R4 Constructors v. Inbalance YogaR4 Constructors v. Inbalance Yoga
Justin D. Heideman and Justin R. Elswick, Attorneys for Appellants
Cody W. Wilson and Andrew L. Berne, Attorneys for Appellee
JUDGE DAVID N. MORTENSEN authored this Opinion, in which JUDGES MICHELE M. CHRISTIANSEN FORSTER and RYAN M. HARRIS concurred.
MORTENSEN, Judge:
¶1 In an earlier appeal of this case between R4 Constructors LLC (R4) and InBalance Yoga Corporation and its owner Jennifer Schnabel (collectively, InBalance), this court reviewed a number of the district court‘s rulings, including rulings on cross-motions for summary judgment. We affirmed much of the court‘s analysis, yet on the question of the cross-motions for summary judgment, we concluded that the court had erred. But we did not reverse. Instead, we vacated those rulings, noting that recovery by R4 would turn on whether certain common-law exceptions to a nonrecovery statute applied. And because the applicability of the common-law exceptions had not been tackled by the district court, we remanded the case for the narrow purpose of addressing this issue.
¶2 On remand, the district court did just that and concluded that two common-law exceptions
BACKGROUND
¶3 As stated, we are visiting this case for the second time. See R4 Constructors LLC v. InBalance Yoga Corp., 2020 UT App 169, 480 P.3d 1075. This dispute stems from InBalance contracting with R4 to build a yoga studio. Sometime after construction began, disputes arose regarding the work, and InBalance refused to pay. Upon completion of the studio, R4 sued over the missing payments. InBalance responded with an answer and counterclaims. R4 filed summary judgment motions on both R4‘s claims and InBalance‘s counterclaims. InBalance also filed a motion for summary judgment regarding R4‘s claims, asserting that the claims were statutorily barred due to R4‘s lack of a contractor‘s license at the time of entering the contract and that none of the common-law exceptions to that statutory bar applied here. See
¶4 In the first appeal, we vacated “the district court‘s judgment denying InBalance‘s cross-motion for summary judgment and granting judgment to R4 on its affirmative claims.” Id. ¶ 25. We vacated instead of reversing the judgment because InBalance could be entitled to the relief it sought “if the court on remand determine[d] as a matter of law that no common law exception to the nonrecovery provision applie[d].” Id. The parties had briefed the issue in their original summary judgment motions leading to the first appeal, but the district court had not addressed it; thus, we remanded the issue “for the district court to consider the remaining arguments raised in InBalance‘s motion regarding R4‘s ability to recover as an unlicensed claimant.” Id. We explicitly stated that the “vacatur of the district court‘s judgment in favor of R4 [was] a narrow one.” Id. ¶ 25 n.4. “We vacate[d] the court‘s order only inasmuch as it permitted R4 to recover without R4 either satisfying the requirements of
¶5 On remand, R4 filed a new motion for summary judgment addressing the issue of licensure, asserting that under facts it claimed were undisputed, some of the common-law exceptions to the statutory nonrecovery provision applied here. InBalance filed a memorandum in opposition and, in the alternative, moved to allow additional discovery. See
ISSUES AND STANDARDS OF REVIEW
¶6 InBalance raises three issues on appeal. First, InBalance argues that the district court erred by allowing R4 to rely on the common-law exceptions to licensure in its motion for summary judgment even though R4 had “never previously raised or relied” on them as “an avoidance, affirmative defense or otherwise until after the close of fact discovery.” Second, InBalance argues that the district court erred by determining that InBalance had admitted key material facts supporting R4‘s argument in its motion that an exception to licensure applied. We review InBalance‘s first two issues for correctness as they concern “the district court‘s ultimate grant or denial of summary judgment.” Far West Bank v. Robertson, 2017 UT App 213, ¶ 15, 406 P.3d 1134 (cleaned up). “We give no deference to the district court‘s legal conclusions
¶7 Third, InBalance argues that the district court erred by denying its
ANALYSIS
¶8 We circle back to the narrow issue we remanded—the applicability of any exceptions to the nonrecovery provision.
