Fosler v. Panoramic Design, Ltd.

ELDRIDGE, J. After becoming dissatisfied with a renovation project on their home, the petitioners, Scott and Gail Fosler, filed three actions against the respondent, Panoramic Design, Ltd., with which the Fosters had entered a “Construction Consultant Agreement.” One suit, filed in the Circuit Court for Montgomery County, was this declaratory judgment action. The Foslers also filed a complaint with the Maryland Home Improvement Commission, a state government agency in the ¹²¹ Maryland Department of Labor, Licensing, and Regulation. In addition, the Foslers filed a complaint with the Montgomery County Department of Housing and Community Affairs. The three actions essentially alleged that Panoramic was performing home improvement work without a license, and, consequently, that the contract between the Foslers and Panoramic was unenforceable.

The Maryland Home Improvement Commission stayed its proceedings during the pendency of the other actions. The Circuit Court, however, allowed this declaratory judgment action to go to trial and to be resolved on the merits. The Circuit Court eventually ruled that Panoramic was performing home improvement work without a license and that the contract was unenforceable. On appeal, the Court of Special Appeals reversed the judgment of the Circuit Court in an unreported opinion.

This Court issued a writ of certiorari, primarily to consider whether the Circuit Court for Montgomery County erred in failing to dismiss or stay the declaratory judgment action. We shall hold that it did; accordingly, we shall not reach any other issues in the case. I. The following facts are not in dispute. The Foslers resided in a single-family house in Chevy Chase, Maryland, which they decided to renovate completely.

Discussions between the Foslers and the respondent, Panoramic Design, Ltd., resulted in the parties entering into a “Design Agreement” and a “Construction Consultant Agreement.” The latter, which is the contract at issue in the case at bar, was executed on May 20, 1997. Pursuant to the Construction Consultant Agreement, Panoramic agreed to the following terms: “A. BIDDING PROJECT 1. PD, Ltd. will bid or negotiate the complete project to individual subcontractors, vendors, and suppliers required to complete the project for Scott and Gail Fosler. ¹²² 2. PD, Ltd. will prepare an itemized construction budget and construction schedule. 3.

PD, Ltd. will coordinate contracts with Scott and Gail Fosler and subcontractors. 4. PD, Ltd. will acquire copies of all subcontractors’ insurance policies, licenses, and references. “B. MANAGING PROJECT 1. PD, Ltd. will coordinate subcontractor work on job site and local government inspections. 2. PD, Ltd. will supervise Gail and Scott Fosler’s construction site, but is not responsible for subcontractors’ work. 3.

PD, Ltd. -will provide Scott and Gail Fosler with a financial Construction Management Report on the 1st and 15th of each month during the construction of your project. This report will outline Scott and Gail Fosler’s financial expenditures for construction to date. 4. PD, Ltd. will secure all subcontractors lien-release forms if required.” In exchange, the Foslers agreed to pay to Panoramic a fee of twenty percent of the cost of materials and labor. Panoramic earned additional income based on a twenty percent mark-up of all procured materials.

Early in 1999, the Foslers became dissatisfied -with Panoramic’s work. As a result, on March 16, 1999, the Foslers filed the present declaratory judgment action in the Circuit Court for Montgomery County. Their complaint sought a declaration that the services provided to them by Panoramic under the contract constituted a “home improvement” within the meaning of the Maryland Home Improvement Law, Maryland Code (1992,1998 RepLVol., 2002 Supp.), § 8-101 et seq. of the Business Regulation Article. 1 They also sought a declaration that the contract was unenforceable under this Court’s ¹²³ holding in Harry Berenter, Inc. v. Berman, 258 Md. 290 , 265 A.2d 759 (1970), on the grounds that Panoramic was required to have a license from the Maryland Home Improvement Commission, but did not have such a license, when it performed home improvement services for the Foslers. As previously mentioned, the Foslers also filed a complaint with the Maryland Home Improvement Commission on May 25, 1999.

