Opinion
166054938S
05-13-2016
A.C.G. Contracting, LLC v. Arbon Equipment Corp
UNPUBLISHED OPINION
MEMORANDUM OF DECISION--APPLICATION TO DISSOLVE
William J. Wenzel, Judge.
This action comes before the court on the Application of A.C.G. Contracting, LLC (" ACG" or plaintiff) to dissolve a mechanic's lien filed by Arbon Equipment Corp. (" Arbon" or defendant). The application was heard over several days and counsel for each side have filed post-hearing briefs in addition to the arguments and issues addressed over the course of the hearing. For the arguments and authorities set out hereinafter, the application is denied.
Connecticut's General Statutes § 49-33 provides, inter alia, that any person having a claim for providing materials or services in the construction of a building, by virtue of an agreement with or the consent of the owner, has the right to secure that claim by a lien upon the property improved. " The purpose of the mechanic's lien is to give one who furnishes materials or services the security of the building and land for the payment of his claim by making such claim a lien thereon . . . its provisions should be liberally construed in order to implement its remedial purpose of furnishing security for one who provides services or materials." F.B. Mattson Co., Inc. v. Tarte, 247 Conn. 234, 237-38, 719 A.2d 1158 (1998).
Section 49-33, provides in pertinent part as follows:
(a) If any person has a claim for more than ten dollars for materials furnished or services rendered in the construction, raising, removal or repairs of any building or any of its appurtenances or in the improvement of any lot or in the site development or subdivision of any plot of land, and the claim is by virtue of an agreement with or by consent of the owner of the land upon which the building is being erected or has been erected or has been moved, or by consent of the owner of the lot being improved or by consent of the owner of the plot of land being improved or subdivided, or of some person having authority from or rightfully acting for the owner in procuring the labor or materials, the building, with the land on which it stands or the lot or in the event that the materials were furnished or services were rendered in the site development or sub-division of any plot of land, then the plot of land, is subject to the payment of the claim.
A mechanic's lien is required to be recorded in a particular manner and must include specific information as to the nature and circumstances of the lien claimed; notice must also be given to the owner or owners of the property in question. An application for discharge of a mechanic's lien is governed by General Statutes § 49-35a. The respective burdens of proof and order in which the litigants are to go forward are also set out by statute, § 49-35b(a). This section requires that the respondent, Arbon, first establish the existence of probable cause to support the lien, and that thereafter the land owner, here ACG, can demonstrate, by clear and convincing evidence, that the lien should be discharged or reduced.
These specifics are set out in General Statutes § 49-34, which provides:
A mechanic's lien is not valid unless the person performing the services or furnishing the materials (1) within ninety days after he has ceased to do so, lodges with the town clerk of the town in which the building, lot or plot of land is situated a certificate in writing, which shall be recorded by the town clerk with deeds of land, (A) describing the premises, the amount claimed as a lien thereon, the name or names of the person against whom the lien is being filed and the date of the commencement of the performance of services or furnishing of materials, (B) stating that the amount claimed is justly due, as nearly as the same can be ascertained, and (C) subscribed and sworn to by the claimant, and (2) not later than thirty days after lodging the certificate, serves a true and attested copy of the certificate upon the owner of the building, lot or plot of land in the same manner as is provided for the service of the notice in section 49-35.
This statute provides in pertinent part as follows;
Whenever one or more mechanics' liens are placed upon any real estate pursuant to sections 49-33, 49-34, 49-35 and 49-38, the owner of the real estate, if no action to foreclose the lien is then pending before any court, may make application, together with a proposed order and summons, to the superior court for the judicial district in which the lien may be foreclosed under the provisions of section 51-345, or to any judge thereof, that a hearing or hearings be held to determine whether the lien or liens should be discharged or reduced. The court or judge shall thereupon order reasonable notice of the application to be given to the lienor or lienors named therein and, if the application is not made by all owners of the real estate as may appear of record, shall order reasonable notice of the application to be given to all other such owners, and shall set a date or dates for the hearing or hearings to be held thereon. If the lienor or lienors or any owner entitled to notice is not a resident of this state, the notice shall be given by personal service, registered or certified mail, publication or such other method as the court or judge shall direct. At least four days' notice shall be given to the lienor, lienors or owners entitled to notice prior to the date of the hearing.Conn. Gen. Stat. Ann. § 49-35a.
