DeOliveira v. Illescas, No. CV 01-0811770 (CT 5/10/2005)

Decision Date10 May 2005
Docket NumberNo. CV 01-0811770,CV 01-0811770
PartiesSergio DeOliveira v. Sonia Illescas Opinion No.: 88810.
CourtConnecticut Supreme Court
MEMORANDUM OF DECISION

HALE, JUDGE TRIAL REFEREE.

This is an action brought in two counts by Sergio Deoliveira, a contractor. The action is brought against the defendant, Sonia Illescas, a home owner. In the first count the plaintiff alleges the breach of a contract and in the second count, unjust enrichment. The plaintiff claims to have performed certain remodeling and repair work on the defendant's premises known as 522 Broadview Terrace, Hartford, Connecticut. The plaintiff alleges that in accordance with the contract he performed and provided materials for the total value of $16,082; that the defendant unilaterally terminated the contract and that the defendant paid $5,000 pursuant to the contract but has refused to pay the balance of $11,082. The defendant has filed an answer, special defense and counterclaim.

In the answer the defendant denies all essential allegations of the complaint. In the special defense the defendant alleges that the contract relied on by the plaintiff fails to conform to the provisions of the "Connecticut Home Improvement Act," Gen. Stat. §40-18, et seq. and therefore said document is not valid or enforceable.

I. COMPLAINT AND SPECIAL DEFENSE

On or about December 19, 2000, the plaintiff and the defendant executed a contract, a copy of which is attached to the complaint and marked Exhibit A. This contact is also in evidence as Plaintiff's Exhibit 2. It is undisputed in the facts stipulated by the parties in a former proceeding involving this case that the document relied upon by the plaintiff does not comply with the provisions of the Home Improvement Act (hereinafter "HIA").1 An examination of the document executed by the parties would disclose the violations of subsections 6 and 7. The evidence in this case also indicates a violation of section 3. The defendant maintains in her special defense that because of these violations the agreement between the parties is unenforceable. The plaintiff, however maintains that even though the agreement violates the HIA, it is still enforceable because federal law and regulations governing the 203(k) program under which the homeowner was obtaining her mortgage money preempts application of the Connecticut Home Improvement Act. The plaintiff provides considerable information regarding the 203(k) program through Exhibits 5 and 6 and a detailed analysis of same in his brief. The 203(k) program is authorized by the National Housing Act, 12 U.S.C. 1709(k), which states in Section 1 that the Secretary of the Department of Housing and Urban Development (hereinafter referred to as "HUD") may, in order to assist in the rehabilitation of one to four family structures used primarily for residential purposes, ensure and make commitments to ensure rehabilitation loans. The plaintiff relies to some extent on the fact that the contract drawn between the parties was put on a HUD form by a Mr. Rizzo who acted as a rehabilitation specialist governed by 24 C.F.R. 200.190, et seq. and 24 C.F.R. 203.50(1). HUD recommends that the homeowner have a consultant help prepare the exhibits to expedite the loan process and HUD required that inspections of the work be performed by a HUD approved fee inspector, a function which was to be provided by Mr. Rizzo who in fact made three inspections before leaving the premises on the ground that the work was not conforming to the contract. The plaintiff cites the supremacy clause of the Constitution of the United States, U.S. Constitution Article 6 C.L. 2 and several cases for the proposition that state law will be preempted if it stands as an obstacle to the accomplishment and execution of the full purpose and objective of Congress. He maintains that Congress's intent to supercede state law altogether may be inferred because the theme of federal regulations may be so pervasive as to make reasonable the inference that Congress left no room for the state to supplement it and Federal regulations have the same preemptive effect as federal statutes. The plaintiff maintains further that the comprehensive provisions established by the federal government for the 203(k) program indicates that Congress meant to preempt any state regulation of the HUD initiative to provide financing for the purchase and rehabilitation of run down residential housing. He claims that the Connecticut Home Improvement Act directly conflicts with the 203(k) program; that the act requires that the contractor shall provide and deliver to the owner the home improvement contract, while the HUD program states that it is the homeowner who is responsible for preparing the documents specifying the work to be completed and that where as here the homeowner employs a consultant, it is the consultant who is to prepare the cost estimate, work write-up and architectural exhibits required for the rehabilitation of the property.

