Charlebois v. J.M. Weller Associates, Inc., 72 N.Y.2d 587 (1988)

A construction contract requiring a contractor to engage a separately retained licensed professional engineer to perform the design function does not violate Education Law licensing protections or public policy.

Summary

Claude and Lesley Charlebois contracted with J.M. Weller Associates, Inc., for the construction of a warehouse and an addition to their existing building. Disputes arose, and the Charleboises refused to make further payments, claiming $600,000 was owed. Weller Associates demanded arbitration, but the Charleboises sued, seeking a declaration that the contract was invalid as against public policy because it violated Education Law §§ 7202 and 7209(4). The New York Court of Appeals held that the contract was valid because it expressly required a separately retained, licensed professional engineer (James M. Weller, P.E.) to perform the design function, thus satisfying the underlying public policy concerns of the Education Law.

Facts

The Charleboises contracted with Weller Associates, an unlicensed business corporation, for a construction project. The contract stipulated that an “Architect/Engineer” would be furnished by the Contractor pursuant to an agreement between the Contractor and the Architect/Engineer, specifically naming James M. Weller, P.E., to provide all architectural and structural engineering services. Disputes arose concerning cost, design, and code compliance, leading to the Charleboises withholding payment.

Procedural History

The Charleboises sued Weller Associates, seeking a declaratory judgment that the contract was invalid. Supreme Court ruled in favor of Weller Associates, finding the contract valid because a licensed engineer was engaged. The Appellate Division affirmed. The Court of Appeals granted leave to appeal based on a two-Justice dissent at the Appellate Division.

Issue(s)

Whether a construction contract entered into between an owner and an unlicensed business corporation building contractor is invalid as against public policy when the contract provides that the project design must be fulfilled by the builder by engaging a specified licensed engineer.

Holding

No, because under the contractual arrangements, the builder does not engage in the unauthorized practice of engineering. The engineer engaged to do the professional work is subject to the regulatory mechanisms of the State Education Department, regardless of whether they are a formal signatory to the contract.

Court’s Reasoning

The Court of Appeals reasoned that Education Law § 7202 prohibits unlicensed individuals from practicing engineering. However, the contract did not require Weller Associates to perform engineering services. Instead, it explicitly mandated the engagement of a licensed engineer, James M. Weller, P.E., who was subject to the State Education Department’s regulatory oversight. The court distinguished this case from American Store Equip. & Constr. Corp. v Dempsey’s Punch Bowl, where the unlicensed corporation itself prepared architectural plans, a direct violation of public policy.

The court emphasized that the key factor was the independent professional judgment of the licensed engineer, James M. Weller, P.E., flowing directly to the Charleboises. The court quoted Vereinigte Osterreichische Eisen und Stahlwerke v Modular Bldg. & Dev. Corp., stating that “The rights sought to be protected by the statute are adequately covered when the contractor, manufacturer or builder engages a properly licensed person to perform those tasks which the law specifies call for certified skills.” The court also noted that the Charleboises were occupying the completed structures and operating their business from it and now sought to disaffirm the contract and be forgiven $600,000 in payments.

The court further stated, “Even if a violation were to be hypothesized for the sake of argument, the public policy that underlies the statute would not be furthered by complete avoidance of this contract.” The court found the remedy of voiding the contract disproportionate, especially since the Charleboises benefited from the completed project and the licensed engineer was subject to professional regulation and potential malpractice liability. The court concluded that forfeitures by operation of law are disfavored and should not be used as a sword for personal gain rather than a shield for the public good.