Opinion
CV176012131S
05-21-2019
Krukoff Excavation & Paving, Inc. v. Weathervane Condominium Assoc., Inc.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Sferrazza, Samuel J., J.T.R.
MEMORANDUM OF DECISION
Sferrazza, J.
The plaintiff sues the Weathervane Condominium Association (Association) and its president, Andrew Cline, to recover damages under theories of breach of contract; unjust enrichment; quantum meruit; breach of the covenant of good faith and fair dealing; bad faith; and negligent and/or fraudulent misrepresentation. After a bench trial, the court finds the following facts and rulings of law.
The Association owns common areas, including several parking lots, forming part of the condominium complex located at 201 Regan Road, Vernon, Connecticut. Elite Property Management, Inc. (Elite) manages the day-to-day business of the Association.
In 2016, because of the deteriorated condition of these parking areas, the Board of Directors for the Association authorized its president, Cline, to solicit bids to repave the two worst areas, known as Lots 4 and 5. The lots are mirror images of each other as to shape and dimensions, with Lot 5 located to the north of Lot 4.
Cline met with some bidders, and Christopher Kohnle, an employee of Elite, met with others. The bids received were discussed with the Board, and the Board selected the plaintiff to perform the work.
Agency
The court finds that Cline was an agent of the Association with respect to its dealings with the plaintiff. The plaintiff has met its burden of demonstrating the existence of an agency relationship and proven, by a preponderance of the evidence, the three elements necessary to establish agency, to wit:
1. Manifestation by the Association that Cline would act on behalf of the Association;
2. Cline accepted this role; and
3. An understanding between the parties that principal, the Association, would be in control of the undertaking, National Publishing Co. v. Hartford Fire Insurance Co., 287 Conn. 664, 678 (2008).
How the parties labeled themselves is inconclusive, id. The court examines the operative terms of their arrangement or understanding, id. The "essential ingredient of agency is that the agent is doing something at the behest and for the benefit of the principal," id.
The Association asked Cline to search for prospective contractors to repair and/or replace Lots 4 and 5; to recommend a contractor; and to enter into a contract with the selected contractor to attain that goal. As president of the corporation, Cline had the authority to execute these functions as prescribed by the Board, General Statutes § 33-1110. Cline had Kohnle prepare the written contract, and Cline signed the contract on behalf of the Association. Cline had negotiated the written contract with the plaintiff, as well as the cost for additional work that later arose in order to complete the project. Cline’s decisions bound the Association, Smith v. Board of Water Commissions of City of Norwich, 38 Conn. 208, 218 (1871).
Work Performed
Repaving is distinct from reconstruction of an asphalt parking lot. With reconstruction, the entire parking area is excavated, redesigned, and essentially built from scratch. Repaving, on the other hand, involves only removal of the old asphalt, making adjustment to the existing gravel base, and laying down a new layer of asphalt. Obviously, reconstruction is more expensive than repaving.
As noted above, Cline had Kohnle prepare the repaving contract. The plaintiff’s bid and the written contract expressly contemplated that only two layers of older asphalt had been applied in the past. That is, the contract price was set based on that circumstance, which was incorporated by reference into the document through attachment of the plaintiff’s proposal. See section (1) "Work" of the contract. The contract price, based on that assumption, was $45,560.
After taking precise measurements, the plaintiff determined the parking lots were very flat and had actually been originally constructed with a negative slope, i.e., the surface water drained toward the buildings and garage door openings rather than away from those structures. Ideally, complete reconstruction was preferable to simple repavement in order to exceed the minimally acceptable slope, which is a one percent positive grade. The Board rejected reconstruction as too costly.
Steven Krukoff alerted Cline that, because of this pre-existing defect in grade, repaving could not eliminate all puddling and to expect that some, minor puddling would persist after repavement. Cline informed Kurkoff that such puddling would be acceptable. Also, Cline acknowledged that broken and disconnected downspouts contributed, in part, to the water problems.
The plaintiff commenced work at the site on September 12, 2016. Krukoff discovered that there had actually been three layers of previously applied asphalt instead of the two layers specified for removal by the contract. Also, the gravel base that had been originally installed was too shallow to support the asphalt layer adequately. Finally, the Call Before You Dig (CBYD) diagram failed to disclose an underground, electrical conduit that needed replacement.