Similarly, this complaint claimed that Panoramic was performing home improvement work without a license, in violation of the Maryland Home Improvement Law. The Commission submitted the complaint to its Legal Services Division to determine whether administrative charges should be issued against Panoramic. Finally, the Foslers filed a complaint with the Montgomery County Department of Housing and Community Affairs. In that action, the Foslers alleged that Panoramic committed a deceptive practice in violation of the County’s consumer protection laws by performing home improvement work without a license.

On August 24, 1999, an investigator from the Montgomery County Department of Housing and Community Affairs sent a letter to the state investigator assigned to the Maryland Home Improvement Commission complaint, stating in relevant part as follows: “Enclosed is a copy of the court notice setting trial in this matter for October 26, 1999. The charge is whether Panoramic committed a deceptive practice in violation of the county’s consumer protection laws by doing home improvement work without a license. “It would be helpful to have the MHIC [Maryland Home Improvement Commission] opinion on the issue of whether Panoramic needed a license by then, as the court would give it great weight.” One month later, however, the Maryland Home Improvement Commission advised the Foslers “that this agency will take no action on the complaint until final resolution” of the court ¹²⁴ actions against Panoramic. 2 Subsequently, Panoramic filed a motion to dismiss the Fos-lers’ declaratory judgment action, asserting that “[t]he Maryland Legislature has determined that the sole and exclusive avenue for determining whether a contractor is a ‘home improvement contractor,’ lies with the Maryland Home Improvement Commission. As such, the Declaratory Judgment Action is an inappropriate and unavailable remedy.” Panoramic also relied on the fact that the Home Improvement Statute “contains no provision authorizing a private cause of action by a homeowner against a person or firm that is alleged to be a home improvement contractor.” Alternatively, Panoramic argued that, “when a statutory scheme includes both administrative proceedings and provisions for judicial review of the administrative decision, this is such a scheme that requires the parties to exhaust the administrative remedies prior to recourse to the courts.” Thus, Panoramic maintained that the declaratory action was improper, since the Foslers had “failed ... to exhaust their administrative remedies.” The Foslers responded by arguing, inter alia, that ¹²⁵ “[e]ven assuming, arguendo, Panoramic’s position relative to administrative exhaustion has some merit, the Foslers filed a complaint with the MHIC [Maryland Home Improvement Commission] and have been advised by the MHIC that MHIC on its own initiative has stayed any action on the Foslers’ complaint pending ‘completion of litigation.’ “Accordingly, any argument that the Foslers have failed to exhaust their remedies before the MHIC is without merit. The Foslers have done everything they could do to obtain a determination from MHIC on their complaint against Panoramic.

It is the MHIC, and not the Foslers, that has decided to await the outcome of the various court actions and take no administrative action on the Foslers’ complaint.” Following a hearing, the Circuit Court denied Panoramic’s motion to dismiss. The Foslers then filed a motion for summary judgment, which was also denied by the Circuit Court. A three-day trial before a jury ensued. At the conclusion of the trial, the court discharged the jury, holding, inter alia, that there were no disputed facts for the jury to consider which could resolve the issue of whether Panoramic was acting as a contractor or as a consultant.

The Circuit Court then filed a judgment declaring that Panoramic “performed home improvement contractor services for” the Foslers “within the meaning of the Maryland Home Improvement statute,” that “Panoramic ... was required to have a license issued by the Maryland Home Improvement Commission,” that “Panoramic ... performed [the] home improvement contractor services for plaintiffs ... without a license issued by the Maryland Home Improvement Commission,” and that, consequently, the contract was unenforceable under Maryland law. Panoramic appealed to the Court of Special Appeals. The intermediate appellate court reversed the order of the Circuit Court and remanded the case for a new trial, holding that the issue of whether Panoramic was a general contractor or a ¹²⁶ consultant was for the jury. The Foslers then filed a petition for a writ of certiorari which we granted, Foster v. Panoramic, 365 Md. 472 , 781 A.2d 778 (2001).

