Maltese v New England Contrs.

[*1] Maltese v New England Contrs. 2007 NY Slip Op 52259(U) [17 Misc 3d 1134(A)] Decided on November 28, 2007 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 28, 2007
Supreme Court, Kings County

Maltese, Joseph & Porzia, Plaintiffs,

against

New England Contractors, New England Environmental Services, Inc., Leonard Taylor Individually & d/b/a New England Contractors, Monique Taylor Pujol Individually & d/b/a New England Contractors, M & L Event Productions, Inc., Defendants.



21884/06



Attorney for Plaintiff:

Charles G. Fiore, Esq.

Lewis & Fiore, Esqs.

225 Broadway, Suite 3300

New York, NY 10007

Attorney for Defendant:

Raymond Cash, Esq.

11602 QUEENS BLVD

FOREST HILLS, NY 11375-7055

Carolyn E. Demarest, J.

Plaintiffs are home owners who hired defendant New England Contractors to perform construction work at 1524 78th Street, Brooklyn, immediately adjacent to their home at 1523 78th Street, so as to expand their living space by connecting the two properties. The case was tried before the Court on September 17 and 18, 2007.Following default, judgment had been entered against New England Contractors, New England Environmental Services, Inc. and M & L Event Productions, Inc.(M & L). The issues for trial included the amount of damages sustained by plaintiffs and whether Leonard Taylor, President of the corporate defendants, and his wife, Monique Taylor Pujol, are to be held personally liable therefor.

Porzia Maltese testified that, following plaintiff's purchase of the premises to be renovated in April or May of 2005 and demolition of the interior by another company, a contract was entered with New England Contractors of Mount Vernon, New York on December 27, 2005. It is noted that the corporate name does not appear on the contract. The contract itemizes the work to be done on three floors, indicating separately the charge for "Electric", "Plumbing", " Carpentry", "Sheetrock" and "Tile" on each floor. The First Floor also included charges for "Bathroom marble" and "Shelving in closet". The "GRAND TOTAL DUE UPON RECEIPT" IS $80,500. Plaintiffs' exhibit 2 in evidence is a list of payments made between December 27, 2005 and April 15, 2006 totaling $79,500.

Work commenced the week of January 3, 2006, and continued into May when plaintiffs met with defendant Leonard Taylor, the principal of both New England Environmental Services, Inc. a/k/a New England Contractors and M & L Event Productions, Inc., to complain of the progress of the job. According to plaintiffs, and not disputed by defendants, Mr. Taylor indicated that he could not complete the job without additional payment. Mr. Taylor told plaintiffs that he would discuss the matter with his wife, a minority shareholder, with Leonard, of [*2]M & L and the person responsible for the office management of New England Contractors. Defendant removed his tools and never returned to the premises, leaving the job unfinished. Plaintiffs were unable to obtain a response from defendants to their repeated attempts to contact them and ultimately retained Primo General Contractors, Inc. to complete the work at a cost of $168,146.79.

The testimony of Porzia Maltese and her husband, Joseph Maltese, and

photographs showing the progress of the work, together establish that a substantial amount of work was done by defendants, not all of which was defective; however, it is undisputed that the plumbing and electrical work was not performed by licensed personnel, nor is New England or M & L licensed as a home improvement contractor in the City of New York pursuant to Administrative Code § 20-387.Plaintiffs provided the testimony of Guiseppe Ferraro , President of Primo,who testified that all unlicensed electrical work that had been performed in the basement had to be removed and replaced. Mr. Maltese testified that he was unable to get approval of the unlicensed plumbing work done by defendants and it also had to be removed and replaced, as did much of the electrical work.

