Opinion
No. CV05-4005897 S
December 5, 2007
Memorandum of Decision
This controversy arises out of the construction of a single-family residence in Westport. The plaintiff is a Connecticut corporation which has been engaged in the contracting business for over twenty years and holds both new home and home improvement contractor licenses issued by the State of Connecticut. The defendant is a home owner who in 2003, along with her husband, entered into a contract to build a new 8,400 sq. ft. home on her two-acre lot in Westport adjacent to the small ranch house where she resided with her family.
The contract contemplated that after the new home was completed and occupied, the ranch house would be demolished to make a room for a new garage and studio which would be connected to the new home by an enclosed hallway. After completion of the new home and during construction of the garage/studio in 2005, disagreements arose which led both parties to issue notices of termination based on the other party's alleged fault. The plaintiff filed a mechanics lien against the defendant's property and subsequently commenced an action to foreclose that lien. The plaintiff's amended complaint dated November 3, 2005 also contains a second count alleging breach of the construction contract by nonpayment of sums due thereunder and a third count alleging breach by violation of the implied covenant of good faith and fair dealing.
The defendant's mortgagee, Merrill Lynch Credit Corporation, is also named as a defendant with respect to the plaintiff's foreclosure claim. The mortgagee appeared, but did not participate in the trial in this matter. This memorandum of decision refers to Susan Levy Shuldman as the "defendant."
The defendant's answer and counterclaim dated July 21, 2005 denied the plaintiff's claims and asserted special defenses and counterclaims. The operative answer, dated December 28, 2005, pleads the following special defenses: 1) unclean hands; 2) payment; 3) performance; 4) set-off; and 5) violation of the Home Improvement Act. The defendant's counterclaim set forth counts alleging 1) breach of contract; 2) unjust enrichment; 3) breach of the implied covenant of good faith and fair dealing; 4) conversion; 5) statutory theft; 6) negligent misrepresentation; 7) willful and wanton misrepresentation; 8) violation of the Connecticut Unfair Trade Practices Act ("CUTPA") and 9) slander of title.
The ninth count of the defendant's counterclaim was stricken by the court on October 31, 2006. Thereafter, on November 13, 2006, the plaintiff filed an answer denying the essential allegations of the defendant's remaining counterclaims. On the same date the plaintiff filed a reply denying the allegations of the defendant's special defenses. On August 13, 2007 the plaintiff filed a pleading asserting four "matters in avoidance" with respect to the defendant's claim that the Home Improvement Act had been violated. Those matters included: 1) the Home Improvement Act does not apply to new home construction; 2) estoppel; 3) the contract complies with the Home Improvement Act; and 4) the defendant's bad faith.
After the pleadings were closed the matter was claimed for a jury trial. During pre-trial hearings before the trial judge immediately prior to the commencement of jury selection, the parties agreed to waive a jury trial. Thereafter the court heard evidence from August 15, 2007 to September 5, 2007.
During the course of the trial, the court heard testimony from numerous witness and received hundreds of exhibits in evidence. After oral arguments were completed on September 6, 2007, the court directed the parties to file simultaneous briefs and proposed findings of fact.
THE FACTS — THE CONTRACT
The court finds the following facts to be established by the pleadings and/or the evidence. In 1999 defendant, Susan Levy Shuldman, was the owner of a ranch house with approximately 2,500 sq. feet in area on a 2-acre lot located at 14 Broadview Road in Westport where she resided with her husband, Bart C. Shuldman and their two daughters. At all relevant times, Bart Shuldman was the chief executive officer and substantial shareholder of a publicly held company, Transact Technologies, Inc.
In 1999, the Shuldmans engaged a designer, Paul Harris of Cole Harris Associates, to design a new home to replace their existing residence. Harris had previously performed work for the Shuldmans with respect to other properties as well as work for Transact Technologies. Harris had also worked with the plaintiff on several previous construction projects. Eventually, Harris and the Shuldmans agreed on a plan to construct a new residence at 14 Broadview Road, immediately adjacent to the existing ranch house and to remove the ranch house after the completion of construction.
The construction of a second residence while the original residence remained in place required special permission from the Town of Westport. On July 7, 1999 while the project was first under consideration, Bart Shuldman wrote to Eleanor Lowenstein, the chair of the Westport Planning and Zoning Commission. In his letter Bart Shuldman asked for permission for his family to continue to occupy their "small ranch house" while "building a new home on the property." Bart Shuldman offered to "guarantee" removal of the existing structure upon completion of the new home. (Ex. 107.) By letter dated August 6, 1999, Katherine Barnard, Westport's Director of Planning and Zoning notified Bart Shuldman that the Planning and Zoning Commission had approved his request upon the following conditions:
No Zoning Certificate of Compliance will be issued to allow occupancy of the new house until the existing house is demolished and only one dwelling unit exists on the property
The existing house must be torn down no more than 18 months from the date the zoning permit is issued.
The existing dwelling must be owner-occupied. (Ex. 107.)
After Harris prepared plans for the Shuldmans' new residence, a number of contractors, including the plaintiff, were invited to submit bids on the project. Following the receipt of bids and after considering the costs, the Shuldmans elected not to proceed with the project at that time. The Shuldmans' decision was based, to some extent, on the value of Bart Shuldman's holdings of Transaction Technologies stock at that time.
In late 2002, the Shuldmans decided to proceed with the project and the plaintiff was invited to submit a new bid on the project. In early 2003, the Shuldmans engaged in extensive negotiations with the plaintiff and with Harris aimed at revising the project so as to reduce the cost. These negotiations led to an agreement which was incorporated into a written construction contract. The cost reductions were achieved primarily though the reduction of "finishes allowances." Finishes allowances are the amount allocated to interior features forming part of the contract, including, cabinetry, flooring, painting, molding and trims and other millwork.
The contract, dated August 30, 2003, was based on AIA Document A107-1997. (ex. 1). The parties to the contract were the defendant and Bart C. Shulman, as "Owner" and the plaintiff as "Contractor." The terms of the contract relevant to this litigation include the following:
Although Bart C. Shuldman was a party to the contract he was not named as a defendant in this litigation.
In the recitations, Cole Harris Associates is designated as the architect under the contract. Paul Harris, a principal of Cole Harris, is identified as "Project Designer." Although Paul Harris does not personally hold an architect's license from any state, he served as the "architect" under the contract to the exclusion of any other employee or principal in his firm.
Article 2.1 provides that the date of commencement will be the latter of the date of issuance of a building permit, date of execution of the agreement or the date of receipt of final contract drawings from the architect.
Article 2.2 provides that "Contract Time shall be measured from the date of commencement."
Article 2.3 requires the Contractor to complete the work in 487 consecutive days, subject to adjustment as provided in the contract documents.
Article 3.1 requires that the plaintiff construct the project for the stipulated sum of $2,150,000, subject to adjustment as provided in the contract documents.
Article 3.1.1 provides that "For increases in the work made for the Owner, the Contractor's markup shall be agreed upon lump sum amount or 20% overhead and profit on the estimated costs of such increases."
Article 3.3 provides that: "For additional work that requires the Contractor's own personnel the following rates apply: . . . General Conditions $600/calendar day."
Article 4.1 provides that the Contractor may submit monthly Applications for Payment to the Architect as work progresses. When the Architect certifies the Application, the Owner is required to pay the amount of the certified Application within ten days after the architect receives the Application.
Article 4.1.3 provides for interest on overdue payments at the rate of 1% per month, except those disputed in good faith.
Article 4.2.1 allows the Owner, upon Substantial Completion, to withhold "one and one-half (1.5) times the agreed value of the punchlist to be completed, and the remaining unpaid balance shall be paid to the Contractor on the next progress payment."
Article 5 lists the contract documents. They include "Project Manual dated April 19, 2001 (to be updated)."
Article 7.3 provides "If the Contractor defaults or persistently fails or neglects to carry out the Work in accordance with the Contract Documents, or fails to perform a provision of the Contract, the Owner, after 10 days written notice to the Contractor and without prejudice to any other remedy the Owner may have, may make good such deficiencies and may deduct the reasonable cost thereof, including Owner's expenses and compensation for the Architect's services made necessary thereby, from the payment then or thereafter due the Contractor."
Article 9.1 provides The Architect will provide administration of the Contract and will be the Owner's representative (1) during construction, (2) until final payment is due . . .
Article 9.4 requires the Architect to review and certify amounts due under Contractor's Applications for Payment within three working days of receipt.
