Southington v. Commercial Union Ins. Co.

• Decision Date: 22 August 2000
• Docket Number: (SC 16194)
• Citation: 254 Conn. 348,757 A.2d 549
• Court: Connecticut Supreme Court
• Parties: TOWN OF SOUTHINGTON v. COMMERCIAL UNION INSURANCE COMPANY

254 Conn. 348

757 A.2d 549

TOWN OF SOUTHINGTON v. COMMERCIAL UNION INSURANCE COMPANY

(SC 16194)

Supreme Court of Connecticut.

Argued April 25, 2000.

Officially released August 22, 2000.

McDonald, C. J., and Borden, Norcott, Palmer and Sullivan, JS. Marjorie S. Wilder, with whom, on the brief, was Thomas A. Rouse, for the appellant (plaintiff).

Bradford R. Carver, with whom, on the brief, were Adam G. Cohen, pro hac vice, and Joseph Yamin, for the appellee (defendant).

Mary-Michelle U. Hirschoff filed a brief for the Connecticut Conference of Municipalities as amicus curiae.

Opinion

BORDEN, J.

The sole issue in this certified appeal is whether a municipality that has accepted a subdivision performance bond may enforce the provisions of the bond pursuant to General Statutes §§ 8-25 and 8-26c (c),¹ if no lots in the subdivision have been conveyed prior to the lapse of the subdivision approval. The plaintiff claims that the Appellate Court improperly concluded eluded that, pursuant to § 8-26c (c), a municipality may only call a subdivision performance bond if lots have been conveyed prior to the expiration of the subdivision approval. We agree and, accordingly, we reverse the judgment of the Appellate Court and remand the case for further proceedings.

The plaintiff, the town of Southington, brought this action against the defendant, Commercial Union Insurance Company, for payment on a subdivision performance bond on which the defendant was surety. After a trial to the court, the trial court rendered judgment for the plaintiff on its complaint. The defendant appealed to the Appellate Court, which reversed the judgment, and remanded the case with instruction to render judgment for the defendant. Southington v. Commercial Union Ins. Co., 54 Conn. App. 328, 334, 735 A.2d 835 (1999). The plaintiff appealed to this court pursuant to our grant of certification.²

The opinion of the Appellate Court sets forth the following relevant facts and procedural history. "The [plaintiff] brought an action against the defendant for payment under a performance bond that the defendant had posted as surety. Michael J. Martinez was the president, sole director and sole shareholder of A.M.I. Industries, Inc. (AMI). In 1988, AMI applied to the [plaintiffs] planning and zoning commission (commission) for approval of an industrial subdivision in the town on Captain Lewis Drive. At the time, the real property was owned by Southington Land Associates, Inc. (SLA). On October 4, 1988, the commission approved the application subject to AMI's furnishing a $590,000 subdivision or public improvement bond.

"On November 1, 1988, Martinez, as principal, and the defendant, as surety, executed a subdivision bond for the real property, and on February 9, 1989, SLA sold the property to MJM Land Investments, Inc. (MJM). Martinez was the president and sole stockholder of MJM.³ By April, 1995, Martinez, AMI and MJM had failed to complete the improvements required under the subdivision approval. The [plaintiff] informed the defendant⁴ that the subdivision had not been completed and that if it was not completed by October 3, 1995, the [plaintiff] would have to call the bond. Martinez declared personal bankruptcy and the [plaintiff] purchased the real property in a foreclosure auction on June 27, 1995. None of the lots in the subdivision was sold prior to the expiration of the subdivision application.⁵

"When the defendant refused to pay the money that the [plaintiff] claimed under the bond, the [plaintiff] commenced suit alleging, in its amended complaint, breach of contract and negligence and, in the alternative, promissory estoppel and identity/unity of interest, seeking damages of $175,000 to complete the subdivision improvements. The trial court rendered judgment in favor of the [plaintiff] on the breach of contract and negligence counts of the complaint." Southington v. Commercial Union Ins. Co., supra, 54 Conn. App. 330-31.

The defendant appealed from the judgment of the trial court to the Appellate Court, which reversed the judgment and remanded the case with direction to render judgment for the defendant. Id., 334. The Appellate Court concluded that, because no lots in the subdivision had been conveyed prior to the date the subdivision approval lapsed, § 8-26c (c) precluded the plaintiff from calling the bond.⁶ Id., 333-34. This appeal followed.

