Justice Court of the Town of Pleasant Valley, Dutchess County, March 22, 2022

Richard Chapman, plaintiff pro se.

Cheryl Davis, defendant pro se.

Heather Kunkel, defendant pro se.

In this small claim, plaintiff pro se Richard Chapman doing business as Chapman Construction seeks the recovery of $2,999.99 for breach of contract. Defendants pro se Cheryl Davis and Heather Kunkel appeared and entered a general denial of the claim, declining to counterclaim. The matter proceeded to trial at the first appearance on February 24, 2022. Each of the parties testified, cross-examined each other and presented documentary evidence to the court. All 12 exhibits presented by the parties were admitted into evidence upon the consent/stipulation of the parties. For the purposes of simplicity, exhibits 1-12 are considered to be joint exhibits.

On or about September 15, 2021, the defendants hired the plaintiff to perform a basement renovation at their home. Plaintiff drafted a written contract (exhibit 3), which he signed together with defendant Kunkel (the contract). The contract contained a general outline of the work to be performed, as well as a payment schedule.

Albeit with some acrimony, the vast majority of the work was completed and paid for. In the end, however, a dispute arose concerning the basement's two egress windows and egress window wells. Regarding these items, the contract provided as follows: "2-Windows will be a minimum of 20 [inches] to meet egress standards and aluminum window wells with clear cover." (Exhibit 3.)

At trial, the parties testified as to the purpose of basement egress windows and wells. By stipulation, excerpts from the relevant building code were entered into evidence. In short, basement egress windows are designed to allow for escape and rescue from bedrooms that are located in basement areas. Section R310 of the International Residential Code (exhibit 8){**75 Misc 3d at 363} requires such egress windows and wells to be installed in basement bedrooms pursuant to certain specifications. Among other things, the code limits the height that the egress windows can be [*2]installed from the basement floor (44 inches), as well as their minimum opening size (24 inches high, 20 inches wide), for ease of escape. Where the egress window is located below ground level, the code requires that a "window well" be dug around the window area to allow sufficient space for the window to "fully" open for purposes of emergency escape and rescue through the window and up to ground level. (Exhibit 8.)

The problem with the basement egress windows was twofold. First, the window wells were not built large enough to allow adequate space for the egress windows to fully open. Additionally, the egress windows were installed too high from the basement floor.

Upon their discovery of this defect, the defendants terminated the contract. At that point in the project, only the contract's final payment remained outstanding. The contract's payment schedule described the final payment as follows: "Final balance of contact [sic] due upon completion of basement renovation. $3525.00." (Exhibit 3.) Notably, the contract also provided that "[a]ll work will be completed to customer satisfaction and the construction area as clean It [sic] was before we came" and "[j]ob is completed upon customer satisfaction." (Exhibit 3.)

After being terminated by the defendants, the plaintiff offered to come back to the project stating the following via text message:

"I'll come back, move dirt and throw the old 2 windows away. Other then [sic] that, this job is done in full. You are holding my final payment of $3,525.00 for nothing. I'm trying to resolve this. You need the egress wells no matter what, as the Building Inspector will tell you." (Exhibits 10, 11, 12.)

In subsequent text messages, the plaintiff additionally offered to take $600 off of the final payment. (Exhibits 10, 11, 12.) The plaintiff's text messages additionally contained threats that he would contact the building inspector and tax assessor if the defendants didn't pay him what he wanted. (Exhibits 10, 11, 12.)^[FN1]

{**75 Misc 3d at 364}The defendants consulted another building professional, who, on or around January 19, 2022, provided the defendants with the applicable building code provisions concerning the basement egress windows and identified what needed to be remedied. (Exhibit 8.)

On January 20, 2022, the plaintiff filed this small claim seeking the amount of $2,999.99, which represented the final scheduled payment due under the terms of the contract.^[FN2]

On or around February 4, 2022, the defendants obtained a contractor's estimate to perform the remedial work for the egress windows and wells, which quoted a total price of $5,450. (Exhibit 9.)

A. The Applicability of General Business Law Article 36-A

In 1987, the New York State Legislature added article 36-A to the General Business Law to regulate "home improvement contracts." (See General Business Law § 770 et seq.)

