Barrett, Robert & Woods, Inc. v. Armi, 8115SC1185

• Citation: 296 S.E.2d 10,59 N.C.App. 134
• Decision Date: 19 October 1982
• Docket Number: No. 8115SC1185,8115SC1185
• Court: North Carolina Court of Appeals
• Parties: BARRETT, ROBERT & WOODS, INC. v. Clement Edson ARMI.

Page 10

296 S.E.2d 10

59 N.C.App. 134

BARRETT, ROBERT & WOODS, INC. v. Clement Edson ARMI.

No. 8115SC1185.

Court of Appeals of North Carolina.

Oct. 19, 1982.

Chambers, Ferguson, Watt, Wallas, Adkins & Fuller by James C. Fuller, Jr., Charlotte, for plaintiff-appellee.

Powe, Porter & Alphin by Charles R. Holton and Laura B. Luger, Durham, for defendant-appellant.

HILL, Judge.

Defendant first assigns error to the trial court's rejection of his licensing defense, a defense raised for the first time in defendant's motion for summary judgment and reasserted by defendant at trial in a motion to dismiss. The court rejected the defense on two bases: that it was not properly raised because defendant never asserted it in his pleadings or amended pleadings; and that, even if properly raised, it should be rejected because plaintiff was licensed at the time it entered into the contract with defendant and substantially complied with the licensing statute. Defendant assigns error to both of these conclusions by the court.

G.S. 87-1, prior to its amendment in 1981, defined "general contractor" as follows:

For the purpose of this Article, a "general contractor" is defined as one who for a fixed price, commission, fee or wage, undertakes to bid upon or to construct any building ... or structure where the cost of the undertaking is thirty thousand dollars ($30,000) or more and anyone who shall bid upon or engage in constructing any undertakings ... above mentioned in the State of North Carolina costing thirty thousand dollars ($30,000) or more shall be deemed and held to have engaged in the business of general contracting in the State of North Carolina.

There is no dispute in this case that plaintiff, by contracting with defendant and undertaking to construct a house for him at a price exceeding $30,000, was a "general contractor" and engaged in the business of general contracting in this State within the statutory definition. Plaintiff thereby became subject to the licensing provisions of G.S. 87-10. The rule is well established in North Carolina that unless a general contractor has substantially complied with the licensing requirements of G.S. 87-10, it may not recover against the owner either under its contract or in quantum meruit. Builders Supply v. Midyette, 274 N.C. 264, 162 S.E.2d 507 (1968); Holland v. Walden, 11 N.C.App. 281, 181 S.E.2d 197, cert. denied, 279 N.C. 349, 182 S.E.2d 581 (1971).

Failure to be properly licensed is an affirmative defense which ordinarily must be specifically pleaded. G.S. 1A-1, Rule 8(c); Roberts v. Heffner, 51 N.C.App. 646, 277 S.E.2d 446 (1981). However, "the nature of summary judgment procedure (G.S. 1A-1, Rule 56), coupled with our generally liberal rules relating to amendment of pleadings, require that unpleaded affirmative defenses be deemed part of the pleadings where such defenses are raised in a hearing on motion for summary judgment. Bank v. Gillespie, 291 N.C. 303, 230 S.E.2d 375 (1976)." Cooke v. Cooke, 34 N.C.App. 124, 125, 237 S.E.2d 323, 324, disc. rev. denied, 293 N.C. 740, 241 S.E.2d 513 (1977). Accord Furniture Industries v. Griggs, 47 N.C.App. 104, 266 S.E.2d 702 (1980). The trial judge erred in rejecting the licensing defense as being improperly raised. The error was not prejudicial, however, because we conclude that based upon the evidence presented plaintiff substantially complied with the licensing provisions of G.S. 87-10.

