August 17, 2016 and $25,240.00 on August 19, 2016. The checks identified Brock’s address as PO Box 34, Southbridge, Massachusetts. This left a balance owed to Brock of $81,560 upon completion of work, and Brock owed Silva $55,940. A subsequent change order increased the amount owed by Brock to Silva to $58,440.
6. Silva performed all of the work on the project, commencing on or about August 15, 2016 and completing work on or about September 13, 2016. Silva provided labor and materials to the site. The YMCA accepted the work without complaint.
7. On September 6, 2016, Brock sent the YMCA two invoices for the balance of the completed work in the amounts of $33,000 and $48,560 for a total of $81,560. Both invoices contained a notice saying, "Please send Remittance to: Brock Enterprises, LLC, P.O. Box 34, Southbridge, MA 01550-0034."
8. On September 7, 2016, the YMCA issued a check to Brock in the amount of $81,560. The Southbridge address was again indicated on the check as Brock’s address, but the check was picked up by Brock personnel.
9. On Friday, September 9, 2016, Brock issued Silva checks in the amounts of $55,940 and $2,500 in payment of the amounts Silva was owed for the YMCA job.
10. However, those checks bounced, and on the same day, September 9, 2016, Mr. Demora, Brock’s project manager, advised the YMCA that its check for $81,560 had been misplaced, and asked that the YMCA stop payment right away on its check to Brock in the amount of $81,560. Accordingly, the YMCA stopped payment on the check.
11. The parties met at the YMCA to discuss the situation on September 13, 2016. The meeting was attended by Mr. Silva, Mr. Leigh (the YMCA’s chief financial officer) and Mr. Demora. Mr. Demora asked the YMCA to issue a replacement check directly to Silva in the amount of $81,560, representing payment for the two outstanding invoices from Brock in the amounts of $48,560 and $33,000. Testimony was conflicting as to whether Mr. Leigh asked why the full $81,560 should be sent to Silva and, if he did ask, what he was told. Mr. Demora claims he advised Mr. Leigh that Brock was out of business, which Mr. Leigh denies. Mr. Leigh asked for written confirmation from Brock of the instruction to pay the entire balance directly to Silva. He received it sometime after 3:19 p.m. on September 13 from Mr. Fred Aniballi, Brock’s vice president for finance.
12. Messrs. Silva and Demora left the meeting with the check. However, a half-hour later, they were called by Mr. Aniballi, who told them that he had just received a call from Mr. Leigh advising him that the YMCA was going to stop payment on the checks.
13. Shortly after the conclusion of the meeting, Mr. Leigh received a telephone call at about 4:12 p.m. from Howard D’Amico, an attorney for the Southbridge Savings Bank of Southbridge, Massachusetts ("the Bank"). In the call, Attorney D’Amico advised Mr. Leigh that Brock was in default on a debt to the Bank, that the Bank had a security interest in Brock’s receivables, and that it was foreclosing on Brock’s receivables, including its outstanding receivable with the YMCA.
14. In a letter from Mr. D’Amico to Mr. Leigh, transmitted later that day at 6:05 p.m., Mr. D’Amico further advised, "As you may know, on or about September 8, 2016, Brock received a check from YMCA of Greenwich, dated on or about September 7, 2016 in the amount of $81,560.00 (the "Check"), representing payment by the YMCA, to Brock, on an outstanding receivable with Brock. The proceeds from that check, were offset by the Bank on or about Friday, September 9, 2016. As you may also know, YMCA of Greenwich apparently has issued a stop payment of that check."
15. The letter directed that the YMCA make all further payments payable to Brock directly to the Bank, care of a designated vice president at the Bank’s offices at 7-11 Elm Street, Southbridge, Massachusetts. The letter stated, "[A]ny further payments owed to Brock, which are not forwarded to the Southbridge Savings Bank, will not be credited to the account and Southbridge Savings Bank may pursue YMCA of Greenwich for those unpaid monies." The letter concluded, "[T]he YMCA receivable belongs to Southbridge Savings Bank."
16. As a result of these communications, the YMCA stopped payment on the check it had issued to Silva on September 13th. On September 16, 2016, the YMCA issued another check for $81,560 to Brock and sent it to the address for remittance, as indicated on the invoices, at PO Box 34, Southbridge, Massachusetts. The Bank advised that it had received the check on September 22, 2016, and it cleared the YMCA’s bank account on the same day.
17. Mr. Leigh testified that "there was a lot of confusion on September 13th." He assumed the Bank "owned the receivables" of Brock. He said he did not want the YMCA to have to pay Brock twice, so he made payment as specified on the invoices and assumed that Brock would work out any dispute with the Bank. Mr. Leigh further testified, "I thought I was doing the right thing."
18. Subsequently, when Silva asked the YMCA for payment, he was informed that the YMCA had paid all money outstanding for the job and that it would not pay Silva anything further.