II

A. The Maryland Home Improvement Law was originally enacted by Ch. 133 of the Acts of 1962. The title of the original statute explained that the General Assembly enacted it with the intention of, inter alia, “providing generally for the regulation of the home improvement business of all persons in this State” and “establishing a system of licensing certain contractors and salesmen under a new administrative agency to be known as the Maryland Home Improvement Commission.” For a review of the Maryland Home Improvement Law and the authority of the Commission, see Judge Harrell’s opinion for the Court of Special Appeals in Brzowski v. Md. Home Improvement, 114 Md.App. 615 , 691 A.2d 699 (1997). Although § 8-208 of the Home Improvement Law charges the Commission with the administration and enforcement of the statute, and subtitle 3, §§ 8-301 through 8-317, authorize the Commission to take certain remedial actions if there are violations of the licensing provisions, there is no indication in the language of the Act that the Legislature intended that the administrative remedies provided therein were to be the exclusive method of enforcement. As this Court explained in detail in Zappone v. Liberty Life Ins.

Co., 349 Md. 45, 60-61 , 706 A.2d 1060, 1067-1068 (1998), “[wjhenever the Legislature provides an administrative and judicial review remedy for a particular matter or matters, the relationship between that administrative remedy and a possible alternative judicial remedy will ordinarily fall into one of three categories. “First, the administrative remedy may be exclusive, thus precluding any resort to an alternative remedy. Under this ¹²⁷ scenario, there simply is no alternative cause of action for matters covered by the statutory administrative remedy. “Second, the administrative remedy may be primary but not exclusive. In this situation, a claimant must invoke and exhaust the administrative remedy, and seek judicial review of an adverse administrative decision, before a court can properly adjudicate the merits of the alternative judicial remedy. See, e.g., McCullough v. Wittner, 314 Md. 602, 613 , 552 A.2d 881, 886 (1989) (‘Under circumstances like these, where a plaintiff has both an administrative remedy and an independent judicial action, and the administrative agency’s jurisdiction is deemed primary, it is appropriate for the trial court to retain, for a reasonable period of time, jurisdiction over the independent judicial action pending invocation and exhaustion of the administrative procedures’); Md.-Nat’l Cap.

P. & P. Comm’n v. Crawford, 307 Md. 1, 18 , 511 A.2d 1079, 1088 (1986) (‘Once the administrative procedures are exhausted, the trial court may proceed [with both the independent judicial action and the administrative review action]; the plaintiff whose case is meritorious may be entitled to whatever relief is available under either the independent judicial action or the administrative/judicial review remedy’); Bd. of Ed. for Dorchester Co. v. Hubbard, 305 Md. 774, 792 , 506 A.2d 625, 634 (1986). “Third, the administrative remedy and the alternative judicial remedy may be fully concurrent, with neither remedy being primary, and the plaintiff at his or her option may pursue the judicial remedy without the necessity of invoking and exhausting the administrative remedy. Md.-Nat’l Cap. P. & P. Comm’n v. Crawford, supra, 307 Md. at 22-31 , 511 A.2d at 1090-1094 ; Bd. of Ed. for Dorchester Co. v. Hubbard, supra, 305 Md. at 791 , 506 A.2d at 633 .... “Which one of these three scenarios is applicable to a particular administrative remedy is ordinarily a question of legislative intent.” 3 ¹²⁸ The Court continued, Zappone, 349 Md. at 63 , 706 A.2d at 1069 (footnote omitted, emphasis added): “Despite occasional dicta in a few opinions suggesting the contrary, where neither the statutory language nor the legislative history disclose an intent that the administrative remedy is to be exclusive, and where there is an alternative judicial remedy under another statute or under common law or equitable principles, there is no presumption that the administrative remedy was intended to be exclusive. There is in this situation, however, a presumption that the administrative remedy is intended to be primary, and that a claimant cannot maintain the alternative judicial action without first invoking and exhausting the administrative remedy.” See also, e.g., Brown v. Fire and Police Employees’ Retirement System, 375 Md. 661 , 826 A.2d 525 (2003); Moose v. F.O.P., 369 Md. 476, 485-494 , 800 A.2d 790, 796-802 (2002); Bell Atlantic v. Intercom, 366 Md. 1, 12 , 782 A.2d 791, 797 (2001); Josephson v. City of Annapolis, 353 Md. 667, 674-678 , 728 A.2d 690, 693-695 (1998); Md. Reclamation v. Harford County, 342 Md. 476, 493, 677 A.2d 567 , 576 (1996); Luskin’s v. Consumer Protection, 338 Md. 188, 194-199 , 657 A.2d 788, 791-793 (1995); Clinton v. Board of Education, 315 Md. 666, 678 , 556 A.2d 273, 279 (1989); Quesenberry v. WSSC, 311 Md. 417, 424 , 535 A.2d 481, 484 (1988); Md.-Nat’l Cap.

