Cooper Realty v. Arkansas Contractors

• Decision Date: 04 December 2003
• Docket Number: No. 03-434.,03-434.
• Citation: 355 Ark. 156,134 S.W.3d 1
• Parties: COOPER REALTY INVESTMENTS, INC. v. ARKANSAS CONTRACTORS LICENSING BOARD.
• Court: Arkansas Supreme Court

134 S.W.3d 1

COOPER REALTY INVESTMENTS, INC. v. ARKANSAS CONTRACTORS LICENSING BOARD.

No. 03-434.

Supreme Court of Arkansas.

December 4, 2003.

Wright, Lindsey & Jennings LLP, by: Troy A. Price, Little Rock, for Appellant.

Gregory L. Crow, North Little Rock, for Appellee.

ROBERT L. BROWN, Justice.

Appellant Cooper Realty Investments, Inc. (Cooper), appeals from an Order and Judgment ordering it to pay $16,056.00 plus interest for civil penalties assessed against its contractor and subcontractors. The penalties stemmed from a failure of the contractors to obtain a contractor's license and to be bonded. Cooper contends that the appellee, Arkansas Contractors Licensing Board, erred in assessing these civil penalties against it and raises four points for reversal: (1) the circuit court construed the applicable statute (Ark.Code Ann. § 17-25-403 (Repl.2001)) too broadly in assessing civil penalties; (2) Cooper is entitled to judgment as a matter of law, because it owes no money to the general contractor; (3) the Board cannot levy civil penalties against Cooper for violations of the subcontractors, because there was no notice to Cooper as required by statute; and (4) § 17-25-403 is void for vagueness and violates Cooper's due process rights. We agree with Cooper that § 17-25-403 does not contemplate the payment of civil penalties. Accordingly, we reverse and dismiss.

On October 6, 2000, Cooper contracted with Edward Krivanek of Bella Vista to haul fill material onto the Lake Bed Project property, which is located in Benton County, to raise the level of the land by nine feet. This contract was estimated to be worth $500,000. Mr. Krivanek subcontracted a portion of the work to Montgomery Gibbs and a portion to Larry Morris Construction, Inc. Both subcontractors were to haul fill material and compact it. Cooper paid Mr. Krivanek $60,075 on December 6, 2000, for work done and then paid him $65,812.50 on February 15, 2001. Cooper received two additional invoices from Mr. Krivanek: one was in the amount of $80,625 and dated April 10, 2001, and the second was for $49,571 and dated May 21, 2001. Neither invoice was paid.

Cooper subsequently learned from an investigator for the Board that Mr. Krivanek was not licensed and thus in violation of state contracting statutes. On April 24, 2001, Cooper sent a letter to Mr. Krivanek in which it terminated their contract due to his non-licensure. Pursuant to Ark. Code Ann. § 17-25-103(d) (Repl.2001), Cooper did not make any further payments to Mr. Krivanek. That same day, the Board sent a letter to Cooper, stating that because Mr. Krivanek failed to comply with § 17-25-403, Cooper had financial responsibility up to $50,000 for Mr. Krivanek's failure to fulfill his financial obligations to the State on the project. Mr. Krivanek received similar letters from the Board on May 14, 2001, which stated that he would be held financially liable up to $9,200 for Mr. Gibbs and up to $8,892.87 for Morris Construction due to their failure to obtain licenses or bonds. Cooper received a later letter dated May 21, 2001, which stated that its financial responsibility was reduced to $22,050.

On May 22, 2001, the Board issued notices to Mr. Krivanek, Mr. Gibbs, and Morris Construction that they were charged with violating the Contractors Code, because they were performing contracting work without a license and without securing a $10,000 bond, as required. The notices informed the contractors that there would be a hearing before the Board on June 8, 2001. On June 6, 2001, Cooper paid Morris Construction $75,589.40 for its work on the job, without knowing that Morris Construction was not licensed. Cooper made the payment under threat that Morris Construction would place a materialmen's lien on the property, if Cooper failed to pay. None of the three contractors appeared before the Board at the called hearing, and the Board levied non-licensure fines against Mr. Krivanek for $4,400, against Mr. Gibbs for $1,840, and against Morris Construction for $1,778, and further levied fines against the three contractors for failure to post bond in like amounts.

On July 19, 2001, the Board demanded that Cooper pay the fines. Cooper declined to do so. On March 14, 2002, the Board filed a complaint against Cooper and prayed that the circuit court require Cooper to pay the Board $16,056 plus interest.

On August 5, 2002, Cooper moved the court to grant it summary judgment and dismiss the complaint. The next day, the Board filed its motion for summary judgment with the court.

On December 10, 2002, the circuit court held a hearing on the motions. At the hearing's conclusion, the circuit court ruled that § 17-25-403 was constitutional, and, under the plain language of § 17-25-403, Cooper was responsible for all financial obligations of its contractors due the State on its project, including the civil penalties. The court subsequently entered its Order and Judgment.

Cooper argues, as its first point on appeal, that the circuit court erred in not dismissing the Board's complaint against Cooper as a matter of law under § 17-25-403, because the contractors' licensing scheme, when strictly construed, does not subject the customers of contractors to liability for civil fines or penalties arising from violations of the law committed by the contractors. Cooper adds that § 17-25-403 deals with the liability of a customer for a contractor's obligations incurred while working on the customer's specific project and not for generally failing to obtain licenses or to post bonds in violation of the Contractor's Code.

Cooper also points out that the phrase "all financial obligations" is not defined in § 17-25-403 but that other statutes, such as § 17-25-404 (Repl.2001), support a narrow interpretation. According to Cooper, when narrowly viewed in light of § 17-25-404, the phrase "all financial obligations" refers only to payment of state and local taxes, workers' compensation premiums, and unemployment security contributions generated through the period that the contractor worked on the project. Cooper adds that the purpose of the bonding law is to protect the public treasury by securing payment of state and local taxes, workers' compensation premiums, and unemployment contributions that are generated through a contractor's work in general.

The Board's answer to this is that § 17-25-403 is clear on its face and means that if a contractor fails to comply with the licensure and bond provisions and further fails to honor its financial obligations to any state agency, the customer for whom the contractor works is responsible for that obligation, including civil penalties.

The Board also responds that "all financial obligations" has an ordinary, plain, and clear meaning that does not require interpretation. For support, the Board cites this court to Kildow v. Baldwin Piano & Organ, 333 Ark. 335, 969 S.W.2d 190 (1998) (the basic rule of statutory construction is to give effect to the intent of the legislature); Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999) (construe a statute just as it reads, giving the words their ordinary and usually accepted meaning in common language); and Thomas v. State, 315 Ark. 79, 864 S.W.2d 835 (1993) ("The rule of strict construction is not the enemy of common sense"). In short, the Board maintains that § 17-25-403 unmistakenly provides that civil penalties are "financial obligations" covered by the Contractor's Code.

The question of the correct interpretation...