Bryan Builders Supply v. Midyette

162 S.E.2d 507 (1968) 274 N.C. 264

BRYAN BUILDERS SUPPLY, a Corporation
v.
Norfleet W. MIDYETTE and wife, Shirley K. Midyette.

No. 688.

Supreme Court of North Carolina.

August 23, 1968.

Williamson & Walton, Whiteville, for Bryan Builders Supply, appellants.

No counsel for Norfleet W. Midyette and wife, appellees.

SHARP, Justice.

The basic error in this case is that the evidence was developed upon one theory, and the court submitted it to the jury upon another theory.

Upon Bryan's stipulation that at all times pertinent to this litigation it was not licensed to construct buildings "where the cost is $20,000.00 or more," Judge McKinnon correctly dismissed its action against owners for the balance due under the terms of the contract upon which it had sued. McArver v. Gerukos, 265 N.C. 413, 144 S.E.2d 277; Tillman v. Talbert, 244 N.C. 270, 93 S.E.2d 101; Courtney v. Parker, 173 N. C. 479, 92 S.E. 324. He correctly retained owners' counterclaim, which stated a cause of action against Bryan for breach of contract and faulty work.

The purpose of Article 1 of Chapter 87 of the General Statutes, which prohibits any contractor who has not passed an examination and secured a license as therein provided from undertaking to construct a building costing $20,000.00 or more, is to protect the public from incompetent builders. When, in disregard of such a protective statute, an unlicensed person contracts with an owner to erect a building costing more than the minimum sum specified in the statute, he may not recover for the owner's breach of that contract. This is true even though the statute does not expressly forbid such suits. 53 C.J.S. Licenses § 59 (1948); 33 Am.Jur. Licenses §§ 68-72 (1941) ; Annot., Failure of artisan or construction contractor to procure occupational or business license or permit as affecting validity or enforcement of contract. 82 A.L.R. 2d 1429 (1962); 5 Williston Contracts (Revised Edition 1937) § 1630; 6 Williston Contracts, Ibid. § 1766 ; 6A Corbin on Contracts §§ 1510-1513.

In denying an unlicensed contractor the right to recover upon his contract, the court sometimes terms such contracts "void," but this term is too broad to be used in this connection. "A void contract is no contract at all; it binds no one and is a mere nullity." 17 Am.Jur.2d Contracts § 7 (1964). Contracts such as the one between owners and Bryan are not totally without legal effect, for the innocent party may maintain an action for damages for breach of a contract entered into between him and an unlicensed contractor. 33 Am.Jur. Licenses § 68 (1968 Cum.Supp. p. 80). See cases collected in Annot., 82 A.L.R. 2d 1429, § 3[b] and § 6[b].

In Cohen v. Mayflower Corp., 196 Va. 1153, 86 S.E.2d 860, the Supreme Court of Virginia affirmed a verdict and judgment of $21,000.00, which a landowner had recovered against an unlicensed contractor for breach of his contract. As the Court pointed out, there is nothing immoral or contrary to public policy in a construction contract involving $20,000.00 or more. The statute does not forbid such contracts; it undertakes to protect citizens who expend over and above that amount from incompetent builders. The denial of recovery to an unlicensed contractor rests upon his conduct and not the nature of the transaction. Quoting from 6 Corbin on Contracts § 1510, p. 962, the Court said: "``It would be a rare or nonexistent case in which such an innocent person could not maintain some kind of action for a breach of the agreement by the guilty party who has wrongfully engaged in business * * *'

"This view is based upon the principle that such innocent party is among the class of persons designed to be protected by such statutes, that he is not in pari delicto with the unlicensed party, and is therefore entitled to relief. Or, to state the matter another way, to deny relief to the innocent party in such cases would defeat the purpose of the statute and penalize the person intended to be protected thereby." Id. at 1162-1163, 86 S.E.2d at 865. (The factual situation in Cohen v. Mayflower Corp. and in the instant case is to be distinguished from the one in which a plaintiff seeks to recover money paid for services on the sole ground that the person who had rendered them was unlicensed. See Comet Theater Enterprises v. Cartwright, 9 Cir., 195 F.2d 80, 30 A.L.R. 2d 1229; Annot., 30 A.L.R. 2d 1233.)

Owners in this case were clearly entitled to pursue the cross action for damages, which they had alleged against Bryan, and, if they established a breach of its contract with them, they were entitled to recover the damages resulting therefrom. Robbins v. C. W. Myers Trading Post, Inc., 251 N.C. 663, 111 S.E.2d 884. In the alternative, owners could have sued to recover payments made in advance for performance which was not rendered as promised. Golding v. Casstevens, 255 N.C. 200, 120 S.E.2d 436.

