Opinion
No. CV 99-0427298 S
May 13, 2009
MEMORANDUM OF DECISION
On February 10, 2009, the court held an evidentiary hearing, on the narrow issue of determining the "payment date," for the purposes of deciding the Motion to Dismiss filed by the defendant Fidelity and Deposit Company of Maryland (Fidelity). Following the hearing, supplemental memoranda were filed by the plaintiff, North Haven Construction Company, Inc. (North Haven), on February 20, 2009 and by Fidelity on March 2, 2009. Essentially, North Haven takes the position that the payment date is October 16, 1998 and that its action is not barred by the statute of limitations; Fidelity posits that North Haven has failed to carry its burden establishing the applicable payment date.
See the court's prior decisions of August 7, 2008 on the Motion to Dismiss and September 25, 2008 on the Motion to Reargue and/or for Reconsideration.
The only witness who testified at the hearing was Ralph Matto, the chairman of the Shelton Housing Authority (SHA) during the Sinsabaugh Heights project at issue. The following facts were established through the testimony of Matto. Matto signed, on behalf of SHA, the October 31, 1995 settlement agreement with the general contractor of the Sinsabaugh Heights project, Banton Construction Company, Inc. (Banton), relating to claims presented by Banton to SHA for the Sinsabaugh Heights project. As indicated in the agreement, the settlement related to Banton's claim for damages due to delays and other items Banton alleged to have suffered on the Sinsabaugh Heights project. Pursuant to the terms of the agreement, which was received as a full exhibit at the hearing, the amount of the settlement was $300,000.00 with a contingency: SHA would give Banton $150,000.00 when the agreement was signed, with the balance of the $300,000.00 to be paid when the job was done. According to Matto, Banton was paid the $150,000.00 when the agreement was signed, and Banton, as it turned out, "got almost all" of the balance. Matto also identified an October 31, 1995 change order signed by him as well as by Banton; that document, also a full exhibit at the hearing, cited construction delay as the reason or cause of the change order. Additionally, Matto testified with respect to the September 30, 1998 application and certificate for payment from Banton to SHA, also marked as a full exhibit whereby Banton was requisitioning $143,370.93 from SHA. The document lists "00025" under the application number, and described at item number 00159 "#4-Delay" as having the scheduled value of $300,000.00 (Column C) and $150,000.00 listed under previous applications (Column D). Matto explained that the document indicates that Banton was requisitioning money for change order number four. Matto, who had no independent recall of the document, had not signed it; it was completed, executed, and submitted by Banton.
The parties stipulated for the purposes of the hearing that SHA made the first payment to Banton under the settlement agreement on October 31, 1995.
Matto testimony further established that he told Banton that they would get the remaining $150,000 under the settlement agreement if there was money in the account at the end of the job. He identified a certified check, no. 105, from SHA to Banton, dated October 16, 1998, in the amount of $143,370.00, as the last payment received by Banton from SHA; that check, which was marked as a full exhibit at the hearing, indicates "#025" in the memo section. As pointed out by Matto, that number corresponds to the payment application number. Additionally, the amount of the check corresponds with the $143,370.93 figure contained in the payment application. Matto testified at the hearing that while he didn't know exactly what the $300,000.00 settlement figure was for, he thought there might be an allocation of the $300,000.00 for North Haven.
The court recognizes that Matto's testimony at the hearing conflicted with the statements in his 2001 affidavit, which had been prepared by former counsel for Banton, whereby Matto indicated that the $300,000.00 settlement was not attributed to any line item of Banton and no consideration was given to any loss of equipment and/or manpower. Matto, who appeared to testify honestly at the hearing, did not draft the affidavit, had no recall of it nor did he recall signing it, although he recognized his initials and believed it was his signature.
