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Maria GOODSPEED, Claimant, v. Michael AIELLO, Defendant.
Maria Goodspeed filed this petition on April 7, 2022, seeking $5,000 from Michael Aiello because he “[d]id not supply materials, took all screws, wire, primer that he did get. He gutted our house and did not put it back together.” The matter was adjourned several times. At the appearance on September 8, 2022, this Court advised the Defendant that it would consider imposing sanctions for possible non-compliance with the General Business Law. At that time, Defendant requested an adjournment to obtain counsel and the matter was adjourned for trial until October 6, 2022. At the trial the Claimant appeared, and the Defendant defaulted.
Claimant testified that she executed with the Defendant a one-page contract on small notebook paper that read as follows: “I Michael Aiello agree to do all repairs caused by the radiator leaking. Work includes sheet rock, paint, flooring, demo & removal. A deposit of $6,200 will be recieved [sic] on 1-27-22. the balance of 2.800 is due upon completion. Any additional cost must be disgussed [sic] and agreed to by both parties”. The document was signed by both Claimant and Defendant. The document indicates that it was paid on February 15, 2022.
Claimant testified they later executed another document that reads as follows: “On 3/1/22 an invoice was turned into Allstate as an additional expense to original job that was being done for Maria Goodspeed. Invoice was agreed to and approved by myself, homeowner and insurance company. The additional invoice was for a total of $8,050.00 The total amount owed to A & B Flooring to date is $11,000.”
Claimant testified that the Defendant scheduled the work for the middle of March 2022, and that she stayed in a hotel at the insurance company's expense. Claimant testified that she has cameras on her home and did not observe Defendant come to the home until the last day of her hotel stay when he did some demolition work. Claimant testified that on April 1, 2022, the Defendant indicated that he needed more money before he could continue with the work, but could not produce receipts for any materials that he purchased. Claimant testified she decided to fire Defendant at this point.
The court's duty in a small claims case is to do substantial justice between the parties according to the rules of substantive law (UCCA § 1804). In this case, article 36-a of the General Business Law applies.
“[I]n this state the sanctity of contracts in this respect at least, has been steadily maintained, and no encouragement has ever been given to that loose and dangerous doctrine which allows a person to violate his most solemn engagements and then to draw the injured party into a controversy concerning the amount and value of the benefits received․ To hold a different doctrine would be simply to make another contract, and would be giving to parties an encouragement to violate their engagements, which the just policy of the law does not permit” (Knobel v. Manuche, 137 Misc 2d 320, 324 [Sup Ct, NY County 1987], affd, 146 AD2d 528, [1st Dept 1989], citing Smith v. Brady, 17 NY 173 ). This means that a contractor who materially breaches a contract may not be entitled to any compensation for his partial performance.
Here, the parties had a contract for the Claimant to pay the Defendant $6,200 upfront for various repair work and a final payment of $2,800 upon completion. The Defendant did not hold up his end of the agreement by asking for progress payments that he was not entitled to receive under the terms of the contract. He also could not produce any receipts for materials showing that the initial payment could not cover these costs.
If this Court were to allow him to keep the benefits of the hours of labor and materials he put into this job, then he would not suffer any loss from breaching the contract. Such an outcome would encourage contractors to leave their contracted work unfinished whenever a better opportunity comes along, knowing that they would be fully compensated for the work that they have performed. In short, it would undermine the sanctity of a contract.
There is legal principal that allows a contractor to be compensated even though he has breached his obligations under a contract, provided that he can show that he had substantially performed its obligations under the contract. To show that, the contractor must establish that the breach is trivial in nature compared to the performance that has occurred, that failure to perform was inadvertent or unintentional, that the primary purpose of the contract has been fulfilled, and that the breaching party proceeded in good faith. It is well settled in New York that “[t]he doctrine of substantial performance has no application, where there is an intentional, deliberate, and willful departure from the contract. Substantial performance is performance, the deviations permitted being minor, unimportant, inadvertent, and unintentional” (Cramer v. Esswein, 220 A.D. 10, 11 [2nd Dept, 1927]; see also Novair Mech. Corp. v. Universal Mgmt. & Contracting Corp., 81 AD3d 909 [2nd Dept, 2011]).
The court will not allow the Defendant to draw the Claimant and the court into a controversy concerning the amount and value of the benefits received when the value of those services left her with a demolished home interior and a contractor asking for things outside the scope of their contract. Accordingly, this Court finds that the Defendant breached the contract, has not substantially performed under the contract. The Claimant gave the Defendant $6,200 as an initial payment. This Court finds that she is entitled to a return of the initial payment. However, the jurisdictional limit of this Court on a small claims is $5,000, so a judgment will issue in that amount.
Next, the Court will address whether a civil penalty is appropriate. As part of the State's consumer protection efforts, in 1988 the Legislature enacted article 36-A which mandates that home improvement contractors put home improvement contracts in writing and that certain provisions be included in the contract. The General Business Law section 771 mandates that various provisions be included in every home improvement contract which will be discussed here individually.