The evidence discloses that at the time the contract was executed on 21 October 1977, plaintiff was duly licensed as a general contractor. Plaintiff commenced work under the contract immediately thereafter by clearing and grading the site and the one-half mile roadway leading to the site, placing gravel on the roadway, consulting with defendant, preparing "working drawings" to expedite work by the subcontractors, negotiating with subcontractors and suppliers and purchasing materials. Due to unusually heavy rainfall in November and December 1977 and a severe ice storm in January 1978 requiring reclearing and retopping of the roadway, actual construction of the house did not commence until March 1978. Plaintiff left the job in early October 1978, and defendant moved in immediately thereafter. Plaintiff's general contractor's license expired on 31 January 1978, at which time approximately 10 percent of the work required under the contract had been done. David Robert, plaintiff's secretary-treasurer, inadvertently failed to file a renewal application until October 1978. Plaintiff's license was renewed on 11 October 1978, immediately after plaintiff filed its renewal application, renewal fee and a late filing fee. Plaintiff remained stable in terms of financial condition, managing officers, composition and nature of the business and all other matters relevant to its license during the entire period of construction under the contract. In particular, Runyon C. Woods, who passed the written examination for building contractors on 12 July 1975 with a score of 96 out of 100 (the minimum passing score being 70), thereby qualifying plaintiff for a general contractor's license, remained a full time employee and managing officer of plaintiff throughout the construction period.

The trial court made findings based upon this evidence in support of its conclusion that plaintiff substantially complied with the licensing statute. Defendant disagrees with the findings regarding plaintiff's stability during the construction period, but they are clearly supported by the evidence.

"The purpose of Article I of Chapter 87 of the General Statutes ... is to protect the public from incompetent builders." Builders Supply v. Midyette, supra, at 270, 162 S.E.2d at 510-11. When a general contractor has substantially complied with the licensing provisions therein such that the protective policy has been realized, no purpose is served in denying that contractor the right to recover upon its contract. See Holland v. Walden, supra. The question thus becomes: What constitutes "substantial compliance" with the licensing provisions such that a contractor may maintain an action upon its contract?

Plaintiff maintains that possession of a valid license at the time of entering the contract alone constitutes "substantial compliance" and that a subsequent lapse of the license during the construction period is irrelevant. Plaintiff relies upon our decision in Construction Co. v. Anderson, 5 N.C.App. 12, 168 S.E.2d 18 (1969), where we affirmed the trial court's dismissal of a contract action brought by a general contractor who was not licensed at the time of entering the construction contract. We stated in our opinion in Construction Co. v. Anderson, supra, that the time of entering the contract is of great significance since that is the time when the owner must decide whether the contractor is sufficiently competent to perform the work. Nevertheless, we decline to hold, and the facts of this case do not require that we decide, that mere possession of a valid license at the moment of contracting, regardless of what transpires thereafter with regard to the license, constitutes "substantial compliance" with the licensing statute.

Article I of Chapter 87 clearly contemplates that a contractor should be licensed at the time of contracting and during the construction period. G.S. 87-10, prior to its 1981 amendment, authorized the holder of a general contractor's license to "engage in the practice of general contracting"; and G.S. 87-1 defined one who is "engaged in the business of general contracting" as "anyone who shall bid upon or engage in constructing" any building or structure costing $30,000 or more. Thus, one who is engaged in construction of certain structures costing more than $30,000 require a general contractor's license. We noted in Construction Co. v. Anderson, supra, that in addition to lacking a license at the time of contracting, the builder never possessed a valid license at any time during the construction. In contrast, the builder in Holland v. Walden, supra, although unlicensed at the time of contracting, procured a license shortly thereafter and remained licensed until completion of the project, constituting 88 percent of the work required under the contract.

As in Holland, plaintiff did not possess a valid license at all times contemplated by the statute. Nevertheless, as in Holland, the protective policy of the statute was realized by plaintiff's substantial compliance with the licensing provisions. The facts which lead us to this conclusion are as follows: plaintiff was licensed at the significant moment of contracting; plaintiff's license lapsed through inadvertence, not as a result of incompetence or disciplinary action by the licensing board; plaintiff's license was renewed immediately upon its filing of a renewal application and fees; and plaintiff's financial condition and composition, particularly the involvement of Runyon C. Woods, plaintiff's chief designer, carpenter and construction supervisor who qualified plaintiff for its general contractor's license by passing the required written examination, remained unchanged during the period plaintiff was not licensed. Although plaintiff was not licensed for 90 percent of the construction period, the factors listed above, particularly the reason for the license lapse and the automatic renewal thereof, confirming plaintiff's continued competence and responsibility, persuade us that the protective purpose of the licensing statute has been satisfied such that plaintiff should not be barred from recovering under its contract with defendant.

Defendant next assigns error to the trial court's conclusions that plaintiff substantially performed its obligations under the contract to provide defendant...