IN THE SUPREME COURT OF MISSISSIPPI
NO. 2008-CA-00464-SCT
LUTZ HOMES, INC. AND BARRY R. LUTZ, INDIVIDUALLY
v.
CARL WESTON AND LORRAINE WESTON
DATE OF JUDGMENT: 04/14/2008 TRIAL JUDGE: HON. ROBERT P. KREBS COURT FROM WHICH APPEALED: JACKSON COUNTY CIRCUIT COURT ATTORNEY FOR APPELLANTS: E. FOLEY RANSON ATTORNEY FOR APPELLEES: DUSTIN N. THOMAS NATURE OF THE CASE: CIVIL - CONTRACT DISPOSITION: REVERSED AND REMANDED - 08/20/2009 MOTION FOR REHEARING FILED: MANDATE ISSUED:
BEFORE WALLER, C.J., RANDOLPH AND CHANDLER, JJ.
WALLER, CHIEF JUSTICE, FOR THE COURT:
¶1. Lutz Homes, Inc., and Barry R. Lutz seek review of the final judgment of the Jackson
County Circuit Court releasing their construction lien and barring the counterclaim of Lutz
Homes, Inc. Finding that Lutz Homes, Inc., complied with Mississippi Code Section 73-59-
9(3) prior to the commencement of this action, we reverse and remand.
FACTS AND PROCEDURAL HISTORY
¶2. In April 1999, Barry R. Lutz obtained a residential builder’s license from the
Mississippi State Board of Contractors in his name. He operated as a sole proprietorship until October 2001, at which time he incorporated his business as Lutz Homes, Inc., naming
himself as president and sole shareholder. Though Lutz thereafter operated in the corporate
name, he did not have his license re-issued under the name of Lutz Homes, Inc.1
¶3. On June 6, 2005, Carl and Lorraine Weston entered into a contract with Lutz Homes,
Inc., for the construction of a home. At the time of contract, and during the course of
performance, Lutz Homes, Inc., was unlicensed because the residential builders license
remained in Lutz’s individual name.
¶4. In the spring of 2006, a dispute caused the Westons to terminate the services of Lutz
Homes, Inc., and to refuse payment. The Westons asserted that Lutz Homes, Inc., had not
performed in a workmanlike manner, had misrepresented its standards, and had refused to
address their concerns. On April 24, 2006, Lutz Homes, Inc., responded by filing a notice
of construction lien in the amount of $118,125.
¶5. In August 2006, Lutz contacted the State Board of Contractors and requested that
“Lutz Homes, Inc.” be named a license holder. Lutz’s request was granted on August 11,
2006.2
1 Lutz claims that the annual license renewal forms requested information about his corporate structure. He submits that he included information about Lutz Homes, Inc., in these forms; therefore, the State Board of Contractors had notice of the change as early as April 2002. 2 According to the record, Lutz requested the name change by telephone, and the change was verified by the State Board of Contractors in a memo dated November 2, 2006. This memo is listed as “Exhibit A” to Lutz Homes, Inc.’s, and Lutz’s Motion for Declaratory Judgment, but it was not included in the record. In their brief, the Westons do not contest the fact that Lutz Homes, Inc., acquired a residential builder’s license in August 2006. They contend, rather, that Lutz did not request merely a change of name, but sought an entirely new license for Lutz Homes, Inc.
2 ¶6. On October 24, 2006, the Westons filed suit against Lutz Homes and Lutz individually
(hereinafter “Defendants”), requesting that the contract be declared null and void, and
seeking a preliminary injunction to terminate the construction lien. The Westons argued that
Mississippi Code Section 73-59-9(3)3 rendered the contract void because Lutz Homes, Inc.,
was an unlicensed residential builder at the time the contract was entered. They asserted that
a preliminary injunction was proper because Lutz Homes, Inc., being unlicensed, was not
authorized to file a construction lien, and that such lien caused them irreparable harm by
preventing them from receiving relief grants in the aftermath of Hurricane Katrina. The
Westons sought $300,000 in damages for breach of contract, wrongful interference with a
contractual right, and slander of title. The Defendants filed an answer acknowledging that
the residential builder’s license had remained in Lutz’s individual name until August 2006.
