MEMORANDUM AND ORDER
Plaintiffs Babak Djourabchi and Monica Welt, District of Columbia residents, filed a two-count complaint [1] in this Court on May 2, 2006, seeking judgment in the amount of at least $627,310.98 plus interest, costs, and fees, against defendants Harry J. Self, Jr., a Maryland resident, and Self Construction, Inc. (“Self Construction”), a Maryland corporation. (Compl.HH 1-5.) Defendants answered [6] on June 12, 2006.
Jurisdiction is proper under 28 U.S.C. § 1332(a) and venue lies in this district under 28 U.S.C. § 1391(a)(2). Three motions are before the Court.
I. Factual Background
Plaintiffs’ claims arise out of a home improvement contract entered into with defendants on May 13, 2005 (“Agreement”), and a subsequent Addendum signed on July 30, 2005, providing for certain work to be performed by Mr. Self and Self Construction on plaintiffs’ residence. (Compl.HH 7-17.) Plaintiffs allege that defendants breached the Agreement and Addendum by failing to perform and complete work in a timely and workmanlike manner, refusing to compensate plaintiffs for damages and costs, and by failing to be licensed to perform work in the District of Columbia as a general contractor. (Compl.HH 18-20.) Plaintiffs further allege that defendants committed an unfair trade practice in violation of the D.C. Consumer Protection Procedures Act, D.C.Code § 28-3904, by accepting payment from plaintiffs to perform home improvement services without being licensed. (Compl.HH 21-26.) Defendants generally deny plaintiffs’ allegations, but in their answer, state that they “are without knowledge or information sufficient to form a belief as to the truth of’ plaintiffs’ allegations that defendants are unlicensed. (Ans. H16; see Compl. H16.) In a conelusory manner, defendants raise twenty-two “affirmative and negative defenses,” but do not
II. Defendants’ Motion to Dismiss for Joinder of an Improper Party
On June 12, 2006, defendants filed a motion to dismiss for joinder of an improper party [4], seeking to release Mr. Self from the litigation in his individual capacity. Plaintiffs opposed [11] the motion on June 23; defendants never replied. Upon consideration of the motion and the opposition thereto, the Court finds that this motion shall be DENIED.
Defendant Harry J. Self, Jr. alleges that he is “an individual operating a corporation duly organized under the laws of the State of Maryland.” (Defs.’ Mot. [4] at 2.) Mr. Self further alleges that “[a]t all times relevant to the matter in dispute, ... [he] operated under the protection of limited liability provided a corporation under the laws of the State of Maryland and the District of Columbia.” (Id.) Mr. Self provided no evidentiary support for these assertions in his motion. (See id.) Citing Fed.R.Civ.P. 19(a) and 20(a), plaintiffs maintain that Mr. Self, in his individual capacity, is a proper and necessary party to both counts of the Complaint. (Pis.’ Opp. [11] at 1-3.) Plaintiffs argue that Mr. Self is not protected from personal liability (id. at 3-6) because Self Construction is not a corporation in good standing in Maryland (Compl.1T 6.). Plaintiffs submitted a certificate from the Maryland Department of Assessments and Taxation showing that the department forfeited Self Corporation’s charter on October 7, 1999. (Pis.’ Opp. [11] Ex. 1.) Nothing before the Court shows that Self Corporation’s charter has been revived.
This Court must accept the facts alleged in the complaint as true, and construe the complaint liberally in plaintiffs’ favor. See Kowal v. MCI Commc’ns Corp.,
Under Maryland law, forfeiture of a corporate charter renders that corporation’s powers “inoperative, null, and void ... without proceedings of any kind either at law or in equity.” Md.Code Ann., Corps. & Ass’ns § 3-503(d) (2006). With a forfeited charter, a corporation “is not legally in existence as a corporation and cannot function as a corporation.” Atlantic Mill & Lumber Realty Co. v. Keefer,
Upon forfeiture, the corporation’s directors act as trustees, Md.Code Ann., Corps. & Ass’ns § 3-515(a) (2006), and may “[s]ue or be sued in their own names as trustees or in the name of the corporation,” id. § 3-515(c)(3). However, trustees are only vested with such powers as are “necessary or proper to liquidate the corporation and wind up its affairs.” Id. § 3-515(c)(4); see Patten v. Bd. of Liquor License Comm’rs,
In this case, the Court finds that Self Corporation forfeited its corporate charter, has not revived its charter, and therefore has
As trustee of Self Construction, Mr. Self may only sue or be sued in his own name on its behalf if the suit is rationally related to winding up Self Construction’s affairsi” Md. Code Ann., Corps. & Ass’ns § 3—515(c)(4) (2006); Dual Inc.,
Mr. Self lacks capacity as trustee of Self Corporation to maintain this suit. Instead, Mr. Self may only proceed in his individual capacity. Fed.R.Civ.P. 17(b). Plaintiffs therefore cannot possibly be accorded complete relief without Mr. Self as a party. Fed.R.Civ.P. 19(a). Defendants’ motion to release Mr. Self as a party in his individual capacity is therefore DENIED. Furthermore, because the Court finds that Self Construction does not legally exist, that party is DISMISSED on the Court’s initiative. Fed. R.Civ.P. 21 (“Parties may be dropped ... by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just.”).