Krukoff, owner of the plaintiff, informed Cline of these discoveries and that the added work necessary to remedy these previously unknown deficiencies would increase the cost of the project accordingly. Cline indicated to Krukoff that the Association would bear the cost of repairing the conduit and asked that the plaintiff "go easy on him" as to the new price to complete the project. Krukoff agreed to minimize the increase in price by only charging the Association for the added material and labor costs. In other words, the plaintiff would forgo additional profit for the added work. The agreed-upon increase was $3,900.
At this time Elite was relocating and use of the parking areas had been disrupted, so Cline approved these changes to the parties’ agreement orally rather than request that Kohnle redraft a new or modified contract to reflect the modifications. The plaintiff completed the work within four days.
In order to rectify the negative slope problem, the plaintiff had to apply a thicker quantity of asphalt at the garage openings. This created a "lip." In order words, the interior surfaces of the cement floors of the garages would be lower than the surface of the new pavement where these surfaces abut.
Expert witnesses testified in this case and clashed over whether the resulting uneven threshold was necessary and acceptable in the paving industry in order to achieve the important goal of having surface water and downspout water flow away from the garage openings and buildings. The court finds the opinion of the plaintiff’s expert more reliable on this point. The solution employed by the plaintiff was sufficient to convert the negative grade to the minimum one percent positive grade and within the accepted practices of reasonably competent paving contractors.
Once completed, the plaintiff requested payment. However, certain Board members balked because they expected that repavement would eliminate all drainage and puddling problems entirely, because some roller marks had not been smoothed out, and because of the presence of the lip at the garage openings. Cline and Kohnle discussed these issue with the plaintiff.
At its own expense, the plaintiff resurfaced the roller marks and ground down and repaved the area of a particularly troublesome puddling complaint. Kohnle had assured Krukoff that, once these actions were taken, payment would follow. After the plaintiff complied, Kohnle opined that the final result was "excellent." He also testified that the new parking area asphalt has held up very well since September 2016. Kohnle cut a check to pay the plaintiff the $49,460 owed ($45,560 plus $3,900 added cost).
Both Cline and Kohnle urged the Board to approve payment. The Board refused to allow Kohnle to remit payment because some members were disappointed with the results and feared that the project would need to be redone. Despite demand, the Association has paid nothing to the plaintiff.
The court determines that the plaintiff performed the repaving work in accordance with the terms of the putative, written contract and oral modifications and in a professionally acceptable fashion. Therefore, the remaining issues pertain to the validity and enforceability of the contract, as modified; whether, in the absence of an enforceable contract, the plaintiff is entitled to recover on unjust enrichment or quantum meruit grounds; and whether Cline may be individually liable on the bases of misrepresentation, unjust enrichment, or bad faith.
Special Defenses of the Association
The Association asserts special defenses of breach of contract, waiver, set off, no unjust enrichment, and violations of the Home Improvement Act, General Statutes ch 400, and the Connecticut Unfair Trade Practices Act, General Statutes ch 375a, (CUTPA).
The first special defense is essentially merely a denial that the plaintiff fulfilled its promises under the contract. Denials are not true special defenses and ought not be pleaded as such, Practice Book § 10-52. In any event, the court has determined that the plaintiff did fully perform its end of the bargain. Therefore, this "special defense" fails.
Similarly, in the fourth special defense, the Association contests that it was enriched unjustly at the plaintiff’s expense. Again, a denial is no special defense, and the court finds the denial unproven.
The seventh special defense avers violations of CUTPA. CUTPA creates a private right of action that may entitle a party to monetary relief, General Statutes § 42-110g. As such, CUTPA may be a cause of action contained in a complaint, counterclaim, or cross claim. But CUTPA is not a special defense, although the underlying allegations that comprise a CUTPA violation may constitute valid special defenses such as fraud or violations of statutory law, Bank of America, N.A. v. Aubut, 167 Conn.App. 347, 371-74 (2016); Danbury v. Dana Investment Corp., 249 Conn. 1, 18-19 (1999). Again, the court also finds these allegations unproven.
