Carney v Coull Bldg. Inspections, Inc.

[*1] Carney v Coull Bldg. Inspections, Inc. 2007 NY Slip Op 51414(U) [16 Misc 3d 1114(A)] Decided on June 8, 2007 Civil Court Of The City Of New York, Richmond County Straniere, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 8, 2007
Civil Court of the City of New York, Richmond County

Loretta Carney, Claimant,

against

Coull Building Inspections, Inc., Defendant.



SCR 68/07

Philip S. Straniere, J.

Claimant, Loretta Carney, commenced this small claims action against the defendant, Coull Building Inspections, Inc.(Coull), alleging that the defendant's inspection failed to reveal a defective heating system. A trial was held on February 15, 2007. Claimant was represented by counsel. Defendant appeared without an attorney.

Claimant testified that she hired the defendant to conduct a home inspection of the premises 35C Franklin Lane, Staten Island, New York on June 25, 2006, a premises she was contemplating purchasing from an Estate. It is unclear as to whether or not the inspection was conducted prior to or after the contract was signed since the copy of the contract submitted into evidence is undated and not signed by the seller. There is a clause in the contract which provides:

Engineer's Inspection. Purchaser shall have the right to have the Premises inspected, at her cost and expense, by an engineer selected by her. Within 10 days after the date of this contract, Purchaser shall deliver to Seller the engineer's inspection together with Purchaser's written statement as to whether any defect or condition disclosed therein is objectionable to her. If the inspection report discloses any material defects or conditions which materially adversely affect the value of the Premise, Seller may (i) repair such defects and conditions, in which event this contract shall continue in full force and effect, or (ii) terminate this contract and direct the Escrow Agent to refund the down payment to Purchaser, whereupon this contract shall terminate and neither party shall have any further claim against the other. Failure to deliver the inspection report within said 10 days shall constitute a waiver by Purchaser of the provisions of this Article 21.

Claimant alleges that when Coull did its inspection, it failed to disclose a defective heating system. Coull conducted the inspection and made a finding that the heating unit is in "good physical condition but we strongly recommend that you take out a contract with one of the heating companies to clean and maintain it for you." On October 11, 2006, Keyspan came and [*2]replaced the heating unit at a cost of $3,400.00 ($2,800.00 for the heating system and $600.00 for a new water heater). It should be noted that defendant pointed out in the report that the hot water heater was "very old" and "has run past its life expectancy."

The defendant established that it is licensed by the Department of State pursuant to Real Property Law 12-B, as a "Home Inspector." Defendant contends that the written agreement entered into with the claimant limits his liability to the $395.00 fee paid for the inspection. Further, defendant asserts that the findings by Keyspan were not in conflict with its report since Keyspan allegedly found "carbonization" and that is an internal condition of the furnace and not something the inspection would have found since the inspector did not take the furnace apart. Defendant points out that it recommends in the report that the claimant hire a heating company to service the unit.

The contract anticipated the closing of title would take place on or about August 15, 2006. There is no showing when the closing actually took place and how long before October 10, 2006, when Keyspan found the defective heating system, the claimant was in possession of the premises.

LEGAL ISSUES PRESENTED:

A. Oh Where Oh Where Has the PCDA Gone?

Effective March 1, 2002 sellers of real property in New York State were bound to comply with the terms of the Property Condition Disclosure Act (PCDA-Real Property Law Article 14) which entitled purchasers to have the seller of residential real property complete a 47-question form designed to inform the purchaser of defects existing in the premises. The form was to be completed prior to the parties entering into a written contract (Real Property Law 462). In the alternative, the seller could opt out of completing the form and give the purchaser a $500.00 credit at closing.