In light of the foregoing, the court finds that the payment of $143,370.93 on October 16, 1998 was the last payment made by SHA to Banton pursuant to the settlement agreement, relating to the delay claim at issue. As discussed by the court in its earlier decisions, this action was commenced on July 14, 1999, when the writ, summons, and complaint were served on the defendants; as the applicable payment date pursuant to Conn. Gen. Stat. § 49-41a is thirty days after the October 16, 1998 payment by SHA to Banton, North Haven's claim against Fidelity was brought well within the one-year statute of limitations.
Fidelity also argues in its Motion to Dismiss that the court lacks subject matter jurisdiction because North Haven failed to comply with the statutory notice requirements set forth in § 42-42 as to both Banton and Fidelity. As to Fidelity's claim, this court held previously that Fidelity did not waive its defense that the notices were untimely. This court also previously held that Banton had actual notice of North Haven's claim, and that North Haven sent its notice to Fidelity on November 10, 1998. In light of the court's findings above as to the payment date, North Haven did submit its notices well within the required two hundred and ten days after the date that Banton received the payment from SHA.
Finally, the court rejects the claim that the $150,000.00 paid by SHA to Banton in 1995 should be time barred. According to Fidelity, the applicable payment date for the October 31, 1995 payment to Banton would be thirty days later, and therefore, the one-year statute of limitations period would have expired at the end of November 1996. Under Fidelity's interpretation, North Haven's claim as to this payment would be time barred. North Haven contends, however, that the court has jurisdiction because it alleged in its complaint that "[i]n October or November 1995, the housing authority paid Banton $300,000 on [the delay] claim, but Banton did not inform North Haven of the payment and converted the money for its own use." According to North Haven, "[t]he motion that a general contractor could conceal the existence of a payment received from an owner, convert the money for its own use and position its payment bond surety to assert a statute of limitations defense flies in the face of the underlying purpose of Connecticut's Little Miller Act."
Under similar circumstances, Connecticut courts have held that the statute of limitations runs each time a subcontractor failed to receive its applicable payment. In Acoustics, Inc. v. Travelers Insurance Co., Superior Court, judicial district of New Britain, Docket No. CV 03 0519565 (January 13, 2004, Cohn, J.) ( 36 Conn. L. Rptr. 476), Trataros Construction, Inc. (Trataros) entered into construction contracts with the city of Bristol for upgrades to the city's high schools. The contracts provided that the city would issue progress payments to Trataros, the general contractor, based on the value of the work performed, but the city would hold back retainage in the amount of 10 percent of the value of the work. Trataros arranged for a payment bond to be issued with the defendant, Travelers Insurance Co., acting as surety. The plaintiff entered into a subcontract with Trataros to perform work and furnish materials for ceilings in the schools. During the course of its work, the plaintiff submitted payment applications to Trataros, and Trataros submitted them, along with others, to the city. When the city made progress payments, Trataros would disburse amounts to the plaintiff and the other subcontractors.
The plaintiff completed its work under the subcontract in March 2001 and submitted another payment application to Trataros. In April 2001, Trataros submitted the plaintiff's payment application to the city. On May 2, 2001, the city transferred an amount to Trataros related to the plaintiff's work, and in addition, made partial payments to Trataros in June and September for the retainage amount due to the plaintiff. In September 2001, the plaintiff submitted a final bill to Trataros showing that it had not been paid from the money Trataros had received from the city in May 2001 and that the city still held money for the retainage. On February 19, 2002, the plaintiff submitted a claim under the payment bond to Travelers. Despite acknowledging receipt of the claim, Travelers did not respond until January 2003, when it denied the claim on the basis that the plaintiff had last performed work on March 7, 2001, and therefore, it was barred by the applicable statute of limitations.
The plaintiff commenced suit against Travelers on January 31, 2003. Each party moved for summary judgment and agreed that there were no factual issues in dispute with regard to the statute of limitations issue. The plaintiff argued that the statute of limitations began to run after the submission of its final bill in September 2001 or sometime thereafter, as it had yet to receive final payment. Travelers, on the other hand, contended that each occurrence of payment by the city to Trataros gave rise to an individual statute of limitations, and therefore, the statute of limitations for bringing suit for Trataros' failure to make payment began to run thirty days after the city made the May 2, 2001 payment.