Section 49-35b provides:
Upon the hearing held on the application or motion set forth in section 49-35a, the lienor shall first be required to establish that there is probable cause to sustain the validity of his lien. Any person entitled to notice under section 49-35a may appear, be heard and prove by clear and convincing evidence that the validity of the lien should not be sustained or the amount of the lien claimed is excessive and should be reduced.
Findings of Fact and Conclusions of Law
The dispute in this case arises in connection with the construction of a waste transfer facility located in the City of Bridgeport, Connecticut. The property is specifically described in the Certificate of Mechanic's Lien, a copy of which was entered into evidence as Defendant's Exhibit " D." (All exhibits will hereafter be referenced as " PX-, " or " DX- "). Notwithstanding the legal description contained in the Certificate, the property was referred to generally by its " street address" of 147-155 Davenport Street or some variation thereof (" hereinafter 147 Davenport.") The Certificate was recorded in the land records of the City of Bridgeport and notice thereof given to the owner of the property.
The court finds that the certificate of lien was properly prepared, executed and recorded in all regards and that it fully complies with all the relevant statutory requirements. The court further finds that notice of such lien was properly given according to law.
The claimant or lienholder in this case is Arbor. Arbor is a corporation with its principal office outside Connecticut. The plaintiff or ACG is a Connecticut limited liability company. ACG owns the property know as 147 Davenport which is the subject of the lien at issue here.
In June of 2014, Arbor submitted a proposal to Acadia Contracting Group, LLC for the sale and installation of four extremely large rolling service doors at the waste transfer facility then under construction at 147 Davenport. These doors were 30 feet in height and between 16 and 20 feet in width. The doors were to serve as openings in the building for delivery and removal of materials. The proposal was followed by two change orders or additions which added the installation of " man doors" which allow personnel to enter and leave the buildings without raising or lowering the extremely large service doors. The proposals spelled out in some detail the materials and services to be supplied and the costs associated with each part of the project. The total cost of the goods and services described in the proposals was $77,710.20. These proposals were negotiated and accepted by Chris Taylor on behalf of Acadia Contracting Group, LLC. There was no dispute as to the authority of Chris Taylor and Acadia Contracting Group to act as authorized agent for the owner of the property, ACG, in contracting for the services of Arbon. The court finds that at all times relevant, Chris Taylor and Acadia Contracting Group, LLC were authorized agents for the owner of the property, ACG, to contract for the work the subject of this lien.
Arbon began work on the project in August of 2014. The work continued until March 22, 2014, which was the last day work was performed at the site. The court finds Arbon has proven the materials and services it was obligated to supply in the contract were in fact provided and that Arbon fully complied with all material obligations of the agreement the basis for its lien. While questions were raised by ACG as to some aspects of the completed project, the court finds Arbon clearly met and exceeded its burden to establish probable cause for the basis and validity of the lien.
On its side of the case, ACG introduced some evidence attempting to question the performance by ACG of the contract. That consisted of questioning relatively minor points in the terms of the contract as to which party had certain obligations for items such as securing permits, code compliance or inspections. ACG also attempted to show one of more of the man doors had small holes in them because the doors had been reversed and mechanical " closers" reattached and that one door was not properly caulked. The court characterizes these the claimed deficiencies as minor because it was never established that any specific obligation was not performed, or, if not performed, resulted in any material breach. Conclusory testimony that the large doors did not operate was never supported and it appeared to the court such problems, if they existed at all, could be as simple as an unplugged or improperly wired electric eye (which problem did occur and was fixed). The court also notes that ACG's own witness testified that the entire building project was on hold because of zoning noncompliance and possible property infringement issues totally unrelated to this defendant's conduct.
In short, the court finds that Arbon's lien was properly filed, recorded and served and that it was based on goods and services actually supplied by Arbon to and for the improvement of the property the subject of the lien. Probable cause has been established to sustain the validity of the lien.