Claimant informed the Court that no PCDA was needed since the seller was an Estate. RPL 463 provides certain exemptions from the disclosure requirement: "A property condition disclosure statement shall not be required in connection with any of the following transfers of residential real property:...7. A transfer by a fiduciary in the course of the administration of a descendent's [sic] estate, a guardianship, a conservatorship, or a trust;..." The wording of this section calls into question whether or not the PCDA was required since the term "administration of a decedent's (rather than a descendent's') estate," generally connotes a situation where there was no will and the decedent died intestate (see Black's Law Dictionary 5th

Edition) and would not be applicable to this transfer from an executor of an estate. Since an executor transferring property in his or her fiduciary capacity is not listed as an exempt transaction, presumably the seller should have either completed the PCDA form or given a $500.00 credit. In this situation no PCDA form was completed nor was a $500.00 credit given to the purchaser. Apparently the statute is using the term "administration" to mean resolving the affairs of the decedent rather than as a differentiation between testacy and intestacy

From a public policy analysis, it must be questioned as to why transfers from an estate are excluded from the protection of the statute in the first place. The law as written presumes that the fiduciary is either an institutional entity, some distance relative or unrelated third party. In fact, the greater number of fiduciaries are surviving [*3]spouses or family members who could either knowledgeably complete the disclosure form, or truthfully answer "unknown" to the questions as permitted by the statute, or give the $500.00 credit as would a usual residential seller. The purchasers of residential real property from fiduciaries like the purchasers of condominium units are excluded from the statute's purported consumer protection (Goldman v Fay, 8 Misc 3d 959 (2005); See Legislative History, Laws of 2001, Chapter 456).

If in fact, executors are not exempt from completing the PCDA, then claimant herein would be limited to damages of $500.00 only for failing to deliver the form (RPL 465(1)), or if the claimant could establish the failure to complete the form was wilful, then the claimant would be entitled to actual damages suffered arising from the breach. This however, creates no additional right of action beyond what the claimant would have had there been no PCDA and in fact, establishes the need for the failure to disclose to be "wilful" a more difficult standard to prove than required to establish common law breach of contract or negligence. If executors are exempt from the statute, then the claimant would still have her common law cause of action against the seller for failure to disclose a latent defect. For some reason, the claimant has elected not to sue the seller and only to seek redress from the defendant home inspector.

B. What is the Effect of the Home Inspection Professional Licensing Law?

As of December 31, 2005, all persons who conduct home inspections must be licensed (Real Property Law Article 12-B). Defendant established that he was in fact licensed at the time he conducted the inspection and at the time of the trial. A review of the statute discloses that no private right of action is created in favor of a consumer against either a licensed or an unlicensed inspector; the statute only gives the secretary of state the authority to pursue violations of the statute (RPL §444-o).

The statute gives the secretary the authority to "issue an order of restitution...upon a determination that a person has engaged in or followed the business or occupation of,...a home inspector within this state without a valid license"(RPL§ 444-n) There is no equivalent clause for ordering restitution when a licensee is found to be in violation of the statute. The only penalty which may be imposed on a licensee is revocation or suspension of the license, reprimand or a civil penalty (RPL §444-i), however, the statute fails to set forth the amount of any civil penalty which might be imposed. As a civil penalty any funds collected would be payable to the state and not to the individual harmed.

By creating a licensing scheme with the secretary of state providing the only avenue of redress, has the legislature preempted the field so as to have terminated any private right of action which existed at common law? When the legislature provided for the licensing of home improvement contractors in 1989 (General Business Law Article 36-A), it specifically preserved the right of the consumer to sue a contractor which had existed at common law irrespective of the passage of the statute when it provided "Nothing in this article shall impair, limit, or reduce the statutory, common law or contractual duties or liability of any contractor" (GBL 772). Similarly when codifying the PCDA the legislature preserved existing rights when it provided that: "Nothing contained in this article shall be construed as limiting any existing legal cause of action or remedy at law, in statute or in equity" (RPL 467).

A more analogous situation exists in regard to GBL Article 30-Health Club Services, where the legislature sought to regulate a previously unregulated industry, suggested contractual terms and granted the attorney general the authority to enforce the statute. This Article specifically created a private right of action. GBL 628 provides: "1. Any buyer damaged by a violation of this article may bring an action to recover damages....2. Nothing in this article shall be construed so as to nullify or impair any right or rights which a buyer may have against a seller at common law, by statute or otherwise." No similar language is contained in the home inspection licensing law.

