Pointe Residential Builders BH, LLC v. TMP Constr. Grp., LLC

• Citation: 213 Conn.App. 445,278 A.3d 505
• Decision Date: 28 June 2022
• Docket Number: AC 44063
• Parties: POINTE RESIDENTIAL BUILDERS BH, LLC v. TMP CONSTRUCTION GROUP, LLC, et al.
• Court: Appellate Court of Connecticut

213 Conn.App. 445

278 A.3d 505

POINTE RESIDENTIAL BUILDERS BH, LLC

v.TMP CONSTRUCTION GROUP, LLC, et al.

AC 44063

Appellate Court of Connecticut.

Argued November 17, 2021

Officially released June 28, 2022

James Colin Mulholland, for the appellants (defendants).

Alvord, Prescott and Clark, Js.

CLARK, J.

This appeal arises out of a contract for the construction of a condominium complex in Greenwich.

The defendants, TMP Construction Group, LLC (TMP), and Olin Paige III, appeal from the judgment of the trial court, rendered in favor of the plaintiff, Pointe Residential Builders BH, LLC,¹ following a trial to the court. On appeal, the defendants claim that the court erred by rendering judgment for the plaintiff with respect to the plaintiff's count alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., and the plaintiff's count alleging unjust enrichment. We conclude that the court did not improperly render judgment on the plaintiff's CUTPA claim. In light of this conclusion, we need not address the defendants’ claims pertaining to the unjust enrichment claim.² Accordingly, the judgment of the trial court is affirmed.

The following procedural history and facts, as found by the trial court, are relevant to this appeal. In a three count complaint dated June 1, 2018, the plaintiff alleged that the defendants breached a construction contract between the parties, that the defendants were unjustly enriched, and that they violated CUTPA. Following a

trial to the court, the court issued a memorandum of decision on February 18, 2020. The court found that the plaintiff, as general contractor, entered into a construction contract with TMP, as subcontractor, dated December 8, 2016 (contract), in relation to the construction of a condominium complex in Greenwich (project). At the time, Paige was the manager and controlling member of TMP. Under the contract, TMP was to perform certain work on the project at a fixed contract sum of $1,071,500. Although the contract called for payment upon delivery for furnished materials and equipment stored on-site, TMP convinced the plaintiff to pay an upfront 30 percent deposit for all of the estimated costs of materials and equipment by representing that those funds would be used to buy the materials ahead of time to avoid an anticipated 20 percent price increase on drywall and to avoid delays on the delivery of material needed for the first few weeks on the job. Relying on these representations, the plaintiff paid TMP $305,377.50 on December 13, 2016, which had been requisitioned by TMP for "material procurement".

Unknown to the plaintiff (but known to the defendants), TMP was "in a shaky financial condition" when it persuaded the plaintiff to pay the deposit. The court found that "TMP did not intend to use these funds to acquire materials and equipment for the project but, instead, intended to use the funds to finance its payroll and work on other projects."³ In particular, TMP intended to use the funds from the deposit to fund its obligations under an unrelated subcontract with Viking Construction, Inc. (Viking), dated December 27, 2016, for a project in Bridgeport (Bridgeport project) that

would occur simultaneously with the project that is the subject of this appeal.

The court found that "TMP's financial house of cards came tumbling down" when Viking demanded that TMP increase its workforce on the Bridgeport project. The court stated: "Unlike the contract with [the plaintiff], [TMP's] subcontract with Viking was not frontloaded and TMP was paid on a thirty day net basis, based on detailed payment requisition forms. When it increased its labor force in response to Viking's demands, TMP could not carry its payroll. TMP also was not able to pay its principal materialman, Marjam Supply Company (‘Marjam’), which also supplied materials for the project. When Viking refused to pay TMP and later terminated its subcontract in May, 2017, TMP used the balance of funds in its account to make payroll. Paige decided the remaining funds would not be used to pay state and federal taxes or to pay its suppliers. Marjam had a balance due on the Bridgeport project of $147,000. Marjam was owed $70,617.32 on the project for materials delivered but not paid for by TMP. Marjam placed a mechanic's lien in that amount on the property .... The mechanic's lien has not been released, remains on the property and is subject to a pending foreclosure action ... to which [the plaintiff] is not a party." Due to TMP's failure to perform in accordance with the contract, the plaintiff sent TMP notices of default on June 22 and December 12, 2017. The contract ultimately was terminated by the plaintiff on December 17, 2017.

