NEMARD CONSTRUCTION CORP., Plaintiff, v. Vicky DEAFEAMKPOR, Defendants.
Defendant Vicky Deafeamkpor moves for an order, pursuant to CPLR Rule 4404(a), alternatively seeking to (1) set Plaintiff's verdict aside, (2) dismiss the underlying complaint, (3) order a new trial, and (4) stay all efforts at collection. She challenges the verdict because Plaintiff is neither registered as a corporation by the State nor properly licensed by New York City.
Ms. Deafeamkpor wants the verdict set aside, in essence, because she claims Nemard Construction Corp. lacked the capacity to commence this action inasmuch as it is not a corporate entity. This despite the fact Plaintiff held itself out as such. Further, Plaintiff is not entitled to maintain the case because it is not licensed under the New York City Administrative Code (see, N.Y.C. Admin. Code § 20-385 et seq., hereinafter “the Code”) (see generally, Hughes & Hughes Contracting Corp. v. Coughlan, 202 A.D.2d 476, 609 N.Y.S.2d 43 [2nd Dept.1994] ).
The instant breach of contract resulted in the jury rendering a unanimous verdict in Plaintiff's favor. It centered on Defendant's failure to pay for improvements to a residential property located at 907 East 156th Street, Bronx County. Pursuant to the parties' December 26, 2003 contract, Plaintiff furnished labor and materials improving Defendant's home in the value of $162,895. Plaintiff maintained that Defendant paid only $41,718, leaving $121,987 unpaid. Of that amount, the jury returned a Plaintiff's verdict for $89,400, together with $700 in costs and $636.70 in disbursements. Defendant does not explain why the licensing issue was not raised timely, except to aver that Plaintiff did not conform to the requirement of CPLR Rule 3015(e), which mandates that a plaintiff set forth that it is properly licensed to do business and that the interests of justice require that a defendant be allowed the raise the issue at this time.1 Further, Plaintiff failed to plead its corporate status as required by CPLR Rule 3015(b) 2
Plaintiff opposes Defendant's seeking of post trial relief, holding forth that the jury properly rendered its verdict in finding that Ms. Deafeamkpor improperly discharged Plaintiff and failed to fully pay for the renovations performed. Plaintiff argues that the motion to vacate should be denied because Defendant failed to raise objection before trial to its failure to obtain a city license (see, N.Y.C. Admin. Code supra.) or failure to register as a corporation with the New York Secretary of State, as required (see, Business Corporation Law § 104). Likewise, Defendant failed to move for summary judgment or to raise any objection during trial. Therefore, Plaintiff argues that Defendant waived her right to object upon these grounds. Additionally, Plaintiff maintains that it showed good faith on the issue because it filed a Business Certificate with the Bronx County Clerk in 1995 certifying that it was conducting business under the name “Nemard Construction.” 3
Finally, Plaintiff sees no reason for a new trial even if Defendant's claim that Plaintiff was unlicensed is accurate. Plaintiff says Defendant cites no error in the trial's conduct that occurred because of this legal mistake. Plaintiff urges that should the Court find that Defendant's arguments concerning its legal status are valid, then the only recourse is to dismiss the action.
In reply, Defendant points out the critical fact that Plaintiff admits never having been licensed as a home improvement contractor. Therefore, Plaintiff is not entitled to any verdict under contract or quantum meruit (see, CPLR § 3015[e] ). Further, because Plaintiff is not a legally incorporated entity, it has no standing to seek compensation; that is, it lacked the legal ability to commence the within action (see, N.Y.C. Admin. Code §§ 20-385 to 20-387).
Failure to Register with State
Initially, the Court notes that its discretionary power to set aside a jury verdict and order a new trial must be exercised with considerable caution. Absent indications that substantial justice was not done, a successful litigant is normally entitled to the benefits of a favorable verdict (see, Nicastro v. Park, 113 A.D.2d 129, 495 N.Y.S.2d 184 [2nd Dept.1985] ). The Court turns first to Defendant's demand that the verdict must be set aside and the complaint dismissed because Plaintiff is not a corporation cognizable under state law. The Court denies this branch of Defendant's motion.
One who contracts with or otherwise deals with an entity as a corporation thereby admits that it is a corporation and is estopped to deny the corporate existence in any action arising out of such contract or dealing (see, Puma Industrial Consulting, Inc. v. Daal Associates, Inc., 808 F.2d 982 [2nd Cir.1987] ) (but see, Cary Oil Co. v. MG Ref. & Mktg., 230 F.Supp.2d 439 [S.D.N.Y. 2002] [Puma distinguished where defendant had no reason to know the plaintiff was not a corporation] ). The “corporation by estoppel” doctrine precludes Defendant from denying the validity of Plaintiff's status in this action (see generally, Boslow Family Ltd. Partnership v. Glickenhaus & Co., 7 N.Y.3d 664, 827 N.Y.S.2d 94, 860 N.E.2d 711  ). This doctrine relies upon the principle that one who recognizes an organization as a corporation in business dealings, as Defendant did here, should not be allowed to quibble on matters which are of little or no concern and do not affect substantial rights (see, Rubenstein v. Mayor, 41 A.D.3d 826, 839 N.Y.S.2d 170 [2nd Dept.2007] ). Defendant cannot dispute that she derived a benefit from the agreement with Plaintiff and that the services provided were not dependent in any way on the Plaintiff's legal status. The Court holds, therefore, that Defendant is estopped from denying the corporation's validity. It is noted that Defendant claimed no prejudice if the sole proprietorship were to be substituted for the corporation (see generally, Tilden Development Corp. v. Nicaj, 49 A.D.3d 629, 854 N.Y.S.2d 418 [2nd Dept.2008] ).