GBL § 771 (1) (a) mandates that the contract contains “[t]he name, address, telephone number and license number, if applicable, of the contractor.” The contract in this case is in general compliance with this provision when taken into consideration with the Claimant's testimony and exhibits that she had electronic communication with the Defendant. Accordingly, this Court finds that the Defendant is in general compliance with this provision.
GBL § 771 (1) (b) mandates that the contract contains “[t]he approximate dates, or estimated dates, when the work will begin and be substantially completed, including a statement of any contingencies that would materially change the approximate or estimated completion date. In addition to the estimated or approximate dates, the contract shall also specify whether or not the contractor and the owner have determined a definite completion date to be of the essence.” Here, the only dates discussed are those relating to payment. Compliance with this section could have prevented Claimant from spending a week in a hotel while there was only one day of work performed on her home. Accordingly, this Court finds that this contract is not in general compliance with this provision.
GBL § 771 (1) (c) mandates that the contract contains “[a] description of the work to be performed, the materials to be provided to the owner, including make, model number or any other identifying information, and the agreed upon consideration for the work and materials.” Here, there is only a very general description of the work to be performed and the materials. Detailed compliance with this section could have prevented the Defendant from asking for more money on two occasions — first to request more from the insurance company and then later to continue work. Even if this Court were to give the Defendant the benefit of the doubt that the materials actually cost substantially more than initially anticipated, that would still work against the defendant because it would demonstrate the lack of a legally sufficient description of the work and materials. Accordingly, this Court finds that the Defendant's contract is not in substantial compliance with this section.
GBL § 771 (1) (d) mandates that the contract contains “[a] notice to the owner purchasing the home improvement that the contractor or subcontractor who performs on the contract or the materialman who provides home improvement goods or services and is not paid may have a claim against the owner which may be enforced against the property in accordance with the applicable lien laws. Such home improvement contract shall also contain the following notice to the owner in clear and conspicuous bold face type:
‘Any contractor, subcontractor, or materialman who provides home improvement goods or services pursuant to your home improvement contract and who is not paid may have a valid legal claim against your property known as a mechanic's lien. Any mechanic's lien filed against your property may be discharged. Payment of the agreed-upon price under the home improvement contract prior to filing of a mechanic's lien may invalidate such lien. The owner may contact an attorney to determine his rights to discharge a mechanic's lien.’ ” This statutory provision is absent from the contract. Accordingly, this Court finds that the Defendant is not in general compliance with this provision.
GBL § 771 (1) (e) mandates that the contract contain “[a] notice to the owner purchasing the home improvement that, except as otherwise provided in paragraph (g) of this subdivision, the home improvement contractor is legally required to deposit all payments received prior to completion in accordance with subdivision four of section seventy-one-a of the lien law and that, in lieu of such deposit, the home improvement contractor may post a bond, contract of indemnity or irrevocable letter of credit with the owner guaranteeing the return or proper application of such payments to the purposes of the contract.” This contract does not contain this notice. At the appearance on September 8, 2022, the Defendant gave unsworn testimony that he did not deposit the contract money in an escrow account. The Claimant provided hearsay testimony that the Defendant paid his rent with the contract money. These statements are not critical to this Court's decision because whether or not the Defendant placed the contract money in escrow or posted a bond, the law requires that the contract contain this disclosure which is absent from this contract. Accordingly, this Court finds that the Defendant is not in general compliance with this provision.
GBL § 771 (1) (f) mandates “[i]f the contract provides for one or more progress payments to be paid to the home improvement contractor by the owner before substantial completion of the work, a schedule of such progress payments showing the amount of each payment, as a sum in dollars and cents, and specifically identifying the state of completion of the work or services to be performed, including any materials to be supplied before each such progress payment is due. The amount of any such progress payments shall bear a reasonable relationship to the amount of work to be performed, materials to be purchased, or expenses for which the contractor would be obligated at the time of payment.” This contract required an upfront payment of $6,200 and the balance of $2,800 was due “due upon completion.” Based on the contract terms, the parties did not agree to progress payments. Although the parties memorialized on or about March 1, 2022, that they were seeking more money from the insurance company, it is precisely the Defendant's repeated demand for uncontracted progress payments without providing receipts that caused the Claimant to consider the contract to be breached. Although the contract itself seems to be in compliance with this provision, it is Defendant's subsequent conduct of not complying with the terms of the contract that caused the breach.