For the purposes of article 36-A, a "home improvement" is defined as the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, siding, insulation, roofing, windows, terraces, patios, landscaping, fences, porches, garages, solar energy systems, flooring, basements, and other improvements of the residential property and all structures or land adjacent to it. (See General Business Law § 770 [3].) A "home improvement contract" arises when a homeowner makes an agreement with a home improvement contractor for a home improvement exceeding $500. (See General Business Law § 770 [6].) A "home improvement contractor" is any person or entity who performs a home improvement (on{**75 Misc 3d at 365} property that they do not own, in whole or in part) for a fee that exceeds $1,500 during any period of 12 consecutive months. (See General Business Law § 770 [5].)

Here, based upon the nature, scope and dollar-value of the defendant homeowners' basement project (exhibit 3), the project qualifies as a "home improvement," plaintiff qualifies as a "home improvement contractor," and the parties' agreement qualifies as a "home improvement contract." As a result, plaintiff's contract is subject to the provisions of General Business Law article 36-A. (See General Business Law § 770 et seq.)

B. The Effect of Failure to Comply with General Business Law Article 36-A

The purpose of article 36-A is to protect homeowners from contractors, who may be innocently unclear or misunderstood (on one end of the spectrum) or who may be completely unscrupulous or venal (on the other end of the spectrum). Briefly summarized, the statute aims to accomplish its purpose by (1) requiring the contract to be memorialized in a way that the agreement is clear and capable of being understood and accepted by the homeowner, (2) requiring the contractor to include certain important terms in the contract along with certain important items of information for the homeowner's benefit and (3) granting special contractual rights to the homeowner. (See generally General Business Law § 771.)

Specifically, General Business Law § 771 requires that every home improvement contract shall be evidenced by a writing, shall be signed by all parties and shall also contain the following information, terms and rights:

"(a) The name, address, telephone number and license number, if applicable, of the contractor.

"(b) The 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.

"(c) 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,{**75 Misc 3d at 366} and the agreed upon consideration for the work and materials.

"(d) 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 [*4]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'.

"(e) 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.

"(f) If 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{**75 Misc 3d at 367} 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.

"(g) If 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.

"(h) 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 [*5]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. . . .

"2. The 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,{**75 Misc 3d at 368} signed by the contractor. The writing may also contain other matters agreed to by the parties to the contract." (See General Business Law § 771 [1] [a]-[h]; [2].)

Courts across the State of New York have treated a contractor's failure to comply with the requirements of General Business Law § 771 in different, and often opposite, manners.

In the Third and Fourth Judicial Departments, the Appellate Divisions have held that failure to comply with the requirements of General Business Law § 771 renders the home improvement contract unenforceable and bars the contractor's recovery for breach of contract. (See LaPenna Contr., Ltd. v Mullen, 187 AD3d 1451 [3d Dept 2020] [failure to comply with General Business Law § 771 (1) (b) rendered the contract unenforceable and resulted in dismissal of contractor's breach of contract claim]; Grey's Woodworks, Inc. v Witte, 173 AD3d 1322 [3d Dept 2019] [failure to comply with General Business Law § 771 (1) (b) through (h) rendered the contract unenforceable and resulted in dismissal of contractor's breach of contract claim]; Frank v Feiss, 266 AD2d 825, 825 [4th Dept 1999] [failure of the contractor to enter into a signed written home improvement contract with the homeowner in conformity with General Business Law § 771 barred recovery based upon breach of contract]; see also TR Constr. v Fischer, 26 Misc 3d 1238[A], 2010 NY Slip Op 50462[U] [Watertown City Ct 2010] [failure to comply with General Business Law § 771 (1) (d), (e) and (h) rendered the home improvement contract unenforceable by the contractor].)

The Appellate Division of the Second Judicial Department, in which this court is located, contains several conflicting decisions. Some of the decisions have stated that failure to comply with General Business Law § 771 does not render a home improvement contract unenforceable. (See e.g. Island Wide Heating & A.C. v Sachs, 189 Misc 2d 355 [App Term, 2d Dept 2001]; Porter v Bryant, 256 AD2d 395 [2d Dept 1998]; Wowaka & Sons v Pardell, 242 AD2d 1 [2d Dept 1998].)

