Brace v. Titcomb

STATE OF MAINE ~) 5 SUPERIOR COURT

CUMBERLAND, SS. oS CIVIL ACTION \y

oo Docket No. RE-00-038 ,

TEH-CUM- ©. i7 2 00R

DONALD L. GARBRECHT

LAW LISRARY

‘eau , Oya Ll

lai. oad dil

RICHARD W. BRACE, ET AL,1

RUUN 2°27 2002

Plaintiffs

vs. DECISION AND ORDER

G. FREDERICK TITCOMB, ET AL,

Defendants

The defendant G. Frederick Titcomb, Inc. ("Titcomb-Corp") is a

closely held corporation that provides general contracting services for the

construction, renovation and remodeling of buildings. The defendant G.

Frederick Titcomb ("Frederick") is its sole shareholder, officer and

employee.

In 1989, the plaintiffs Richard and Cheryl Brace purchased lakefront

nroperty on Basswood Bay Road, Harrison, Maine. The property included a

summer home with exterior dimensions of approximately 26' by 36’.

1This case was originally styled as Hancock Lumber Company, Inc., v. G.

Frederick Titcomb. Pursuant to the stipulations of the parties, all of the claims of the

original plaintiff Hancock Lumber Company, Inc., have been dismissed without

prejudice. As a result, both Hancock Lumber and Norway Savings Bank are no longer

parties in this action.

The trial proceeded on the cross claims of the defendants Brace and Titcomb

against each other. Simply for ease of identification throughout the trial and in this

Judgment, Richard W. Brace and Cheryl M. Brace are designated and referred to as the

plaintiffs and G. Frederick Titcomb and G. Frederick Titcomb, Inc., are designated

« d referred to as the defendants.

In July 1999, Richard Brace first contacted Frederick about doing

renovation and expansion work on the Braces's summer home. They had

several discussions during which Frederick said that he would be personally

on the job site and that his company would stand behind its work. In

September 1999, the parties entered into a written contract for the

renovation and substantial expansion of the home. The agreement was

drafted by Frederick on the stationery of Titcomb-Corp and identified Cheryl

Ezace as the "customer"? and Titcomb-Corp as the "contractor." After

adjusting for credits and unused allowances, the contractor agreed to

provide the necessary labor and materials for a total fixed price of $144,250.

In addition, the contractor provided extra items that were not part of the

underlying contract for an additional $5,300: a half bathroom (plumbing not

included)($1,600); a roof extension for the entry deck ($350); a Salt Box

generator and storage building ($3,000); and two triangle louvers ($350).

“ke Braces obtained a construction loan from Norway Savings Bank and

agreed to pay the contractor pursuant to a progress or draw payment

schedule set forth in the contract.

Between September 7, 1999, and January 11, 2000, the contractor

submitted four draw requests totalling $125,693. Mr. Brace became

increasingly concerned that each draw request did not fully conform to the

2At trial, the parties acknowledged that, in fact, the “customer” was Cheryl and

Richard Brace.

contract requirements and included work that had not been done.* He was

also concerned about construction defects and the quality of the contractor's

work. Frederick did the electrical work for the house even though he was

not licensed to do so. As a result, an electrician hired by the Braces to run

_ electrical service to the house refused to tie into the work done by

Frederick.4 There were other contract nonconformities and defects with

respect to the J-beam floor joists and perimeter joists, sub-flooring, the

bead-board cathedral ceiling in the great room (kitchen/living room), half-

walls in the kitchen, the exterior porches or decks, elevations of the new

foundation flooring, the seal or bond at the joint between the new and

existing foundations, the use of steel fascias instead of aluminum as required

‘ay the contract, glass sliding door and windows in the basement, drainage,

chimney refacing, lack of headers for load bearing walls, and the wrong

color bay window.®

In mid-January 2000, the Braces were informed that a major material

supplier, Hancock Lumber, had not been paid by the contractor and

intended to place a mechanics’ lien on their property. On February 9, 2000,

the supplier's attorney notified the Braces that the lien had been recorded

3The second draw request included items totalling $2,000 that had been paid as

part of the first request. The third included items not yet completed: i.e., installation

of porch, entry decks and framing; rough wiring; and excavation. The fourth

requested more than the amount allowed by the contract and included electrical

wiring personally done by Frederick, who was not licensed to do such work.