By the terms of § 49-35b, at a hearing on the application for discharge, once probable cause to establish the validity of the lien has been shown, the burden of proof shifts to the party receiving notice to " prove by clear and convincing evidence that the validity of the lien should not be sustained or the amount of the lien . . . should be reduced." ACG's effort to defeat the lien in question centered on its claim that ACG was entitled to a credit for payments made in good faith to the original contractor, Arcadia Contracting Group, before notice of any lien, pursuant to General Statutes § 49-36. The evidence offered in this regard was that in August of 2013, approximately one year before the work began on the overhead doors, ACG and Arcadia Contracting Group entered into an agreement for the development of the 147 Davenport property, which agreement included the work Arcadia Contracting Group later secured from Arbor, and ACG paid in full for such services.
This section provides in pertinent part as follows:
In determining the amount to which any lien or liens may attach upon any land or building, or lot or plot of land, the owner of the land or building or lot or plot of land shall be allowed whatever payments he has made, in good faith, to the original contractor or contractors, before receiving notice of the lien or liens.
" Clear and convincing proof denotes a degree of belief that lies between the belief that is required to find the truth or existence of the [fact in issue] in an ordinary civil action and the belief that is required to find guilt in a criminal prosecution . . . [The burden] is sustained if evidence induces in the mind of the trier a reasonable belief that the facts asserted are highly probably true, that the probability that they are true or exist is substantially greater than the probability that they are false . . . O'Connor v. Larocque, 302 Conn. 562, 576, 31 A.3d 1 (2011) (quoting from Wildwood Associates, Ltd. v. Esposito, supra, 211 Conn. 36, 42 (1989).
For the reasons set out hereafter, the court finds that ACG has failed to prove by clear and convincing evidence that it ever made payments in good faith to qualify for the protection afforded by this statute.
Citing the authority of Hubbell, Hall & A and all Co. v. Pentecost, 89 Conn. 262, 268, 93 A. 672 (1915), ACG claims " Defendant bears the burden of proof that the Plaintiff's payment was made in bad faith." This claim is not what Hubbell says. Hubbell dealt not with any claim of bad faith, but with the timing of payments to the contractor relative to persons who had furnished material or services. Even if Arbon had a duty to prove the payment at issue were made in bad faith, the evidence here is so strong, the court finds such burden was met.
The definition of good faith has been made in many different contexts and in various terminology. In this particular instance, neither side has identified controlling authority which gives a precise definition of the phrase as used in the statute. Indeed, in considering this statute's use of the phrase " good faith, " one early case said: " What constitutes a payment in good faith the statute leaves to judicial determination." J.L. Purcell, Inc. v. Libbey, 111 Conn. 132, 149 A. 225 (1930). An excellent discussion of the meaning of this phrase was given by an early Appellate Court decision:
" [G]ood faith" . . . " in common usage . . . has a well defined and generally understood meaning, being ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one's duty or obligation." . . . It has been well defined as meaning " An honest intention to abstain from taking an unconscientious advantage of another, even through the forms or technicalities of law, together with an absence of all information or belief of facts which would render the transaction unconscientious." Phillipe v. Thomas, 3 Conn.App. 471, 474-75, 489 A.2d 1056 (1985) (citations omitted).
The term good faith is used numerous times throughout Connecticut's Uniform Commercial code. In such use, it is defined as follows: " " Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing." Conn. Gen. Stat. § 42a-1-201(20). In Rene Drywall Co. v. Strawberry Hill Assoc., 182 Conn. 568, 574, 438 A.2d 774 (1980), the Connecticut Supreme Court, applying the " good faith" language of § 49-36, described the standard as " good faith and reasonableness." Even if " reasonableness" is not incorporated into the meaning of good faith under this statute, " [e]vidence of what is reasonable, however, may be relevant to determining one's good faith and is not excluded from playing a part in that determination." Phillipe, 3 Conn.App. at 476.
