Landsman v. Maryland Home Improvement Commission

BARBERA, J. We are asked to decide in this case whether the General Assembly’s 2000 amendment to the Home Improvement Guaranty Fund, increasing by a third the maximum amount a homeowner can recover for actual loss due to the unsatisfactory work of a contractor, applies retroactively to contracts entered into before the effective date of that amendment. For the reasons that follow, we hold that it does. ²⁴⁶ BACKGROUND The underlying facts are not in dispute. Appellant, Sheldon I. Landsman, entered into a contract for a home improvement project with David Somerville, t/a Somerville Construction, on January 19,1997. At that time, Somerville possessed a Maryland home improvement contractor’s license.

Somerville completed some work on the project, but abandoned it on or about December 5, 1997, when he advised Landsman that he was moving to Arizona. Somerville refused to refund some of the monies that Landsman had paid him under the agreement, representing to Landsman that there was no money available. Somerville’s contractor’s license had expired on June 30,1997. Following enactment of Chapter 144 of the Maryland Session Laws of 2000, the maximum recovery under the Maryland Home Improvement Guaranty Fund (“Fund”) was increased from $10,000.00 to $15,000.00.

By express provision in the enacting legislation, the effective date was October 1, 2000. Nothing in the legislation indicated whether the statute should be applied retroactively. On November 10, 2000, Landsman filed a claim against the Fund. The matter came on for a hearing in March 2001, before an administrative law judge (“ALJ”).

Landsman represented himself at the hearing. The Fund was represented by counsel. Somerville was not present, and no representative appeared on his behalf. 1 The ALJ thereafter issued his written proposed decision. The ALJ found as a fact that Landsman had incurred an “actual loss” of $42,395.41, and concluded that Landsman was entitled to recover the statutory maximum of $15,000.00 from the Fund.

In a proposed order, Panel B of the Maryland Home Improvement Commission, (“Commission”), appellee, ap ²⁴⁷ proved the ALJ’s proposed decision but reduced Landsman’s award from $15,000.00 to $10,000.00. The panel concluded that “the $15,000.00 claim limit applies to contracts entered into on or after October 1, 2000 and that contracts entered into prior to October 1, 2000 are subject to the $10,000.00 claim limit.” The panel’s proposed order further stated that “the contractor’s liability to the Guaranty Fund constitutes a penalty, and that an increase in such a penalty may not be applied retroactively to contracts entered into before the amendment to the law took effect.” Landsman filed exceptions to the proposed order. Following an exceptions hearing, the Commission entered a final order on July 24, 2001, affirming the proposed order. Landsman thereafter filed a petition for judicial review in the Circuit Court for Montgomery County.

After a hearing on the merits, the court affirmed the Commission’s final order. In an opinion and order entered on March 22, 2002, the court declared “that the Legislature’s intent was clear not to make the amendment to Md. Ann. Code Art. Bus. Reg. § 8-405(e)(1) retroactive.” Noting that the effective date “is expressly stated to be October 1, 2000” and that “[tjhere is no express statement by the Legislature to the contrary,” the court concluded that “ § 8-405(e)(l) fits neatly into the general category of statutes, which carry the strong presumption against retroactivity.” The Court rejected Landsman’s argument that the 2000 amendment was remedial, stating that the increase in the maximum award “clearly creates new rights, new duties and new obligations thus effecting the substantive rights of the Petitioner and Somerville, a licensed contractor.” The court reasoned that the 2000 amendment “gives the claimant a new right to seek a higher monetary award from the Fund” and affects Somerville’s substantive rights by increasing the “maximum penalty,” thereby exposing Somerville to greater risk of license suspension for failure to reimburse the Fund the full amount of a claim. ²⁴⁸ Following entry of the court’s order, Landsman filed this timely appeal raising five issues for our review, which we have consolidated into one: Did the Commission err in concluding that, as a matter of law, the $15,000.00 claim limit applies only to contracts entered into on or after October 1, 2000, and that contracts entered into prior to October 1, 2000 are subject to the $10,000.00 claim limit? DISCUSSION In 1962, the General Assembly enacted the Maryland Home Improvement Law, now codified at Md.Code (1992, 1998 Repl.Vol., 2003 Supp.), § 8-101 et seq. of the Business Regulation Article. 2 This law, which had its genesis in a 1961 report of the Governor’s Commission to Study the Home Improvement Industry in Maryland, is a regulatory scheme designed for the protection of the public.