Defendants asserted affirmatively that the delay and cost overruns were the result of
Hurricane Katrina, and that the Westons themselves had prevented completion of the
contract. Additionally, Lutz Homes filed a counterclaim for breach of contract, and sought
$152,898 in damages for the cost of labor and materials.
¶7. On December 12, 2007, Defendants filed a motion for declaratory judgment to
establish Lutz Homes, Inc.’s right to proceed on the counterclaim and to maintain the
construction lien. They argued that Lutz’s residential builder’s license should benefit Lutz
Homes, Inc., because the company was essentially Lutz’s alter ego. On February 29, 2008,
3 Mississippi Code Section 73-59-9(3) states that “[a] residential builder or remodeler who does not have the license provided by this chapter may not bring any action, either at law or in equity, to enforce any contract for residential building or remodeling or to enforce a sales contract.” Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009 Miss. Laws ch. 556.
3 the trial court denied Defendants’ Motion for Declaratory Judgment. It further found that
Lutz Homes, Inc., was not a licensed residential builder at the time of contract and ordered
that its lien be released and its counterclaim barred. On April 15, 2008, the trial court entered
a final judgment pursuant to Rule 54(b) of the Mississippi Rules of Civil Procedure
dismissing Lutz Homes, Inc.’s counterclaim. Defendants now appeal, raising one assignment
of error.
DISCUSSION
Whether Mississippi Code Section 73-59-9(3) prohibits Lutz Homes4 from proceeding on its counterclaim for breach of contract.
¶8. “Statutory interpretation is a matter of law which this Court reviews de novo.”
Wallace v. Town of Raleigh, 815 So. 2d 1203, 1206 (Miss. 2002) (citing Donald v. Amoco
Prod. Co., 735 So. 2d 161, 165 (Miss. 1999)).
¶9. When a statute is unambiguous and coveys a clear and definite meaning, this Court
follows its plain terms. Nat'l Union Fire Ins. Co. v. Miss. Ins. Guar. Ass'n, 990 So. 2d 174,
180 (Miss. 2008) (quoting Marx v. Broom, 632 So. 2d 1315, 1318 (Miss. 1994)). This Court
resorts to the canons of statutory interpretation only where a statute is ambiguous or silent
on a specific issue. Nat'l Union Fire Ins. Co., 990 So. 2d at 180 (citing Dupree v. Carroll,
967 So. 2d 27, 30 (Miss. 2007)).
4 Both parties concede that Lutz Homes, Inc., is the rightful party to the contract. As an aside, we note that, even though the contract is signed solely in Lutz’s individual name, the signature line is preceded by the term “Authorized Signature.” This implies that Lutz signed as an authorized agent of Lutz Homes. See Turtle & Hughes, Inc. v. Browne, 1996 U.S. Dist. LEXIS 9555, *10 (S.D.N.Y. July 9, 1996); Marveon Sign Co. v. Roennebeck, 694 P.2d 604, 604 (Utah 1984).
4 ¶10. Section 73-59-9(3) states that “[a] residential builder or remodeler who does not have
the license provided by this chapter may not bring any action, either at law or in equity, to
enforce any contract for residential building or remodeling or to enforce a sales contract.”
Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009 Miss. Laws ch. 556. The term
“residential builder” encompasses corporations, partnerships, and individuals alike. Miss.
Code Ann. § 73-59-1(b) (Rev. 2008), extended by 2009 Miss. Laws ch. 556. Accordingly,
any “corporation, partnership or individual” seeking a residential builder’s license must file
a written application with the State Board of Contractors. Miss. Code Ann. § 73-59-5 (Rev.
2008), extended by 2009 Miss. Laws ch. 556. Mississippi’s residential builder’s licensing
statutes thus indicate that a corporation operating as a residential builder should maintain a
license distinct from its individual incorporator(s), officer(s), member(s), or shareholder(s).
