Opinion
No. CV 08-5024517
May 28, 2009
MEMORANDUM OF DECISION
Plaintiffs Northland Two Pillars, LLC ("NTP"), Northland Tower Block, LLC and Northland Trumbull Block, LLC (the latter together, the "Block Entities"), apply to discharge the mechanic's liens filed by defendant, Turner Construction Company ("Turner"), Harry Grodsky Co., Inc. ("Grodsky") and Kone, Inc. ("Kone"), pursuant to Conn. Gen. Stat. § 49-35a.
Plaintiff's application actually was titled, "Application for Discharge or, in the alternative, Reduction of Mechanic's Lien." However, only the application for Discharge was heard and briefed by the parties so the application for Reduction is deemed abandoned.
The three cases were consolidated for the purpose of this court hearing and ruling on this application.
This case arises out of the construction of the residential tower built over the Hartford Civic Center located on Trumbull Street in downtown Hartford. Until 1970, the property and airspace over it was owned entirely by the City of Hartford. On October 25, 1974, the City of Hartford leased to Aetna Life Casualty Company the airspace "all above the east and south portion of" the civic center. The lease was amended several times, and on December 20, 1985, Aetna Life Casualty assigned the airspace lease to Aetna Life Insurance Company. The City never gave a deed conveying any fee interest in the property to the Aetna companies.
On October 19, 2001, Aetna Life Insurance Company assigned to plaintiff NTP its leasehold interest, including the airspace leases, and agreements relating to the Hartford Civic Center. On that same date, Aetna also executed and delivered to plaintiff NTP a limited warranty deed conveying "the building and improvements commonly known as `Hartford Civic Center Mall,' . . . which were constructed by and are owned by the grantor pursuant to that certain Airspace Lease between the City of Hartford and Aetna Life Casualty Company dated October 25, 1974." NTP never executed a deed of that property to anyone else.
On October 28, 2003, the plaintiff NTP and defendant Turner signed a letter of intent for Turner to provide preconstruction and management services in the lump sum amount of $140,000, for the "Town Square-Redevelopment of the Hartford Civic Center Mall" (the name then used for the subject project). The letter of intent also provided for an "Early Mobilization" by Turner to award subcontracts and commence construction phase work prior to entering into the final construction contract. By June 30, 2004, at the direction and with the approval of NTP, Turner had awarded over $80 million in subcontracts, had eight major trades working on the project, had expended over 10,000 man hours, and had billed NTP over $4 million for work completed. Thus, as far as Turner knew, NTP was the owner and developer of the project.
On October 28, 2003 (although dated June 30, 2004) Turner and the Block Entities entered into a contract for the construction of the residential tower over the civic center. On behalf of each of the Block Entities, NTP signed as "its Sole Member and Manager."
On June 30, 2004, in order to obtain construction financing, NTP assigned the airspace leases to the Block Entities. NTP was never informed of that assignment. Project lender Citizen's Bank of Massachusetts wanted to create a mechanism whereby it could sever the ownership of the property into separate parcels in order to facilitate a partial sale or refinancing at a later point in time. On June 30, 2004, NTP and the Block Entities also entered into a general assignment and an assumption agreement, transferring all contracts, approvals and permits relating to the property from NTP to the Block Entities. However, despite those assignments to Block Entities, NTP continued to act as the developer of the project, as it had under the letter of intent with Turner.
The construction contract price was $103,364,000. Although after June 30, 2004, the change orders on the project listed the Block Entities c/o Northland Investment Corporation as owners, NTP paid Turner more than fifty progress payments, a total of more than $90,000,000, over the course of construction. Not one of those payment cheeks were ever issued to Turner by the Block Entities.
During the course of the project, NTP made no effort to distinguish among its related entities in its dealings with Turner or the other defendants. Andrew Swayze, Project Manager for Turner, testified that "[T]hroughout the duration of the job I only knew them as `Northland.'" Jeffrey Grodsky executive vice-president of defendant Grodsky, testified that he knew the owner to be "Northland" and there was no differentiation made among the various Northland entities. "Everyone was Northland."
The lien waiver forms NTP provided to Turner named as owner of the property, not Northland Trumbull Block or Northland Tower Block, but rather NTP or Northland Investment Company, the latter an entity that apparently never held any property interest.
