Baltimore Street Builders v. Stewart

SALMON, J. Baltimore Street Builders, LLC filed a petition to establish and enforce a mechanic’s lien in the Circuit Court for Baltimore City. The petition was accompanied by a proposed show cause order and named Thomas G. Stewart (“Stewart”) as the defendant. The petition alleged that Baltimore Street Builders, LLC (hereinafter “BSB”) entered into a contract with Stewart to construct an addition to an existing building that Stewart owned. The work contracted for was intended for residential use.

According to the petition, during the course of the construction work, BSB was directed by Stewart to furnish and install additional labor and materials, which resulted in the issuance of change orders that increased the contract price to a projected total cost of $363,780.07. Stewart paid BSB $183,418.60 but failed to pay the $180,361.47 balance. Attached to the petition was the contract signed on February 25, 2006, by Stewart and by one Robert Lenkey, on behalf of BSB. ⁶⁸⁷ A show cause order was issued by the circuit court on March 12, 2008. It required Stewart to show cause “by filing a counter-affidavit or verified answer on or before the 23rd day of April, 2008, why a lien for the amount claimed should not attach upon the land described in the petition.” The petition and the show cause order were served upon Stewart on April 3, 2008.

Stewart, pro se, attempted to file an answer to the petition and show cause order on April 23, 2008. His attempt, however, was rebuffed by the clerk of the circuit court because his answer was not accompanied by a certificate of service. On April 29, 2008, BSB filed a motion asking the court to issue an interlocutory order granting BSB a mechanic’s lien, based upon the fact that Stewart had not filed a response to the petition. On May 4, 2008, Stewart, by counsel, filed an answer to the petition, supported by an affidavit.

Stewart also filed on the same date a motion for additional time to file an answer to the petition to establish and enforce the mechanic’s lien and a motion to dismiss or, in the alternative, a motion for summary judgment. This last mentioned pleading was supported by a memorandum of law. Four days after Stewart’s pleadings were filed, on May 8, 2008, a hearing was held in the circuit court concerning the petition to enforce the mechanic’s lien. At the conclusion of the hearing, the judge delivered an oral opinion in which she ruled that because BSB had no home improvement license it had no right to enforce the contract or to establish a lien based upon that contract.

A written order was promptly signed dismissing the petition. BSB then filed this appeal in which it raises three questions, which we have reordered: 1. Did the Circuit Court err by finding as a matter of fact and law that [a]ppellant was not a licensed contractor, as required by the Maryland Home Improvement Commission? 2. Did the Circuit court err by not giving [a]ppellant 30 days to request a trial on [ajppellant’s Petition to Establish and Enforce Mechanic’s Lien? ⁶⁸⁸ 3.

Did the Circuit court err in denying [ajppellant’s motion for an interlocutory Order? L In the affidavit filed on May 4, 2008, Stewart swore that the following facts were true: 1) that prior to signing a home improvement contract with BSB he dealt with Robert Lenkey; 2) Lenkey told Stewart that he owned Harbour House Builders, LLC [Harbour House] and that Harbour House would be the entity that would enter into a contract with him; 3) on the day the contract was signed, Lenkey told Stewart that another company he owned, BSB, would perform the home improvement work on Stewart’s property; 4) after the contract was signed, Stewart learned that BSB did not come into existence until March 9, 2007, which was, according to Stewart’s affidavit, “near the expiration of Robert and Barbara Lenkeys’ work on my property.”; 5) work on Stewart’s property began in “Mid-January 2006” and was completed in “June 2007,” 6) the work performed on his property by Lenkey and/or BSB was deficient in numerous respects; 7) after the contract was executed, at some unspecified time, Stewart learned that “Robert Lenkey, Barbara Lenkey and BSB [were] not licensed as home improvement contractors [with] the Maryland Home Improvement Commission.” Attached to Stewart’s affidavits were various exhibits that demonstrated, inter alia, that neither the Lenkeys or BSB have ever had a home improvement license; the exhibits also showed that, according to the records of the Maryland State Department of Assessment and Taxation, BSB did not come into existence until March 9, 2007, which was a little over a year after BSB’s contract with Stewart was signed.

