1. Construction Claims--residential construction contract--modular home--no general contractor
license--bond requirements met
A defendant who met the $5,000 surety bond requirements under N.C.G.S. § 143-139.1 was not required
to be a licensed general contractor under N.C.G.S. § 87-1 in order to enter into a residential construction
contract with plaintiffs for the erection of a modular home, because: (1) N.C.G.S. § 87-1 and N.C.G.S. § 143-
139.1 read together evidence an intent to exempt a general contractor who erects modular buildings from having
a license if the surety requirement is met; (2) the title of N.C.G.S. § 143-139.1 evidences a legislative intent to
exempt general contractors from the licensing requirement so long as they meet the surety bond requirement; (3)
the North Carolina Department of Insurance, charged with general supervision over the administrative and
enforcement of the building code, has determined that general contractors who erect modular buildings are
exempt from the licensing requirement if they meet the bond requirements; (4) the legislature did not intend that
everyone who engages in the erection of modular homes be licensed as a general contractor and be required to
meet the bonding requirement of N.C.G.S. § 143-139.1; and (5) the two cases cited by plaintiffs in an attempt to
make the contract unenforceable are inapplicable since the contractor in those cases constructed a conventional
residence and not a modular home.
2. Construction Claims--modular surety bonds--exemption from obtaining general contractor's
license--additional activities within scope of bond
Although plaintiffs rely on the Department of Insurance's 10 March 1998 memorandum on modular
surety bonds to contend that defendant should not be exempt from the licensing requirement under N.C.G.S. §
87-1 regarding the erection of modular homes since he exceeded the $30,000 limit on additional construction
activities, the additional activities including constructing a basement, attaching a garage, installing hardwood
flooring, a HVAC system, and a septic tank all fall within the erection and installation of the modular home under
N.C.G.S. § 143-139.1 and are thus within the scope of the surety bond posted with the county.
3. Contracts--construction of modular home--additional options--lien waiver in exchange for second
note--consideration
The trial court properly granted summary judgment in favor of defendant on his claim on a second
promissory note where plaintiffs contracted with defendant to construct a modular home, plaintiffs executed a
second note for additional options they wanted to add that exceeded the original contract price, defendant
executed a lien waiver in order to enable plaintiffs to obtain financing from their lender, and plaintiffs thereafter
failed to make payments due on the note, because: (1) the agreement was supported by adequate consideration
based on the fact that plaintiffs received the lien waiver in exchange for the note, and it was irrelevant which
documents were signed first; and (2) the execution of the second note and a deed of trust by plaintiffs in
exchange for defendant's lien waiver was outside the scope of the existing residential construction contract and
thus constituted a new agreement between the parties.
Richard I. Shope for plaintiffs-appellants.
Robinson & Lawing, L.L.P., by Robert J. Lawing and H. Brent Helms, for
defendant-appellee.
WALKER, Judge.
Plaintiffs entered into a residential construction contract (contract)
with defendant on 11 February 1997, whereby defendant agreed to furnish labor
and materials to erect a modular dwelling manufactured by Nationwide Homes,
Incorporated (Nationwide), a licensed North Carolina general contractor. At
the time, defendant was not a licensed general contractor in North Carolina.
Under the original contract, plaintiffs were to pay defendant $183,642.00
less a down payment of $1,500. This amount included the base price of the
home as well as numerous options. On 15 May 1997, plaintiffs executed a note
and deed of trust in favor of defendant to cover the contract price. The
note was to be paid in full by 15 July 1997, when plaintiffs were to obtain
permanent financing at the completion of construction of their modular home.
The contract price was later increased to $199,022.00 to allow for additional
options in the home's construction. Because defendant was not a licensed
general contractor, he posted a modular building set-up contractor license
bond with Guilford County Planning and Development Department (County) on 3
April 1997.
Plaintiffs' home arrived from Nationwide in fully constructed sections,
complete with all of the options they had selected, including the garage.
For this reason, defendant's work was limited to pouring the home's
foundation, assembling the sections, and overseeing the installation of the
heating, air conditioning, plumbing and electrical work by sub-contractors.