After reviewing General Statutes §§ 49-41a and 49-42, as well as a commentator's interpretation of the Connecticut statute and the application of similar statutes in other jurisdictions, the court agreed with Travelers, stating that "every monthly subcontractor requisition can be an occasion for the exercise of enforcement rights, even though . . . the subcontractor is still working." It further explained that "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." The court held that each failure by the subcontractor to obtain payment from the general contractor of monies paid by the city pursuant the subcontractor's requisition within thirty days of the city's payment commenced the running of the one year statute of limitations. Accordingly, the court granted Travelers' motion for summary judgment on the grounds that the plaintiff's claim as to the May 2, 2001 payment was time barred because the suit was filed beyond one-year and thirty days after the payment by the city.
The court, however, granted the plaintiff's motion as to its claim of entitlement to the amount of retainage because the city had yet to pay Trataros.
In a subsequent case with similar facts, the court expressly agreed with Judge Cohn's reasoning and adopted the holding of Acoustics, Inc. v. Travelers Insurance Co. See Gagliardi Electric, LLC v. Lawrence Brunoli, Inc., Superior Court, judicial district of Hartford, Docket No. CV 03 082774 (July 15, 2004, Wagner, J.T.R.) ( 37 Conn. L. Rptr. 489). In Gagliardi Electric, LLC, the plaintiff had subcontracted with the general contractor to furnish labor and materials to a public project, and Peerless Insurance Company (Peerless) agreed to act as the surety on the contract and issue a payment bond. As in Acoustics, Inc., the general contractor failed to pay the plaintiff pursuant to the terms of the contract, leading to the plaintiff making a claim on the payment bond and eventually filing suit. Peerless raised as a special defense that the plaintiff's claim was time-barred pursuant to General Statutes § 49-42 because the plaintiff did not file suit until after the statute of limitations period had expired.
In support of its motion for summary judgment, the plaintiff argued that the statute of limitations period did not begin to run until the state made its final payment to the general contractor. In response, Peerless contended that the statute sets out multiple applicable payment dates with overlapping limitations periods that begin to run each time the state paid the general contractor. 490. Noting the Acoustics, Inc., decision, the court, Wagner, J.T.R., stated "[w]e agree with Judge Cohn that [General Statutes] § 49-41a assigns a distinct limitations period to each requisition and that each limitations period runs when the contractor receives payment from the state for that particular requisition."
Finally, in Bernhard Thomas Building Systems, LLC v. JPI Apartment Construction, LP, Superior Court, judicial district of Tolland at Rockville, Docket No. CV 05 4002713 (June 5, 2007, Sferrazza, J.) ( 43 Conn. L. Rptr. 567), the court concurred with the previously cited decisions. In Bernhard, the court addressed whether it had jurisdiction over the plaintiff's claim against the surety on a payment bond in the context of the plaintiff's motion for summary judgment. The plaintiff had subcontracted with the general contractor, JPI Apartment Construction Limited Partnership (JPI), to perform roofing and framing work on a public project, and St. Paul Fire and Marine Insurance Company (St. Paul) issued a payment bond. After a dispute arose between the plaintiff and JPI regarding payment, the parties agreed, inter alia, that JPI would pay to the plaintiff certain amounts of retainage within seven days following JPI's receipt of payment of the same from the owner of the project. At the time of agreement, the plaintiff and JPI contemplated a lump sum payment to JPI by the owner, but the payment was actually made in two installments; the first on January 12, 2004, and the second on October 23, 2004. The plaintiff alleged that JPI never paid it the retainage owed, and filed suit against St. Paul on June 13, 2005.
