Willow Springs Condominium Ass'n, Inc. v. Seventh BRT Development Corp.

• Citation: 245 Conn. 1,717 A.2d 77
• Decision Date: 02 June 1998
• Docket Number: No. 15755,15755
• Court: Supreme Court of Connecticut
• Parties: WILLOW SPRINGS CONDOMINIUM ASSOCIATION, INC. v. SEVENTH BRT DEVELOPMENT CORPORATION et al.

Page 77

717 A.2d 77

245 Conn. 1

WILLOW SPRINGS CONDOMINIUM ASSOCIATION, INC. v. SEVENTH BRT DEVELOPMENT CORPORATION et al.

No. 15755.

Supreme Court of Connecticut.

Argued Jan. 22, 1998.

Decided June 2, 1998.

Michael D. O'Connell, Hartford, with whom was Julia B. Morris, Manchester, for appellants (named defendant et al.).

Robert J. O'Brien, with whom, on the brief, was Chester J. Bukowski, Jr., Hartford, for appellee (plaintiff).

Before CALLAHAN, C.J., and BORDEN, NORCOTT, KATZ and PALMER, JJ.

KATZ, Associate Justice.

This appeal encompasses a number of issues related to alleged design, construction and maintenance defects in a condominium complex known as Willow Springs Condominiums (Willow Springs) and in an on-site sewage treatment plant constructed solely to serve only that condominium complex. The plaintiff, Willow Springs Condominium Association, Inc. (association), has claimed breach of statutory warranties pursuant to the Connecticut Common Interest Ownership Act CIOA) ¹ and the New Home Warranties Act (NHWA), ² as well as violation of the Connecticut Unfair Trade Practices Act (CUTPA), ³ breach of fiduciary obligations by individuals who were employees and officers of several of the defendants and who served on the executive board of the association, in addition to various common-law tort claims. The named defendant, Seventh BRT Development Corporation (Seventh BRT), appeals from the judgment of the trial court, after a jury trial, in favor of the association, which represents the individual owners of condominium units. Seventh BRT, which was the developer of Willow Springs, is one of several original defendants to this action. ⁴

I

In the interests of clarity, before describing the various defects in the complex alleged in the complaint, we first address the history of the development of the Willow Springs project and the relationships among the various corporate and individual defendants who were parties to the original action. Second BRT Development Corporation obtained an $18.6 million construction loan to finance the Willow Springs project, which was originally named Kenwood Condominium. In September, 1985, prior to the start of construction, Second BRT Development Corporation merged with Seventh BRT, leaving Seventh BRT as the surviving corporate entity. Construction proceeded in phases over the course of three years, from 1984 until 1987. At the time of trial, the complex was comprised of twenty residential buildings, a sewage treatment plant and a clubhouse. The last units were completed in 1987 and certificates of occupancy for the various units were granted in 1985, 1986 and 1987. The first unit was sold on November 19, 1985. The association assumed control over Willow Springs in August, 1987, shortly after the last building was completed.

On June 11, 1987, after individuals already had purchased a number of units, Seventh BRT sold ninety-two of the remaining units to a partnership called BRT Property Group, for $4,784,000. ⁵ BRT Property Group held these units for rental until 1991, at which time it began to sell them to individual purchasers. Although individual purchasers of units had signed affidavits that they would occupy the units they purchased, BRT Property Group did not do so. The plaintiff introduced a number of warranty deeds showing that Seventh BRT continued to sell units to individual purchasers from November 19, 1990, through February 20, 1992.

Although the corporate defendants ⁶ maintained separate legal identities, they had a number of officers and directors in common. Barry J. Bertram was the president of Little Rock Properties Corporation (Little Rock), Danbury Crossroads Corporation (Danbury) and Seventh BRT. The shareholders of Seventh BRT were Bertram, Edmund J. Nahom, and the law firm of Paul S. McNamara as trustee for some of Bertram's children. Dennis McDonald, who served as a director of the association, was an individual partner in BRT Property Group, an officer of Seventh BRT, an officer of BRT Development Corporation (BRT Development), and an officer of BRT Corporation, which owned Condominium Management Group. In addition, McDonald operated Condominium Management Group. BRT Corporation, Nahom and McDonald were partners in BRT Property Group. Nahom, who was senior vice president of BRT Property Group, also served on the association board from August, 1987, until August, 1988, and then again from June, 1991, until early 1993. Teresa LaCroce was a director of Little Rock, Danbury, and Seventh BRT. She was also an employee of BRT Property Group and was actively involved in selling units at Willow Springs. LaCroce testified that she became corporate secretary for Little Rock, Danbury and Seventh BRT in 1989. In describing her positions at these companies, she referred to them as "the sales department" and "the property management department." LaCroce served on the association's board of director's from 1987 until February, 1993. LaCroce testified that Bertram, who is her father, made many of the significant decisions regarding the three companies. Thomas Miller, who is not a defendant in this case, was the treasurer of BRT Property Group, Little Rock, Danbury and Seventh BRT.

