Yard v Adirondack Custom Homes, LLC

[*1] Yard v Adirondack Custom Homes, LLC 2008 NY Slip Op 51990(U) [21 Misc 3d 1106(A)] Decided on October 6, 2008 Supreme Court, Warren County Krogmann, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 October 6, 2008
Supreme Court, Warren County

John Yard and Jill Yard, Plaintiff

against

Adirondack Custom Homes, LLC, PETER O'NEIL and EUGENE O'NEIL, Defendants



48317



APPEARANCES:

Bartlett, Pontiff, Stewart & Rhodes, PC (Eileen M. Haynes, Esq., of counsel), Attorneys for Plaintiffs

Muller, Muller & Mannix, Esqs. (Michael J. Muller, Esq., of counsel), Attorneys for Defendants

David B. Krogmann, J.

Defendants Peter O'Neil and Eugene O'Neil separately move to dismiss plaintiffs' complaint.

By deed dated July 29, 2005, defendant Eugene O'Neil conveyed a house located at 94 Middle Road, Town of Lake George to the plaintiffs. The house had been constructed by defendant Adirondack Custom Homes, LLC ("Adirondack") a limited liability company whose sole principal is Peter O'Neil, the son of Eugene O'Neil. The parcel was originally acquired by Adirondack in January, 2004 and Adirondack conveyed the lot to Eugene O'Neil on June 10, 2004. Adirondack had entered into a construction contract with Eugene O'Neil dated three months earlier, in March of 2004. Eugene O'Neil obtained construction financing the same date he took to title to the parcel.

This history is of some importance because after taking possession of this new home, plaintiffs developed a long laundry list of its shortcomings, a few of them structural in nature. They contacted Peter O'Neil with whom they had negotiated their purchase contract, and he attended to repairing a small number of items from the list. Plaintiffs then sent a written notice of warranty claim by certified mail to all three named defendants[FN1] [*2]

Plaintiffs then initiated this action setting forth two causes of action. The first alleges a breach of the Housing Merchant Warranty as provided by Article 36-B of the General Business Law ("Article 36-B") and the second a common law negligence cause of action.

Defendants' papers point out that the contract of sale contains paragraph 8(a) entitled "Condition of Premises" which, as relevant, states "the buildings on the premises are sold as is' without warranty as to condition, and Buyer agrees to take title to the buildings as is' and in their present condition..." Also pointed out is the existence of an "Inspection Contingency" at paragraph 9(b) of the contract which provided plaintiffs with nearly two weeks to obtain a structural examination and to cancel the contract if a threshold level of defects were found. Although common in real estate contracts, neither provision is sufficient to exclude or overcome the housing merchant implied warranty. (See Article 36 - B at section 777-a (5)).

The thrust of the dismissal motion is the positing by each O'Neil defendant in their first affirmative defense that neither of those persons are a "warrantor" under the statute and so the Article 36-B cause of action cannot be applicable to them. Article 36-B, at section 777-a provides for a statutory implied warranty for three separate time periods warranting a house will be "free from defects" due to "a failure to have been constructed in a skillful manner (sub a) or that it will be "free from material defects"(sub c). The list of shortcomings set forth at paragraph 28 of plaintiffs' complaint surely includes items which could be considered "defects" as well as lacking being "constructed in a skillful manner" as those terms are defined in Article 36-B.[FN2]

Defendants ask for a close examination of the definitions contained in the aforesaid section 777. The remedial portion of the statute set forth at section 777- a makes reference to "the builder" only in subdivision "b". It would appear that warranties described in subdivisions "a" and "c" are implied in the contract of sale regarding the passage of title to a "new home" and are not dependant upon the status of the conveying entity as being a "builder".