Other Second Department decisions have stated that failure to comply with General Business Law § 771 does render a home improvement contract unenforceable. (Home Constr. Corp. v Beaury, 149 AD3d 699, 702 [2d Dept 2017]; Johnson v Robertson{**75 Misc 3d at 369}, 131 AD3d 670, 672 [2d Dept 2015]; Evans-Freke v Showcase Contr. Corp., 85 AD3d 961, 962 [2d Dept 2011].)^[FN3]

When there is a disagreement among the judicial departments on the interpretation of a statute, it is for the New York State Court of Appeals to resolve. (Lee v Rogers, 177 AD3d 965, 967 [2d Dept 2019]; see also 22 NYCRR 500.22 [b] [4].)

The Court of Appeals, however, has not yet addressed the disagreement between the [*6]judicial departments concerning the effect of General Business Law § 771 on home improvement contracts.

In a situation such as this, the doctrine of stare decisis compels a trial court to follow the latest decision of its controlling appellate court. (Douglas v Latona, 61 Misc 2d 859, 864 [Sup Ct, Erie County 1970]; Matter of Weinbaum, 51 Misc 2d 538 [Sur Ct, Nassau County 1966].)

[1] The latest decision of the Appellate Division, Second Judicial Department, is Home Constr. Corp. v Beaury (149 AD3d 699 [2d Dept 2017]). As a result, this court must apply the rule stated in the Beaury case, i.e., that failure to comply with General Business Law § 771 renders a home improvement contract unenforceable and bars a contractor's recovery for breach of contract.

C. The contract is unenforceable for plaintiff's failure to comply with General Business Law § 771.

Here, the plaintiff's contract fails to comply with the requirements of General Business Law § 771 in several respects. First, plaintiff failed to obtain the signature of defendant homeowner Davis on the contract, thus, resulting in a partial failure to comply with the general provisions of General Business Law § 771 (1). Plaintiff also partially failed to comply with General Business Law § 771 (1) (a), in that his address was not stated in the contract. More significantly, however, plaintiff's contract completely failed to comply with the requirements of General Business Law § 771 (1) (b), (d), (e) and (h).

As a result, the contract is unenforceable and the plaintiff is barred from seeking recovery under a theory of breach of contract. Accordingly, plaintiff's small claim seeking recovery{**75 Misc 3d at 370} of the final installment payment pursuant to the contract is hereby denied and dismissed.

D. If the contract were enforceable, plaintiff's material breach precludes recovery.

A "material breach" of contract is generally regarded as a breach that "substantially defeats" the purpose of an agreement in such a fundamental way as to "defeat the object of the parties in making the contract," and otherwise occurs where a party fails to perform a substantial part of the agreement, the performance of which was the initial inducement for entering the agreement. (Matter of Buffalo Schs. Renovation Program, 54 Misc 3d 1204[A], 2016 NY Slip Op 51846[U] [Sup Ct, Erie County 2016]; Awards.com v Kinko's, Inc., 2002 NY Slip Op 30025[U] [Sup Ct, NY County 2006].)

In determining whether a breach is a "material breach," New York courts may consider the following factors: (1) the purpose of the contract, (2) the extent to which the injured party will be deprived of the benefit it reasonably expected or damaged by the lack of full performance, (3) the extent to which the injured party can be adequately compensated for the part of the benefit that it will not receive, (4) the extent to which the party failing to perform will suffer forfeiture, (5) the likelihood that the party failing to perform will cure its failure, taking into account all of the circumstances including any reasonable assurances, and (6) the extent to which the behavior of the party failing to perform comports with the standards of good faith and fair dealing. (Wechsler v Hunt Health Sys., Ltd., 330 F Supp 2d 383, 414 [SD NY 2004]; Awards.com v Kinko's, Inc., 2002 NY Slip Op 30025[U] [Sup Ct, NY County 2006].)

Where a party has materially breached the contract, the other party may terminate or rescind the contract and suspend its own further performance of the contract. (Lanvin Inc. v Colonia, Inc., 739 F Supp 182, 195 [SD NY 1990]; RR Chester, LLC v Arlington Bldg. Corp., 22 AD3d 652 [2d Dept 2005].) This is particularly true where the contract does not contain provisions requiring that notice of breach or an opportunity to cure be provided to the breaching party. (Awards.com, LLC v Kinko's, Inc., 14 NY3d 791, 793 [2010].)