After June 30, 2004, various subcontractors filed mechanic's liens against the project and in each and every ease they named NTP as the owner of the property. In each instance NTP demanded that Turner bond those liens, as required by a provision of the construction contract. At no time did NTP state that these liens were invalid because they were not filed against the actual owner of the property. Turner acceded to NTP's demands to bond the liens.
Letters dated August 14, 2008 and October 22, 2008 by NTP's counsel, Samuel M. Starr to Turner identified NTP as the owner of the property. The subordination certificates required by First American Title Insurance Company, which were completed by NTP, list a variety of entities as the owner, including NTP, "Northland" and Northland Investment Corporation.
On September 17, 2008, Turner made a claim against Northland Trumbull, LLC and Northland Tower, LLC for the "Town Square" project in the amount of $5,360,283. On September 15, 2008, Turner filed its mechanics lien against NTP. It stated that "by virtue of certain written contract ("Contract") with Northland Trumbull Block, LLC and Northland Tower Block, LLC, jointly and severely, with said contract being entered into with the consent of the following: (i) Northland Two Pillars, LLC [NTP], the fee owner of the above-described premises; (ii) Northland Two Pillars Partners, Inc., manager of Northland Trumbull Block, LLC and Northland Tower Block, LLC (iii) Northland Trumbull Block, LLC and/or (iv) Northland Tower Block, Inc . . . [Turner] has a lien under Chapter 847 of the Connecticut General Statutes on the above-described premises and to the improvements and buildings thereon, in the amount of Six Million, Six Hundred Fifty-Three Thousand, Two Hundred and Four Dollars ($6,653,204), plus interest, and such amount claimed is justly due, as nearly as the same can be ascertained."
The lien further states: "this lien is for work, labor and services and material furnished for the construction and renovating of the old Hartford Civic Center and related parking garage and commercial space and the construction of a connected residential tower . . ." It also states that "this lien is filed against Northland Two Pillars, LLC [NTP], the fee owner of the premises" and the premises are described in Schedule A. Schedule A states: "The premises encumbered by the attached Certificate of Mechanic's Lien and notice of intent to claim the lien ("Mechanic's Lien") includes any and all fee and leasehold rights that the owner, Northland Two Pillars, LLC [NTP] . . . has in and to the certain piece or parcel of land previously conveyed to the owner by Limited Warranty Deed from Aetna Insurance Company dated October 19, 2001 . . ." Appended to the schedule is the limited warranty deed with a description of the property.
Defendant Kone filed a notice of mechanic's lien dated October 16, 2008 against NTP, based upon its subcontract with Turner, for the installation of elevators, in the amount of $259,290. The property on which the lien is lodged is the same as described in the limited warranty deed from Aetna to NTP.
Defendant Grodsky, also a subcontractor of Turner, filed a lien against NTP dated July 29, 2008 in the amount of $634,140. The property on which the lien is lodged is the same as described in the limited warranty deed by Aetna to NTP.
All three liens were served upon NTP at 215 Washington Street, Newton, Massachusetts. As noted above, NTP had signed the construction contract with Turner on behalf of Block Entities as its "Sole Member and Manager." That is also the address of the Block Entities and Northland Investments Corporation. All these entities have the same corporate agent for service. NTP and Block Entities have no employees. Only Northland Investment Corporation has employees at the above address.
The plaintiff claims the subject mechanic's liens are invalid because: (1) the mechanic's liens fail to name the correct entity against which the liens have been filed; (2) the liens fail to be based upon an agreement or consent of the owner of the land; and (3) the liens were not served on the owner of the land. In support of these contentions, the plaintiffs assert that the evidence establishes that the liens are filed against NTP, instead of Block Entities; not NTP, but Block Entities, entered into the construction contract upon which the liens are based; and NTP, not Block Entities, was served as the owner of the property.
The court starts its discussion by referring to the relevant statutes:
Section 49-34 provides:
A mechanic's lien is not valid unless the person performing the services or furnishing the materials (1) within ninety days after he has ceased to do so, lodges with the town clerk of the town in which the building, lot or plot of land is situated, a certificate in writing, which shall be recorded by the town clerk with deeds of land, (A) describing the premises, the amount claimed as a lien thereon, the name or names of the person against whom the lien is being filed and the date of the commencement of the performance of services or furnishing of materials, (B) stating that the amount claimed is justly due, as nearly as the same can be ascertained, and (C) subscribed and sworn to by the claimant, and (2) not later than thirty days after lodging the certificate, serves a true and attested copy of the certificate upon the owner of the building, lot or plot of land in the same manner as is provided for the service of the notice in section 49-35. (Italics added).
