Opinion
No. X08 CV 03 0196069
October 4, 2004
MEMORANDUM OF DECISION RE: APPLICATION FOR PREJUDGMENT REMEDY
The plaintiffs, Antonios Zarikos and his wife Uta Werner (collectively "the Zarikos") have sued the defendants Joseph and Diane Mannetti (Mannettis) and Luongo Construction Co. LLC (Luongo) on claims arising from a sale of a house and property owned by the Mannettis to the Zarikos. The Zarikos claim that the house was defective in many respects, most notably that the individual modules of the modular structure are not positioned correctly or supported adequately.
The Zarikos' Second Amended Complaint alleges the following claims against the Mannettis: breach of contract violation of the New Home Warranties Act, General Statutes §§ 47-116 et seq., violation of the Mobile and Modular Homes Act, General Statutes §§ 21-85 et seq., negligence, violation of the Connecticut Unfair Trade Practices Act, General Statutes §§ 42-110a et seq., violation of the New Home Construction Contractors Act, General Statutes §§ 20-417a et seq., and rescission. The Zarikos also claim that Luongo was negligent and claim that both the Mannettis and Luongo created an unreasonable risk of emotional distress.
The Zarikos have made application for a prejudgment remedy in the total amount of over $5.2 million. A hearing lasting four days took place in May and July 2004. Luongo did not appear at this hearing except to make a brief argument through its attorney on the last day.
In 1998 the Mannettis purchased a house located at 215 Smith Ridge Road in New Canaan, Connecticut, where they resided with their children until January 2001 when the house was destroyed by fire. With the help of the insurance proceeds the Mannettis started to rebuild their home on the Smith Ridge property. They purchased a modular home from Luongo which then ordered the modules from Signature Building Systems. The Mannettis also contracted with Luongo for the latter to "set" the four modules which required placing the two first-floor modules on the foundation and two second-floor and attic modules on top of the first-floor modules. The set was completed in December 2001. In approximately early March 2002 the Mannettis' home was about 80% completed.
At that time the Zarikos were actively looking at houses in the New Canaan area to purchase as a residence. A broker acting for the Zarikos contacted Joseph Mannetti and inquired whether the Mannettis might consider selling their home on Smith Ridge. The Mannettis agreed to consider sale, and the Zarikos saw the house several times. Substantial negotiations occurred between the Zarikos and the Mannettis. Finally a contract of sale was executed in May 2002 in which the Mannettis agreed to sell the house at 215 Smith Ridge to the Zarikos for $1,645,000.
Prior to the execution of the contract the Zarikos visited the Mannettis' house on numerous occasions, often in the company of a consulting architect, Denise Bloodgood, who prepared an extensive list of "corrective" work the Zarikos wanted completed before purchase. Joseph Mannetti agreed to do this work and, as far as the court can tell most, if not all of the work, was completed. Bloodgood also compiled another extensive list of work referred to as a pre-closing punch list which was attached to the contract. While the Zarikos did undertake to have certain limited inspections of the house, such as for radon, Mr. Zarikos testified that no full building inspection was done and indeed he had not had a full inspection done when the Zarikos had bought their prior home in Norwalk.
A certificate of occupancy for the house was issued by New Canaan on July 8, 2002 and the closing of the sale to the Zarikos occurred in mid-July. In the next six to eight weeks the Zarikos had several complaints: a backfire occurred in the boiler flue and a crack appeared in a foundation wall. The Zarikos repaired these problems, in the case of the crack by installing a French drain, and the Mannettis paid for this and paid for other repairs demanded by the Zarikos, in all over $43,000. Complaints continued, and the Mannettis refused to pay approximately $22,000 more demanded by the Zarikos.
Around or shortly after Labor Day the Zarikos noticed additional cracks in the walls and at least one in a ceiling. They forbade Mannetti from making or arranging for additional repairs. In November 2002 the Zarikos family moved into the house.
The Zarikos claim a notable number of deficiencies in the house. Most importantly, they claim significant structural defects arising from the fact that they allege the four modules (two first-floor and two second-floor) were incorrectly set and mated leaving a one-to two-inch gap between the east (back of the house) and west (front of the house) modules. They also claim that a major support for the modules, a series of 40 to 44 2"x6" wood stud columns in the basement of the house is inadequate and deteriorating. The third major element of Zarikos' claim involves a series of deficiencies in workmanship. On all these elements the evidence presented by the parties was highly conflicting.
