WHO MUST SIGN A HOME IMPROVEMENT CONTRACT

J.B. Sterling Co. v. Verhelle, NYLJ September 16, 2019, Date filed: 2019-09-09, Court: U.S. District Court for the Western District of New York, U.S. - WDNY, Judge: District Judge Elizabeth Wolford, Case Number: 6:15-CV-06271:

"Defendants’ primary argument in support of their motion for partial summary judgment is that the Contract is unenforceable because it does not satisfy the requirements of GBL §771, which governs home improvement contracts in New York. (See Dkt. 68-13 at 8-11). The Court agrees, for the reasons that follow.

GBL §771 sets forth the requirements for a valid home improvement contract under New York State law. First, the home improvement contract must be “evidenced by a writing” and “signed by all the parties to the contract.” N.Y. Gen. Bus. L. §771(1). Second, the home improvement contract must contain various disclosures regarding the contractor, the work to be performed, pricing and payment, and the homeowner’s rights and obligations. Id. at §§771(1)(a)-(h).

It is undisputed that the Contract in this case was a home improvement contract within the meaning of GBL §771 and, accordingly, compliance with that law was required. As such, the Contract was required to be “evidenced by a writing” and “signed by all the parties to the Contract.” N.Y. Gen. Bus. L. §771(1) (emphasis added). The Contract itself defines “William & Cyndee Verhelle” as “signing parties” (Dkt. 67-18 at 2 (emphasis added)), yet it is undisputed that Mrs. Verhelle never signed the Contract. Accordingly, a reasonable jury would have to conclude that the Contract fails, on its face, to comply with GBL §771′s fundamental requirement that a home improvement contract be signed by all the parties.2

Plaintiff offers several arguments in support of its position that Mrs. Verhelle’s signature was not required on the Contract. First, it claims that there “can be no question that there was a meeting of the minds in a written agreement,” because Mr. Verhelle participated in the drafting of the Contract, and because “both parties acknowledge that they entered into a contract for remodeling and renovation.” (Dkt. 71-1 at 3). Second, Plaintiff contends that it was Mr. Verhelle who modified the Contract to identify “William & Cyndee Verhelle (Homeowner)” as signing parties, and that Mr. Verhelle held himself out as a homeowner. (Id. at 3-4). Finally, Plaintiff contends that Mr. Verhelle intended to bind Mrs. Verhelle to the terms of the Contract, and that he had the authority to bind Mrs. Verhelle as her spouse under “an implied agency theory.” (Id. at 4). The Court is not persuaded by these arguments.

Plaintiff’s argument that there was a “meeting of the minds” between it and Mr. Verhelle, who purportedly participated in drafting the Contract, misses the point. GBL §771 is a consumer protection statute, and its requirement that a home improvement contract be signed by “all parties” ensures that a homeowner is aware of his or her rights. See Carrea & Sons, Inc. v. Hemmerdinger, 42 Misc. 3d 791, 796 (Rye City Ct. 2013) (explaining GBL §771 is part of “a consumer protection disclosure regimen to protect the property of homeowners from home improvement contractors”). In this case, regardless of any agreement reached between Plaintiff and Mr. Verhelle, there is no evidence that Plaintiff ever reached a “meeting of the minds” with Mrs. Verhelle, the sole owner of the Mendon Property. Moreover, contrary to Plaintiff’s contentions, Mrs. Verhelle does not acknowledge entering into the Contract, and in fact testified at her deposition that she did not recall having ever seen the Contract in 2014, that she was not involved in the bid process, and that she was not involved in the renovation project until the very end. (Dkt. 73-1 at 6-8).

Turning next to Plaintiff’s argument that Mr. Verhelle is the one who included Mrs. Verhelle as a party to the Contract, it is not clear to the Court why Plaintiff thinks this contention supports its position. It is undisputed that Mrs. Verhelle is the sole legal owner of the Mendon Property. As such, her consent was required before any home improvement project could lawfully be undertaken. As a matter of basic property law, it was appropriate and necessary for her to be included as a party to the Contract. Additionally, under New York law, “it is the contractor’s obligation to prepare the contract in compliance with the law. If the contractor fails to do so, it is the contractor who should bear the burden, not the homeowner, who only occasionally may enter into a home improvement contract.” Carrea & Sons, 42 Misc. 3d at 796. In other words, regardless of what changes Mr. Verhelle may have requested as to the Contract, it was ultimately Plaintiff’s burden, as the contractor, to ensure compliance with GBL §771.

