ALFRED CHIULLI & SONS, INC. v. HANOVER INSURANCE COMPANY,

SC 18398

Judicial District of Hartford

 Payment Bonds; Equitable Subrogation; Whether the Trial Court Properly Decided that, Under the Doctrine of Equitable Subrogation, the Plaintiff General Contractor was Liable to the Defendant Surety for the Payments the Defendant had Made to Subcontractors who had Asserted Claims Against a Payment Bond.  In 1999, the plaintiff general contractor and the city of Meriden entered into a contract for the construction of a middle school.  Pursuant to General Statutes § 49-41, the plaintiff, as principal, and the defendant, as surety, executed a payment bond in the amount of the construction contract guaranteeing payment to subcontractors supplying labor and materials to the project.  Thereafter, the defendant paid $102,540.36 to four subcontractors who had asserted claims against the bond.  A dispute later arose as to whether the defendant had agreed, pursuant to settlement negotiations in some earlier lawsuits, to release the plaintiff from all liability arising out of the payments to the subcontractors, and the parties consequently agreed to place sufficient funds in an escrow account to cover the amount at issue.  The plaintiff then brought this action, claiming that the defendant had breached its agreement to provide a release to the plaintiff and that the defendant was not entitled to the escrow funds.  In response, the defendant filed a counterclaim, alleging that the plaintiff was primarily liable for the amounts that the defendant had paid to the subcontractors and that the escrow funds should therefore be released to it under the doctrine of equitable subrogation.  The plaintiff then filed an answer to the counterclaim, which raised the special defense that the defendant's action was barred by the statute of limitations applicable to indemnification actions, namely, General Statutes § 52-598a.  In ruling on a motion for summary judgment by the plaintiff, the trial court ruled that a portion of the counterclaim was barred by that statute.  Subsequently, the plaintiff moved to amend its statute of limitations defense to include the limitation period provided in General Statutes § 52-576, which applies to contract claims.  The trial court denied the motion on the ground that the plaintiff's request came too late.  On the merits, the court determined that there was insufficient evidence to support the plaintiff's claim that the defendant had agreed to provide a release.  It also rejected the plaintiff's contention that, because the defendant failed to establish that the payments that it had made to the four subcontractors fully discharged the plaintiff's debts, it could not succeed on its equitable subrogation claim.  In doing so, the court emphasized that the plaintiff had repeatedly acknowledged that the amounts paid by the defendant were both accurate and reasonable.  Based on the foregoing, the court concluded that the defendant was entitled to the sums it had paid to the subcontractors on behalf of the plaintiff.  In this appeal by the plaintiff, the Supreme Court will determine whether the trial court's rulings were correct.