First, unlicensed contractors have been allowed to recover when the party for whom the work is to be done possesses skill or expertise in the field. . . .
Second, an unlicensed contractor may recover if the work it performed was supervised by a licensed contractor. . . .
Third, if the reason a contractor fails to obtain proper licensure is minor and does not undermine its ability to perform its work, the unlicensed contractor may recover. . . .
Finally, courts have considered whether the contracting party relied on the subcontractor‘s representations that he was properly licensed and whether the subcontractor has posted a performance bond.
Id. ¶¶ 17-20. For simplicity, we refer to these common-law exceptions as the Whipple exceptions.
I. Summary Judgment
¶9 InBalance argues that the district court erred in granting R4‘s motion for summary judgment because (1) R4 untimely raised and relied on the Whipple exceptions and (2) the court relied on disputed factual allegations. We address each argument in turn.
A. Reliance on the Whipple Exceptions
¶10 InBalance contends that the district court erred by allowing R4 to “raise and rely on the defenses to licensure as set forth in [Whipple] even though [R4] had never previously raised or relied on the Whipple exceptions as an avoidance, affirmative defense or otherwise until after the close of fact discovery.” InBalance argues that the Whipple exceptions are an avoidance under
¶11 We addressed a related issue in this case‘s first appeal. In the initial litigation, the district court denied InBalance‘s cross-motion for summary judgment based on R4‘s lack of licensure because the district court determined that the argument was an affirmative defense that InBalance waived when it did not raise lack of licensure in answer to R4‘s complaint. R4 Constructors, 2020 UT App 169, ¶ 14. As a matter of first impression in Utah, we determined that licensure is part of the cause of action and, as such, “objection to lack of an opposing party‘s license” falls under “failure to state a claim upon which relief can be granted.” Id. ¶¶ 22-24 (cleaned up). We cited
¶12 An avoidance, which InBalance now contends the Whipple exceptions constitute, also falls under
¶13 In the context of the present appeal, where the issue is whether R4 waived its right to rely on the Whipple exceptions to the statutory bar by not raising the exceptions in either its complaint or in its reply to InBalance‘s counterclaim, we similarly decide that
¶14 Further, even if R4 did have a pleading obligation with regard to its license status, see
B. Merits of the Summary Judgment Motion
¶15 InBalance argues that the district court incorrectly granted summary judgment because the court reached its conclusion by “determining [InBalance] admitted ‘key facts.‘” The court‘s order concluded that “at least the first Whipple exception” applied by relying on “key facts” it determined that InBalance “admitted” in its response to R4‘s summary judgment motion. Those facts and InBalance‘s responses are as follows:
18. Ms. Schnabel testified that she acted as her own general contractor in building two of her own homes, and that she built two additional homes in Spanish Fork in the 2008 time frame. Response: Admitted. However, regardless of any prior experience, [InBalance] specifically hired [R4] to be the “General Contractor” for the construction work.
19. Ms. Schnabel was in control of the schedule and quality of the job.
Response: Admitted that Ms. Schnabel was in charge of the “schedule.” Denied that the “quality” of the job was Ms. Schnabel‘s sole obligation. Article 5 of the Contractor Agreement specifically requires that [R4] perform in a “workmanlike manner,” in “compliance with all building codes,” and in accordance with [Schnabel‘s] expectations, applicable laws and industry standards.
