Opinion
FSTCV166029448S
07-30-2018
YALE ELECTRIC EAST, LLC v. SEMAC ELECTRIC CO., INC., et al.
UNPUBLISHED OPINION
Jacobs, J.
BACKGROUND
On August 5, 2016, the plaintiff, Yale Electric East, LLC, filed a four-count complaint, sounding in breach of contract as against the defendant Semac Electric Co. (count one); unjust enrichment as against the defendant Semac Electric Co. (count two); quantum meruit as against Semac Electric Co. (count three); and an action to recover under bond in substitution of the plaintiff’s mechanic’s lien pursuant to General Statutes § 49-37 as against the defendant Fidelity & Deposit Co. of Maryland (count four).
On January 26, 2018, the defendant filed a motion for summary judgment as to count four of the complaint, along with a memorandum of law [# 123] and affidavits [# 124, # 125] in support of its motion. On February 28, 2018, the plaintiff filed a memorandum of law in opposition to the defendant’s motion [# 135] and supporting exhibits [# 136]. On March 9, 2018, the defendant filed a reply [# 137].
The court granted a motion for default for failure to appear against defendant Semac on February 9, 2018, leaving Fidelity and Deposit Company of Maryland as the only remaining defendant.
On January 29, 2018, the plaintiff filed the current motion for summary judgment, also as to count four of the complaint, along with a memorandum of law [# 127] and affidavits [# 128, # 129, # 130] in support of its motion. The defendant’s opposing memorandum of law [# 132] and affidavits [# 133, # 134] were filed on February 27, 2018.
Although the plaintiff’s motion for summary judgment does not explicitly state that it is directed at count four of its complaint, its motion is directed at the defendant alone, which necessarily implies that it is directed at count four.
The court heard oral argument on both motions at the April 9, 2018 short calendar.
The plaintiff alleges the following facts. Skanska USA Building, Inc. (Skanska), as general contractor, entered into a construction contract with Stamford Hospital (hospital), as owner, for the construction of a project known as the Stamford Hospital Expansion and Renovation Project (project). Skanska, in turn, entered into a subcontract with the defendant Semac Electric Co., Inc. (Semac), whereby Semac was to complete the electrical work at the project. The plaintiff, in turn, entered into an open account contract with Semac, whereby the plaintiff supplied materials to Semac to be incorporated into the project, at a total price of $1,112,164.33, for which the plaintiff has invoiced Semac. The plaintiff, however, has only received payments by or on behalf of Semac totaling $798,231.90, leaving $313,932.43 now due and unpaid. On January 8, 2016, the plaintiff served a notice of intent to file mechanic’s lien (notice) on the hospital and Semac, and on January 11, 2016, served a notice on Skanska. On February 12, 2016, the plaintiff recorded a certificate of mechanic’s lien (certificate) with the City of Stamford Town Clerk. A copy of the certificate was served on the hospital, Semac, and Skanska. On March 29, 2016, the plaintiff recorded an amended certificate of mechanic’s lien with the City of Stamford Town Clerk (amended certificate); a copy of the amended certificate was thereafter served upon Skanska, Semac, and the hospital. Skanska, as principal, subsequently obtained a bond in substitution for the mechanic’s lien (bond) issued by the defendant, Fidelity and Deposit Company of Maryland (defendant), as surety, naming the plaintiff as lienor, the hospital as owner, and identifying the certificate and amended certificate as the liens to be substituted by the bond. To date, the plaintiff has not been paid the amounts set forth in its certificate and amended certificate.
See footnote 1.
In count four of the plaintiff’s complaint, the plaintiff incorporates the previously discussed allegations, and alleges the following facts. By filing the certificate and amended certificate, the plaintiff established a valid mechanic’s lien against the project, which was thereafter substituted by the defendant’s bond. Under that bond, the defendant is obligated to pay to the plaintiff the amount secured by the liens for which the defendant’s bond was substituted. Despite demand, the hospital, Skanska, Semac, and the defendant have failed and refused to make payment to the plaintiff pursuant to the bond.