4Frederick Titcomb was criminally charged and convicted in connection with

the electrical work done by him, and the Maine State Electrical Inspector ordered that

his work be corrected by a licensed electrician.

5The correct replacement bay window was delivered to the site, but not

installed, at the time the contract was terminated by the Braces in February 2000.

3

on the land records.® As a result, Norway Savings Bank froze further

2isbursement of the construction loan proceeds. On February 16, 2000, the

Braces notified the contractor by letter that they were terminating the

contract. As of that date, the Braces's total payments to the contractor were

$78,748 and the contractor's total expenditures for the project were

$90,000.

The Braces then hired a new contractor, D.C. Building & Remodeling

("D.C. B&R"), to repair the defects and finish the work contemplated by the

-omtract.’ The new contractor completed the work on a "time and

materials" basis by December 18, 2000,®° and was paid $130,686.30 by the

Braces.2 Of this sum, $17,320.59 is not attributable to repairing or finishing

the original contract work and should not be included.!° Accordingly, the

court finds that, in addition to the sums already paid to Titcomb-Corp, it

cost the Braces $113,365.71 to repair the defective work and complete the

project.

6Hancock Lumber subsequently sued the Braces on its lien claim and was the

original plaintiff in this action. As previously noted, Hancock is no longer a party in

this case.

7The principals of D.C. B&R were Mike Dean and John Courteau.

8After December 18, 2000, D.C. R&B did additional work not related to the

subject matter of this case.

9Although not conceding liability or the validity of their respective legal and

factual arguments, the parties have agreed that, in its analysis of the claims in this

ease, the court may consider the summary figures set forth in Attorney Vickerson's

istter to the court, dated March 18, 2002, without having to undertake additional

analysis concerning the composition of those figures.

10Charges for labor ($1,760), fireplace ($3,960.59), tree removal ($1,600), and

landscaping ($10,000) are excluded.

The Braces assert claims!! against the defendants for breach of

contract (Count I), breach of warranty (Count II), violation of the Home

Construction Contract Act (Count III), violation of the Unfair Trade Practices

Act (Count IV), and slander of title (Count V).!2_ Correspondingly, the

defendants assert claims against the Braces for violation of the Prompt

Payment Act (Count J), unjust enrichment (Count I), mechanics’ lien (Count

III), and contribution (Count IV).*?

DISCUSSION

A Breach of Contract

Based upon the foregoing, the court finds that the contractor breached

the contract and that the Braces paid a total of $192,113.71 for a result that

the contractor agreed to provide for a fixed contract price of $144,250, plus

exira items totalling $5,300. Accordingly, the Braces have been damaged in

the amount of $42,563.71. See VanVoorhees v. Dodge, 679 A.2d 1077,

1081 (Me. 1996); see also Kleinschmidt v. Morrow, 642 A.2d 161, 165 (Me.

1994).

B. Home Construction Contract Act

The contract in this case did not comply with the Maine Home

Construction Contract Act in several respects. It did not include a starting

11Originally, the Braces and Frederick and Titcomb-Corp were party-

defendants in this action. Their respective claims against each other were made as

cross-claims.

12The Braces also made a claim for unlawful electrical installations pursuant

to 32 M.R.S.A. § 1105. However, that statute only provides remedies to the state and is

not a viable claim in this case.

13 See supra note 12.

date, a completion date, a warranty statement, an insulation disclosure

statement, dispute resolution procedures, a change order statement, or an

energy standards statement. 10 M.R.S.A. § 1487(3),(7)-(9), (1) & (12).

