Alstom Power, Inc. v. Balcke-Durr, Inc.

• Citation: 269 Conn. 599,849 A.2d 804
• Decision Date: 15 June 2004
• Docket Number: (SC 17106).
• Parties: ALSTOM POWER, INC. v. BALCKE-DURR, INC.
• Court: Supreme Court of Connecticut

269 Conn. 599

849 A.2d 804

ALSTOM POWER, INC. v. BALCKE-DURR, INC.

(SC 17106).

Supreme Court of Connecticut.

Argued February 10, 2004.

Officially released June 15, 2004.

Sullivan, C. J., and Norcott, Katz, Vertefeuille and Zarella, Js.

Ben A. Solnit, with whom, on the brief, was Gerald T. Giaimo, for the appellant (plaintiff).

Richard F. Wareing, with whom were Timothy T. Corey and, on the brief, Gary F. Sheldon, for the appellee (defendant).

Opinion

VERTEFEUILLE, J.

This appeal arises out of the trial court's judgment denying the petition filed by the plaintiff, Alstom Power, Inc., to dissolve a bond substituted for a mechanic's lien filed by the defendant, Balcke-Durr, Inc. Following a hearing, the trial court concluded that, because the parties finalized the agreement at issue in this case after October 1, 1999, General Statutes § 42-158l(a),¹ which nullifies lien waiver provisions in construction contracts created on or after October 1, 1999, applied to nullify the mechanic's lien waiver signed by the defendant. On appeal to this court, the plaintiff claims that the trial court improperly: (1) shifted the burden of proof to the plaintiff in derogation of General Statutes § 49-37 (b) (5)² by not requiring the defendant first to show probable cause to sustain the mechanic's lien; and (2) applied the parol evidence rule to exclude extrinsic evidence of conduct that would have established that the parties' agreement had been formed prior to October 1, 1999, and therefore was within the purview of § 42-158l(a). The defendant maintains that the plaintiff explicitly waived its right to have the defendant proceed first at trial and further contends that the trial court properly excluded the extrinsic evidence pursuant to the parol evidence rule.³ We agree with the defendant on both claims, and we affirm the judgment of the trial court.

The following facts and procedural history are relevant to our resolution of this appeal. On July 5, 1998, ABB Power Generation, Ltd., a Swiss corporation and the predecessor in interest of the plaintiff, entered into a long-term supply agreement (supply agreement) with Balcke-Durr GmbH, a German corporation and the predecessor in interest of the defendant.⁴ The supply agreement functioned as an umbrella agreement; it created no project-specific contractual obligations, but set certain standards and parameters relating to equipment that the defendant, as the supplier, would manufacture and supply to the plaintiff for use in several power plant construction projects that the plaintiff was to undertake. The supply agreement did not obligate the plaintiff to purchase any equipment from the defendant. Section 6.1 of the supply agreement provided that an obligation to purchase equipment would be established by a purchase order issued by the plaintiff that was to be signed and returned by the defendant.⁵ Section 1 of the supply agreement also defined the following terms specifically: "[1] `Acknowledgement' shall mean the [defendant's] final acceptance of the Purchase Order(s). [2] `Agreement' shall mean the Long Term Supply Agreement and Purchase Order(s) setting forth the Works,⁶ including all Documents incorporated therein by reference . . . [and] [3] `Purchase Order' shall mean the Document issued by [the plaintiff] and entitled `Order', by which the Agreement come[s] into effect and force." The supply agreement also contained the following lien waiver provision, set forth in § 19.2: "[The defendant] hereby waives for himself, his successors in interest and assigns, and for all subcontractors, vendors, suppliers, etc., their successors in interest and assigns for all claim or right of lien upon [the plaintiff's] or [its] Employer's property or any part thereof as a result of the furnishing of labour and/or material under the terms of the Agreement."