On September 30, 2016, the defendant filed an answer denying the substantive allegations of the plaintiff’s complaint and setting forth a special defense, which alleges the following facts. The plaintiff provided material to Semac for use in connection with the project, but the plaintiff did not have a contract with the hospital, Skanska, or the defendant, for any of the materials presently at issue, and thus, the plaintiff’s only claim against the defendant must flow through Semac. Semac, however, defaulted on its subcontract with Skanska, and Skanska has had to take reasonable steps to complete the work contemplated by the subcontract through others. Despite reasonable attempts to control the costs of completion of the work contemplated by the subcontract, Skanska, the defendant’s principal, has incurred and will incur costs that exceed the contract price as set by the subcontract. Therefore, the lienable fund has been exhausted, and neither the defendant nor Skanska are liable for any of the damages alleged by the plaintiff. On October 12, 2016, the plaintiff filed a reply leaving the defendant to its proof as to the allegations set forth in the defendant’s special defense.
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Bozelko v. Papastavros, 323 Conn. 275 (2016). "The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ... and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Internal quotation marks omitted.) Stuart v. Freiberg, 316 Conn. 809 (2015).
In the current case, the defendant’s motion for summary judgment asserts that there is no genuine issue of material fact that the lienable fund that forms the basis for the plaintiff’s recovery has been exhausted, and thus, as a matter of law, the plaintiff cannot recover on the bond issued by the defendant. The plaintiff’s motion asserts that there is no genuine issue of material fact that the lienable fund that forms the basis for the plaintiff’s recovery has not been exhausted, and thus, as a matter of law, the plaintiff is entitled to recover the full amount secured by the liens for which the defendant’s bond was substituted.
Many of the material facts in the current case are not in dispute, but the parties offer conflicting interpretations of how of Connecticut’s mechanic’s lien statutes apply to the facts. The defendant asserts that because there is no genuine issue of material fact that the lienable fund which forms the basis for the plaintiff’s recovery has been exhausted, the plaintiff cannot recover pursuant to the bond issued by the defendant. The defendant claims that, pursuant to our statutory framework, the amount available to a contractor or subcontractor for recovery pursuant to a mechanic’s lien is limited to a lienable fund, which cannot be greater than the amount of the original contract between an owner and general contractor. The defendant asserts that the lienable fund is diminished by bona fide payments made by the owner before receiving notice of the lien and by the cost of completing the contract. The defendant asserts that the plaintiff’s recovery is barred because the lienable fund has been exhausted by bona fide payments made by the hospital to Skanska before receiving notice of the plaintiff’s lien, and by payments made by the hospital to Skanska after receiving notice of the plaintiff’s lien, as such payments were made in order to complete the contract. The defendant asserts there are genuine issues of material fact as to whether the materials which form the basis of the plaintiff’s mechanic’s lien were actually incorporated into the project.
See Def.’s Mem. of Law in Supp. Summ. Judg., pp. 1-4 (discussing undisputed facts), and Smerglio Aff. (establishing various material facts and submitted in support of both defendant’s and plaintiff’s motions for summary judgment).
The plaintiff asserts that it is entitled to summary judgment because there is no genuine issue of material fact that the lienable fund which forms the basis for the plaintiff’s recovery has not been exhausted, and thus, the plaintiff is entitled to recover the full amount secured by the liens for which the defendant’s bond was substituted. The plaintiff agrees that the lienable fund available to a contractor or subcontractor for recovery pursuant to a mechanic’s lien cannot be greater than the amount of the original contract between an owner and general contractor, and that the lienable fund can be diminished by bona fide payments made by the owner before receiving notice of the lien. The plaintiff also agrees that the lienable fund in the present case was diminished by bona fide payments made by the hospital to Skanska before receiving notice of the plaintiff’s lien. The plaintiff argues that, because Connecticut’s statutory framework provides that subcontractors are subrogated to the rights of general contractors, the lienable fund is only diminished by the cost of completing the contract where the general contractor is in breach of the original contract with the owner or the general contractor is terminated by the owner. As such, in this case, the lienable fund is not diminished by the hospital’s payments to Skanska after receiving notice of the plaintiff’s lien because Skanska was never placed in default of the general contract or otherwise terminated by the hospital.
