Sunday, April 11, 2010

Alcoa Concrete & Masonry, Inc. v. Stalker Brothers, Inc. (Ct. of Special Appeals)

Filed: March 31, 2010

Opinion by Judge Lawrence F. Rodowsky

An unlicensed contractor is entitled to be paid under a home improvement agreement with a contractor, regardless of the requirement that contractors must be licensed under the Maryland Home Improvement Law. The statute was intended to protect the public under contractor-owner contracts, not contractors who enter into arms-length agreements with knowledge of the subcontractor’s professional qualifications.

Analysis: In deciding a dispute to determine whether a home improvement general contractor is contractually obligated to pay a subcontractor who was not licensed under the Maryland Home Improvement Law (the “Act”) at the time of entering into the subcontract, but who was licensed when the suit was brought, the Court found that it is not a reasonable construction of the statute to allow a contractor to withhold payment on the grounds that a subcontractor previously was unlicensed (but is licensed at the time payment is due). Section 8-315(a) of the Act, which prohibits payment by contractor to subcontractor “unless the person to be compensated is licensed” does not bar payment to a subcontractor licensed at time of suit.

Applying the “revenue/regulation rule,” the Court distinguished between the owner-unlicensed contractor home improvement contract (the contractual relationship covered by the Act) and the contractor-unlicensed subcontractor contract, and found that the purpose of the requirement that contractors and subcontractors be licensed is to protect the public. As such, the Act was not intended to be a shield for contractors to escape liability for the unpaid balance due to a subcontractor by asserting the illegality of the subcontract.

The full opinion is available in PDF.

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