Defendant completed this work, and on 9 July 1997, the County issued a
certificate of occupancy certifying that the erection and construction fully
complied with the North Carolina Building Code (Code) and other applicable
ordinances.
As the time for closing on the loan approached, plaintiffs informed
defendant that they were unable to obtain permanent financing for the entire
amount owed under the contract, leaving a balance of $33,185.67 still owed to
defendant. It was agreed by the parties that plaintiffs would execute asecond note and deed of trust in favor of defendant for $33,185.67
and
defendant would in turn execute a lien waiver. Plaintiffs failed to make the payment due under the second note and
deed
of trust on 31 August 1997. After defendant filed a claim of lien and
demanded payment, plaintiffs filed this action on 19 October 1998 seeking to
have declared void the two notes and deeds of trust and defendant's claim of
lien.
On 11 January 1999, defendant filed an answer and counterclaimed for
$33,187.00 plus interest and attorney fees. Plaintiffs and defendant then
filed motions for summary judgment, and on 27 April 1999, the trial court
granted plaintiffs' motion for summary judgment as to their claim on the
first note and deed of trust and denied plaintiffs' motion for summary
judgment as to the second note and deed of trust and claim of lien.
Defendant's motion for summary judgment was allowed as to the second note and
deed of trust and claim of lien. Judgment was entered in defendant's favor
in the amount of $44,489.26, which included interest and attorney fees.
On appeal, plaintiffs contend the trial court erred by denying their
motion for summary judgment and in granting defendant's motion for summary
judgment as to the second note and deed of trust and claim of lien. In
support of their contention, plaintiffs argue they presented evidence that
the residential construction contract was not enforceable because: (1)
defendant was not a licensed general contractor as required by law; and (2)
defendant signed a lien waiver after plaintiffs signed the second note and
deed of trust, thereby relinquishing his right to collect under these
instruments.
At the outset, we note that summary judgment is appropriate only “if the
pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that any party is entitled to a judgment as a matter
of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c)(1999); See also Pressman v. UNC-Charlotte, 78 N.C. App. 296, 337 S.E.2d 644 (
1985), disc. review allowed, 315
N.C. 589, 341 S.E.2d 28 (1986).
[1]We first address whether defendant was required to be a licensed
general contractor in order to enter into a residential construction contract
calling for the erection of a modular home.
It is well settled in North Carolina that a general
contractor within the meaning of G.S. 87-1 who has no
license may not recover for the owner's breach of the
contract, or for the value of the work and services
furnished or materials supplied under the contract on the
theory of unjust enrichment.
Harrell v. Clarke, 72 N.C. App. 516, 517, 325 S.E.2d 33, 34 (1985), citing
Builders Supply v. Midyette, 274 N.C. 264, 162 S.E.2d 507 (1968). However,
defendant contends that because he complied with the requirement of posting
a surety bond with the County, the contract is enforceable. Defendant
further asserts that the legislature carved out an exception to the general
contractor license requirement of N.C. Gen. Stat. § 87-1 when it adopted the
following statutory language in N.C. Gen. Stat. § 143-139.1:
The Building Code Council may also adopt rules to insure
that any person that is not licensed, in accordance with
G.S. 87-1, and that undertakes to erect a North Carolina
labeled manufactured modular building, meets the
manufacturer's installation instructions and applicable
provisions of the State Building Code. Any such person,
before securing a permit to erect a modular building,
shall provide the code enforcement official proof that he
has in force for each modular building to be erected a
$5,000 surety bond insuring compliance with the
regulations of the State Building Code governing
installation of modular buildings.
N.C. Gen. Stat. §§ 87.1, 143-139.1 (1999); Act of July 15, 1989, Ch. 653,
1989 N.C. Sess. Laws 1810 (providing that persons who erect manufactured
modular structures either have a valid contractor's license or comply with
the rules of the Building Code Council).
