Murphy v. Campbell Investment Co. , 79 Wash. 2d 417 ( 1971 )

Finley, J.

Appellants Murphy and Paulosky, doing business as Murphy and Paulosky Enterprises, applied to the Division of Professional Licensing for a specialty contractor’s certificate of registration, pursuant to RCW 18.27. Appellants’ application, dated November 4, 1967, was received by the division on November 8, and was rejected because appellants — who, in fact, carried public liability and property damage insurance as required by RCW 18.27.050 — failed to include proof of such insurance in their application.

. Contemporaneously, appellants were negotiating contracts with an agent of respondent, Campbell Investment Co., to provide labor, materials and equipment for construction to be done upon respondent’s property. The parties signed two separate contracts on November 19, 1967, and work was commenced immediately. On December 7, 1967, appellants resubmitted their application for a certificate of registration, including therewith proof of the requisite statutorily-prescribed insurance. Thereafter, appellants’ registration certificate was promptly issued.

During the course of appellants’ performance of construction work regarding respondent’s property, a dispute arose between the parties. Respondent refused to make more than the first two payments and thereafter terminated the agreement with appellants for construction work. Appellants then filed notices of lien claims and commenced the instant action. The trial court dismissed appellants’ amended complaint for failure to state a claim upon which relief could be granted, and this appeal followed.

Appellants’ amended complaint asserted four claims. The first two sought to foreclose appellants’ mechanics’ liens; the third sought relief through quantum meruit; the fourth claim was treated by the trial court as one for relief upon fraud. Respondent’s central defense to appellants’ claims is based upon the wording of RCW 18.27.080, which provides:

No person engaged in the business or acting in the capacity of a contractor may bring or maintain any action in any court of this state for the collection of compensation for the performance of any work or for breach of any contract for which registration is required under this chapter without alleging and proving that he was a duly registered contractor at the time he contracted for the performance of such work or entered into such contract.

(Italics ours.)

There can be no dispute that appellants are contractors within the meaning of RCW 18.27, or that appellants did not possess the requisite certificate of registration prescribed by RCW 18.27.020. The trial court felt constrained to dismiss appellants’ first three claims in light of the wording of RCW 18.27.080.

Appellants argue, however, that a strict construction of RCW 18.27.020 and RCW 18.27.080 will cause a gross injustice. They allege that, even though their original application for certification was faulty, they nevertheless possessed the statutorily-required insurance. Appellants reason that their possession of such insurance conformed to the purpose of RCW 18.27, and that the statutes in question should be liberally or functionally construed in terms of the doctrine of substantial compliance. We agree.

We are convinced that the interpretation of these statutes urged by respondents fails to give a relevant and rational effect to the statutory scheme involved in RCW 18.27. An absolute or uncritical application of the questioned statutes would produce an unnecessary and unrealistic result. In this light, it is appropriate to comment that, in some quarters, there is considerable misunderstanding or disregard relative to the traditional and accepted nature of the judicial function in that important area of law involving the interpretation of legislative enactments.

But, •unquestionably, the interpretation of statutes has, historically and traditionally, been the role or function of the judiciary as an interrelated or close counterpart to the recognized function of the legislative branch of government. The scope and importance of this function is clearly recognized and accepted by most highly respectable modem authorities. See, e.g., Llewellyn, Remarks on the Theory of Appellate Decision and Rules or Canons About How Statutes are to be Construed, 3 Vand. L. Rev. 395 (1950); Loyd, Equity of a Statute, 58 U. Pa. L. Rev. 76 (1909); Radin, Realism in Statutory Interpretation and Elsewhere, 23 Calif. L. Rev. 156 (1934); Horack, Statutory Interpretation—Light from Plowden’s Reports, 19 Ky. L.J. 211 (1931). It is a disservice or disfunction for the judicial branch to be dissuaded from performing its traditional interpretative function because nowadays — through intellectual phobia or myopia, or because of other more pragmatic political reasons — there is'some tendency in some quarters to characterize performance of the traditional function as “judicial legislation” — a superficially appealing cliché, to say the least.

It should be quite obvious that:

There ‘are times when even the literal expression of legislation may be inconsistent with the general objectives or policy behind it, ...

(Italics ours.) J. Sutherland, Statutes and Statutory Construction § 6006 (Horack 3d ed. 1943).