See Miss. Code Ann. §§ 73-59-1 to 73-59-21 (Rev. 2008), extended by 2009 Miss. Laws ch.
556.
¶11. Mississippi Code Sections 73-59-1 through 73-59-21 charge the State Board of
Contractors with enforcement and supervisory authority for licensing residential builders and
remodelers. Miss. Code Ann. §§ 73-59-1 to 73-59-21 (Rev. 2008), extended by 2009 Miss.
Laws ch. 556. Pursuant thereto, the State Board of Contractors has promulgated rules and
regulations concerning changes in a licensee’s name or corporate structure. Board of
Contractors Regulations, 50-023 CMSR § 002-1 (1994). The rules state that, when corporate
structure is altered, the currently licensed person or entity must complete an application
outlining the change of structure, articulating the impact of the change, paying a fifty-dollar
fee. Id. Specifically, the pertinent rule provides that:
5 Any corporation or other legal business entity holding a valid license shall immediately notify the [State Board of Contractors] of any change of name or corporate structure by filing an application with the Executive Secretary of the Board outlining the specific change and the impact on the status of the entity. A fee of $50.00 shall accompany each application filed pursuant to this rule.
Id.
¶12. As early as 2002, Lutz noted the change in business structure by filing his annual
license renewal forms. In his April 2002 license renewal form, Lutz reported that he had
incorporated his business in October 2001. Thereafter, Lutz provided information about his
new business structure on each annual license renewal form until 2006, when the form was
modified so that such information was no longer required. While Lutz may be credited for
diligently and accurately filing his annual license renewal forms, he did not comply with the
rules set forth by the State Board of Contractors in submitting the required application for
a change in corporate structure. Lutz failed to submit the requisite application or fifty-dollar
fee.
¶13. No issue exists on appeal concerning whether Lutz Homes, Inc., was licensed prior
to August 2006. Lutz acknowledges that “technically speaking, at the time of execution of
the construction contract (June 6, 2005) Lutz Homes Inc. [sic] did not have a residential
builders license.”
¶14. We agree that Lutz Homes, Inc., was unlicensed at the time it entered into the
construction contract with the Westons. Nevertheless, Section 73-59-9(3) does not bar its
counterclaim or lien. Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009 Miss.
Laws ch. 556.
6 ¶15. As previously discussed, under Section 73-59-9(3), a corporation must be licensed
prior to asserting an “action.” 5 Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009
Miss. Laws ch. 556. The plain language of Section 73-59-9(3) requires only that a residential
builder obtain a license prior to bringing an action. Id. Unlike similar statutes found in Title
73 of the Mississippi Code, Section 73-59-9(3) does not require that a residential builder be
licensed at the time of performance or at the time the cause of action accrued. Cf. Miss. Code
Ann. § 73-34-55 (Rev. 2008) (in order to maintain an action to recover a commission, fee,
or compensation, a real estate appraiser must have been licensed at the time of doing the act
or rendering the service); Miss. Code Ann. § 73-35-33(1) (Rev. 2008) (in order to maintain
an action to recover a commission, fee, or compensation, a real estate broker must have been
licensed at the time of the act or service). Once a license has been obtained, the
disqualification is removed and an action may be brought to enforce a residential building
or sales contract, regardless of whether the contract was made before or after the license was
acquired.6 See Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009 Miss. Laws ch.
5 An “action” is defined at common law as “a legal demand of one’s right.” United States v. Smelser, 87 F.2d 799, 800 (5th Cir. 1937); cf. Black’s Law Dictionary 24 (abridged 7th ed. 2000) (defining “action” as “[a] civil or criminal judicial proceeding”). 6 In an unpublished opinion issued August 17, 2004, the United States Court of Appeals for the Fifth Circuit found that Section 73-59-9 required a license at the time the cause of action accrued. Libbey v. Ridges, 113 Fed. Appx. 3 (5th Cir. 2004) (unpublished). This unpublished opinion, however, is not considered precedent under Fifth Circuit Rules. 5th Cir. R. 47.5.4. Moreover, while Fifth Circuit decisions are highly persuasive, they are not binding authority for this Court. Sperry-New Holland, Div. of Sperry Corp. v. Prestage, 617 So. 2d 248, 256 (Miss. 1993) (superseded on other grounds by statute).