P. & P. Comm’n v. Crawford, 307 Md. 1, 13 , 511 A.2d 1079, 1085 (1986); Bd. of Ed. for Dorchester Co. v. Hubbard, 305 Md. 774, 786 , 506 A.2d 625, 631 (1986). Specifically with regard to declaratory judgement actions, the presumption that a statutory administrative remedy is primary is reflected in the Declaratory Judgment Act. ¹²⁹ Code (1974, 2000 Repl.Vol.), § 3-409(b) of the Courts and Judicial Proceedings Article, which is part of the Declaratory Judgment subtitle, states that, “[i]f a statute provides a special form of remedy for a specific type of case, that statutory remedy shall be followed in lieu of a proceeding under this subtitle.” See Brown v. Fire and Police Employees’ Retirement System, supra, 375 Md. at 669 , 826 A.2d at 530 ; Moose v. F.O.P., supra, 369 Md. at 486 , 800 A.2d at 796-797 ; Utilities v. WSSC, 362 Md. 37, 44-45 , 763 A.2d 129, 133 (2000); Montgomery County v. Broadcast Equities, 360 Md. 438, 457 , 758 A.2d 995, 1005 (2000). We explained in the Zappone opinion, 349 Md. at 61-65 , 706 A.2d at 1069-1070 , and have reaffirmed in more recent opinions (e.g., Bell Atlantic v. Intercom, supra, 366 Md. at 12 , 782 A.2d at 797 ), that several factors may be pertinent in determining whether the Legislature intended that the administrative remedy be primary or, stated another way, in determining whether the presumption of administrative primary jurisdiction is rebutted. The factors include any indication of legislative intent in the statutory language, the comprehensiveness of the administrative remedy, the agency’s view as to whether its jurisdiction is primary, etc. Among the most important factors are the nature of the alternative judicial remedy in relation to the statutory scheme containing the administrative remedy, the type of disputed issues, and the relevance of administrative expertise.

The Zappone opinion thus stated ( 349 Md. at 65-66 , 706 A.2d at 1070 ): “An extremely significant consideration under our cases is the nature of the alternative judicial cause of action pursued by the plaintiff. Where that judicial cause of action is wholly or partially dependent upon the statutory scheme which also contains the administrative remedy, or upon the expertise of the administrative agency, the Court has usually held that the administrative remedy was intended to be primary and must first be invoked and exhausted before resort to the courts. ¹³⁰ “On the other hand, where the alternative judicial remedy is entirely independent of the statutory scheme containing the administrative remedy, and the expertise of the administrative agency is not particularly relevant to the judicial cause of action, the Court has held that the administrative remedy was not intended to be primary and that the plaintiff could maintain the independent judicial cause of action without first invoking and exhausting the administrative procedures.” Applying these principles to the present controversy leads to the conclusion that the administrative remedies provided by the Maryland Home Improvement Law are primary under the circumstances of the present case. Thus, the Circuit Court and the Court of Special Appeals erred in not requiring the petitioners to exhaust their administrative remedies prior to proceeding with the merits of the declaratory judgment action. B. The Foslers’ complaints against Panoramic fall within subtitle 3 of the Maryland Home Improvement Law, §§ 8-301 through 8-317 of the Business Regulation Article, which relate to the requirement that a home improvement contractor, subcontractor, or salesperson “must” have a license from the Commission, the examination and other requirements for obtaining a license, the approval or denial of applications for a license, the scope and term of a license, an applicant’s right to a contested case hearing before the Commission in accordance with the Maryland Administrative Procedure Act, Code (1984, 1999