Shade v. State, 306 Md. 372, 377 , 509 A.2d 664 (1986); Harry Berenter, Inc. v. Berman, 258 Md. 290, 294 , 265 A.2d 759 (1970). As the title of the original statute explained, the law was enacted, in part, “with the intention of ‘providing generally for the regulation of the home improvement business for all persons in the 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.’ ” Fosler v. Panoramic Design, Ltd., 376 Md. 118, 126 , 829 A.2d 271 (2003). “The Commission’s primary functions are to investigate complaints about home improvement contractors, and to administer the licensing of those contractors in this state.” Brzowski v. Maryland Home Improvement Comm’n, 114 Md.App. 615, 628 , 691 A.2d 699 , cert. ²⁴⁹ denied, 346 Md. 238 , 695 A.2d 1227 (1997) (code citations omitted). In 1981, the General Assembly enacted Subtitle 4 of the Home Improvement Law, establishing the Fund. The Fund was created to provide a remedy for homeowners who suffer an “actual loss that results from, [inter alia,] an act or omission by a licensed contractor.” § 8-405(a); Fosler, 376 Md. at 131 , 829 A.2d 271 . 3 Subtitle 4 sets forth an administrative remedy before the Commission for claims against the Fund, and provides for a contested case hearing before the Commission and payments by the Commission to claimants.

Fosler, 376 Md. at 131 , 829 A.2d 271 . As we have said, prior to 2000, the maximum amount that a homeowner could recover from the Fund for actual loss due to the unsatisfactory work of a home improvement contractor was $10,000.00. By Chapter 144 of the Acts of 2000, the General Assembly increased that amount to $15,000.00. 4 As amended, § 8-405(e)(1) reads: “The Commis ²⁵⁰ sion may not award from the Fund [ ] more than $15,000 to 1 claimant for acts or omissions of 1 contractor.” At the heart of this appeal is whether Landsman, having established an actual loss resulting from Somerville’s abandonment of the job in December 1997, is entitled to benefit from the increased maximum amount provided under the 2000 amendment. The answer to this question is dictated by whether the amendment is to be applied retrospectively or prospectively. 5 As we undertake to answer that question, we note preliminarily that “[i]t is well settled that a reviewing court may not substitute its judgment for that of the administrative agency or make its own findings of fact when reviewing the decision of an ALJ.” Maryland State Bd. of Pharm. v. Spencer, 150 Md.App. 138, 147-48 , 819 A.2d 383 , cert. granted, 376 Md. 49 , 827 A.2d 112 (2003); accord Marzullo v. Kahl, 366 Md. 158, 172 , 783 A.2d 169 (2001).

Although “an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts,” Marzullo, 366 Md. at 172 , 783 A.2d 169 , an agency’s decision “is owed no deference ... when it is based on erroneous legal conclusions,” Handley v. Ocean Downs, LLC, 151 Md.App. 615, 642 , 827 A.2d 961 (2003). Therefore, “we ‘must substitute [our] judgment for that of the agency if our interpretation of the applicable legal principles is different.’ ” Spencer, 150 Md.App. at 148 , 819 A.2d 383 (quoting Perini Servs., Inc. v. Maryland Health Res. Planning Comm’n, 67 Md.App. 189, 201 , 506 A.2d 1207 , cert. denied, 307 Md. 261 , 513 A.2d 314 (1986)). ²⁵¹ The question we decide in this case is one of statutory construction, not involving any special expertise of the Commission. Consequently, we owe no deference to the Commission’s decision respecting the applicability of the amendment.