To the extent Plaintiff contends that Mr. Verhelle wrongfully held himself out as co-owner of the Mendon Property, the Court notes as an initial matter that property ownership is a matter of public record, and that the appropriate filing of a deed serves as constructive notice regarding the owner of real property. See, e.g., Smullens v. MacVean, 183 A.D.2d 1105, 1107 (3d Dep’t 1992) (“The recording of the deed constituted constructive notice…that [the plaintiff] was the owner of such real property. A reasonable investigation of public records…would have revealed that [the plaintiff] was the title owner of the real property adjacent to defendants’ property.” (citations omitted)). Moreover, there is no evidence in the record before the Court that Mrs. Verhelle ever represented to Plaintiff that Mr. Verhelle was a co-owner of the Mendon Property.3 Plaintiff essentially asks the Court to hold Mrs. Verhelle responsible for Mr. Verhelle’s purported misrepresentations simply because he is her husband, which is a result New York law will not countenance. See Schwartz v. Bankers Tr. Co., 28 A.D.2d 696, 698 (2d Dep’t 1967) (“[A] husband is not deemed the agent of his wife by inference from the marital relationship, the rule being that no agency is to be implied between the spouses from the mere fact of their marriage.”), aff’d, 21 N.Y.2d 927 (1968); Parent Teacher Ass’n, Pub. Sch. 72 v. Manufacturers Hanover Tr. Co., 138 Misc. 2d 289, 297 (N.Y.C. Civ. Ct. 1988) (“One spouse is not an agent of another and cannot be held liable for a spouse’s independently wrongful act because of the marital relationship.” (citation omitted)). In other words, Mr. Verhelle’s alleged misrepresentations could perhaps serve as the basis for a tort claim against Mr. Verhelle (a claim that has not been pleaded). However, the alleged misrepresentations by Mr. Verhelle cannot circumvent the statutory requirement that Mrs. Verhelle’s signature was required on the Contract in order to render it enforceable.

Lastly, the Court is not persuaded that Mr. Verhelle was serving as Mrs. Verhelle’s agent, such that he could bind her to the Contract’s terms. It is true that, under New York law, “[a] spouse, under certain circumstances, may also cause his or her spouse to incur liability under a theory of implied agency.” Jones-Soderman v. Mazawey, No. 09 CIV 3185 SCR LMS, 2010 WL 54759, at *4 (S.D.N.Y. Jan. 6, 2010). In particular, implied agency may exist “where the circumstances are such as to give rise to, or raise a presumption of, an implied authority to make such contracts or purchases, as for example, where the one spouse has been in the habit of conducting the other’s business and making purchases therefor, and the other spouse has acquiesced therein.” 45 N.Y. Jur. 2d Domestic Relations §245. However, “[i]n accordance with the general rule of agency, one spouse is not, under any theory of agency, bound by, or liable for, the act or contract of the other which is beyond the actual, and not within the apparent, scope of the other spouse’s authority or employment, unless the transaction is ratified by the spouse.” 45 N.Y. Jur. 2d Domestic Relations §247 (emphasis added). In other words, as with all theories of agency, an implied agency theory requires some affirmative act by the purported principal to demonstrate an intent or willingness to be bound by the purported agent. See Greene v. Hellman, 51 N.Y.2d 197, 204 (1980) (“As with implied actual authority, apparent authority is dependent on verbal or other acts by a principal which reasonably give an appearance of authority to conduct the transaction….”); see Hallock v. State, 64 N.Y.2d 224, 231 (1984) (“The agent cannot by his own acts imbue himself with apparent authority.”).

Here, Plaintiff has identified no affirmative acts by Mrs. Verhelle to support a finding of implied agency. To the contrary, Plaintiff has cited no facts whatsoever in support of its implied agency argument. (See Dkt. 71-1 at 4). As the party claiming apparent authority by a purported agent, Plaintiff bears the burden of proof on this issue. See Ford v. Unity Hosp., 32 N.Y.2d 464, 472 (1973) (under New York law, “[o]ne who deals with an agent does so at his peril, and must make the necessary effort to discover the actual scope of authority,” and in order to support an apparent authority argument, a party must make “a factual showing that the third party relied upon the misrepresentations of the agent because of some misleading conduct on the part of the principal – not the agent”). On the record before the Court, no reasonable jury could conclude that Plaintiff had met that burden.

