Scott E. Mollen
Scott E. Mollen ()

Interior Design Services—UCC 2-275 (Four-Year Statute of Limitations)—CPLR 213(2) (Six-Year Statute of Limitations)—”A ‘Mixed’ Transaction, Involving Both Goods and Services,” Requires a Determination Whether the Transaction Is Predominantly for Goods or for Services—Court Applied Six-Year Statute of Limitations—Action Was Timely

This case involved a determination as to whether a contract for interior design services (contract) “is predominantly one for goods or one for services, for statute of limitations [SOL] purposes.” The contract provided for “interior design services, including the procurement of furniture and other items required for achieving the desired design.” The court observed that notwithstanding the extent of interior design services that are provided in New York, to the court’s knowledge “there are no published opinions on this issue in this state.”

The dispute involved “an unpaid bill mostly for furniture and other items.” The issue was “whether plaintiff’s breach of contract claim is governed by the four-year [SOL] set forth in UCC 2-725 for breach of a sale-of-goods contract or the six-year [SOL] in CPLR 213 for breach of a services contract.” The court held that the contract was “predominantly one for services,” “the sale of goods is merely incidental to the services provided” and the plaintiff’s breach of contract claim was commenced within the applicable six-year SOL.

The plaintiff, an interior and exterior designer, alleged that she and the defendant entered into a contract in June 2007 for interior design services related to the defendant’s home (home). The contract obligated the defendant to compensate the plaintiff for “creative design services as well as the cost of furniture and other tangible items needed to achieve plaintiff’s vision.” The plaintiff alleged that the “predominant feature of the contract was her creative design services, with the furniture and other tangible items being incidental to such services.”

During the period of December 2007 through July 2010, the plaintiff “renovated and decorated numerous rooms in defendants’ home…. She also provided landscaping, exterior painting, and other exterior decorating services, which were billed separately.” The plaintiff “ultimately performed interior design services for three of defendants’ houses.” The defendant allegedly accepted and approved the plaintiff’s designs and “all furniture and items that plaintiff chose, placed, and arranged” at the home.

The plaintiff had presented bills to the defendants on a regular basis. The bills reflected “list prices” for furniture and other items that the plaintiff had paid to her suppliers and the plaintiff’s fee for creative design services. The plaintiff noted that her fee arrangement was “standard in the interior design industry” and she had billed the defendants “in the same manner for her work” at each of the defendants’ three houses.

The defendant had allegedly paid the bills until June 2009. Thereafter, the defendant made only partial payments, or no payments. The last payment had been made on or about March 14, 2010. The plaintiff’s final bill for services at the home had been delivered to the defendant in July 2010. The plaintiff commenced this action on or about May 11, 2015, alleging claims for breach of contract, “unjust enrichment, quantum meruit, and account stated….”

The defendant moved to dismiss the complaint based upon “documentary evidence, [the SOL], and for failure to state a cause of action.” The defendant asserted that “the contract was predominantly for the sale of goods” and “subject to the four-year [SOL] provided in UCC 2-275.” The defendant argued that “the undated” contract “has a provision that states that a design fee of $1,200 will be charged at the start of the job, but that provision had been crossed out.” The unsigned contract further stated that “the products and materials were to be shown to [defendant], purchased by plaintiff, and ‘charged at list price,’ that ‘[a]ll advice and design suggestions such as construction, cabinetry, painting and using clients [sic] existing items will be charged at $200/hour,’ and that ‘[a]ll purchases including tax and delivery will be paid in full before delivery.’” There was also a handwritten contract signed by plaintiff and the defendant, dated June 10, 2009, which provided that the defendant would “purchase all furniture and accessories shown in photos or in person by [defendant] through [defendant] and only from [defendant].”

The plaintiff contended that the parties had agreed to delete the $1,200 design fee and the defendant did not have to pay such fee. The plaintiff explained that when they signed the contract, she had advised the defendant that her “creative services fee would be ‘billed as mark-ups, into the cost of the goods/materials’ charged to defendants.” The plaintiff further alleged that in addition to her interior design fee, which was built into the “list prices,” she billed the defendants a $200-per-hour consulting fee. She stated that such “fee was separate, and included specific items, such as construction, cabinetry, and painting.” The complaint alleged that approximately $53,000 was outstanding, of which “only $4,000 (for 20 hours) is for consulting work in connection with the exterior of the home, kitchen layout, and bathroom layout.”

From December 2007 to July 2010, the plaintiff designed and decorated the home, “including living rooms, hallways, dining rooms, sitting rooms, most of the five bedrooms, and three servants’ rooms.” She claimed that she had spent “hundreds of hours designing.”

The trial court granted the defendant’s motion to dismiss the complaint. The trial court reasoned that since “the contract discusses ‘products and materials,’ and the large majority of the outstanding bills involve goods, the services are ‘incidental’ to the purchase of goods, and the four-year [SOL] applies, barring the complaint.” The court also held that the plaintiff failed to state a cause of action against another named defendant.