III. Plaintiffs’ Motion to Dismiss Counterclaim
Defendants filed a counterclaim [12] on June 23, 2006. Having dismissed Self Corporation, the Court will treat the counterclaim as having been brought by Mr. Self in his individual capacity and will now refer to him as “defendant.” Defendant seeks judgment against plaintiffs for $56,512.40 plus interest, costs, and fees, alleging breach of contract (Countercl.HH 23-27) and promissory estoppel (id. HH 28-32). On July 3, plaintiffs filed a motion to dismiss the counterclaim [13] for failure to state a claim upon which relief can be granted. Defendant opposed [14] the motion on July 14; plaintiffs replied [15] on July 21. Upon consideration of the pleadings, the motion, and the opposition and reply thereto, the Court finds that this motion shall be GRANTED.
Defendant alleges in his counterclaim that on July 30, 2005, the parties “executed an additional handwritten Addendum with notes” that shifted the responsibility of obtaining permits from defendant to plaintiffs. (CountercLHH 12-13.) Defendant alleges that the permits were not obtained, that plaintiffs demanded he continue work despite this, and that defendant refused to work without the permits. (Id. HH 14-15.) Defendant further alleges that “[t]hroughout this matter, [plaintiffs] requested that [defendant] remain available for work under the contract and [defendant] agreed to do so. At this time, [defendant] informed [plaintiffs] that in order to do so he was incurring costs and requested that they be paid.” (Id. H 25.) Defendant alleges that he incurred costs “[c]onsistent with this Agreement” (id. H26), or in the alternative, that he incurred costs “[i]n reliance on this Agreement ... to the detriment of [his] rights to withdraw from the contract” (id. H 31).
Because the defendant’s counterclaim arises out of the same “transaction or occurrence” as plaintiffs’ claims, it is a compulsory
The Court has supplemental jurisdiction over defendant’s counterclaim because it is so related to plaintiffs’ claims, over which the Court has original jurisdiction, as to form part of the same case or controversy. 28 U.S.C. § 1367(a). There is no reason to decline exercising supplemental jurisdiction under either § 1367(b) or § 1367(c).
A counterclaim should not be dismissed under Fed.R.Civ.P. 12(b)(6) unless the eounterclaimant “can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson,
Plaintiffs argue that defendant cannot bring a counterclaim under D.C. consumer protection law, because as an unlicensed contractor, defendant accepted payment before completing work under the Agreement, thereby rendering the contract void and unenforceable. (Pis.’ Mot. [13] at 1-5.) Defendant responds that he “believed [he] operated under the supervision of a licensed Contractor.” (Def.’s Opp. [14] at 2.) Defendant further argues that he stopped work because no building permit had been obtained and he did not want to commit an illegal act, therefore it would be harsh to bar his counterclaim. (Id. at 3.)
The D.C. Consumer Protection Procedures Act provides that “[i]t shall be a violation of this chapter, whether or not any consumer is in fact misled, deceived or damaged thereby, for any person to: ... (dd) violate any provision of title 16 of the District of Columbia Municipal Regulations.” D.C.Code § 28-3904(dd) (2006). Under the Municipal Regulations, “[n]o person shall require or accept any payment for a home improvement contract in advance of the full completion of all work required to be performed under the contract, unless that person is licensed as a home improvement contractor.” D.C. Mun. Regs. tit. 16, § 800.1 (2006). This provision is strictly applied and results in voiding the contract and rendering it unenforceable. Cevern, Inc. v. Ferbish,
Exhibit 4 of defendant’s counterclaim, the purported Agreement, states that “Harry Self, as sole proprietor of Self Construction, a general contracting business” (Def.’s Opp. [14] Ex. 4, preamble), “attests that he is ... licensed as a general contractor in the District of Columbia, and will
Defendant’s argument that he “believed [he] operated under the supervision of a licensed Contractor” (Def.’s Opp. [14] at 2), whose identity defendant does not specify, only lends support to the inference that defendant in fact had no license. Even if defendant believed that Self Construction was properly licensed, this belief would be unavailing, because as the Court has already held, Self Construction has no legal existence. Furthermore, even if defendant believed that he operated under the supervision another licensed contractor hired by plaintiffs, this would not shield defendant from liability because the regulation is not limited to general contractors, but provides that “[n]o person shall require or accept any payment for a home improvement contract in advance of the full completion of all work....” D.C. Mun. Regs. tit. 16, § 800.1 (2006) (emphasis added). Liberally construing the counterclaim and giving defendant the benefit of all reasonable inferences that may be drawn therefrom, the Court still finds no ground to support the conclusion that defendant was a licensed contractor.