19. On September 23, 2016, Silva filed a mechanic’s lien on the YMCA’s premises in the amount of $55,190 "in accordance with a certain contract between ... Silva ... and the owner YMCA ..." Mr. Silva testified at trial that he had filed the lien under time pressure, and that the correct amount Silva was owed was $58,440. Mr. Leigh testified credibly that he was unaware of the lien before it was filed.
20. Mr. Silva claims that he has not been paid the $58,440 he is owed, and he has not sought recovery from the Bank.
21. At trial, Mr. Demora testified that Brock owed Silva considerably more than $58,440. Mr. Demora also testified that he and Brock had advised the YMCA to stop the check to Brock dated September 7th in the amount of $81,560 in order to keep the money away from the Bank and to get Silva paid. In other words, the statement made to the YMCA that the check had been "misplaced" was not truthful.
Relevant Statutes
Conn. Gen. Stat. § 49-33 (Mechanic’s Lien) provides in pertinent part:
(e) A mechanic’s lien shall not attach to any such building or its appurtenances or to the land on which the same stands or to any lot or to any plot of land, in favor of any subcontractor to a greater extent in the whole than the amount which the owner has agreed to pay to any person through whom the subcontractor claims subject to the provisions of section 49-36.
(f) Any such subcontractor shall be subrogated to the rights of the person through whom the subcontractor claims, except that the subcontractor shall have a mechanic’s lien or right to claim a mechanic’s lien in the event of any default by that person subject to the provisions of sections 49-34, 49-35 and 49-36, provided the total of such lien or liens shall not attach to any building or its appurtenances, or to the land on which the same stands or to any lot or to any plot of land, to a greater amount in the whole than the amount by which the contract price between the owner and the person through whom the subcontractor claims exceeds the reasonable cost, either estimated or actual, as the case may be, of satisfactory completion of the contract plus any damages resulting from such default for which that person might be held liable to the owner and all bona fide payments, as defined in section 49-36, made by the owner before receiving notice of such lien or liens.
Conn. Gen. Stat. § 49-36(c) (Payment to Original Contractor) provides, in part:
(c) In determining the amount to which any lien or liens may attach upon any land or building, or lot or plot of land, the owner of the land or building or lot or plot of land shall be allowed whatever payments he has made, in good faith, to the original contractor or contractors, before receiving notice of the lien or liens.
Contentions of the Parties
The plaintiff summarizes the effect of Section 49-36(c), set forth immediately above, as follows, "If, as in this case, a general contractor receives progress payments that are not turned over to those who have done the work represented by the progress payments, and ultimately defaults entirely, the owner making such payments and completing such a job is protected as long as the owner acts in good faith and reasonably, as defined by the statutes." Pl. Br. at 8-9. However, the plaintiff contends that (a) the payment by the YMCA of $81,560 on September 16, 2016 was made to the Southbridge Savings Bank and not to the original contractor Brock, and (b) was not made in good faith. Accordingly, the YMCA is not entitled to the defense of full payment to the original contractor.
Plaintiff states that the YMCA was made aware of Brock’s precarious financial position on September 13th and therefore understood, after the confirming communications with the Bank on the same day, that when it issued a check to Brock, the original contractor, on September 16th, that the money would go to the Bank and not to Brock. Because it knew that the plaintiff had not been paid, and agreed to pay the Bank to avoid being sued for the receivable by the Bank, it did not act in good faith as to plaintiff, relying on the holding in Purcell, Inc. v. Libbey, 11 Conn. 132, 139-42 (1930). Further, the plaintiff contends without citation that the YMCA could not have been sued by the Bank because of lack of privity. The plaintiff accuses the YMCA of "collud[ing] with Southbridge to defeat the right of Silva and preventing] him from being paid for his labor and materials." Pl. Reply Br. at 3. Further, the plaintiff contends, "The behavior of GYWCA demonstrates an attempt to avoid detection by making the check payable to Brock Enterprises and sending it directly to Southbridge Savings Bank." Id., at 5. "The distinction which separates this case is their attempt to avoid detection." Id., at 6.
Plaintiff did not present any evidence at trial relating to its counts sounding in quantum meruit and unjust enrichment, and did not mention them in post-trial briefing. Accordingly, they have been abandoned. Seven Oaks Enterprises, L.P. v. Devito, 185 Conn.App. 534, 558 (2018).
In response, the defendant first asserts that it never had a contract with Silva. Next, it asserts that it paid the contract price in full by tender of all payments directly to Brock, including the final check of September 16th as sent to Brock at the address designated by Brock. The defendant notes that it disregarded the Bank’s instruction that the final check be sent directly to its vice president, and instead sent it to the address contained on Brock’s invoices. Also, it denies it acted in bad faith. It contends it had no knowledge of Brock’s "financial infirmity when the final payment arrangements were being made." Def. Br. at 5. Indeed, the defendant claims it acted in good faith. In summary, the YMCA contends that Silva failed to establish (a) the existence of any contract or agreement between it and Silva, (b) the existence of any lienable fund available to pay Silva’s claim, (iii) that payments were tendered after notice of Silva’s lien, or (iv) that it did not act in bad faith.