Section 49-34b provides:
(a) Upon a hearing held on the application or motion set forth in Section 49-35a, [to discharge a mechanic's lien], the lienor shall first be required to establish that there is no 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. (Italics added).
Section 49-33 provides:
(a) If any person has a claim for materials furnished or services rendered in construction . . . of any building . . . and the claim is by virtue of an agreement with or by consent of the owner of the land upon which the building is being erected . . . the building, with the land upon which it stands . . . is subject to the payment of the claim.
(b) The claim is . . . a lien on the land, [and] building . . . and the claim takes precedence of any other encumbrance originating after the commencement of the services. (Italics added).
Defendant's burden of proof in sustaining the validity of their liens is slight — "probable cause," and the plaintiff's burden of proof to establish that the liens should not be sustained is heavy — "clear and convincing evidence." Probable cause is proven by establishing "a bona fide belief in the existence of the facts essential under the law of the action . . . such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it." New England Land Co. Ltd. v. DeMarkey, 213 Conn. 612, 620 (1990).
Our law has long given the mechanic's lien law a liberal interpretation. As stated in F.B. Mattson Co. v. Tarte, 247 Conn. 234, 238 (1998), "Although the mechanic's lien statute creates a statutory right in derogation of the common law, . . . its provisions should be liberally construing in order to implement its remedial purpose of furnishing security for one who provides services or materials . . ."
To the same effect is First Constitutional Bank v. Harbor Village, Ltd, Partnership, 230 Conn. 807, 815 (1994): "We have also repeatedly stated, however, that although a mechanic's lien is in derogation of common law, we do not compel a strict construction of its requirements . . . `We have long endorsed a policy favoring liberal construction of claimed inadequacies in certificates of mechanic's liens in order to achieve the remedial purposes of the mechanic's lien statute.' . . . We recognize that the remedial purpose of the Mechanic's Lien Law is `to furnish security for a contractor's labor and materials' and that this beneficent purpose requires `a generous construction.'"
Plaintiffs argue that passage of the Plain Meaning Statute, Conn. Gen. Stat. § 1-2z, in 2003 changes the legal validity and the precedential force of cases decided prior to that date that interpreted the lien statute liberally so as to achieve its remedial purpose. Plaintiffs make the argument the central focus of their brief, asserting it over and over again. That argument is totally without validity for two reasons:
Section 1-2z
The meaning of this statute shall, in the first instance be ascertained from the text of the statute itself and its relationship to other statutes. If after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield an absurd or unworkable result, extra textual evidence of the meaning of the statute shall not be considered in the body of the text.
First, no cases after 2003 hold that the Plain Meaning Statute affects the precedential significance of decisions rendered prior to passage of the statute. In fact, the Supreme Court has held precisely the opposite. As stated in Hummel v. Marten Transport, 282 Conn. 477, 501, 923 A.2d 657 (2007):
It is perfectly clear from [the] legislative history that the sole purpose of the legislature in enacting § 1-2z was to restore the plain meaning rule that had existed prior to Courchesne. There is nothing in the legislative history to suggest that the legislature also intended to overrule every other case in which our courts, prior to the passage of § 1-2z, had interpreted a statute in a manner inconsistent with the plain meaning rule, as that rule is articulated in § 1-2z. We are unwilling to impute to the legislature such a sweeping purpose in the absence of convincing evidence of that purpose.
Second, many cases since 2003 have quoted from or cited with approval prior decisions stating the liberal interpretation of the lien law. For example: Inter City Development, LLC v. Andrade, 286 Conn. 177, 183 (2008), quoting F.B. Mattson Co. v. Tarte, supra; Rollar Construction Demolition, Inc. v. Granite Rock Associates, LLC, 94 Conn. 125, 129 (2006) quoting F.B. Mattson, supra; Louis Gherdone Excavating, Inc. v. McLean Construction Co., 88 Conn.App. 775, 782, citing Constitution Bank v. Harbor Village Ltd. Partnership, supra; Marmor, Inc. v. Century 21 Across America, No. CV 04401302, judicial district of Fairfield at Bridgeport, January 4, 2005 (Owens, J.), citing several pre-2003 liberal interpretation cases.
