Ron Medlin Constr. v. Harris

• Decision Date: 20 December 2010
• Docket Number: No. 417A09.,417A09.
• Citation: 364 N.C. 577,704 S.E.2d 486
• Parties: RON MEDLIN CONSTRUCTION, a Partnership, and George Ronald Medlin, Individually, Plaintiffsv.Raymond A. HARRIS and Sarah N. Harris, Defendants,andRon Medlin Construction, a Partnership, and George Ronald Medlin, Individually, Third–Party Plaintiffsv.Intracoastal Service, Inc; John Bird d/b/a Bird Roofing; Lindsay Wade Millsaps d/b/a Engineered Plumbing; Ed Newsome's Hardwood Flooring, Inc.; and The Paint Doctor, Third–Party Defendants.
• Court: North Carolina Supreme Court

364 N.C. 577

704 S.E.2d 486

RON MEDLIN CONSTRUCTION, a Partnership, and George Ronald Medlin, Individually, Plaintiffs

v.Raymond A. HARRIS and Sarah N. Harris, Defendants,andRon Medlin Construction, a Partnership, and George Ronald Medlin, Individually, Third–Party Plaintiffs

v.Intracoastal Service, Inc; John Bird d/b/a Bird Roofing; Lindsay Wade Millsaps d/b/a Engineered Plumbing; Ed Newsome's Hardwood Flooring, Inc.; and The Paint Doctor, Third–Party Defendants.

No. 417A09.

Supreme Court of North Carolina.

Dec. 20, 2010.

OPINION TEXT STARTS HERE

Appeal pursuant to N.C.G.S. § 7A–30(2) from the decision of a divided panel of the Court of Appeals, 199 N.C.App. 491, 681 S.E.2d 807 (2009), affirming an order allowing summary judgment for defendants entered on 5 September 2006 by Judge B. Craig Ellis in Superior Court, Brunswick County. Heard in the Supreme Court 23 March 2010.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., Raleigh, by Robin K. Vinson, for plaintiff-appellants.

Shipman & Wright, L.L.P., Wilmington, by Gary K. Shipman and William G. Wright, for defendant-appellees Raymond and Sarah Harris.

PARKER, Chief Justice.

Plaintiffs Ron Medlin Construction and George Ronald Medlin appeal from the decision of a divided panel of the Court of Appeals affirming the trial court's entry of summary judgment for defendants on Ron Medlin Construction's claim for relief based on quantum meruit. For the reasons stated herein, we modify and affirm the decision of the Court of Appeals and remand this case to the Court of Appeals for further remand to the trial court for additional proceedings not inconsistent with this opinion.

Plaintiffs Ron Medlin Construction (Medlin Construction), a partnership, and George Ronald Medlin (Medlin), individually, instituted this civil action arising out of the construction of a house for defendants Raymond A. Harris and Sarah N. Harris. The complaint seeks a declaratory judgment defining the rights and liabilities of the parties, sets forth claims based on quantum meruit /unjust enrichment and negligent misrepresentation, and requests that the court impose a constructive trust on defendants' property for monies allegedly owed. In essence, plaintiffs' complaint asserts that Medlin Construction built a house for defendants, that defendants have refused to pay for materials and labor furnished, that defendants misrepresented certain financial information, and that defendants refinanced the house, but did not use the proceeds to pay Medlin Construction amounts owed to it.

Defendants answered the complaint, asserting that they entered into a contract for construction of the house with Medlin individually and that the contract is unenforceable in that Medlin is not a licensed contractor. Moreover, defendants denied that they have a contractual relationship with, or are indebted to, Medlin Construction. Defendants also counterclaimed against Medlin, asserting that the guaranteed maximum cost of construction under the contract as amended was $554,000, that defendants or others acting on their behalf have paid in excess of $626,000 for construction of the residence, that the house was not completed, that unpaid bills for labor and materials exceed $75,000, and that Medlin refused to complete construction of the residence. Defendants assert claims for negligence and unfair and deceptive practices against Medlin.

The agreement executed by Medlin and the Harrises, a copy of which is attached as an exhibit to defendants' answer and counterclaim, is known as a “cost plus” contract and provides that: (a) the “guaranteed maximum” cost of construction would not exceed $604,800,¹ “except as provided in Change Orders”; (b) the Harrises would pay Medlin a fee for contractor's profit and overhead in the amount of “13 percent of the Cost of Construction” to be paid monthly based on “an itemized statement” for the previous month delivered to the owner by the contractor; (c) Medlin, as contractor, would “obtain the building permit and provide all labor, material, and equipment and [would] construct the dwelling house”; (d) “[t]he parties may agree to written change orders in the construction of the House and the Compensation paid to Contractor and Time for Completion shall be adjusted as agreed to by both parties”; and (e) the “Contract Documents may not be assigned or transferred without the written agreement of Contractor and Owner.”