Failure to Obtain a License from City
The Court now considers Defendant's contention concerning Plaintiff's failure to obtain a license to operate as a home improvement contractor in New York City. It is here, rather than with the issue of incorporation, that makes for Plaintiff's difficulty.
Under the Code, a person or business must have a home improvement contractor license if engaged in construction, repair, or remodeling, involving an addition to any land or building used as a residence. This includes, but is not limited to, construction, replacement, or improvement of “driveways, swimming pools, terraces, patios, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements to structures or upon land which is adjacent to a dwelling house” (see, N.Y.C. Admin. Code § 20-386  ). Since 1983, the CPLR has required pleading the Consumer Affairs license where the Plaintiff is suing a consumer upon a claim arising out of the business that requires the license (see, B & F Bldg. Corp. v. Liebig, 76 N.Y.2d 689, 563 N.Y.S.2d 40, 564 N.E.2d 650  ). The business is required to plead and identify the license (see, CPLR Rule 3015[e]; Chosen Construction Corp.v. Syz, 138 A.D.2d 284, 525 N.Y.S.2d 848 [1st Dept.1988] ).
There is no dispute that Plaintiff had no home improvement contractor's license when it conducted the work on Defendant's residence. Likewise, there is no dispute that the services Plaintiff performed require such a license. The issue becomes whether Defendant waived her right to object when she failed to move for summary judgment or had other opportunities to raise the issue. Thus, after determining the effect of Plaintiff not having a home improvement license, the Court is faced with deciding whether vacating the jury verdict is barred because the licensing issue was not raised before or during trial.
Public Policy Concerns
Under the Code, an unlicensed contractor may neither enforce a home improvement contract against an owner nor seek recovery in quantum meruit (see, Blake Elec. Contracting Co. v. Paschall, 222 A.D.2d 264, 635 N.Y.S.2d 205 [1st Dept.1995] ) (see also, JMT Bros. Realty, LLC v. First Realty Builders, Inc., 51 A.D.3d 453, 856 N.Y.S.2d 616 [1st Dept.2008] [arbitration denied] ). As set forth in the City Council's legislative declaration, the purpose of the licensing requirement is to protect homeowners against fraudulent practices through licensing persons engaged in the home improvement, remodeling and repair businesses (see, N.Y.C. Admin. Code § 20-385). The seriousness and public policy implications of this provision are underscored by the fact that willful non compliance is a misdemeanor carrying imprisonment of up to six months and/or a $1,000 fine (see, N.Y.C. Admin. Code § 20-401[a] ). In addition, the City can seek additional fines and treble damages against any contractor who violates this section (see, N.Y.C. Admin. Code § 20-401 and  ).
Our courts strictly enforce the home improvement licensing requirements even when the work performed is satisfactory; the general rule is that an agreement to render home improvement services may not be enforced by one who is not licensed even when the services are fully performed (see generally, Primo Construction, Inc. v. Stahl, 161 A.D.2d 516, 555 N.Y.S.2d 785 [1st Dept.1990]; Papadopulos v. Santini, 159 A.D.2d 335, 552 N.Y.S.2d 611 [1st Dept.1990] ). In B & F Building Corp. v. Liebig, 76 N.Y.2d 689, 563 N.Y.S.2d 40, 564 N.E.2d 650 (1990), the Court of Appeals found that the fact that a home improvement contractor is not licensed under the Code when an agreement for work is signed or when work is performed makes the contract unenforceable. Moreover, an unlicensed contractor is precluded, as a matter of public policy, from enforcing a home improvement contract even where the contractor seeks recovery in quantum meruit (see generally, JMT Brothers Realty, LLC v. First Realty Builders, Inc., 51 A.D.3d 453, 856 N.Y.S.2d 616 [1st Dept.2008] ).
In this respect, the Home Improvement Business Law (N.Y.C Admin. Code, Title 20. Chapter 2, subchapter 22) is considered a consumer protection statute intended to safeguard and protect consumers against fraudulent practices and inferior work by persons and businesses claiming to be qualified home improvement contractors (see generally, Matter of Harmon v. Ivy Walk Inc., 48 A.D.3d 344, 853 N.Y.S.2d 289 [1st Dept.2008] ). The Code provides that those who conduct home improvements must be licensed (see, N.Y.C. Admin. Code § 20-387[a] ). Strict compliance with this licensing requirement is mandatory (see generally, Hanjo Contractors v. Wick, 155 A.D.2d 304, 547 N.Y.S.2d 590 [1st Dept.1989] ) (see also, Al-Sullami v. Broskie, 40 A.D.3d 1021, 834 N.Y.S.2d 873 [2nd Dept.2007] ). Even the fact that a homeowner maybe aware of the absence of a license, or even that the homeowner planned to take advantage of its absence, creates no exception to the statutory requirement (see generally, Hughes & Hughes Contracting Corp. v. Coughlan, supra.). Therefore, the Court concludes that under the circumstances of this case, in the event Defendant is determined to be entitled to raise the licensing issue post verdict, public policy bars enforcement of the contract.