II

The May 8, 2008 Hearing At the beginning of the hearing, counsel for BSB pointed out that there was a “legal issue” that was presented for the ⁶⁸⁹ first time in Stewart’s motion to dismiss and/or motion for summary judgment. BSB’s counsel said that he and counsel for Stewart, because of this new issue, were “requesting the court ... to postpone the interlocutory hearing, so that we could resolve [the legal issues] through a hearing on the summary judgment motion or [the] motion to dismiss.” The court inquired of counsel for BSB whether he wanted a five minute recess to talk to opposing counsel while the court considered another matter. To this, BSB’s counsel said (ambiguously) “fine—the time for me to respond to the motion hasn’t passed yet.” The court next advised counsel that it was going to decide the motion to dismiss and/or motion for summary judgment first, and that it was necessary for her to do so in order to decide whether or not to grant BSB’s petition to establish a mechanic’s lien. Counsel for BSB did not object; instead, he said that he understood the court’s position, and after some further colloquy, a short recess was called while the court directed its attention to another case.

After the just mentioned interlude, counsel for BSB admitted to the court that his client had never had a home improvement license. BSB’s counsel proffered, however, that James Kunkel, 1 a 50% owner of BSB, held “a home improvement license through a company called Stonehenge International [,] Incorporated.... ” According to counsel’s proffer, Stonehenge International, Inc. (“Stonehenge”) did work on Stewart’s home inasmuch as Mr. Kunkel, as a representative of Stonehenge, “acted as the construction management company on the project.” Counsel for BSB also proffered that his clients (at some unspecified time) contacted the Home Improvement Commission and based on that contact “were led to believe that they were operating properly, because one of the principals in their company held a home improvement license.” Counsel for BSB further proffered that: 1) BSB had a federal tax identification number that was issued to it in 2005; 2) BSB filed an income tax return in 2006, and 3) Mr. Kunkel ⁶⁹⁰ was listed on the tax returns as a 50% member 2 of BSB, a “Limited Liability Company.” BSB also introduced into evidence a complaint against BSB, which was filed by Stewart with the Home Improvement Commission. According to BSB’s counsel, the complaint with the Home Improvement Commission was significant because Stewart said in that complaint that before the project commenced, Robert Lenkey introduced Stewart “to his [Mr. Lenkey’s] partner Jimmy Kunkel (who has a business that operates in Maryland under the name of ‘Stonehenge International’)”.

III

BSB makes several arguments in its opening brief in support of its claim that the circuit court erred in granting summary judgment against it. First, it claims that “the circuit court erred as a matter of law when it found that appellant was not a license[d] contractor when performing the contract with appellee.” Under the argument just mentioned, BSB, citing Antigua Condominium Asso. v. Melba Investors Atlantic, Inc., 307 Md. 700, 719 , 517 A.2d 75 (1986) and Worsham v. Ehrlich, 181 Md.App. 711, 722 , 957 A.2d 161 (2008), makes the following statement: the trial court here treated the motion as one for summary judgment by allowing matters outside the pleading into evidence [on] the day of the hearing on Appellant’s Show Cause Order. Since the trial court treated the motion as one for summary judgment, it must provide the parties with ⁶⁹¹ a reasonable opportunity to present, in a form suitable for consideration on summary judgment, additional pertinent material. The rule BSB cites is well established and the reason for it “is because a non-moving party may be prejudiced if a trial court treats a motion to dismiss as a motion for summary judgment by considering matters outside the pleadings, but does not give the non-moving party a reasonable opportunity to present material that may be pertinent to the court’s decision as required by Maryland Rule 2-501.” Worsham, 181 Md.App. at 722-23 , 957 A.2d 161 .

We agree with BSB that the circuit court did treat the motion as one for summary judgment. After all, the facts as set forth in the complaint indisputably stated a cause of action upon which relief could be granted. It was only by looking outside the pleading, more specifically by looking at the affidavit signed by Stewart, that the court had a basis to rule that BSB could not enforce the contract because it had no home improvement license. BSB maintains that the court erred in failing to give it a reasonable amount of time to respond to the summary judgment motion.

Stewart answers by pointing out (correctly) that BSB failed to state in its opening brief what else it would have presented to the circuit court if it had been granted more time. The failure to point out what would have been done if more time had been available is important because in order to prevail in a civil case, an appellant must show not only error but must show as well that it was prejudiced by that error. See Flores v. Bell, 398 Md. 27, 33 , 919 A.2d 716 (2007). In its reply brief, BSB sets forth what it would present if we were to remand this case: 1.

Evidence of licensure by the Maryland Home Improvement by Mr. Kunkel and Stonehenge International.[ 3 ] ⁶⁹² 2. Evidence of the partnership agreement and responsibilities between Robert and Barbara Lenkey, James Kunkel and Stonehenge International regarding Baltimore Street Builders. 3. Evidence of Mr. Kunkel’s supervision of the work done on Appellee’s property. 4. Evidence of the application by Stonehenge International for various construction permits from the City of Baltimore. 5.

