Naples v. Keystone Building and Development Corporation, (SC 18397) (Conn. 3/30/2010)

• Decision Date: 30 March 2010
• Docket Number: (SC 18397).
• Court: Supreme Court of Connecticut
• Parties: FRANK NAPLES ET AL. <I>v.</I> KEYSTONE BUILDING AND DEVELOPMENT CORPORATION ET AL.

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FRANK NAPLES ET AL.v.

KEYSTONE BUILDING AND DEVELOPMENT CORPORATION ET AL.

(SC 18397).

Supreme Court of Connecticut.

Argued January 6, 2010.

Officially released March 30, 2010.

Vincent F. Sabatini, for the appellants (plaintiffs).

Donald Gaudreau, with whom was Patricia Groves, for the appellees (defendants).

Rogers, C. J., and Norcott, Katz, Palmer, Vertefeuille, Zarella and McLachlan, Js.

Opinion

NORCOTT, J.

The plaintiffs, Frank Naples and Karen Naples, brought this action against the named defendant, Keystone Building and Development Corporation, its successor entity, Keystone Builders and Developers, LLC (Keystone, LLC),¹ and their principal, Leonard Bourbeau, alleging that their poor workmanship in the construction of the plaintiffs' new home constituted, inter alia, breach of contract, and violated the New Home Warranties Act (warranties act), General Statutes § 47-116 et seq., and the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. After a trial to the court, the trial court rendered judgment for the plaintiffs in the amount of $59,140.40. The plaintiffs appeal² from this judgment, claiming that the trial court improperly failed to: (1) award them damages in an amount sufficient to repair their home; (2) find that the defendants had violated CUTPA; (3) pierce the corporate veil and hold Bourbeau individually liable for his negligence; and (4) find that the defendants had been unjustly enriched. We agree with the plaintiffs' damages claim, but disagree with their other claims. Accordingly, we reverse the judgment of the trial court in part and remand the case for a new trial limited to damages.

The record reveals the following relevant facts, as found by the trial court and set forth in its memorandum of decision, and procedural history. On November 17, 2000, the plaintiffs entered into a contract with the named defendant, signed by Bourbeau, to construct a single-family home in Glastonbury for a contract price of $620,500.³ The contract provided in relevant part that "[e]very attempt has been made to use the finest materials available to produce the highest quality home possible," and contained a one year limited warranty against defects in material and workmanship. The contract further provided that the home's "[s]iding shall consist of [one-half inch by six inch] beveled cedar clapboards and pine trim applied over Tyvek house [wrap] or similar."⁴ Although not all of the work had been completed on the home, the plaintiffs took possession of it by warranty deed and moved in on December 21, 2001.

In the spring of 2002, the plaintiffs began to notice numerous problems with their new home, including peeling paint, mold on trim boards, leaking windows in the kitchen, master bedroom and bathroom, rotting wood trim, stress fractures in the sheetrock walls and other signs of water damage. The plaintiffs sent the defendants numerous lists outlining the various problems. Bourbeau came to the plaintiffs' home two or three times and also sent a subcontractor to address some of the issues. The problems persisted, even after the defendants replaced trim boards and recaulked areas of the exterior in response to a July, 2004 report by a claims adjuster sent by the plaintiffs' home insurer.⁵

Robert Dykins, a builder of residential homes in the Glastonbury area with more than twenty-three years of experience, opined in expert testimony credited by the trial court that the home's problems were caused by poor workmanship, specifically, the improper installation of window flashings and exterior trim in a manner that caused water to enter the home, as well as gaps in the siding and the Tyvek barrier that lay underneath.⁶ Dykins testified that, to remedy the problems with the home, the windows and new flashings would need to be reinstalled in a proper manner to direct water away from the house, new wood exterior trim would need to be installed to the same effect, the master bedroom window would need to be replaced and a new Tyvek barrier and siding would need to be installed. Repainting was required, as well.