"Although the mechanic’s lien statute creates a statutory right in derogation of the common law ... its provisions should be liberally construed in order to implement its remedial purpose of furnishing security for one who provides services or materials." (Citations omitted; internal quotation marks omitted.) F.B. Mattson Co. v. Tarte, 247 Conn. 234 (1998). Under Connecticut’s mechanic’s lien statutes, General Statutes § 49-33 et seq., "a contractor can put a lien on real estate for claims of more than ten dollars for materials furnished or services rendered in making repairs or improvements to the real estate affected ... The lien can be foreclosed on in the same manner as a mortgage." (Citation omitted.) Dehm Drywall, LLC v. Geary, Superior Court, J.D. of Windham, Docket No. CV-08-5003665-S (4/20/11, Vacchelli, J.). A mechanic’s lien, however, "can only be enforced to the extent that there is a ‘lienable fund’ available against which it can be applied." Id. "The statutory limitations on lienable funds as applicable to subcontractors are set forth in General Statutes § § 49-33 and 49-36." (Footnotes omitted.) ProBuild East, LLC v. Poffenberger, 136 Conn.App. 184 (2012).
The lienable fund statutes pertinent to the present matter are § § 49-33(e) and (f), and § § 49-36(a) and (c). General Statutes § 49-37 allows for the substitution of a bond in place of a mechanic’s lien. Pursuant to this statutory scheme, "[a] subcontractor is subrogated to the rights of the general contractor through whom he claims, such that a subcontractor only can enforce a mechanic’s lien to the extent that there is unpaid contract debt owed to the general contractor by the owner." ProBuild East, LLC v. Poffenberger, supra, 136 Conn.App. 191-92. A second tier subcontractor is similarly subrogated to the rights of the general contractor through whom he claims. See Seaman v. Climate Control Corp., 181 Conn. 592 (1980) (holding that second tier subcontractor can be subrogated to general contractor’s claims against owner even where first tier subcontractor has been fully paid).
General Statutes § 49-33(e) provides: "A mechanic’s lien shall not attach to any such building or its appurtenances or to the land on which the same stands or to any lot or to any plot of land, in favor of any subcontractor to a greater extent in the whole than the amount which the owner has agreed to pay to any person through whom the subcontractor claims subject to the provisions of section 49-36."
General Statutes § 49-36(a) provides: "No mechanic’s lien may attach to any building or its appurtenances, or to the land on which the same stands, or any lot, or any plot of land, in favor of any person, to a greater amount in the whole than the price which the owner agreed to pay for the building and its appurtenances or the development of any such lot, or the development of any such plot of land."
"Those who provide services or materials in connection with the construction of a building are entitled to claim a lien on the land that they have improved if they fall into one of two categories. Lienors are protected if they have a claim either (1) by virtue of an agreement with or the consent of the owner of the land, or (2) by the consent of some person having authority from or rightfully acting for such owner in procuring labor or materials ... Lienors in the second category must give timely notice of their intent to claim a lien in order to perfect their lien, while those in the first category need not give such notice ... Lienors in the second category include subcontractors and persons who furnish materials or services by virtue of a contract with the original contractor or with any subcontractor, that is to say at least first and second tier subcontractors." (Citations omitted; footnote omitted.) Id., 595-96.
"General Statutes § § 49-33 and 49-36 ... define and delimit the fund to which a properly noticed mechanic’s lien may attach. Both of these sections start with the proposition that no mechanic’s lien may attach to any building or land in an amount greater than the price which the owner has agreed to pay to the general contractor for the building being erected or improved. This amount may be diminished to the extent that it exceeds the reasonable cost ... of satisfactory completion of the contract plus any damages resulting from ... default for which [the general contractor] might be held liable to the owner ... The amount may be diminished further by bona fide payments, as defined in section 49-36, made by the owner [to the general contractor] before receiving notice of [the mechanic’s] lien or liens." (Citation omitted; footnotes omitted; internal quotation marks omitted.) Rene Dry Wall Co. v. Strawberry Hill Associates, 182 Conn. 568 (1980).