It is clear that RPL Article 12-B does not create a private right of action based on the existence of the statute in favor a consumer who alleges he or she was wronged by a licensed or unlicensed home inspector and to do so requires the specific action of the legislature (See Varela v Investors Insurance Holding Corp., 81 NY2d 958 (1993)). The question remains however as to whether or not any common law rights of action for breach of contract or negligence still exist against a home inspector or are the statutory remedies all that is available to a consumer.

Analysis of the statute does not really clarify what was the legislature's intent as there are seemingly [*4]contradictory sections in the law. If the parties to a home inspection contract are able to retain their common law rights, then what is the effect of RPL 444-g(3) which in regard to the obligation of the inspector to provide a written report within five business days states: "Every such written report and information contained therein shall be deemed confidential and shall not be disclosed without the express consent of the client; provided, however, that department representatives, conducting an investigation or other official business for the purpose of enforcing this article, shall have access to such reports and the information contained therein." Clearly the statute does not make an exception for disclosure in the case of litigation commenced by the client alleging negligence or breach of contract by the home inspector or a claim by the home inspector for payment. The only exception is for investigations conducted by the department of state when enforcing the licensing requirements. Since only the client may waive the disclosure right, how could an inspector sue for payment for the inspection? Without the client consenting to having the report placed into evidence, the inspector would effectively be prevented from proving his or her case. Common sense would tell you that if the client commences the litigation alleging the inspector was negligent or breached the contract, the client would be waiving the right to object to the report coming into evidence. This however, "ain't necessarily so,"[FN1] as this Court pointed out in regard to the disclosure of a plaintiff's medical conditions in personal injury cases where medical records cannot be examined without the consent of the plaintiff (CPLR 3122; Favor v Horne, 2 Misc 3d 289 (2003); Campos v Payne, 2 Misc 3d 921 (2003)). This statute, along with sections of the New York Public Health Law and HIPAA, altered the long adhered to practice that once a plaintiff claimed to have suffered personal injuries, all of his or her relevant medical history was discoverable without their consent. By placing a confidentiality clause in the statute in regards to the contents of the inspection report, the legislature is creating a similar barrier and seems to impliedly be negating any common law causes of actions which previously existed between the parties.

While the above section seems to lead to the conclusion that no common law causes of action survive the statute, RPL 444-k, apparently contradicts that result. This statute, entitled "Liability coverage," provides that: "Every licensed home inspector who is engaged in home inspection shall secure, maintain and file with the secretary proof of a certificate of liability coverage,..." In furtherance of this objective the Rules and Regulations of the Department of State provides that: "Every applicant and every licensed home inspector shall secure, maintain, and file with the Department of State proof of general liability insurance of at least $150,000 per occurrence and $500,000 in the aggregate" (19 NYCRR 197-1.1). Why would a home inspector need liability insurance if he or she would not be subject to civil damage claims for negligence or breach of contract? None of the penalties that the secretary may invoke for violations of the statute appear to be of the nature that would be covered under a standard policy issued by a liability insurance carrier. This leads to the conclusion that the legislature even though it failed to specifically preserve all common law claims must be anticipating that home inspectors will be subject to suit by their clients.

The Court would not be performing mental gymnastics trying to interpret the intent of this statute if New York's "dysfunctional legislature"[FN2] had exhibited some consistency in how it drafts consumer protection legislation. As pointed out above, some consumer protection legislation specifically grants a consumer a private right of action under the relevant statute, some specifically preserve all existing common law causes of action, while others, like the home inspection licensing law, are silent. Instead of utilizing a formula in drafting legislation that would recognize the importance of having a consistent approach to licensing and consumer protection laws, the legislature has taken to heart Ralph Waldo Emerson's observation that "A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines,"[FN3] as well as William Allen White's comment that "Consistency is a [*5]paste jewel that only cheap men cherish."[FN4] As a result, courts find themselves trying to divine from the language of the statute what is to be intended by the legislative silence. Such a procedure leads to inconsistent protection of consumers in New York State. But perhaps this is to be expected from a legislature that has managed to draft about twenty duplicate numbered sections of the law as well as believing that chronologically GBL section 389-m to 389-r comes after GBL 390-f.