Plaintiffs contend that while the plain language of this provision
requires contractors to post a $5,000 surety bond, it does not provide an
exception to the license requirement for general contractors who erectmodular homes. Plaintiffs further argue that a literal interpretatio
n of
this statute merely grants the Building Code Council (Council) the authority
to adopt rules for the purpose of insuring compliance with manufacturer's
instructions and the Code.
Since our analysis invokes interpretation of two separate statutes, we
are compelled to discern the legislative intent. In re Banks, 295 N.C. 236,
244 S.E.2d 386 (1978). An intent analysis is also warranted by the fact that
N.C. Gen. Stat. § 143-139.1 and § 87-1 are in pari materia since they relate
to the same subject and have a common purpose. Taylor v. City of Lenoir, 129
N.C. App. 174, 497 S.E.2d 715 (1998). “Such statutes should be reconciled
with each other when possible, and any irreconcilable ambiguity should be
resolved so as to effectuate the true legislative intent.” Comr. of
Insurance v. Automobile Rate Office, 287 N.C. 192, 202, 214 S.E.2d 98, 104
(1975)(citations omitted).
Our Supreme Court has held that “[t]he will of the legislature 'must be
found from the language of the act, its legislative history and the
circumstances surrounding its adoption which throw light upon the evil sought
to be remedied.'” State v. Oliver, 343 N.C. 202, 212, 470 S.E.2d 16, 22
(1996), citing Milk Commission v. Food Stores, 270 N.C. 323, 332, 154 S.E.2d
548, 555 (1967). Moreover, “where a literal interpretation of the language
of a statute will lead to absurd results, or contravene the manifest purpose
of the Legislature, as otherwise expressed, the reason and purpose of the law
shall control and the strict letter thereof shall be disregarded.” Mazda
Motors v. Southwestern Motors, 296 N.C. 357, 361, 250 S.E.2d 250, 253
(1979)(citations omitted). “The courts will control the language to give
effect to the legislative intent.” Variety Theatres v. Cleveland County, 15
N.C. App. 512, 514, 190 S.E.2d 227, 228, affirmed, 282 N.C. 272, 192 S.E.2d
290 (1972), and appeal dismissed, 411 U.S. 911 (1973), quoting Ikerd v. R.
R., 209 N.C. 270, 183 S.E.2d 402 (1936). In this regard, we note that at the time N.C. Gen. Stat. § 143-13
9.1
was amended, portions of § 87-1 were also amended under the same legislation.
N.C. Gen. Stat. §§ 87-1, 143-139.1. N.C. Gen. Stat. § 87-1 was rewritten to
include within its definition of a general contractor “any person, firm or
corporation that is not licensed as a general contractor . . . [who]
undertakes to erect a North Carolina labeled manufactured modular building
meeting the North Carolina State Building Code,” or one who undertakes
construction costing $45,000 or more. N.C. Gen. Stat. § 87-1; Ch. 653, 1989
N.C. Sess. Laws at 1811. On the other hand, N.C. Gen. Stat. § 143-139.1
provides that an unlicensed general contractor may erect a modular building
upon posting the required surety bond. N.C. Gen. Stat. §§ 87-1, 143-139.1;
Ch. 653, 1989 N.C. Sess. Laws at 1810-1812. It is thus clear that these two
statutes, when read together, evidence an intent to exempt a general
contractor who erects modular buildings from having a license if the surety
bond requirement is met.
In addition, “[w]hen the meaning of a statute is in doubt, reference may
be made to the title and context of an act to determine the legislative
purpose.” Preston v. Thompson, 53 N.C. App. 290, 292, 280 S.E.2d 780, 782
(1981)(citations omitted). “However, the title does not control the text
when it is clear.” Blowing Rock v. Gregorie, 243 N.C. 364, 90 S.E.2d 898
(1956). This is because “[t]he title is part of the bill when introduced,
being placed there by its author, and probably attracts more attention than
any other part of the proposed law, and if it passes into law the title
thereof is consequently a legislative declaration of the tenor and object of
the Act . . . . Consequently, when the meaning of an act is at all doubtful,
all the authorities now concur that the title should be considered.” Sykes
v. Clayton, Comr. of Revenue, 274 N.C. 398, 406, 163 S.E.2d 775, 781 (1968).