Defendant also denied that he has received any payment from plaintiffs. (Ans.K 10.) However, the exhibits attached to defendant’s counterclaim contradict this denial. Defendant’s Exhibit 4 states that plaintiffs were required to make a $20,000.00 down payment when the Agreement was signed. (Countercl. Ex. 4 at U 4.) Furthermore, Defendant’s Exhibit 3, the purported Addendum, states that defendant “will need a[sic] our third Deposit due to lack of funds.” (Countercl. Ex. 3 at U 3.) Defendant’s exhibits harmonize with rather than contradict the allegations in the complaint that plaintiffs did pay defendant prior to completion of the project. (See Compl. 1Í10.) The Court must assume for the purposes of this motion that defendant’s exhibits are accurate. Reading these two statements together, defendant’s own exhibits indicate that he had received two payments prior to the signing of the Addendum, which necessarily occurred prior to the completion of the work.
In sum, the Court finds that defendant, as an unlicensed home improvement contractor, required and accepted payment in advance of completion of the work required under the contract, and that the contract is thereby rendered void and unenforceable. D.C. Mun. Regs. tit. 16, § 800.1 (2006); Cevern, Inc.,
TV. Plaintiffs’ Motion for Leave to Amend the Complaint
Plaintiffs filed a motion for leave to amend their complaint [16] on October 5, 2006. Plaintiffs seek to add a third count to their complaint, for fraud, fraudulent misrepresentation, or fraudulent inducement. (Pis.’ Mot. [16] Ex. A HH 26-32.) Defendant opposed [17] the motion on October 16 and plaintiffs replied [19] on October 23. Upon consideration of the pleadings, the proposed
Under Fed.R.Civ.P. 15(a), after a responsive pleading has been served, “a party may amend the party’s pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” Such leave is appropriate “in the absence of undue delay, bad faith, undue prejudice to the opposing party, repeated failure to cure deficiencies, or futility.” Richardson v. United States,
Plaintiffs state that their motion will cause neither undue delay nor undue prejudice to defendant because the Court has not issued a scheduling order; that it is in good faith; and that it is not a repeated effort to cure deficiencies, as they have made no previous requests, nor is it futile, as defendant has yet to make any dispositive challenge to the complaint. (Pis.’ Mot. [16] at 2.) Defendant argues that plaintiffs’ request is in bad faith, but fails to specifically address plaintiffs’ grounds in support of their motion. (Def.’s Opp. [17] at 2-3.) Instead, defendant merely rehashes the claims he made in opposition to plaintiffs’ motion to dismiss the counterclaim. (Id.) Defendant further argues that granting plaintiffs leave to amend would unduly prejudice him in two ways. First, he claims that plaintiffs’ third count would place upon him “the additional burden of subjecting [defendant] to damages beyond damages [plaintiffs] would normally be entitled under the statutory scheme.” (Id. at 4.) Second, defendant claims that he will be burdened by being required to “amend [his] answer, counter-complaint and original pleading ... and will require preparation of additional witnesses to defend this action.” (Def.’s Opp. [17] at 4.)
The most important factor the Court must consider when deciding whether to grant a motion for leave to amend is the possibility of prejudice to the opposing party. Wright, Miller & Kane, supra, § 1487 (citing, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc.,
In this case, the Court finds that plaintiffs’ proposed count of fraud, fraudulent misrepresentation, or fraudulent inducement does not substantially change the theory on which the case is proceeding. Plaintiffs have already pled in their original complaint the facts upon which these theories of recovery are based, namely that defendant failed to perform and complete work in a timely and workmanlike manner, refused to compensate plaintiffs for damages and costs, and failed to be licensed to perform work in the District of Columbia as a general contractor. (Compl.HH 18-20.) Plaintiffs simply desire to add that defendant made false representations with respect to these material facts and that plaintiffs made payments to defendant in reliance upon these representations. (See Pis.’ Mot. [16] Ex. A HH 27-29.)
Furthermore, the amendment is not proposed so late in the litigation that defendant will be required to engage in significant new preparation, because the Court has yet to order discovery. Also, it is unlikely that the addition of this count will significantly complicate or lengthen the trial, because the issues raised, that defendant made false representations to plaintiffs with respect to the above-mentioned facts, are not remote to
V Conclusion
For the foregoing reasons, it is hereby
ORDERED that defendant Self Construction, Inc., is DISMISSED as a party on the Court’s initiative pursuant to Fed.R.Civ.P. 21; and it is further
ORDERED that defendants’ Motion to Dismiss for Joinder of an Improper Party [4] is DENIED; and it is further
ORDERED that plaintiffs’ Motion to Dismiss Counterclaim [13] is GRANTED; and it is further
ORDERED that plaintiffs’ Motion for Leave to Amend the Complaint [16] to add Count III, for fraud, fraudulent misrepresentation, or fraudulent inducement, is GRANTED. However, because the Proposed Amended Complaint named Self Construction as a defendant, plaintiffs shall correct their pleading to conform with this Court’s order dismissing Self Construction as a party, and shall file their First Amended Complaint within ten (10) days of this order. Defendant shall respond within ten (10) days thereafter.
SO ORDERED.