On May 28, 2013, I published a blog entitled "No Certificate of Responsibility—No Payment for Work Performed" based upon a May 21, 2013, decision from the Mississippi Court of Appeals. [click here for decision]  On June 6, 2013, the Mississippi Supreme Court issued a decision suggesting that an unlicensed contractor may be entitled to recovery under the theory of quantum meruit or unjust enrichment. [click here for decision]

In Ground Control, LLC v. Capsco Industries, Inc., et al., the general contractor was W.G. Yates and Sons Construction Company ("Yates"), the subcontractor was Capsco Industries, Inc. ("Capsco") and its subcontractor was Ground Control, LLC ("Ground Control").  Neither Capsco nor Ground Control held a Certificate of Responsibility from the Mississippi State Board of Contractors.  Neither Yates nor the Owner was a party to the contract between Capsco/Ground Control.  Yates terminated Ground Control for default due to safety issues and Ground Control sued for payment of work performed under its contract with Capsco.  The trial court had determined that because the contract was null and void under Miss. Code Ann. § 31-5-15, Ground Control was not entitled to payment for the work it had performed. Ground Control appealed.

The Mississippi Supreme Court began its analysis by stating that "[t]his Court has never determined whether a party to an illegal contract is barred from recovery under theories of unjust enrichment or quantum meruit." It went on to find as follows:

Capsco knowingly solicited Ground Control to enter into an unlawful contract, allowed Ground Control to perform a substantial part of the work, made an interim payment to Ground Control, and obtained payment from Yates for Ground Control’s work.  To allow Capsco to use the void contract to shield itself from any obligation to pay for the work performed by Ground Control is unconscionable.  Enforcing the statute in such a way as to preclude any recover is inequitable, invites fraudulent activity, and violated the Remedy Clause of our State Constitution. See Miss. Const. art. 3, § 24.

Although the contract is void pursuant to Section 31-3-15, Ground Control should not be precluded from having the opportunity to proceed in court under a claim for the value of what it expended in labor and supplies on the project.  We do not address the issue of other penalties, if any that may be appropriate for the trial court to address.

Interestingly, the Mississippi Supreme Court did not mention Ace Pipe Cleaning, Inc. v. Hemphill Const. Co., Inc. and Federal Ins. Co., but the Ground Control decision seems to suggest Ace Pipe Cleaning, Inc. is now overruled.

There is now a glimmer of hope for those who have failed to comply with the statutory requirement for a Certificate of Responsibility.  However, recovery under quantum meruit may not be without the assessment of a civil penalty by the Mississippi State Board of Contractors under Miss. Code Ann. § 31-3-21(4) or criminal penalty or fine under Miss. Code Ann. § 31-3-21(1). [click here for statute]

When all the dust has settled, the rule of thumb remains that before soliciting bids or entering into a construction contract in Mississippi, check with the Mississippi Board of Contractors to determine if a Certificate of Responsibility is required.

Do you want an attorney that defends personal injury claims or a construction lawyer representing you where there has been an allegation of defective construction associated with the work of a subcontractor?  Obviously, you want an attorney whose practice is concentrated in the area of construction law.

As a preliminary matter, claims asserted by an owner against its general contractor for alleged defective construction are typically complex and costly.  Even "simple" payment disputes between an owner and general contractor can and frequently do evolve into allegations of defective construction by the owner against the general contractor to justify withholding payment.

If an allegation of defective construction is made against the general contractor due to work performed by its subcontractors, the general contractor should consider submitting such a claim under its Commercial General Liability ("CGL") Policy and notify the subcontractor whose work has been called into question and its insurance carrier.  As a general contractor, you should already have a copy of your subcontractor’s certificate of insurance identifying you as an additional insured under the policy before allowing the subcontractor to commence work.

If your insurer denies coverage for the alleged defective construction but agrees to provide you with a defense under reservation of right, you have the right to select a "construction attorney" to defend you against the defective construction claim and your insurance carrier must pay for that defense.  Do not let your insurance adjuster "assign" you to an attorney This is a construction defect case and not personal injury or a car wreck case.  There will likely be issues concerning the interpretation of plans and specifications, scheduling and coordination of the work, the standard of care required to be exercised by various parties involved in the dispute, construction industry standards and construction and design experts.  Make the right choice; retain a lawyer with construction litigation experience to defend you against allegations of defective construction not a personal injury defense attorney.