Article 9.7 provides The Architect will interpret and decide matters concerning performance under, and requirements of, the Contract Documents on written request of either the Owner or Contractor. The Architect shall make initial decisions on all claims, disputes and other matters in question between the Owner and Contractor . . .
Article 9.10.1 provides "Claims, disputes and other matters in question arising out of or relating to this Contract . . . shall be referred to the Architect for decision. Such matters . . . shall after initial decision by the Architect or 30 days after submission of the matter to the Architect, be subject to mediation as a condition precedent to arbitration of the institution of legal or equitable proceedings by either party."
Article 9.10.2 recognizes the right of a party asserting a mechanic's lien to protect its interests notwithstanding the provisions of Article 9.10.1
Article 9.10.4 of the standard AIA contract, which provides for mandatory arbitration of disputes under the Construction Industry Rules of the American Arbitration Association, was replaced by a provision permitted arbitration only "if both parties agree to arbitrate, or the parties have the right to proceed in a court of law."
Article 9.11 sets forth a mutual waiver of consequential damages.
Article 12.1 provides for changes in the work to be reflected in written Change Orders to be signed by the Contractor, the Owner and the Architect.
Article 14.2.1 requires the Architect, within three working days of receipt of an Application for Payment to issue a certification for payment in the full amount or a partial amount or notify the Contractor and the Owner in writing of withholding certification in whole or in part.
Article 14.2.2 provides, in part, "The issuance of a Certificate for Payment will further constitute a representation that the Contractor is entitled to payment of the amount certified."
Article 14.2.3 provides, in part, "The Architect may also withhold a Certificate for Payment or, because of subsequently discovered evidence, may nullify the whole or part of a Certificate for Payment previously issued, to the extent as may be necessary in the Architect's opinion to protect the Owner from loss for which the Contractor is responsible, including loss resulting from the act or omissions described in Subparagraph 8.2.2 because of
.1 defective work not remedied;
.2 third party claims filed or reasonable evidence indication probably filing of such claims unless security acceptable to the Owner is provided by the Contractor;
.3 failure of the Contractor to make payments properly to Subcontractors or for labor, materials or equipment;
.4 reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum
.5 damage to the Owner or another contractor;
.6 reasonable evidence that the Work will likely as not be completed within the Contract Time and that the unpaid balance would probably not be adequate to cover reasonably estimated, actual or liquidated damages for the anticipated delay; or
.7 persistent failure to carry out the Work in accordance with the Contract Documents.
Article 14.3 requires the Contractor to promptly pay each Subcontractor upon receipt from the Owner of payment on account of such Subcontractor's work.
Article 14.4.1 defines "Substantial Completion" as "the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use as determined by the date the Certificate of Occupancy is issued. If the Certificate of Occupancy is delayed through no fault of the Contractor, including, but not limited to, delays in the zoning and permitting process, then Substantial Completion shall be defined as the time when Contractor's Certificate for Payment is approved for 95% completion."
Article 19.1 provides "If the Architect fails to recommend payment for a period of 30 days through no fault of the Contractor, or if the Owner fails to make payment thereon for a period of 30 days, the Contractor may, upon seven additional days written notice to the Owner and the Architect and a reasonable opportunity for the Owner to cure or begin to cure the default terminate the Contract and recover from the Owner payment for the Work executed and for proven loss, with respect to materials, equipment, tools and construction equipment and machinery, including reasonable overhead profit and damages applicable to the Project."
Article 19.2 provides:
.1 The Owner may terminate the Contract if the Contractor:
.1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials;
.2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractor;
.3 persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or
.4 otherwise is guilty of a substantial breach of the Contract Documents.
.2 When any of the above reasons exists, the Owner, upon certification by the Architect that sufficient cause exists to justify such action may, without prejudice to any other remedy the Owner may have and by giving the Contractor seven days' written notice, terminate the Contract and take possession of the site and may finish the Work by whatever reasonable method the Owner may deem expedient.
Although not explicitly stated in the text of the contract, the parties and Harris envisioned a two-phased project. In the first phase a new 8,400 sq. ft. residence would be constructed adjacent to the existing Shuldman residence, while the Shuldman family continued to dwell there. After completion of the first phase, the Shuldmans would relocate to the new residence and the second phase of the project would commence. In the second phase, the old residence would be demolished, and a four-car garage with an attached studio would be constructed in its place. The second phase also contemplated the construction of a hallway connecting the new residence with the garage/studio. The total size of the second phase would be approximately 1,600 sq. ft.
THE FACTS — PERFORMANCE OF THE CONTRACT
Shortly after the contract was signed the plaintiff assigned Mark San Angelo and Richard Valente to the project as project manager and project superintendent, respectively. At the same time the plaintiff moved a trailer to the job site and began site preparation work. Building permit #63949 was issued by the Town of Westport on October 15, 2003 (ex. A). Purportedly acting pursuant to Article 2.1 of the contract, San Angelo issued an e-mail addressed to "Shuldman Project" titled "Notice of Commencement Date" (ex. 88) stating that the commencement date for contract purposes was October 14, 2003. San Angelo testified that the e-mail was sent to a group address that included both Bart Shuldman and Paul Harris. Neither Harris nor Shuldman recall having received the starting date e-mail or any other communication addressed to them under the group heading — "Shuldman Project." In this regard, the court finds the testimony of San Angelo to be more credible than that of Harris and the Shuldmans.
Pursuant to the terms of the contract, the plaintiff submitted periodic applications for payment to the architect on AIA form G702 entitled "Application and Certificate for Payment." Each Application was submitted with an invoice reflecting the amount plaintiff claimed to be due. During the course of the project and the disputes that arose the applications for payment were referred to by the plaintiff, the Shuldmans and their respective counsel and Harris as "applications," "applications for payment," "billings," "requisitions" and/or "certificates." In the context of the parties' discussions and in the trial, there was never any confusion caused by the use of these various terms for the same documents.
Throughout the course of the project, the parties adopted the practice of documenting authorized changes in the work on additional work authorizations (AWAs) which were approved by the Shuldmans and Harris. The AWAs were summarized in change orders (COs) which were, in most cases, signed by Harris and the Shuldmans.
In order to provide financing for the construction of their new residence the Shuldmans obtained construction mortgage financing from Merrill Lynch Credit Corporation. The total amount of the construction loan was $2,235,000, approximately $85,000 more than the stipulated sum under the Contract. For the first fourteen applications for payment the parties adopted a procedure allowing for payments of applications by both Merrill Lynch and the Shuldmans. Under the procedure each application for payment would list the portions of the completed work under the original contract and the additional work called for in AWAs and change orders. Merrill Lynch would pay the share allocated to the original contract while the Shuldmans would pay for the additional work. In order to obtain payment from Merrill Lynch the plaintiff would submit the signed payment application together with an application on forms required by Merrill Lynch. Merrill Lynch would make payment directly to the plaintiff and increase the amount of the outstanding construction loan on its books.
In connection with the pouring of the foundation of the new residence in the fall of 2003, a minor problem arose that foreshadowed the more serious disagreements between the parties fifteen months later. The foundation had been prepared for pouring in accordance with the plans prepared by Harris. An inspection by the Westport Building Department was arranged. The inspector was not satisfied with the quantity of reinforcing rods, known as rebar, in the foundation and withheld approval until additional rebar was added. Technically, the building inspector's decision was subject to an administrative appeal. However, the project, which was then fully mobilized, would come to a halt while the appeal was pending. Thus, the only practical course of action was the one taken by the plaintiff, ordering the additional rebar and making it part of the foundation. The cost of the additional rebar was submitted to Harris and the Shuldmans as Additional Work Authorization #4. Bart Shuldman was furious and refused to pay for the additional rebar, claiming that he should have been consulted in advance. Bart Shuldman's uncompromising attitude caused Kelly Wright, the plaintiff's president, to lose his temper and consider quitting the job. In fact he threatened to do so.
Harris was an experienced construction professional and the owners' representative and advisor under the terms of the contract. However he did little to allay Bart Shuldman's suspicions that the plaintiff was attempting to take advantage of him or to explain to him, that the plaintiff had little choice but to add the additional re-bar foundation as required by the building inspector. Nevertheless, Harris was eventually able to broker an agreement to split the cost of the additional rebar and the project proceeded without serious problems for the next fifteen months. Weekly meetings were held at the site which were generally attended by either or both of the Shuldmans, plaintiff's project manager and site superintendent and Harris. However, because of the bad feelings engendered by the rebar dispute, subsequent communications between the Shuldmans and the plaintiff did not include direct contacts between Bart Shuldman and Kelly Wright.
