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.
THOMPSON, ASSOCIATE 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.
I.
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.
II.
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
...