O & G Indus., Inc. v. Am. Home Assurance Co.
| Decision Date | 18 May 2021 |
| Docket Number | AC 43135 |
| Parties | O AND G INDUSTRIES, INC. v. AMERICAN HOME ASSURANCE COMPANY |
| Court | Connecticut Court of Appeals |
Louis R. Pepe, with whom was Rory M. Farrell, Hartford, for the defendant (appellant).
Jared Cohane, with whom was Timothy T. Corey, Hartford, for the plaintiff (appellee).
Cradle, Alexander and Harper, Js.
The defendant, American Home Assurance Company, appeals from the judgment of the trial court rendered in favor of the plaintiff, O & G Industries, Inc., finding that the plaintiff was entitled to payment under certain bonds issued by the defendant as surety, including a payment bond and a bond (substitute bond) that had been substituted for the discharge of a mechanic's lien filed by the plaintiff in connection with materials it had furnished for a construction project. On appeal, the defendant claims that the court erred by (1) failing to find that the plaintiff breached its obligation of "diligence and utmost good faith" owed to the defendant, (2) finding that the plaintiff satisfied the condition precedent to the payment bond, (3) allowing the plaintiff to recover beyond the penal sum of the mechanic's lien bond, and (4) allowing the plaintiff to put on a rebuttal case after the defendant had rested its case without calling any witnesses or introducing any evidence.1 We disagree and, accordingly, affirm the judgment of the trial court.
The following facts, either found by the court or undisputed in the record, and procedural history are relevant to our resolution of this appeal. The plaintiff is a producer and supplier of construction materials, including concrete, with a place of business in Torrington. A large scale, eighteen-story residential apartment building construction project (project) in Stamford commenced at 1011 Washington Boulevard, which is owned by Stamford Phase Four JV, LLC (owner). The owner and The Morganti Group, Inc. (Morganti), the general contractor, entered into a construction contract on January 28, 2016. The first executed payment bond was an agreement between the owner as the obligee, Morganti as the principal, and the defendant as the surety. The defendant served as surety on the payment bond and a performance bond. Those bonds were issued by the defendant, each in the penal sum of $53,690,000, naming Morganti as the bonded principal.
On January 31, 2016, Morganti entered into a written subcontractor agreement with Concrete Superstructures, Inc. (CSS), of Bloomfield. Morganti hired CSS to deliver and pour concrete for the project. The subcontract price was $3,710,000. CSS then contacted the plaintiff and requested that the plaintiff supply materials to CSS so that CSS could fulfill its obligations to Morganti under the subcontractor agreement. CSS submitted a credit application and credit agreement to the plaintiff in April, 2016, after receiving a price quotation from the plaintiff. The Redi-Mix price quotation provided CSS with a list of items for sale, their prices, and payment and billing information. The credit agreement included the billing and credit conditions that governed the agreement between CSS and the plaintiff. The plaintiff conducted a credit check on CSS and the personal guarantor, Douglas Cartelli, and decided not to extend credit to CSS for the project at that time and put the application aside. In July, 2016, Morganti sent the plaintiff a joint check agreement and lien waiver. The plaintiff then supplied the concrete and other related materials called for in the subcontract to CSS and delivered them to the site from April until September, 2016. During that time period, the plaintiff sent invoices directly to Morganti for the materials and was paid in full by Morganti for a total value of $385,988. On July 20, 2016, CSS e-mailed the plaintiff to express its displeasure with the plaintiff's choice to continue to bill Morganti directly instead of directly dealing with CSS. CSS threatened to use a different concrete supplier if the plaintiff did not open an account for CSS and bill CSS directly. The plaintiff then reconsidered CSS’ credit application on August 11, 2016, and approved CSS for a credit limit of $3000; however, the account was for a project unrelated to the Washington Boulevard project at issue. The joint check agreement previously sent to the plaintiff in July, 2016, was returned to Morganti in September, 2016, with amendments, including the redaction of the lien waiver provision. While the amended joint check agreement was under review by Morganti, the plaintiff furnished construction supplies to CSS from September 3 through December 2, 2016, for a total value of $484,919.30, but charged CSS directly instead of Morganti. Morganti informed the plaintiff on November 1, 2016, that the plaintiff's amended joint check agreement had been denied. The plaintiff also informed Morganti on or about November 1, 2016, that CSS had yet to pay for any of the materials the plaintiff had furnished for the project since September, 2016, with a total balance owed of approximately $255,512. Morganti gave CSS another $225,000 after being informed of the balance due to the plaintiff, which had been paid timely up until September, 2016. For each transaction between September and December, 2016, CSS would request payment from Morganti in order to pay the balance owed to the plaintiff for the deliveries. Although Morganti made payments to CSS that CSS was supposed to use to pay the plaintiff, CSS did not forward the payments to the plaintiff. Consequently, CSS defaulted after accruing a $484,919.30 balance that it owed to the plaintiff.