7 ¶16. Lutz Homes, Inc., became licensed in August 2006, two months prior to the start of
this litigation, and four months before its counterclaim was filed. Its counterclaim and lien,
therefore, are not barred under Section 73-59-9(3).
CONCLUSION
¶17. We find that the trial court erred in dismissing Lutz Homes, Inc.’s counterclaim and
ordering its construction lien released. Accordingly, we reverse the trial court’s judgment
and remand this case for further proceedings.
¶18. REVERSED AND REMANDED.
CARLSON, P.J., RANDOLPH, LAMAR AND PIERCE, JJ., CONCUR. KITCHENS, J., CONCURS IN RESULT ONLY WITH SEPARATE WRITTEN OPINION JOINED BY GRAVES, P.J., AND CHANDLER, J.; DICKINSON, J., JOINS IN PART. DICKINSON, J., CONCURS IN PART AND IN RESULT WITH SEPARATE WRITTEN OPINION.
KITCHENS, JUSTICE, CONCURRING IN RESULT ONLY:
¶19. I agree that Lutz Homes may bring a counterclaim, but not for the reasons stated by
the majority. In my opinion, there is no need to engage in the business of statutory
interpretation, because Lutz Homes, Inc., was a licensed builder prior to entering into the
contract.
¶20. Lutz originally obtained his residential builder’s license while operating his business
as a sole proprietorship. As required, each year he filed a renewal application with the State
Board of Contractors, and his license was consistently renewed annually. For several years,
he indicated on the renewal form that he was doing business as an individual, but once he
began operating his business as a corporation, Lutz correctly reported the change. In his
8 2002 application, he noted that ownership of the business was different, that he was now
operating as a corporation, that he was the president of the corporation, and he also listed the
corporation’s federal tax identification number. Lutz filled out the form completely and
accurately. He did not include the name of the new corporation, but the form did not ask for
that information. It did have a blank for the “name in which license is issued” (emphasis
added), and Lutz correctly answered, “Barry R. Lutz.”
¶21. From the record before us, it appears that Lutz did everything he was required to do
to ensure that his corporation was lawfully operating with a residential builder’s license. The
information filed with the State Board of Contractors clearly indicated that the license
renewal was for a corporation, and this first occurred some three years before Lutz and the
Westons contracted with each other.
¶22. The majority finds, however, that Lutz Homes, Inc., was not a licensed builder
because Lutz did not file a separate application to change the name on his license. The
majority relies on language from the Board of Contractors Regulations, regulations not cited
by either party, and which, according to the record, are not strictly enforced. In 2006,
according to Lutz, he was able to make the technical name change to his license with a
simple telephone call. There is no indication that the State Board of Contractors required
him to file a separate application or pay a $50 fee. Moreover, Lutz maintains that he was not
aware “that he could have requested that [the license] be transferred from Barry R. Lutz to
Lutz Homes, Inc. or even that this action was desirable and/or necessary as a condition to any
future attempt to enforce a contract.”
9 ¶23. Finding that Lutz Homes, Inc., was unlicensed at the time the contract was entered
into and performed, the majority opinion goes on to reason that the corporation may still
pursue a counterclaim through an interpretation of the statute that, with respect, I find highly
problematic and strained. The majority holds that a residential builder may file a civil action
seeking to collect payment for work done without a license, as long as that builder obtains
a license prior to filing suit. Reading Mississippi Code Section 73-59-9 (3) in the context of
the entire statutory scheme, I believe this interpretation to be erroneous.
¶24. The pertinent language provides, “[a] residential builder or remodeler who does not
have the license provided by this chapter may not bring any action, either at law or in equity,
to enforce any contract for residential building or remodeling or to enforce a sales contract.”