Discussion
"In this state, a mechanic’s lien is a creature of statute and gives a right of action which did not exist at common law ... The purpose of the mechanic’s lien is 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 ... Moreover, [t]he guidelines for interpreting mechanic’s lien legislation are ... well established. Although the mechanic’s lien statute creates a statutory right in derogation of the common law ... its provisions should be liberally construed in order to implement its remedial purpose of furnishing security for one who provides services or materials ... Our interpretation, however, may not depart from reasonable compliance with the specific terms of the statute under the guise of a liberal construction." (Internal quotation marks omitted.) Intercity Development, LLC v. Andrade, 286 Conn. 177, 183-84 (2008).
In this matter, plaintiff’s case depends on the application of General Statutes Section 49-36(c) (Payment to Original Contractor). Plaintiff makes a claim in the nature of subrogation to the claim of the original contractor, Brock, which is subject to a defense of payment by the YMCA to original contractor in good faith. W.C. Glenney Co. v. Bianco, 27 Conn.App. 199, 201 (1992) ("A subcontractor’s right to enforce a mechanic’s lien against a property owner is based on the doctrine of subrogation").
In Rene Dry Wall Co., Inc. v. Strawberry Hill Assocs., 182 Conn. 568, 573 (1980), a case relied upon by both parties, our Supreme Court described the legislative purpose of Section 49-36(c) as follows: "If, as in this case, a general contractor receives progress payments that are not turned over to those who have done the work represented by the progress payments, and ultimately defaults entirely, the owner making such payments and completing such a job is protected as long as the owner acts in good faith and reasonably, as defined by the statutes. In determining whether the owner has met the statutory requirements of good faith and reasonableness, the trial court is making a finding of fact. See Purcell, Inc. v. Libbey, 111 Conn. 132, 139-41, 149 A. 225 (1930)." The required finding of good faith is directed to payment; the finding of reasonableness is directed to the costs of completion.
In Rene Dry Wall, the owner had made partial progress payments prior to terminating the general contractor and incurred costs to complete the project. The owner had designated some of the partial payments for the benefit of certain subcontractors, not including the plaintiff subcontractor. The Supreme Court upheld the finding of good faith, saying "There was substantial evidence to support the trial court’s finding that the payments made by the defendant were made in good faith. The statute, § 49-33, imposes no duty of inquiry upon the owner but rather affords protection for bona fide payments ‘made by the owner before receiving notice of such lien or liens.’ At best, the owner had information that the general contractor had been delinquent in making some payments to subcontractors, that the general contractor had requested that some checks be pre-endorsed to designated subcontractors and that the plaintiff had executed one, only partial, lien waiver. In their totality, these facts do not demonstrate a lack of good faith. There was evidence neither of collusion with the general contractor designed to defeat the rights of the plaintiff, nor of misrepresentations by the defendant to the plaintiff to induce further performance than was financially warranted. The defendant’s conduct is therefore readily distinguishable from the egregious misconduct which this court characterized as constituting bad faith in Purcell, Inc. v. Libbey, 111 Conn. 132, 139-41, 149 A. 225 (1930)." Id., 182 Conn. 574-75.
In Purcell, the owner retained a general contractor, which it knew was in a precarious financial condition, but which also owed the owner money. The owner and the contractor arranged that the contractor would be paid, pursuant to an undisclosed clause in their contract, by credits against the contractor’s debt, thereby avoiding the payment of any money which might be subject to the lien of the plaintiff subcontractor. Subsequently, the owner paid the general contractor by check, but required that the contractor endorse the check back to him. Finally, the owner induced the plaintiff subcontractor to continue working by assuring him that the practice of crediting the debt instead of paying for the work would cease, but it did not. Id., 111 Conn. 132. The Supreme Court of Errors held, "The statute is explicit, only payments made by the contractor to the owner in good faith before receiving notice of the lien shall be allowed ... A finding such as this is equivalent to a finding of fraud on the part of the owner, for the facts found can lead to no other conclusion. The trial court so concluded, and also concluded that plaintiff was induced by the fraudulent representations and concealment to furnish the material he filed his lien for. The facts found support both conclusions." J.L. Purcell, Inc. v. Libbey, 111 Conn. 132 (1930).