On appeal, R4 also directs us to facts 16 and 17. InBalance argues that because the district court did not rely on these two additional facts to reach its decision, they are not relevant on appeal. However, we give a district court‘s grant of summary judgment no deference. Far West Bank v. Robertson, 2017 UT App 213, ¶ 15, 406 P.3d 1134. As such, our only question on appeal is whether summary judgment was properly granted. Accordingly, we are free to consider the entirety of the record, including facts 16 and 17. Those facts and responses are as follows:
16. The contract required Ms. Schnabel to perform her own supervision of the jobsite.
Response: Admitted. However, “supervision” does not obviate [R4‘s] contractual obligations concerning its licensure status, obtaining an appropriate bond or other professional duties imposed by statute. Furthermore, Article 5 of the Contractor Agreement requires that [R4‘s] work should meet the “Owner‘s expectations,” and comply with building codes, applicable laws and be performed in accordance with industry standards. There are previously recognized disputed material facts whether [R4] complied with these contractual obligations. Further discovery is required to ascertain [the owner of R4‘s (and an associated contractor‘s)] understanding of their duties and obligations vis-à-vis Jennifer Schnabel—particularly since the first Whipple exception applies “when the party for whom the work is to be done possesses skill or expertise in the field.”
17. R4 contracted to have Ms. Schnabel perform her own supervision because she represented to [R4‘s owner] that she had construction experience, and she wanted to cut costs as much as possible.
Response: Denied. Pursuant to
Utah R. Civ. P. 56(d) [InBalance] requires additional discovery to adequately respond to this allegation. In particular, [InBalance] needs to query [the owner of R4] as to the specifics of this alleged “representation” and his understanding of his own duties under the Contractor Agreement.
We give no deference to the court‘s legal conclusions on summary judgment, but even if we assume that the district court correctly construed InBalance‘s responses as admissions, we must reverse for the reasons identified below.
¶16 InBalance argues that after determining that the facts were undisputed, the court failed to draw all reasonable inferences from those facts in InBalance‘s favor as the non-moving party. To support this argument, InBalance quotes our supreme court in USA Power, LLC v. PacifiCorp, 2010 UT 31, ¶ 33, 235 P.3d 749, which explained, “Even if the moving party‘s objective statement of the facts are agreed upon, reasonable inferences made from those undisputed facts can indeed create a genuine issue of material fact. That the objective facts are undisputed does not mean that no genuine issues remain as to those facts.” Id. InBalance contends that the district court “ignored the qualifications that [InBalance] gave with respect to [its] admission to [fact 18]” that Schnabel “had acted as her own contractor on personal homes,” arguing that this admission does not lead to the inference that Schnabel “possessed skill or expertise in the field” sufficient to establish the first Whipple exception. InBalance makes a similar argument in regard to fact 19, that Schnabel oversaw the construction schedule, which, as InBalance argues it, does not lead to the inference that Schnabel had the appropriate skill or expertise in the field.
¶17 The first Whipple exception excuses an unlicensed contractor from complying with the licensing requirement if “the party for whom the work is to be done possesses skill or expertise in the field.” A.K. & R. Whipple Plumbing & Heating v. Aspen Constr., 1999 UT App 87, ¶ 17, 977 P.2d 518. Utah courts have not yet determined what constitutes “skill or expertise in the field.” Precedent establishes, however, that “a litigant is not a member of the class the legislature intended to protect if the required protection is in fact afforded by another means.” Pacific Chromalox Div. v. Irey, 787 P.2d 1319, 1326 (Utah Ct. App. 1990) (cleaned up); accord Govert Copier Painting v. Van Leeuwen, 801 P.2d 163, 170 (Utah Ct. App. 1990). A sufficient other means of protection has included possessing a license “in the same trade or profession as the unlicensed practitioner.” Pacific Chromalox, 787 P.2d at 1326; accord Govert, 801 P.2d at 170. The Utah Supreme Court has also held that where an individual is licensed in one field and that field “necessarily includes some practices or activities which are common” to another field, that individual is not required to obtain a license in the other field unless mandated by statute. Smith v. American Packing & Provision Co., 130 P.2d 951, 955, 958 (Utah 1942) (determining that a licensed engineer did not go outside of his field when his job required him to accomplish tasks common to the field of architecture). Furthermore, caselaw explains that litigants “usurp[ing] the general contractor‘s prerogatives in constructing” a building and relying “on their own competence,” even if they do not have their own license in the field, can be a contributing factor in determining that a contractor‘s licensing status does not preclude recovery. Lignell v. Berg, 593 P.2d 800, 805 (Utah 1979) (determining that an unlicensed general contractor could still recover where it “had inadvertently permitted its license to lapse” and owners relied on their own competence).