Following discovery, defendants moved for summary judgment, and after hearing the motion, the trial court entered summary judgment for defendants and dismissed plaintiffs' complaint. The motion for summary judgment did not address, and the trial court did not rule on, defendants' counterclaim. Plaintiffs appealed the ruling, and the Court of Appeals issued an opinion reversing the summary judgment. Ron Medlin Constr. v. Harris, 189 N.C.App. 363, 658 S.E.2d 6 (2008). Thereafter, defendants petitioned for rehearing. The petition was allowed, and on rehearing the Court of Appeals in a divided decision entered a superseding opinion affirming the trial court's entry of summary judgment for defendants. Ron Medlin Constr. v. Harris, 199 N.C.App. 491, 681 S.E.2d 807 (2009).

Plaintiffs appeal to this Court based on the dissenting opinion in the Court of Appeals, arguing that the express contract between Medlin and defendants does not preclude Medlin Construction from recovering based on quantum meruit.

This Court reviews a trial court's entry of summary judgment de novo. Builders Mut. Ins. Co. v. N. Main Constr., Ltd., 361 N.C. 85, 88, 637 S.E.2d 528, 530 (2006) (citing Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470, 597 S.E.2d 674, 693 (2004)). Summary judgment is proper when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C.G.S. § 1A–1, Rule 56(c) (2009). “ ‘When considering a motion for summary judgment, the trial judge must view the presented evidence in a light most favorable to the nonmoving party.’ ” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001)). The moving party has the burden “to show the lack of a triable issue of fact and to show that he is entitled to judgment as a matter of law.” Moore v. Crumpton, 306 N.C. 618, 624, 295 S.E.2d 436, 441 (1982) (citing Oestreicher v. Am. Nat'l Stores, Inc., 290 N.C. 118, 225 S.E.2d 797 (1976)).

Quantum meruit “operates as an equitable remedy based upon a quasi contract or a contract implied in law” which provides “a measure of recovery for the reasonable value of services rendered in order to prevent unjust enrichment.” Paul L. Whitfield, P.A. v. Gilchrist, 348 N.C. 39, 42, 497 S.E.2d 412, 414–15 (1998) (citing Potter v. Homestead Pres. Ass'n, 330 N.C. 569, 578, 412 S.E.2d 1, 7 (1992)). Quantum meruit is “not an appropriate remedy when there is an actual agreement between the parties,” id. at 42, 497 S.E.2d at 415, because “an express contract precludes an implied contract with reference to the same matter,” Vetco Concrete Co. v. Troy Lumber Co., 256 N.C. 709, 713, 124 S.E.2d 905, 908 (1962) (citing, inter alia, Ranlo Supply Co. v. Clark, 247 N.C. 762, 102 S.E.2d 257 (1958)).

Plaintiffs contend that because Medlin Construction did not enter into a contract with defendants for construction of defendants' residence, the principle that the existence of a contract covering the subject matter of the performance precludes recovery based on quantum meruit is inapplicable, and the dissenting opinion in the Court of Appeals is, thus, correct. Defendants contend, however, that the express contract for construction of defendants' home executed between defendants and Medlin, one of the two partners in Medlin Construction, precludes Medlin Construction's recovery under quantum meruit in that the express contract covers the same subject matter . Defendants further contend that even if preclusion requires that the claimant be a party, Medlin Construction is a party in that Medlin Construction is controlled by Medlin and Medlin now is seeking to do indirectly what he cannot do directly.

In this case the fact is undisputed that Medlin executed a contract with defendants to construct a home for them. The parties do not dispute that at the time Medlin signed the contract, he was not a licensed general contractor. Under the law in this state, “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor.” Brady v. Fulghum, 309 N.C. 580, 586, 308 S.E.2d 327, 331 (1983). Moreover, an “unlicensed person” is precluded from recovering damages “based on quantum meruit ” for work performed pursuant to an unenforceable contract. Bryan Builders Supply v. Midyette, 274 N.C. 264, 273, 162 S.E.2d 507, 512 (1968) (citing T.J. Oliver, Annotation, Failure of Artisan or Construction Contractor to Procure Occupational or Business License or Permit as Affecting Validity or Enforceability of Contract, 82 A.L.R.2d 1429, § 3(c) (1962); 53 C.J.S. Licenses § 59b (1948)). However, Medlin, individually, is not seeking either to enforce the contract or to obtain recovery based on quantum meruit. Plaintiffs emphasize in their brief to this Court that the complaint does not refer to the contract between Medlin and defendants. The complaint does, however, without identifying with whom defendants contracted, allege that “Defendants prepared and executed a construction contract for the construction of a residence on their property.”

Plaintiffs' complaint also alleges numerous times that “Ron Medlin Construction reasonably believed that it had the right and responsibility to construct a residence on the property of Defendants.” The complaint further alleges that, relying on this reasonable belief,

Ron Medlin Construction...