SMITH ASSOCIATES INC v. BANDOIAN (2026)

DECISION & ORDER

W/

In related actions, inter alia, to recover damages for breach of contract, Kevin Bandoian and Melissa Bandoian, the defendants in Action No. 1 and the plaintiffs in Action No. 2, appeal from a judgment of the Supreme Court, Suffolk County (Jerry Garguilo, J.), dated September 22, 2020.  The judgment, insofar as appealed from, after a nonjury trial, is in favor of the plaintiff in Action No. 1 and against Kevin Bandoian and Melissa Bandoian in the principal sum of $106,000, dismissing Kevin Bandoian's and Melissa Bandoian's counterclaims alleging breach of contract and violation of Lien Law §§ 70, 71, and 71–a in Action No. 1, and dismissing their causes of action alleging fraud and seeking to impose liability under a theory of alter ego in Action No. 2.

ORDERED that the judgment is modified, on the facts, by deleting the provisions thereof in favor of the plaintiff in Action No. 1 and against Kevin Bandoian and Melissa Bandoian in the principal sum of $106,000, and dismissing the counterclaim alleging breach of contract based on a failure to refund $146,000, and substituting therefor provisions sustaining that counterclaim and in favor of Kevin Bandoian and Melissa Bandoian and against the plaintiff in Action No. 1 in the principal sum of $40,000;  as so modified, the judgment is affirmed insofar as appealed from, with costs to Kevin Bandoian and Melissa Bandoian.

In September 2000, Kevin Bandoian and Melissa Bandoian, the defendants in Action No. 1 and the plaintiffs in Action No. 2 (hereinafter together the Bandoians), entered into an architectural services agreement to procure architectural design plans for renovations to their home located in Cold Spring Harbor (hereinafter the project).  After receiving the architectural designs, the Bandoians learned that the architect, Peter E. Smith, a defendant in Action No. 2, owned a construction company, P.E. Smith Associates, Inc. (hereinafter Smith Associates), the plaintiff in Action No. 1 and a defendant in Action No. 2. In October 2002, Smith Associates entered into a contract with the Bandoians to perform the renovations for the project.  During the course of the project, the Bandoians made multiple requests for changes or additions to the agreed-upon plans through verbal discussions with Smith.  After the Bandoians made payments for certain materials and services to third parties, Smith issued them a credit in the amount of $146,000 against the amount owed on the contract.

In November 2003, before the project was completed, Smith sent the Bandoians an invoice totaling $156,228.41 for the additional costs Smith Associates had incurred as a result of the Bandoians’ requested changes to the project (hereinafter the extra costs).  The Bandoians, claiming they had already paid in excess of their obligations by paying for certain materials and services that were Smith's responsibility under the contract, refused to pay the invoice.

Smith Associates commenced an action (Action No 1) against the Bandoians, alleging, inter alia, that the Bandoians had breached the contract by failing to pay the $156,228.41 in extra costs.  The Bandoians interposed an amended answer and asserted counterclaims alleging, among other things, breach of contract based on Smith Associates's failure to refund the $146,000 the Bandoians had overpaid (hereinafter the credit) and violation of Lien Law §§ 70, 71, and 71–a.  The Bandoians thereafter commenced a separate action (Action No. 2) against Smith, Smith Associates, and P.E. Smith Architecture, P.C. (hereinafter Smith Architecture, and collectively with Smith and Smith Associates, the Smith parties), inter alia, to recover damages for architectural malpractice, malpractice related to the renovations, and fraud and seeking to impose liability against the Smith parties under a theory of alter ego.

After a nonjury trial, the Supreme Court, in effect, determined, among other things, that (1) the Bandoians had breached the contract by failing to pay the extra costs;  (2) Smith Associates had not breached the contract by not refunding the credit to the Bandoians;  (3) Smith Associates had not violated the Lien Law;  (4) the Bandoians had not been fraudulently induced to enter into the contract;  and (5) Smith Architecture and Smith Associates were not the alter egos of Smith.  A judgment was entered, inter alia, in favor of Smith Associates and against the Bandoians awarding it the principal sum of $106,000, dismissing the Bandoians’ counterclaims alleging breach of contract and violation of Lien Law §§ 70, 71, and 71–a in Action No. 1, and dismissing their causes of action alleging fraud and seeking to impose liability against the Smith parties under a theory of alter ego in Action No. 2. The Bandoians appeal.

“In reviewing a determination made after a nonjury trial, the power of this Court is as broad as that of the trial court, and this Court may render the judgment it finds warranted by the facts, bearing in mind in a close case that the trial judge had the advantage of seeing the witnesses” (Virgilio Trailer Corp. v. Ferrandino & Son, Inc., 213 AD3d 970, 971;  see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 N.Y.2d 492, 499).

“The elements of a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of its contractual obligations, and resulting damages” (Virgilio Trailer Corp. v. Ferrandino & Son, Inc., 213 AD3d at 971 [internal quotation marks omitted];  see Matter of Atane Engrs., Architects & Land Surveyors, D.P.C. v Nassau County, 227 AD3d 708, 709–710).