As work progressed on the new phase I residence the Shuldmans and Harris made decisions regarding interior finishes in that structure. Instead of leading to an $80,000 reduction in the cost of the project, the choices of finishes increased the cost of the project considerably. In addition, certain features were added to the project or upgraded, by way of additional work authorizations and change orders including a wine cellar, upgrading of the windows, changing the roof from asphalt to cedar shingles, changing gutters and leaders from aluminum to lead coated copper, gas piping of fireplaces, etc.
During the course of the project, the plaintiff suggested that the Shuldmans consider vacating the ranch house so that work on Phases I and II could proceed simultaneously. The plaintiff went so far as to offer a credit to the Shuldmans to induce them to move to rental quarters while the project was being completed. In the end, the Shuldmans decided for reasons of cost and family disruption to remain in the ranch house until Phase I was completed.
The original schedule had envisioned that phase I would be ready for occupancy by the fall of 2004. However, a number of factors served to delay the project. These included: the failure of the plaintiff's cabinet supplier in the spring of 2004; the untimely delivery of shop drawings by Harris; changes in the scope of the work being made "on the fly" by the Shuldmans and Harris. There was no evidence offered by either party satisfactorily establishing the length of the delay caused by any of these factors.
In June 2005, Kelly Wright became concerned over perceived delays caused by choices of interior finishes and changes to finishes directed on the job site by Harris. He foresaw the possibility of the need to eventually bill for "general conditions charges" because of the extent to which these delays had extended the time required to complete the project. Kelly Wright testified that "general conditions" charges represent the cost to a contractor of the overhead associated with maintaining a presence on a job site. These costs would include, the salary of the on-site project superintendent, the cost of providing a trailer to serve as the on-site office, electricity for the trailer and the job site, insurance of the job site and the rental cost of portable toilets and dumpsters. If the completion of the job took more time than the 487 days budgeted in Article 2.3 of the contract, the plaintiff would bear the additional expense of maintaining "general conditions" at the job site, unless additional "general conditions charges" were agreed to.
Because of Bart Shuldman's attitude on the re-bar issue he chose to discuss possible general conditions charges with Harris rather than Bart Shuldman. According to Kelly Wright, Harris advised him to leave the matter to later when he would "handle Bart." Although Harris denied remembering the conversation, the court finds Kelly Wright's testimony in this regard to be more reliable.
Toward the end of 2004, work on Phase I was nearing completion. The plaintiff had incurred considerable expenses in providing the upgraded interior finishes chosen by the Shuldmans and Harris. Under the contract finishes had been budgeted and billed as allowance items in anticipation of achieving a savings of $80,000 over the amount set forth in the plaintiff's original estimate of the cost of the job. The defendant and Harris were aware that the choices made with respect to finishes had long since negated the possibility of any savings and had, in fact, far exceeded the initial estimate. All parties were striving to complete Phase I so that the Shuldman family could move to their new residence and demolition of the ranch house could proceed, clearing the way for the construction of the garage/studio/connecting hallway under Phase II.
Because of the pace of work, the plaintiff was not able to prepare a fully integrated Application for Payment incorporating the additional charges for finishes. In that environment, San Angelo requested Bart Shuldman to pay an advance of $50,000 to provide cash for payments to sub contractors and suppliers. After some discussion, a payment of $43,891 was made to the plaintiff by Bart Shuldman on January 10, 2005, the same day that the Shuldman family took occupancy of their new residence.
Between November 2003 and November 2004, applications for payment were made on a monthly basis by Mark San Angelo, plaintiff's project manager. These, in turn were approved by Harris and paid by the Shuldmans or their construction lender. The protocol which the parties adopted required the plaintiff to segregate charges relating to the original contract requirements from the additional work authorizations and change orders. Progress payments on the original work were submitted to and paid for by the Shuldmans' contraction lender and the balance was paid by the Shuldmans directly.
After Phase I was completed in early January 2005, the Shuldmans immediately occupied the new home as their principal residence. They were very pleased with the quality of the plaintiff's work on phase I and sent an e-mail to the plaintiff stating: "We love our new home." (Ex. 42.)
On February 3, 2005 San Angelo submitted Application for Payment #16 (ex. 17) to Harris for approval in the amount of $220,871. That application included a large share of the cost of the "finishes" for Phase I which had been completed in January 2005. The application allocated responsibility for payment between Merrill Lynch, described as "the bank' ($69,345) and the Shuldmans ($151,526). Harris failed to take action on Application for Payment #16 within three working days of submission as required by the contract. However, on February 10, 2005 Bart Shuldman sent an e-mail to Mark San Angelo claiming that the press of business had prevented him from devoting attention to the house and asking him to resubmit Application #16 for the same amount of money, but allocating a greater share to Merrill Lynch and less to the Shuldmans. (Ex. 44.) San Angelo agreed to Bart Shuldman's request on the same day and promised to bring a revised Application for Payment to the project meeting scheduled for the next day. San Angelo prepared a new application labeled Application #16R (ex. 18) which allocated a larger portion of the charges to the original work, which Merrill Lynch would pay, and less to the change orders and exceeded allowances which the Shuldmans would pay. Application #16R was submitted to Harris and approved by him at the February 11, 2005 meeting. Thereafter, the plaintiff sent an application to Merrill Lynch to draw down on the Shuldmans' construction mortgage. On the next day, Harris left for a vacation which lasted until the end of February.
Coincidentally, San Angelo abruptly resigned his position with the plaintiff on February 11, 2005 following the Shuldman project meeting. The plaintiff promptly appointed Christopher Wright to succeed San Angelo as project manager. Despite his resignation, San Angelo attended meetings with the Shuldmans and their representatives in an effort to answer questions that arose concerning the charges for finishes included in the applications for payment relating to Phase I.
On February 18, 2005, Bert Shuldman made a payment of $21,882 to plaintiff which included the Shuldmans' presumed share of the Application for Payment #16R. The Shuldman family then left town for a week's vacation which was prolonged by weather-related flight delays. On February 18, 2005, the plaintiff also received a check from Merrill Lynch in the amount of $69,345.00. As a result of these transactions, a total of $91,227 had been paid on Application for Payment #16R leaving a balance due of $129,644. This payment delinquency stressed the plaintiff's ability to make payments to the sub-contractors it had engaged to perform work on the Shuldman project.
In late February, the Shuldmans returned from vacation and Bart now found that he had the time to discuss the charges for finishes which had been billed as a major part of Applications #16 and #16R. He was not willing to fund the unpaid portion of Application #16R until he was satisfied that he understood all the billings for finishes. The plaintiff was in a position to explain most of the finishes charges. However, a substantial portion of the amount billed by the painting sub-contractor was for work which was performed under the on-site direction of Paul Harris. Harris would or could not make himself available to verify and reconcile these charges. Things quickly reached an impasse and the Shuldmans retained counsel to advise them in the dispute. In the meanwhile the plaintiff remained on the job and proceeded to demolish the ranch house in preparation for the execution of Phase II of the work.
The Shuldmans' failure to pay the balance due on Application #16R angered Kelly Wright and he decided it was time to raise the issue of general conditions charges. On March 3, 2005 he wrote to Harris claiming that changes and delays caused a delay of 4 1/2 months in the project causing out-of-pocket losses of $75,000. He offered to accept a lesser amount in return for a quick resolution and asked Harris to support his claim. The letter was hand delivered to Harris by Valente.
Kelly Wright's letter was forwarded by Harris to the Shuldmans and their counsel. The Shuldmans' counsel then wrote the plaintiff's counsel on March 11, 2005 to establish an agenda for a meeting of parties and counsel scheduled for the next week (ex. 24). He specifically requested that Kelly Wright not attend the meeting because of his recent unspecified "threatening" behavior. The Shuldmans' counsel purported to justify the failure of his clients to pay the balance of Application #16R on the several grounds, including: 1) the resignation of San Angelo; 2) the alleged inability of San Angelo to explain the charges on the application to the satisfaction of the Shuldmans and Harris; and 3) an alleged recommendation of the architect under Article 14.2.3 of the Contract. No evidence of any such recommendation was produced at trial.
