Gene Taylor & Sons Plumbing Co., Inc. v. Corondolet Realty Trust

• Decision Date: 02 February 1981
• Citation: 611 S.W.2d 572
• Parties: GENE TAYLOR & SONS PLUMBING CO., INC., Plaintiff-Appellant, v. CORONDOLET REALTY TRUST, W & W Construction Company, A Partnership Composed of William W. Watts and Harlan C. Watts, and James P. Gates, Trustee for Tri-South Mortgage Investors, Defendants- Appellees.
• Court: Tennessee Supreme Court

Page 572

611 S.W.2d 572

GENE TAYLOR & SONS PLUMBING CO., INC., Plaintiff-Appellant, v. CORONDOLET REALTY TRUST, W & W Construction Company, A Partnership Composed of William W. Watts and Harlan C. Watts, and James P. Gates Trustee for Tri-South Mortgage Investors Defendants- Appellees.

Supreme Court of Tennessee.

Feb. 2, 1981.

Lloyd C. Kirkland, Jr., Memphis, for plaintiff-appellant.

Al H. Thomas, Memphis, Robert J. Ames, Nashville, for defendants-appellees.

OPINION

DROWOTA, Justice.

I.

The issue in this case is whether a subcontractor not licensed under T.C.A. § 62-601 et seq. can recover against a licensed general contractor and a property owner under a subcontract agreement.

The subcontractor, Gene Taylor & Sons Plumbing Co., Inc., filed a complaint to enforce a mechanic's lien in the Chancery Court of Shelby County against Corondolet Realty Trust, property owner, W & W Construction Co., general contractor, and James P. Gates, trustee under a deed of trust on the real estate securing an indebtedness to Tri-South Mortgage Investors. The Chancellor dismissed the case with prejudice on the authority of Farmer v. Farmer, 528 S.W.2d 539 (Tenn.1975). The Court of Appeals affirmed citing Santi v. Crabb, 574 S.W.2d 732 (Tenn.1978) as additional controlling authority.

The pertinent facts are set forth in an agreed stipulation which was incorporated by the Chancellor in his final decree, as follows:

1. Plaintiff is a Tennessee Corporation engaged in the plumbing business with its principal offices in Shelby County, Tennessee, and was at the time of performing the contract in question duly and properly licensed to engage in the plumbing business.

2. Corondolet Realty Trust was the owner of a certain tract of real property located in Shelby County, Tennessee on which a townhouse development known as the "Glenn Townhouses" has been constructed, said property being known as 6071 Summer Avenue.

3. James P. Gates was named as Trustee under Trust Deed No. H2 6071 securing indebtedness to Tri-South Mortgage Investors.

4. W & W Construction Company is a partnership composed of William W. Watts and Harlan C. Watts with its principal offices in Memphis, Shelby County, Tennessee. Said Defendant entered into a contract with Corondolet Realty Trust to construct apartments known as "The Glenn Townhouses"; Defendant is a licensed general contractor.

5. Defendant W & W Construction Company contracted with the Plaintiff to perform certain plumbing work in the construction of said townhouse development and agreed to pay Plaintiff the sum of $178,493.34 for said plumbing work pursuant to the sub-contract dated October 31, 1972 marked Exhibit A to the Complaint.

6. Plaintiff was also authorized by Defendant, W & W Construction Company by contract change order dated November 8, 1972 to add an additional $2,760.00 for a City of Memphis sewer tap fee pursuant to said change order marked Exhibit B attached to the Complaint.

7. Plaintiff has been paid by Defendant, W & W Construction Company a total of $162,362.22, leaving a balance due of $18,891.12 on the original contract as amended. Defendant, W & W Construction Company admits owing this balance in its answer, but takes the position that Plaintiff is barred from recovering any amount whatsoever because Plaintiff did not have (a) general contractor's license at the time the contract was entered into and the work performed.

8. Plaintiff did not possess a general contractor's license at the time that Plaintiff entered into the contract with Defendant W & W Construction Company in October, 1972 nor at any time during the time that it did the work.

9. Plaintiff was requested by Defendant to do some extra work on the project for which Plaintiff claims it is owed $7,172.90. Defendant denies that it owes any such amount because Plaintiff is barred from collecting due to the fact that Plaintiff did not have a general contractor's license and also because Defendant claims that it is entitled to offsets and backcharges which would offset the amount of extras claimed by the Plaintiff.

10. Within 90 days after the completion of the townhouses Plaintiff notified all Defendants that it claimed a lien on said property and within said 90 day period filed with the County Register of Shelby County, Tennessee a sworn statement of notice of lien which is attached as Exhibit C to the Complaint. A second notice was filed and is attached as Exhibit D to the Complaint.

