Connecticut Court Holds Termination Improper Where Subcontractor Substantially Performed; Also Holds Evidence Supported Subcontractor’s Inefficiency Claim

DuBaldo Electric, LLC v. Montagno Construction, Inc.
119 Conn. App. 423; 2010 Conn. App. LEXIS 55 (Conn. App. Feb. 23, 2010)

Subcontractor, DuBaldo Electric contracted with general contractor, Montagno Construction to perform electrical work in connection with the renovation of retail space leased by Burlington Coat Factory.

DuBaldo had estimated that it could complete the work in 3200 man hours over the scheduled ten week period. Issuance of the permit required for DuBaldo to commence its electrical work was delayed three weeks due to deficiencies in Burlington’s architectural design and understaffing at the City electrical inspector’s office. Unable to perform the electrical work without a permit, DuBaldo fell approximately three weeks behind. Nevertheless, Montagno refused to update the schedule. To make up for lost time, DuBaldo agreed to work 7 days a week with overtime. In addition, Montagno hired Globe Electric to work along side DuBaldo, and deducted from DuBaldo’s account the amount it paid to Globe for work performed within DuBaldo’s scope.

Thereafter, the relationship between Montagno and DuBaldo deteriorated when DuBaldo intentionally disabled a fire alarm one day before the City’s scheduled inspection for the issuance of a certificate of occupancy. Montagno discovered the disabled alarm, instructed Globe to reconnect it, and terminated DuBaldo, citing the fire alarm incident and insufficient manning of the job as grounds for the termination.

DuBaldo brought suit against Montagno seeking to recover its contract balance and damages for loss of efficiency. The appellate court affirmed the lower court’s conclusion that DuBaldo had completed 81% of its contract at the time of termination, which it deemed to be substantial performance. Thus, the court held that Montagno’s termination constituted a material breach of the contract. The Court also rejected Montagno’s argument that the doctrine of substantial performance was inapplicable because DuBaldo intentionally breached the contract by disabling the fire alarm system. The Court recognized that “even a conscious and intentional departure from the contract specifications will not necessarily defeat recovery, but may be considered as one of the several factors involved in deciding whether there has been full performance.”

The Court further noted that “the pertinent inquiry is not simply whether the breach was willful but whether the behavior of the party in default comports with standards of good faith and fair dealing.”   Although the Court found that DuBaldo disabled the fire alarm, it held that the evidence did not reveal DuBaldo’s true motive in doing so. Because Montagno could not satisfy its burden of proof, the Court rejected its argument that the doctrine of substantial performance was inapplicable.

Finally, the Court affirmed the lower court’s finding that DuBaldo experienced a 20% loss of efficiency as a result of Burlington’s unreasonably early fixturing (i.e. adding shelving, gondolas, cabinetry, cash registers, etc.). Dubaldo supported its claim with testimony from its employees, as well as those of other independent electrical companies on the project, that working around the fixturing impeded the effectiveness of the man lifts necessary to complete the work. DuBaldo presented testimony that such difficulties caused it to spend at least 1000 additional man-hours and resulted in a 30% loss of efficiency, costing an extra $25,000 to $30,000. The lower court found this testimony to be credible, and thus, the appellate court affirmed.

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