In the penultimate paragraph of his March 11, 2005 letter the Shuldmans' counsel invoked the provisions of Article 9.10.1 and referred the disputed issues to the architect for decision. He also included in that letter a "punchlist" prepared by Bart Shuldman and Harris purportedly justifying the withholding of $24,500 to cover the cost of completion or repair of the listed items. Neither the items set forth in the punch list nor their value was "agreed" as required by Article 4.2.1 of the contract. Since only Phase I of the contract had been completed, it is questionable as to whether the contractual precondition of "substantial completion" required for the creation of any punchlist had been met. Plaintiff's counsel pointed out this apparent oversight of the contractual provisions to the Shuldmans' counsel in a letter dated April 4, 2005. (Ex. 30.)
A meeting was held as scheduled on March 15, 2005 and resulted in an exchange of positions and some narrowing of differences, but did not result in resolution of the parties' differences or in the payment of the balance of Application #16R.
At about the same time the market price of the stock of Bart C. Shuldman's company suffered a significant decline. In one day the stock plunged from about $17 a share to about $12 a share on extremely high volume. Over the next few weeks the share price continued to decline to less than $10 a share. The decline cost Bart Shuldman well over $1 million in lost value of his holdings of stock and options. Nevertheless, he claimed that this deterioration of his personal financial position played no part in the failure to pay the plaintiff the amounts due on approved applications for payment or in his subsequent conduct. Bart Shuldman's demeanor on the witness stand and his professed inability to recall the facts concerning the fall in the stock price calls his credibility into serious question. However, for reasons hereinafter set forth, the court finds that Bart Shuldman's motivations are not ultimately relevant to the issues of this case.
On March 18, 2005, the Shuldman's counsel wrote to the plaintiff's counsel to summarize his client's position following the meeting of March 15, 2005. (Ex. 27.) In that letter he states "Other than the Revised Budget Estimate referred to above, the Shuldmans believe they have signed every requested change order." Despite her counsel's statement in that letter, the defendant now claims that she is not responsible for paying for any work performed pursuant to Change Orders #10, dated February 10, 2005, because neither she nor her husband signed those documents. On its part, the plaintiff claims that the March 18, 2005 letter constitutes a binding admission which the defendant may not now dispute.
On March 21, 2005, Christopher Wright caused the plaintiff to originate AWA #37, claiming general conditions charges of $142,000 based on 197 days of added time for execution of the work caused by changes in the work and by delays attributable to Harris and the Shuldmans. The document recited that the plaintiff "will accept a reduced amount of $75,000.00 for general conditions charges for payment of current invoice within 10 days. We reserves (sic) the right to seek full payment of outstanding general conditions if payment isn't received and this issue needs to be litigated." The general conditions charges set forth in AWA #37 were included in CO #12, also dated March 21, 2005, in the amount of $90,000. However, these general conditions charges were not billed or invoiced to the Shuldmans or Harris as part of an Application for Payment or otherwise.
On March 24, 2005, while counsel for the parties continued to exchange correspondence aimed at resolving their client's differences, Paul Harris took an unusual action. He sent a letter to the plaintiff (ex. LL) purporting to nullify or withdraw his approval of Application #16R. In the second paragraph of his letter he states:
Billing #16. We now have two #16's, an original that I signed and a subsequent #16 that had been revised. I would like to nullify the first one and review your "revised" #16. I believe the "revised" #16 will still require changes that have been reviewed in a meeting that took place at Alan Spirer's office. I also understand that you have some additional information that has been passed along to Bart via email regarding deductions/credits/etc that I need to review with you before we can put #16 back in proper order for submittal.
Harris testified that he sent this letter at the express direction of Bart Shuldman. At that time payments on Application #16R were more than a month overdue. All disputes between the parties had, by virtue of the March 11, 2005 letter from the Shuldman's counsel, been referred to Harris for decision pursuant to Article 9.10.1 of the contract. Harris' letter of March 24, 2005 letter does not purport to decide the issue referred to him nor does it indicate any intention to fulfill his role under that provision of the contract. Harris testified at length concerning the justification for his purported nullification of Application for Payment #16R. His memory as to events and motivations was unclear and often at odds with his deposition testimony. His answers to the same question seemed to change depending upon which party was examining him.
The second paragraph of Harris' letter of March 24, 2005 presents a number of additional problems. First, he is evidently confused as to whether he signed Application #16 or Application #16R. The parties seem to have mutually agreed to ignore this mistake and to treat the letter as an attempt to nullify the approved and certified Application #16R. Secondly, Harris does not actually purport to nullify his prior approval, he only states that he "would like to nullify the first one . . ." However, despite Harris' lack of clarity, the parties treated Harris' letter as an attempted nullification of Application #16R and ignored his imprecise language as well as his inaccurate identification of the Applications.
The court will do likewise.
More importantly, Harris' attempted nullification did not comply with the provisions of the contract pertaining to the architect's limited right to nullify a previously approved Application for Payment. Article 14.2.3 of the contract allows the architect to nullify previously approved applications for payment only under the very limited circumstances enumerated in subsections .1 to .7. Harris' letter fails to specify any ground for his action. The defendant now claims that nullification was justified on the ground of subsection .4 "reasonable evidence that the work cannot be completed for the unpaid balance of the Contract Sum." The evidence does not support that claim. Moreover, Article 14.2.3 imposes a requirement that any nullification be based on "subsequently discovered evidence." Harris' letter did not include any reference to the existence of subsequently discovered evidence. At trial the defendant did not demonstrate that any subsequently discovered evidence existed at the time of Harris' attempted nullification or at any time thereafter. Bart Shuldman's excuse for not honoring his obligation to pay Application #16R was based on a claim of inadequate documentation, not newly discovered evidence. The court concludes that Harris' purported nullification of the Application #16R was ineffective.
From the beginning of discussions in early March 2005 until early June 2005 when attempts to compromise the differences between the parties were abandoned, Bart Shuldman consistently failed to engage in meaningful discussions with plaintiff's representatives and Harris concerning the billings for the finishes selected by the Shuldmans and Harris which resulted in the allowances for such items to be exceeded. Instead, Bart Shuldman focused on withholding payments based on reconciliations of credits which, under the Contract were not appropriate until the time of final payment at the end of Phase II.
In her post-trial brief and her proposed findings of fact, the defendant claims that at various times during the spring of 2005, the Shuldmans did not owe anything to the plaintiff, but had, in fact, overpaid the plaintiffs. The defendant reasons that if Harris effectively withdraw or nullified his certification of Application #16R, then the unpaid portion of that application was no longer due and payable. It is claimed that, under those circumstances, payments made to the plaintiff with regard to Application #16R should have been applied to later applications. In post-trial oral argument, defendant's counsel conceded that if the court found that Harris' purported nullification of his certification of Application #16R was ineffective, there would be no basis on which the defendant could show that the Shuldmans were not delinquent in their obligations to the plaintiff from February 21, 2005 until the date of the plaintiff's termination notice of May 26, 2005.
Under the provisions of Article 4.1.2 of the Contract, payment in full of Application #16R was due ten days after Harris received the application on February 11, 2005.
Harris provided little help to either party or their counsel in their efforts to reconcile their differences. Ultimately, the plaintiff suggested that the Shuldmans employ an independent advisor or owner's representative to determine whether the documentation which the plaintiff had provided to the Shuldmans justified their changes for finishes. Bart Shuldman rejected this proposal, insisting that he alone would determine whether he was satisfied with the plaintiff's documentation and reconciliation of charges. There is no provision of the contract which supports the position taken by Bart Shuldman in this regard.
During the course of these discussions, the plaintiff's controller, Ed Lord, prepared spreadsheets attempting to demonstrate to Bart Schuldman that, even conceding his position with respect to most issues and setting aside generous allowances for his punch list, the Shuldmans were still delinquent in making payments to the plaintiff. Although the Shuldmans failed to make the requested minimum payments to the plaintiff, the defendant now claims that the spreadsheets prepared by Lord were relied on by the defendant and constitute binding admissions. The court disagrees. The defendant has failed to demonstrate any action or change of position made by the Shuldmans in reliance upon Lord's spreadsheets. Further, the evidence shows that at the time of Lord's attempts to convince Bart Shuldman to make payments to plaintiff to keep the project funded, the plaintiff and, perhaps, the Shuldmans were attempting to resolve the differences between the parties and get Harris to reconcile the bills for the painting work that he had personally directed toward the end of phase I. Under these circumstances, the court finds no basis to limit the plaintiff's claims to the amounts set forth in Lord's spreadsheets or to find that these calculations, in some way, excused the Shuldmans from their obligations to make timely payments under the contract.
