Fausnight v. Perkins

• Decision Date: 23 May 2008
• Docket Number: 1060171.
• Citation: 994 So.2d 912
• Parties: Brian FAUSNIGHT v. Ronald G. PERKINS and Naomi Perkins.
• Court: Alabama Supreme Court

994 So.2d 912

Brian FAUSNIGHT v. Ronald G. PERKINS and Naomi Perkins.

1060171.

Supreme Court of Alabama.

May 23, 2008.

Chip Cleveland of Cleveland & Colley, P.C., Prattville, for appellant.

G. Houston Howard II of Howard, Dunn, Howard & Howard, Wetumpka, for appellees.

MURDOCK, Justice.

Brian Fausnight¹ appeals from a partial summary judgment entered by the Elmore Circuit Court in favor of Ronald G. Perkins and Naomi Perkins. We reverse.

I. Facts and Procedural History

In 2004, the Perkinses contacted Fausnight about constructing a log house for them on property they owned. After they reached an agreement on building the house, Fausnight purchased a building permit from the Town of Eclectic and began work on the house. Fausnight was not licensed to build houses, as required by Ala.Code 1975, § 34-14A-5. The Perkinses paid Fausnight $195,359.83 for the construction of the house.

After Fausnight completed the house, certain repairs were needed. Although Fausnight intended to make the repairs, before he could do so the Perkinses sued him.

In their complaint, filed on January 5, 2006, the Perkinses asserted six counts against Fausnight: (1) fraudulent suppression of the fact that Fausnight was not a licensed home builder; (2) breach of contract; (3) negligence; (4) wantonness; (5) breach of contract by failing to complete construction of the house by October 1, 2004; and (6) promissory fraud. In an amendment to their complaint, the Perkinses added a seventh count for a refund of their payments to Fausnight on the basis that, because Fausnight was not a licensed home builder, he was not entitled to keep any payments made to him for the construction of the Perkinses' house. In his answer to the complaint and to the amended complaint, Fausnight denied the material allegations of the Perkinses' complaint.

On June 9, 2006, the Perkinses moved for a summary judgment on count 1 (fraudulent suppression) and count 7 (refund of payments) of their complaint, as amended. They argued that, because Fausnight was not licensed to build houses, they were entitled to a return of the $195,359.83 they had paid Fausnight under the contract.

On August 16, 2006, Fausnight filed a response to the Perkinses' summary-judgment motion. As to the claim for restitution, he conceded that, because he was not licensed to build houses, he could not bring an action to enforce his contract with the Perkinses. However, he pointed out, he was not bringing such an action but was merely defending against an action brought by the Perkinses. The Perkinses' request for the return of funds paid, he argued, was "contrary to the law."

On September 8, 2006, the trial court granted the Perkinses' motion and entered a partial summary judgment in their favor on the restitution claim.² In its order granting the motion, the trial court stated, in pertinent part:

"This case came before the court for a hearing on August 21, 2006, on the plaintiff's Motion for Partial Summary Judgment under counts I (fraud) and court VII (refund of payments). ...

"The sole issue before the court is ... a legal one: whether [Fausnight's] failure to obtain a homebuilder's license, as required by law, entitles the plaintiffs to a refund of their payments. [Fausnight] concede[s] that the parties' contract `would be void and unenforceable assuming the defendants were attempting to enforce the same.' ...

"Thus, if [Fausnight] had completed construction of the home, and the plaintiffs had paid them nothing for it, then [Fausnight] would have absolutely no recourse against the plaintiffs, even though the plaintiffs would have obtained the benefit of all [Fausnight's] work. Ala.Code § 34-14A-14 ('A residential homebuilder, who does not have the license required, may not bring or maintain any action to enforce the provisions of any contract for residential home building which he or she entered into in violation of this chapter.').

"Now that [Fausnight has] been paid, may [he] retain money that [he] had no legal right to collect from the plaintiffs? After considering the Alabama cases under similar statutes, the court finds that [he] may not. For instance in Thomas Learning Center, Inc. v. McGuirk, 766 So.2d 161, 174 (Ala.Civ.App.1998), the court quoted a New Mexico case, holding, `as a matter of public policy, an unlicensed contractor may not retain payments made pursuant to a contract which requires him to perform in violation of the [general contractor licensing] Act.' (quoting Mascarenas v. Jaramillo, 111 N.M. 410, 806 P.2d 59 (1991)). That is the exact issue in this case; whether the unlicensed defendant[] may retain the plaintiffs' payments.