The title of the subject amendment to N.C. Gen. Stat. § 143-139.1 reads:
“AN ACT TO PROVIDE THAT PERSONS WHO ERECT MANUFACTURED MODULAR STRUCTURES
EITHER HAVE A VALID CONTRACTORS' LICENSE OR COMPLY WITH RULES OF THE BUILDING
CODE COUNCIL.” Ch. 653, 1989 N.C. Sess. Laws at 1810-1811. Thus, the title
also evidences a legislative intent to exempt general contractors from the
licensing requirement so long as they meet the surety bond requirement.
Moreover, “[a]n administrative interpretation of a statute, acquiesced
in over a long period of time, is properly considered in the construction of
the statute by the courts.” Duggins v. Board of Examiners, 25 N.C. App.
131, 137, 212 S.E.2d 657, 662, cert. allowed, 287 N.C. 258, 214 S.E.2d 430
(1975), and affirmed, 294 N.C. 120, 240 S.E.2d 406 (1978). “But an
administrative interpretation can never be considered when in direct conflict
with the intent and purpose of the act, or when in conflict with the
interpretation of the courts.” Duke Power Co. v. Clayton, Comr. of Revenue,
274 N.C. 505, 164 S.E.2d 289 (1968).
The North Carolina Department of Insurance (Department of Insurance) is
charged with general supervision over the administration and enforcement of
the Code. The Department of Insurance has determined, as evidenced in
memorandums dated 16 March 1990 and 10 March 1998, that general contractors
who erect modular buildings are exempt from the licensing requirement if they
meet the bond requirements. This interpretation by the Department of
Insurance is also in accord with the Code, which now provides:
In accordance with General Statutes G.S. 87-1 and G.S.
143-139.1 any person, firm or corporation that undertakes
to erect a modular building must have either a valid
North Carolina General Contractors License or provide a
$5,000 surety bond for each modular building to be
erected.
VIII N.C. State Bldg. Code § 206.4 (1994). Under the authority granted by
the legislature, the Council adopted the Code for the purpose of ensuring
safe buildings by regulating their construction. N.C. Gen. Stat. § 143-138(1999); In re Appeal of Medical Center, 91 N.C. Ap
p. 107, 370 S.E.2d 597
(1988); State v. Walker, 265 N.C. 482, 144 S.E.2d 419 (1965).
Furthermore, we are convinced the legislature did not intend that
everyone who engages in the erection of modular homes be licensed as a
general contractor and be required to meet the bonding requirement of N.C.
Gen. Stat. § 143-139.1.
Plaintiffs further contend that under the rule of Brady v. Fulghum, 309
N.C. 580, 308 S.E.2d 327 (1983), superseded on other grounds as stated in
Hall v. Simmons, 329 N.C. 779, 407 S.E.2d 816 (1991), and Harrell, 72 N.C.
App. 516, 325 S.E.2d 33, the contract between the parties is unenforceable.
However, our review of these cases reveals that they are not applicable to
the issue in this case. In Brady, our Supreme Court held that “[g]enerally,
contracts entered into by unlicensed construction contractors, in violation
of a statute passed for the protection of the public, are unenforceable by
the contractor.” Brady, 309 N.C. at 583, 308 S.E.2d at 330 (citation
omitted). However, the present case is distinguishable because the
contractor constructed a conventional residence and not a modular home.
Harrell is likewise distinguishable for the same reason. Harrell, 72 N.C.
App. 516, 326 S.E.2d 33.
In sum, based on our interpretations of N.C. Gen. Stat. §§ 87-1 and 143-
139.1, the public will be protected since modular buildings must be
constructed according to the Code. For the reasons set forth above, we hold
that a person or entity who undertakes to erect a modular home need not be
licensed if he meets the surety bond requirements.