On May 26, 2005, the plaintiff's counsel sent notice of termination pursuant to Article 19.1 of the contract on the ground of non-payment of Applications for Payment #16 and #17 for more than thirty days after they were due. (Ex. 31.) A notice under Article 19.1 commenced a period within which the defendant had a right to cure the default. The period consisted of a seven-day period plus "a reasonable opportunity for the Owner to cure or begin to cure the default." Under the circumstances, it is clear that the cure of the default would involve payment of the past due amounts. On June 1, 2005, one day before the expiration of the seven-day period, the defendant sent a check to the plaintiff in the amount of $2,083.92 marked "payment in full through requisition #19" (ex. 33). The check was rejected as insufficient and returned to the Shuldmans' counsel. The defendant presented no evidence that any additional time was required to provide her with a reasonable opportunity to cure the default. The court finds that the Shuldmans were not entitled to any additional time to cure their default with respect to payments due under the contract and concludes that the plaintiff's notice was effective to terminate the contract as of June 2, 2005.
On June 10, 2005 the Shuldman's counsel wrote to the plaintiff's counsel purporting to give notice of termination pursuant to Article 19.2 of the contract. (Ex. 37.) The letter enumerated the following reasons for the termination:
1. The Contractor's persistent or repeated refusal or failure to supply enough properly skilled workers or proper materials:
2. The Contractor's failure to make payment to subcontractors for materials or labor in accordance with the respective agreements between the contractor and subcontractors; and
3. The Contractor's substantial breach of the Contract.
The June 10, 2005 letter claimed that the reasons for the termination had been confirmed by the architect as required by Article 19.2.2 of the contract. In support of that claim the Shuldmans' counsel attached a letter dated June 7, 2005 from Harris addressed to him. (Ex. 38.) The text of Harris' letter is one sentence long:
I believe there is reasonable cause to terminate the Shuldman-Wright Brothers contract based on the contractor's poor performance or lack of performance in time, proving labor and material, payment or proof of payment to subcontractors and accounting and documentation.
The court notes that, in large measure, the grounds claimed in the notice of termination fail to match those purportedly certified by Harris. However, the court need not determine whether the notice and the Harris' certification are sufficiently specific to inform the plaintiff as to the purported grounds for termination. The court finds that the notice of termination sent by the Shuldmans' counsel was ineffective to terminate the contract because the contract had already been terminated when the defendant failed to cure the default in payment referenced in the plaintiff's May 26, 2005 notice. Accordingly, the court finds that the defendant's notice of termination dated June 10, 2005 was, in any event, unavailing.
Prior to terminating the contract and leaving the project, the plaintiff addressed many of the items set forth on the Shuldmans' "punch list." The plaintiff also performed substantial work on Phase II which was reflected on Applications for Payment #17, #18, #19 and #20. Applications for Payment #19 and #20 were not certified by Harris, however, the evidence supports the plaintiff's claim that the work set forth on those applications was performed in accordance with the contract.
On June 13, 2005, the plaintiff served and filed a mechanic's lien against the 14 Broadview Road property in the amount of $324,600.00. (Ex. 23.) The lien was filed by the plaintiff within ninety days after the plaintiff ceased performing services and furnishing materials, describes the premises, states the amount claimed, states the name of the person against whom the lien is being filed, states the date of the commencement of performance of services, states that the amount claimed is justly due as nearly as the same can be ascertained, is subscribed and sworn to by the claimant and was served on the Defendant and recorded in the Westport Land Records. The court concludes that the lien was filed in accordance with the requirements of General Statutes § 49-33 et seq.
The plaintiff commenced this action to foreclose its mechanics lien on June 28, 2005. Thereafter the defendant filed a motion to discharge or reduce the mechanics lien. (#103.00.) On February 16, 2006, the court (Karazin, J.) considered the defendants motion and sustained the validity of the lien. However, in its memorandum of decision, the court found:
Since the amount of unbilled work after Application No. 19 was $34,109.00 instead of the $62,354.00 determined by the Plaintiff on June 2, 2005, the Plaintiff offered to reduce the amount of the Mechanic's Lien from $324,600.00 to $296,363.00. The court finds the amount due under the lien to be $296,363.00.
Because the defendant's claims regarding the applicability of and non-compliance with the Home Improvement Act would be dispositive of the claims set forth in the plaintiff's complaint, the court will first address those issues.
HOME IMPROVEMENT ACT — DEFENDANT'S FIFTH SPECIAL DEFENSE
In her fifth special defense the defendant claims that the work being performed by the plaintiff is covered under the Home Improvement Act (HIA), General Statutes § 20-418 et seq. and that the plaintiff failed to comply with the requirements General Statutes § 20-429(a)(7) by failing to include in the contract a starting date and a completion date. The defendant claims that the plaintiff's failure to comply with the requirements of HIA renders the plaintiff's claims unenforceable against her.
General Statutes § 20-419(4) sets forth an exhaustive definition of the term "Home improvement." In relevant part, the definition of "Home improvement" includes: ". . . the repair, replacement, remodeling, alteration, conversion, modernization, rehabilitation or sandblasting of, or addition to any land or building or that portion thereof which is used or designed to be used as a private residence, dwelling place or residential rental property . . ." The same subsection of the statute provides "`Home improvement' does not include: (A) the construction of a new home . . ." The term "new home" is not defined in the Home Improvement Act. However, the New Home Construction Contractors Act ("NHCCA"), General Statutes §§ 20-417a(4), defines "New home" as "any newly constructed (A) single family dwelling unit, (B) dwelling consisting of not more than two units, or (C) unit, common element or limited common element in a condominium . . . or common interest community . . ."
Whether the HIA or the NHCCA applies to the contract is relevant only if the court determines that the defendant is correct in her determination that the contract fails to include a starting date and a completion date as required by General Statutes § 20-429(a)(7). Failure to comply with that requirement would not only render the contract unenforceable against the defendant, it would also bar the plaintiff's recovery for the reasonable value of the work done under the provisions of General Statutes § 20-429(f). Economos v. Liljedahl Brothers, Inc., 279, Conn. 300, 310 (2006).
The NHCCA also requires that certain provisions of a new home construction contract be in writing. General Statutes § 20-417d. However, the Supreme Court has determined that a contractor's failure to comply with these requirements does not preclude a contractor from enforcing an agreement with a homeowner or render the contractor's lien invalid. D'Angelo Development Construction Co. v. Cordovano, 278 Conn. 237, 243-46 (2006).
While testifying during the trial the defendant and her husband consistently referred to the 8,400 residence constructed during Phase I as the "addition." The evidence shows that while the old ranch house was demolished at the end of Phase I, a portion of the foundation of that structure was incorporated in the foundation on which the new garage/studio was constructed in Phase II. The defendant urges that the court find that because every component constituting the ranch house was not completely obliterated in the course of the work performed by the plaintiff, the resulting structure could not be considered to be a "new home," but must be considered to be an "addition" to the ranch house. The court does not agree.
The Shuldmans' repeated characterization of the project as an "addition" represented a transparent attempt to bring the project within the scope of the Home Improvement Act rather than the New Home Construction Contractors Act. In support of that attempt the defendant also relied on the building permit application (ex. B) and the building permit (ex. A) which both describe the work to be done in more or less than same words — "major renovations/construct 7800 S/F addition for kit, famrm., bdrms and bath; remove part of existing house/renovate existing for garage/studio."
After completion of phase I, the defendant was the owner of a completely new, self-contained single-family dwelling which her family occupied as their principal residence. Shortly after the completion of phase I the structure of the old ranch house was demolished and the plaintiff began to erect a new garage/studio in its place as contemplated by phase II of the project. Only a modest portion of the foundation of the ranch house was incorporated into the garage/studio foundation.
In Rizzo Pool Co. v. Del Grosso, 232 Conn. 666 (1995), the plaintiff contractor brought an action for breach of contract when the defendant homeowners refused to permit the plaintiff to install a swimming pool on the property where they were building a new home. The defendants filed a special defense in which they asserted that the agreement was a home improvement contract, unenforceable because it did not contain a starting or completion date and was not signed by both defendants. The defendants filed a motion for summary judgment on this ground, which the court denied on the ground that the HIA did not apply because the statute exempted activities that are connected with new home construction. At trial, the court prohibited the defendants from introducing any evidence of this special defense. The jury returned verdicts in favor of the plaintiff on its complaint as well as on the defendants' counterclaim. The defendants appealed on the ground, inter alia, that the trial court improperly precluded them from establishing their special defense.