The Appellate Division (court) reversed. The court held that the breach of contract claim was “governed by CPLR 213(2), which provides for a six-year [SOL].” Breaches of sale-of-goods contracts are governed by the four-year SOL embodied in UCC 2-725.

The subject case involved “a ‘mixed’ transaction, involving both goods and services,” which required a “determination whether the transaction is predominantly one for goods or predominantly one for services….” The court noted that New York courts appeared not “to have directly confronted whether an interior design contract is one for goods or services.” However, “they have addressed analogous situations.” The Appellate Division, Third Department held that “a contract for the creation of a bridge, which included the furnishing of structural steel, was a contract for services.” The Appellate Division, Second Department held that “a contract for construction of new entrances, which included, inter alia, the purchase of gates, was primarily one for services….” Other jurisdictions that had adopted the “predominant purpose test have found interior design contracts to be contracts for services, not goods….”

Here, the court found that “the contract was primarily for interior design services, and the provision of furniture and accessories was merely incidental.” Accordingly, the court held that “the six-year [SOL] applies.” The court reasoned that the plaintiff was an expert in interior design, and that she was hired for that reason. The contract was on the plaintiff’s interior design company’s letterhead and specified that the plaintiff would “provide advice and design suggestions regarding construction, cabinetry, painting, and using the clients’ existing items.”

The plaintiff alleged that she designed most of the rooms in the home and the contract stated that she would “select products and materials, show them to [defendant], and then purchase them on her behalf.” The contract also provided that the defendant would “be charged ‘list price,’” which plaintiff alleged “is understood in the industry to include both the cost of the materials as well as a percentage service fee.” Additionally, “the contract acknowledge[d] that certain ‘custom work’ will be done by ‘interior designers work people,’ and a number of the invoices referenced such ‘custom made’ items.” The parties had also agreed that the “plaintiff could use and publish photographs of the items to show off plaintiff’s work, which demonstrates that plaintiff’s value is attributed to the selection of the various items and putting them together for a particular scheme, not merely to her acting as a retailer.”

The court opined that the trial court had “improperly focused on the fact that most of the bills at issue listed goods purchased by plaintiff for [the defendant].” Although the cost of materials significantly exceeded the cost of labor, “this factor should not have been the sole consideration; the court should have looked to the nature of the transaction.” The plaintiff had “selected the items purchased, and the contract was primarily for the value that she added.” The court stated that the “fact that title to the furniture and items would transfer to defendants is incidental to the purpose of the contract.”

Since the defendant did not contest the existence of the interior design contract or that the contract addressed the subject issues, “the quantum meruit and unjust enrichment claims” had been properly dismissed “as duplicative of the breach of contract claim.” Those claims were also correctly dismissed against the nonsignatory defendant. The court explained that “the account stated claim” had been properly dismissed as merely “another means to attempt to collect under a disputed contract.”

Comment: There have been many disputes in New York involving interior designers and their customers. The lack of case law with respect to the applicable statute of limitations, may be because most such disputes are either settled quickly, since customers want the job finished quickly and do not want to incur the delay and expense of changing decorators in the middle of a job, or because customers become so angry (because these disputes involve peoples’ homes), they sue quickly.

Some customers will terminate decorators because, among other reasons, they blame them for poor service, extensive delays by vendors whom the decorators had recommended or because they learned that their decorator was receiving an undisclosed referral or “kick back” from one or more vendors.

On the other “side,” some decorators quit an assignment because a customer has failed to timely pay the decorator’s bills or the bills of a vendor or the customer repeatedly changed their mind or failed to make a decision and that has caused added expense which the customer did not want to pay for or has caused undue delay that the customer is unwilling to accept.

Hagman v. Swenson, 154708/ 15, NYLJ 1202780068520, at *1 (App. Div., 1st, Decided Feb. 23, 2017), Acosta, J.P., Renwick, Andrias, Saxe, Gische, JJ. Opinion by Acosta, J.P. All concur.

Landlord-Tenant—Summary Non-payment Proceeding—Respondents’ Motion to be Restored to Possession Denied—Respondents Were Relatively Inactive In Obtaining Funds, Respondents Were Neither Seniors Nor Disabled and the Case Was Pending For More Than a Year and a Half—Tenants Lacked “Good Cause”

The respondents had been evicted on Feb. 7, 2017. They had failed to comply with a court order staying the execution of a warrant “to September 30, 2017, for payment of $25,958 of arrears in rent through September 2016.” The apartment was exempt from rent stabilization, since “it is owned by a limited liability housing company organized under Article 2 of the Private Housing Law and federally financed.” The respondents receive a Section 8 rent subsidy through the NYC Housing Authority (NYCHA).