With regard to the alleged structural defects evidence was given by two engineers on each side and one experienced modular home builder. Dr. Kareem Adeeb, a civil engineer, testified for the plaintiffs that the individual modules were not "mating" or properly in contact with each other. He opined that this put too much stress on the bolts which were designed to hold the individual modules together. He stated the resulting gap of one to two inches between the vertical walls of the modules allows each module to move vertically and laterally and they tended to tip toward each other. This movement has caused cracks in the house's floor, ceiling and walls. Dr. Adeeb also found the 2"x6" stud wall in the cellar was inadequate to bear the weight assigned to it and some of the studs were bowing (bending) causing the center area of the house to drop.
The Mannettis' expert was a structural engineer, Dr. Romeo Fraccaroli. He found the one inch gap not to be a structural problem and the bolts sufficient to keep the modules in place. He was also of the opinion that the stud wall was adequate and an acceptable and valid alternative to the lolly columns (steel pipes filled with concrete) deemed necessary by Dr. Adeeb.
The plaintiffs presented Andrew Karp of Karp Associates, a general building contractor and construction manager, who testified as to the cost of repairing the alleged defects in the house. Karp testified that he estimated the cost of repairing most of over three hundred claimed defects to the house would be $662,704.90. He also testified that the cost of razing the house and replacing it with a new residence would be $1,497,000.
William Gaudiano, a home builder with experience working on two dozen modular homes, including six manufactured by Signature, testified after inspecting 215 Smith Ridge, that the repairs estimated by Karp could be accomplished for a little over $58,000. He also testified that every modular home he had seen or constructed had a 1" to 1-1/2" gap between the modules and the gap at the subject house was normal and properly functional. Gaudiano said the gap was necessary to allow room for the plywood sheathing that surrounded the individual modules, and the cables that the crane used to lift the module into place.
Discussion CT Page 14953
Under Connecticut's statutory prejudgment remedy scheme, to obtain such relief the party seeking the remedy must establish to the court's satisfaction that there is probable cause that a judgment in the amount sought, or greater, will be rendered in that party's favor. General Statutes § 52-278d(a). Probable cause has been defined as a bona fide belief in facts essential under the law for the action and such as would lead a reasonable, prudent person to entertain such a belief. DuFraine v. Commission on Human Rights and Opportunities, 236 Conn. 250, 261 (1996). The probable cause standard is a lesser burden of proof than ordinarily employed in the final determination of civil cases. The prejudgment remedy hearing is not a full-scale trial on the merits, but all claims between the parties should be evaluated. The court's role in such a hearing is to weigh the probabilities. See Goodwin v. Pratt, 10 Conn.App. 618, 620-21 (1987).
The Zarikos seek a prejudgment remedy against the Mannettis in the amount of $3,579,552 and against Luongo in the amount of $1,709,600. The sums purportedly include costs, including attorneys fees, expert fees and punitive damages. The court determines that there is probable cause that the Zarikos will be successful on one or more of their several causes of action. However, the court determines that there is not probable cause to believe that the Mannettis engaged in the business of new home construction for the purpose of compensation or profit. There is no evidence that the Mannettis set out to construct the house at 215 Smith Ridge Road for compensation or profit. The evidence is unchallenged that they built and virtually finished the structure for their own use, including picking out kitchen cabinets and appliances, before the Zarikos showed interest in buying it. Nor is there any evidence that the Mannettis held themselves out as a new home construction contractor. Therefore, the court concludes they were not, at the time of the sale, required to be registered under the New Home Construction Contractor Act and were not required to provide the Zarikos with any information required under that Act because they never entered into a contract with the Zarikos for construction. See General Statutes §§ 20-417b, 20-417d (requiring certain information be given to a consumer "prior to entering into a contract for new home construction").
