Cevern, Inc. v. Ferbish

• Decision Date: 21 September 1995
• Docket Number: No. 93-CV-216.,93-CV-216.
• Citation: 666 A.2d 17
• Parties: CEVERN, INC., Appellant, v. Robert FERBISH, et al., Appellees.
• Court: D.C. Court of Appeals

666 A.2d 17

CEVERN, INC., Appellant, v. Robert FERBISH, et al., Appellees.

No. 93-CV-216.

District of Columbia Court of Appeals.

Argued December 21, 1994.

Decided September 21, 1995.

Curt S. Hansen, Washington, DC, for appellant.

Quentin W. Banks, Washington, DC, for appellees.

Before TERRY, FARRELL and RUIZ, Associate Judges.

Opinion for the court by Associate Judge FARRELL.

Dissenting opinion by Associate Judge RUIZ at p. 24.

FARRELL, Associate Judge:

Once again we confront the situation of a home improvement contractor who accepted progress payments without having obtained the required license to perform work. Once again our decisions compel us to affirm the trial court's determination, under the applicable regulations, that the contractor thereby forfeited the right to recover for work performed on either a contract or a quantum meruit theory. Our dissenting colleague invites us down a path we have long since rejected of deciding whether substantial compliance or equitable notions may substitute for the strict obedience to licensing which the legislature has commanded. We decline the invitation.

I.

Cevern, Inc., the appellant, brought an action to establish a mechanic's lien on the home of appellees Robert Ferbish and Viola Stanton. Cevern sought to recoup a balance of $10,295.61 it said was owed to it for work performed under a home improvement contract with Thelma Ferbish, also an appellee, who allegedly acted as the owners' agent. Appellees counterclaimed, alleging that they had expended $43,600 to correct Cevern's work.

On August 24, 1992, the scheduled date of trial, counsel for appellees orally moved for summary judgment, asserting that Cevern was not licensed at the time it entered into the home improvement contract. The trial judge granted the motion the next day on the ground that "Cevern was not a licensed contractor at the time it received payment on the home improvement contract . . ., notwithstanding the fact that Cevern subsequently received a valid license before the work was completed." The judge also rejected Cevern's claim for recovery in quasi-contract. At appellees' request, he dismissed without prejudice their counterclaim. On September 3, 1992, Cevern moved for reconsideration of the judgment, which the trial judge denied. Also, pursuant to a request in appellees' opposition, the judge entered judgment in their favor for $14,000, the amount counsel for appellees stated they had paid to Cevern. (To do so, the judge on his own motion reinstated the counterclaim and deemed it amended to demand restitution).

In the trial court, the parties stipulated orally to the following facts:

(1) Cevern was bonded and insured as of August 8, 1990, as required by District of Columbia regulations;

(2) Cevern applied for a home improvement contractor license on August 14, 1990;

(3) The Department of Consumer and Regulatory Affairs approved all of the required certifications for Cevern's application on August 20, 1990;

(4) On August 24, 1990, the investigator for the Department of Consumer and Regulatory Affairs certified that Cevern met all regulatory requirements;

(5) Cevern and the appellees entered into a home improvement contract on August 27, 1990;

(6) Cevern received a $7,000 advance payment¹ from appellees on August 31, 1990;

(7) Cevern paid its licensing fee² and was issued its home improvement license on September 5, 1990.³

Counsel for appellees further represented, and Cevern did not appear to dispute, that appellees paid Cevern an additional $7,000 after September 5, 1990.

In entering judgment for appellees for $14,000 in restitution, the trial judge declared that, under this court's decisions, "a contract made in violation of a licensing statute that is designed to protect the public will usually be considered void and unenforceable, and the party violating the statute cannot collect monies due on a quasi-contractual basis." Therefore, since Cevern accepted an advance payment from appellees on August 31, 1990, in violation of 16 DCMR § 800.1,⁴ it could recover neither in contract nor in quantum meruit. The fact that Cevern acquired a license before completing the contracted-for work, and before receiving the balance of payment therefor, did not avail it. The judge explained:

The purpose of licensing statutes would be frustrated if recovery were permitted for work performed without a license. . . . This rationale equally applies to situations where the contract is entered before the issuance of a license, or where some of the preliminary work is done before a license is issued, and a balance of the work is completed after the license has issued. . . . Such a "straddle" arrangement would also run afoul of the underlying rationale for the statutory and regulatory scheme in this area of the law.

II.

