Opinion
No. CV 06-5007487S
January 15, 2008
MEMORANDUM OF DECISION
I
The plaintiffs Frank N. Naples and Karen D. Naples (Naples) have filed a twelve-count complaint against Keystone Building Development Corporation, et al. (Keystone) dated September 17, 2007.
By stipulation dated December 4, 2007 it is stipulated that the successor to the defendant corporation is Keystone Builders Development, LLC. It is also stipulated that if the court finds liability in favor of the plaintiffs, the successor LLC will be responsible for and pay any and all damages that would have been paid by Keystone Building Development Corp.
Pursuant to a motion made by the defendant at the conclusion of plaintiffs' case, the court ruled that only the following counts remain: Count 1 Breach of Contract against Keystone; count 2 Unjust Enrichment against Keystone; Count 9 Negligence as to defendant Leonard Bourbeau; Count 10 Pierce the Corporate Veil; Count 11 Breach of Warranty pursuant to C.G.S. § 47-116, et seq. against all defendants and Count 12 Connecticut Unfair Trade Practices (CUTPA) C.G.S. § 42-110a, et seq. against all defendants.
The defendants have filed an answer and special defenses dated October 29, 2007. The first special defense claims the causes of action are barred by the applicable statute of limitations and the second special defense asserts that the claims are barred by the doctrine of laches.
The plaintiffs' main claim is in breach of contract. The plaintiffs contend that the defendant breached its contract in the construction of a home built by the defendant at 499 Main Street, Glastonbury, Connecticut.
CT Page 803
II
The court will first rule on the issues raised in count 10, which sets forth a claim seeking to pierce the corporate veil.Disregard of a corporate entity or limited liability company for the purpose of imposing liability upon an individual shareholder or member for acts of the corporation or member is commonly referred to as piercing the corporate veil.
"A corporation is a separate legal entity, separate and apart from its stockholders . . . It is an elementary principle of corporate law that a corporation and its stockholders are separate entities and that . . . corporate property is vested in the corporation and not in the owner of the corporate stock." (Citations omitted; emphasis in original; internal quotation marks omitted.) State v. Radzvilowicz, 47 Conn.App. 1, 18-19, 703 A.2d 767, cert. denied, 243 Conn. 955, 704 A.2d 806 (1997). That principle also is applicable to limited liability companies and their members. General Statutes § 34-133. Litchfield Asset Management Corporation v. Mary Ann Howell et al., 70 Conn.App. 133; 799 A.2d 298 (2002).
"To hold a corporate officer personally liable for wrongdoing, there must be a sufficient factual basis for a court to pierce the corporate veil. Angelo Tomasso, Inc. v. Armor Construction Paving, Inc., 187 Conn. 544, 561, 447 A.2d 406 (1982); Skyler Ltd. Partnership v. S.P. Douthett Co., 18 Conn.App. 245, 253, 557 A.2d 927 (1989); Schmidt v. Yardney Electric Corporation, 4 Conn.App. 69, 73, 492 A.2d 512 (1985).
"A court may pierce the corporate veil only under exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice, SFA Folio Collections, Inc. v. Bannon, 217 Conn. 220, 230, 585 A.2d 666, cert denied, 501 U.S. 1223, 111 S.Ct. 2839, 115 L.Ed.2d 1008 (1991), quoting Angelo Tomasso, Inc. v. Armor Construction Paving, Inc., supra, 187 Conn. 557. The corporate veil will be pierced when the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor. Saphir v. Neustadt, 177 Conn. 191, 209, 413 A.2d 843 (1979); Falcone v. Night Watchman, Inc., supra [ 11 Conn.App. 220]." (Internal quotation marks omitted.) United Electrical Contractors v. Progress Builders, Inc., 26 Conn.App. 749, 755, 603 A.2d 1190 (1992). The Connecticut Supreme Court has established a two-pronged test necessary to establish sufficient grounds for piercing the corporate veil: The instrumentality rule and the identity rule.
"The instrumentality rule requires, in any case but an express agency, proof of three elements:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the Defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of Plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of." (Emphasis in original; internal quotation marks omitted.)Id., at 553. "The key factor in any decision to disregard the separate corporate entity is the element of control or influence exercised by the individual sought to be held liable for corporate actions." Christian Bros., Inc. v. South Windsor Arena, Inc., 7 Conn.App. 648, 651, 509 A.2d 1095 (1986).