¶18 Here, the record is clear that Schnabel possessed some skills or expertise in the field given that, under the contract, Schnabel performed her own supervision of R4‘s work because she represented to R4 that “she had construction experience.” Schnabel also controlled the schedule and quality of R4‘s work but shared that responsibility with R4. Furthermore, Schnabel testified that she had previously acted as her own general contractor over the building of two of her own homes, as well as two additional homes. On this record, a factual predicate exists on which a factfinder could potentially conclude that the first Whipple exception applies. However, making all reasonable inferences in favor of InBalance, a factual question still remains as to whether Schnabel possessed sufficient skills or expertise in the field to provide her with the protection
To the extent it is needed, the third Whipple exception potentially applies. InBalance admitted the statement that “R4 had not yet received its license because of an outstanding tax debt owed [by the owner of R4].” This admission establishes the reason R4 failed to receive proper licensure was minor and does not undermine its ability to perform the work. InBalance has failed to establish a genuine issue of material fact related to this third Whipple exception.
We first note that the district court did not rule explicitly that the third exception applied as a matter of law but only that it “potentially” applied. The court was quoting the entirety of fact 22 as asserted in R4‘s statement of facts in its motion for summary judgment. InBalance‘s response to this statement of fact was as follows:
Admitted. This is an admission that R4 was not licensed as a general contractor at the time it entered into the Contractor Agreement (contrary to the representation that it was duly licensed and in compliance with applicable law).
Though InBalance admitted this fact, that admission remains silent—or at least materially ambiguous—as to the extent of R4‘s tax debt, the reason for its accrual, or how and why it prevented R4 from obtaining a license. Without these and other questions answered, it is impossible to determine whether a reasonable jury must conclude that the lack of licensure was “minor” and did not “undermine” R4‘s ability to complete the contracted work. Id. The evidentiary picture is simply insufficient to establish that the third exception applies. We therefore cannot affirm on this alternative basis.1 Thus, we address this issue further in the following section with respect to InBalance‘s
II. Rule 56(d) Request
¶20 InBalance relatedly argues that the district court erred by denying its
¶21 Here, we similarly determine that it was reasonable for the district court to deny InBalance‘s request as to information regarding the first Whipple exception because InBalance had “sufficient information to create an issue of material fact if such an issue actually existed” as to any skills or expertise in the field Schnabel did or did not possess. Id. The district court reasonably concluded that Schnabel, a named defendant, “could have provided a declaration to her attorneys objecting to the allegations that she was supervising or that she was qualified to supervise the work,” yet InBalance chose not to submit or seek that information. Thus, the district court did not abuse its discretion and properly denied InBalance‘s
¶22 However, as to the third Whipple exception, the district court should have granted the motion in order to allow InBalance to discover the reason for R4‘s lack of licensure, particularly the truthfulness of and details concerning the owner of R4‘s alleged tax debt. Unlike information concerning the sufficiency of Schnabel‘s skills and expertise in construction, InBalance had no access to R4‘s records or any other information to confirm or deny the accuracy of R4‘s claim that the delay in obtaining licensure was due to a “minor” tax debt as opposed to some other reason. And R4 has pointed to no reason InBalance would have had during discovery to investigate this issue. Nor does the district court‘s ruling identify any such reason. The issue only arose in the context of dispositive motions. Therefore, the district court exceeded its discretion and should have granted the
CONCLUSION
¶23 The district court erred by granting R4‘s motion for summary judgment, and it exceeded its discretion in denying the entirety of InBalance‘s