Evidence of tax filing by Baltimore Street Builders, listing James Kunkel as a partner. 6. An analysis of Maryland Code Business Regulations Section 8-301(d)(l), which may not require Baltimore Street Builders to have a home improvement contractor’s license. 7. An analysis of the regulations of the Maryland Home Improvement Commission regulations, particularly • 09.08.01.04(B), which may also not require Baltimore Street Builders to hold such license. 8. Testimony by Barbara Lenkey regarding her discussions with and understanding of the policy of the Maryland Home Improvement Commission concerning licensure.[ 4 ] 9.

Evidence of findings in the District Court of Maryland for Baltimore City in case numbers 4B0178330 and 2B01861125 whereby Robert and Barbara Lenkey were found not guilty of allegations by the Maryland Home Improvement Commission that they acted as a home improvement contractor without a license. ⁶⁹³ 10. A case analysis of Maryland law demonstrating how the courts have viewed “substantial compliance” with regulatory statutes. We will assume, arguendo, that all the proffers made by BSB’s counsel to the motions judge are true and that if given the chance BSB would have presented additional facts to the circuit court in accordance with representations made by it in its reply brief. But even with those assumptions, we shall hold that appellant has failed to show that it was prejudiced by the court’s failure to give it additional time to answer the summary judgment motion.

The Maryland Home Improvement Law is set forth in Maryland Code (1992, 1998 Repl.Vol., 2002 Supp.), section 8-101 to 8-702 of the Business Regulation Article. 5 Section 8-301 reads as follows: § 8-301. License required; exceptions. (a) Contractor license.—Except as otherwise provided in this title, a person must have a contractor license whenever the person acts as a contractor in the State. (b) Subcontractor license.—Except as otherwise provided in this title (c) Salesperson license.—Except as otherwise provided in this title, a person must have a salesperson license or contractor license whenever the person sells a home improvement in the State.

(d) Exceptions.—This section does not apply to: (1) an individual who works for a contractor or subcontractor for a salary or wages but who is not a salesperson for the contractor; (2) a clerical employee, retail clerk, or other employee of a licensed contractor who is not a salesperson, as to a transaction on the premises of the license contractor; ⁶⁹⁴ (3) a solicitor for a contractor' who calls an owner by telephone only; (4) an architect, electrician, plumber, heating, ventilation, airconditioning, or refrigeration contractor, or other person who: (i) is required by State or local law to meet standards of competency or experience before engaging in an occupation or profession; (ii) currently is licensed in that occupation or profession under State or local law; and (iii) is: 1. acting only within the scope of that occupation or profession; or 2. installing a central heating or air-conditioning system; (5) a security systems technician licensed under Title 18 of the Business Occupations and Professions Article; or (6) a person who is selling a home improvement to be performed by a person described in item (4) of this subsection. (Ann.Code 1957, art. 56, §§ 247, 255, 256; 1992, ch. 4, § 2; ch. 649; 1994, ch. 3, § 13; ch. 362; 1999, ch. 483.) (Emphasis added.) Section l-101(g) of the Business Regulation Article defines “person” as “an individual, receiver, trustee, guardian, personal representative, fiduciary, representative of any kind, partnership, firm, association, corporation, or other entity.” BSB did not exist at the time the contract for home improvements was signed. It was, according to appellant’s proffer, a partnership. BSB did exist, however, at the time of the hearing on this matter.

Because Robert Lenkey signed the contract for BSB, he would have been liable to Stewart if the contract was breached and Stewart had sued for damages. Curtis G. Testerman Co., v. Buck, 340 Md. 569, 576 , 667 A.2d 649 (1995). Inasmuch as neither Robert Lenkey or BSB of ⁶⁹⁵ the informal partnership known as BSB ever had a home improvement contractor’s license, it cannot be said that the “person” with whom appellee contracted complied with section 8-301(a). In S.A.S. Personnel Consultants Inc. v. Pat-Pan, Inc., 286 Md. 335, 341 , 407 A.2d 1139 (1979), the Court said: This Court assumes, if the Legislature does not indicate otherwise, that contracts made by unlicensed persons subject to regulatory statutes designed to protect the public are illegal as against public policy and will not be enforced.

Harry Berenter, Inc. v. Berman, 258 Md. 290, 298-99 , 265 A.2d 759, 764 (1970); Goldsmith & Dell v. Manufacturers’ Liability Ins. Co., 132 Md. 283, 286 , 103 A. 627, 628 (1918). The Maryland Home Improvement Law “is a regulatory statute enacted for the protection of the public.” Brzowski v. Maryland Home Improvement Commission, 114 Md.App. 615, 628 , 691 A.2d 699 (1997) (citing Harry Berenter, Inc. v. Berman, 258 Md. 290, 294 , 265 A.2d 759 (1970)). In Brzowski , we stated: The act also established the Home Improvement Guaranty Fund.