In the instant case the Construction Agreement is in the corporate name of Keystone Building Development Corporation and signed by Leonard Bourbeau, President.
The warranty deed transferring the property to the plaintiffs was in the corporate name and signed by Leonard Bourbeau as President of the corporation.
Also Richard Abalun, a self-employed subcontractor of defendant testified that defendant acted in a corporate capacity in building about 40 homes.
The court finds that the corporation served a legitimate business purpose.
The plaintiffs have failed to meet the requirements for piercing the corporate veil.
Therefore, the court finds that the plaintiffs have failed to meet their burden of proof in piercing the corporate veil and that claim is denied.
Accordingly, the defendant in this case according to the stipulation is Keystone Builders Developers, LLC.
III
The plaintiffs entered into a contract (Construction Agreement) with the defendant dated November 17, 2000 for construction of a resident on property described as "497 Main Street." The agreement contained an attachment "A" Limited Warranty.
The price is indicated to be $620,500 in clause 9, although Frank Naples testified that the ultimate price was $680,000-$690,000. The property was conveyed to the plaintiffs by a warranty deed from the defendant corporation dated December 21, 2001.
In the early part of 2002 the plaintiffs contacted Leonard Bourbeau, president of the corporation concerning problems with the construction of their residence. In this regard, starting in the Spring of 2002, the plaintiffs sent the defendant punch lists, exhibits 30, 31 and 32 outlining items that needed to be addressed.
Karen Naples testified that Leonard Bourbeau came to the property two or three times and sent Rick a subcontractor to address some of the problems listed. Some of the problems were peeling paint, mold on trim boards and moisture in the dwelling.
Frank Naples indicated that the first Spring that they were in the home, windows in the master bedroom and bathroom leaked. Such leaks also occurred in the kitchen. He also noticed stress fractures in the sheet rock and detected some rotted wood.
Leonard Bourbeau came to the premises a few times and sent a subcontractor to deal with some of the issues. Some of the boards were replaced, however, most of the items were not taken care of by the defendant.
Mr. Naples also stated that the defendant came back to the property and caulked windows. Also that there was water damage in the master bedroom, family room, dining room and garage. He therefore made a claim with his insurance company.
The plaintiffs presented the testimony of Robert Bath, a property adjustor for USAA Insurance, in that the plaintiffs had made a claim under their insurance policy.
Mr. Bath indicated that he examined the plaintiff's residence in July of 2004. He observed the windows and doors were not properly caulked when installed.
In his report dated July 19, 2004, Mr. Bath noted "Based on our inspection of your property, the damage consists of rot, deterioration, wear, tear and improper workmanship." "This damage is excluded as indicated by the exclusion cited."
In a follow up letter dated November 7, 2005, Mr. Bath stated further, "when I inspected your dwelling there was no caulking performed on the exterior." "This includes the joints on the siding."
The plaintiffs also presented an array of photographs to show the condition of their home and established their claim of poor workmanship. For example plaintiff's exhibit 7bbb is labeled water damage plywood, plaintiff's exhibit ddd noted severely damaged wood under trim and plaintiff's 7ooo indicates application of Tyvek — no taping.
Robert Dykins, a builder of residential homes in the Glastonbury area for 23 years, testified on behalf of the Naples. He visited the plaintiffs' property in the fall of 2005. He indicated that the window flashings were tilted the wrong way causing water to come into the home. Mr. Dykins stated that poor workmanship was a factor in causing problems with the dwelling. In his estimate dated April 13, 2007 he states:
The following estimate was prepared because of improper installation of siding, exterior trim and moisture barrier under siding. The moisture barrier was not installed in some areas of the house and lapped incorrectly (under lapped not overlap) in others. There is no counter flashing at trim and siding intersection which allowed water behind siding/trim. With the moisture barrier as it is and lack of flashing and proper overlapping of one material over the lower one I feel that this was what led to the siding and exterior trim failing which is causing water damage to materials under the siding.
Mr. Dykins then in his estimate lists the following:
CT Page 807
1. Reinstall windows properly so the window shed water away from interior of the house.
2. Install counter flashing under and around window flange to redirect water to the weathered surface of siding.
3. Install drip flashing on top of windows and doors pitch out to the weathered surface of siding.
4. Install counter flashing at all intersection where trim and siding meet to redirect water away from the interior.
5. Install new wood exterior trim in a manner to shed water to the exterior of the siding.
6. Install new Tyvek moister barrier and cedar lapped siding.
7. Replacement of master bedroom window.
***Estimate does not include any damage to underlaying structure where windows, doors, and exterior trim have failed, estimate only includes exterior damage that can be seen on the surface.
