Ground Control, LLC v. Capsco Indus., Inc.
| Decision Date | 06 June 2013 |
| Docket Number | NO. 2011-IA-00928-SCT,2011-IA-00928-SCT |
| Court | Mississippi Supreme Court |
| Parties | GROUND CONTROL, LLC v. CAPSCO INDUSTRIES, INC., W.G. YATES & SONS CONSTRUCTION COMPANY AND HARRAH'S ENTERTAINMENT, INC. |
R. MARK ALEXANDER, JR.
EN BANC.
¶1. Ground Control, LLC, seeks review of summary judgment granted in favor of Capsco Industries and other defendants. The circuit court held in part that Ground Control's failure to obtain a certificate of responsibility, as required by Mississippi Code Section 31-3-15, rendered its construction contract with Capsco null and void. While we affirm the court's finding that the lack of certificates of responsibility rendered the parties' contract null and void, we reverse the grant of summary judgment in part and remand this case for furtherproceedings on whether Ground Control is entitled to recover based on claims of unjust enrichment and quantum meruit. We also reverse the grant of summary judgment in favor of Harrah's and Yates because of inadequate notice of the conversion from a motion to dismiss to a motion for summary judgment.
FACTS AND PROCEEDINGS BEFORE THE TRIAL COURT
¶2. The plaintiff and counterdefendant below, Ground Control, LLC, an Alabama corporation, entered into a contract with Capsco Industries, Inc., also an Alabama corporation, to perform construction on the "Margaritaville Spa and Hotel" in Biloxi, on behalf of Harrah's Entertainment, Inc. W.G. Yates and Sons Construction Company served as the general contractor. Capsco was employed as a subcontractor, and Capsco subcontracted in-ground construction work to Ground Control.
¶3. Capsco entered into its contract with Ground Control on December 19, 2007; neither Yates nor Harrah's was a party to the contract. Ground Control was to perform work related to in-ground installation of water, sewage, and storm-drain lines. It is undisputed that neither party obtained a certificate of responsibility as required by Mississippi Code Section 31-3-21. Ground Control worked on the project until October 28, 2008, when Yates terminated it from the project for alleged safety violations and failed drug tests of its employees.
¶4. On August 25, 2009, Ground Control filed its complaint against the defendants in Harrison County Circuit Court. On December 4, 2009, Capsco counterclaimed and filed a third-party claim against Ground Control's president, Frank Beaton, alleging that Ground Control breached the contract and that Beaton had committed acts of fraud. On December 8, 2009, Harrah's and Yates jointly moved to dismiss for lack of privity. On December 29,2009, Ground Control filed a supplemental complaint alleging various extracontractual claims. On January 2, 2012, Capsco filed a motion for summary judgment, and a hearing subsequently was held on Harrah's and Yates' joint motion to dismiss as well as Capsco's motion for summary judgment. On April 4, 2011, the trial court granted summary judgment to Capsco and to Harrah's and Yates, even though the latter two jointly had moved to dismiss and not for summary judgment. The record shows that Ground Control never received notice that Yates' and Harrah's motion to dismiss would be converted to a motion for summary judgment until the trial court issued its order granting summary judgment. Ground Control timely filed this appeal.
DISCUSSION
¶5. This Court applies a de novo standard of review to a circuit court's grant or denial of summary judgment. Kilhullen v. Kan. City S. Ry., 8 So. 3d 168, 174 (Miss. 2009). Upon review, this Court must view the evidence "in the light most favorable to the party against whom the motion has been made." Id. (quoting Daniels v. GNB, Inc., 629 So. 2d 595, 599 (Miss. 1993)).
¶6. On appeal, Ground Control asks the court to consider multiple issues pertaining to the three defendants. Because some of the issues are very closely related to one another, we have consolidated the arguments for the sake of clarity into the following issues: (1) whether Ground Control's failure to acquire the proper certification pursuant to statute barred any claim for recovery against Capsco and (2) whether the trial court properly converted Yates' and Harrah's motion to dismiss to one for summary judgment.
I. WHETHER GROUND CONTROL'S FAILURE TO ACQUIRE THE PROPER
CERTIFICATION UNDER SECTION 31-3-15 BARRED ANY CLAIM FOR RECOVERY AGAINST CAPSCO.