[2]Plaintiffs also argue that if N.C. Gen. Stat. § 143-139.1 is found
by this Court to be an exception to the licensing requirement regarding the
erection of modular homes, it does not apply in the instant case. In so
doing, plaintiffs rely on the following statements made by the Department ofInsurance while addressing modular surety bonds in a memorandum
dated 10
March 1998:
N.C.G.S. § 143-139.1 only applies to the set-up and
installation of the modular unit itself. The only
permissible building activity, other than the
construction of the foundation for the modular unit, is
the setting and field connections of the labeled
manufactured modular unit. N.C.G.S. § 143-139.1 does not
apply to additional activities . . . . If the cost of
these additional construction activities meets or exceeds
the thirty thousand dollar ($30,000) limit established by
N.C.G.S. § 87-1, then a general contractor's license will
be required. In any case, these activities are not
included in the scope of the modular surety bond.
Plaintiffs therefore contend that defendant exceeded this $30,000 limit
because of the additional activities such as constructing a basement,
attaching a garage, installing hardwood flooring, a HVAC system, and a septic
system. While the record indicates that plaintiffs' modular home arrived
from Nationwide in fully constructed sections and complete with all of the
options that plaintiffs had ordered, the record is unclear as to the extent
of defendant's activities in these areas. However, even assuming the above
activities were the defendant's responsibility, we conclude that these
activities fall within the erection and installation of the modular home and
are thus within the scope of the surety bond posted with the County.
[3]We last address whether summary judgment was proper as to the lien
waiver. As defendant points out, this issue is similar to that in
Construction Co. v. Coan, 30 N.C. App. 731, 228 S.E.2d 497, disc. review
denied, 291 N.C. 323, 230 S.E.2d 676 (1976) where defendants contracted with
plaintiff to construct a motel. When the completion date approached, the
extras that defendants wanted exceeded the original contract price. Id. at
732, 228 S.E.2d 498. The parties agreed upon a final amount for which
defendants executed two notes. Id. In return and as part of the agreement,
plaintiff executed a lien waiver “acknowledging payment in full and waiving
any lien rights in the project[,]” in order to enable defendants to obtain
financing from their lender. Id. After defendants failed to make paymentsdue on the notes, plaintiff filed suit and moved for summ
ary judgment which
was granted. Id. This Court upheld the trial court's entry of summary
judgment because the evidence was “clearly sufficient to show an accord and
satisfaction.” Id. at 738, 228 S.E.2d 502. This Court held that the trial
court correctly found that the agreement was supported by adequate
consideration because “defendants received the [lien waiver] in return for
the notes. By that instrument, plaintiff admitted being fully paid on the
underlying obligation and also waived its rights to file and perfect
mechanic's and materialmen's liens . . . . That the lien waiver constituted
value to the defendants is evidenced by their admission of using [it] to
obtain permanent financing.” Id. at 739-740, 228 S.E.2d 502-503.
Plaintiffs attempt to distinguish the case at hand from Coan on the
basis that the second note and deed of trust in this case were signed before
the lien waiver and therefore were not signed in consideration of it. Id.
However, in both cases, the parties reached an agreement whereby one party
would execute a note and deed of trust, and in return, the other party would
execute a lien waiver. Id. It is irrelevant which documents were signed
first. Plaintiffs further assert that Coan has no bearing on this case
because the lack of a disputed amount makes accord and satisfaction
inapplicable. However, this Court in Coan also affirmed the trial court's
finding that “[t]he making and delivery of the two notes which are the
subject matter of this action by defendants was outside the scope of the
contract between plaintiff and defendants for the construction of the
[motel], since such contract did not provide for or require the defendants to
make and deliver such notes.” Id. at 734, 228 S.E.2d 499. We agree that
accord and satisfaction is not applicable because there is no dispute as to
the amount plaintiffs owed to defendant. However, as in Coan, the execution
of the second note and deed of trust by the plaintiffs in exchange for
defendant's lien waiver was outside the scope of the existing residentialconstruction contract and thus constituted a new agreement between
the
parties. Id.
For the foregoing reasons, we conclude that summary judgment was
properly granted on behalf of defendant and properly denied on plaintiffs'
claims.
Affirmed.
Judges LEWIS and HUNTER concur.
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