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Joseph Gen. Contr., Inc. v. Couto

Supreme Court of Connecticut

July 21, 2015

JOSEPH GENERAL CONTRACTING, INC.
v.
JOHN COUTO ET AL. JOHN COUTO ET AL.
v.
LANDEL REALTY, LLC, ET AL

Argued December 9, 2014

Page 571

[Copyrighted Material Omitted]

Page 572

[Copyrighted Material Omitted]

Page 573

Action, in one case, to recover damages for, inter alia, breach of contract, and for other relief, action, in a second case, to foreclose a mechanic's lien, and for other relief, and action, in a third case, to recover damages for, inter alia, violation of the Connecticut Unfair Trade Practices Act, and for other relief, brought to the Superior Court in the judicial district of New London, where the first and second cases were consolidated; thereafter, the named defendant et al. in the first and second cases filed counterclaims; subsequently, the cases were tried to the court, Hon. Joseph Q. Koletsky, judge trial referee, who, exercising the powers of the Superior Court, rendered judgment, in the first and second cases, for the named defendant et al. on the consolidated complaint and on the counterclaims, and rendered judgment, in the third case, for the plaintiffs, from which the plaintiff in the first and second cases and the defendants in the third case filed separate appeals to the Appellate Court, where the appeals were consolidated; thereafter, the Appellate Court, Gruendel, Sheldon and Peters, Js., affirmed the trial court's judgments, and the plaintiff in the first and second cases and the defendants in the third case, on the granting of certification, appealed to this court.

SYLLABUS

S, the sole owner and shareholder of the plaintiffs, J Co., a building contractor, and L Co., a realty company, appealed from the judgment of the Appellate Court affirming the trial court's judgment finding him personally liable for, inter alia, breach of contract, breach of implied warranty, and violation of the Connecticut Unfair Trade Practices Act (CUTPA) (§ 42-110a et seq.) in connection with the construction of a residence for the defendant homeowners. The homeowners originally entered into a written contract with J Co. for the construction of a home and carriage house on a parcel of real property owned by L Co. in Stonington. S assured the homeowners that, if they did not like the home and the carriage house as completed, they would not be obligated to purchase the lot or the dwellings. During the course of construction, the homeowners entered into a series of oral agreements supplementing the terms of the original contract and, thereafter, entered into two written contracts signed by S, individually and on behalf of L Co., regarding financing and certain escrowed funds. After S began having financial difficulties, he represented to the homeowners that his inability to obtain additional credit was due to the homeowners' reservation of the right to decline to purchase the property and that, if the homeowners did not pay for the construction upfront, they would lose certain funds they had paid as a deposit. The homeowners acquiesced, purchased the property and obtained a loan to help finance the construction. A new agreement incorporating the modification was drafted, but never signed by either party. Although S, J Co., and L Co. had been compensated for the work that had been performed, S demanded a large progress payment, which the homeowners refused to pay in light of certain issues that had arisen during the course of construction. Thereafter, S ceased construction and obtained a mechanic's lien on the property. The homeowners thereafter moved ahead with construction with a different contractor, who discovered that a large quantity of construction debris had been buried under the portion of the property designated for the carriage house. J Co. subsequently filed an action seeking to recover damages for the homeowners' breach of contract and a separate action seeking to foreclose the mechanic's lien on the property. The homeowners in turn filed counterclaims against J Co. alleging, inter alia, breach of contract. They also filed an action against L Co. and S, in his individual capacity, alleging, inter alia, breach of contract, breach of implied warranty, and violation of CUTPA. After a trial, the trial court rendered judgment in favor of the homeowners on those counts of their complaint against S in his individual capacity. On appeal, the Appellate Court concluded that that the trial court had properly held S personally liable for breach of contract because, although he had initially disclosed his role as an agent of J Co., it was reasonable for the trial court to find that S did not clearly inform the homeowners that he continued to be acting in a representative capacity in relation to future agreements and that S was a party to the modified contract. The Appellate Court further concluded that, because S had personally engaged in tortious conduct directed at the homeowners, the trial court's finding that S was personally liable for his conduct under CUTPA was not clearly erroneous. The Appellate Court rendered judgment affirming the trial court's partial judgment in favor of the homeowners and, thereafter, S, on the granting of certification, appealed to this court.

Held :

1. The Appellate Court improperly affirmed the judgment of the trial court on the homeowners' claims of breach of contract and breach of an implied warranty against S, this court having concluded that the facts found by the trial court were not sufficient, as a matter of law, to impose liability on S in his individual capacity: S could not be held individually liable for breach of the original construction contract, which S signed on behalf of J Co., because he was not a party to the contract and the subsequent actions of the parties to the contract did not display an agreement to change that contract's terms; moreover, this court having previously stated that breach of an implied warranty does not stand as a separate cause of action, because S could not be held personally liable under the original construction contract, he also could not be held liable for breach of an implied warranty.

2. The Appellate Court properly affirmed the judgment of the trial court as to the individual liability of S under CUTPA: this court, applying federal law directed by statute (§ 42-110b), concluded that liability under CUTPA may be extended to an individual who knowingly or recklessly engages in unfair or unscrupulous acts in the conduct of a trade or business and that here, S either directly participated in the wrongful conduct or, by virtue of his ownership, position and day-to-day involvement in J Co. and L Co., had the ability to control it, and given the character of that actions at issue, S knew or should have known of their wrongfulness; moreover, attaching liability to S under the circumstances of this case supported the remedial nature of CUTPA and the ultimate protection of the consumer.