The cases cited by Plaintiff are distinguishable from the instant matter, because in each of them, there was evidence of affirmative conduct by the party who was found to be potentially bound by their spouse. In In re Bear Stearns Companies, Inc. Sec., Derivative, & Erisa Litig., 308 F.R.D. 113 (S.D.N.Y. 2015), there was evidence in the record that the husband and wife had “worked in concert to make the trades at issue in the case,” and had affirmatively claimed each other as agents in a related context. Id. at 121. In Jill Real Estate, Inc. v. Smyles, 150 A.D.2d 640 (2d Dep’t 1989), the issue was whether a husband’s signature on a memorandum of sale bound his wife, the co-owner of the property at issue. Id. at 642. In that case, the wife had participated in the sale and “unequivocally informed [the plaintiff] that she was not the owner of the property.” Id. Finally, in Kozecke v. Humble Oil & Ref. Co., 46 A.D.2d 986 (3d Dep’t 1974), the Court expressly acknowledged that “an agency between husband and wife is not to be implied from the mere fact of marriage,” but explained that the evidence of record supported the conclusion that the wife in that case had participated in and ratified her husband’s conduct. Id. at 987. In this case, Plaintiff has not adduced any evidence of participation by Mrs. Verhelle in the negotiation of the Contract, or cited any facts that would support the conclusion that she ratified its terms. To the contrary, the record before the Court shows no communication between Plaintiff and Mrs. Verhelle whatsoever. Plaintiff cannot demonstrate that Mr. Verhelle was acting as Mrs. Verhelle’s implied agent based on nothing more than their marital relationship.

Moreover, even were Plaintiff able to show an implied agency relationship between Mr. and Mrs. Verhelle, the plain language of GBL §771 requires the signatures of all parties, not their agents. Plaintiff has cited to no case law supporting the position that GBL §771′s requirement that all parties sign a home improvement contract can be satisfied through a showing of implied agency. GBL §771 is a consumer protection statute that contains a writing requirement specifically to make certain that homeowners are informed of their rights and, and requiring a personal signature from every contracting party is part of that statutory scheme. Plaintiff has not demonstrated that the common-law concept of implied agency can trump this express statutory requirement. Cf. Wilner v. Allstate Ins. Co., 71 A.D.3d 155, 159 (2d Dep’t 2010) (explaining that the New York Court of Appeals reads consumer protection statutes broadly to effectuate their remedial purposes).

Having determined that the Contract in this case fails to satisfy GBL §771, the Court next considers whether, as Defendants contend, that renders the Contract unenforceable. New York’s highest court, the New York Court of Appeals, has not opined on the consequences for failing to comply with the requirements of GBL §771. However, two of New York’s intermediate appellate courts-the Appellate Divisions of the Third and Fourth Departments-have held that “the failure to strictly comply with [GBL §771] bars recovery under an oral or insufficiently detailed written home improvement contract[.]” Harter v. Krause, 250 A.D.2d 984, 986-87 (3d Dep’t 1998); see also Weiss v. Zellar Homes, Ltd., 169 A.D.3d 1491, 1493 (4th Dep’t 2019); Frank v. Feiss, 266 A.D.2d 825, 826 (4th Dep’t 1999).

The Appellate Division, Second Department has taken a somewhat more lenient approach to compliance with GBL §771, holding that “an otherwise valid, signed, written contract” is not “rendered unenforceable solely by virtue of its failure to contain each and every item enumerated in General Business Law §771.” Wowaka & Sons, Inc. v. Pardell, 242 A.D.2d 1, 7-8 (2d Dep’t 1998). However, even the Second Department has held that GBL §771 precludes enforcement of home improvement contracts that are not “in writing and signed by the parties thereto.” F & M Gen. Contracting v. Oncel, 132 A.D.3d 946, 948 (2d Dep’t 2015); see also Home Const. Corp. v. Beaury, 149 A.D.3d 699, 702 (2d Dep’t 2017) (“General Business Law §771 sets forth a number of requirements for home improvement contracts, including that the contract be evidenced by a writing signed by all the parties to the contract…. [A] contractor cannot enforce a contract that fails to comply with General Business Law §771.”).

Based on these intermediate appellate court cases, the Court concludes that, under New York law, a home improvement contract that does not comport with GBL §771′s signature requirement is unenforceable. Accordingly, the Court agrees with Defendants that Plaintiff’s first cause of action, for breach of the Contract, fails as a matter of law.

The Court’s conclusion does not leave Plaintiff without recourse to seek the compensation it contends it is owed for the work it performed. See Weiss, 159 A.D.3d at 1493 (explaining that “although the failure to strictly comply with the statute bars recovery under an oral or insufficiently detailed written home improvement contract, such failure does not preclude recovery for completed work under principles of quantum meruit” (quotation omitted)). Defendants have not sought summary judgment on Plaintiff’s unjust enrichment claim, and Plaintiff remains free to pursue that theory of recovery."