GBL § 771 (1) (g) mandates “[i]f the contract provides that the home improvement contractor will be paid on a specified hourly or time basis for work that has been performed or charges for materials that have been supplied prior to the time that payment is due, such payments for such work or materials shall not be deemed to be progress payments for the purposes of paragraph (f) of this subdivision, and shall not be required to be deposited in accordance with the provisions of paragraph (e) of this subdivision.” Here, the contract states “[a]ny additional cost must be disgussed [sic] and agreed to by both parties.” It is not clear to the Court whether this provision is referring to additional work beyond the scope of the contract or if it refers to unanticipated expenses. In any event, the cost of materials could easily be obtained at the time of executing the contract. Further, the Claimant testified it was the Defendant's inability to produce receipts that caused her to find another contractor to finish the job. Although the contract seems to be in the most loosely construed general compliance with this provision, it was the Defendant's conduct that caused the breakdown in their business relationship.
GBL § 771 (1) (h) further mandates that the contract provides “[a] notice to the owner that, in addition to any right otherwise to revoke an offer, the owner may cancel the home improvement contract until midnight of the third business day after the day on which the owner has signed an agreement or offer to purchase relating to such contract. Cancellation occurs when written notice of cancellation is given to the home improvement contractor. Notice of cancellation, if given by mail, shall be deemed given when deposited in a mailbox properly addressed and postage prepaid. Notice of cancellation shall be sufficient if it indicates the intention of the owner not to be bound. Notwithstanding the foregoing, this paragraph shall not apply to a transaction in which the owner has initiated the contact and the home improvement is needed to meet a bona fide emergency of the owner, and the owner furnishes the home improvement contractor with a separate dated and signed personal statement in the owner's handwriting describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the home improvement contract within three business days. For the purposes of this paragraph the term “owner” shall mean an owner or any representative of an owner.” This provision is absent from the contract. Accordingly, the Court finds that the Defendant is not in general compliance with this provision.
GBL § 771 (1) (i) further provides “[b]efore a contractor or subcontractor begins work on a home, such writing shall disclose to the homeowner the existence of a property and/or casualty insurance policy that covers the scope of such contractor or subcontractor's employment should an insurance claim be filed resulting from losses arising from the work at such property. Such disclosure shall also include the contact information of the insurance company providing such property and/or casualty insurance, including a phone number and address.” This disclosure is absent from the contract. Accordingly, the Court finds that the Defendant is not in general compliance with this provision.
GBL § 771 (2) further mandates that “[t]he writing shall be legible, in plain English, and shall be in such form to describe clearly any other document which is to be incorporated into the contract. Before any work is done, the owner shall be furnished a copy of the written agreement, signed by the contractor. The writing may also contain other matters agreed to by the parties to the contract.” Here, the contract handwritten on small notebook paper is in general compliance with this provision.
In sum, this Court find that the Defendant is not in general compliance with the following section of the General Business Law 771: (1) (b); (1) (c); (1) (d); (1) (e); (1) (h); and, (1) (i). Next the Court must decide if a civil penalty is appropriate under General Business Law section 773.
GBL § 773 (2) defines substantial violations as “Every home improvement contractor who fails to deposit funds in an escrow account or provide a bond or contract of indemnity or irrevocable letter of credit in compliance with the requirements of section seventy-one-a of the lien law, or who fails to provide a written contract substantially in compliance with the requirements of this article, shall be subject to a civil penalty not to exceed the greater of two hundred fifty dollars for each violation or five percent of the aggregate contract price specified in the home improvement contract; provided, however, that in no event shall the total penalty exceed twenty-five hundred dollars for each contract.” With respect to this $9,000 contract, the court could impose a civil penalty of up to $450 for the Defendant's noncompliance with the General Business Law.
However, GBL § 773 (3) requires the court to consider mitigating factors such as “the volume of business which the home improvement contractor performs on an annual basis, the number of contracts in violation, the actual financial loss or exposure to financial loss suffered by any owner as a result of the violations, and whether the home improvement contractor acted in good faith or willfully with respect to such violations. No home improvement contractor shall be subject to the increased penalties provided by subdivision two of this section if such contractor shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error made notwithstanding the maintenance of procedures reasonably adopted to avoid such a violation.”
With respect to this case, the Defendant defaulted after being warned the court would consider imposing a civil penalty if he was found liable under the contract, so it is unknown the Court how much business he does on an annual basis. This is also the Defendant's first case in this Court regarding a home improvement contract. It seems the Defendant initially acted in good faith because he started the demolition work before asking for more money. Without more information such as a demonstrated pattern of misconduct, it seems at the time of the contract's execution there is insufficient evidence to warrant a finding of bad faith — which is also why this Court is not considering a sanction for fraud under GBL § 772. However, the homeowner has substantial financial loss and $4,000 out of pocket expenses. Having assessed all of this information, the Court will not assess a civil penalty at this time. However, if there are future sustained violations in the future, this Defendant is on notice that a civil penalty will be considered.
Therefore, it is hereby ordered that judgment be entered in favor of Claimant against Defendant in the amount of $5,000 plus costs.
This constitutes the decision and order of the court.
Joshua P. Bannister, J.
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Docket No: Index No. SC-000070-22/LF
Decided: October 14, 2022
Court: City Court, New York,
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