Reading between the law: A case study of the Home Repair and Remodeling Act of Illinois

I.          Introduction

            When thinking about judicial activism, the first thing that comes to mind often is the Supreme Court of the United States making decisions regarding civil rights. However, judges expand the law and create exceptions thereto in many fields and at many levels. The purpose of this article is not to question whether judicial activism exists, or even whether or not it is proper to practice it. Instead, this article considers one instance of activism in an everyday legal situation and then analyzes a series of judicial approaches and considers the ramifications of each.

A trial judge in Illinois once ordered an unnecessary evidentiary hearing, noting that he would “err on the side of caution… and allow [the case] to go forward” hoping that “some day, [he would] be enlightened by the Appellate Court… [as to] whether there can ever be an exception to the application of this Act.”[1] The act in question was the Home Repair and Remodeling Act[2](hereafter the "HRRA") and the act has been the cause of several judicial squabbles within the state of Illinois in the last few years.  The act enumerates certain requirements that must be met by contractors hoping to recover their fees after performing home repair or remodeling worth in excess of $1000 and acts as an extension of theMechanic’s Lien Act.[3] The problem, many judges would argue, is with the language of the act, which serves to create situations that appear contrary to the act’s stated purpose.[4] Other judges, however, would counter that the problem actually lies with the judicial creation of exceptions to the act rather than with the act itself.[5] This article will examine the act as well as the case law surrounding it and examine the approaches taken by Illinois state judges as they attempt to expand the law to deal with the situations that have arisen since its inception.

II.        The Mechanic’s Lien and Home Repair and Remodeling Acts

The question of contractors hired for home repairs has loomed large in Illinois for some time.[6] Contractors and homeowners both have little coercive power on the other. Like other states, Illinois presents contractors with the option of filing mechanic’s liens as a means of insuring payment. Mechanic’s liens are strictly a statutory construction and do not exist at  common law, and this has typically led the courts to interpret the requirements spelled out in mechanics’ lien statutes very strictly. [7]Generally, statutory rights cannot be exercised without full compliance withthe statute creating that right.[8] As remedial acts, these statutes protecting consumers and contractors are typically held to be applicable liberally once the requirements have been clearly met. [9]

In Illinois, the Mechanic's Lien Act[10] provides contractors with the statutory right to liens on the property they improved should their work go unpaid. The act also conversely sets forth requirements for contractors to follow in order to have the right to a lien, in part because of the great coercive power afforded to them through the ability to create liens. [11] 

The Mechanics'Lien Act gives great power to the contractors, who can now enforce the collection due to them. As a result, the HRRA serves to protect homeowners and other unsuspecting consumers with unequal bargaining power by providing further requirements for the validity and enforceability of their contracts. Without proof of a valid contract, contractors are unable to obtain a mechanics' lien, thereby reducing the potential for abuse by limiting their ability to contract. Particularly, the statute requires that homeowners be provided with a brochure outlining their rights and responsibilities towards the contractor, and it also requires all work orders and changes thereto to be signed by the homeowner.[12] However, the statute only declares the failure to do so illegal, rather than state exactly what this means for contract recovery.

III.       The Cases

Several cases have considered the issue in the last few years, and many of the judges have had their own unique approach to the issues. Amongst others, K. Miller Const. Co., Inc. v. McGinnis[13], Behl v. Gingerich[14], and Fandel v. Allen[15] present three very different views of the act in question and of its interpretation. Though all generally concur on the necessary outcomes in terms of fairness and justice, the three courts have very different procedural and interpretive approaches.

