Burns v. Adler

• Decision Date: 28 March 2017
• Docket Number: SC19561,SC19560
• Court: Connecticut Supreme Court
• Parties: BURNS v. ADLER

BURNS v. ADLER

SC19560

SC19561

Supreme Court of Connecticut

March 28, 2017

DISSENT

ROBINSON, J., with whom ESPINOSA, J., joins, dissenting. I respectfully disagree with the majority's decision in the first certified appeal, SC 19560, to reverse the judgment of the Appellate Court affirming the trial court's judgment in favor of the plaintiff contractor, James E. Burns, Jr., on the ground that the conduct of the defendant homeowner, David Y. Adler,¹ did not fall within the bad faith exception to the statutory bar on the enforcement of contracts that do not comply with the requirements set forth in General Statutes (Rev. to 2007) § 20-429.² See Burns v. Adler, 158 Conn. App. 766, 806, 120 A.3d 555 (2015). Specifically, I disagree with the majority's conclusions, set forth in part II of its opinion, that: (1) the bad faith exception is applicable only when a homeowner enters into an agreement with, or accepts services from, a home improvement contractor knowing that, under the Home Improvement Act (act), General Statutes § 20-418 et seq., the defective contract provides them with an " 'escape hatch' " from payment; and (2) the defendant's repudiation of the contract was the product of a good faith dispute over the goods and services provided by the plaintiff.³ Instead, I would hold that the bad faith exception, as articulated in Habetz v. Condon, 224 Conn. 231, 237-40, 618 A.2d 501 (1992), applies when a homeowner has acted in a manner inconsistent with the duty of good faith and fair dealing in the course of his relationship with a contractor, as the trial court properly found to have occurred in the present case. As a result of this conclusion, I would reach the second certified appeal, SC 19561,⁴ and conclude that the Appellate Court properly determined that the plaintiff was not entitled to an award of attorney's fees for the foreclosure of his mechanic's lien pursuant to General Statutes § 52-249 (a).⁵ Burns v. Adler, supra, 808. Because I would affirm the judgment of the Appellate Court, I respectfully dissent.

I

I begin by noting my agreement with the background facts and procedural history set forth in the majority opinion. I also agree in limited part with the majority's statement of the standard of review. Specifically, I agree that the issue of whether the plaintiff can invoke the bad faith exception in this case presents a question of law over which our review is plenary, albeit only to the extent that the defendant's claims on appeal require this court to define the contours of that doctrine. See, e.g., Thompson v. Orcutt, 257 Conn. 301, 308-309, 777 A.2d 670 (2001) (application of equitable doctrine of unclean hands is committed to trial court discretion, but interpretation of that doctrine is question of law subject to plenary review); see also Walpole Woodwork- ers, Inc. v. Manning, 307 Conn. 582, 588, 57 A.3d 730 (2012) ("[t]he determination of whether an equitable doctrine applies in a particular case is a question of law subject to plenary review"). With respect, however, to the application of the bad faith exception, I disagree with the majority's statement of the standard of review to the extent it conflicts with the well established principle that "[w]hether a party has acted in bad faith is a question of fact, subject to review only for clear error." Renaissance Management Co. v. Connecticut Housing Finance Authority, 281 Conn. 227, 240, 915 A.2d 290 (2007); see MacMillan v. Higgins, 76 Conn. App. 261, 271-73, 822 A.2d 246, cert. denied, 264 Conn. 907, 826 A.2d 177 (2003); see also Habetz v. Condon, supra, 224 Conn. 237 n.11. This reflects the fact that a finding of bad faith turns on subordinate considerations such as the relevant actor's motives and intent, which often may only be inferred from circumstantial evidence.⁶ See, e.g., Wadia Enterprises, Inc. v. Hirschfeld, 224 Conn. 240, 250, 618 A.2d 506 (1992).

A

I begin with the majority's analysis of the defendant's claims on appeal, which, notwithstanding footnote 16 of the majority opinion, may be misconstrued as embracing an unduly narrow approach to the bad faith exception. In particular, I wish to emphasize my disagreement with the defendant's position, founded largely on this court's decision in Wadia Enterprises, Inc. v. Hirschfeld, supra, 224 Conn. 240, that the bad faith exception is applicable only to cases wherein the homeowner entered into an agreement or accepted services from a contractor knowing that the act gave the homeowner an "escape hatch" from payment because the contract was defective under § 20-429 (a). I do not read our articulation of the bad faith exception in Habetz as so narrowly circumscribed.

