Second Department, Once Again, Dismisses Payment Claim of Unlicensed Electrical Contractor Despite Close Relationship with Licensed Electrical Contractor that Obtained the Permits and Performed the Work
Print Article- Posted on: Dec 20 2024
This BLOG has previously addressed issues related to proper licensure for contractors and the problems that arise for them if they perform work without a license. See, e.g., [here], [here], [here] and [here]. As previously noted in prior articles, contractors are frequently required by municipalities to be licensed. Unlicensed home improvement contractors are precluded from collecting payments due from homeowners. Brightside Home Improvements, Inc. v. Northeast Home Improvement Services, 208 A.D.3d 446, 449 (2nd Dep’t 2022).
Indeed, with respect to “consumers,” CPLR § 3015(e) requires that if a business must be licensed by virtue of state or local law, a plaintiff must allege in its complaint “as part of the cause of action, that plaintiff was duly licensed at the time of services rendered” and must contain specific information about the license. See, e.g., Thomas Lavin Construction, LLC v. Epstein, 226 A.D.3d 1059 (2nd Dep’t 2024); Cunningham v. Nolte, 188 A.D.3d 806 (2nd Dep’t 2020). The purpose of such licensing legislation was previously described in this BLOG [here] when we noted that in Millington v. Rapoport, 98 A.D.2d 765 (2nd Dep’t 1983), in reversing the court below and dismissing plaintiff’s complaint which sought to foreclose a mechanic’s lien, the Court stated:
Since the purpose of [New York City’s Administrative Code] is to protect the homeowner against abuses and fraudulent practices by persons engaged in the home improvement business, it is well established that the lack of a license bars recovery in either contract or quantum meruit. Since strict compliance with the licensing statute is required, recovery is barred regardless of whether the work was performed satisfactorily or whether the failure to obtain a license was willful. The fact that the homeowner was aware of the absence of a license or even that the homeowner planned to take advantage of its absence creates no exception to the statutory requirement [citations omitted].
Millington, 98 A.D. at 766 (citations omitted); see also Callos, Inc. v. Julianelli, 300 A.D.2d 612, 2013 (2nd Dep’t 2002) (“It is well settled that licensing statutes are to be strictly construed and that an unlicensed contractor forfeits the right to recover damages based either on breach of contract or on quantum meruit.”)
Section 27-3017(a) of the New York City Administrative Code (Electrical Code), which is not limited to “consumers” or homeowners, prohibits the performance of electrical work in New York City without a license. This furthers the purpose of the Electrical Code, which provides that “[s]ince there is danger to life and property inherent in the use of electrical energy, the electrical code is enacted to regulate the business of installing, altering or repairing wiring and appliances for electrical light, heat, power, signaling, communication, alarm or data transmission in the city of New York and the licensing of all persons who engage in such business.” New York City Administrative Code § 27-3002.
The significance of the Electrical Code and the strictness with which compliance will be construed was addressed in Electrical Contracting Solutions Corp. v. Trump Village Section 4, Inc., the subject of a recent BLOG article [here]. The plaintiff in Electrical Contracting entered into contracts with the defendant to perform electrical work. The plaintiff’s vice president, who held a master electrician’s license, pulled the permits under the name of his own (but different from the Plaintiff) company. The plaintiff’s vice president supervised the electrical work that was performed by the Plaintiff’s own employees. The Second Department dismissed the plaintiff’s contract claim because it was unlicensed and the relationship between the plaintiff and the licensed entity that actually obtained the permit was insufficient to satisfy the requirements of the NYC Administrative Code.
On December 18, 2024, the Appellate Division, Second Department, decided Mikoma Electric, LLC v. Otek Builders, Inc., a case similar to Electrical Contracting. Defendant in Mikoma was a general contractor (“GC”) on numerous projects. GC hired plaintiff Mikoma Technology of Power and Lights Wiring and Control Limited Liability Partnership (“Mikoma Tech”) to perform electrical work on some of the projects and plaintiff Mikoma Electric, LLC (“Mikoma Electric”) to perform electrical work on the remainder of the projects. Mikoma Electric was properly licensed under § 27-3017 of NYC’s Administrative Code and Mikoma Tech was not. “Mikoma Electric obtained the electrical work permits for the projects subcontracted to Mikoma Tech, and the work on those [projects] was allegedly performed by Mikoma Electric’s employees and supervised by the treasurer of Mikoma Electric … who is a licensed master electrician and works as an electrician for Mikoma Tech.” Mikoma Tech filed a mechanic’s lien and both Mikoma Tech and Mikoma Electrical brought breach of contract claims for, inter alia, failure to pay for the work. The motion court denied GC’s motion to dismiss Mikoma Tech’s claims and to discharge its lien.
On appeal, the Second Department found that GC’s motion to dismiss pursuant to CPLR 3211(a)(1) was properly denied “because the printouts from the New York City Department of Buildings’s webpage, submitted by the defendants to prove that Mikoma Tech was not a licensed electrical business, do not constitute documentary evidence within the meaning of CPLR 3211(a)(1).” (Citations omitted.)
However, the Second Department held that Mikoma Tech’s claims should have been dismissed pursuant to CPLR 3211(a)(7). The Court first noted that licensing statutes should be “strictly construed” and, therefore, cannot “be satisfied by employing or subletting the work to an appropriately licensed person.” (Internal quotation marks omitted.) Thereafter, the Court stated:
Here, the complaint, even as supplemented by affidavits from Mikoma Tech’s president and [Mikoma Electrical’s licensed Master electrician], failed to allege that Mikoma Tech was licensed to perform electrical work in New York City. As Mikoma Tech was not licensed to perform electrical work in the City, it may not recover against the defendants under a breach of contract or quantum meruit theory and has forfeited the right to foreclose on mechanic’s liens.
Mikoma Tech’s contention that recovery should not be denied because Mikoma Electric was a duly licensed subcontractor that performed the electrical work is without merit. This Court has previously held that such a relationship is insufficient to permit an unlicensed contractor to recover for work performed in the City. Moreover, that the permits were obtained in Mikoma Electric’s and [its master electrician]’s names and that [GC] may have known that the electrical work permits were issued to an entity other than Mikoma Tech does not bar application of the above rule.
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.
