Court of Appeals holds contractor defendant to building permit application; name on permit application and threat to withdraw permit bar summary judgment


Utica Mutual Insurance Company & Co., v. Style Management Associates Corp., et al., __ N.Y.3d ___; 2016 NY Slip Op 07046 (October 27, 2016)

New York’s highest court reversed an intermediate appellate decision and denied summary judgment to a defendant contractor where it found “triable issues of fact exist as to the nature of the relationship between the moving defendants and the unlicensed contractor involved in the renovation project.”

At issue was whether the contractor that had applied for and obtained a building permit for work could escape liability for property damage by contending that it did not perform the relevant work and that having its name on the permit alone could not create a duty to ensure safety or conditions at the construction site. Plaintiff is the insurer that paid the claim of the homeowners whose property was damaged by two fires that occurred during renovations as a result of improperly using, storing and maintaining flooring materials.

Defendant’s motion for summary judgment had been denied by the motion court, which found numerous questions of fact regarding the roles of the contractor’s principal and the other contractor. A divided Appellate Division reversed, the majority holding that “The fact that the building permit for the renovation project named Style Management Corp. as the contractor, and the deposition testimony that the Baruch defendants paid a sum of money to the Style defendants for the use of the name Style Management Corp. on the permit, is insufficient to raise a triable issue of fact as to whether the Style defendants were the general contractor for the project, in the absence of evidence that the Style defendants acted as the general contractor by, for example, hiring, supervising, or paying subcontractors.” 125 AD3d 759, __, 2015 NY Slip Op 01266 (2nd Dep’t 2015).

In a searching dissent, Justice Maltese identified several issues of fact but also stepped back to acknowledge what else was at stake. He wrote, “The fact that the Style defendants may have abandoned their duty as the licensed home improvement contractor in allowing Zak Baruch and AA Find Home Builder, Inc. (hereinafter together the Baruch defendants), or someone else, to oversee and safeguard the premises from a fire hazard during the renovations should not obviate the responsibilities of the Style defendants as the named contractor, who was carrying the insurance. To hold otherwise would allow the Style defendants to perpetuate fraud on the Village of Lake Success and circumvent the very purpose of requiring licenses and insurance to protect both consumers and workers.” Id. at ___. The Appellate Division subsequently granted plaintiff’s motion to appeal to the Court of Appeals.

A unanimous Court of Appeals reversed the decision of the Appellate Division majority based upon evidence that the defendant’s role in the home renovation project was more than the mere listing of defendant’s name on the building permit and the completion of some minor carpentry work.

The record showed that the unlicensed contractor paid the defendant, who was licensed, to obtain the building permit to cover the entire renovation project, including the installation of wood floors. The two had engaged in similar arrangements on other projects. The permit application identified the defendant as the contractor and included floor installation in the work to be performed. The application had been supported by defendant’s certificate of liability insurance, contractor’s license, and workers’ compensation information.

The record also showed that the defendant’s principal demanded (and received) additional funds when he found out that the job was bigger than he had anticipated. He had even threatened to withdraw the permit – and thus bring the project to a halt – if the unlicensed contractor did not supply the additional funds. The Court held that, “A trier of fact should be permitted to determine whether [the contractors] were partners, a joint venture, or in an agency relationship such that the Style defendants would be liable for the damage that occurred as a result of the flooring work.” 2016 NY Slip Op 07046.