The Supreme Court agreed with the defendants and reversed that portion of the trial court judgment. The court engaged in the following statutory construction. "Our starting point is the broad language of § 20-419(4), which defines `home improvement' to include the installation of a swimming pool for use at a private residence. Although construction of the defendants' new home had not been completed at the time the parties contracted for the installation of the pool, it is undisputed that the new dwelling was designed and intended for use as the defendants' private residence. Thus, the pool to be constructed by the plaintiff constituted a `home improvement' as defined by § 20-419(4) unless its installation represented `[t]he construction of a new home' under § 20-419(4)(A) . . ." "In the circumstances of this case, we conclude that the planned pool installation was not a part of `[t]he construction of a new home.' The pool installation contract was completely separate and distinct from the defendants' home construction contract, and the two contracts were to be performed by entirely different and unrelated contractors. Moreover, the documents that comprise the contract for the construction of the swimming pool contain no indication that the pool was to have been installed at any particular stage of the new home construction, or even that it was to have been installed prior to the completion of the new home. In fact, the contract documents make no reference whatsoever to the construction of the defendants' new home. Thus, although the defendants anticipated that the swimming pool would be installed prior to the completion of their new home, the record does not support the conclusion that the swimming pool installation and the new home construction were so interrelated, temporally or otherwise, that the installation of the pool constituted an integral part of "[t]he construction of a new home under § 20-419(4)(A)." 232 Conn. 677-78.
Similarly, in Weber's Nursery, Inc. v. Prior, 71 Conn.App. 433 (2002), the Appellate Court decided that the trial court properly determined that the HIA applied to the plaintiff's landscaping work at the site of the defendants' new house because the work was not "an integral part of [t]he construction . . ." (Internal quotation marks omitted.) Id. The Appellate Court explained: "In this case, the [trial] court found, relying on the reasoning set forth in Rizzo Pool Co. v. Del Grosso, 232 Conn. 666, 678 (1995), that the landscaping work was not `so interrelated, temporarily or otherwise, that [it] constituted an integral part of "[t]he construction of a new home.'" The court concluded that "the work performed was a home improvement to which the act applies . . ."
"The court had before it the fact finder's report, which contained the finding that nothing in the proposal referenced new home construction or specified performance at a certain stage of the home construction . . . In support of its conclusion that the landscaping was not an integral part of the construction of a new home, the court considered the fact that a certificate of occupancy was issued before the landscaping was begun and the fact that the plaintiff was not the general contractor building the house, nor was the plaintiff working for the general contractor." Weber's Nursery, Inc. v. Prior, supra, 71 Conn.App. at 437.
The reasoning of Rizzo Pool, supra, requires the court to carefully consider the project contemplated by the contract both separately and in context to the contractor's obligations to the homeowner. In the present case, it is clear that the defendant's former home was not renovated or added to. It was, for all intents and purposes, demolished. The portion of the project constituting the defendant's new residence was entirely constructed of new materials on a new foundation. The fact that a small portion of the old residence was recycled as a part of the foundation of the garage/studio does not change the fact that the defendant's home was neither improved nor was it renovated. The new residence was a "new home" and accordingly not subject to the provisions of the Home Improvement Act.
Even if the contract were subject to the Home Improvement Act, the court would be compelled to find that it is in sufficient compliance with the Act's requirements to permit the plaintiff to maintain this action. In the defendant's brief, the only alleged violation of the Home Improvement Act is the failure to provide for a starting date and a completion date as required by General Statutes § 20-429(a)(7). Under the provisions of Article 2.3 of the contract, the completion date was to be a date 487 days after the date of commencement, subject to adjustment. Article 2.1 defined the date of commencement as the latter of the date of issuance of a building permit, date of execution of the agreement, or the date of receipt of final contract drawings from the architect.
The evidence shows that the contract was signed on August 14, 2003 and the building permit was not issued until October 15, 2003. The evidence was unclear as to exactly when Harris issued final contract drawings, although it can be inferred that the date was probably in December 2003 or January 2004. However, the evidence shows that the plaintiff mobilized for the job in September 2003 and was actively engaged in site preparation work prior to the issuance of the building permit. The evidence also shows that the plaintiff originated an e-mail designating October 14, 2003 as the commencement date as it was required to under the provisions of Article 2.1 of the contract.
The defendant has not cited any authority supporting the proposition that the starting date in a home improvement contract must be a fixed calendar date and can not be determined with reference to some other event (e.g. issuance of a building permit, obtaining a zoning variance, completion of final plans). The defendant relies on the opinion in Caulkins Designs v. Trieb, Superior Court judicial district of New London No. 549374 (December 20, 1999, Corradino, J.) [26 Conn. L. Rptr. 99]. In that case the blanks in a home improvement contract for starting date and completion date were filled in with the words "not available." In that case, the court found that the omission constituted a violation of the Home Improvement Act, but denied the defendant homeowner's motion for summary judgment finding that the plaintiff contract should be allowed to show that the defendant acted in bad faith under the circumstances of the case. Even if the Home Improvement Act were to apply the contract in this case, any issues or controversies arising out of the commencement date, would be a matter of contract interpretation and not of compliance with the requirements of General Statutes § 20-429(a)(7).
In view of the foregoing analysis, the court has no need to address the matters pled by the plaintiff in avoidance of the plaintiff's fifth special defense, including the claims of bad faith under Habetz v. Condon, 224 Conn. 231, 236 (1992).
GOOD FAITH AND FAIR DEALING PLAINTIFF THIRD COUNT DEFENDANT'S THIRD COUNTERCLAIM
In the third count of the complaint the plaintiff accuses the defendant of breach of the implied covenant of good faith and fair dealing. Likewise, in the third count of her counterclaim the defendant accuses the plaintiff of breach of the same covenant.
The plaintiff's claims focuses on the conduct of the Shuldmans beginning shortly after the certification of Application for Payment #16R by Harris on February 11, 2005 and ending in early June when both parties purported to terminate the contract based on the other's breach. This conduct includes:
1. The failure to pay the balance of Application for Payment #16R in a timely manner.
2. The submission of the parties' dispute to Harris for decision under Article 9.10.1 of the contract and the subsequent order issued to Harris to nullify his certification of Application for Payment #16R before he could decide the dispute.
3. Ordering Harris to attempt to nullify his certification of Application for Payment #16R.
4. Inquiring of subcontractors on the job site as to the status of their payments.
5. Refusing to make payments for work on a timely basis, thereby preventing the work from proceeding.
6. Refusal to either review paperwork substantiating the plaintiff's claims with respect to finishes allowances or to engage a representative to conduct a good faith review of such paperwork.
The court finds that nearly all of the misconduct ascribed to the Shuldmans relates to the actions of Bart Shuldman. The only evidence of alleged misconduct by Susan Shuldman involved conversations with subcontractors regarding whether they had been paid. The court need not determine whether Bart Shuldman's conduct breached the covenant of good faith and fair dealing. He is not a party to this litigation. If the plaintiff had wished to make him a party defendant it could have done so. The plaintiff has not alleged in its complaint any basis on which the defendant could be held liable for the breach of the implied covenant based on the conduct of a different party to the contract. The court finds that the conduct of Susan Shuldman was not so egregious as to constitute a violation of the implied covenant of good faith and fair dealing. Accordingly, the court finds the issues on the third count of the complaint for the defendant.
The defendant's claims of breach of the implied covenant of good faith and fair dealing focus on the plaintiff's attempts to collect general conditions charges. The court has found that the plaintiff's initial demands for such charges were excessive. However, the court finds that the defendant has failed to show that the demands were made in bad faith or in an attempt to coerce the defendant into paying unjustified charges. Under these circumstances, the court finds that the defendant cannot prevail on the third count of her counterclaim.
DEFENDANT'S FIRST COUNTERCLAIM — BREACH OF CONTRACT
The defendant presented a substantial amount evidence regarding the costs she incurred to complete Phase II of the project. That evidence included the testimony of Gus Papajohn, the owner of A. Papajohn Construction, the contractor hired by the Shuldmans to complete Phase II, as well as the testimony of the defendant and her husband. There was also evidence of certain costs incurred to remedy defects in the work performed by the plaintiff. Based on the facts found by the court, the defendant can not prevail on her claim that the plaintiff breached the contract. Accordingly, the court does not make any findings concerning the evidence of the costs which the defendant incurred to complete Phase II of the project following termination of the contract. Evidence of the cost to remedy defects in plaintiff's work were considered both with respect to defendant's special defenses and the issue of damages.