The weight of applicable authority places the burden of proof on the plaintiff in this closure action to establish that the YMCA did not pay the full amount to Brock, the general or "original" contractor, or that it did not do so in good faith. Hubbell, Hall & Randall Co. v. Pentecost, 89 Conn. 262, 268 (1915) ("We think the burden of proof is on the plaintiff and the other lienors, who claim that the payment was not made in good faith ..."); accord, O.J. Mann Elec. Servs., Inc. v. Village at Kensington Place, Superior Court, judicial district of New Haven, Docket No. CV 02 0282281 S, 2004 WL 3130257, at *2 (Dec. 17, 2004, Frazzini, J.) , aff’d on other grounds, 99 Conn.App. 367 (2007); Waterbury Landfill Ass. v. Eastern. Co., Superior Court judicial district of Waterbury, Docket No. 0122318, 1996 WL 166345, at *6 (March 4, 1996, L. Sullivan, J.), aff’d per curiam, 44 Conn.App. 917 (1997); contra, BPS Realty Assocs. v. Ferraro & Sons Carting Co., Superior Court, judicial district of New Haven, Docket No. 28 25 76, 1990 WL 271978, at *1 (May 7, 1990, Hodgson, J.) (the party asserting special defense of payment in good faith has burden of proof by a preponderance of evidence).
"Our Supreme Court has stated that ‘the term good faith has a well defined and generally understood meaning, being ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one’s duty or obligation ... It is a subjective standard of honesty of fact in the conduct or transaction concerned, taking into account the person’s state of mind, actual knowledge and motives ... Whether good faith exists is a question of fact to be determined from all the circumstances.’ (Citation omitted; internal quotation marks omitted.) Bhatia v. Debek, 287 Conn. 397, 412-13, 948 A.2d 1009 (2008)." Fernwood Realty, LLC v. AeroCision, LLC, 166 Conn.App. 345, 368-69 2016).
Analysis
The facts of this case put it closer to the situation in Rene Dry Wall than in J.L. Purcell. YMCA had no notice of Silva’s lien at the time it made the contested payment. It made no misrepresentation to the plaintiff. The testimony is conflicting as to what Mr. Leigh was told about the financial condition of Brock Enterprises, but the court finds Mr. Leigh’s testimony to be more credible than that of Mr. Demora and Mr. Silva. There was no duty of inquiry as found in Rene Dry Wall. The court also credits the testimony of defendant’s witnesses that they had no interest in depriving Silva of payment. Mr. Leigh testified that he wanted to protect the YMCA from having to make a double payment to Brock and so followed the remittance instructions on its invoice. The court does not find collusion between the YMCA and the Bank for the purpose of denying Silva payment. Nor does it find collusion between the YMCA and Brock for that purpose. Mr. Leigh testified credibly, "I thought I was doing the right thing." Accordingly, in light of the circumstances and the testimony of the witnesses, and based on their credibility as found by the court above, the court finds that the YMCA made the payment of September 16th in the amount of $81,560 in good faith.
Indeed, the court finds that any collusion in the case existed between Silva and Brock to divert money from the Bank. Support for that conclusion is found in the evidence that Brock picked up the checks by hand rather than letting them be mailed to a post office box in Southbridge, Massachusetts. When the Bank managed to catch the check dated November 7, 2016, Brock lied to the YMCA by claiming it had been lost or "misplaced" and requested that the YMCA stop payment and, subsequently, give it a replacement check. It is understandable that the YMCA would be wary of participating in a scheme to divert funds from the Bank to Brock and Silva.
A closer question is whether the YMCA can be held to have paid the original contractor, Brock, as required by § 49-36(c). Two separate events are relevant. First, Brock picked up the check for $81,560 on September 7, 2016 and apparently deposited it. Brock effectively rejected the tender when it falsely claimed the check had been "misplaced" and requested a replacement check. Second, the YMCA sent the second check on September 16, 2016, made out to Brock for $81,560, to the address designated for remittances by Brock’s invoices, as indicated on every check paid to Brock. The court cannot find the YWCA guilty of deception when it followed instructions from Brock as to where to send payment. Further, the YWCA had every reason to believe that such payment was for the benefit of the original contractor because it would be applied to its debt to the Bank. The court notes that no evidence was presented at trial that Brock claimed it had not been paid by the YMCA or sought further payment from it.
Based on the foregoing, the court makes a finding of fact that the defendant YMCA (a) adequately and effectively made full payment to the original contractor, and (b) acted in good faith before learning of plaintiff’s lien, in reasonable compliance with the specific terms of Section 49-36(c). Intercity Development, LLC v. Andrade, supra, 286 Conn. 184. As a result, the court holds for the defendant YMCA, denies foreclosure of plaintiff’s mechanics lien, directs that the lien be discharged, and that the lis pendens be removed from the YMCA’s title.
The court would make this finding even if it found that the defendant had the burden of proof on the issue.
Conclusion
Based on the foregoing, the court directs entry of judgment in favor of the defendant Young Men’s Christian Association of Greenwich consistent with the foregoing.