It is well-established that the failure to possess a license as a home improvement contractor pursuant to the Administrative Code at the time the work is performed precludes recovery for the work . B & F Building Corp. V. Liebig, 76NY2d 689 (1990); Hammerman v. Jamco Industries, Inc., 119 AD2d 544 (2d Dep't, 1986); Millington v. Rapoport, 98 AD2d 765; see also, Richards Conditioning Corp. v. Oleet, 21 NY2d 895 (1968); Piersa, Inc. v. Rosenthal, 72 AD2d 593 (2d Dep't, 1979). The policy underlying the licensing provisions is the protection of the homeowner from "abuses on the part of itinerant home improvement contractors" . Piersa at 594. As such, the provisions require strict compliance. Id.

The circumstances presented here are exactly those intended to be prevented by the licensing requirements of the Administrative Code which requires, in addition to the license of the home improvement contractor, that no plumbing or electrical work be done within the City of New York unless supervised by a person authorized and possessed of a master or special plumber's or electrician's license. Administrative Code §§ 26-142 and 27-3017. Defendant did not dispute that he is not a licensed plumber or electrician and admitted that he is not licensed [*3]as a contractor in the City of New York. While he claimed to have had the plumbing and electrical work "checked" by a licensed person following completion and asserted that he is licensed in Westchester County to do home improvement work, he produced no evidence whatever to support this testimony. In any case, the Administrative Code requires supervision by licensed master plumbers and electricians throughout performance of the job so that "checking" the work upon completion would not meet Code standards. Finally, the evidence is that all of the plumbing and much of the electrical work done by defendant had to be completely removed and replaced by independent licensed plumbing and electrical contractors hired by Primo.

Mr. Ferraro testified that not all of the work performed by defendants was "worthless" but he was unable to place a value on the work that was retained. Some of the items contained in the Primo contract were not part of the defendants' contract and it was admitted that plaintiffs upgraded some of the materials used by Primo, thus resulting in greater cost than that anticipated under the terms of the New England contract. It is, therefore, not possible to precisely determine the additional cost to plaintiffs of defendants' failure to perform. Despite the. Malteses' testimony that the cost of remediating defendant's defective work exceeded the value of the original contract and evidence that Primo and the licensed plumbing and electrical contractors were paid a total of $111,350.to complete the work, at the close of the evidence, plaintiffs requested damages of $79,500, the sum paid to defendants.

In Johnston v. Dahlgren, 166 NY 354 (1901), the Court set forth the rule precluding recovery upon a contract for the costs of construction work performed in the absence of a statutorily- mandated license, but found that a payment voluntarily made to the contractor could not be recouped notwithstanding the contractor's violation of the statute. This ruling has been followed and applied in the First Department in denying recovery of sums paid to unlicensed contractors(Voo Doo Contracting Corp. v. L & J Plumbing & Heating Co.,Inc., 264 AD2d 361 (1999); Sutton v. Ohrbach,198 AD2d 144 (1993); but see,Wineman v. Blueprint 100, Inc.,75 Misc 2d 665,668 (Civ. Ct. City of NY, NY Co., 1973),awarding judgment for return of deposit to unlicensed architect on a counterclaim), however, no such authority has been discovered from the Second Department which has consistently required strict compliance with the statutory mandate for the protection of the homeowner. See Hammerman v. Jamco [*4]Industries, Inc.,119 AD2d 544: Piersa, Inc. V. Rosenthal, 72 AD2d 593. Moreover, the cited First Department authority rests upon Schank v. Schuchman, 212 NY 352 (1914), wherein a claim for equitable relief to recover sums paid upon a fully-executed contract in which the benefit had been consumed was found not to lie upon the holding that such equitable relief was unavailable based on plaintiff's complaint of fraud where plaintiffs were unable to demonstrate a disparity between the value received and the price paid, and Charlebois v. Weller Assocs., 72 NY2d 587 (1988), in which the Court found that Education Law §§7202 and 7209(4), requiring a licensed professional engineer to perform design functions, had not been violated under the terms of the subject contract because the professional services had in fact been provided by a licensed engineer and not unlawfully by the unlicensed business corporation. Both of those cases are readily distinguished from the case at bar.