A summary holdover proceeding had been adjourned twice to permit the respondents time “to meet with NYCHA to rectify an issue with their subsidy.” On Sept. 18, 2015, the respondents had failed to appear and the petitioner was awarded final judgment on default. The respondents thereafter moved to vacate the default. That motion was adjourned several times to permit the respondents to subpoena NYCHA records. On the eighth adjournment, the respondents failed to appear and their motion to vacate the Sept. 18, 2015 default was denied.

A respondent again moved to vacate the more recent default. The court denied that motion, finding that although the respondents demonstrated “excusable default,” they failed to show a “meritorious defense.” At that time, the respondents owed $22,254. The respondents “had failed to recertify with Section 8 and had inexcusably defaulted in making any rent payment since October 2015.”

A respondent thereafter moved again to open a default. That “motion was granted in the interest of justice, pursuant to the court’s discretionary power under CPLR 2201, based on the representation that there was a verbal commitment by the NYC Human Resources Administration…to pay up to $15,000 of the arrears on the condition that respondents obtain the balance through other sources.” Based on assurances that Legal Services would attempt to help the respondents obtain the balance of the funds, the court stayed execution of the warrant through Aug. 30, 2016. After “what appeared to be a strong showing that respondent would imminently be able to pay the now $25,958 in arrears,” by combining certain governmental assistance with some other resources, the court once again, “stayed execution of the warrant, in the interest of justice, to Sept. 30, 2016….”

The court thereafter denied an order to show cause returnable Aug. 3, 2016, since it appeared that the respondents had not made much progress and the respondents were still “$10,000 short of satisfying the arrears.” Thereafter, the court denied the respondents’ then pending motion, because the respondents had yet to show the availability of the remaining balance. Another judge had denied a further application by the respondents, citing “the lack of ability to pay all the arrears due.” On Feb. 7, 2017, a city marshal evicted the respondents.

Now, the respondents made a post eviction motion arguing that “they are now extremely close to paying the arrears due, as the less than 2 percent of the money not yet available, would be ready to tender on the return date.” On the return date, the respondents had “the entire $28,805 in rent arrears through February 2017, and sought additional time to obtain any legal fees and marshal disbursements which may be awarded.”

The court explained:

The Real Property Actions and Procedures Law (…RPAPL),…, is silent as to the what discretion the court has in deciding a motion seeking restoration to possession after execution of the warrant. RPAPL 749, which states that the issuance of the warrant severs the landlord tenant relationship, also explicitly affords the court with discretionary power to vacate a warrant and Judgment upon a showing of good cause, prior to its execution RPAPL 749(3).

The court further noted that an “inquiry into whether good cause exists to restore a tenant to possession must be conducted on a case-by-case basis.”

When the subject proceeding had been commenced, the respondent owed $4,995 in arears through May 2015. Since the litigation began, the respondent had only paid $1,000 on Oct. 18, 2015 and another $1,000 on July 6, 2016. Currently, the arrears amounted to $28,805. The respondent alleged that that money only became available for payment after the eviction took place.

It appeared that in January 2015, the respondent was injured in a motor vehicle accident. Although the respondent was “denied disability benefits, he was prescribed physical therapy and was directed to refrain from working until about April 2015.” The respondent returned to work and continued to be employed until June 2016. Thereafter, he received unemployment benefits which ended in December 2016.

The respondent had not addressed whether he had received any financial recovery relating to his personal injuries and there was no explanation as to “why during this 14-month interval, while presumably fully employed, respondent tendered only $2,000 toward the rent arrears.” The respondent’s motion papers were “completely devoid of any effort by respondent to obtain assistance for the arrears that were continuously rising during the first year of this matter’s pendency.” Additionally, the respondent could have applied for a “one-shot deal grant” from the Department of Social Services. “He also could have applied for assistance from a variety of charitable organizations.”

Although the respondent submitted supplemental papers with “copies of checks issued by HRA, dated Feb. 8, 2017, covering the entire $28,805″ and offered “to expeditiously pay any reasonable legal and marshal costs which the court may award,” the court stated that the respondents were neither seniors nor disabled and they did not “suffer from any mental or physical impairment.” They had not presented any facts that established “difficulty with dealing with public assistance” that is “commonly referred to as ‘welfare snafu.’”

Finally, the court explained:

This case has been pending for well over one and one half years. The surprising availability of funds to satisfy the full arrears a day after the eviction is not persuasive since no explanation was given as to why HRA could not have issued these funds in time to avoid the eviction. Respondents are indeed long term occupants of these rent regulated premises. However, the unexplained intervals, several months long, especially transpiring while represented, where capable respondent s apparently did nothing to facilitate obtaining the arrears, weighs heavily against them in the court’s determination on whether it would be equitable to restore respondent s to the apartment.

Accordingly, the court held that the respondents failed to demonstrate “good cause at this very late time” and despite the “present availability of the full rent arrears, the motion should be denied.”

River Park Residences v. Reed, 32756/15, NYLJ 1202782196599, at *1 (Civ., BX, Decided Feb. 24, 2017), Thermos, J.