DEFENDANT'S SECOND COUNTERCLAIM — UNJUST ENRICHMENT DEFENDANT'S FOURTH COUNTERCLAIM — CONVERSION DEFENDANT'S FIFTH COUNTERCLAIM — STATUTORY THEFT
The court has found that since February 2005 to the present, the defendant has owed the plaintiff substantial amounts of money under the contract. Under these circumstances there is no basis to support the defendant's claims that the plaintiff has been unjustly enriched, has converted the property of the defendant or committed statutory theft.
DEFENDANT'S SIXTH COUNTERCLAIM — NEGLIGENT MISREPRESENTATION DEFENDANT'S SEVENTH COUNTERCLAIM — WILLFUL MISREPRESENTATION
The defendant's sixth and seventh counterclaims are based on the assertion that the plaintiff either negligently or willfully misrepresented to the defendant the amounts to which it was entitled to under the contract and that the defendant relied on these misrepresentations to her detriment. The court finds that neither of these claims are supported by the evidence.
DEFENDANT'S EIGHTH COUNTERCLAIM — VIOLATION OF CUTPA
In her eighth counterclaim the defendant asserts that the plaintiff's conduct in the performance of the contract constituted immoral, unethical, oppressive and/or unscrupulous conduct in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110b et seq. The defendant did not explain this claim either at extensive post-trial oral argument or in her post-trial brief. However, it appears that the CUTPA claim is based on the defendant's allegations of incorrect billing and the plaintiff attempt to recover general conditions charges from the defendant. As noted herein the court finds that the plaintiff is not entitled to general conditions charges to the full extent claimed. Nevertheless, the court finds that the plaintiff's attempt to negotiate reimbursement for these charges was made in good faith and in reliance upon Harris' assurance to Kelly Wright that he would "handle Bart" with respect to the plaintiff's claim at the end of the project. Any other billing issues were either minor in scope or were not immediately resolved due to the misconduct of Bart Shuldman and Harris. These matters do not furnish any basis to support a CUTPA claim.
DEFENDANT'S OTHER SPECIAL DEFENSES
The only probative evidence which might support the defendant's special defense of unclean hands is the same evidence which the court considered and rejected in connection with the defendant's counterclaim alleging breach of the implied covenant of good faith and fair dealing. Under the circumstances of this case, the special defenses of payment, performance and set-off are not absolute defenses to plaintiff's claims, but rather matters which are relevant to the determination of plaintiff's damages.
DAMAGES
The court finds that the plaintiff has proven that the defendant breached the contract by failing to make payments when due. Under the provisions of Article 19.1 of the contract, in the event of the defendant's breach, the plaintiff is entitled to "recover from the Owner payment for the Work executed and for proven loss, with respect to materials, equipment, tools and construction equipment and machinery, including reasonable overhead profit and damages applicable to the Project."
WORK EXECUTED — APPLICATIONS FOR PAYMENT
The defendant disputes many of the plaintiff's charges as reflected on both certified and uncertified Applications for Payment. In her brief the plaintiff calls the court's attention to a complex analysis of painting charges included as Attachment 3 to her proposed findings of fact. Based on this analysis, the defendant invites the court to conclude that the plaintiff was guilty of double billing and poor bookkeeping. The defendant's analysis purportedly shows that the defendant was over-billed for painting charges by $47,854. The plaintiff has acknowledged that the painting charges were overstated and issued Charge Order #23 crediting the Shuldmans for overcharges in the amount of $26,778. The court finds plaintiff's analysis of the painting credit to be more accurate and more firmly grounded in the evidence. As noted above, issues with regard to painting bills were, in large measure, the result of Harris' failure to respond to the plaintiff's requests for assistance in determining what verbal authorizations Harris had given to the painting subcontractor at the job site in the months preceding the completion of Phase I of the project.
With respect to the "Work executed" the court finds that the plaintiff has proven (except as noted below) that it has performed the work set forth in the following certified Applications for Payment:
Application for Payment #16R: Amount $ 220,871.00 Payments February 18, 2005 $ 69,345.00 February 18, 2005 $ 21,882.00 March 7, 2005 $ 28,229.00 April 15, 2005 $ 21,580.00 Total payments $ 141,036.00 Balance Due $ 79,835.00 Application for Payment #17: Amount $ 70,185.00 Payment April 28, 2005 $ 57,718.00 Balance Due $ 12,467.00 Application for Payment #18: Amount $ 35,644.00 Payment May 19, 2005 $ 30,058.00 $ 5,586.00 Total due for certified Applications for Payment $ 97,888.00 Application for Payment #19, in the amount of $49,156.00, and Application for Payment #20, in the amount of $34,109.00, were not certified by Harris prior to the plaintiff's termination of the contract. However, the evidence supports plaintiff's claim that the work described in those applications was performed in accordance with the terms of the contract. Applications for Payment #19 and #20 total $83,265.00. No payments have been made by the defendant on account of those applications. The court finds that the total due the plaintiff for the work performed on certified applications and Applications for Payment #19 and #20 is $181,153.00.The defendant is entitled to a credit for the prepayment of $22,800.00 made on Change Order #11 on January 11, 2005. This leaves a balance due the plaintiff under the Applications for Payment (both certified and uncertified) of $158,353.00.
WORK EXECUTED — GENERAL CONDITION CHARGES
On Additional Work Order #37, dated March 21, 2005, the plaintiff attempted to have Harris and the Shuldmans to agree to an increase in the contract price of $75,000 to compromise a "general conditions" claim for $142,800. The basis of the claim was the plaintiff's assertion that "added work requested by owners and architect as well as delays encountered with the owner and architects design improvements of the home" added a total of 238 days to the work schedule at $600 a day. Neither Harris nor either of the Shuldmans agreed to this claim.
The court notes that each charge order submitted by the plaintiff sets forth, not only a description of the work added to or deleted from the project, but also a statement that: "The Contract Time will be (increased) (decreased) (unchanged) by ___ ( ) days." With two exceptions, each of the approved change orders, states that the contract time will be unchanged "by 0 days." The two exceptions are Change Order #5 which extends the contract time by 10 days and Change Order #10 which extends the contract time by 30 days. Change Order #5 was signed by the plaintiff, the Shuldmans and Harris.
Change Order #10, dated February 10, 2005, was signed and submitted by the plaintiffs, but was not signed by either the Shuldmans or Harris. The work listed on Change Order #10 included both work related to phase I (AWAs #29b, 30, 34 and 35) and phase II (AWA #32). All work included in phase I was completed and reflected in Certified Applications for Payment (#17). However, the plaintiff's Applications for Payment reflect that the phase II work shown on AWA #32 — "rear terrace" was only 3% complete by the time the plaintiff terminated the contract and ceased work on the project. None of the AWAs included in Change Order #10 included details of any increases in Contract Time attributable to the work included in the AWA. In AWA #37 the plaintiff attempted to claim thirty days of additional time for AWA #29, five days for AWA #30, twenty days of AWA #32 and five days for AWA #35. The total of sixty days for these AWAs cannot be reconciled with the claim of additional Contract Time of thirty days set forth on Change Order #10. There was no evidence from which the court could determine the extent to which the thirty-day extension of the contract time reflected in Change Order #10 was attributable to either the completed phase I work or the uncompleted phase II work.
In his letter to plaintiff's counsel dated March 18, 2005, the Shuldmans' counsel stated: "Other than the Revised Budget Estimate referred to above, the Shuldman's (sic) believe they have signed every requested change order." The plaintiffs argue that this letter constitutes a binding admission with respect to Change Order #10 and that the increase in the Contract Time must be considered to have been accepted by the Shuldmans. The court disagrees. In the context of the discussions then underway, it is clear that the issue of extensions of Contract Time and General Conditions charges were not yet at issue. Those matters arose when the plaintiff submitted AWA #37 and Change Order #12 on March 21, 2005, three days after the letter from the Shuldmans' counsel. The court concludes that the evidence does not support the plaintiff's claim for the thirty days of additional Contract Time set forth in Change Order #10.
Change Order #12 and AWA #37 proposed to add 150 days to the contract time. That change order was not approved by the Shuldmans or Harris. As noted above, the claims of additional days can not be reconciled with previously submitted AWAs and Change Orders.