[2] Here, considering factors No. 1 and No. 2 above, the overriding purpose of the basement [*7]renovation was to provide two bedrooms for the defendants' two daughters. Notably, the contract, itself, acknowledged the significance of these basement egress windows/wells and the triggering of certain residential{**75 Misc 3d at 371} building code requirements. Unmistakably, receiving two functioning, useable and safety code-compliant basement bedrooms was an integral and substantial part of the contract. Without them, use of the basement would be dangerous and/or illegal.

Considering factors No. 4, No. 5 and No. 6, it is significant to note that the plaintiff never offered to fully remedy the defects. Instead, the plaintiff threatened to report the defendants (and, ironically, his own non-compliant work) to the building inspector. In any event, the vast majority of the contract's work had already been performed and paid for at that point. The final payment sought by the plaintiff represented, more or less, the value of the basement egress window and window well installation, which was defective (in the first instance) and would have had to have been removed and reinstalled at greater cost to the plaintiff (in the second instance). Therefore, the plaintiff was not suffering a forfeiture by being terminated from the project at that point in time. In fact, being terminated and relieved of his obligation to replace and repair his defective work under the contract likely had the effect of saving him money and avoiding loss of profit.

It is also important to note that the contract expressly required that all work be completed to the defendants' "satisfaction," and that the work would not be considered complete until the defendants were "satisfied." (See exhibit 3.) Obviously, the defendants were not satisfied here, and that, alone, could constitute a material breach of the contract as it is written.

In consideration of the above-mentioned factors, this court finds that plaintiff's failure to install operational basement egress windows and window wells constituted a material breach of the contract.

As a result, the defendants were justified in terminating the plaintiff from the project and suspending their own performance under the contract by refusing to pay the final scheduled payment. Significantly, the contract did not contain a requirement that the defendants provide a particular form of notice of breach or an opportunity for the plaintiff to cure his breach. Consequently, this afforded the defendants the ability to terminate the contract unilaterally and immediately.

E. The Availability of Quantum Meruit Recovery in the Absence of an Enforceable Contract

Although a contractor cannot enforce a contract that fails to comply with General Business Law § 771, a contractor may{**75 Misc 3d at 372} seek to recover based upon the legal doctrine of quantum meruit. (See Home Constr. Corp. v Beaury, 149 AD3d 699 [2d Dept 2017].) Quantum meruit is Latin for "as much as deserved." In the absence of an enforceable contract, the doctrine of quantum meruit allows the contractor an opportunity to prove and recover the reasonable value of the labor and materials supplied and, thus, prevent the unjust enrichment of the party who received the benefit of the labor and materials. (Evans-Freke v Showcase Contr. Corp., 85 AD3d 961 [2d Dept 2011].)

[3] Significantly, however, quantum meruit is an equitable remedy. (Home Constr. Corp. v Beaury, 149 AD3d 699 [2d Dept 2017]; Glinskaya v Zelman, 128 AD3d 771, 772 [2d Dept 2015].) The Small Claims Part of the Justice Court can only hear causes of action for "money only" and, thus, lacks the equity jurisdiction needed to fashion an equitable remedy, such as quantum meruit. (See UJCA 1801; see e.g. TR Constr. v Fischer, 26 Misc 3d 1238[A], 2010 NY Slip Op 50462[U] [Watertown City Ct 2010] [holding that the home improvement contract at issue was unenforceable due to failure [*8]to comply with General Business Law § 771 and, further, dismissing any claim to recover under a theory of quantum meruit due to lack of equity jurisdiction].)

Consequently, this court cannot award relief to the plaintiff based upon the alternative theory of quantum meruit.

Even if this court could award relief based upon quantum meruit, the plaintiff would not be entitled to recovery of the same for failure to demonstrate that the value of his services exceeded the amounts already paid by the defendants. (See e.g. Home Constr. Corp. v Beaury, 149 AD3d 699, 702 [2d Dept 2017] [dismissing quantum meruit claim for insufficient proof of value exceeding what had already been paid]; see also Van Deloo v Moreland, 84 AD2d 871, 871 [3d Dept 1981] [holding that, in view of the trial court's finding with respect to defendant's breach of the contract, defendant was not entitled to recover the unpaid installments either on the contract or in quantum meruit].)

For the foregoing reasons, it is hereby ordered that the plaintiff's small claim herein is denied and dismissed.