Nandlal v. Al-Pros Constr., Inc., Index No. 16256/12, 4/7/17 (Dufficy, J.)

Breach of Contract; Unjust Enrichment; Alter-Ego Liability

By: Gregory Brown, Jr. | Executive Publications Editor

Plaintiffs entered into a contract with Defendant, a construction company, for the renovation of Plaintiff’s home. There were several deficiencies in Defendant’s work: Defendant removed Plaintiff’s roof and did not place a protective tarp over the open structure of the premises; Defendant failed to remove the construction debris from Plaintiff’s home; and Defendant did not properly align or install several parts of the home’s structure. The contract provided that if any of Defendant’s work was of poor quality, there would be “immediate remediation to the satisfaction of the [Plaintiffs] at no additional cost.” Plaintiffs sent two letters to the Defendants requesting that the deficiencies be corrected and in response, Defendant refused and ceased work on Plaintiff’s home. Since Defendant failed to complete the renovation in compliance with the contract, Plaintiffs exercised their option to terminate and sued Defendant alleging three causes of action: (1) breach of contract, (2) unjust enrichment, and (3) alter-ego liability.

During the bench trial, Plaintiffs introduced testimony from a structural engineer who confirmed that there were serious deficiencies in Defendant’s work and that substantial repairs were needed to avoid compromising the structural integrity of Plaintiff’s home. Defendant’s president also testified; he admitted that Defendant was barred from performing work in New York, so he formed a new corporation with a slightly different name.

The Court rendered judgment in favor of Plaintiffs. First, the court found that Plaintiffs established all the elements of their breach of contract claim. To prove a breach of contract, four elements must be proven: (1) formation of a contract between the parties, (2) performance by plaintiff, (3) defendant’s failure to perform, and (4) resulting damages. Each of these elements were met: Plaintiffs and Defendant entered into a contract; Plaintiffs gave Defendant access to complete the renovations; Defendant failed to complete the renovation in a good and; and Plaintiffs’ home was substantially damaged. Thus, the Court found that plaintiffs were entitled to recover their out-of-pocket expenses.

Second, the Court rejected Plaintiffs’ unjust enrichment claim. To prove an unjust enrichment claim, three elements must be proven: (1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered. Since Plaintiffs were awarded their out-of-pocket expenses for their breach of contract claim, an additional award under their unjust enrichment claim would result in double recovery.

Third, the Court ruled that Defendant and its president were alter egos of each other. Alter-ego liability will be imposed (1) where the corporate form been used to achieve fraud or (2) where the corporation has been so dominated by an individual or another corporation, and its separate identity so disregarded, that it primarily transacted the dominator’s business, rather than its own. Since Defendant’s president formed the new corporation to avoid his restrictions on working in New York, the Court found that the corporate form was used to achieve fraud. Thus, Defendant’s president was jointly and severally liable for the amount awarded to Plaintiffs.

Accordingly, the Court rendered judgment in favor of Plaintiffs. In addition to their out-of-pocket expenses, Plaintiffs were also awarded attorneys’ fees, which was provided for in the contract.

Nandlal v. Al-Pros Constr., Inc., Index No. 16256/12, 4/7/17 (Dufficy, J.).

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