2004 Ct. Sup. 3580
No. CV 02 0078038 SConnecticut Superior Court, Judicial District of Tolland at Rockville
February 10, 2004
MEMORANDUM OF DECISION
KLACZAK, JUDGE TRIAL REFEREE.
The plaintiff (Berlin Steel) filed a claim with the defendant (Liberty Mutual) who had issued a surety bond in connection with a contract with its principal, HRH/Atlas Construction, Inc. (HRH/Atlas). HRH/Atlas had been awarded a contract to construct a new agricultural biotechnology laboratory at the University of Connecticut in Storrs (UConn). HRH/Atlas was required to furnish a performance bond with surety pursuant to Connecticut General Statutes § 49-41(a).
In connection with the HRH/Atlas-UConn contract, HRH/Atlas sub-contracted with Berlin Steel for the provision of metal framing and other project-related metal work. (Exhibit B.)
As the project progressed Berlin Steel executed partial releases to HRH/Atlas and received partial payment accordingly, in the amount of $907,116.22 for work and materials supplied through January 31, 2000.
The amount did not include payment for certain additional extra work and materials which Berlin Steel provided outside the contract pursuant to change order requests. Nor did it include payment for “retainage.” Retainage is money due under the contract to the general contractor (HRH/Atlas) but which is withheld until, UConn in this case, gives final approval for the construction work. In this case the retainage amount withheld was $23,326.40.
The evidence established that Berlin Steel expected to receive the retainage from HRH/Atlas once UConn gave its final approval for the project and authorized the release of those retainage funds.
From time to time an employee of Berlin Steel would inquire as CT Page 3581 to the status of the retainage and was first told it would probably be released toward the end of 2000, then later told it would probably be February 2001, then later was told it might be August 2001. It was not unusual in the trades to have lengthy delays for final project approval and it appears, in this case, the final approval and release of retainage was in September 2000. HRH/Atlas acknowledged and affirmed that it owed Berlin Steel $23,326.40 by its letter of January 16, 2001 to Liberty Mutual (Exhibit J) and stated it would pay that amount to Berlin Steel once it received final payment from UConn.
Meanwhile, on or about December 18, 2000, Berlin Steel filed a notice of claim with Liberty Mutual making a demand for payment of $28,061.42. The amount was incorrect as it included, in addition to the retainage of $23,326.40, invoices for change orders outside of the contract for which Berlin Steel had already been paid. In short, it was a bookkeeping error and easily correctable. The retainage amount was not in dispute.
Upon receiving the claim from Berlin Steel, Liberty Mutual contacted HRH/Atlas and was apprised that they owed the retainage but had already paid the other change order invoices. (Exhibit S.) Liberty Mutual thereupon asked Berlin Steel to document its claims. In July 2001, Berlin Steel responded (Exhibit L) and Liberty Mutual again corresponded with its principal, HRH/Atlas, as to the claim. In response, HRH/Atlas then advised Liberty Mutual that it had a general release signed by the assistant treasurer of Berlin Steel, dated September 25, 2000 and, relying on that release, Berlin Steel was not owed any money. (Exhibit 20.)
The issue in this case is whether the release (Exhibit 20), acts to bar Berlin Steel’s claim for the retainage. The Court concludes it does not for the following reasons:
The terms of the contract between HRH/Atlas and Berlin Steel provided for Berlin Steel to be paid a sum of money equal to 97.5% of the contract price in accordance with requisitions approved by the HRH/Atlas. The balance (2.5%) was to be held as retainage and, once final approval for the completed job was obtained from the owner (UConn), HRH/Atlas and the architect, and a general release executed by Berlin Steel was provided to HRH/Atlas, the balance owed (the retainage in this case) would be paid to CT Page 3582 Berlin Steel. (Exhibit B, Sec. 10.1.)
There was no evidence that Berlin Steel did not perform the work properly and it was clearly entitled, pursuant to the contract to be paid the retainage upon final approval of the job. HRH/Atlas, in fact acknowledged as much in its letter of January 16, 2001 to Liberty Mutual. (Exhibit J).