In this case, the transaction giving rise to the lien involves a major construction project entered into by parties that purport, at least when it serves their interests, to be knowledgeable and experienced in the area of construction and development. The overall project has been described as involving millions of dollars. Yet at the same time, ACG has described its involvement with such vagueness, uncertainty and guile as to present itself as an unknowing victim which stands to benefit greatly at its own studied naivete and blind trust, all to the detriment of the lienholder which clearly provided great benefit and value to ACG and the Davenport property.
The defense which ACG asserts is based on the August 5, 2013 contract (DX-A) between itself and Acadia Contracting Group, LLC and the payments which ACG claims were made in good faith according to that agreement. Many of the credibility problems the court experienced with this claim spring from the misleading and incestuous dealing between and among the entities which were parties to this 2013 agreement or involved in its performance.
ACG was organized on February 9, 2003 by Attorney Pinheiro. In the filing with the Secretary of State, it was represented that one Christopher Taylor was the manager of the company. On a regular basis filings with the State confirmed Christopher Taylor as the sole manager of ACG at least until November 28, 2014. For that entire period, Christopher Taylor was the sole person held out as the person with any authority to manage the affairs of ACG.
Shortly after the organization of ACG, attorney Pinheiro also filed the articles of Organization for Acadia Contracting Group, LLC. (DX-F), and the same Christopher Taylor is shown as the manager for this entity. In 2006, Mr. Taylor is shown leaving as manager, but in 2007 he is shown in multiple corporate filing as returning as manager and also having the status of owner and member of Acadia Contracting Group, LLC. Christopher Taylor continues on in his capacity as manager until March of 2015, when he departs as manager and using a power of attorney, designates Mr. Keith Myers as the new manager and member of Acadia. Upon Mr. Taylor's departure from Acadia Contracting Group, the principal office of the business is also shown as relocated to the street address of the Bridgeport Correctional Facility and an inmate number is provided to contact Mr. Myers.
The property known as 147 Davenport was acquired by A.C.G. by Quit Claim Deed dated December 16, 2008, from Theresa Black. Ms. Black is the mother of Christopher Taylor, who acted as notary public for the deed. The deed was not delivered to Mr. Prieto but held by Christopher Taylor until it was recorded in 2011. ACG paid nothing to acquire 147 Davenport. Though Mr. Prieto claimed he and he alone was actually in charge of ACG at all times, he did not know who transferred the property to A.C.G.
In 2009, when Christopher Taylor was manager of Acadia Contracting Group, LLC, he reported 147 Davenport to the Secretary of State as Acadia Contracting Group, LLC's principal office address. By 2011, Mr. Taylor, as manager, of ACG and Samson Associates, LLC, (" Samson"), a new entity he had just organized, was reporting 147 Davenport as the principal office address of these two companies.
Samson was involved in construction of the 147 Davenport building.
Though Mr. Prieto claimed he was handling all the negotiations on behalf of ACG for the contract with Acadia Contracting Group, LLC, he was unclear where the plans--which would specify what would be built--came from. Even though he knew Samson got the plans from somewhere, he denied any real knowledge about how Samson got them. The following year, 2014, Mr. Prieto, claiming to be the member of Samson removed Christopher Taylor as the Manager of Samson.
On the date shown on the contract purportedly entered into between ACG and Acadia Contracting Group, LLC, it clearly appears to the court that the individuals acting as agents for the parties to that contract had positioned themselves in such a way that negotiation, execution and performance of the contract, though on paper between separate legal entities, could be fashioned and performed in whatever way they wished. There was no credible evidence that the contract ACG claims was the basis for the " good faith" payments was anything more than a sham agreement. In other words, whatever the terms of the agreement, the parties could do whatever they wished. For example, Mr. Taylor was undisputedly the sole manager of both parties to this agreement. Mr. Preito, who had never been identified as connected with ACG or having any involvement in this project, suddenly appears to act on behalf of ACG.