A more proper special defense is the sixth, which alleges that any agreement between the plaintiff and the Association is invalid and unenforceable because the putative contract violated provisions of the Home Improvement Act (HIA). Specifically, the Association contends that the oral modifications to the original, written contract fails to comply with General Statutes § 20-429(a)(1)(B), which mandates that such changes must be in writing. Also, the written contract lacked the cancellation notice rights provision required by General Statutes § 20-429(a)(1)(A).
Both allegations are factually correct. Subsection 20-429(a)(1)(A) directs that "[n]o home improvement contract shall be valid or enforceable against an owner" if such omissions occur. "Owner" is defined under the HIA to include "a condominium association," § 20-419(6). "Home improvement" embraces replacement and/or improvements to driveways, § 20-419(4). Therefore, on its face, the HIA prevents the plaintiff from enforcing the agreement with the Association through recovery for breach of contract, quantum meruit, or unjust enrichment, Barrett Builders v. Miller; 215 Conn. 316, 325-28 (1990).
However, two exceptions to this prohibition have arisen since Barrett was decided. In response to the harsh result caused by complete denial of recovery on any ground in that case, our legislature enacted subsection (f) of § 20-429 to limit that forfeiture. Subsection § 20-429(f) permits contractors to seek reasonable compensation for services and materials provided as long as the contractor complied with certain, key requirements, although not all of them, as long as the trial court deems it inequitable to deny any recovery.
Besides that statutory exception, our Supreme Court also recognized a common-law basis for recovery despite noncompliance with the HIA, Habetz v. Condon, 274 Conn. 231 (1992). That judicially created exception applies when the owner engages in mischief and then attempts to "hide behind the act [and] benefit from his own wrong ..., id., 237. To hold otherwise would encourage such misbehavior, id. The Supreme Court confirmed that bad faith on the part of the owner could revive restitutionary remedies for the contractor which would otherwise be lost under the HIA. In Habetz v. Condon, supra, the Supreme Court ruled that the bad faith exception could be raised by a denial of any statutory violation, id., 235. The plaintiff has raised this matter of avoidance by a general denial in its reply to the Association’s special defenses and by asserting bad faith allegations in separate counts of its amended complaint.
The common-law exception of Habetz v. Condon, supra, predated the statutory one enacted in 1993, P.A. 93-215. That chronology raised the specter of whether the legislative amendment supplanted the bad faith exception. Put another way, did a contractor have to show compliance with § 20-429(f), in order to assert the bad faith exception? The Appellate Court answered that question in the negative, Walpole Woodworkers, Inc. v. Manning, 126 Conn.App. 94, 103 (2011), aff’d, 307 Conn. 582 (2012).
Thus, if the Association interposed the failure to comply with the HIA in bad faith, the plaintiff can recover from the Association, not for breach of contract, but under quantum meruit principles. "Bad faith," for this exception, means more than mere negligence," Habetz v. Condon, supra, 237. "The central element giving rise to this exception is the recognition that to allow the [owner] who acted in bad faith to repudiate the contract and hide behind the act would be to allow him to benefit from his own wrong, and indeed encourage him to act thusly," id.
"The law does not permit the exercise of a right to repudiate a contract when the exercise of such a right in bad faith would work an injustice," id. (emphasis added). Note that the bad faith pertains to the exercise of the right to repudiate; that is, the trial court must focus on the bad faith interposition of the strictures of the HIA as the basis for repudiation of the contract. This doctrine is "founded on public policy and [contains] a strong strain of estoppel [to] prevent a misbehaving party from invoking the benefits of a statute which is absolute on its face," id., 240 (emphasis added). Courts will refuse "to countenance a gross injustice and indeed to encourage its perpetuation and to assure its success," id.
Nonpayment based on disagreement about performance is insufficient to comprise bad faith, Lucien v. McCormick Construction, LLC, 122 Conn.App. 295, 300 (2010). Bad faith entails dishonest purpose, id. The burden is on the plaintiff to prove, by a preponderance of the evidence, that the Association acted in bad faith in seeking refuge from its obligations under the agreement by recourse to the invalidation provision of the HIA. The court finds that the plaintiff has satisfied that burden in this case.
