Appeal by defendants/third-party plaintiffs George Sachs and Barbara Sachs from a judgment of the District Court of Suffolk County, Third District (C. Steven Hackeling, J.), entered December 8, 2003. The judgment, insofar as appealed from, after a nonjury trial, awarded plaintiff the principal sum of $11,630, as against

defendant George Sachs, which included, as a setoff, the sum of $1,270 awarded to defendant George Sachs on his counterclaim, and dismissed the third-party action.

By decision and order dated September 20, 2005, the appeal was held in abeyance and the matter remanded to the court below for a reconstruction of the trial testimony which took [*2]place on May 5, 2003. The lower court has reconstructed said testimony.

Judgment, insofar as appealed from, modified by vacating the award in favor of plaintiff, dismissing plaintiff's complaint, increasing the amount awarded to George Sachs and Barbara Sachs on their counterclaim to the sum of $1,390, reinstating the third-party complaint of George Sachs and Barbara Sachs and awarding judgment in their favor as against the third-party defendant in the sum of $1,390; as so modified, affirmed without costs.

Plaintiff, C.F.C. Commercial Flooring Contractors, Inc. (C.F.C.), a licensed home improvement contractor, commenced this action to recover the balance due on a contract to install tile flooring in defendants' house. Defendants counterclaimed and initiated a third-party action against Euro Marble Center, Inc. (Euro), the subcontractor who installed the tile, for damages to their house. Following trial, the complaint against Barbara Sachs and the third-party complaint were dismissed, and plaintiff was awarded
the principal sum of $11,630 against George Sachs, after a $1,270 setoff for monies awarded to said defendant on his counterclaim.

On appeal, defendants George Sachs and Barbara Sachs contend that the court below erroneously denied their motion for a trial order of dismissal on the ground that plaintiff failed to plead and prove a license pursuant to CPLR 3015 (e). The Suffolk County Code, Chapter 345 Article II, Home Improvement Contracts, provides in relevant part as follows:

"345-17. License required.

A. It is unlawful for any person to engage in any business as a home improvement contractor without obtaining a license therefor from the Office [Department of Consumer Affairs] in accordance with and subject to the provisions of this Article and Article I. Every licensee shall maintain an establishment within the State of New York.

345-23. Exempted operations.

No license or identification card shall be required of:

A. An employee, other than a salesman or a person acting as a salesman, who performs labor or services for a licensed home improvement contractor for wages or salary."

In Butler Gen. Contr. v Rocco (281 AD2d 527 [2001]), the Appellate Division, Second Department, was faced with a similar statute and fact pattern as in the instant case and held in relevant part as follows:

"It is well settled that an unlicensed home improvement contractor or subcontractor forfeits his right to recover damages based either on breach of contract or on [*3]quantum meruit (see B & F Bldg. Corp. v Liebig, 76 NY2d 689; Matter of Ashmawy v L. I. Dock & Bulkhead Corp., 251 AD2d 500; Fisher Mech. Corp. v Gateway Demolition Corp., 247 AD2d 579; Ellis v Gold, 204 AD2d 261). Here, however, it is undisputed that the plaintiff contractor was licensed to perform home improvements in Nassau County. Furthermore, the Administrative Code of the County of Nassau provides that no contractor's license shall be required of [a]n individual who performs labor or services for a contractor as an employee thereof' (Administrative Code § 21-11.10 [1]). The defendants contend that the workers hired by the plaintiff were independent contractors who do not qualify for this exemption. The existence of an employee-employer relationship is based upon evidence that the employer exercises either control over the results produced or over the means used to achieve the results (see Matter of 12 Cornelia St., 56 NY2d 895, 897; Bhanti v Brookhaven Mem. Hosp. Med. Ctr., 260 AD2d 334; Murphy v ERA United Realty, 251 AD2d 469). Here, there is an issue of fact as to whether the plaintiff exercised sufficient control over the work performed by the workers it hired to create an employee-employer relationship. Accordingly, it cannot be determined as a matter of law whether these workers were required to be licensed. Accordingly, the defendants' motion for summary judgment must be denied."

Although in the instant case the lower court made no findings with regard to whether plaintiff so exercised control over the work performed by Euro as to bring Euro within the purview of the employee exception contained in section 345-23 of the Suffolk County Code, it is apparent from a review of the record that no control whatsoever was exercised. The parties stipulated that all the installation work was performed by Euro and that plaintiff's president was not present when the work was performed. Accordingly, plaintiff was not entitled to recover for the work performed based on either breach of contract or quantum meruit and the lower court erred insofar as it awarded plaintiff judgment for same. In view of the foregoing, we need not reach the issue of whether plaintiff's failure to allege in its complaint that it is a licensed home improvement contractor is fatal to its right to recover.

Contrary to appellants' contention on appeal, the court below thoroughly addressed their claim for damages. However, since there was evidence that Euro improperly removed some of the tarp that defendants had installed to keep the dust from spreading throughout the house, the court should have awarded George Sachs an additional $120 on his counterclaim against C.F.C., representing the cost of cleaning three additional bed covers, necessitated by the removal of the tarp.

As to the issues raised concerning the dismissal of the third-party complaint, under the circumstances, George and Barbara Sachs were the third-party beneficiaries of the agreement between C.F.C and Euro. Accordingly, the lower court erred in dismissing the third-party action (see R. H. Sanbar Projects v Gruzen Partnership, 148 AD2d 316; 22 NY Jur 2d, Contracts §§ 306, 307). Since the damages awarded
($1,390) resulted from Euro's breach of contract, they were entitled to judgment for same on their third-party action. C.F.C. and Euro are jointly and severably liable to appellants for said $1,390.

Rudolph, P.J., Angiolillo and Tanenbaum, JJ., concur.
Decision Date: November 30, 2006