In Capital Constr. Co. v. Plaza West Coop. Ass'n, 604 A.2d 428 (D.C.1992) (per curiam), this court stated:

In the District of Columbia it is a principle of long standing that an illegal contract, made in violation of a statutory prohibition designed for police or regulatory purposes, is void and confers no right upon the wrongdoer. This rule applies to a breach of 16 DCMR § 800.1, a prohibitory regulation enacted to protect the public. . . .

Therefore, we have oft held that receipt of payment by an unlicensed contractor before completion of the work under the contract violates the home improvement regulations and renders the contract void and unenforceable, even on a quasi-contractual basis.

Id. at 429-30 (citations, internal quotation marks, and footnotes omitted). Our decisions rejecting any deviation from this rule span more than a quarter-century. See Marzullo v. Molineaux, 651 A.2d 808, 809-10 & n. 3 (D.C.1994); Nixon v. Hansford, 584 A.2d 597, 598 (D.C.1991); Billes v. Bailey, 555 A.2d 460, 462 (D.C.1989); Woodruff v. McConkey, 524 A.2d 722, 724 n. 1 (D.C.1987); Erwin v. Craft, 452 A.2d 971, 971-72 (D.C. 1982) (per curiam); Truitt v. Miller, 407 A.2d 1073, 1078 (D.C.1979); Bathroom Design Inst. v. Parker, 317 A.2d 526, 528 (D.C.1974); Miller v. Peoples Contractors, Ltd., 257 A.2d 476, 477-78 (D.C.1969); cf. Saul v. Rowan Heating & Air Conditioning, Inc., 623 A.2d 619, 621 (D.C.1993) (unlicensed refrigeration and air conditioning contractor); Jackson v. Holder, 495 A.2d 746, 748 (D.C.1985) (unlicensed master plumber); Family Constr. v. District of Columbia Dep't of Consumer & Regulatory Affairs, 484 A.2d 250, 254 (D.C. 1984) (home improvement contractor, not registered as a retail seller, who entered into retail installment contract).

In some, even most, of these cases we have been met with the plea (usually by way of a petition for rehearing en banc) that the nullification of a contract effected by receipt of advance payments alone is harsh and disproportionate, resulting in a windfall to consumers who received good value for their money and then were allowed to keep the money anyway. Our response uniformly has been rejection of this appeal, primarily for two reasons: first, because compliance with the licensing requirement by a qualified contractor is a simple administrative matter; and second, because anything but an unyielding rule would put temptation in the way of unqualified (and unscrupulous) contractors and invite recurrence of the same abuses that underlay enactment of the regulatory scheme. See, e.g., Bathroom Design Inst., 317 A.2d at 529.⁵ In short, potential unfair applications of the rule at the margins have not persuaded us to sacrifice the benefits of a clear-cut, unmistakable requirement, with equally clear consequences for noncompliance, in this area of consumer protection.

Cevern nevertheless offers two reasons why we should relieve it of the consequences of the rule. First, Cevern argues that it "all but" complied with the regulation by meeting every one of the requirements for licensure except the act of paying for and receiving the license. Second, Cevern eventually—indeed, shortly after being certified by the Department investigator—did obtain the license, and argues that denying it payment for work performed thereafter is a reductio ad absurdum of the rule barring even quasi-contractual recovery. We reject both contentions.

A.

As to the first, Cevern's position as one who had met the bonding, insurance and other requirements for licensing, but had not been licensed when it accepted advance payment, distinguishes it only in degree but not kind from others who have felt the full impact of the nullification ("voidance") rule. In Capital Constr. Co., for example, the court required the contractor to disgorge progress payments accepted after its license had lapsed or expired before completion of the work. One assumes, since the contractor still possessed the license at most a few months before it accepted progress payments,⁶ that at the time it violated the regulation it was in compliance with some if not all of the other licensing requisites; yet this was unavailing. Similarly, in Saul v. Rowan Heating & Air Conditioning, Inc., supra, it was "undisputed that the contractor had no license to engage in the regulated activity at the time the work was performed, even though it appears that it may have met at least the eligibility requirements set forth in 17 DCMR § 305.1 governing refrigeration and air conditioning licensing." 623 A.2d at 621. Specifically, we held that "although its president had an individual Master Mechanic's license thus satisfying a key requirement of the regulation, this could not excuse Rowan, Inc., the contracting party, from obtaining the required license before engaging in the business." Id. at 621-22. Accordingly, the contractor could not recover for work performed "on either a contract or a quantum meruit theory." Id. at 620. While Cevern may have come closer than these contractors to complying with the regulation, the fact is that it did not do so, and our decisions specify the consequence.

We do not accept our...