The fact that Berlin Steel put in an erroneous claim for $28,061.42 instead of $23,326.40 does not justify a refusal to pay the correct amount due. Liberty Mutual was made aware that the difference was a bookkeeping error in not crediting HRH/Atlas for several relatively small payments which it made for change orders outside the original contract plus a $268 interest charge. That discrepancy was easily correctable, however instead of doing so Liberty Mutual took the position that, because a general release was provided to HRH/Atlas, it was not required to pay anything further.
The release relied upon by Liberty Mutual (Exhibit 20) was executed by Robert Smith, Jr., the assistant treasurer of Berlin Steel on September 25, 2000. The unsigned release had been sent to Berlin Steel by HRH/Atlas together with a check for $2601.50. This was the exact amount owed to Berlin Steel for a change order to install a fence gate. There was never any discussion between the parties that the release was a negotiated release of the retainage. Mr. Smith believed it was in satisfaction of the change order invoice for $2601.50 since the accompanying cheek was in that amount. Even if Mr. Smith was mistaken in his belief, Berlin Steel was still required to deliver up a general release before it could receive its final payment in accordance with the provisions of Section 10.1 of the contract. Significantly, in January 2001 HRH/Atlas acknowledged it still owed Berlin Steel the retainage.
Under these facts the Court finds the release was not intended to, and does not, excuse nonpayment of the retainage.
Turning now to a discussion of the three (3) counts of the amended complaint. The first count alleges breach of contract. The Court finds that Berlin Steel complied with the terms of its contract with HRH/Atlas. Its workmanship was satisfactory. It complied with the contract requirement for final payment of the retainage and HRH/Atlas later confirmed it owed that sum to Berlin Steel. Liberty Mutual, as surety, is obligated to pay CT Page 3583 Berlin Steel the retainage since its principal did not.
The second count alleges that Liberty Mutual violated Connecticut General Statutes § 49-42 in failing to act on the claim within 90 days of its receipt. The Court does not find a violation of § 49-42. First of all Berlin Steel submitted an incorrect claim to Liberty Mutual. Liberty Mutual asked HRH/Atlas to respond and in turn responded to Berlin Steel. Berlin Steel did not respond for six or seven months, whereupon Liberty Mutual again corresponded with its principal and was told Berlin Steel had executed a general release and was not owed additional money. Based on that information it denied the claim. The facts do not support a finding of bad faith by Liberty Mutual.
For the same reasons the Court does not find Liberty Mutual to be in breach of the covenant of good faith and fair dealing. While it appears that both parties could have done a better job of getting to the heart of the problem and some carelessness by both contributed to the dispute, it does not rise to the level of bad faith and unfair dealing.
Berlin Steel’s alternative argument that the release was a mutual mistake is not being pursued since the ruling here does not release Liberty Mutual from payment. (Plaintiff’s post-trial brief p. 16.) In any event while there may have been a unilateral mistake on the part of Berlin Steel, it has not proven, by clear and convincing evidence, a mutual mistake. The intent of HRH/Atlas in sending the release to Berlin Steel is unclear from the evidence.
Accordingly, judgment shall enter for the plaintiff in the amount of $23,326.40 plus costs.
The plaintiff filed an offer of judgment on June 21, 2002, which was within 18 months of the filing of the complaint on March 4, 2002. (See Connecticut General Statutes § 52-192a and Connecticut Practice Book §§ 17-14 to 17-18.)
The plaintiff is entitled to interest at 12% per annum from March 4, 2002 to February 10, 2004 in the amount of $6,211.89.
Pursuant to § 52-192a the Court awards attorneys fees of $350. (The Court is not aware of any contract provision for attorneys fees and the plaintiff has not referred to any such provision). CT Page 3584
The defendant’s second special defense is denied and judgment shall enter for the plaintiff on the counterclaim.
Conclusion
Judgment shall enter for the plaintiff in the amount of $29,888.29 plus costs.
Klaczak, JTR CT Page 3585