Connecticut construction lawyer Archives - Page 3 of 6 - Attorney Scott S. Orenstein

A Mechanic’s Lien: Something Simple That’s Been Made Complicated

One of the first things I was ever taught about mechanic’s liens is that the legislation’s original intent was for a contractor to be able to perfect a mechanic’s lien without the aid of an attorney. If that’s true, the system is not working as intended. Of course, that is not surprising given the complicated legislation and its arguably inconsistent interpretation.

A mechanic’s lien is unique insofar as it allows a contractor to obtain an interest in real property without requiring any kind of hearing or notice. As long as the lien documents are properly prepared, recorded, and served, the lien is in place. In addition, the fact that mechanic’s liens have priority dates that relate back to the first day that the contractor performs work and/or supplies materials, mechanic’s liens that did not exist when a mortgage was given or the property was sold can appear on the land records after such transactions and take priority over an earlier filed mortgage and/or encumber property owned by someone who was not the property owner at the time the work was performed, materials were supplied and/or services were rendered.

Of course, reading the statutes is not sufficient to completely understand mechanic’s liens.

A Recent Supreme Court Decision Found an Owner of a Construction Company Personally Liable to the Owners of a Project

As most people are aware, one of the benefits of doing business as a corporation or limited liability company is that, generally speaking, the owners of the company cannot be held personally liable for the company’s debts. The exception to that general rule is that a court may pierce the corporate veil and hold the company owners personally liable if the company owners are found to have improperly used the corporate form, or have used the corporate form to commit wrongful acts. Nonetheless, even a cursory of the caselaw indicates that plaintiffs do not often prevail when they are attempting to pierce the corporate veil.

The statement of the law with regard to piercing the corporate view is quite simple. In All Phase Builders, LLC v. New City Rests., 2011 Conn. Super. LEXIS 1793, *20-21, 2011 WL 3483368 (Conn. Super. Ct. July 12, 2011), the court ruled:

“In order to pierce the corporate veil, a plaintiff must plead and prove that the corporate shield can be pierced under either the instrumentality rule or the identity rule. The instrumentality rule requires… proof of three elements: (1) Control …; (2) that such control must have been used by the defendant to commit fraud or wrong …;

Contractual Time Limits for Providing Notice of Claim Must be Taken Seriously

The Connecticut Appellate Court recently issued a decision that should cause every contractor some concern. In J. WM. Foley Inc. v. United Illuminating Co., 158 Conn. App. 27 (Conn.App. 2015), the Appellate Court upheld a decision that denied a contractor’s $4.7 million delay claim because the contractor did not provide proper notice of the claim within the 10 days required by the contract. The case is disconcerting because the court’s decision appears to be based upon the contractor’s failure to strictly comply with the contract’s notice provision. There is no discussion indicating that the owner was harmed or prejudiced by the delay in receiving notice of the claim. Moreover, the decision acknowledges that the contractor had provided the owner with notice of events giving rise to the claim. In fact, despite denying the delay claim, the trial court awarded the plaintiff over one million dollars for its direct costs, which arose out of the same facts as the delay claim.

The project underlying the dispute in J. WM. Foley Inc. was the construction of a utility pipeline. The parties’ agreement stated that the contractor was expected to encounter subsurface obstructions and that the contractor would be entitled to additional compensation associated with same.

Only the “Owner” may seek Judicial Discharge of Mechanic’s Liens

The Connecticut Superior Court recently decided a case of first impression regarding the right to file an application for discharge of mechanic’s liens. The court in Grade A Mkt., Inc. v. Surplus Contrs., LLC held that a lessee did not have “standing” to file an application for discharge of mechanic’s liens and dismissed the tenant’s application. Grade A Mkt., Inc. v. Surplus Contrs., LLC, 2015 Conn. Super LEXIS 1342 (Conn. Super. May 26, 2015). In layman’s terms, “standing” is the right to have the court decide your case. The Grade A Mkt decision is interesting because it limits the ability of a tenant to obtain a discharge of mechanic’s liens even though the tenant’s lease with the owner may require the tenant to obtain a discharge of mechanic’s liens filed by contractors performing work for the tenant.

Mechanic’s liens are a statutory right that the legislature created to provide contractors and/or suppliers that furnish labor, materials, and/or services to a property with security for the alleged debt but mechanic’s liens were not intended to prevent the free transfer of property rights. For that reason, the statutes provide a few different mechanisms by which an appropriate individual or company may obtain a release of the mechanic’s lien.

Recent Local Law Shows that the Law’s Understanding of Blasting is not Improving

In 2003, I published an article in The Journal of Explosives Engineering entitled “The Laws Governing Blasting,” in which I explained that, despite the fact that blasting is the most widely used method for rock removal on construction projects, court decisions pertaining to blasting damage claims often wrongfully hold blasters liable for alleged damage their blasting could not have possibly caused. As my article explains, these decisions reach the wrong conclusion because of a general misunderstanding of the science governing blasting. By citing technical and legal sources, the article demonstrates that courts often ignore scientific evidence in favor of lay testimony that the blasting caused damage because cracks were noticed after the building shook. However, years of research by the United States Bureau of Mines (“USBM”) demonstrates that such anecdotal evidence is not reliable or accurate.

A fundamental principle from the USBM research stated in USBM Bulletin 8507 is that blast generated vibrations that are measured at the nearest structure at less than 2 inches per second at 40 Hz are not likely to cause damage to typical residential construction. (For a full discussion of the scientific information pertaining to the USBM research, see my earlier article).

