Case Title: Gene Taylor & Sons Plumbing Co. Inc. v. Corondolet Real. Trust

Citation: 611 S.W.2d 572

Docket Number: 

State: tennessee

Court: Tennessee Supreme Court

Date: 1981-02-02T00:00:00Z

Document:
611 S.W.2d 572 (1981) 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. February 2, 1981. Lloyd C. Kirkland, Jr., Memphis, for plaintiff-appellant. Al H. Thomas, Memphis, Robert J. Ames, Nashville, for defendants-appellees. DROWOTA, Justice. 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: 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 *575 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): 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 statute. As such, the general rule need not be applied inflexibly without regard to the facts in a particular case. A leading authority on the law of contracts has stated: 6A A. Corbin, Contracts § 1512 at 713, 716 (1962) (cited with approval in Farmer v. Farmer, supra at 542.) In the instant case, the appellant contends that the particular facts justify this Court in permitting recovery under a theory of quantum meruit. With regard to the cause of action against the appellee W & W Construction Co., we agree. In both Farmer and Santi, the unlicensed contractors were suing the owner of the property where the work was to be done. In the instant case, the appellant contracted with and brought suit against a construction company licensed as a general contractor. Other courts have recognized that the policies that bar recovery against a member of the general public do not apply in suits against licensed professionals in the *576 same business. Fillmore Products, Inc. v. Western States Paving, Inc., 561 P.2d 687 (Utah 1977); Dow v. U.S., 154 F.2d 707 (10th Cir.1946), and cases there cited. As stated in Kennoy v. Graves, 300 S.W.2d 568 (Ky.App. 1957): We adopt this language and refuse to permit W & W Construction Co. to raise the rule of Farmer as a bar to recovery under a theory of quantum meruit. The appellees Corondolet and Gates, appearing respectively as owner and trustee of the property on which appellant holds a lien, are among the class of persons the licensing statute was designed to protect. They occupy the same position as the defendants in Farmer and Santi when this Court barred recovery under quantum meruit. Absent other considerations that might justify a departure from the rule in Farmer, they are entitled to raise the failure of the appellant to obtain a license as a defense to a suit in quantum meruit. In Farmer, we recognized that even when a defendant is in the protected class, application of the general rule might result in an injustice "where a contractor has faithfully and fully performed his contract and no complaint is made to his skill or workmanship." 528 S.W.2d at 542. We are also aware that the amount of the "penalty" has no relation to the conduct it penalizes, but instead is determined in a fortuitous manner by the amount owing when the defendant ceases to make payments according to the agreed terms of the contract. Yet these considerations are not enough to warrant a departure from Farmer for defendants in the protected class. As the court there stated, the remedy for this injustice "lies with the legislature." Id. Farmer v. Farmer was decided on September 22, 1975. At their next regular session, the General Assembly enacted Chapter 822, § 21, Public Acts of 1976, now codified at T.C.A. § 62-621 (Cum.Supp. 1980). In pertinent part, it provides: Courts in other jurisdictions have interpreted similar penalty statutes as providing sufficient protection to the public to render unnecessary the judicially created bar to quantum meruit. See, e.g., Wilson v. Kealakekua Ranch, Ltd., 57 Haw. 124, 551 P.2d 525 (1976); Hiram Ricker & Sons v. Students International Meditation Society, 342 A.2d 262 (Me. 1975), appeal dismissed, 423 U.S. 1042, 96 S. Ct. 764, 46 L. Ed. 2d 631 (1976); Town Plan & Eng. Assoc., Inc. v. Amesbury Spec. Co., Inc., 369 Mass. 737, 342 N.E.2d 706 (1976). In John E. Rosasco Creameries v. Cohen, 276 N.Y. 274, 11 N.E.2d 908 (1937), an unlicensed milk dealer sought to recover the value, approximately $11,000.00, of milk sold and delivered to certain defendant milk dealers. The New York Court of Appeals stated: 11 N.E.2d at 910. In the instant case, however, all events material to the appellant's cause of action occurred prior to March 29, 1976, the effective date of T.C.A. § 62-621. For this reason, we hold that the Court of Appeals properly barred the appellant from enforcing its lien against the appellees Corondolet and Gates. In permitting recovery against W & W Construction Co. under a theory of quantum meruit, we do not intend to approve unlawful conduct or to enforce an illegal contract. The application of the Farmer rule is unjust only with regard to the aspect of forfeiture when forfeiture is required neither by the licensing statute nor by the policy underlying that statute. In short, we merely avoid "unreasonable penalties and forfeitures." Corbin, supra, at 716. Any recovery the appellant might have against W & W Construction Co. should be limited to actual expenses in the form of labor and materials expended on the project as shown by clear and convincing proof. These expenses should not include any amounts which constitute profit under the contract. In all events, recovery should be limited by the contract price unless the appellant can show by clear and convincing proof that labor and materials were expended in addition to that required by the contract.[1] The stipulated facts state the amount owed the appellant under the contract. There is, however, no finding as to the amount to which the appellant is entitled under the measure of recovery we have just stated. The parties also disagree on the sum due the appellant for certain extra work. These issues should be resolved in further proceedings before the Chancellor. The decision of the Court of Appeals is affirmed in part and reversed in part. This cause is remanded to the Chancellor for further proceedings in keeping with the opinion of this Court. Affirmed in part; reversed in part; and remanded. BROCK, C.J., and FONES, COOPER, and HARBISON, JJ., concur. [1] T.C.A. § 62-603(c) permits an unlicensed general contractor to recover actual documented expenses upon a showing of clear and convincing proof. Although this statute is inapplicable to the instant case, since it did not become effective until March 27, 1980, our holding with regard to the measure of recovery is consistent with the legislative intent expressed therein.