Notwithstanding the fact that owners' evidence with reference to their damages, both as to breach of contract and the value of the actual benefit received from Bryan's construction, was minimal, under no theory was Bryan entitled to a judgment of nonsuit. "In a suit for damages for breach of contract, proof of the breach would entitle the plaintiff to nominal damages at least." Bowen v. Fidelity Bank, 209 N.C. 140, 144, 183 S.E. 266, 268. In a suit brought under the doctrine which prohibits unjust enrichment, the measure of recovery and the rules governing implied contracts apply. 22 Am.Jur.2d Damages § 78 (1965). Bowen v. Fidelity Bank, supra. "[I]mplied assumpsit (contract) is the basis for recovery on quantum meruit; and, if such contract was breached [by Bryan], plaintiffs [owners] were entitled at least to nominal damages." Gales v. Smith, 249 N.C. 263, 267, 106 S.E.2d 164, 168. Upon owners showing a breach of contract or a failure of consideration in any amount, they were entitled to recover nominal damages. Bryan's first assignment of error is overruled.

All other assignments which Bryan has brought forward relate to those portions of the charge which are set out in the statement of facts. Assignment of error No. 9, that the court failed to explain and apply the law to the evidence as required by G.S. § 1-180, is broadside and will be rejected. State v. Webster, 218 N.C. 692, 12 S.E.2d 272. An assignment based on failure to charge should set out the appellant's contention as to what the court should have charged. State v. Malpass and State v. Tyler, 266 N.C. 753, 147 S.E.2d 180. Bryan has no such assignment. However, its contention that the court erred in not instructing the jury that owners had "accepted the house for occupancy in its defective condition" is totally without merit. The evidence would not support a charge that owners had waived their right to object to the defects.

Owners might well have excepted to, and assigned as error the issues submitted and those portions of the charge which constitute Bryan's assignments of error 3, 4, and 7. Clearly, the judge erred when he charged the jury that the contract between the parties was totally void and that neither could base a cause of action upon it. Owners, being a member of the class for whose protection G.S. § 87-1 et seq. was enacted, and not being in pari delicto with Bryan, were entitled to maintain an action for Bryan's breach of contract. Owners, however, have not appealed, and Bryan may not complain of error which is harmful to owners but not to it. Ray v. French Broad Electric Membership Corp., 252 N.C. 380, 113 S.E.2d 806. An appellant "must show not only error, but that the alleged error was prejudicial to it. * * * A party cannot justly complain of an error in a charge favorable to him." (Citations omitted.) Taylor Co. v. North Carolina State Highway and Public Works Commission, 250 N.C. 533, 539, 109 S.E.2d 243, 247.

Our reading of the evidence in this case causes us to conclude that the theory upon which the judge submitted the case to the jury was favorable to Bryan. But be that as it may, Bryan did not except to the issues which determined the theory upon which the case was submitted to the jury. A litigant "may not acquiesce in the trial of his case in the Superior Court upon one theory and here complain that it should have been tried upon another." Mills v. Dunk, 263 N.C. 742, 746, 140 S.E.2d 358, 362.

No error prejudicial to Bryan appears in the court's charge on the first issue. The jury's answer to it eliminated the second issue from the case. We deem it appropriate to say, however, that we find no error in the charge on the second issue which could have prejudiced Bryan in the jury's consideration of the first issue. The same rule which prevents an unlicensed person from recovering damages for the breach of a construction contract has generally been held also to deny recovery where the cause of action is based on quantum meruit or unjust enrichment. Annot., 82 A.L.R. 2d 1429, § 3(c); 53 C.J.S. Licenses § 59b (1948). Bryan, therefore, was not entitled to the second issue. To deny an unlicensed person the right to recover damages for breach of the contract, which it was unlawful for him to make, but to allow him to recover the value of work and services furnished under that contract would defeat the legislative purpose of protecting the public from incompetent contractors. Northen v. Elledge, 72 Ariz. 166, 232 P.2d 111. The importance of deterring unlicensed persons from engaging in the construction business outweighs any harshness between the parties and precludes consideration for unjust enrichment. Lewis & Queen v. N. M. Ball Sons, 48 Cal. 2d 141, 308 P.2d 713.

A qualification of the rule that an unlicensed contractor may not maintain any action based on his construction contract was noted in Culbertson v. Cizek, 225 Cal. App. 2d 451, 37 Cal. Rptr. 548. That case held that the rule did not prevent the unlicensed person from offsetting, as a defense against damages due the owner, any sums which the owner otherwise owed him. This relaxation of the rule "permits the unlicensed contractor to assert his counter-demands defensively as it were, to the end of reducing in whole or in part the claims against him but without authorizing an affirmative judgment in the contractor's favor for an excess. * * * This result is consistent with the position taken by the courts that despite possible injustice resulting between the parties, they will not ``lend their assistance to a party who seeks compensation for an illegal act.'" Id. at 473-474, 37 Cal. Rptr. at 560-561.

The transcript of the evidence convinces us that no injustice resulted to appellant in the trial of this case. Indeed, Bryan seems to have profited greatly by owners' failure to offer more specific evidence tending to establish the exact amount of their monetary damage resulting from Bryan's breach of contract. We find no reason to impose upon owners, who are willing to abide by the verdict and who were not represented by counsel on this appeal, "the monstrous penalty of a new trial." State ex rel. Freeman v. Ponder, 234 N.C. 294, 308, 67 S.E.2d 292, 302.

No error.

HUSKINS, J., took no part in the consideration or decision of this case.