Recent Supreme Court Case Teaches Important Lessons

It is no secret that public works construction is a difficult business. On any given project there are innumerable ways that things can go wrong. With any project involving excavation and underground utilities, encountering changed conditions should not be a surprise. Of course, such changed conditions are not the contractor’s responsibility. What is the contractor’s responsibility, however, is providing the public owner with proper notice of its claims in accordance with the subject agreement.

One of the reasons public works construction projects are more onerous than their private counterparts is because public owners rarely negotiate contract terms. Contracts that are slanted significantly in the public owner’s favor are the norm. Thus, as the contractor in a recent state Supreme Court decision learned, it is vitally important to read the contract and abide by its terms.

One of the lessons from Old Colony Cosntr., LLC v. Town of Southington, 316 Conn. 202 (Conn. April 21, 2015) is that general assertions of entitlement to damages and/or additional contract time is not sufficient when the contract requires more detail. During the long duration of the project, the contractor in Old Colony repeatedly indicated that each problem that occurred impacted its schedule and costs.

Changes to the Prevailing Wage Law Considered

According to Conn. Gen. Stat. §31-53, all public works construction contracts require the wages paid on the project to “be at a rate equal to the rate customary or prevailing for the same work in the same trade or occupation in the town in which such public works project is being constructed. Any contractor who is not obligated by agreement to make payment or contribution on behalf of such persons to any such employee welfare fund shall pay to each mechanic, laborer or worker as part of such person’s wages the amount of payment or contribution for such person’s classification on each pay day.” The reason for the “prevailing wage” requirement is to level the playing field for those bidding on public projects by requiring non-union companies to pay the equivalent of union wages on such projects. In the last legislative session, Connecticut lawmakers considered an expansion of the prevailing wage law beyond projects owned by the state or its subdivisions.

The considered legislation expands the prevailing wage law so that it would apply to any project which receives financial assistance from the state. For example, if your project is funded—or even partially funded—by a loan or a grant from the State Department of Economic Development,

Public Owners Have Substantial Discretion in Determining the Lowest Responsible Bidder

In a recent decision, the Appellate Court reminded us that it is the lowest responsible bidder and not merely the bidder that submits the lowest price that shall be awarded the contract for a public project. In Good Earth Tree Care, Inc. v. Town of Fairfield, 2014 WL 3408914 (Conn.App.), 2 (Conn.App., 2014), the plaintiff brought an action against the Town of Fairfield (the “Town”) because of the Town did not award the plaintiff the contract to operate the Town’s leaf and yard waste facility (the “Facility”) despite the plaintiff having submitted the lowest bid. The lawsuit was dismissed after the plaintiff presented its evidence because it failed to prove that the Town engaged in “fraud, corruption, or favoritism.” Based upon the facts of this case, however, it is easy to understand why the plaintiff thought that there might have been an element of favoritism involved. Specifically, the Town awarded the 5 year contract to the contractor that had operated the Facility for the previous five years at a higher price than the plaintiff had offered.

In the private sector, it is perfectly permissible for an owner to say that it is willing to pay a familiar entity a higher price than a new company if the private company is happy with the existing company’s performance but public owners do not have that type of discretion.

With Payment Bond Claims, Different Rules Apply to the Bond Claimant and the Surety

As previously discussed in this Blog, Conn. Gen. Stat. § 49-41 requires each general contractor on a public works projects valued over $100,000 to post a payment bond that guarantees payment to the general contractor’s subcontractors and suppliers. The payment bond also guarantees payment to each subcontractors’ sub-subcontractors and suppliers.

The procedure by which such subcontractors, sub-subcontractors, and/or suppliers may make claim against such payment bonds is described in Conn. Gen. Stat. § 49-42. With the exception of claims for retainage, the statute requires those making claim on the payment bond to submit their “notice of claim” within 180 calendar days after the last day that it worked and/or supplied materials. The statute then provides the surety that issued the payment bond with 90 calendar days to pay or deny the claim. Until recently, both time provisions were mandatory. See Barreira Landscaping & Masonry v. Frontier Ins. Co., 47 Conn. Supp. 99, 110, 779 A.2d 244, 252 (Super. Ct. 2000)(holding that both the notice of claim and the surety’s response both much be made within the time specified by statute.)

With regard to the 90 day time limit, the court in Barreira Landscaping &

Mechanic’s Liens – Legislative Update

Every year, state legislatures across the country pass new laws and revise old ones. In fact, these state legislatures often tinker with existing statutes that have been in place for many years and are working as intended. This year, the Connecticut legislature has raised a bill, Raised Bill No. 887, “An Act Concerning the Requirements for the Filing of a Mechanic’s Lien” (the “Act”), that may have an adverse effect on the construction industry through unintended consequences.

The Act would add a new requirement for a mechanic’s lien to be valid. Specifically, the Act states that the contractor performing the work must hold “the appropriate registration or license to perform the services.” On one hand, the Act has the valid purpose of discouraging unlicensed individuals from performing construction services. On the other hand, this revision to the mechanic’s lien laws would be duplicative of the laws and regulations pertaining to licensure already in place insofar as the existing laws and regulations prohibit certain work from being performed without a license. In addition, the mechanic’s lien statutes are not the best place to address this issue.

The mechanic’s lien laws were established in all fifty states to provide contractors and suppliers with recourse in the event of nonpayment for their labor,

Categories

Recent Posts