The parties did not exempt themselves from the requirements of the Act.

10 M.R.S.A. § 1489. Accordingly, the violations by the contractor constitute

prima facie evidence of a violation of the UTPA. 10 M.R.S.A. § 1490; 5

M.R.S.A. § 205-A, et seq.

Cc. Unfair Trade Practices, Act

Under the circumstances of this case, the court concludes that the

violation of the Home Construction Contract Act is, in fact, a violation of the

UTPA. Further, the defective work, including the illegal electrical

installation by Frederick, also constitutes an unfair trade practice within the

meaning of the Act and all are attributable to the contractor. The resulting

injury to the Braces was substantial, was not "outweighed by any

countervailing benefits to consumers or competition," and could not

reasonably have been avoided by the homeowners. Suminski v. Maine

Appliance Warehouse, Inc., 602 A.2d 1173, 1174 n.1 (Me. 1992); see also

15 U.S.C.A. § 45(n) (1997). However, the analysis does not end there.

The Braces must also show that they sustained a loss of money or

property as a result of the UTPA violations. 5 M.R.S.A. § 213; VanVoorhees,

679 A.2d at 1082. They have demonstrated no such loss as a result of the

contractor's violations of the Home Construction Contract Act. However,

they have sustained money damages as a result of the contractor's defective

“performance and contract breach. William Mushero, Inc. v. Hull, 667 A.2d

6

853, 855 (Me. 1995) (amounts expended by homeowner to correct

contractor's defective performance can constitute damages resulting from

violation of UTPA).

Based upon the foregoing, the Braces are entitled to recover their

reasonable attorney's fees, but "only to the extent that the fees were earned

pursuing a UTPA claim." VanVoorhess, 679 A.2d at 1082. The Braces

ccunsel shall be given an opportunity to submit an appropriate attorney's

fees affidavit to the court and the defendants shall be given an opportunity to

file an objection thereto. See Beaulieu v. Dorsey, 562 A.2d 678, 679 (Me.

1989) ("the person seeking costs should provide affidavits and bills which

separate the costs of pursuing the UTPA claim from those incurred in

pursuing a remedy not available under the Act’).

D. Individual or Corporate Liability

The Braces assert that the court should pierce the corporate veil of

Titcomb-Corp and find Frederick personally liable for the damages owed to

them. "As a matter of public policy, corporations are separate legal entities

with limited liability [and] courts are generally reluctant to disregard the

legal entity and will cautiously do so only when necessary to promote

justice.". Johnson v. Exclusive Props. Unlimited, 1998 ME 244, 9 5, 720

A.2d 568, 571 (quotations and citations omitted). The Law Court has

established a two part test for balancing the policies of “encouraging

business development” and "protecting those who deal with the

corporation." Johnson, 1998 ME 244, 1 6, 720 A.2d at 571. This test

requires a plaintiff to establish (1) an abuse of the privilege of a separate

7

corporate entity by the defendant, and (2) an unjust or inequitable result if

the separate corporate entity is recognized. The evidence in this case does

not disclose any abuse of the corporate status privilege. Although Frederick

paid some personal obligations through the corporation's account, it was

done for convenience and without subterfuge and there is no evidence that

it was part of a significantly recurring pattern.

The court is mindful that the electrical work done by Frederick was

illegal and was done by him with the full knowledge of its illegality. The law

responded by holding Frederick criminally responsible, individually. See

State v. Placzek, 380 A.2d 1010, 1015 (Me. 1977) (principle widely

embraced that, under certain circumstances, corporate agent criminally

liable for acts committed in name of his corporation). However, in the

context of the legal theories pursued by the Braces in this case, the court is

unable to find any corresponding principle in the civil law. Rather, the civil

test here is whether there has been an abuse of the privilege of having a

separate corporate entity and. if so, whether it would be unjust or

inequitable to recognize the separate corporate existence. Although

Frederick broke the law in the performance of a contract between his

corporation and the plaintiffs, he did not create or use the corporate entity

for the purpose of committing or facilitating the crime. Thus, the Braces

have not established the "abuse of privilege" prong of the test for piercing

the corporate veil and the court need not reach the issue of whether it

would be unjust or inequitable to recognize the separate corporate existence

of Titcomb-Corp.