Angelini v. Harford County, 144 Md.App. 369, 373 , 798 A.2d 26 , cert. denied, 370 Md. 269 , 805 A.2d 265 (2002). Rather, we examine this purely legal question de novo. “Whether a statute operates retrospectively or only prospectively is in the first instance a question of legislative intent.” Tyrone W. v. Danielle R., 129 Md.App. 260, 277 , 741 A.2d 553 (1999), aff'd sub nom. Langston v. Riffe, 359 Md. 396 , 754 A.2d 389 (2000). “ ‘Because of the potential for interference with substantive rights, however, and because of the resulting prejudice against retroactive application,’ a statute that affects substantive rights is presumed to operate prospectively.” Id. (quoting State of Maryland Comm’n on Human Relations v. Amecom Div. of Litton Sys., Inc., 278 Md. 120, 123 , 360 A.2d 1 (1976)).

When, however, a statute affects only a procedure or remedy, and not a substantive right, the presumption in favor of prospective application does not apply. Rawlings v. Rawlings, 362 Md. 535, 556 , 766 A.2d 98 (2001); Langston, 359 Md. at 408 , 754 A.2d 389 . Indeed, “[a]bsent a contrary intent made manifest by the enacting authority, any change made by statute or court rule affecting a remedy only (and consequently not impinging on substantive rights) controls all court actions whether accrued, pending or future.” Aviles v. Eshelman Elec. Corp., 281 Md. 529, 533 , 379 A.2d 1227 (1977); accord State Admin.

Bd. of Election Laws v. Supervisory Bd. of Elections of Baltimore City, 342 Md. 586, 601 , 679 A.2d 96 (1996); Grandison v. State, 341 Md. 175, 257 , 670 A.2d 398 (1995), cert. denied, 519 U.S. 1027 , 117 S.Ct. 581 , 136 L.Ed.2d 512 (1996). These rules of construction apply equally to amendatory acts. Tyrone W., 129 Md.App. at 278 , 741 A.2d 553 . Remedial statutes are “ ‘those which provide a remedy, or improve or facilitate remedies already existing for ²⁵² the enforcement of rights and the redress of injuries,’ ” but do “ ‘not affect substantive or vested rights.’ ” Langston, 359 Md. at 408-09 , 754 A.2d 389 (citation omitted).

If, however, the statute provides a new form of relief that itself constitutes a substantive right, it is not purely remedial, and will not be presumed to apply retroactively. Amecom, 278 Md. at 125 , 360 A.2d 1 . The General Assembly did not expressly declare that its 2000 amendment of § 8-405(e)(l) was to be applied retrospectively. Neither is there anything in the scant legislative history of the amendment that indicates the legislative intent in this regard.

We therefore follow the statutory construction principles laid out above to ascertain whether the amendment affects substantive rights or liabilities, in which case the strong presumption of prospectivity applies, or whether the amendment is purely procedural or remedial, in which case there is no presumption of prospectivity and the amendment will be applied retroactively. The Commission adheres to the position it took below, arguing that the 2000 amendment is neither procedural nor remedial in nature, and that it affects the substantive rights of home improvement contractors in this State. Landsman of course takes a contrary position. He does not argue that the amendment is procedural, but does argue that it is purely remedial.

The question whether the 2000 amendment to § 8-405(a)(l) is purely remedial is one that has not been resolved by either this Court or the Court of Appeals. Our decision in Brzowski , however, sheds some light on the issue because we had occasion in that case to construe portions of Subtitle 4 of the Home Improvement Law. In the course of doing so, we examined the legislative history of the subtitle. Brzowski involved a contractor’s challenge to the Commission’s compensation of a claimant through the Fund pursuant to an arbitration award that did not comply with § 8-409(a)(2).

That section requires that an arbitration award contain a statement by the arbitrator that he “expressly found on the merits that the claimant is entitled to recover under § 8- ²⁵³ 405(a) of this subtitle.” Brzowski 114 Md.App. at 621-22 , 691 A.2d 699 . After a thorough examination of the history of the Home Improvement Law, we concluded in Brzowski that the law was enacted for the protection of the public, and that the Fund provides “an additional remedy for homeowners who suffered actual loss” due to the actions or omissions of a contractor. Id. at 627 , 691 A.2d 699 . 6 We conclude, here, that the 2000 amendment increasing the maximum award that can be awarded from the Fund is likewise remedial in the sense that it improves a remedy “already existing for the enforcement of rights and the redress of injuries.” Langston, 359 Md. at 408 , 754 A.2d 389 . Our determination that the amendment is remedial in this sense does not end the inquiry, however, because we must also determine whether retrospective application of the amendment would “interfere with vested or substantive rights.” Id. at 408, 418 , 754 A.2d 389 .

