Issue

May City Court entertain small claims construction litigation if no valid contract existed and court lacks equity jurisdiction?

This case arises from a construction contract claim. Plaintiff TR Construction (Robert Stephenson, Contractor) sued Defendant Shameice Fischer over a September 29, 2009, contract [*2]for $5,500 of construction work upon Defendant's Watertown residence, seeking $4,000 for work already performed.

Each party submitted paperwork purportedly representing the contract between them. Plaintiff provided an undated invoice entitled "Final Bill" and apparently signed by Mr. Stephenson, listing a variety of services either to be provided or which had been provided and indicating a total due of $4,000 ($5,500 less a $1,500 down payment). Defendant provided another document signed and dated by both parties detailing work to be performed on her house, completion timelines and payment details. It specifies that Defendant provided a $1,500 down payment with $2,500 owed upon completion ("less 5% of the original price quote, $200, to be paid upon completion of all work").

Two points of law govern disposition of this case. The first, General Business Law § 771 invalidates home improvement contracts not substantially satisfying its requirements. See Frank v. Feiss, 266 AD2d 825, 826 (4th Dept. 1999);. See also GBL § 771. The second, Uniform City Court Act § 1801, denies small claims courts equity jurisdiction, even over contract disputes where the court determines the contract is unenforceable. UCCA § 1801; David. D. Siegel, NY Prac. § 581 (4th ed.). As explained below, because the contract fails to comply with GBL § 771, it is legally unenforceable. Accordingly, any remedies the parties may seek sound in equity and therefore this matter must be heard in a court enjoying such jurisdiction.

Plaintiff's failure to comply with GBL § 771 in drafting the agreement he hoped would govern this matter prevented it from becoming an enforceable contract. See Frank v. Feiss, supra, at 826 ("[T]he failure of plaintiff to enter into a signed written home improvement contract in conformity with General Business Law § 771 bars recovery based upon breach of contract."); Harter v. Krause, 250 AD2d 984, 986 (3d Dept. 1998) ("[F]ailure to strictly comply with the statute [§ 771] bars recovery under an oral or insufficiently detailed written home improvement contract . . ."); Mindich Developers, Inc. v. Milstein, 227 AD2d 536, 537 (2d Dept. 1996) ("We find . . . that the plaintiff cannot recover for lost profits for work not performed where there was . . . [no] strict compliance with [GBL 771] . . . ."). The contract here lacks several provisions, including § 771(1)(d)'s required warning that an unpaid contractor may have a mechanic's lien against the owner's property. GBL § 771(1)(d). Also missing are subsection (1)(e)'s notice that contractors must deposit pre-completion payments in accordance with New York's lien law or take other steps to protect the money prior to completion and subsection [*3](1)(h)'s provision permitting an owner three days to cancel the contract unless the work occurs on an emergency basis. GBL §§ 771(1)(e), (h).^[FN1]

The Court is aware of other cases in the Second Department upholding construction agreements notwithstanding § 771 omissions. See Island Wide Heating & Air Conditioning v. Sachs, 189 Misc 2d 355, 356 (2d Dept. 2001); Porter v. Bryant, 256 AD2d 395 (2d Dept. 1998); Wowaka & Sons, Inc. v. Pardell, 242 AD2d 1, 3-5 (2d Dept. 1998); see also 21 NY Jur. Consumer and Borrower Protection § 467 (2d ed.). Among these, Pardell provides the most comprehensive defense of allowing partial § 771 compliance. There, the Second Department reasoned that, while "illegal contracts are generally unenforceable[,]" invalidating the contract at hand would amount to overkill because "violation of a statutory provision will render a contract unenforceable only when the statute so provides, and the loss of judicial recourse would not be out of proportion to the requirements of public policy or appropriate individual punishment." Pardell at 6. It then observed that General Business Law article 36-A "does not expressly mandate that contracts which are not in strict compliance therewith are unenforceable" and that the § 771 provisions omitted were immaterial to the parties' dispute ("none of the alleged omissions from the written contract caused them to enter into the contract, or are relevant to the appellants' reason for terminating the respondent's services, to wit, the respondent's alleged inability to deliver the project as per the contract.'" Id. at 6, 8. The court concluded that the parties had forged a valid contract notwithstanding its § 771 shortcomings. Id. at 8 ("Accordingly, in the absence of an express statutory command or other cogent argument, we are not persuaded that the omissions from the instant contract should result in a per se finding that it is unenforceable.").

Besides being obliged to adhere to the Fourth Department's holding in Frank v. Feiss, this Court can surmise at least one "cogent argument" supporting perfect compliance as a requirement of § 771 contracts. It is that Pardell, Bryant and Sachs put a judicial gloss upon the statute permitting compliance with the spirit of the law (as opposed to its letter) of the sort that the Fourth Department has specifically condemned. See Cucinotta v. Hanulak, 231 AD2d 904, 905 (4th Dept. 1996). In Hanulak, the Fourth Department overruled a lower court's sua sponte amendment of Real Property Law § 227-a(2) to render timely a senior citizen's untimely notice of vacation to her landlord: "[T]he order and judgment cannot be sustained on grounds of equity and fair play or on the ground that plaintiff complied with the statute in spirit.'" Id. Doing so, the court observed, effectively conferred equity powers upon a court specifically forbidden them. [*4]See Id. (citing Siegel, NY Prac. §581 [2d ed.]). Of course, the consumer protections § 771 was designed to provide afford another good reason for the Fourth Department's sola scriptura approach.

III.

The parties' failure to create an enforceable contract normally would not preclude relief under quantum meruit (see Frank v. Feiss, at 364; Harter v. Krause at 547). However, as noted above, this Court lacks the equity jurisdiction necessary to provide it. UCCA § 1801; Hanulak at 905; Siegel, supra, NY Prac. § 581. The Parties are therefore directed to seek relief in a court with equity jurisdiction.

IV.

The Case is dismissed.

This Opinion shall serve as the Judgment and Order of the Court:

Entered: February 9, 2010____________________________________

Date: February 9, 2010Hon. Judge James C. Harberson, Jr.