"Similarly, in Ex parte Ledford, 761 So.2d 990 (Ala.2000), the court held that the plaintiff was entitled to a refund of real [estate] commissions that he had paid an unlicensed broker, fees that it held the unlicensed agent `could not legally charge.' 761 So.2d at 995. Alabama cases on unlicensed lenders have reached similar results. See Edwards v. Alabama Farm Bureau Mut. Cas. Ins. Co., 509 So.2d 232 (Ala.Civ.App.1986) ('Edwards is entitled to a refund of his payments to Farm Bureau.'); Johnson v. Alabama Power Co., 664 So.2d 877 (Ala.1995) (recognizing common law right to recover payments made to unlicensed lender).

"[Fausnight has] argued that this result is [an] extremely harsh result. Although this result may appear harsh, it nevertheless flows directly from the Legislature's expressed intent to protect the public from `unqualified, incompetent or dishonest home building contractors and remodelers.' Hooks v. Pickens, (Ala.Civ.App.2006) (quoting Ala.Code § 34-14A-1). The court also notes that `harsh results sometimes flow from the construction of a penal statute.' White v. Miller, 718 So.2d 88, 90 (Ala.[Civ.App.]1998).

"Since [Fausnight's] contract is void, and due to the penal nature of the statute, the court finds that the plaintiffs are entitled to a refund of their payments."

The trial court made its partial summary judgment on the Perkinses' restitution claim final pursuant to Rule 54(b), Ala. R. Civ. P. Fausnight appeals. The sole issue for consideration in this appeal is whether the trial court correctly entered a summary judgment in the Perkinses' favor on their claim for restitution.

II. Standard of Review

The standard by which we review a summary judgment is well settled:

"This Court reviews a summary judgment de novo. Turner v. Westhampton Court, L.L.C., 903 So.2d 82, 87 (Ala. 2004). We seek to determine whether the movant has made a prima facie showing that there exists no genuine issue of material fact and has demonstrated that the movant is entitled to a judgment as a matter of law. Turner, supra."

Muller v. Seeds, 919 So.2d 1174, 1176 (Ala. 2005).

III. Analysis

Fausnight contends that the trial court erred when it entered a partial summary judgment in favor of the Perkinses on their claim for restitution as to the payments they made to Fausnight in the amount of $195,359.83 for the construction of their house. Fausnight contends that, although the statutes relating to the licensing of home builders prevent an unlicensed home builder from bringing an action to enforce a contract for the construction of a house, those statutes do not provide a homeowner with a right to sue to obtain a refund of payments already made to the unlicensed home builder.³ We agree.

The licensing statute at issue here is contained in Chapter 14A of Title 34, Ala. Code 1975, which is entitled "Home Building and Home Improvement Industries." Among other things, this chapter deals with the licensing of individuals and companies engaged in the profession of residential home construction. Legislative findings supporting the implementation of the chapter are found at § 34-14A-1:

"In the interest of the public health, safety, welfare, and consumer protection and to regulate the home building and private dwelling construction industry, the purpose of this chapter, and the intent of the Legislature in passing it, is to provide for the licensure of those persons who engage in home building and private dwelling construction, including remodeling, and to provide home building standards in the State of Alabama. The Legislature recognizes that the home building and home improvement construction industries are significant industries. Home builders may pose significant harm to the public when unqualified, incompetent, or dishonest home building contractors and remodelers provide inadequate, unsafe or inferior building services. The Legislature finds it necessary to regulate the residential home building and remodeling construction industries."

Section 34-14A-5 requires "residential home builders" to obtain a license from the Home Builders Licensure Board, which is established pursuant to §§ 34-14A-2(3) and -3 "to regulate the home building and residential construction industry." A "residential home builder" is statutorily defined as

"[o]ne who constructs a residence or structure for sale or who, for a fixed price, commission, fee, or wage, undertakes or offers to undertake the construction or superintending of the construction, [or who manages, supervises, assists, or provides consultation to a homeowner regarding the construction or superintending of the construction,] of any residence or structure which is not over three floors in height and which does not have more than four units in an apartment complex, or the repair, improvement, or reimprovement thereof, to be used by another as a residence when the cost of the undertaking exceeds ten thousand dollars ($10,000)."

§ 34-14A-2(10) (bracketed language added in 2006, see Act No. 2006-105, Ala. Acts 2006).

Penalties for violating the requirements of Chapter 14A are set forth in § 34-14A-14, which, at the time of the events at issue, provided, in pertinent part:

"Any person who undertakes or attempts to undertake the business of residential home building without holding a current and...