The Second District Weighs In On The Ability to Recover Monies for a Failure to Comply With The Home Repair and Remodeling Act - Artisan Design Build, Inc. v. Bilstrom
The district split that we identified in our posting about K. Miller Construction Company, Inc. v. McGinnis (1st Dist. Doc. No. 1-08-2514) has another fracture. Last week, the Illinois Second District Appellate Court handed down its decision in Artisan Design Build, Inc. v. Bilstrom (2nd Dist. Doc. No 2-08-0855).
In case you don’t feel like re-reading, the split is over the Illinois Home Repair and remodeling Act (815 ILCS 513/1 et seq.) and whether the failure of a contractor to comply with the act will strip the contractor of the right to recover monies that it is owed or whether the failure to comply with the act bars certain claims but not others. For instance, a contractor may be owed $10,000 for a job, but failed to provide a copy of the pamphlet required under the act – in the fourth district, this would be a bar to all claims for payment including mechanics liens, breach of contract claims, unjust enrichment claims and the like. In the first district, the failure to provide the pamphlet would not currently bar an unjust enrichment claim but would bar the mechanic’s lien claim and the breach of contract claim given that the act calls contracts made in contravention of its requirements “unlawful” and unlawful contracts are void. (see K. Miller above.)
Now comes a new wrinkle.
In Artisan, the plaintiff was a contractor who claimed it was owed in excess of $208,695.69 for construction work on a house in Hinsdale, Illinois. The plaintiff wasn’t paid and sued the owner alleging it had a mechanic’s lien for the sum, that the owner had breached the contract, and also pled a claim for unjust enrichment (even if there wasn’t a contract, the owner benefited from the work and should have to pay for that work).
The owner asked the district court to dismiss the case because the plaintiff had failed to provide the owners with the brochure, had failed to commence or complete work within the contracted time period, and didn’t maintain insurance. The district court dismissed the case on the basis that the plaintiff admittedly did not furnish the owners with the consumer rights brochure. The plaintiffs appealed and asked that the appellate court overturn the decision.
The Second District was faced with the same decision as the other districts have been faced with… what, if anything, does a contractor’s failure to comply with the act mean for its claims against the home-owner?
The Second District interpreted the act to mean that the contractor’s failure to provide the consumer with the brochure does NOT remove the contractor’s right to recover in either equity (quantum meruit) or law (breach of contract, mechanic’s lien).
“To hold that a failure to provide a consumer with the brochure allows the consumer to defeat all legal and equitable claims by the contractor would lead to mischief and a result the legislature could not have intended.”
In reaching this conclusion, the Court said it was looking to legislative intent, which is a phrase and methodology addressed in many of the cases involving this act. Oddly, apart from attempting to interpret legislative intent through reading the “plain language” of the statute, none of the cases attempt to examine what the legislature had to say about the bill in debate or committee.
Many of the transcripts of the Illinois Legilsature’s general session debates dating back to 1971 are available online. These transcripts include debate on House Bill 1177 from the 91st General Assembly’s session in 1999 that became the Home Repair and Remodeling Act. Of note from the debates are the main debate from the House after the final reading of the bill, and the similar debate from the Senate.
From the Senate and House transcripts on the matter, we see that there was not only opposition to this bill on the part of people who felt the bill just added an extra hoop for honest contractors to have to jump through without punishing the ne’er-do-wells who were the reason for the bill, but that the main justification for its passage was the protection of seniors and unwary consumers. Another point was the information this bill would force on people having their homes repaired – like the rights involved in contracting, an up-front contract price, and – after a 1994 amendment – a knowing acceptance or relinquishment of arbitration and the right to trial by jury. The debates focus on the Attorney General’s ability to prosecute and say nothing about voiding contracts or allowing a private right of action (an issue heavily debated by the justices of the Courts).
During the original House debate, representative Winters had these closing remarks,
“The Attorney General of the State of Illinois has listed home repair fraud as the #1 consumer complaint in their offices. Over the last five years, they average almost 500 complaints from consumers a year of being ripped off by artists who simply go up and down the street looking for the elderly, looking for the unprotected, looking for the uninformed. This Bill seeks to inform the consumer, it is not onerous to the contractors, a simple brochure and contract language is all that it requires….
“The only way that the criminal provision in this would be put forward is in fact that the State’s Attorney or the Attorney General can find a consistent pattern of fraud. And it is only a civil penalty in this Bill, it is not criminal. We have other criminal statutes under deceptive business practices. This Bill is simply civil penalties for failing to have the brochure disseminated and signed off by the consumer. It is a great consumer protection Bill, very little burden to the, to the contractors of this state. And I would urge adoption of this Bill.” [emphasis added] IL H.R. Tran. 2000 Reg. Sess. No. 55
The failure to have the brochure passed out and signed off on was to be the ground for a penalty… and not just the loss of the right to arbitrate or to have a trial by jury, that provision wasn’t even part of the act until 1994, so the statement that there would be a penalty for failure to have the brochure passed out contemplated some other form of a civil penalty.
The notion that there should be some form of a penalty for failure to comply with the act by passing out a brochure along with the “shall” language of the act's requirements seems to make more sense when interpreted with the loss of the legal rights given the nullification or voidance of any contract between parties subject to the act where the act hasn’t been complied with. But again, that reading means that Section 35 of the act giving the AG and SAGs the power to enforce the act is not the sole mechanism for enforcement… If the act was to help seniors, did that really mean that the legislature wanted the “500” annual complaints referenced by representative Winters to be handled solely by the AG’s office? Wouldn’t it make more sense to allow Seniors to void any contracts and eliminate mechanics liens where the act hasn’t been complied with… if, as discussed in the General Assembly’s debates, compliance was as simple as handing over a brochure?
Another issue comes out of the transcripts of the assembly’s deliberations – that of the knowing contractor vs. the unwary contractor.
Back in March of this year, we discussed a case called Kunkel v. P.K. Dependable where the 5th District decided that a contractor guilty of a violation under the act wouldn’t have to pay the attorneys fees of a home owner forced to go to court and pay an attorney to prosecute this kind of action if the contractor didn’t “knowingly” not comply with the act.
Interestingly, the Assembly transcripts show that the “knowing” issue was also important to the legislature and they expected the contractors to know about the act and also thought other State agencies as well as trade associations would hand out brochures and increase awareness… but in the end, that “knowing” would not be an issue.
The best way to make sure there are no problems is to comply with the act. The brochure is linked above and getting the homeowner to sign off on it, having insurance, and delineating the terms of the project in a written contract or statement are what the act requires. No home-owner should be allowed to reap a windfall for the failure to turn over the pamphlet, but if allowing a few wind-falls finally forces everyone to comply with the act, which is what the legislature intended, it is not unlikely that a few more courts may award a few wind-falls to accomplish that.