The testimony and exhibits submitted in this case also blurred any distinction between these two entities. Not only were they organized in the same year by the same organizer, with the same manager, the same principal business office location and the same addresses for service, it appears the individuals affiliated with them had trouble keeping them separate. At one point in his testimony, Mr. Preito referred to Acadia Contracting Group, LLC as ACG. Mr. Taylor mistakenly submitted filings for ACG which pertained to Acadia Contracting Group, LLC. In at least one corporate filing for Acadia, Christopher Taylor uses an email account with the exact name of plaintiff (" acgcontracting@aol.com ").
The payments purportedly made by ACG to Acadia also were handled in an unusual and ambiguous way. The contract in question, though for an industrial facility and with a total value, with change orders, of $385,000, is on a home improvement form. The contract has an express provision allowing ACG to cancel the agreement for a three-day period, yet payments were made prior to the time allowed for rescission.
The right of cancellation notice has multiple and apparently inconsistent dates and actually appears to have been signed as exercised. As there was no testimony about this issue, the court simply notes it.
The terms of payment were unusual as well. Notwithstanding the printed terms of the agreement which speak to schedules for payments, delays in payment and collection, the scope of works sheet states, " Full payment on contract." This included full payment of monies which, in the case of Arbor, were not going to be used for well over a year. On DX-H, the receipt Mr. Taylor provided on August 7, 2013, it provided that the $140,000 paid that date was " non-refundable." Mr. Taylor testified that this language meant " we're not giving it back." Payments under this contract included two payments in cash totaling $70,000. Yet, other than a receipt for one such payment there was no documentation submitted to show such payment. Such documentation should have been readily available. All of the funds paid other than in cash, some $315,000, were paid in a series of cashier's checks, though there was no evidence Acadia Contracting Group, LLC needed such funds or would be doing such work anytime in the foreseeable future. All of the cash was handed to Christopher Taylor and all of the cashiers' checks were payable to Christopher Taylor not to Acadia Contracting Group, LLC. There was no documentation submitted to show where any of the cash went or where the proceeds of the cashiers' checks went, though such documentation would be easily available.
Under both Federal Statute, 31 U.S.C. § 5331, and IRS Regulations, 26 U.S.C.S. 6050I, any person (such as Christopher Taylor and/or Acadia Contracting Group, LLC) who, in the course of their trade or business receives more than $10,000 in cash or currency must file a report (e.g. IRS Form 8300) and furnish a written statement to each person (such as ACG) whose name is shown in such report. Civil and criminal penalties apply to violations.
One of these checks bore the title " Official Check" rather than cashier's check.
When asked why he would entrust hundreds of thousands of dollars in cash or cash equivalent to Christopher Taylor, Mr. Preito said it was because the owner of Acadia Contracting Group, LLC, one Mr. Keith Myers, said it was okay. When asked why he would pay Acadia Contracting Group, LLC. such large sums for work that might never be done, Mr. Preito, said it was because he trusted Mr. Myers, though he knew Mr. Myers had been recently been sentenced and incarcerated for serious crimes and also knew Mr. Myers had a current substance abuse problem, later identified as heroin addiction.
The allegation that the payments claimed by plaintiff were in fact made and were made in good faith seems to be plainly at odds with almost every detail introduced at the hearing about the nature of the transaction. Even if practices at odds with common sense and the most elementary principles of business could be disregarded in assessing good faith, the claim of good faith in any aspect of the payment of funds by ACG to Acadia Contracting Group, LLC. would ultimately rest on the testimony of Mr. Preito and Christopher Taylor. At the risk of being unkind, the demeanor, bearing and manner of these witnesses, as well as the substantive inconsistencies of their testimony, prevent this court from finding any such testimony to be credible.
In summary, the court finds that ACG has failed to prove it is entitled to credit for any payments claimed made to Acadia Contracting Group, LLC. Plaintiff has failed to prove such payments were in fact made to Acadia Contracting Group, LLC. Plaintiff has failed to prove that if any payments were made to Acadia Contracting Group, LLC. that such were made in good faith, using any definition of that term.
Accordingly, as the defendant/lienor has established probable cause to sustain the validity of its lien, and that plaintiff has failed to prove that the validity of the lien should not be sustained or that the amount of the lien is excessive and should be reduced, the motion to discharge the mechanic's lien in question is denied.