In regard to Real Property Law Article 12-B, it must be concluded that had the legislature intended to create a private right of action under the licensing law, it would have done so. It has not done so, so there is no private right of action. It must also be concluded that since in regard to other licensing statutes, the legislature has specifically retained common law causes of action for injured parties, the legislature's silence in this regard must mean that all common law causes of action are no longer applicable and that an injured consumer is limited to filing a complaint with the department of state. The only remedies available in that case are those set forth in the statute. Based on what the legislature has done in other similar situations, it must be concluded that in regard to claims against licensed home inspectors, the statute has preempted any right to commence a civil action for damages.[FN5]

C. Can the Defendant Limit Its Liability?

On June 25, 2006, the parties entered into a written agreement whereby defendant agreed to conduct an inspection of the premises 35C Franklin Lane. The agreement provides:

LIMITATION OF LIABILITY: It is understood and agreed that the INSPECTOR is NOT an insurer and is NOT warranting or guaranteeing the adequacy, performance or life expectancy of any structure, item, component or system in the building. Further, it is mutually agreed that the maximum amount of joint and several liability the INSPECTOR can incur for any errors, mistakes, omissions, breach of contract, breach of warrantee[sic], negligence, negligent misrepresentation, negligent hiring, or any other theory of liability including violation of a statute or consumer protection act is strictly limited to the FEE PAID for the inspection report.

Although courts tend to frown upon exculpatory clauses and often hold that they are unenforceable as against public policy, there has been case law upholding the validity of these clauses in regard to home inspections (Rector v Calamus Group, Inc., 17 AD3d 960 (2005); Peluso v Tauscher Cronacher Professional Engineering P.C., 270 AD2d 325 (2000); Weidenbenner v Stern, 263Ad2d 453 (1999)). In general, absent a statute or public policy to the contrary, such provisions of a contract limiting a party's liability are enforceable (Sommer v Federal Signal Corp., 79 NY2d 540 (1992)). Courts have held that a party may not insulate itself from damage claims caused by gross negligence. There is no showing in this case that there was [*6]any gross negligence committed by the defendant. Nor is a "home inspection" an occurrence that would be covered by General Obligations Law 5-323, which prohibits the enforcement of exculpatory clauses in connection with the "construction, maintenance or repair of real property" (See Anunziatta v Orkin Exterminating Co., 180 F. Supp2d 353 (2001)).

Based upon the above, even if there were a cause of action against the defendant, the contract would have limited the defendant's liability to the fee paid, in this case, $395.00. Unfortunately for the claimant, the Court has taken the position that since the defendant is licensed as a home inspector, her only redress is to file a complaint with the department of state and she cannot bring an independent negligence or breach of contract action for damages against a licensee.

D. Is There Any Other Theory of Liability?

Although this Court has determined that the claimant no longer has a common law right of action for damages and her redress is solely with the department of state, are there any other legal theories that could provide the claimant with some relief? Examination of RPL Article 12-B reveals the following requirements to which a licensee must adhere: "Every home inspector shall display his or her license number and status as a licensed home inspector on every home inspection report and on all advertising"(RPL 444-g(2)) and "No later than five business days after the completion of a home inspection on behalf of a client, each home inspector shall provide such client with a written report of the findings of such inspection" (RPL 444-g(3)).