There was conflicting testimony as to the cause of delays of completion of phase I of the project. The defendant claims that the evidence shows that the delays were attributable to the inability of the cabinet maker selected by the plaintiffs to timely deliver cabinetry as scheduled. The evidence shows that a new cabinet maker had to be engaged to prepare the materials after the original supplier went out of business. However, the evidence also showed that the architect and the defendant made numerous design changes which contributed to the delays. Except for the accepted claim for ten additional days shown on Change Order #5, and the unaccepted claim for thirty additional days shown on Change Order #10, no delay claims were made by the plaintiff until more than two months after the completion of phase I.
The plaintiff claims that the issue of design delays was raised by Kelly Wright with Harris in the spring of 2004 and that Harris persuaded Kelly Wright to wait and let Harris "handle Bart" at a later date. Although Harris denies having such a conversation, the court finds Kelly Wright's testimony on this point to be more credible. Nevertheless, the evidence does not support the plaintiff's claim that Harris had the authority to orally extend the contract time as an agent or representative of the Shuldmans. The court concludes that the plaintiff decided to leave the issue of general conditions claims to the conclusion of the work, hoping that Harris would convince the Shuldmans that the result was worth the extra payment.
In addition to its claim for general conditions charges under the contract as modified by AWAs and Change Orders, the plaintiff asserts that it is entitled to such charges as damages, pursuant to Article 19.1 of the Contract, as part of a "proven loss with respect to materials, equipment, tools and construction equipment and machinery, including reasonable overhead, profit and damages applicable to the Project."
The court finds that the plaintiff is entitled to general conditions charges of $600 a day for the ten days by which the contract time was extended pursuant to Change Order #5. These charges amount to $6,000.00.
PROVEN LOSS — GENERAL CONDITIONS
In addition to its claims for additional general conditions under the contract, the plaintiff also claims that it is entitled to general conditions charges as proven losses. In that regard, the plaintiff claims 159 days of such charges at the rate of $600 per day (totaling $95,400.00) plus an additional $3,550 for unbilled general conditions charges as shown on application for payment #10. (Ex. 22.) The court finds that the plaintiff has shown that it was on the site for 646 calendar days, substantially more than the 487 calendar days contemplated by the contract. The court further finds the that delays attributable to the plaintiff and its suppliers and subcontractors did not account for the entire period of delay. The evidence shows that a substantial portion of the delays may have been attributable to changes in the work during the course of Phase I of the project, particularly with respect to finishes chosen by Harris and the Shuldmans. However, the plaintiff had repeated opportunities to include general conditions charges in the COs and AWAs relating to the changes, but, in large measure did not do so.
The plaintiff did not submit credible evidence supporting general conditions charges as they relate to delays during Phase II of the project arising from the Shuldmans' failure to make timely payments on approved applications commencing with Application #16R in February 2006. The plaintiff had the burden of proof with respect to these damages. Beverly Hills Concepts, Inc. v. Schatz and Schatz, 247 Conn. 48 (1998). The court finds that the plaintiff has not sustained its burden of proof with respect to general conditions charges for such delays. However, the court is satisfied that the plaintiff is entitled to $3,550.00 in general conditions charges representing the unbilled portion of the general conditions charges included in the contract price.
In addition, the court finds that the plaintiff is entitled to damages for lost profits with respect to the uncompleted portion of Phase II of the project. As of the date of termination of the contract there was a balance to finish the contract, as amended by change orders, of $172,972.00 (ex. 22). This amount consisted of $75,330.00 in work required under the contract and $97,642.00 in unexecuted change order work. The uncontroverted testimony of Kelly Wright established that work under the original contract included a 12% mark up. Article 3.1.1 of the contract provides for a 20% mark up on the costs of change order work performed. The court finds that the plaintiff is entitled to damages in the amount of $28,568.00 which includes $9,040.00 for lost profits at 12% on the uncompleted portion of the original work and $19,528.00 for profit and overhead at 20% on the uncompleted portion of the change order work.
SET-OFFS AND CREDITS
At the time the plaintiff terminated the contract, there were certain items which had been included in the plaintiff's charges which were not, however, ever delivered to the Shuldmans. These included a $10,000.00 charge for a generator and a $7,415.00 charge for a custom bar for a billiards room. The plaintiff claims that the $10,000.00 generator charge was a deposit which was not recovered and that the $7,415.00 paid for the custom bar was not refunded by the subcontractor who made it out of mahogany rather than cherry wood as specified. Based on these facts, the plaintiff claims that the defendant is not entitled to a credit or set-off for these items. It is plaintiff's contention that these amounts are part of the plaintiff's "proven loss." The court disagrees.
The plaintiff failed to produce evidence that any efforts had been made to recover the generator deposit or recover the amounts paid for the non-conforming bar. Under these circumstances the court concludes that the defendant has sustained her burden of proving her right to a set-off in the amount of $17,415. The cost of the bar was included in AWA #24. The charge for the generator was included in AWA #26. The costs for both formed part of plaintiff's charges under Application for payment #14 dated November 14, 2004. The defendant is entitled to have these credits applied against the amounts first due plaintiff under the contract.
In its post-trial brief the plaintiff invites the court to take judicial notice of a claim which it pursued against the sub-contractor/fabricator of the bar. Section 2-2 of the Connecticut Code of Evidence requires that "A party requesting the court to take judicial notice of a fact shall give timely notice of the request to all other parties." In the absence of such timely notice, the court declines to take such notice.
The evidence shows that the plaintiff completed approximately one-half of the work listed on the "punch list" unilaterally produced by Bart Shuldman. All of the work included on the punch list related to Phase I work. The plaintiff accepted responsiblity to complete or correct the punch list work, but disputed the amounts established by Bart Shuldman. The defendant's evidence with respect to correct or complete punch list items was scant. However, based on the defendant's testimony and the payments to contractors shown in Exhibit KKK, the court finds that the defendant is entitled to credits for the following:$ 374.00 $ 3,774.00
Corrective painting $ 250.00 Pocket door hardware $ 955.00 Repair of leaking bathroom $ 1,285.00 Cherry wood disks $ 910.00 Completion of removal of old septic system Total "punch list" credits Together with the credits for the bar and the generator, the court finds that the defendant is entitled to credits in the total amount of $21,189.00.DAMAGES — FIRST COUNT
The court finds that the plaintiff is entitled to damages under the first count for work performed and material furnished as follows:$ 21,189.00 $ 143,164.00
Unpaid applications for payment $ 158,353.00 General Conditions charges CO #5 $ 6,000.00 Total $ 164,363.00 Less: Credits Net Damages As discussed below the plaintiff is also entitled to statutory interest and attorneys fees under the first count of the complaint.DAMAGES — SECOND COUNT
The court finds that the plaintiff is entitled to the damages under the second count as follows:28,568.00 171,732.00
Net Damages for work performed and materials furnished under the contract: $143,164.00 Proven losses under Article 19.1 $ Total Damages $INTEREST
On the first count, the court finds that the plaintiff is entitled to statutory interest as set forth in General Statutes § 37-3a.On the second count, the plaintiff is entitled to interest at the rate of one per cent per month in accordance with Article 4.1.3 of the contract. That article further provides that interest on payments disputed in good faith are "suspended." Having heard the evidence, the court finds that the failure of the Shuldmans to make timely payments to the plaintiff was not the result of a good faith dispute. Accordingly, the plaintiff is entitled to interest pursuant to Article 4.1.3.
A final calculation of interest will be made upon entry of judgment following the hearing on attorneys fees (discussed below) and resolution of issues concerning the type of judgment of foreclosure to be entered with respect to the plaintiff's first count, the law days or sale date, etc.
ATTORNEYS FEES
Both parties claimed to be entitled to attorneys fees and submitted interim statements covering services rendered prior to trial. The parties agreed that the court would reserve judgment on the issue of attorneys fees and hear evidence with respect to the fees claimed by the prevailing party after it had determined the issues on the parties' respective claims. Having found the issues for the plaintiff with respect to the first and second counts of its complaint and with respect to all counts of the defendant's counter claims, the court will schedule a hearing to determine that extent to which the plaintiff is entitled to attorneys fees pursuant to General Statutes § 52-249(a). Original Grasso Construction Co., Inc. v. Shepherd, 70 Conn.App. 404 (2002); Smith v. Synder, 272 Conn. 722 (2005).
"The plaintiff in any action of foreclosure of a mortgage or lien, upon obtaining judgment of foreclosure, when there has been a hearing as to the form of judgment or the limitation of time for redemption, shall be allowed the same costs, including a reasonable attorneys fee, as if there had been a hearing on an issue of fact . . ."