At the outset, I briefly discuss the statutory scheme governing home improvement contract disputes and the history of the bad faith exception in Habetz. "Section 20-429 (a) provides that no home improvement contract shall be valid or enforceable against a homeowner unless it contains certain enumerated criteria. The aim of the [act] is to promote understanding on the part of consumers with respect to the terms of home improvement contracts and their right to cancel such contracts so as to allow them to make informed decisions when purchasing home improvement services. . . .

"In Barrett Builders v. Miller, 215 Conn. 316, 328, 576 A.2d 455 (1990), this court held that a contractor who did not comply with the written contract requirement of the act could not recover in restitution. This result was subsequently modified by one common-law and one statutory exception. First, in Habetz v. Condon, supra, 224 Conn. 240, this court held that contractors may recover in restitution despite noncompliance with § 20-429 (a), when homeowners invoke the protections of the act in bad faith. Subsequently, the legislature enacted No. 93-215, § 1, of the 1993 Public Acts, now codified at § 20-429 (f), which allows recovery of payment for work performed based on the reasonable value of services which were requested by the owner for partial noncompliance with certain requirements of the act when the court determines that it would be inequitable to deny such recovery. Thus, both Habetz and § 20-429 (f) provide for recovery in quantum meruit despite a contractor's noncompliance with certain statutory requirements." (Citation omitted; footnotes omitted; internal quotation marks omitted.) Walpole Woodworkers, Inc. v. Manning, supra, 307 Conn. 586-87; see also footnote 2 of this dissenting opinion.

In formally adopting the bad faith exception,⁷ this court emphasized in Habetz that its "central element . . . is the recognition that to allow the homeowner 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. Proof of bad faith therefore serves to preclude the homeowner from hiding behind the protection of the act. . . . [W]e need look no further than the maxim that no person may take advantage of his own wrong. . . . This deeply rooted principle has been applied in many diverse classes of cases by both law and equity courts and has frequently been employed to bar what would otherwise be inequitable reliance on statutes."⁸ (Citations omitted; footnote omitted.) Habetz v. Condon, supra, 224 Conn. 237-38. The court emphasized that the "bad faith exception is designed to prevent a party's disavowal of previous conduct if such repudiation would not be responsive to demands of justice and good conscience. 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. Every contract carries an implied covenant of good faith and fair dealing requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement. . . . To demand this implicit component but do nothing about its absence would be at best incongruous, and, more accurately, grossly unfair. Thus, a contractor, otherwise precluded from recovering moneys owed for his work because of a violation of the act, must be permitted to assert that the homeowner's bad faith precludes him from safely repudiating the contract and hiding behind the act in order to bar the contractor's recovery." (Citations omitted.) Id., 238. Acknowledging that this conclusion potentially "frustrate[s]" the purpose of the act, the court emphasized that the bad faith doctrine is "founded on public policy and contain[s] a strong strain of estoppel," and is intended to "prevent a misbehaving party from invoking the benefits of a statute which is absolute on its face. To deny the contractor any opportunity of recovery after he has completed his end of the bargain if he has persuaded the trier of fact that a statutory remedy is being invoked by a homeowner in bad faith would be to countenance a gross injustice and indeed to encourage its perpetuation and to assure its success." Id., 239-40.

Applying the bad faith exception in Habetz, this court upheld the judgment of the trial court with respect to a contractor's counterclaim for unpaid sums, despite the fact that the contract violated § 20-429 (a) by lacking a notice of cancellation provision—a defect that the trial court had deemed "minor." (Internal quotation marks omitted.) Id., 233-35. Although this court did not engage in a detailed discussion of what had constituted bad faith on the part of the homeowner,⁹ it observed that the homeowner did not pay for numerous requested extras memorialized in change orders during the construction of an addition to his home, along with a portion of the balance remaining on the original contract, and that the homeowner had refused "repeated requests" by the contractor to sign the change orders with respect to the extras. Id., 233-34.

Rather than confine the bad faith exception to a limited array of homeowner conduct involving the knowing acceptance of services under a noncompliant agreement, I believe ...