The damage sheathing at the corners and around windows do to water leakage will cause a structural weakness under wind loading. I feel there is damage at these areas and prepared an estimate to repair sheathing materials under siding would be in the range of $12,000 to $18,000 which is not included in this estimate and would be an extra charge.**
Estimate does not include any painting to new or existing siding or trim.
On the second page of the estimate he indicates the following:
Demolition Removal from house of existing siding and exterior trim $14,850.00
Windows New master bedroom window with on interior and exterior to matching existing $670.00
Materials Lap cedar siding to reside house $17,497.00
Labor rot Estimated labor to replace exterior trim and siding repair $46,750.00
Roofing The following estimate to replace roofing were disturbed to re-insulate, re-roof and tie into existing house, roofing material to match existing $1,237.50
Dump fee Cost to remove construction refuse $900.00
Construction cost $94,592.90
Overhead Profit and overhead $18,918.58
Mr. Dykins indicated that he prepared the estimate for the Naples on the anticipation that he will be hired to do the work described.
The plaintiffs also presented the deposition testimony of Justin Farnsworth, a product specialist at Parksite Plunkett-Webster, who are wholesalers who sell to lumberyards, one of their products is Tyvek.
Mr. Farnsworth inspected the Naple's residence and determined that the Tyvek was not installed properly. He noted that the Tyvek was not taped and not overlapped. He also observed reverse flashing.
The plaintiffs called Leonard Bourbeau as a witness. He indicated that he became an LLC in 2002 on the advice of his lawyer and CPA. Also that he was contacted by the plaintiffs in 2002 regarding problems with their residence.
He further indicated that he has been a builder for 17 years and has operated as a corporation or LLC. Also he has built about 100 homes and is still building homes. Mr. Bourbeau stated that he sent workers to the Naples' residence to address items on the punch list.
The testimony of Leonard Bourbeau indicates that there was a continuing course of conduct on his part in dealing with the problems raised by the Naples. By virtue of the continuing course of conduct, the defense of statute of limitations and latches are not applicable.
In its case in chief, the defendant elicited the testimony of its expert Jonathan Van Dine owner of building Performance Engineering, LLC. Mr. Van Dine, works with environmental problems and deals with issues of moisture and mold in residences. He examined the Naples residence and found wood that was stained caused by moisture, he saw peeling paint and mildew.
What was significant about Mr. Van Dine's testimony is that he did not contradict the testimony of the plaintiffs' expert Mr. Dykins.
The court must conclude that the opinion of Mr. Dykins, of improper installation of siding, exterior trim and moisture barrier under siding has gone unrefuted.
IV
In the seventh count the plaintiffs claim a violation of the Uniform Fraudulent Transfer Act C.G.S. § 52-552a, et seq.
The plaintiffs allege that the LLC was formed to escape faulty workmanship performed by the corporation. Also that the conduct of the defendant in the acquisition of assets was an intentional attempt to defraud creditors.
The plaintiffs have the burden of proof as to said claim. The court finds that the plaintiffs have not produced credible evidence to show such an intent.
While the plaintiffs have shown aspects of poor workmanship on the part of the defendant and that it did not satisfactorily address the plaintiffs' complaints, they have not established an intent to avoid any debt or duty.
Therefore, the court denies the plaintiff's claim of violation of C.G.S. § 52-552a, et seq.
V
In the eleventh count the plaintiffs seek to invoke the provisions of C.G.S. § 47-116, et seq., Breach of Warranty.
The transaction in the instant case comes within the scope of C.G.S. § 47-116, et seq.
Also it is noted that the Construction Agreement contains an attachment labeled "Limited Warranty." The defendant has provided a warranty pursuant to the provisions of the agreement.
VI
The twelfth count of the plaintiff's complaint alleges a cause of action for violation of the Connecticut Unfair Trade Practices Act (CUTPA). The plaintiff asserts that the defendant misrepresented to the plaintiffs that it was highly skilled and knowledgeable in the area of construction of residential homes. That the defendant's conduct was unethical and unscrupulous outline the meaning of C.G.S. § 42-110b.