Taking the plaintiff's claims for discharging these mechanic's liens in inverse order, plaintiff asserts that the defendants violated § 49-34 by serving NTP, as owner of the property, rather than the real owners Block Entities. The evidence was that NTP and Block Entities all have the same address, 215 Washington Street, Newton, Massachusetts and used the same corporate agent for service. NTP is the sole member and manager of Block Entities. Peter Standish, senior vice president of Northland Investment Corporation, testified that NTP acted as "the board of directors" for the Block Entities. Clearly NTP is the authorized agent of Block Entities for this project, and service on it constitutes service on Block Entities. Moreover, Northland Investment Corporation is also located at the same address and is the only company with employees. The court finds that Northland Investment's employees very likely directed the mechanic's liens to Block Entities. As a consequence, the court concludes that defendants proved probable cause that there was substantial compliance with the § 49-34 requirement of service of the liens upon the owners of the property.
NTP next claims that the liens are invalid because the construction was not done "by virtue of an agreement with or consent of the owner of the land," as required by § 49-33. This requirement was clearly met by the contract between Block Entities, as owners, and Turner, providing for the construction of the residential tower.
Finally, NTP claims it is not the proper entity against which the liens can be filed because it is not the owner of the premises and therefore, the liens violate § 49-34, in this particular, and must be discharged.
At this point, it is important to identify what the matter before this court is really about. It is NOT about holding NTP individually liable for the unpaid amounts owed to Turner, Kone Grodsky for the services they rendered and the materials they furnished for the project. It is about determining the validity of their mechanic's liens. As § 49-33(b) provides, those liens are solely against the land and buildings. That property was properly identified and described in the liens, and plaintiffs do not claim otherwise. If Turner, Kone Grodsky foreclose upon those liens, their recourse will be only against the property. The mechanic's lien law has no remedy for a deficiency judgment against the owner, as the mortgage foreclosure law has.
The provisions of § 49-34 requiring naming the owner of the property in the lien and serving the owner must be read together. They have the common purpose "to protect the due process rights of property owners who would not otherwise have actual notice of the recorded lien." H.S. Torrington Associates v. Lutz Engineering Co., 185 Conn. 549, 554 (1981). That purpose has been here fulfilled. This court determined above that the liens were duly served on Block Entities. Moreover, the Block Entities are plaintiff parties in this action and will have every opportunity to interpose any defenses they have to the mechanic's liens, including their amounts.
Therefore, the narrow and specific issue here presented is whether the error of incorrectly naming NTP in the lien as owner of the property invalidates the liens simply because it fails facially to comply with § 49-34. To wipe out almost $7 million of liens on that basis, especially when the purpose of the provisions in § 49-34 has been fulfilled, dignifies form over substance and defies common sense.
Despite the emphasis of interpreting statutes by looking at their words, even after 2003, our courts have not abandoned the canon that statutes be construed so as to make sense. As the Supreme Court said in ATC Partnership v. Coats North American Consolidated, Inc., 284 Conn. 537, 545 (2007): "In construing a statute, common sense must be used and the courts must assume that a reasonable and rational result was intended."
Turning to plaintiff's specific claim for invalidating the liens, a number of Superior Court cases hold that a mistake in naming the lienor or the lienee does not invalidate a mechanic's lien. In Tilcon Connecticut, Inc. v. J.F. Burnett, CV 97-574226, Judicial District of Hartford (April 1, 1998 Freed, J.) [21 Conn. L. Rptr. 643], Tilcon Roncari, Inc. furnished supplies and materials. It subsequently merged with Tilcon, Connecticut, Inc. which filed the lien. The court held the mistake not fatal to the validity of the lien.
In Big Y Trust v. Wesco Distribution, Inc., No. CV 95-005204S, Judicial District of Windham at Putnam (December 18, 1995 Sferrazza, J.) [15 Conn. L. Rptr. 501], the lien named Big Y Supermarket as the property owner, while the deed stated the owners were three trustees of the Big Y Trust. The court upheld the lien.
To the same effect are Design Professionals v. Sammartino, No. CV 91-47234S, Judicial District of Tolland (February 24, 1994 Klaczak, J.) [11 Conn. L. Rptr. 99]; and McDonald/Sharpe and Assoc. v. Lewis, Ass., No. CV 59790, Judicial District of Middlesex (November 10, 1992 Higgins, J.). Contrary is Park Ridge Owners, Ass'n. v. V.M.B.M, Inc., No. CV 00-0444968S, Judicial District of New Haven (April 19, 2002 Zoarski, JTR).