The plaintiff claims that the Appellate Court improperly concluded that, pursuant to § 8-26c (c), the plaintiff could not call the defendant's performance bond in the absence of lots having been conveyed prior to the lapse of the subdivision approval. The plaintiff argues that § 8-26c (c) neither explicitly nor implicitly diminishes its authority to call a performance bond obligation pursuant to § 8-25 when no lots have been conveyed. The defendant contends, to the contrary, that § 8-26c (c) limits the plaintiff's ability to call the defendant's performance bond under § 8-25 because § 8-26c (c) limits municipal authority to call performance bonds to situations where lots have been conveyed prior to the lapse of the subdivision approval. We agree with the plaintiff.⁷

Whether the plaintiff was permitted to call the defendant's performance bond pursuant to §§ 8-25 and 8-26c (c) is a matter of statutory interpretation, as well as an issue of first impression for this court. Well settled principles of statutory interpretation govern our review. "When we construe a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature.... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.... Furthermore, [w]e presume that laws are enacted in view of existing relevant statutes... because the legislature is presumed to have created a consistent body of law.... Conway v. Wilton, 238 Conn. 653, 663-64, 680 A.2d 242 (1996). We construe each sentence, clause or phrase to have a purpose behind it. State v. Ayala, 222 Conn. 331, 346, 610 A.2d 1162 (1992). In addition, we presume that the legislature intends sensible results from the statutes it enacts. State v. Parmalee, 197 Conn. 158, 165, 496 A.2d 186 (1985). Therefore, we read each statute in a manner that will not thwart its intended purpose or lead to absurd results.... Coley v. Camden Associates, Inc., 243 Conn. 311, 319, 702 A.2d 1180 (1997)." (Internal quotation marks omitted.) Linden Condominium Assn., Inc. v. McKenna, 247 Conn. 575, 583-84, 726 A.2d 502 (1999).

We conclude that a municipality has broad discretion in deciding whether to call a subdivision performance bond posted pursuant to § 8-25. We further conclude that § 8-26c (c) limits that discretion in only one way: if lots have been conveyed during the applicable time period, the municipality is obligated to call the bond "to the extent necessary to complete the bonded improvements and utilities required to serve those lots...." If, however, no lots have been conveyed, the municipality's broad discretion to decide whether to call the bond remains.

This question of statutory interpretation also must be resolved in light of several fundamental legal principles governing suretyship law and performance bonds. First, the general purpose of a suretyship contract is to "guard against loss in the event of the principal debtor's default." L. Simpson, Suretyship (1950) p. 2. "Suretyship by operation of law results when a third party promises a debtor to assume and pay the debt he owes to a creditor." Id., p. 32. Second, municipal bonds are construed in accordance with the general rules for written instruments. 13 E. McQuillin, Municipal Corporations (3d Ed. Rev. 1997) § 37.209, p. 526. It is axiomatic that a performance bond runs to the benefit of the obligee. "[T]he obligation of a surety is an additional assurance to the one entitled to the performance of an act that the act will be performed." Restatement, Security, p. 225 (1941). Third, "[t]he liability of sureties is to be determined by the specified conditions of the bond...." 13 E. McQuillin, supra, § 37.201, p. 502. In the present case, the bond signed by the defendant as surety provided that the defendant would be bound until the improvements were completed.⁸ Fourth, when a bond is required by statute, a court will read the statute into the contract between the principal, surety and obligee. Id., § 37.193, p. 477. "A contractor's bond, given for the full and faithful performance of a contract for a public improvement, will be construed with reference to the statute pursuant to which it is given, and such statutory provisions will be read into the bond...." Id., § 37.195, p. 481.

Mindful of these legal principles, we first turn to the language of the relevant statutes, namely, §§ 8-25 and 8-26c (c). Section 8-25 gives municipalities the authority to approve or reject subdivision applications. Section 8-25 (a) provides in relevant part: "The commission may also prescribe the extent to which and the manner in which streets shall be graded and improved and public utilities and services provided and, in lieu of the completion of such work and installations previous to the final approval of a plan, the commission may accept a bond in an amount and with surety and conditions satisfactory to it securing to the municipality the actual construction, maintenance and installation of such improvements and utilities within a period specified in the bond. ..." (Emphasis added.) By its language, § 8-25 permits municipalities, prior to subdivision approval, to accept performance bonds in lieu of actual performance of subdivision improvements. Implicit in this statutory authority to accept a bond with surety in lieu of some other form of...