As we consider this aspect of the issue, we bear in mind that “ ‘[statutes which do not destroy a substantial right, but simply affect procedure or remedies, are not considered as destroying or impairing vested rights, for there is no vested right in any particular mode of procedure for the enforcement or defense of the right.’ ” Rawlings, 362 Md. at 561 , 766 A.2d 98 (quoting Winston v. Winston, 290 Md. 641, 650 , 431 A.2d 1330 (1981)); accord Dua v. Comcast Cable of Maryland, Inc., 370 Md. 604, 625-26 , 805 A.2d 1061 (2002). ²⁵⁴ In this case, the Commission interpreted the 2000 amendment to § 8 — 405(e)(1) to apply only to actions arising out of contracts entered into on or after October 1, 2000, because of the increased “penalty” to the contractor. In affirming that decision, the circuit court found that the 2000 amendment of § 8-405(e)(l) “clearly creates new rights, new duties and new obligations thus effecting the substantive rights” of both Landsman and the contractor. We of course do not review the decision of the circuit court; instead, we review that of the Commission. Mehrling v. Nationwide Ins.

Co., 371 Md. 40, 57 , 806 A.2d 662 (2002). Regardless, we do not agree with the court that the 2000 amendment created new rights, duties, or obligations of either Landsman or Somerville. Indeed, insofar as Landsman is concerned, the Commission does not even discuss the extent to which, if at all, the amendment created a new substantive right of Landsman and comparably situated homeowners. In any case, Landsman did not have a vested, legally enforceable right to compensation from the Fund until July 24, 2001, the date on which the Commission determined that he was entitled to compensation.

We so conclude by resort to our decision in McComas v. Criminal Injuries Compensation Bd., 88 Md.App. 143 , 594 A.2d 583 (1991). In McComas , we addressed the question of whether an amendment to the Criminal Injuries Compensation Act, establishing for the first time a ceiling for the award of benefits under the Act, applied to claims that were pending prior to the effective date of the amendment. We said that rights created by the Criminal Injuries Compensation Act are purely statutory and, unless vested, may be amended or repealed “at the whim of the legislature.” Id. at 150 , 594 A.2d 583 ; see also id. at 149, 594 A.2d 583 (discussing cases). We also said that a crime victim does not have a substantive right to benefits under the Act.

Instead, the victim has only an expectation of receiving benefits unless and until the Criminal Injuries Compensation Board determines that statutory requirements for the award of benefits have been met, at which time, but not ²⁵⁵ before, the right to an award becomes vested. Id. at 150 , 594 A.2d 583 . Observing that amendments to purely statutory rights are not bound by the general rule that statutes are presumed to apply prospectively, id., we said, “[ajbsent a saving provision or some other clear expression by the legislature that it intends to protect claims that are pending on the date of enactment, an amendment of a purely statutory right affects all claims not yet vested,” id. at 150-51 , 594 A.2d 583 . We recognize that in the case sub judice we are dealing with an amendment that increases a statutory benefit, rather than reducing one, as was the case in McComas .

We nevertheless find instructive the discussion in McComas identifying when a statutorily bestowed benefit vests. Like the right to compensation under the Criminal Injuries Compensation Act granted the crime victim in McComas , Landsman’s right to compensation from the Fund is a creature of statute. Amendments to such rights are not bound by the usual presumption against retrospective application, and these rights are subject to change “at the whim of the legislature.” Furthermore, McComas teaches that Landsman’s right to an award under the Act vested only when the Commission determined that he was eligible to be compensated. By that time the amendment increasing the maximum award from the Fund had been in effect for nearly