The statute defines "builder" as "...any person, corporation, partnership or other entity contracting with an owner for the construction or sale of a new home." Here, Eugene O'Neil took title to the building lot and then obtained construction financing to support the referenced building contract with Adirondack. As such, both Eugene O'Neil and Peter O'Neil claim that they are not a "builder" and cannot be held personally liable. Plaintiffs want the opportunity for further discovery in an attempt to find documents with which to pierce the liability shield of the LLC as to Peter and to show that Eugene O'Neil is in some way connected to Adirondack. Defendants emphatically deny the existence of any further documents. Eugene O'Neil states that he originally intended to reside in the house when he purchased the parcel, although at the end of the day, it is just as likely that his involvement provided a financial mechanism for his son's business to construct the house, especially since he did not even take title to it until several months after the date of the construction contract between himself and Adirondack. The statute defines "owner" as the first person to whom the home is sold ( and any successors during the [*3]warranty period). The Court deems that definition to apply to plaintiffs as the definition is also not dependant upon the status of the entity selling the home. It is the determination of this court that the motion for dismissal by Peter O'Neil should be granted notwithstanding plaintiffs claim that he is the person they negotiated with and that there are no formal meeting minutes for this one person limited liability company. He simply is not the selling entity nor, under the circumstances presented, is he the builder. Being a principal in a "builder" which is an LLC or a corporation will not create personal liability .

As for the motion of Eugene O'Neil, it is the Court's present view that a titled owner of a vacant piece of real estate who arranges with another to build a house before selling it is clearly the seller/conveyor of the "new home" and, under certain circumstances, is likely to be deemed a "builder" for relevant purposes of Article 36-B. To hold that an owner of real estate could never be deemed a "builder" for Article 36-B purposes simply because of the existence of a building contract would seem to potentially eviscerate the intent of that part of the statute that relates to builder liability. At any rate, a cause of action under Article 36 - B, section 777-a subdivision (1) (a) and possibly subdivision (1) (c)[FN3] is stated as against Eugene O'Neil. His motion for dismissal of the Article 36 - B cause of action is denied.[FN4]

As for the second cause of action alleging common law negligence, plaintiffs allege defendants and their subcontractors "failed to perform their duty in such a manner as to not cause damage to plaintiffs' property". Of course at the time that any of the alleged "damage" was caused to the subject property, plaintiffs were not the owner of it. Defendant could not be held in negligence to a person or entity that it had not met, likely never had heard of, at a time when it was not in privity with any potential buyer. Indeed, at the time that any construction shortcoming occurred, defendants did not have a duty to plaintiffs against which other elements of negligence such as proximate cause can be applied. This cause of action is not saved by the "liberal construction" directive identified in Rushford v. Facteau, 247 AD2d 785, 786. The second cause of action is hereby dismissed as it

fails to state a cause of action as against these defendants.

The above constitutes the decision and order of this Court.

DATED:________________________

__________________________________

DAVID B. KROGMANN

JUSTICE OF THE SUPREME COURT

The Court is filing the original decision and order together with the original papers in the Warren County Clerk's Office. Attorneys for the plaintiffs to comply with CPLR 2220.

Distribution to:

Bartlett, Pontiff, Stewart & Rhodes, PC (Eileen M. Haynes, Esq., of counsel), Attorneys for Plaintiffs

Muller, Muller & Mannix, Esqs. (Michael J. Muller, Esq., of counsel), Attorneys for Defendants Footnotes

Footnote 1: The envelope to Eugene O'Neil was addressed to the Florida address contained on the deed between he and plaintiffs some eleven months previous and was returned unclaimed after two final notice' dates. The relevant statutory section requires such written notice to be sent to the builder prior to commencement of an action. A copy of the postal return receipt to Adirondack is attached to plaintiffs' papers.

Footnote 2: A number of items on plaintiffs' list, upon closer examination, might be properly classified as patent defects which would not be covered by the Housing Merchant Warranty as per Article 36-B, 777-a(2)(b). (Also see Milstein v. Port Jefferson, 154 AD2d 442).

Footnote 3: The Court need not now determine whether the damages complained of comport to the definition of "material defect" as described in subdivision (1) (c).

Footnote 4: The O'Neils' arguement that the Article 36 - B implied warranties do not apply to either of them because neither of them fits the definition of "builder" is misplaced. Section 777-a (1)creates the implied warranty "in the contract or agreement for the sale of a new home." It does not create the warranty only where the designated seller is also a builder. That the pre-litigation written warranty claim must be received by the builder seems a potential inconsistency of sorts, but such does not re-write the operative section which creates the implied warranty in the contract or agreement for the sale of a new home without regard to the status of the seller.