All of the BRT companies were housed in the same office building. The BRT companies voted as a block at general meetings of the association. BRT Development Corporation (now Danbury), BRT Corporation (now Little Rock) and Seventh BRT maintained separate checking accounts and separate corporate books, and also filed separate corporate reports with the secretary of the state. The only company that had employees was Little Rock.

We turn next to the facts surrounding the various design, construction and maintenance defects described in the complaint. Over the course of time, a number of serious difficulties surfaced at Willow Springs, including problems with the sewage treatment plant, the paving and the residential buildings. The plaintiff filed this action on May 13, 1993, claiming, inter alia, breach of warranty with respect to the sewage treatment plant, CUTPA violations, and breach of fiduciary duty. The complaint was amended a number of times adding, inter alia, claims related to other defects. The fourth and final amended complaint was filed on December 7, 1995. That seventeen count complaint alleged that Seventh BRT had breached the implied warranties in the CIOA ⁷ and the NHWA ⁸ with respect to the paving and structural defects in the residential buildings, including, but not limited to, the chimneys, decks and roofs. ⁹ The complaint stated a number of other claims against Seventh BRT specifically in relation to the sewage treatment plant, including: (1) breach of the express and implied warranties provided in the CIOA and the NHWA; (2) fraudulent concealment; (3) fraudulent misrepresentation; (4) wilful and wanton misrepresentation; (5) CUTPA violations; (6) breach of the duty of care; and (7) unity of interest among Seventh BRT, Danbury and Little Rock. ¹⁰ The complaint also alleged that Condominium Management Group breached its contract in that it had failed to operate and maintain the plant properly. The defendant answered by denying the essential allegations of the complaint and asserting various statutes of limitations as a special defense to all of the plaintiff's claims.

In connection with the various defects alleged by the plaintiff, the record reveals the following evidence. The on-site sewage treatment plant, ¹¹ which was designed by Consultants and Engineers, Inc., was constructed for the exclusive use of the complex and served all of the units. The state department of environmental protection (department) conducted a preliminary review of the treatment plant project and made suggestions that were incorporated by Consultants and Engineers, Inc., prior to approval of the final plan by the department. Upon completion of the plant, the department conducted a final inspection to determine whether the plant had been built in accordance with the approved plans and specifications. The plant began operating in November, 1985, pending approval by the department. A five year permit to operate the plant was issued by the department on May 15, 1986. A second permit was issued on May 11, 1993.

Roman Platosh, an expert in the design of sewage treatment plants, testified that he had inspected the plant in January, 1993, and had found that "[t]he conditions were deplorable.... There's a building exhaust fan which was not in use. The vapor inside the building looked as if it was on fire from all the fog inside. Heavy odors in the buildings. Much of the equipment was rusting. I remember seeing the control panel with the doors open and wires hanging off of it.... [A]t that time the sand filters were not operational. They were being bypassed. Very heavy solids going over in the effluent. Everything was basically slimy. I was afraid to touch anything, including the hand rails. It was very dingy." Platosh further testified that the design of the plant was deficient in that: (1) it did not provide adequate flow equalization in order to provide sewage flow into the treatment plant at a uniform or nearly uniform rate; (2) a single blower served two tanks causing (a) improper oxygen distribution in that the unit that was furthest away from the blower could not be operated if the other unit malfunctioned; (3) improper pacing of the chemical feed to the influent pump; and (4) the influent pump station pumped in sewage at a higher rate than the capacity of the treatment plant.

McDonald, one of the original defendants in this action, was vice president of construction for Seventh BRT and oversaw the construction of the sewage treatment plant. He was the "principal contact" between Seventh BRT and Consultants and Engineers, Inc., the designer of the plant. In addition, McDonald was a management agent with Condominium Management Group, ¹² a division of Little Rock, which was...