A recent decision handed down by the Suffolk County Supreme Court (Hon. Sanford Neil Berland, J.) in the matter of Sweeney v. Waitz and Artisan Builders of the North Fork, Inc. (66 Misc.3d 384) reminds us of the rights and risks that homeowners and home improvement contractors must confront when the home improvement contractor is doing business in the corporate form.
Many are familiar with the principle that an individual who incorporates a business generally has no personal liability for the obligations of the corporation. Incorporation creates a legal entity which is distinct from the individual incorporator. When transacting business, the individual acts in the capacity as an agent for the corporation. So long as the homeowner is made aware that the individual is acting as an agent on behalf of the corporate entity and the individual has not specifically agreed to personally assume any obligations, the individual cannot be held liable for the obligations of the company.
In Sweeney, the homeowner filed an action against the corporate defendant and its individual/principal in connection with a home improvement contract for the renovation of a personal residence. The individual defendant made a motion for summary judgment asking the Court to dismiss the claims which were asserted personally against the individual based on the principle that an individual acting as an agent for a disclosed principal generally has no personal liability. The individual defendant established that he always disclosed that he was acting as an agent for the corporate principal and that he never assumed any personal liability.