The contractor further maintains that to require a HUD contractor to qualify under the HIA would necessitate making a second contract, one under the provisions of the 203(k) plan and the other to qualify under HIA and that this would penalize the contractor.

The contractor also maintains that applying the HIA to a case such as this does not accord with the legislature's intent in passing the act. He says the act protects the homeowner by invalidating any contract that did not adhere to the act's requirements but that no purpose is served by applying the act to construction work performed pursuant to the 203(k) program where the program has its own safeguards for protecting the consumer, since the work must be inspected and approved by a HUD consultant and the final payment of the contract cannot be made unless the homeowner states in writing that the work is complete and the consultant agrees. It is the plaintiff's position that to hold him to the HIA would be a great injustice when the plaintiff is not even being faulted for drafting an improper contract but for signing a contract that was presented to him by a homeowner acting through a federally approved consultant.

It is the opinion of this court that the federal government, acting through the HUD program, does not preempt application of the Connecticut Home Improvement Act. The HIA "is a remedial statute that was enacted for the purpose of providing the public with a form of consumer protection against unscrupulous home improvement contractors." Wright Brothers Builders, Inc. v. Dowling, 247 Conn. 218, 231 (1998). The HUD 203(k) program is an insurance program which provides protection for the lender not the borrower. This insurance is provided to induce lenders to loan money for the rehabilitation and construction of older property within certain limitations. Each program stands alone. One does not conflict with the other. While not directly on point it is notable that the HUD regulations state, with respect to minimum property standards, that its requirements "do not preempt local or state standards, or do they alter or affect the builder's obligations to comply with any local or state requirements." 24 C.F.R. 200.926(b). If HUD does not allow a home improvement contractor to shrug off local and state requirements concerning property standards, it is very unlikely that it would give a contractor leave to ignore a state's HIA mandates.

"Under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, the enforcement of a state regulation may be pre-empted by federal law in several circumstances: first, when Congress, in enacting a federal statute, has expressed a clear intent to pre-empt state law . . . second, when it is clear, despite the absence of explicit pre-emptive language, that Congress has intended, by legislating comprehensively, to occupy an entire field of regulation and has thereby left no room for the States to supplement federal law . . . and, finally, when compliance with both state and federal law is impossible . . . or when the state law is an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." (Citations omitted; internal quotation marks omitted.) Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 698-99, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984).

None of the three conditions expressed in this opinion applies to the instant case.

"[P]re-emption of state law by federal statute or regulation is not favored in the absence of persuasive reasons — either that the nature of the regulated subject matter permits no other conclusions, or that the Congress has unmistakably so ordained." (Internal quotation marks omitted.) Commonwealth Edison Co. v. Montana, 453 U.S. 609, 634, 101 S.Ct. 2946, 69 L.Ed.2d 884, rehearing denied, 453 U.S. 927, 102 S.Ct. 889, 69 L.Ed.2d 1023 (1981). Neither of the conditions outlined by the Supreme Court in this decision indicate preemption.

Rowe v. Pierce, 622 F.Sup. 1030, 1033 (D.C.D.C. 1985), HUD attempted to preempt a Washington, D.C. housing law. In that case the plaintiffs were tenants of a single-family dwelling located in the District of Columbia. They entered into an agreement with the landlord to set their rent at $300 per month for the next three years and it would be binding on all future owners of the property. The owners of the property had a mortgage with a private lender and the mortgage was insured by the Department of Housing and Urban Development pursuant to the National Housing Act. 12 U.S.C. Section 1707-1750g. The mortgage was sold to the mortgagee at a foreclosure...

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