In Bernhard, the parties agreed that General Statutes § 49-42(b) required the plaintiff to file suit within one year after the applicable payment date and that a failure to comply with the statutory time limitation implicated the court's subject matter jurisdiction. St. Paul argued that there were two applicable payment dates thirty days after each of the two installment payments were made to JPI on January 12, 2004, and October 23, 2004, respectively. As the suit was not filed until June 13, 2005, it was commenced more than one year after the applicable payment date for the first payment, and less than one year after the second. Under St. Paul's interpretation, the court lacked subject matter jurisdiction to adjudicate the plaintiff's claim at least as to the first payment of retainage. The plaintiff, however, contended that the agreement between it and JPI modified the applicable payment date to seven days after payment to JPI of the full retainage amount, which occurred on October 23, 2004.
The court in Bernhard found the reasoning of Acoustics, Inc. and Gagliardi Electric, LLC persuasive and adopted the holding "that § 49-41a of our Little Miller Act mandates a general contractor to pay its subcontractor each time the owner compensates the general contractor for work done by the subcontractor, and, therefore, the jurisdiction conferred by § 49-42(b), which relies on the thirty-day period of § 49-41a(a) as its trigger, begins to run separately with respect to each successive payment by the owner to the general contractor." The court farther explained that "[i]f the owner pays the general contractor for such work in installments, the general contractor . . . must pay subcontractors within thirty days rather than wait until the final installment arrives. Therefore, the one-year statute of limitations set forth in § 49-42(b) runs separately for each installment payment." In addition, the court rejected the plaintiff's argument that the payment had been modified by agreement, holding that "§ 49-41a must be incorporated into every contract for public work . . . and the parties are bound by the payment schedule dictated by § 49-41a(a) and cannot negate that obligation by agreement." Accordingly, the court found that it lacked subject matter jurisdiction to adjudicate the plaintiff's claim as to the first installment payment of retainage, but that it did have jurisdiction with regard to the second.
Pursuant to the interpretation of Connecticut's Little Miller Act set forth in Acoustics, Inc., and subsequently adopted by the courts in Gagliardi Electric, LLC, and Bernhard Thomas Building Systems, LLC, North Haven's claim as to the first payment by the housing authority to Banton pursuant to the October 31, 1995, settlement agreement is time barred. As Acoustics, Inc., Gagliardi Electric, LLC, and Bernhard Thomas Building Systems, LLC, each found, General Statutes §§ 49-41a and 49-42 assign a distinct applicable payment date and limitations period to each requisition, and each limitations period begins to run thirty days from when the contractor receives payment from the owner for that particular requisition. In the present case, the evidence shows that the housing authority made two separate payments to Banton related to North Haven's requisition for payment for losses incurred as a result of the project delays. The housing authority made the second payment on October 16, 1998. The one-year limitations period established by General Statutes § 49-42 began to run thirty days from that payment date, and therefore, expired in November 1999. The present action was commenced on July 14, 1999. Accordingly, as discussed in detail above, this action was commenced within the one-year limitations period and the court has jurisdiction over that claim.
The first payment, however, was made concurrently with the agreement between Banton and the housing authority on October 31, 1995. The one-year limitations period began to run thirty days from that payment date, and therefore, expired at the end of November 1996. As the present action was not commenced until July 14, 1999, North Haven's claim with regard to this payment would be time barred and the court would lack subject matter jurisdiction to adjudicate it. See North Haven Construction Co. v. Banton Construction Co., supra, 46 Conn. L. Rptr. 225 (noting that the relevant statute of limitations "is a jurisdictional requirement establishing a condition precedent to maintaining an action under the Little Millet Act"). The plaintiff, however, alleged in its complaint that Banton concealed the occurrence of the October 31, 1995, payment from North Haven. Indeed, as the court previously noted, "Frank Pirovane, owner of North Haven, attested that Banton told [North Haven] that no delay claim would be paid because the owner did not have any money for delay claims . . . He also averred that North Haven was never told that Banton and the housing authority were negotiating a settlement . . . and that Banton never told North Haven that it had collected $300,000." (Citations omitted; internal quotation marks omitted.)
