Hees v. Burke Const., Inc., 18075.

Citation290 Conn. 1,961 A.2d 373
Decision Date06 January 2009
Docket NumberNo. 18075.,18075.
CourtSupreme Court of Connecticut
PartiesGerald HEES et al. v. BURKE CONSTRUCTION, INC.

Scott M. Harrington, Stamford, for the appellant (defendant).

Richard H. Raphael, Westport, for the appellees (plaintiffs).



The principal issue in this appeal is whether a violation of the Home Improvement Act (act), General Statutes § 20-418 et seq., and specifically, General Statutes § 20-429(a),1 precludes a home improvement contractor from reducing the damages that it owes for breach of contract to a nonbreaching homeowner by an amount equal to the unpaid balance remaining on the contract. The defendant, Burke Construction, Inc., appeals from the judgment of the trial court,2 accepting the report of the attorney trial referee, David Albert (referee), which found that the defendant had breached its contract with the plaintiff homeowners, Gerald Hees and Beatrice Hees, and recommended a damages award in the amount of $16,085.17.3 On appeal, the defendant claims that the referee improperly calculated the plaintiffs' damages award. Specifically, the defendant claims that, although the failure of a home improvement contract to comply with § 20-429(a) renders that contract unenforceable against a homeowner, § 20-429(a) nevertheless does not preclude a contractor from reducing a damages award against it by the unpaid contract balance, in an action brought by the homeowner against the contractor. The defendant further claims that, when the award in this case is so reduced, the plaintiffs have not suffered any actual damages for which they can recover. We agree with the defendant, and, accordingly, we reverse the judgment of the trial court.

The record reveals the following relevant facts and procedural history. The parties entered into a written home improvement contract on June 1, 2002, the terms of which provided that the defendant would provide various home improvement services and materials for $349,500. The original terms of the contract were changed periodically through the execution of thirty different change orders, which increased the price for the project by $42,354, to a total of $391,854. The terms of the contract required the plaintiffs to make monthly requisition payments for work already completed, the first nine of which the plaintiffs made in a timely fashion. The plaintiffs failed, however, to make the tenth requisition payment within thirty days, as required by the contract. By letter dated May 19, 2003, the defendant advised the plaintiffs that it intended to terminate the contract, in accordance with its terms, if payment was not received within one week. Thereafter, the plaintiffs did not pay the defendant, which then terminated the contract on May 29, 2003. At the time of termination, the defendant had completed and billed the plaintiffs for $346,378 worth of work,4 in addition to $625 for which the plaintiffs were not billed. The plaintiffs, however, had only paid the defendant $330,531, which left an unpaid balance on the contract for work already performed of $16,472.5

The plaintiffs thereafter brought this action, alleging that the defendant had breached the contract by failing to complete all of the work, and by performing some of that work in a defective manner. The complaint did not contain any reference to the act, nor did it assert a claim under the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The defendant filed three counterclaims, seeking money damages for breach of contract, quantum meruit and foreclosure of its mechanic's lien.

The court referred the case to the referee, who, after conducting a hearing, filed a report finding in favor of the plaintiffs with regard to both the breach of contract claim6 and the defendant's three counterclaims. The referee concluded that, because the contract did not contain a right of rescission clause, it was unenforceable against the plaintiffs under § 20-429(a)(6), and the defendant was, therefore, precluded from seeking recovery under the contract. The referee found that the plaintiffs had incurred $16,085.17 in costs to complete and repair the work, and recommended that judgment be rendered in favor of the plaintiffs in that amount. In so recommending, the referee declined the defendant's request to reduce the damages award commensurate with the unpaid balance on the contract, namely, $16,472, on the ground that such an offset was precluded by the defendant's violation of § 20-429(a)(6).7

The trial court accepted the referee's report and rendered judgment for the plaintiffs. This appeal followed.