The plaintiffs brought this action in a twelve count complaint seeking compensatory, incidental and punitive damages, and attorney's fees and costs. The plaintiffs alleged that the problems with their home, and the defendants' failure to correct them, constituted, on the part of the named defendant: (1) breach of contract; (2) unjust enrichment; (3) fraud and intentional misrepresentation; (4) intentional misrepresentation by nondisclosure; and (5) negligent misrepresentation. In the sixth count, the plaintiffs claimed that Keystone, LLC, had engaged in fraud and intentional misrepresentation, and in the seventh count, the plaintiffs alleged that all defendants had violated the Uniform Fraudulent Transfer Act (transfer act), General Statutes § 52-552a et seq. In the eighth and ninth counts, the plaintiffs raised claims of negligence, fraud and misrepresentation against Bourbeau individually. Finally, the tenth, eleventh and twelfth counts were brought against all of the defendants, seeking to pierce the corporate veils of the named defendant and Keystone, LLC, and alleging violations of the warranties act and CUTPA. The defendants filed an answer denying the plaintiffs' allegations, as well as special defenses asserting that the plaintiffs' claims were barred by the applicable statutes of limitations, and also by the doctrine of laches.

Following a trial, the trial court filed a memorandum of decision that began with the tenth count of the complaint and rejected the plaintiffs' piercing the corporate veil claim.⁷ The court determined that both the named defendant and Keystone, LLC, served a legitimate business purpose and, accordingly, that Keystone, LLC, was the proper defendant in the present case. See footnote 1 of this opinion. Consistent with its prior oral decision; see footnote 7 of this opinion; the trial court similarly disagreed with the plaintiffs' transfer act claim, concluding that Keystone, LLC, had not been formed with the intention of avoiding a debt or legal duty. The trial court then rejected the defendants' special defenses⁸ and concluded, on the basis of Dykins' "unrefuted"⁹ testimony concerning the improper installation of the siding, exterior trim and Tyvek barrier on the plaintiffs' home, that the defendants had breached the contract, as well as the statutory and contractual warranties. The court then concluded that this finding also resolved the plaintiffs' unjust enrichment claim and rejected the plaintiffs' claim that the defendants' conduct constituted a CUTPA violation, concluding that the defendants only had committed a "simple breach of contract," rather than acting unethically, unscrupulously, wilfully or recklessly.

With respect to the plaintiffs' damages, the trial court utilized the reasonable cost of construction method to determine the damages caused by the breach of the construction contract. The trial court noted that Dykins' $113,511.48 repair estimate,¹⁰ and the plaintiffs' painting estimate of $15,818.75,¹¹ were the only damages evidence offered at trial. The court then found that, "based on the credible evidence . . . 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," along with painting the new wood siding and trim. The trial court next found that the plaintiffs were entitled to all amounts in the estimates except for Dykins' estimate of $46,750 for labor to replace the trim and siding, and $18,918.55 for profit and overhead, because those items had "not been established with a sufficient degree of certainty. . . ." Accordingly, the trial court rendered judgment for the plaintiffs against Keystone, LLC, in the amount of $59,140.40 The trial court later denied the plaintiffs' subsequent motion for reargument. This appeal followed.¹²

On appeal, the plaintiffs challenge several of the trial court's factual findings and claim that the court improperly failed to: (1) award them the entire costs needed to repair their home, in particular the labor costs, profit and overhead estimate, and costs for painting, insulation and a replacement Pella window; (2) find that the defendants had violated CUTPA; (3) pierce the corporate veil and hold Bourbeau liable individually for his negligence; and (4) find that the defendants have been unjustly enriched. We address each claim in turn and set forth additional relevant facts when necessary in the context of each claim.

I

We begin with the plaintiffs' claim that the trial court improperly failed to award them the full cost required to repair their home. Specifically, the plaintiffs argue that the trial court improperly declined to credit the portions of Dykins' testimony and his report that estimated the labor cost of replacing the siding at $46,750, and also declined to award damages for interior painting compensation for unknown damages ranging from $12,000 to $18,000, costs for insulation and a replacement Pella window. The plaintiffs claim that the trial court's award is illogical and that a proper damages award in this case would be $148,540.23. In response, the defendants contend that the trial court was not obligated to accept all of the estimates in their entirety and that we should defer to the trial court's assessment of Dykins' credibility and the weight of the evidence. The defendants further emphasize that the trial court properly considered Dykins' testimony to be speculative and uncertain on the bases of his limited inspection of the house and his inclusion of a range of an extra $12,000 to $18,000 for indeterminate "[u]nknown [d]amages." We agree with the plaintiffs and conclude that the trial court's damages finding was clearly erroneous to the extent that it failed to compensate them for the...