DECISION

Based upon the foregoing, and pursuant to MLR. Civ. P. 7 Q(a), the Clerk

is directed to enter this Decision and Order on the Civil Docket by a

notation incorporating it by reference and the entry is

A.

On the Cross-Claims of Plaintiffs (the Braces) against Defendant G.

Frederick Titcomb, Inc., Judgment for Plaintiffs in the amount of

$42,563.71, together with reasonable attorney's fees incurred in

pursuing their UTPA claim, plus costs of this action;

Plaintiffs' counsel shall have a period of 20 days from the date of this

Decision within which to file and serve upon Defendants an

appropriate attorney's fees affidavit, and Defendants shall have 20 days

from the date of such service within which to file and serve on

Plaintiffs any opposition thereto;

On the Cross-Claims of Plaintiffs against Defendant G. Frederick

Titcomb, individually, Judgment for Defendant; and

On the Cross-Claims of Defendants G. Frederick Titcomb and G.

Frederick Titcomb, Inc., Judgment for Plaintiffs.

Dated: May 17, 2002 Mee

Justice, Superior Court

Date Filed _03-24-00

CUMBERLAND Docket No. _ RE 00-038

Action

County

MECHANICS LIEN

HANCOCK LUMBER COMPANY, INC.

G. FREDERICK TITCOMB

G. FREDERICK TITCOMB, INC.

RICHARD W. BRACE and

CHERYL M. BRACE

vs NORWAY SAVINGS BANK

Plaintiffs Attorney

ARNOLD C. MACDONALD ESQ

193 MIDDLE ST., PORTLAND ME 04101

Defendant’s Attorney

WILLIAM L. VICKERSON, ESQ.

P.O. BOX 465 ((Titcombs)

PORTLAND, MAINE 04112-0465

775-5200

Timothy H.Norton, Esq. (Brace)

PO Box 597, Portland ME 04112

775-3581

Date of

Entry

ZU0U

Mar. 27 Received 03-24-00:

Complaint Summary Sheet filed.

" " Complaint with Exhibits A,B,C and D filed.

Mar. 28 On 03-27-00:

Clerk's Certificate filed with Registry of Deeds. Copy and receipt filed.

Mar. 31 Received 3-31-00.

Summons filed showing officer's return of service on 3-28-00 upon

Defendant, Norway Savings Bank.

Apr. 14 Received 4-14-00.

Defendant, Norway Savings Bank's, Answer filed.

May 2 Received 05/01/00:

Plaintiff's Motion to Amend Complaint with exhibit A Amend Complaint filed.

mn mn Plaintiff's Motion for Approval of Attachment and Trustee Process with

exhibit A Affidavit of Nikki Lavigne and attachments filed.

mu Memorandum in Support of Motion for Approval of Attachment and Trustee

_ Process filed.

May 10 Received 05-10-00:

Defendants, G. Frederick Titcomb and G. Frederick Titcomb, Inc. Answer and

Cross Claim Against Dependants Richard W. Brace and Cheryl M. Brace with

Exhibits 1 and 2 filed.

noo Counterclaim and Crossclaim Summary Sheet filed.

May 16 Received 05-15-00:

Order filed. (Delahanty, J.).

This Court hereby GRANTS and Motion and the Amended Complaint is deemed fil

as of this date.

On 05-16-00 Copies mailed to Arnold C. Macdonald, Es.q and William L.

Vickerson, Esq.