Id., § 8-401 et seq. The Fund was created to provide an additional remedy for homeowners who suffered actual loss due to unsatisfactory work performed by a home improvement contractor. Md. Ann. Code art. 56, § 257A(a) (Supp.1985) (recodified at Md.Code Ann., Bus. reg., §§ 8-403(a),-405(a)); Senate Economic and Environmental Affairs Committee, Bill Analysis for Senate Bill 507 at 2 (1985). The statutory provisions governing the administration of the Fund, however, limit payments from the Fund to only those claims that establish that a homeowner has suffered “actual loss” due to the act or omission of a licensed contractor.

Md.Code Ann., Bus. Reg. § 8-405(a). We shall explain further. A claim for reimbursement from the Fund requires the submission of a claim to the Commission, with “the amount claimed based on the actual loss. ” Id., § 8-406(1) (emphasis added).

Upon receipt of a claim, the Commission must ⁶⁹⁶ transmit a copy of the claim to the contractor “alleged to be responsible for the actual loss.” Id., § 8-407(b)(l) (emphasis added). When the Commission orders payment from the Fund, serious repercussions can be visited upon the contractor responsible for the actual loss that the Fund payment sought to compensate. For instance, if the Commission pays any amount from the Fund on account of a contractor’s conduct, the Commission may suspend the contractor’s license if he fails to reimburse the Fund in full. Md.Code Ann., Bus.

Reg. § 8-411. Naturally, loss of license can have dire consequences for a contractor. A person may not act as contractor in this state without a contractor’s license. Id., § 8-601(a).

Indeed, “a licensed person will not be given the assistance of the courts in enforcing contracts within the provisions of the regulatory statute because such enforcement is against public policy.” Harry Berenter, 258 Md. at 293 , 265 A.2d at 761 . See Donmar Md. Corp. v. Hawkesworth, 46 Md.App. 575, 576 , 420 A.2d 295 (1980). Furthermore, if the Commission pays a claim against the Fund, the rights of the claimant against the contractor are subrogated to the Commission to the extent of the amount paid to the claimant from the Fund. Md.Code Ann., Bus.

Reg. § 8-410(a)(l). The Commission, therefore, may sue any contractor on whose account a claim was paid, if the contractor does not reimburse the Fund in full, including interest. Id., § 8-410(b). 114 Md.App. at 628-30 , 691 A.2d 699 (emphasis added). Stewart contends that the case subjudice is controlled by Harry Berenter, supra.

In the Berenter case, Harry Berenter, Inc. attempted to enforce a mechanic’s lien in the Circuit Court for Montgomery County against the property of Phillip G. and Toby Berman. 258 Md. at 291 , 265 A.2d 759 . In that case, as in the one sub judice, the contractor who performed the home improvement work was not licensed under the Maryland Home Improvement Law. Id. In the Harry Beren ⁶⁹⁷ ter case, the Court of Appeals, relying upon Goldsmith v. Manufacturers’ Liability Ins.

Co., 132 Md. 283 , 103 A. 627 (1918), and later Maryland cases, held that the Maryland Home Improvement Law is a regulatory statute enacted for the protection of the public and not merely a revenue measure. 258 Md. at 294 , 265 A.2d 759 . The Court of Appeals then said: Berenter, Inc. earnestly contends that because the enforcement of a mechanic’s lien is involved in an equity court, the rule against the enforcement of contracts by unlicensed persons under regulatory laws should not apply. In our opinion, even though the mechanic’s lien is created by statute, nevertheless such a lien is provided for the enforcement of a contract for work done and materials furnished, Code (1957), Art. 63, §§ 1, 19. The same public policy is involved in regard to this remedy as is present in regard to other remedies to enforce contracts.

It is also clear that courts of equity will not lend their aid to enforce an illegal contract, 3 Pomeroy, Equity Jurisprudence (5th Ed.), § 940, p. 728. The appellant Berenter, Inc., also argues that unless the mechanic’s lien is enforced, the Bermans will be “unjustly enriched to no small extent.” However, as we said in Thorpe v. Carte, [ 252 Md. 523 , 250 A.2d 618 (1969) ] supra, quoting from 2 Restatement, Contracts, § 598, comment a: The court’s refusal is not for the sake of the defendant, but because it will not aid such a plaintiff. Nor is the contention that there is unjust enrichment of the defendants tenable. To permit a recovery on a quantum meruit would defeat and nullify the statute.

Northen v. Elledge, 72 Ariz. 166 , 232 P.2d 111 (1951); Lewis