The parties also stipulated to the following facts. The materials delivered by the plaintiff to CSS from September through December, 2016, were all billed to CSS under a credit account that CSS had opened with the plaintiff on or about August 11, 2016, for a project that was taking place in Norwalk—the Wall Street Theater project.2 The delivery tickets and invoices showed that the plaintiff's supplies were sold to CSS only and were not sold or delivered to any other party. It is undisputed that CSS failed to pay the plaintiff for the materials it delivered to the project between September and December, 2016. Moreover, there is no dispute as to the quality or value of the materials that the plaintiff had delivered to CSS.
On February 2, 2017, the plaintiff mailed the defendant a notice of claim under the payment bond after CSS had defaulted. The plaintiff sent timely notice to Morganti of its intent to file a mechanic's lien. The plaintiff then proceeded to record a mechanic's lien against the owner's Washington Boulevard property on February 28, 2017, to secure payment for the materials that the plaintiff had provided to the project. There is no dispute that the mechanic's lien was filed timely. In response, on March 6, 2017, the defendant issued the substitute bond, as a surety, in the penal sum of $533,411.23, which the plaintiff accepted as a substitute for its mechanic's lien pursuant to General Statutes § 49-37.3
On March 16, 2017, Morganti issued a response to the defendant as to the plaintiff's claim under the payment bond, effectively denying that the plaintiff's claim had any merit. The defendant later denied the plaintiff's claim on April 6, 2017. After multiple correspondences between the plaintiff and Morganti, the defendant sent an e-mail on May 5, 2017, to the plaintiff and Morganti affirming its decision to deny the plaintiff's claim and refused to pay the plaintiff under both the payment bond and the substitute bond.
The plaintiff then brought this action against the defendant, claiming that it had not been paid the amount owed under the substitute bond of $484,919.30. As the trial court delineated in its memorandum of decision, (Citations omitted.)
In its nine special defenses, the defendant alleged that (1) the plaintiff's reckless conduct in how it conducted business with CSS by allowing CSS to have its own account, despite CSS being deemed not creditworthy, and by failing to demand timely payments, exposed the plaintiff, the defendant, Morganti, and the owner to an unreasonable risk that CSS would run up a large, unpaid balance, (2) the plaintiff's claims were barred by the doctrine of unclean hands as a result of the plaintiff's reckless, unreasonable, and unfair conduct, (3) the plaintiff's claims were barred by the doctrine of avoidable consequences and/or its failure to mitigate its damages, (4) the plaintiff's claims were barred by the doctrine of estoppel, (5) the plaintiff's claims were barred by the doctrine of laches because it had failed to take action to address the inability of CSS to submit timely payments, (6) the plaintiff's claims against the defendant were barred in their entirety because both the owner and Morganti, as bond principal for the defendant, had paid in full for all of the concrete material furnished by the plaintiff to CSS for the project, (7) the plaintiff...
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