In this connection, it is well recognized that the underlying purpose inherent in the function of judicial interpretation of statutory enactments is to effectuate the objective —often referred to as the intent — of the legislature. Interestingly enough, in recognition of this purpose, early English courts developed and applied the so-called “equity of the statute” doctrine, perhaps best illustrated by a statement in the early English case of Eyston v. Studd, 75 Eng. Rep. 688, 2 Plowden 460, 464 (1574), as follows:

intent of statutes is more to be regarded and pursued than the precise letter of them, for oftentimes things, which are within the words of statutes, are out of the purview of them, which purview extends no further than the intent of the makers of the Act, and the best way to construe an Act of Parliament is according to the intent rather than according to the words.

(Italics ours.) And this court has long held that a thing within the letter of the law, but not within its spirit, may be held inoperative where it would otherwise lead to an absurd conclusion. See, e.g., Discargar v. Seattle, 25 Wn.2d 306, 171 P.2d 205 (1946). In Discargar, this court, quoting from Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188, 12 Am. St. 819, 5 L.R.A. 340 (1889) stated, at page 311:

“There was a statute in Bologna that whoever drew blood in the streets should be severely punished, and yet it was held not to apply to the case of. a barber who opened a vein in the street. It is commanded in the Decalogue that no work shall be done upon the Sabbath, and yet, giving the command a rational interpretation founded upon its design, the Infallible Judge held that it did not prohibit works of necessity, charity or benevolence on that day.”.

(Italics ours.)

Upon the facts presented in the instant appeal, it is our belief that the trial court’s reading of the statutes fails to give the questioned statutory scheme a “rational interpretation founded upon its design.” There can be little doubt as to the legislatively intended “design” of RCW 18.27, relating to the registration of contractors. We have recently stated that:

RCW 18.27, et seq., was designed to prevent the victimizing of a defenseless public by unreliable, fraudulent and incompetent contractors, many of whom operated a transient business from the relative safety of neighboring states.

Stewart v. Hammond, 78 Wn.2d 216, 219, 471 P.2d 90 (1970). The crucial devices utilized by the legislature to regulate and restrain unreliable, fraudulent, and incompetent contractors are contained in RCW 18.27.040, requiring a contractor’s surety bond; and in RCW 18.27.050, requiring a contractor to' obtain public liability and property damage insurance. These two named devices are designed to provide some protection — albeit minimal — for customers in today’s “market place” against the financially irresponsible contractor.

The additional registration requirement imposed by RCW 18.27.020 is, essentially, merely an adjunct of, or to better implement, the requirements to insure minimum financial security for consumers (customers of building contractors) . Such filing is designed to give public notice, and thus to aid those persons dealing with contractors in determining that such contractors have, in fact, met the minimal security and financial responsibility standards imposed by RCW 18.27.040 and 18.27.050.

In the instant case, the appellant contractors had, in fact, substantially complied with the requirements of RCW 18.27. They had secured both the bond required by RCW 18.27.040 and the liability insurance required by RCW 18.27.050. But for a technical defect in the appellants’ original application for registration, the appellants would have possessed the requisite registration prior to the date upon which the parties entered into their written agreement.

In the instant case, it is a fact, as pointed out above, that the appellant contractors had substantially complied with the provisions of RCW 18.27; i.e., they had secured bonding and insurance — those indicia of minimal financial responsibility required by the statutory enactment to protect the general public against the unreliable, fraudulent or incompetent contractor. Since appellants had substantially complied with the requirements crucial to the underlying design intended by the legislature in the enactment of RCW 18.27, we hold that the appellants’ complaint does state a claim upon which relief can be granted. Consequently, the determination of the trial court must be reversed.

Although the above reasoning is sufficient to dispose of the instant matter, it is worth noting in passing that we find sound reasons of public policy behind denial of relief to appellants upon the other alleged grounds — i.e., those in the nature of waiver, estoppel or unjust enrichment. In essence, this is true because the questioned statutory enactment is designed to protect the general public, and parties to a specific agreement should not be allowed the option of rewriting the statutory law as to themselves by agreeing to disregard the obligations of financial responsibility imposed by the statutes. We reiterate, however, this cannot be said under circumstances where there has been substantial compliance by a contractor with the crucial requirements of a statutory scheme or design — necessary to effectuate its objectives.

For the above reasons, the determination of the trial court is reversed, and the case is remanded for further proceedings in accordance with this opinion.

Hamilton, C.J., Hunter, Hale, and Neill, JJ., concur.