In the present matter, the plaintiff has submitted evidence demonstrating that at the time that it gave notice of its lien on January 8, 2016, Skanska was still owed $54,778,345.44 pursuant to its contract with the hospital. Smerglio Aff. ¶¶ 10, 14. This amount represents the lienable fund available to the plaintiff, from which it may seek recovery pursuant to its bond. The court concludes that there is no genuine issue of material fact that a lienable fund exists.
The court concludes that the cases cited by the defendant in the current case do not support its position. In cases cited by the defendant, the general contractor either defaulted on the original contract or was terminated by the owner. Angiolillo v. Tradesource, Inc., Superior Court, J.D. of Stamford-Norwalk, Docket No. CV-01-0186513-S (10/1/02, Landau, J.); W.G. Glenney Co. v. Bianco, 27 Conn.App. 199, 206-07 (1992); Rene Dry Wall Co., Inc. v. Strawberry Hill Associates, supra, 182 Conn. 570. In the current case, in contrast, Skanska has not defaulted on its original contract, nor was it terminated by the hospital.
In Chris Construction Co. v. May Centers, Inc., 23 Conn.App. 453 (1990), the subcontractor left the job site, the owner completed the subcontractor’s work at its own expense. Id., 455. Subsequent to the subcontractor’s filing of a mechanic’s lien, and pursuant to a hearing, the trial court awarded the subcontractor $16,000 in damages, plus costs and statutory interest. Id. The court’s finding was based on an overall subcontract total of $43,300, which was setoff (1) by $19,000, which represented payments made by the general contractor to the subcontractor before the lien was filed, and (2) by another $8,300, which represented the amount the owner had to spend to complete the subcontract. Id. The court, however, did not apply a reduction to the lienable fund based on any payments made by the owner to the general contractor under their original contract, which is what the defendant argues that the court should do here. Rather, the court in Chris Construction Co. only applied a reduction to what the subcontractor was due, based on the owner’s completion of the subcontractor’s work. The defendant in the present matter, however, does not claim, nor has it introduced evidence to demonstrate, that the plaintiff has not fulfilled its obligations under its subcontract so as to apply a reduction to the lienable fund.
The defendant’s interpretations of § 49-33 and § 49-36 are inconsistent with the holding of Seaman v. Climate Control Corp., supra, 181 Conn. 601-04, in which our Supreme Court established that the mechanic’s lien laws in Connecticut are based on a subrogation theory. In Seaman, the court held that a second tier subcontractor has a right to a mechanic’s lien against an owner’s property when the owner owes money to the general contractor, even when the first tier subcontractor has been fully paid. Id., 593-607. The court explained that "[i]n this state, a subcontractor’s right to a mechanic’s lien is said to flow from his equitable entitlement to the lien which would otherwise attach in favor of the general contractor." Id., 601. "In light of the obvious linkage ... between the subrogation theory and the limitation of the lienable fund to the unpaid obligation to the general contractor, we see no reason to read the theory restrictively to bar [the second tier subcontractors’ claims.] In all of the reported cases in which subrogation was used to defeat a mechanic’s lien claim, it was the general contractor who had no surviving right to which the claimant could be subrogated ." (Emphasis altered.) Id., 602.
Pursuant to the subrogation theory, if a general contractor has a surviving right against the owner, so does the subcontractor. It is only in circumstances where the general contractor would not have a surviving right against the owner- e.g., where a general contractor is terminated or defaults on the original contract and the owner is forced to complete the contract in excess of its original price, or where a general contractor is paid in full prior to placing a lien on the owner’s property- that a subcontractor will be prevented from realizing its equitable entitlement to the lien that would otherwise attach in favor of the general contractor. In the current case, because Skanska had a right to a mechanic’s lien claim at the time when the plaintiff gave notice of its lien, such right survives in the plaintiff. The court concludes that the lienable fund has not been extinguished; it exists in the amount of $39,024,390.36.