Pursuant to the supply agreement, the parties ultimately entered into five purchase orders for five power plant projects, including the project on Lake Road in the town of Killingly (Lake Road project). On September 27, 1999, the plaintiff issued a signed, proposed purchase order for the Lake Road project (Lake Road purchase order), to the defendant. The Lake Road purchase order provided: "Please indicate your acceptance of this order subject to the terms and conditions as shown on the face and reverse side and the required shipping schedule by signing after the words `accepted by' and returning this acknowledgement . . . ." The plaintiff also appended purchase order notes and plant-related purchase conditions to the Lake Road purchase order. The purchase order notes specifically provided that, "[the Lake Road purchase order] and its integrated specifications and documents constitute the entire agreement between [the plaintiff] and [the defendant] and replaces all previous and actual verbal or written communications and agreements." The defendant received the Lake Road purchase order and accompanying documents on October 7, 1999. The defendant thereafter modified the terms of the Lake Road purchase order, and returned a signed, acknowledged copy to the plaintiff on October 15, 1999.⁷

By the summer of 2000, the parties had commenced arbitration to resolve a dispute regarding the Lake Road project. Thereafter, on February 12, 2002, the defendant recorded a mechanic's lien against the property on which the Lake Road project was to be constructed to secure payment for labor, material and services in the amount of $17,004,142.82. The plaintiff then posted a surety bond in the amount of $20,400,000 as a substitute for the lien and, pursuant to § 49-37 (b) (1),⁸ filed an application in the Superior Court to dissolve or reduce the bond. The defendant moved to stay the plaintiff's application to dissolve or reduce the bond pursuant to General Statutes § 52-409,⁹ until resolution of the pending arbitration. The trial court granted the stay as to the claim for reduction, but denied the stay as to the requested dissolution of the bond.¹⁰ The trial court also ordered further memoranda and oral argument regarding whether the defendant effectively had waived its right to assert a mechanic's lien through the lien waiver provision contained in § 19.2 of the supply agreement.

At oral argument before the trial court, the plaintiff claimed that the defendant, by the express terms of the lien waiver provision, had waived its right to file a mechanic's lien. The defendant maintained that § 42-158l (a), which applies to construction contracts entered into on or after October 1, 1999, rendered the lien waiver provision "void and of no effect." The trial court concluded that, because the agreement between the parties was established on October 15, 1999, when the defendant returned the acknowledged Lake Road purchase order, § 42-158l (a) did apply and rendered the lien waiver provision "void and of no effect." In reaching this conclusion, the trial court refused to admit evidence of conduct that had occurred prior to the defendant's acceptance of the Lake Road purchase order pursuant to the parol evidence rule. Accordingly, the trial court denied the plaintiff's application to dissolve the bond and rendered judgment in favor of the defendant.¹¹

The plaintiff appealed from the trial court's judgment to the Appellate Court. We thereafter transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.

I

The plaintiff's first claim on appeal is that the trial court applied an incorrect burden of proof to its application to dissolve the bond substituted for the mechanic's lien. Specifically, the plaintiff claims that the trial court improperly bypassed the threshold inquiry into whether the defendant, as the obligee of the bond, could establish probable cause to sustain the validity of the lien as required by § 49-37 (b) (5),¹² and instead proceeded directly to the merits of the plaintiff's case, that is, whether the plaintiff could prove by clear and convincing evidence that the bond should be dissolved. The defendant claims that the plaintiff cannot raise this issue on appeal because it waived the probable cause inquiry before the trial court. We agree with the defendant and therefore do not consider the merits of this claim.

Section 49-37 (b) (5) provides in relevant part: "Upon the hearing held on the application or motion set forth in this subsection, the obligee on the bond shall first be required to establish that there is probable cause to sustain the validity of the lien. Any person entitled to notice under subdivision (1) of this section may appear, be heard and prove by clear and convincing evidence that the validity of the lien should not be sustained . . . ." (Emphasis added.) In the present case, the plaintiff expressly waived the probable cause showing when, through counsel, it made the following statement to the trial court: "I think that [§ 49-37 (b) (5)] requires that [the defendant] would have the burden of proof in a hearing like this, since they would have to show probable cause for the validity of the lien. I don't think that that's necessary to go through that formality." (Emphasis added.)

Moreover, when evidence was presented to the trial court on the plaintiff's application to dissolve the bond, the plaintiff presented its witnesses first, before the defendant. Had the burden to establish probable cause been an issue at that point in the proceeding, the defendant would have presented evidence first to establish probable cause to sustain the mechanic's lien before the plaintiff presented its evidence challenging its validity. Accordingly, we conclude that the plaintiff waived the probable cause showing required under § 49-37 (b) (5), and we therefore decline to review the plaintiff's first claim.

II

The plaintiff next claims that the trial court improperly applied the parol evidence rule by excluding evidence that would have established, by clear and convincing evidence, that the...