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HVAC Specialist, Inc. v. Dominion Mechanical Contractors, Inc.

Court of Appeals of The District of Columbia

February 28, 2019

HVAC Specialist, Inc., Appellant/Cross-Appellee
Dominion Mechanical Contractors, Inc., Appellee/Cross-Appellant.

          Argued February 21, 2018

          Appeals from the Superior Court of the District of Columbia (CAB-9870-15) (Hon. Jeanette Jackson Clark, Trial Judge)

          Nancy D. Greene for appellant/cross-appellee.

          Stephanie M. Rochel, admitted pro hac vice, for appellee/cross-appellant. Richard Mann and Hanna L. Blake were on the brief.

          Before Thompson and Beckwith, Associate Judges, and Washington, Senior Judge.


         These consolidated appeals are from Superior Court orders that dismissed claims and counterclaims brought by appellant/cross-appellee HVAC Specialist, Inc. ("HVAC") and appellee/cross-appellant Dominion Mechanical Contractors, Inc. ("Dominion"). All of the claims and counterclaims relate to the renovation of the Takoma Elementary School in the District of Columbia, a project for which HVAC was a heating, ventilation, and air conditioning subcontractor to Dominion. In a March 11, 2016, order (the "March 11 order"), the Superior Court dismissed HVAC's claim against Dominion for indemnification or contribution. Subsequently, through a November 17, 2016, order (the "November 17 dismissal order"), the court dismissed all of the remaining claims and counterclaims on the ground that the subcontract was illegal, and therefore void, because, at all relevant times, HVAC lacked the relevant license to do business in the District of Columbia as a refrigeration and air conditioning contractor. We affirm the judgment of the Superior Court.


         The subcontract, dated August 2, 2011, required HVAC to "perform a portion of the heating, ventilation and air conditioning work" on the project. Specifically, HVAC was to furnish and install refrigeration piping, to receive and install heating, ventilation, and air conditioning equipment, to charge the equipment with gas, and to assist with the startup of equipment at the elementary school. HVAC ran into difficulties paying its employees and suppliers, and Dominion eventually terminated the subcontract for HVAC's alleged default. There followed the parties' claims and counterclaims for breach of contract and related causes of action. HVAC, a Virginia corporation, filed its initial complaint in December 2012, while it was an unregistered "foreign filing entity or foreign limited liability partnership doing business in the District," a status that precluded it from "maintain[ing] an action in the District." D.C. Code § 29-105.02 (b) (2011). Dominion moved for dismissal of HVAC's complaint on that basis, and the Superior Court dismissed the original complaint without prejudice. HVAC filed its new complaint on December 22, 2015. Dominion initially responded by filing a motion to dismiss, arguing that the court should dismiss the action for lack of subject matter jurisdiction and should additionally dismiss some of the counts for failure to state a claim. On March 11, 2016, the trial court granted Dominion's motion as to Count III of HVAC's complaint, a claim for indemnification or contribution.[1]

         Thereafter, on March 25, 2016, Dominion filed its answer to the December 22, 2015, complaint, asserting counterclaims of breach of contract and termination for default. Dominion asserted a number of affirmative defenses in its answer, but did not assert illegality of the contract as a defense.[2] On August 8, 2016, however, Dominion filed another motion to dismiss, wherein it alleged that HVAC could not recover under the subcontract or under "a quantum meruit or quasi-contractual basis" because HVAC "had no license" when it entered into the subcontract and performed work under it. In particular, Dominion asserted that, at all relevant times, HVAC lacked the refrigeration and air conditioning contractor's license it was required to have under District of Columbia law to perform work under the subcontract. Opposing Dominion's motion to dismiss, HVAC argued that Dominion waived any illegality defense by failing to assert it in the prior case, and for nearly 8 months after HVAC refiled its complaint, despite knowledge of HVAC's licensure status. To the extent Dominion did not waive the asserted illegality defense, HVAC further argued, Dominion was "estopped" from raising the defense after having filed a counterclaim for damages for breach of the allegedly void contract.

         In ruling on Dominion's motion to dismiss, the Superior Court noted that "[b]y its own admission," HVAC "'had no license to do business in the District of Columbia when it entered into the [s]ubcontract.'" The court explained that it was "constrained to grant" Dominion's motion "inasmuch as the statutes and regulations requiring licenses for businesses operating in the District of Columbia are very clear that businesses performing refrigeration or air conditioning work must have a license to do so and there are no exceptions." Relying primarily on this court's opinion in Sturdza v. United Arab Emirates, 11 A.3d 251, 257 (D.C. 2011), the court concluded that HVAC "could not recover in contract or in quantum mer[ui]t for services rendered." Citing this court's opinion in Billes v. Bailey, 555 A.2d 460, 463 (D.C. 1989), the court reasoned that even though Dominion "was aware that [HVAC] had no District of Columbia license at the time they entered into [the] [s]ubcontract," "the doctrine of unclean hands does not entitle [HVAC] to recover in the instant action." Although recognizing that Dominion "belatedly filed [its] Motion to Dismiss based on [HVAC's] failure to have the required District of Columbia licenses," the court did not specifically address HVAC's argument that Dominion waived or was estopped from asserting the defense of illegality. The court dismissed Dominion's counterclaims because they were "based on a void contract."[3] These consolidated appeals followed.


         We focus on the November 17 dismissal order because our conclusion regarding the subcontract's unenforceability is dispositive of all of HVAC's claims, including those dismissed through the March 11 order.[4] Our review of the November 17 dismissal order is de novo. See Williams v. District of Columbia, 9 A.3d 484, 488 (D.C. 2010).

         The various District of Columbia Code provisions and regulations cited in the November 17 dismissal order require licensure with respect to the refrigeration and air conditioning "occupation[] or profession[]," because it is one that has "been determined to require regulation in order to protect public health, safety or welfare, or to assure the public that persons engaged in such occupations or professions have the specialized skills or training required to perform the services offered." D.C. Code § 47-2853.04 (a) (2011); D.C. Code § 47-2853.04 (a)(29) (2011).[5]Further, "[t]he rule is well-established in the District of Columbia that a contract made in violation of a licensing statute that is designed to protect the public will usually be considered void and unenforceable, and that the party violating the statute cannot collect monies due on a quasi-contractual basis either." Sturdza, 11 A.3d at 257 (internal quotation marks and brackets omitted); see also id. at 256 n.19 (declining to create an exception for commercial transactions or an exception based on the sophistication of the parties); Saul v. Rowan Heating & Air Conditioning, Inc., 623 A.2d 619, 621 (D.C. 1993) ("This jurisdiction has held consistently that a contract entered in violation of a licensing statute or regulation directed at protecting the public is void and unenforceable."). "Although the operation of this rule may appear to be harsh and disproportionate in some ...

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