See also, 56 C.J.S. 247, Mechanics’ Liens § 205 (2007) ("Where the contractor has abandoned the contract before full performance, the aggregate claims of subcontractors and other claimants not contracting directly with the owner cannot extend beyond the contract price or the amount due and unpaid on the contract. The unpaid balance of the contract price is subject to deductions for the cost of completing the building or for damages sustained by the owner because of the contractor’s default." [Emphasis added.] ).
Although a lienable fund remains, the defendant argues that genuine issues of material fact remain as to whether the materials that form the basis of the plaintiff’s mechanic’s lien were actually incorporated into the project, making summary judgment in favor of the plaintiff inappropriate.
General Statutes § 49-33(a) provides: "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 subdivision of any plot of land, then the plot of land is subject to the payment of the claim." (Emphasis added.) In turn, General Statutes § 49-33(b) provides that: "The claim is a lien on the land, building and appurtenances or lot or in the event that the materials were furnished or services were rendered in the site development or subdivision of any plot of land, then on the plot of land and the claim takes precedence over any other encumbrance originating after the commencement of the services, or the furnishing of any such materials, subject to apportionment as provided in section 49-36."
"[T]o be the subject of a mechanic’s lien, the materials for which a lien has been claimed must not merely have been furnished for, or delivered to the site of, the particular building or improvement, but must actually also have been used in its construction ... The rationale for this rule is that it is equitable to grant a lien against property that has increased in value by virtue of the use of materials and, conversely, that it is not equitable to burden the property with a lien to secure the price of materials that never entered the construction. Similarly, we have construed the meaning of ‘services’ to be confined to services that are of a mechanical nature or to those services related to the construction of a building or skilled workmen using tools, machinery and other equipment to improve the land." (Citation omitted.) Thompson & Peck, Inc. v. Division Drywall, Inc., 241 Conn. 370 (1997). Section 49-33 does not extend the availability of a mechanic’s lien to "materials that have not enhanced the property in some physical manner, laid the groundwork for the physical enhancement of the property or that did not play an essential part in the scheme of physical improvement." Id., 380.
In support of its motion for summary judgment, the plaintiff has submitted, inter alia, the affidavit of Paul Hutchinson, its general manager, in which he testifies that the plaintiff "entered into an open account contract ... with ... Semac whereby Semac would order and [the plaintiff] would supply Materials to Semac for use or incorporation into the Project ... [The plaintiff] commenced to furnish Materials to Semac for the Project on or about June 13, 2014 and ceased to furnish said Materials to Semac on November 18, 2015 ... [O]n or about November 18, 2015 Semac was terminated from the Project by Skanska, after which, [the plaintiff] at the direction of Skanska, delivered Materials to Skanska for the Project." Hutchinson Aff. ¶¶ 8-10. Although the evidence submitted by the plaintiff demonstrates that it supplied materials for the project, neither the testimony of Hutchinson, nor the other exhibits submitted by the plaintiff establish that there is no genuine issue of material fact that the materials supplied by the plaintiff were actually used in the project’s construction.
CONCLUSION
The defendant’s motion for summary judgment is denied. The plaintiff’s motion for summary judgment is denied.
General Statutes § 49-33(f) provides: "Any such subcontractor shall be subrogated to the rights of the person through whom the subcontractor claims, except that the subcontractor shall have a mechanic’s lien or right to claim a mechanic’s lien in the event of any default by that person subject to the provisions of sections 49-34, 49-35 and 49-36, provided the total of such lien or liens shall not attach to any building or its appurtenances, or to the land on which the same stands or to any lot or to any plot of land, to a greater amount in the whole than the amount by which the contract price between the owner and the person through whom the subcontractor claims exceeds the reasonable cost, either estimated or actual, as the case may be, of satisfactory completion of the contract plus any damages resulting from such default for which that person might be held liable to the owner and all bona fide payments, as defined in section 49-36, made by the owner before receiving notice of such lien or liens."
General Statutes § 49-36(c) provides: "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. No payments made in advance of the time stipulated in the original contract may be considered as made in good faith, unless notice of intention to make the payment has been given in writing to each person known to have furnished materials or rendered services at least five days before the payment is made."