Thomas J. Londregan, with whom were Ralph J. Monaco, and, on the brief, Brian K. Estep, for the appellant (Anthony Silvestri).

Jennifer Antognini-O'Neill, with whom was John C. Zaccaro, Jr., for the appellees (John Couto et al.).

Patrick M. Fahey filed a brief for the Home Builders and Remodelers Association of Connecticut, Inc., as amicus curiae.

Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald, Espinosa and Robinson, Js. EVELEIGH, J. In this opinion the other justices concurred.

OPINION

EVELEIGH, J.

Page 574

[317 Conn. 568] The appellant Anthony J. Silvestri[1] appeals from the judgment of the Appellate Court affirming the judgment of the trial court in favor of the appellees, John Couto and Jane Couto.[2] The trial court had found Silvestri personally liable for, inter alia, breach of contract, breach of implied warranty, and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The dispositive issue in this appeal is whether the Appellate Court properly affirmed the judgment of the trial court finding that Silvestri, in his individual capacity, had incurred individual contractual obligations to the Coutos and was, therefore, personally liable for damages that the Coutos sustained as a result of his actions. We affirm in part and reverse in part the judgment of the Appellate Court.

The opinion of the Appellate Court sets forth the following facts and procedural history. " On June 27, 2007 . . . Joseph General Contracting, Inc. (Joseph General), filed two separate complaints against the [Coutos]. The first action contained five counts and raised claims of breach of contract, and the second action sought to foreclose a mechanic's lien held by Joseph General on the Coutos' property. The Coutos denied their liability and asserted various special defenses, including allegations that [Silvestri, who was] [317 Conn. 569] the owner and president of Joseph General . . . personally had induced them to enter into a contract through material misrepresentations, that [Joseph General's] claims were barred by its own breach of contract and warranty, and that Joseph General had been fully paid for the work it completed in accordance with the contractual agreement.

" The Coutos also filed a six count counterclaim against Joseph [General], alleging violation of General Statutes § 47-200 et seq., the Common Interest Ownership Act, breach of contract, fraud, breach of implied warranty, trespass and violation of . . . [CUTPA]. Subsequently, the Coutos . . . commenced a separate action on February 6, 2009, against Silvestri, the sole owner and shareholder of Joseph General, and Landel Realty, LLC (Landel), of which Silvestri is also the sole owner. That action incorporated the allegations of the Coutos' counterclaim, in addition to

Page 575

alleging intentional infliction of emotional distress and seeking declaratory relief pursuant to the Common Interest Ownership Act. A consolidated trial of [these actions] was held before the court [in May, 2011].

" After trial, the court rendered judgment in favor of Joseph General, Landel, and Silvestri as to the Coutos' claims of fraud, violation of the Common Interest Ownership Act and intentional infliction of emotional distress. The [trial] court rendered judgment in favor of the Coutos as to all other counts, holding Joseph General, Landel and Silvestri each jointly and severally liable for breach of contract and implied warranty, trespass and violation of CUTPA, awarding a total of approximately $573,659 in damages. On appeal to [the Appellate Court], Silvestri challenge[d] the propriety of these adverse rulings with respect to his personal liability.

" In view of the evidence presented in the consolidated trial of these actions, the [trial] court reasonably [317 Conn. 570] could have found the following facts. In 2006, the Coutos entered into a written contract with Joseph General for the purchase and construction of a home and carriage house to be built on a piece of property in the Admiral Cove subdivision in Stonington (lot 5), for the price of $1,980,000. The carriage house was intended for use as a separate dwelling for the Coutos' special needs daughter, a purpose of which Silvestri was aware. At the time the contract was signed, Silvestri assured the Coutos that if they did not like the home and the carriage house, they would not be obligated to buy lot 5 or the completed dwellings. Although the contract terms were vague, they specified that the new home was to be of like kind and quality, and built with the same materials as used in a model home also located in Admiral Cove, which previously had been constructed by Joseph General, Landel and Silvestri, collectively. The architect who designed the model house was also to design the two dwellings on lot 5 for the Coutos. Silvestri knew, however, that the zoning requirements regulating Admiral Cove contained a single-family dwelling restriction applicable to each of the lots in the development. At the time they signed the contract, the Coutos were unaware of this zoning restriction.

" Although the original contract for the development of the new home and carriage house was executed between the Coutos and Joseph General, the parties also proceeded to negotiate additional oral agreements to supplement its terms. . . . The trial court apparently found credible the testimony of the Coutos that, throughout the continued construction process, they were confused as to whom they were dealing with. The Coutos also entered into a written agreement to deliver funds to escrow in payment for a security card system, docking installation, docking permits and estate paving, as well as a second written contract relating to a construction loan obtained by the Coutos. Both of these [317 Conn. 571] agreements were signed by Silvestri, individually, and on behalf of Landel. In light of this evidence presented at trial, the trial court determined that a contract existed not only between Joseph General and the Coutos, but also between the Coutos, Landel and Silvestri.

" The evidence at trial showed that, as the construction process continued, Silvestri had financial difficulties in performing his obligations. The Chelsea Groton Savings Bank declined to provide financing because the bank did not believe that extending further funds to Silvestri was prudent. Silvestri represented to the Coutos that the reason for the bank's refusal to finance the project was that ...


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