Here, the evidence presented clearly established that plaintiffs had incurred out of pocket losses as a result of defendants' failure to perform under the contract and as a result of defendants' undisputed failure to comply with the licensing requirements of the Administrative Code of the City of New York. Thus the proof demonstrated a "disparity" between the sums paid and the value received. See Schank. Although the exact cost of the loss attributable to defendants' default in performance cannot be ascertained, it undoubtedly exceeded the sum paid to defendants.

In B & F Building Corp. V. Liebig, 76 NY2d at 692, the Court of Appeals recently observed: " The Home Improvement Business provisions of the Administrative Code of the City of New York were enacted to safe-guard and protect consumers against fraudulent practices and inferior work by home contractors". The evidence in this case is that defendants committed the very transgressions intended to be prevented by the Code provisions. To permit the defendants to retain the sums paid, nearly the entire compensation due under the contract, without giving the full consideration due to plaintiffs, would surely not be in compliance with legislative intent and would undermine the public policy expressed in the Administrative Code. Refund of the full $79,500 paid to defendants is warranted.

The corporate defendants are in default and there is no question that judgment should enter against them. Plaintiffs also seek judgment against the [*5]individual defendants, principals of the corporate defendants, upon the theory that they are the alter-egos of the corporations and have failed to observe the corporate formalities so as to insulate themselves from liability.

As heretofore noted, the written contract does not bear the corporate name but was presented to plaintiffs upon the letterhead of "New England Contractors". The acknowledgment of payments received dated 3/3/06 is also on the letterhead of "New England Contractors"; the acknowledgment of payments received dated 1/13/06 is on the letterhead of "M & L Productions Inc." at the same address as that for New England Contractors. (M & L is in the business of planning parties). Clearly, at the very least, defendants co-mingled the funds of the purportedly separate corporations.

Leonard Taylor acknowledged in his testimony that he and his wife, Monique Taylor Pujol, are the owners of M & L and that he is the sole officer, shareholder and employee of New England. He further admitted that corporate documents had not been created and he was unable to describe the corporate structure, indicating that New England Contractors and New England Environmental Services, Inc. were the same company. Both in his deposition and his trial testimony he was evasive and obfuscatory in responding to questions regarding his ownership and role in the corporate entities and was unable to produce any records which would support a truly separate corporate existence. Although defendants admitted in evidence copies of checks drawn upon an account of New England Environmental Services Inc., there is no indication that these checks were related to the Maltese job and they were offered solely to demonstrate that the corporation did have a bank account notwithstanding Mr. Taylor's admission that many of the checks given to him by plaintiffs and drawn to the order of New England Contractors had not been deposited into the corporate account, but had been cashed. At his deposition, portions of which were admitted at trial, Mr. Taylor stated that all records of the corporation were maintained at his home and that his wife assisted in the operation of the business. The corporation has no identifiable assets. Expenses were paid in cash. He testified that no payroll was maintained for the Maltese job and workers were not hired by the corporation but by someone named "Jose" who ran the job. A corporate tax return prepared for 2006 was admitted as a defense exhibit, but was unsigned and Mr. Taylor was unable to represent that the document had ever been filed. [*6]

The evidence is overwhelming that the alleged corporation is merely a shell dominated entirely and exclusively by the individual defendants. Accordingly, the corporate veil should be pierced and the individual defendants held liable to plaintiffs who have been wronged by their actions. See Ventresca Realty Corp. V. Houlihan, 41 AD3d 707 (2d Dep't, 2007); Pae v. Yoon, 41 AD3d 681 (2d Dep't, 2007).

Judgment shall be entered against all defendants for $79,500 with interest from May 31, 2006 together with statutory costs and disbursements.

The foregoing constitutes the decision and order of the Court.

E N T E R :

HON. CAROLYN E. DEMAREST, J.S.C.