On appeal, the defendant contends that the plaintiffs' damages award should have been reduced by an amount equal to the unpaid balance remaining on the contract, because, under traditional contract damages law, the appropriate measure of damages in a construction contract case is the plaintiffs' reasonable cost to complete or repair the work, less the unpaid balance on the contract. The defendant further contends that the trial court improperly accepted the referee's conclusion that a violation of § 20-429(a) serves to alter this well established principle of contract damages law. We agree with the defendant in both respects, and conclude, therefore, that the referee improperly failed to reduce the plaintiffs' damages by the unpaid balance remaining on the contract.

We begin by determining the appropriate standard of review. "While the reports of [attorney trial referees] ... are essentially of an advisory nature, it has not been the practice to disturb their findings when they are properly based upon evidence, in the absence of errors of law, and the parties have no right to demand that the court shall redetermine the fact[s] thus found....

"A reviewing authority may not substitute its findings for those of the trier of the facts. This principle applies no matter whether the reviewing authority is the Supreme Court ... the Appellate Court ... or the Superior Court reviewing the findings of ... attorney trial referees. ... This court has articulated that attorney trial referees and factfinders share the same function ... whose determination of the facts is reviewable in accordance with well established procedures prior to the rendition of judgment by the court....

"Although it is true that when the trial court reviews the attorney trial referee's report the trial court may not retry the case and pass on the credibility of the witnesses, the trial court must review the referee's entire report to determine whether the recommendations contained in it are supported by findings of fact in the report. ...

"Finally, we note that, because the attorney trial referee does not have the powers of a court and is simply a fact finder, [a]ny legal conclusions reached by an attorney trial referee have no conclusive effect.... The reviewing court is the effective arbiter of the law and the legal opinions of [an attorney trial referee], like those of the parties, though they may be helpful, carry no weight not justified by their soundness as viewed by the court that renders judgment.... Where legal conclusions are challenged, we must determine whether they are legally and logically correct and whether they find support in the facts found by the ... referee." (Citations omitted; internal quotation marks omitted.) Alliance Partners, Inc. v. Oxford Health Plans, Inc., 263 Conn. 191, 201-202, 819 A.2d 227 (2003).


We begin our analysis by briefly addressing the defendant's first claim, namely, that the trial court improperly accepted the referee's report because the referee failed to use an appropriate method to calculate the plaintiffs' damages. "It is axiomatic that the sum of damages awarded as compensation in a breach of contract action should place the injured party in the same position as he would have been in had the contract been performed. ... The injured party, however, is entitled to retain nothing in excess of that sum which compensates him for the loss of his bargain.... Guarding against excessive compensation, the law of contract damages limits the injured party to damages based on his actual loss caused by the breach.... The concept of actual loss accounts for the possibility that the breach itself may result in a saving of some cost that the injured party would have incurred if he had had to perform. ... In such circumstances, the amount of the cost saved will be credited in favor of the wrongdoer ... that is, subtracted from the loss ... caused by the breach in calculating [the injured party's] damages.... It is on this ground that ... when an owner receives a defective or incomplete building, any part of the price that is as yet unpaid is deducted from the cost of completion that is awarded to him.... Otherwise, the owner would be placed in a better position than full performance would have put him, thereby doubly compensating him for the injury occasioned by the breach." (Citations omitted; internal quotation marks omitted.) Argentinis v. Gould, 219 Conn. 151, 157-58, 592 A.2d 378 (1991).

Thus, we agree with the defendant that the referee used an improper method to calculate the plaintiffs' damages. The parties do not dispute the fact that, at the time of the breach, there remained an unpaid balance on the contract of $16,472. They also do not dispute the fact that, as a result of the breach, the plaintiffs incurred expenses to complete and repair the work in the amount of $16,085.17. Accordingly, in the absence of some legal justification for not doing so, the referee should have subtracted any unpaid amount remaining on the contract from the extra costs incurred by the plaintiffs, so as to avoid placing the plaintiffs in a better position than they would have been in had the contract been fully performed. See id. Had the referee done so, it becomes...

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