11. Prior to April, 1972 Plaintiff was not required to have general contractor's license. Section 62-601, et seq., T.C.A. was amended by Chapter 633 of the Public Acts of 1972 in April of 1972, to be effective July 1, 1972, in such manner as to require the Plaintiff to have a general contractor's license in order to enter into a contract of the magnitude involved in this matter. At the time of entering into said contract in October, 1972 Plaintiff was not aware that a general contractor's license was required of it, nor was Plaintiff aware of said requirement at anytime during the performance of its contract. Plaintiff now has a general contractor's license which was acquired after the Complaint was filed in this cause.

At all times material to this litigation Sections 62-601 and 62-602 of Tennessee Code Annotated provided as follows:

62-601. CONTRACTORS SUBJECT TO PROVISIONS. For the purpose of this chapter, the term "general contractor" is defined as any person, firm or corporation who, for a fixed price, fee, commission, or gain of whatever nature, undertakes to construct, erect, alter or repair, or have constructed, erected, altered or repaired, under his, their or its supervision, buildings, structures, and private works and utilities of every nature or character whatsoever, including railroads, municipal works, water supply systems, sewerage and drainage systems, levees, locks and dams, canals, industrial works, and any highways, roads, bridges, or similar structures or projects where the cost of the completed structure or improvement, or of different structures and improvements under the same contract, exceeds twenty thousand dollars ($20,000.00). However, the term "general contractor" shall not include subcontractors, firms or corporations not in privity with the owner of the property being improved, or his lessee, agent or representative, except subcontractors engaged in doing electrical work, plumbing work, heating, ventilating and air conditioning work, each of whom shall be required to have a license hereunder with limits not less than the amount of the contract between such subcontractor and the general contractor where such subcontract sum is in excess of twenty thousand dollars ($20,000.00) ; but if the cost of the entire project exceeds twenty thousand dollars ($20,000.00), then any person, firm or corporation engaged in any part of the construction such as plumbing, heating, wiring, decorating, painting and so forth, and contracting with the original owner or his lessee, agent or representative, shall be treated as general contractor in his line of work and shall be required to have a license hereunder. (emphasis added)

62-602. QUALIFICATION-LICENSE REQUIRED. Any person, firm or corporation engaged in general contracting in this state shall be required to submit evidence that he is qualified to engage in general contracting, and shall be licensed as hereinafter provided; and it shall be unlawful for any person, firm or corporation to engage in or offer to engage in general contracting in the state, unless such person, firm or corporation has been duly licensed under the provisions of this chapter, as hereinafter provided. (emphasis added)

II.

In Farmer v. Farmer, supra, an unlicensed general contractor agreed to build a dwelling for the defendant homeowners. The homeowners agreed to pay the contractor the cost of construction plus 10% profit. The homeowners made certain payments and the contractor completed the house. The homeowners, however, refused to pay the full contract price, leaving $4,561.98 for labor and materials plus the 10% profit owing. The contractor sued and the Chancellor granted recovery limited to the unreimbursed cost of labor and materials on a theory of quantum meruit. This Court reversed, holding that when the statute required a contractor to be licensed, an unlicensed contractor was barred from suing either on the contract or in quantum meruit. In so doing, the Court adopted the following language found in Stewart v. Hammond, 78 Wash.2d 216, 471 P.2d 90, 92 (1970):

The statute was designed for protection of the public. The overriding public policy must not be defeated by an attempt to accommodate one who has violated its specific provisions, albeit unwittingly. The law will be nullified if noncomplying contractors are permitted to evade the statute by a claim of "unwitting violation" or "undue loss" or by a claim that the other contracting party will be "unduly enriched". Every noncomplying contractor could raise one or all of the suggested defenses. The remedy for those who find themselves in the position of appellant lies with the legislature.

528 S.W.2d at 542.

Santi v. Crabb, supra, involved a virtually identical fact situation. In that case, the homeowner acted as his own general contractor and made an agreement with the plaintiff under which the plaintiff was to perform certain sheetrock work. The plaintiff was not licensed as a general contractor in his line of work as required by T.C.A. § 62-601. The plaintiff subsequently sued the homeowner for the value of his services, but this Court denied recovery on the authority of Farmer v. Farmer.

In Farmer and in Santi, this Court has recognized the general rule regarding the effect of noncompliance with licensing statutes on the enforceability of contracts. Yet this rule is neither explicitly nor implicitly required by the licensing statute. The rule is a judicial creation designed to further the public policy behind the...