In considering CUTPA claims, the Appellate Court in Angiolilo v. Buckmiller, 102 Conn.App. 697, stated the following:
CUTPA provides in relevant part that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). In determining whether a practice violates CUTPA, we are guided by the criteria set out in the Federal Trade Commission's so-called cigarette rule: "(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons]." (Internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 155, 881 A.2d 937 (2005), cert. denied, 547 U.S. 1111, 126 S.Ct. 1913, 164 L.Ed.2d 664 (200 ). "All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets all three." (Internal quotation marks omitted.) Id. "Although our supreme Court repeatedly has stated that CUTPA does not impose the requirement of a consumer relationship . . . the court also has indicated that a plaintiff must have at least some business relationship with the defendant in order to state a cause of action under CUTPA." (Citation omitted; emphasis in original; internal quotation marks omitted.) Pinette v. McLaughlin, 96 Conn.App. 769, 778, 901 A.2d 1269, cert. denied, 280 Conn. 929, 909 A.2d 958 (2006).
As indicated, the plaintiff's first count is a claim for breach of contract, the plaintiff also claims a CUTPA violation in the twelfth count. The plaintiffs allege that the conduct of the defendant was unfair, immoral, oppressive and/or deceptive.
In Greene v. Orsini, 50 Conn.Sup. 312, the Superior Court held:
The same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation. Lester v. Resort Camplands International, Inc., 27 Conn.App. 59, 71, 605 A.2d 550 (1992). Not every contractual breach rises to the level of a CUTPA violation. Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004). "There is a split of authority in Superior Court decisions regarding what is necessary to establish a CUTPA claim for breach of contract, the majority of courts holding that a simple breach of contract, even if intentional, does not amount to a violation of CUTPA in the absence of substantial aggravating circumstances." (Internal quotation marks omitted.) Zelencich v. American Yacht Services, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 02-0187145 (July 31, 2006) (Jennings, J.).
A simple breach of contract does not offend traditional notions of fairness and, standing alone, does not offend public policy so as to invoke CUTPA. A CUTPA claim lies where the facts alleged support a claim for more than a mere breach of contract. Depending upon the nature of the assertions, however, the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation. Lester v. Resort Camplands International, Inc., 27 Conn.App. 59, 71, 605 A.2d 550 (1992). That generally is so when the aggravating factors present constitute more than a failure to deliver on a promise. Tienshan, Inc. v. George, Superior Court, complex litigation docket at Waterbury, Docket No. X01 CV 04-4006907 (July 28, 2006) (Sheedy, J.).
While the plaintiff may have established a claim for breach of contract by showing that the defendant's efforts were unworkmanlike, a simple breach of contract does not amount to a violation of CUTPA in the absence of substantial aggravating circumstances. At most the plaintiffs have shown that the defendant did not come back to the premises when he promised. This falls short of a CUTPA violation.
The court finds that the evidence does establish substantial aggravating circumstances. Further the plaintiff has not sustained its burden of proof that the defendant's conduct was unethical or unscrupulous or that its conduct was willful or reckless. Accordingly, the court denies the plaintiff's claim of a violation of CUTPA.
VII
As to the plaintiff's claim of unjust enrichment in the second count, the damages for this cause of action will be determined under the breach of contract claim in the first count.
VIII
In the defendant's post-trial brief, it argues for the first time that the doctrine of merger applies. In the defendant's special defense it raises issues of statute of limitations and laches, nowhere is the doctrine of merger plead, nor was it put forth in the trial of the case.
Even though said doctrine is technically not in the case, the court will make a reference to it. In discussing the doctrine of merger, the defendant cites the case of Knight v. Brockheimer, 3 Conn.App. 487, however in Knight, supra, the buyers agreed that provisions of their contract shall not survive the delivery of the deed. The buyers in the instant case have made no such agreement, therefore no intent has been established to allow for a merger.
The agreement in this case has appended a schedule "A Limited Warranty." The buyers in the instant case have not manifested their assent to take the deed as full performance.
Furthermore, the court has previously found that the defense of statute of limitations does not apply in that there was a continuing course of conduct on the part of the defendant.
In Nardi v. AA Electronic Security Engineering, 32 Conn.App. 205, the Appellate Court stated: "To support a finding of a continuing course of conduct that may toll the statute of limitations there must be some evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto."
The court found that in the instant case, the defendant returned to the plaintiffs' premises in an effort to correct items that the plaintiffs claimed were due to unworkmanlike performance by the defendant, thus showing a course of continuing conduct on its part.