With respect to the breach of contract claim, the court concluded that the contract was properly terminated and that TMP breached the contract by its failure (1) to perform the work, and to promptly cure defaults upon written notice, (2) to pay the difference between the value of the completed work and the amounts requisitioned and paid to TMP, (3) to pay for materials, equipment and labor used in the period covered by the

requisitions, and (4) to furnish satisfactory evidence of completed work upon request by the plaintiff. The court, however, concluded that the plaintiff failed to satisfy its burden of proving damages in accordance with the provision of the contract entitling it to replacement costs, stating that the "witnesses’ estimate of ‘approximately $500,000’ premium paid to replacement subcontractors seems to have been a guess plucked out of the air and is not credible."

The court also found that TMP was unjustly enriched. It found that "[u]nder the circumstances here, the injustice was TMP's deceiving [the plaintiff] into paying a deposit not required under the contract and requisitioned in violation of contract terms and under false pretenses. TMP and Paige never intended to use the deposit to order materials and equipment for the project as represented. There is no remedy under the contract for restitution of the deposit wrongfully requisitioned."⁴

As to the CUTPA claim, the court found that the defendants’ conduct was "deceptive, unethical and unscrupulous and constituted an unfair and deceptive business practice" in violation of the statute. It found that "Paige was aware the deposit was requisitioned for material procurement for the project but was not intended or used for the purposes represented, but failed to disclose this contrary intention to [the plaintiff]. Paige used the funds provided by [the plaintiff] to pay other expenses of TMP unrelated to the project. Moreover, the financial circumstances and needs of

TMP were such that Paige was aware that TMP would not be able to finish the project or pay [the plaintiff] back if TMP's expenses grew or cash flow was disrupted and recklessly exposed [the plaintiff] to this risk."

The court found that "[t]he damages for unjust enrichment and the actual damages recoverable under CUTPA ... are the same under the facts proven here: $224,878, the net of the $305,378 deposit paid less the $80,500 stated value in the requisition for [the] completed work. This sum represents the unjust benefit received by TMP and also equals the actual loss sustained by [the plaintiff] ...." The court also awarded punitive damages pursuant to General Statutes § 42-110g (a) in the amount of $225,000 because it found that the "defendants’ conduct in requisitioning a deposit specifically for material purchases with the intention of diverting the funds for other uses and depleting the funds for purposes unrelated to the project was intentional, wilful and done with reckless indifference to [the plaintiff's] rights." In concluding that the plaintiff proved its CUTPA claim, the court exercised its discretion and awarded reasonable attorney's fees. In its memorandum of decision, the court ordered the plaintiff to submit an affidavit as to fees and costs.⁵ The court rendered judgment in the amount of $463,519.77, in favor of the plaintiff on February 18, 2020. This appeal followed. Additional facts will be set forth as necessary.

On appeal, the defendants make various claims pertaining to the court's judgment in favor of the plaintiff on its CUTPA claim. The defendants argue that (1) the evidence does not support a finding that either defendant engaged in aggravating unscrupulous conduct, that Paige knowingly or recklessly engaged in

unfair or unscrupulous acts with respect to TMP's taking of the deposit, that the plaintiff suffered any ascertainable loss of money or property due to a CUTPA violation, or that either defendant engaged in conduct or practices that violated the so-called cigarette rule; and (2) that the court abused its discretion by awarding the plaintiff "double" damages and attorney's fees and costs. We disagree.

We turn now to the legal principles that guide our resolution of the defendants’ claims. CUTPA provides that: "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b (a). "Any person who suffers any ascertainable loss of money ... as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action ... to recover actual damages. ..." General Statutes § 42-110g (a).

"[I]n determining whether a practice violates CUTPA we have adopted the criteria [previously] set [forth] in the cigarette rule by the [Federal Trade Commission] for determining when a practice is unfair: (1) [w]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some [common-law], statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [o...