Although neither party has cited to any Connecticut authority in favor or against the proposition that such allegations of concealment of a claim by the principal or surety on a payment bond may be sufficient to avoid a statute of limitations defense raised in the context of a motion to dismiss, Connecticut courts have freely looked to federal court interpretations of the analogous federal statute known as the Miller Act; 40 U.S.C. §§ 3131 through 3134 (2006). See American Mason Supply Co. v. F.W. Brown Co., 174 Conn. 219, 223-25, 384 A.2d 378 (1978) (observing that the general assembly intended Connecticut's Little Miller Act to operate in conformity with the federal statute, and adopting interpretation of federal court's interpretation of the statute). Several federal courts have recognized that it is possible that equitable considerations may compel a finding that the statute of limitations was tolled or enlarged, or that a defendant should be estopped from asserting a statute of limitations defense due to concealment of the claim or other wrongdoing. For example, in United States v. Fidelity Deposit Co. of Maryland, 813 F.2d 697 (5th Cir. 1987), the appellate court reversed the district court's dismissal of an action brought under the Miller Act beyond the one-year statute of limitations and remanded the case to the district court, Id., 700. In that case, the record indicated that the principal on a payment bond had made assurances that the plaintiff subcontractor's bill would be paid. Id., 698. The appellate court held that "the district court had subject matter jurisdiction over the Miller Act cause of action and that the [principal and surety on the payment bond] may be estopped from relying on the Act's one-year limitation period if sufficient equitable considerations exist to warrant [the plaintiff's] claim of estoppel." The court explained that "[t]he Supreme Court [of the United States] has made it very clear that classification of a statutory limitation period as substantive rather than procedural does not preclude its enlargement under equitable principles of estoppel" and noted that the Fourth, Ninth and Tenth Circuits had applied that doctrine to the Miller Act., 699. Other courts have reached similar conclusions. See, e.g., Datastaff Technology Group, Inc. v. Centex Construction Co., 528 F.Sup.2d 587, 593-95 (E.D.Va. 2007) (discussing applicability of equitable estoppel to avoid a statute of limitations defense in Miller Act cases); United States ex rel. Torres Drywall Services v. Norden Enterprises, LLC, United States District Court, Docket No. 01 C 8968 (N.D.Ill. January 6, 2004) (applying federal law and recognizing equitable estoppel as possible defense to statute of limitations but finding that plaintiff had not shown that defendant concealed existence of a claim); United States v. JP, Inc., 655 F.Sup. 480, 481-82 (D. Alaska 1985) (discussing applicability of concealment and equitable estoppel claims to avoid statute of limitations); Farmer's Union Central Exchange, Inc. v. Reliance Insurance, 626 F.Sup. 583, 587-88 (D.N.D. 1985) (recognizing equitable estoppel as possible defense to statute of limitations under North Dakota's Little Miller Act).
In the present matter, North Haven alleged in its complaint that the 1995 payment was concealed from it. The cases cited demonstrate that equitable considerations may compel the conclusion that North Haven's suit to enforce its claim as to this payment should not be time barred. Whether the facts require that the principles of equity should effect such an outcome is not, however, within the province of this court in the context of a motion to dismiss, and such a query should be resolved by the trier of fact. See Pedro v. Miller, 281 Conn. 112, 116, 914 A.2d 524 (2007) (stating that a motion to dismiss asserts that "the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court"). Moreover, this particular rendering of Fidelity's statute of limitations defense was not raised until supplemental briefs were recently filed. Based on these considerations and the interpretations of analogous law in other jurisdictions, the court has jurisdiction over North Haven's action to enforce its claim regarding the 1995 payment. Accordingly, Fidelity's motion to dismiss is denied.
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