CAUSES OF ACTION AGAINST HOME IMPROVEMENT CONTRACTOR

In addition to breach of contract, there are remedies under the General Business Law and the Lien Law. In this case, the court dismissed the claims for fraudulent inducement and unjust enrichment because of the breach of contract claim.

Cha v Columbia E. Constr. Corp., 2019 NY Slip Op 31829(U), June 18, 2019, Supreme Court, Kings County, Docket Number: 525240/18, Judge: Karen B. Rothenberg:

"With regard to the first cause of action, the plaintiff sufficiently pleaded a claim under the New York Home Improvement Business Law, N.Y. Gen. Bus. Law [GBL] Art. 36-A, §770 et. seq. Defendants argument that plaintiff is not a protected individual because the "home" is an investment property and not her residence is without merit. GBL§ 771(1) provides that "[e]very home improvement contract subject to the provisions of ... article [36-a], and all amendments thereto, shall be evidenced by a writing and shall be signed by all the parties to the contract." GBL §770 defines an "Owner" as any "homeowner" and defines a "home improvement contract" as "an agreement for the performance of home improvement, between a home improvement contractor and an owner, and where the aggregate contract price specified ... exceeds five hundred dollars." Defendant fails to cite any language in the text of the GBL or case law interpreting the provisions of the GBL as restricting its protections to only certain types of homeowners. Further, as this action is not based on an alleged violation of the Home Improvement Business provisions of the Administrative Code of the City ofNew York, §20-386 et. seq, defendants' citation to cases holding that such provisions are only applicable to individuals residing in the subject premises is of no import. Thus, the protections afforded under GBL §770, et. seq. applies to the home improvement contract at issue.

Moreover, plaintiff, as an owner, sufficiently pleaded her third cause of action against defendants for diversion of trust funds in violation of Art. 3A of the Lien Law (see Ippolito v TJC Dev., LLC [83 AD3d 57 [2d Dept 2011]). Under the Lien Law, the funds paid to defendants under the home improvement contract qualify as trust funds, requiring defendants to hold the funds in an escrow account, where they would remain the property ofthe plaintiffuntil substantial completion of the contract (GBL §771[1][e]; N.Y. Lien Law §71-a[4][a][d]). The use of trust funds for any purpose "other than the expenditures authorized in Lien Law §71 before all trust claims have been paid or discharged constitutes an improper diversion of trust assets, regardless of the propriety of the trustee's intentions" and enables an owner to commence an action pursuant to Art. 3A of the Lien Law (RLI Ins. Co. v New York State Dept. of Labor, 97 NY2d 256 [2002]). Further, an officer or agent of the defendant corporation, may be held personally liable for his/her acts which constitute an improper diversion of trust funds (see Ippolito at 71). The complaint alleges that the defendants, in violation of the Lien Law, wrongfully co-mingled funds and used or applied a portion of the paid funds for purposes unrelated to the construction and renovation work contemplated by the contract. It is also alleged that the defendants failed to maintain the required records concerning the trust. Thus, the plaintiff has a viable cause of action against both defendants pursuant to Art. 3A of the Lien Law (see Gorman v Fowkes, 97 AD3d 726 [2d Dept 2012]). Lastly, as it is alleged that the project was abandoned by the defendants, the one-year limitations period of §77(2) of Art. 3A of the Lien Law is not applicable (see Putnins Contracting Corp. v Winston Woods at Dix Hills, Inc., 36 NY2d 679 [1975]). "