The court’s finding of bad faith largely rests on the fact that the deficient contract was drafted by and proffered to the plaintiff by the Association, and the Association now wishes to utilize those very defects, which it created, to avoid payment despite having the use and benefit of the plaintiff’s work and materials. Again, the court emphasizes that it was the Association, through Kohnle, that failed to include a proper cancellation notice of rights. The court also infers that, if subsequent changes had been reduced to writing, that task would probably have fallen to Kohnle because he drafted the original agreement. Because it was inconvenient for Kohnle to produce a written modification due to time constraints and relocation of Elite’s offices, no writing memorialized that modification as required by the HIA, § 20-429(a)(1)(B).
It would be unconscionable to allow the Association to assume the task of drafting the contract; do so in a manner that violated the HIA; and then use its own omissions as a shield to liability. Having previously determined that the plaintiff adequately completed its obligations under the original agreement, as modified, the plaintiff is entitled to obtain a restitutional remedy.
In such cases, "the measure of restitution is essentially equitable," Walpole Woodworkers, Inc. v. Manning, 307 Conn. 582, 589-90 (2012). The trial court "may select from among several methods of determining the amount of recovery in restitution ... ," id. One method is to use the price the recipient of the benefit "has expressed a willingness to pay," id., 590. The court concludes that this measure of restitution is particularly appropriate under all the circumstances and the actions of the parties in the present case.
The Association selected the plaintiff’s proposal which was the second least expensive. Cline agreed to the increase in price, $3,900, once it became apparent that excavation, adjustment of the gravel base, and reversing the direction of surface water flow went beyond the specifications of the written contract, which erroneously assumed that only two layers of old asphalt existed. To obtain some additional corrective work, performed without charge by the plaintiff, the Association’s agents, Cline and Kohnle, assured the plaintiff that payment was forthcoming. Kohnle prepared the remittance for the agreed-upon amount, but disappointed Board members derailed compensation. To reiterate, the plaintiff performed the repaving as agreed, with the caveat that minor puddling would persist unless total reconstruction were done; a costly proposition that the Association wished to avoid.
The court enters judgment in favor of the plaintiff against the Association on the third count in the amount of $49,460 (the original contract price of $45,560 plus the $3,900 for the extra work) plus prejudgment interest under General Statutes § 37-3a, at the rate of five percent per annum from the final invoice date of September 12, 2016, to present which is $6,626.00 (978 days at $6.775 per day) for a total award of $56,086.00 plus costs to be taxed by the clerk.
The unjust enrichment claim (Count 2) and breach of the implied covenant of good faith and fair dealing claim (Count 4) are alternatives to the quantum meruit count and are dismissed as moot. Similarly, the bad faith claim of Count 5 is subsumed in the exception to the violation of the HIA and is moot. It appears that the allegations of that count are preemptive and in avoidance of the Association’s special defense based on violation of the HIA.
Because of noncompliance with the HIA, the plaintiff cannot prevail on its breach of contact claim (Count 1). Judgment for the Association enters as to that count.
It should be noted that the plaintiff, in its prayer for relief, seeks punitive damages and attorneys fees. In Walpole Woodworkers, Inc. v. Manning, 126 Conn.App. 94, aff’d, 307 Conn. 582, the Appellate Court overturned an award of attorneys fees, id., 95-96. That court remarked, "under the bad faith exception, the plaintiff is entitled only to recover the value of the work performed because the contract is otherwise unenforceable due to the violation of the act," id., 102.
The Appellate Court further observed, however, that the plaintiff in that case failed to raise any basis for attorneys fees besides those arising from the invalidated contract, id. The court in the present matter discerns no basis for awarding punitive damages and/or attorneys fees. Although the court has found that the Association’s reliance on noncompliance with the HIA, which violations it precipitated, was in bad faith, the court does not find that the Association acted deceptively or fraudulently to avoid payment. The Association always expected to pay for the repaving of Lots 4 and 5 but failed to do so over members’ concerns about the quality of the work done. The Association’s position was untenable and ill-advised but sincerely held and does not merit the imposition of punitive damage or attorneys fees.
As to the remaining counts, the court determines that the allegations of intentional or negligent misrepresentation, bad faith, and unjust enrichment against Cline, individually, are without merit. Cline was, in fact, the agent of the Association and had the authority to bind the Association as he did. Cline never attempted to induce the plaintiff to do additional work with knowledge that the Association would not pay for it. To the contrary, Cline reasonably expected the Association to live up to the bargain he negotiated. Therefore, judgment in favor of Cline enters on all counts pertaining to him.