“General Business Law § 771 sets forth a number of requirements for home improvement contracts” (Big C Contr.  Corp. v. Fishman, 237 AD3d 1022, 1024 [internal quotation marks omitted];  see White Knight Constr.  Contrs., LLC v Haugh, 216 AD3d 1345, 1347).  “However, inasmuch as ‘General Business Law article 36–A does not expressly mandate that contracts which are not in strict compliance therewith are unenforceable,’ the failure to strictly comply with all of the requirements of General Business Law § 771 does not render a home improvement contract per se unenforceable in all cases” (Big C Contr.  Corp. v. Fishman, 237 AD3d at 1024, quoting Wowaka & Sons v. Pardell, 242 A.D.2d 1, 6;  see Porter v. Bryant, 256 A.D.2d 395, 396).  Contracts which evidence “a meeting of the minds between the parties as to the material terms of the contract” may be deemed to be valid and enforceable notwithstanding any failures to comply with the requirements of General Business Law § 771 (Big C Contr.  Corp. v. Fishman, 237 AD3d at 1024;  see Porter v. Bryant, 256 AD3d at 396;  Wowaka & Sons v. Pardell, 242 A.D.2d at 6).

Here, upon our independent review of the evidence presented at trial, we find that the Supreme Court properly found that Smith Associates held a valid home improvement license during the project (see ENKO Constr.  Corp. v. Aronshtein, 89 AD3d 676, 677).  Furthermore, although the contract failed to strictly conform to the requirements of General Business Law § 771, the contract and the parties’ testimony demonstrated that there was a meeting of the minds between the Bandoians and Smith Associates as to the material terms of the contract and “the alleged contractual omissions played no part whatsoever in inducing the [Bandoians] to enter into the contract” (Big C Contr.  Corp. v. Fishman, 237 AD3d at 1024 [internal quotation marks omitted];  see Porter v. Bryant, 256 A.D.2d at 396;  Wowaka & Sons v. Pardell, 242 A.D.2d at 7–8).  Under these circumstances, the contract is not per se unenforceable (see Porter v. Bryant, 256 A.D.2d at 396;  see also Environmental Appraisers & Bldrs., LLC v Imhof, 143 AD3d 756, 758).

Contrary to the Bandoians’ contention, the Supreme Court properly determined that the Bandoians and Smith Associates waived the provision in the contract requiring that “[a]ll change orders must be in writing.”  “Once a contract is formed, the parties may of course change their agreement by another agreement, by course of performance, or by conduct amounting to a waiver or estoppel” (Kamco Supply Corp. v. On the Right Track, LLC, 149 AD3d 275, 280 [internal quotation marks omitted] ).  “Thus, ‘[c]ontractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned,’ and ‘[s]uch abandonment may be established by affirmative conduct or by failure to act so as to evince an intent not to claim a purported advantage’ ” (id., quoting Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P., 7 NY3d 96, 104).  Here, the record demonstrated patterns of conduct whereby the Bandoians evinced an intent to waive the contractual requirement that changes or additions to the renovation plans be reduced to writing (see Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P., 7 NY3d at 104;  Kamco Supply Corp. v. On the Right Track, LLC, 149 AD3d at 280).  Thus, through their verbal requests for changes throughout the renovation work, the Bandoians assumed an obligation to pay for the extra costs incurred by Smith Associates (see Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P., 7 NY3d at 104;  Kamco Supply Corp. v. On the Right Track, LLC, 149 AD3d at 280).  Accordingly, the court properly determined that by failing to do so, the Bandoians breached the contract (see Virgilio Trailer Corp. v. Ferrandino & Son, Inc., 213 AD3d at 971).

However, the Supreme Court should have found that Smith Associates breached the contract by not refunding the credit in the amount of $146,000 to the Bandoians (see generally Fortuna Design & Constr., Inc. v 888 Crescent, LLC, 221 AD3d 861, 862).  The parties do not dispute that the Bandoians were entitled to the credit, representative of costs the Bandoians had assumed and payments they had advanced during the renovation work.  Since the amount of the credit was greater than the amount owed by the Bandoians for the extra costs, Smith Associates failed to establish that it was owed any amount in excess of what it was paid (see Fortuna Design & Constr., Inc. v 888 Crescent, LLC, 221 AD3d at 862).  Accordingly, the Bandoians were entitled to have their obligation regarding the extra costs offset by the $146,000 credit, which consequently warrants a judgment being entered in favor of the Bandoians and against Smith Associates in the principal amount of $40,000.

The Supreme Court properly dismissed the Bandoians’ counterclaim alleging a violation of Lien Law §§ 70, 71, and 71–a in Action No. 1, and their causes of action alleging fraud and seeking to impose liability against the Smith parties under a theory of alter ego in Action No. 2. Contrary to the Bandoians’ contentions, the record does not demonstrate that any of Smith's purportedly fraudulent misrepresentations were what induced the Bandoians to enter into the contract with Smith Associates (see General Business Law § 772;  Tutor Perini Corp. v. State of New York, 209 AD3d 692, 696;  cf.  Crippen v. Adamao, 165 AD3d 1227, 1228;  International Exterior Fabticators, LLC v Decoplast, Inc., 128 AD3d 1016, 1018).  Further, the Bandoians failed to establish any injury associated with Smith Associates's failure to comply with Lien Law article 3–A (see Ippolito v. TJC Dev., LLC, 83 AD3d 57, 64;  see also Teves v. Greenspun, 159 AD3d 1105, 1106;  Anthony DeMarco & Sons Nursery, LLC v Maxim Constr.  Serv. Corp., 130 AD3d 1409, 1411) or that Smith's control and domination over Smith Associates and Smith Architects was used to commit a fraud or wrong against the Bandoians which resulted in injury to them (see KSZ Bldg. Materials v. Stognin, 241 AD3d 1445, 1447;  Vivir of L I, Inc. v. Ehrenkranz, 145 AD3d 834, 835).

The Bandoians’ remaining contention is without merit.

LASALLE, P.J., FORD, VOUTSINAS and MCCORMACK, JJ., concur.