Question

Case 16.3

Stonhard, Inc. v. Blue Ridge Farms, LLC

New York Supreme Court, Appellate Division, Second Department, 114 A.D.3d 757, 980 N.Y.S.2d 507 (2014).

Background and Facts

Who is liable when the installer of food plant flooring is not paid?
Stonhard, Inc., makes epoxy and urethane flooring and installs it in industrial and commercial buildings. Marvin Sussman entered into a contract with Stonhard to install flooring at Blue Ridge Farms, LLC, a food-manufacturing facility in Brooklyn, New York. Sussman did not disclose that he was acting as an agent for the facility’s owner, Blue Ridge Foods, LLC. When Stonhard was not paid for the work, the flooring contractor filed a suit in a New York state court against the facility, its owner, and Sussman to recover damages for breach of contract. Stonhard filed a motion for summary judgment against the defendants, offering in support of the motion evidence of the contract entered into with Sussman. The court denied Stonhard’s motion and dismissed the complaint against Sussman. Stonhard appealed.

In the Words of the Court …

William F. MASTRO, J.P. [Judge Presiding], Reinaldo E. RIVERA, Sandra L. SGROI, and Jeffrey A. COHEN, JJ.

* * * *

An agent who acts on behalf of a disclosed principal will generally not be liable for a breach of contract. A principal is considered to be disclosed if, at the time of a transaction conducted by an agent, the other party to the contract had notice that the agent was acting for the principal and of the principal’s identity. Knowledge of the real principal is the test, and this means actual knowledge, not suspicion. The defense of agency in avoidance of contractual liability is an affirmative defense and the burden of establishing the disclosure of the agency relationship and the corporate existence and identity of the principal is upon he or she who asserts an agency relationship. [Emphasis added.]

The plaintiff established, prima facie, its entitlement to judgment as a matter of law on the complaint insofar as asserted against the defendant Marvin Sussman with evidence that it entered into a contract with Sussman of “Blue Ridge Farms,” pursuant to which the plaintiff was to install flooring at the “Blue Ridge Farms” food manufacturing facility in Brooklyn, and Sussman failed to disclose that he was acting as an agent for the defendant Blue Ridge Foods, LLC, which owns the facility. * * * The documentary evidence submitted on the plaintiff’s motion * * * indicates at best that Sussman was acting as an agent for a partially disclosed principal, in that the agency relationship was known, but the identity of the principal remained undisclosed. As an agent for an undisclosed [or partially disclosed] principal, Sussman became personally liable under the contract. [Emphasis added.]

Accordingly, the [lower] Court should have granted that branch of the plaintiff’s motion which was for summary judgment on the complaint insofar as asserted against Sussman.

Decision and Remedy

A state intermediate appellate court reversed the lower court’s dismissal of Stonhard’s complaint and issued a summary judgment in the plaintiff’s favor. The evidence of the parties’ contract indicated that Sussman “at best” was acting as an agent for a partially disclosed principal (or he was acting as an agent for an undisclosed principal). In that capacity, Sussman was personally liable on the contract with Stonhard.

The Legal Environment Dimension

The court ruled that Sussman was personally liable on the contract with Stonhard. Is the principal, Blue Ridge Foods, also liable? Explain.

The E-Commerce Dimension

The court cited “documentary evidence,” which is evidence contained in documents, such as a contract offered to prove its terms. Could documentary evidence include a printout of e-mail exchanged between the parties?

What are the facts of the case?

What is the legal issue of the case?

How did the court decide on the issues?

What reasoning did the court use to substantiate their findings?

Do you agree or disagree with how the finding by the court in this matter? Please discuss why you decided as you did.

Answer 1

Blue Ridge Foods is the principal in this case and Marvin Sussman is the agent. From the details, provided, it is clear that the agent did not disclose the principal to Stonehard Inc., the plaintiff. This means that considering that the agent was working for an undisclosed principal, Blue Ridge Foods will not be held liable.

Emails are accepted as evidence in the court. However the validity and authenticity of the emails need to be scrutinized before considering it as an evidence. The evidence of email exchange can be used as evidence as long as an authority has validated that the emails are genuine.

The facts of the case are that Stonehard was hired by Marvin Sussman for a project. Marvin Sussman was working as an agent for Blue Ridge Foods but did not mention his involvement as merely the agent and not the principal. After the work, Blue Ridge Foods did not pay Stonehard Inc. This resulted in Stonehard Inc suing Blue Ridge Foods.

The legal issue of the case arises considering the involvement of Marvin Sussman. The contract was signed by Marvin Sussman on behalf of Blue Ridge Foods. However, he is not the principal hence Blue Ridge Foods liability in the matter is not certain. The only fact is that Stonehard has delivered their end of the contract but have not received the mentioned compensation. The question remains, in this case, was the contract valid? And if so, then between which two parties?

Court decided that since the plaintiff, Stonehard Inc, was suing Blue Ridge Foods, but Blue Ridge Foods is not the one who signed the contract, they were not liable to pay for the damages. Instead it is Marvin Sussman who is liable.

The reasoning behind the court’s ruling was that the agent acted on behalf of a partially disclosed principal. If Sussman would have disclosed Blue Ridge Foods as the principal then he would not be liable. However since that was not the case, Sussman is liable instead of the Blue Ridge Foods.

No. I do not agree with the court’s decision in this matter. The reason is that Blue Ridge Foods was likely aware of this project undertaken by Stonehard Inc. In such instance it is also the duty of the principal to disclose themselves. However, that has not happened. Also Blue Ridge should not have allowed the project to begin if there have not been explicit mention of them being the principal.