Waiver Post Verdict
The Court now focuses upon Plaintiff's claim that Defendant waived her licensing arguments by waiting until after the verdict to raise the issue. As stated, the lack of a license was never raised before or at trial. Therefore, Plaintiff maintains that the Court should reject the belated proffer of the licensing evidence.
As guidance on this issue, the Court looks to the Court of Appeals' decision in Matter of Niagara Wheatfield Administrators Association v. Niagara Wheatfield Central School Dist., 44 N.Y.2d 68, 404 N.Y.S.2d 82, 375 N.E.2d 37 (1978). There, the high court sanctioned the raising of a public policy issue for the first time on appeal in a case involving labor arbitration. By contrast, in this non-arbitration case, the Court finds that the public policy behind the home improvement licensing provisions is of such magnitude that it must permit Defendant to raise the issue even after verdict.4
Based upon the foregoing, the Court finds that the branch of Defendant's motion seeking to set Plaintiff's verdict aside, vacating the judgment and entering judgment in Defendant's favor, must be granted. Defendant is entitled to judgment as a matter of law. The underlying complaint is dismissed. The public policy announced by the City Council in enacting the licensing provisions outweighs any consideration that Defendant may have waived her rights in this matter (see, N.Y.C. Admin. Code § 20-385) (see also, Mortise v. 55 Liberty Owners Corp., 102 A.D.2d 719, 477 N.Y.S.2d 2 [1st Dept.1984] ).
The Court views these licensing requirements as mandatory; they cannot be overturned absent specific legislative intent. This case does not involve a situation where Plaintiff subsequently obtained a license (see generally, Todisco v. Econopouly, 155 A.D.2d 441, 547 N.Y.S.2d 103 [2nd Dept.1989]; Matter of Klineman (NJS Inc.), 160 Misc.2d 774, 611 N.Y.S.2d 729 [Sup.Ct. New York County 1993] ). Nor do the within facts provide equitable or other grounds for ignoring public policy concerns (see generally, JMT Bros. Realty, LLC v. First Realty Bldrs.,Inc., supra.; Blake Electric Contracting Co. v. Paschall, supra.). Likewise, a party may not benefit by indirection that which is directly denied to it (see generally, Broadwall Am., Inc. v. Bram Will-El LLC, 32 A.D.3d 748, 821 N.Y.S.2d 190 [1st Dept.2006] ).
In light of the foregoing, no purpose would be served by requiring a new trial in the matter at hand. Consistent with this conclusion, the branch of Defendant's motion continuing to stay the original judgement's entry is granted. That judgment is vacated.5
BASED UPON THE FOREGOING, it is
ORDERED that the branch of the Defendant's motion, pursuant to CPLR Rule 4404(a), seeking to set the verdict aside, vacate the original judgment and grant Defendant judgment as a matter of law, is GRANTED; and it is
ORDERED that the branch of Defendant's motion seeking to dismiss the complaint is GRANTED, and it is
ORDERED that the branch of the Defendant's motion, pursuant to CPLR 4404(a), seeking to order a new trial is DENIED as moot; and it is further
ORDERED that the branch of the Defendant's motion seeking to continue to stay the judgement's entry is GRANTED.
The foregoing constitutes the decision and order of the Court.
1. CPLR Rule 3015(e) requires that where a plaintiff's cause of action against a consumer arises from plaintiff's conduct of a business required to be licensed by the New York City Department of Consumer Affairs, the complaint must allege, as part of the cause of action, that Plaintiff is duly licensed and it must contain the name and number of such license and the governmental agency which issued the license. Plaintiff failed to comply with this requirement.
2. CPLR Rule 3015(b) states that “(w)here any party is a corporation, the complaint shall so state and, where known, it shall specify the state, country or government by or under whose laws the party was created.”
3. The Business Certificate actually states that one Sutcliffe Banton was conducting business as “Nemard Construction,” not that he was conducting business as a corporation.
4. In Matter of Hirsch Construction Corp. (Cooper), 181 A.D.2d 52, 585 N.Y.S.2d 418 (1st Dept.1992), the Appellate Division balanced the public policy against recovery by unlicensed home improvement contractors with the public policy of not vacating an arbitration award on public policy grounds. The Court found the arbitration policy controlling.
5. In view of the finding that there is “corporation by estoppel,” the Court see no validity to Plaintiff's argument that the appropriate remedy is that the complaint should be dismissed for lack of jurisdiction, which might allow Plaintiff to renew its action.
DOMINIC R. MASSARO, J.