Miss. Code Ann. § 73-59-9(3) (Rev. 2008), extended by 2009 Miss. Laws ch. 556. The
immediately preceding subsections make it a misdemeanor, punishable by a fine of up to
$5,000 and/or imprisonment of thirty to sixty days, to build or remodel a residence without
a license. Miss. Code Ann. § 73-59-9(1)-(2), extended by 2009 Miss. Laws ch. 556.
¶25. This strong prohibition against residential construction work by unlicensed
corporations, partnerships, or individuals, which clearly is penal in nature, is simply
reinforced by the additional penalty of prohibiting unlicensed builders or remodelers from
using the state’s courts to try to collect unpaid bills for residential construction work
performed without benefit of the required license. Such an interpretation is consistent with
the majority’s conclusion that the intent of the statute is “to protect [consumers] against the
dangers associated with unlicensed builders.” Yet, following the majority’s reasoning, an
unlicensed builder could utilize Mississippi’s courts to enforce a contract for work illegally
10 performed if only the builder obtained a license in advance of filing suit. Surely the
Legislature could not have intended such a patently perverse course of events.
¶26. Indeed, traditional rules of statutory construction militate against this Court’s reaching
the conclusion that it does today via the path traveled by the majority. “Unthought of results
must be avoided if possible, especially if injustice follows, and unwise purpose will not be
imputed to the Legislature when a reasonable construction is possible.” Evans v. Boyle
Flying Service, Inc., 680 So. 2d 821, 825 (Miss. 1996) (quoting McCullen v. State, 217
Miss. 256, 63 So. 2d 856, 861 (1953)). Moreover, “[w]hen no valid reason exists for one of
two possible constructions of a statute, the interpretation with no valid reason ought not be
adopted.” Allred v. Webb, 641 So. 2d 1218, 1222 (Miss. 1994) (citing Thornhill v. Ford,
213 Miss. 49, 56 So. 2d 23, 30 (1952)). I see no valid reason why the Legislature would
allow a builder to sue for work performed without a license, so long as the builder obtains
a license prior to filing suit. The prohibition against bringing suit should apply to those
builders and remodelers who were unlicensed at the time the work in question was
performed.
¶27. Having said that, I nevertheless would hold that this builder was not and is not
prohibited by the statute from maintaining a civil action, in this case by means of its
counterclaim, in an effort to collect what it claims it is owed by the Westons, inasmuch as
Lutz, either individually or corporately, was continuously licensed at all relevant times.
Barry R. Lutz had done everything the State Board of Contractors’ form asked of him to
transfer the license he had acquired and maintained as an individual to the corporate entity
he had organized to continue his residential construction and remodeling business without
11 interruption. In short, this building contractor is not prohibited from utilizing Mississippi’s
court system in pursuit of its claim against Mr. and Mrs. Weston for the simple and obvious
reason that the contractor was properly licensed at all relevant times.
¶28. For these reasons, I respectfully concur in result only.
GRAVES, P.J. AND CHANDLER, J., JOIN THIS OPINION. DICKINSON, J. JOINS THIS OPINION IN PART.
DICKINSON, JUSTICE, CONCURRING IN PART AND IN RESULT:
¶29. Although I agree with the majority’s conclusion that Lutz Homes, Inc. may pursue its
cause of action against the Westons, I do not agree with its reasoning. Rather, I agree with
Justice Kitchens’s reading of the documents, which clearly demonstrates that Lutz Homes,
Inc. was a licensed contractor when the work for the Westons was performed.
¶30. However, my agreement with Justice Kitchens is not complete. I find myself in the
unfortunate position of parting ways with my esteemed colleague from Copiah County only
as to his view that the clear, unambiguous language of Section 73-59-9(3) of the Mississippi
Code would not have allowed the corporation to become licensed after performing the work,
and then to file suit. I believe it would.
¶31. Furthermore, I cannot agree that our personal view of what is “perverse” should
control our interpretation of a statute. In my opinion, even where enforcing a statute’s clear
language might yield a “perverse” result (as Justice Kitchens reasonably fears would happen
in this case), it is not within our constitutional prerogative to refuse to apply the statute’s
plain language. Rather, the prospect that a perverse result might flow from the application
of a constitutional statute is a legitimate and serious legislative concern.