¶7. The contract between Capsco and Ground Control falls within Mississippi Code Section 31-3-15, which requires contractors to have certificates of responsibility. It states:
No contract for public or private projects shall be issued or awarded to any contractor who did not have a current certificate of responsibility issued by said board at the time of the submission of the bid, or a similar certificate issued by a similar board of another state which recognizes certificates issued by said board. Any contract issued or awarded in violation of this section shall be null and void.
Miss. Code Ann. § 31-3-15 (Rev. 2010) (emphasis added).
¶8. The stated purpose of requiring certificates of responsibility "is to protect the health, safety and general welfare of all persons dealing with those who are engaged in the vocation of contracting and to afford such persons an effective and practical protection against incompetent, inexperienced, unlawful and fraudulent acts of contractors." Miss. Code Ann. § 31-3-2 (Rev. 2010) (emphasis added). Clearly, the statute was intended to protect both parties to the contract. Furthermore, the penalties that serve to deter parties from entering illegal contracts—such as voiding the contract and imposing fines—apply to both parties.1
¶9. Both Ground Control and Capsco were required by statute to obtain certificates ofresponsibility. Both failed to do so.
¶10. This Court has never determined whether a party to an illegal contract is barred from recovery under theories of unjust enrichment or quantum meruit. We are not dealing with an unlawful activity contemplated by the rule that "[n]o Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act." Price v. Perdue Pharma Co., 920 So. 2d 479, 484 (Miss. 2006) () (citing Morrissey v. Bologna, 240 Miss. 284, 300-01, 123 So. 2d 537, 545 (1960) ().
¶11. It can be argued that Ground Control should be denied equitable relief because it does not have clean hands. See Bailey v. Bailey, 724 So. 2d 335, 337 (Miss. 1998) (). However, Capsco should not be able to use this defense in light of its far more egregious conduct. Capsco recruited Ground Control to do the work although it knew that Ground Control did not hold a certificate of responsibility as required by statute. Both were qualified to enter into the contract, and yet Capsco argues that the penalty should be applied only to Ground Control.
¶12. In a case remarkably similar to this one, the Supreme Court of Nevada held that, where a subcontractor was not licensed in Nevada (though required by statute), the parties' contract was void, and therefore contractual remedies were precluded; however, the subcontractor's claims for fraud and unjust enrichment were not barred. Magill v. Lewis, 74 Nev. 381, 333 P. 2d 717 (1958). That court discussed the general rule that courts will not lend aid to parties of an illegal contract but found that this rule should not be applied "where,by applying the rule, the public cannot be protected because the transaction has been completed, where no serious moral turpitude is involved, where the defendant is the one guilty of the greatest moral fault, and where to apply the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff." Id. Here, the subject matter of the contract—construction work performed by Ground Control—was perfectly legal. Most states provide for exceptions for legitimate work done under illegal contracts. Some states—Arizona, Arkansas, California, Idaho, Iowa, Louisiana, Nevada, Oregon, and Tennessee—allow parties to a void contract to recover through claims of quantum meruit or unjust enrichment.2 Other states—Alabama, Delaware, the District of Columbia, Indiana,Kentucky, Missouri, New Jersey, New York, North Dakota, Utah, Vermont, Washington—permit recovery by the party that the statute was designed to protect or by the party that was less culpable in the illegal agreement.3 This Court has explained that "courtsof this state have always, in proper cases, been prepared to 'hold a person to a representation made or a position assumed where otherwise inequitable consequences would result to another who, having the right to do so under all of the circumstances of the case, has in good faith relied thereon and been misled to his injury.'" PMZ Oil Co. v. Lucroy, 449 So. 2d 201, 206 (Miss. 1984) (quoting Stokes v. Am. Cent. Ins. Co., 211 Miss. 584, 589, 52 So. 2d 358, 360 (1951)); PMZ Oil Co. v. Lucroy, 449 So. 2d 201, 206 (Miss. 1984) (quoting Stokes, 52 So. 2d at 360).
¶13. The trial court granted Capsco's motion for summary judgment on the basis that Mississippi Code Section 31-3-15 rendered the parties' contract null and void; and since an express contract existed, the court held that Ground Control was precluded from recovering under the claims of unjust enrichment and quasi-contract. The trial court explained that "such a recovery would frustrate the public policy purposes inherent in the...
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