A review of the documents submitted into evidence discloses that although the defendant's licensing information is on the report, the defendant does not indicate on the contract that it is licensed. Even though the "contract" is not mentioned specifically in the statute, it is essential that it too contain the inspector's licensing information since this agreement will determine the parties' rights and responsibilities and would aid the consumer in analyzing what avenues are available should a dispute arise with the inspector. A second defect in the documents involves the report. The Building Inspection Report indicates it is "As of: 6/25/06," it does not however reveal on what date the report was issued. Since the statute requires the report to be provided to the client within five business days of the inspection, it is essential that the report contain both the date of the inspection and the date of the report. One would think that since the failure to deliver the report within five days constitutes a violation of the statute, such a failure would subject the inspector to penalties for noncompliance. However, RPL 444-h does not list the failure to deliver a copy of the report within five business days as a basis for suspension or revocation of the license. Further, in order to determine if there has been compliance with the delivery requirement an affidavit of mailing or some other indica of delivery is necessary. The statute is silent on this as well.

General Business Law 349 declares that deceptive acts and practices in the conduct of any business are unlawful. This statute gives a consumer the right to commence an action alleging injury from such deceptive practices and recover either actual damages or fifty dollars which ever is greater (GBL 349(h)). This court has held on other occasions that the failure of a business to comply with the terms of regulatory statute designed to protect a consumer may be a violation of GBL 349. Analysis of the facts of this case leads to the conclusion that defendant's [*7]failure to indicate its license status on its contract along with not clarifying the inspection date and report date constitutes a deceptive practice under GBL 349 and entitles the claimant to enforce the terms of the contract and have the $395.00 fee she paid refunded. In addition, the language in defendant's contract that attempts to limit its liability to the "fee paid" for the "violation of a statute or consumer protection act" is blatantly false and unenforceable. The defendant cannot limit the penalty which can be imposed by a regulatory agency or a court for violation of a statute. Further, the inclusion of such language also constitutes a "deceptive act and practice" because an uninformed consumer might not seek redress from administrative or judicial sources believing that the contract language would preclude such an avenue. As such, the contract language has a "chilling effect" on a consumer's rights and is a deceptive act and is unenforceable.

CONCLUSION:

Real Property Law Article 14 does not apply to this situation since the seller was an Estate. This is another defect in that statute (PCDA) and points out by failing to require fiduciaries to complete the disclosure statement purchasers are being denied the protection of the statute since they are not receiving useful information concerning real property they intend to purchase.

There is no private right of action in favor of a consumer created by the Home Inspection Licensing Statute, Real Property Law 12-B. Nor does the statute preserve any common law rights of action against home inspectors. A dissatisfied client is limited to filing a complaint with the department of state against a licensee.

The law permits home inspectors to limit their liability for negligence in conducting an inspection to the amount of the fee charged.

The failure of the home inspector to comply with RPL Article 12-B, constitutes a deceptive act and practice under General Business Law 349 and entitles the claimant to damages in that regard.

Judgment for claimant in the amount of $395.00 with interest from the date of judgment, costs and disbursements.

The foregoing constitutes the decision and order of the Court.

Exhibits, if any, will be available at the office of the clerk of the court 30 days after receipt of a copy of this decision.

Dated: June 8, 2007

Staten Island, NYHON. PHILIP S. STRANIERE

Judge, Civil Court [*8] Footnotes

Footnote 1: "It Ain't Necessarily So," from Porgy & Bess, George Gershwin, Ira Gershwin and DuBose Heyward.

Footnote 2: In July 2004 the Brennan Center for Justice at NYU School of Law issued a report, The New York State Legislative Process: An Evaluation for Reform, which found New York's legislative process to be the most dysfunctional in the nation.

Footnote 3: Ralph Waldo Emerson, "Self-Reliance," Essays, First Series, 1841.

Footnote 4: William Allen White, commenting on an item in the Topeka Capital: "The Emporia Gazette is the best loved paper in Kansas because its editor never looks in yesterday's files to see if what he proposes to write today is consistent."

Footnote 5: Admittedly the Court is troubled by this interpretation in light of the fact that the law is intended to protect consumers and the legislature included a requirement for liability insurance for licensees. However, there would be no motivation for the legislature to add consistency to the drafting of these statutes by holding common law causes of action have not been preempted, especially in light of its behavior in regard to other similarly purposed laws.