IX
Based on the foregoing, the court finds that the plaintiffs have established a cause of action pursuant to the first count of the complaint (breach of contract) and the eleventh count of the complaint (breach of warranty under Connecticut General Statutes § 47-116, et seq.).
In cases dealing with a breach of a construction contract, damages are determined either by the reasonable cost of construction or by the diminished value of the property if construction was provided under the contract, Levesque v. DM Builders, Inc., 170 Conn. 177.
The only evidence offered at trial on the issue of damages was that presented by the plaintiffs, specifically that of Robert Dykins, wherein his estimate totals $113,511.48. No evidence was presented on the theory of diminished value, therefore, the court must determine the reasonable costs to correct the results of the defendant's unworkmanlike construction.
As previously noted, Mr. Dykins stated that his estimate was prepared because of improper installation of siding, exterior trim and moisture barrier under siding.
On page 2 of his, Mr. Dykins lists the following:
Demolition Removal from house of existing siding and exterior trim $14,850.00
Windows New master bedroom window with trim on interior and exterior to match existing $670.00
Materials Exterior trim and casework on house, around doors and windows $12,688.40
Materials Lap cedar siding to re-side house $17,497.00
Labor rot Estimated labor to replace exterior trim and siding repair $46,750.00
Roofing The following estimate to replace roofing where disturbed to re-insulate, re-roof and tie into existing house, roofing material to match existing $1,237.50
Dump fee Cost to remove construction refuge $900.00
Construction cost $94,592.90
Overhead Profit and overhead $18,918.58
TOTAL $113,511.48
The court finds that based on the credible evidence that the main corrective work is needed because of the improper installation of the siding and the moisture barrier (Tyvek) under the siding and therefore replacement of the moisture barrier and existing siding are warranted. The plaintiffs in their memorandum of law state that the main problem centered around the exterior of the house.
The court finds that the weight of the evidence supports the plaintiffs' claim of unworkmanlike performance by the defendant and that the most severe problem centered around the exterior of the house. This was the conclusion of Mr. Dykins who noted in his estimate, "The following estimate was prepared because of improper installation of siding, exterior trim and moisture barrier under siding."
The court finds that based on the credible evidence, that the plaintiffs are entitled to have corrective work done on the siding, trim and moisture barrier, also that painting is required because the siding and trim are wood.
As to the requirement for painting, the plaintiffs have presented the estimate of Gordek Painting, Inc. (Exhibit 6), said exhibit lists the following:
Exterior Painting Entire house will be Power Washed prior to painting or staining $350.00
Exterior Painting All new exterior Trim (excludes trim in front entrance door area) — All new trim will have nail holes filled and receive one complete coat of Cabot white Problem Solver primer. All trim will receive one complete coat of Benjamin Moore or Cabot white exterior lo-sheen trim paint. $9,460.00
Exterior Painting All exterior Siding and Doors will receive one complete coat of Benjamin Moore or Cabot solid color stain or soft gloss trim paint (Doors). Colors to match original. $3,520.00
Materials Estimate Estimate of all trim paint materials. $325.00
Materials Estimate Estimate of all Siding and Door materials. $450.00
Interior Painting Ceiling repairs and painting for Mud Room, Kitchen, Family Room and Living Room (Labor and Materials) $1,713.75
TOTAL $15,818.75
Based on the circumstances of this case and the credible evidence, the plaintiffs have established that they are entitled to only the following elements of damages in accordance with the estimates of Mr. Dykin and Gondek Painting:
Removal of existing siding and trim $14,850.00
Exterior trim and casework, around doors and windows $12,688.40
Lap cedar siding to re-side house $17,497.00
Power wash of entire house $350.00
Paint exterior trim $9,460.00
Paint siding and doors $3,520.00
Estimate of trim paint materials $325.00
Estimate of siding and door materials $450.00
TOTAL $59,140.40
The court finds that the other items listed in the exhibits are not justified by the evidence. Further the court finds that the amounts in Mr. Dykin's estimate of $46,750 for labor to replace trim and siding, and $18,918.55 for profit and overhead have not been established with a sufficient degree of certainty and are therefore disallowed. The plaintiffs have not sustained their burden of proof as to the items disallowed by the court.
Therefore the total amount allowed for the plaintiffs' damages is $59,140.40.
Conclusion
Based on the foregoing, judgment may enter for the plaintiffs in the amount of $59,140.40.