Our appellate courts have invalidated a mechanic's lien because it was not sworn to under oath, as required by § 49-34. J.C. Penney Properties v. Peter M. Santella Co., 210 Conn. 511 (1989); Lewis Gherlone Excavating, Inc. v. McLean Construction Company, Inc., 88 Conn.App. 775 (2005). But they have also validated mechanic's liens when there have been failures to comply with the letter of § 49-34. Those cases are summarized in First Constitution Bank v. Harbor Village Ltd. Partnership, supra, 230 Conn. at 816. The parties cite to no Connecticut appellate cases, nor has the court found any, in which a Connecticut appellate court invalidated a lien on the ground a wrong entity was named as owner of the property.
Our courts "do not compel a strict construction," of the requirements of the mechanic's lien statutes, First Constitution Bank v. Harbor Village Ltd. Partnership, supra, at 815, but do require "reasonable compliance," J.C. Penney Properties, Inc. v. Peter M. Santella Co., supra at 511, or "substantial" compliance, H S Torrington Assoc. v. Lutz Engineering Co., 185 Conn. 549, 556 (1980).
In the instant case, the facts compel the conclusion that the lienors reasonably complied with § 49-34 by naming NTP as owner of the property rather than the Block Entities.
The mistake they made was a result of the interconnectedness of NTP and Block Entities. These three LLCs did not distinguish themselves in their business relationships with the lienors. Employees of the lienors were led to believe they were dealing with the generic company "Northland," rather than any of the individual LLCs.
Moreover, NTP acted as the company responsible for the project. Prior to the assignment of the air leases to the Block Entities and the contract between them and Turner, NTP had signed the letter of intent for Turner to construct the residential tower and paid Turner over $4 billion dollars for work Turner did. After the assignment and the construction contract, NTP continued to act as the project owner by making construction progress payments to Turner with its checks. These payments continued for four years and amounted to over $90 million dollars. NTP further held itself out as the owner by insisting, when subcontractor liens were filed against NTP as owner, that Turner bond these liens. It never rejected those subcontractor liens on the ground the NTP was not the owner. Furthermore, on several occasions NTP's attorney referred in correspondence to Turner that NTP was the owner of the property.
Finally, and really the bete noir of this case, is the limited warranty deed by Aetna to NTP which conveyed the buildings and improvements upon which the project was constructed. That deed created the confusion that caused the lienors to name NTP as owner. Although plaintiffs' expert called the deed "meaningless" because the City assigned to Aetna only the airspace and not the fee to the buildings and improvements, nevertheless, that deed misled the tax assessor of Hartford to name NTP as the owner of the property. It also mislead the three professional title searchers for the three lienors, all of whom referred to that deed as the source of title in NTP.
It must be noted that a mechanic's lien on an assignment of airspace is highly unusual. Section 49-33 speaks of the mechanic's lien as a claim on "the building [and] the land upon which it stands." As a consequence, a title searcher would normally look for a deed of land to establish the owner for purposes of naming that person on the lien. The limited warranty deed from Aetna to NTP appeared to provide that information.
Even George Brown, Vice President and General Counsel of First American Title Insurance Company, admitted the deed "led people [such as defendants] down the wrong trail" and "led the assessor to the wrong result."
As noted in First Constitutional Bank v. Harbor Village, Ltd. Partnership, 230 Conn. 807, 816 (1994), "In accordance with this policy our courts have been liberal in validating liens despite claimed errors of the face of the lien certificate where the mistake was made in good faith and no resulting prejudice was claimed . . . As we have reasoned many times, `we do not think a court of equity can be called upon to declare [a] lien utterly void upon the motion of persons who have lost nothing by the mistake.'"
The court added, "Reasonable compliance with statutory requirements have been routinely measured by whether the lienor's mistake was made in good faith and by whether any prejudice resulted from the mistake." 818.
In this case, defendants' mistake in naming NTP as the owner rather than Block Entities was clearly made in good faith, in light of the interconnection of the "Northeast" entities, NTP acting as or holding itself as owner, and the misleading nature of the limited warranty deed. Moreover, not only has NTP not been prejudiced as a consequence of the error, but it has not even offered any evidence to show prejudice.
Based on the foregoing, the court finds that the defendants have sustained the burden of establishing by probable cause the validity of their liens. The motion to discharge is denied.