The court also determines that CUTPA does not apply to this case. The evidence shows plainly that the Mannettis were selling their house and were not in the business of selling houses. This court, and others, have held that a single sale of a personal residence does not entail an act in the conduct of a trade or business such as to be regulated by CUTPA. Twisdale v. Tierney, Superior Court, judicial district of Stamford-Norwalk at Stamford, CV 02 0189029 (January 2, 2003).
Subsequently, the Mannettis have built at least one house for the purpose of sale.
Under their breach of contract claim the Zarikos seek the remedies of rescission and restitution. They seek rescission of their full purchase price of $1,645,000 and restitution of improvements they have made to the property, costs of corrective work, lost appreciation ($432,000) legal and expert fees and estimated future fees ($594,000) and prejudgment interest ($751,000) for a grand total of $3,579,552.
In the alternative, they seek breach of contract damages in the amount of $1,709,600 including $665,000 for corrective work, $594,000 for present and future fees, prejudgment interest of $113,600 and "stigma" damages and lost appreciation of $200,000 and $43,000 respectively.
The court does not find that the plaintiffs' claim of rescission is supported by probable cause. An essential element of rescission is that the parties must be restored to their original position as nearly as possible. Barco Auto Leasing Corp. v. House. 202 Conn. 106, 113 (1987). In this case the house at 215 Smith Ridge has been significantly altered by the Zarikos. The court believes there is probable cause to find that the Zarikos have a contractual or warranty claim for damages.
While there was sharply divergent evidence on whether the gap between the modules was a structural defect and what if anything, was required to remedy it, the Zarikos have offered sufficient evidence to meet the probable cause standard for success on their claims. The evidence presented on costs of such repair (including any fire dangers resulting from the gaps) were estimates of Karp Associates and RMS. The plaintiffs claim these estimates showed repair costs for these alleged defects were $434,610, plus overhead and profit of 21% and $412,150 plus 18% overhead and profit. The court finds it impossible to discern where these numbers come from, and exactly which of the 305 claimed defects are symptomatic of, or related to, the alleged structural problems.
Without much to go on, despite the four days of hearings and voluminous exhibits and briefs, the court determines that the alleged damages can be divided into three categories. The first is damages arising from the alleged improper setting and mating of the modules; the second is damages from the alleged inadequate stud wall in the basement; and the third is damages from other defects or defective workmanship.
None of the damage estimates clearly delineates items related to the first category. There was no evidence that the modules could, or should, be reset. The court estimates that there is probable cause to find that the plaintiffs may be able to prove $225,000 of such damages.
The evidence as to the stud wall in the basement was sharply contradictory as to whether it was defective or inadequate. Dr. Adeeb testified the studs were "bowing" under the weight of the structure above. Dr. Fraccaroli subsequently observed and measured no such distortion. It was further noted that the wall was in open view and passed the inspection necessary for the issuance of a certificate of occupancy. Again, the repair estimates do not specify a cost figure for remedying the alleged defect. Under the low burden of the probable cause standard the court determines that damages of $50,000 might be established.
As to the third category of damage — general poor workmanship and defects, there is the wide disparity of cost estimates between Karp, RMS and Gaudiano. Additionally, the court finds that many of the claimed items of damages could, and should, have been discovered by means of any reasonable inspection of the house prior to contract. Among such items are alleged broken pipes, non-working or improperly connected electrical switches, visible nails pushing through drywall, exposed foundations, loose Belgian blocks, and the appearance of the front porch. In addition, the architect Bloodgood had told the Zarikos, before contract, that the workmanship at 215 Smith Ridge was below her standards. The court determines that probable cause exists for an award of damages of $80,000 on this category of claim.
The evidence shows quite clearly that a prejudgment remedy against Luongo should be entered in the amount of $225,000 as it was solely responsible for the initial setting of the modules. Luongo argues that the harm resulting from a negligent setting of the modules was not foreseeable, but the plaintiffs meet the probable cause standard on that issue. The Zarikos contend that the Mannettis should also be responsible for damages arising from the setting, but the facts do not bear this out. There is no evidence that the Mannettis had any knowledge of or exercised any control over Luongo's work in this regard, except to say when to start. A prejudgment remedy in the amount of $130,000 should enter against the Mannettis.
So Ordered.
Taggart D. Adams SUPERIOR COURT JUDGE