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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, November 7, 2011

Unlicensed Subcontractor Can Sue General Contractor Despite Maryland's Home Improvement Law

In Stalker Brothers, Inc. v. Alcoa Concrete Masonry, Inc., Maryland's high court, the Court of Appeals granted certiorari to address the following question"

Whether an unlicensed subcontractor’s claim for non- payment should be honored by a Maryland court in view of more than ninety years of Maryland Court of Appeals precedent refusing to honor claims of unlicensed entities under regulatory licensing requirements[?]

Maryland Ct of AppealsThe basic facts of the case are as follows: Alcoa did work for Stalker Brothers for a few years.  Homeowners paid Stalker Brothers and then Stalker Brothers paid Alcoa for its part.  But Stalker Brothers soon ran into financial difficulties and got behind on its payments to its subcontractor.  But Stalker Brothers made promises that it would soon get caught up on its payments, and Alcoa was thus lured into continuing to serve as Stalker Brothers' subcontractor.  Then Stalker Brothers told Alcoa that it was going bankrupt.  It still made representations that it would pay Aloca through the proceeds of a building it was selling, but although the building was sold for over $2 million, Alcoa was not paid and claims that it is owed over $50,000.  It also appears that Stalker Brothers never entered bankruptcy.

Stalker Brothers then sought refuge in the fact that Alcoa was unlicensed and argued that under Maryland's Home Improvement Law, "contracts made by an unlicensed entity such as an unlicensed home improvement contractor or subcontractor (i.e. Alcoa Concrete and Masonry, Inc.), are 'illegal' 'and will not be enforced.'”  But the Court of Special Appeals ruled that the law only bars suits by unlicensed contractors against property owners and does not apply in suits between contractors and their subcontractors.  The Court of Appelas embraced the conclusion of the intermediate appellate court:

We find no indication in the [Maryland Home Improvement Law] or in the Maryland cases that a policy of the Act is to protect general contractors from unlicensed subcontractors. Consequently, the fact that the Act is a regulatory measure does not bar Alcoa from recovering on its subcontract with Stalker.

The Court of Appeals noted that this reading of the Act protects the public from unlicensed contractors by reducing the incentive for general contractors to hire them.  

[JT]

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