A.         K. Miller Cons. Co., Inc. v. McGinnis

In K. Miller, a contractor and homeowner orally agreed to a renovation project. [16]  In the midst of the project, the scope of the work greatly expanded, as did the costs. [17] The two parties came to disagree on what the owners actually owed. [18] While the homeowners made some payments, they failed to pay the amount the contractor claimed was due in full. [19] The contractor sued for foreclosure of a mechanic's lien, for recovery under the contract, and, inter alia, for quantum meruit recovery. [20] Quantum meruit recovery would allow the contractor to recover for the fair market valueof their services to prevent homeowners from being unjustly enriched by not having to pay for the contractor's work.[21] The homeowners successfully filed a motion to dismiss, and the contractor appealed. [22] The Illinois Appellate Court for the First District concluded that while foreclosure of the mechanics' lien and contract-based recovery were barred bythe unlawful violation of the HRAA, quantum meruit recovery was still available because the act did not specifically forbid it. [23]

B.         Behl v. Gingerich

In Behl, a plumber hired a contractor to do work on his personal residence.[24] Thecontractor performed significant amounts of work on the home before vacating the work site because of deteriorating relations with the homeowners.[25] The contractor was only paid $39,895 of the $55,395 total.[26] The contractor sued the homeowner on the basis that he was owed the remaining amount for his services. [27] The homeowners alleged wrongdoing on the part of the contractor, but the court concluded that the contractor had indeed completed work in accordance with the initial work order. [28]The lower court initially awarded the contractor a monetary award. [29] Thehomeowner appealed on the basis that the HRRA should bar the contractor from recovering at all. [30] The Appellate Court for the Fourth District of Illinois concluded that the HRRA only barred recovery if the contract did not substantial perform his duties in the act. [31] In the end, the court concluded that though the exact requirements were not met, the contractor had performed sufficiently under the act to meet its intents and therefore was not barred recovery. [32]

C.         Fandelv. Allen

In Fandel, a homeowner contacted acontractor for roofing work. [33] Though the contractor did itemize a work order, it was never signed, and the contractor never provided the homeowner with the required brochure. [34] The contractor completed the work and was thereby owed $9,681.00 for the work.[35] The homeowner tendered a check, and then subsequently cancelled payment on said check. [36] The contractor filed a claim for a mechanic's lien, and later tried to foreclose on said lien. [37] The lower court dismissed the foreclosure action because the contractor had failed to follow the requirements of the HRRA. [38] On appeal, the Third District Court of Illinois determined that a HRRA violation did not bar recovery under a contract suit or the foreclosure of a mechanics' lien and that the HRRA's only effect was to give the attorney general the ability to fine the offending contractor. [39]

IV. Analysis

All four of the approaches outlined above are clearly contradictory. Each attempts to realize afair outcome in line with the intents of the legislature and with regard to the facts before each tribunal.

All four courts realized the basic problem that lies at the heart of the issue: it is possible for a contractor to fail to meet the act's requirements but still deserve someform of payment. The court in K. Miller decided that a strict interpretation of the statute was warranted. [40] As a result, that court concluded that its contractor was not entitled to any recovery under the contract because an illegal act, a violation of the HRRA, had taken place. [41] However, it also concluded that allowing quantum meruit recovery to the contractor for his work would not run afoul of the legislature's intent in creating the act. [42] Specifically, the K Miller court found that there was no reason to conclude that the legislature had intended to harshly punish offending contractors by removing all potential for recovery. [43] Rather, the court concluded, it was the legislature's intent to bar recovery on suspecton contracts and instead allow recovery based on the value of the services rendered. [44]

The Fandel court, however, strongly disagreed with the K Miller approach. [45] The court in Fandel simply refused to recognize that the HRRA could bar recovery on the underlying agreement between a contractor and a homeowner and therefore concluded that quantum recovery, as was prescribed in K Miller, was unnecessary. [46] It even went so far as to accuse the KMiller court of totally misreading the section that voids contracts and contends that it is clearly not intended to apply in these situations. [47] The Fandel court instead concluded that the HRRA enabled the attorney general to have the contractor fined for his failure to follow the brochure and work order requirements but that it did not negate the underlying agreement between the parties. [48] As such, Fandel similarly concluded that there was no legitimate reason to block the contractor's recovery given that it appeared legitimate, but instead concluded that the HRRA itself did not bar recovery in any way. [49]

Generally, it appears as though the K Miller court preferred to read the HRRA to be a block upon recovery whereas the Fandel court refused to do so. The court in Behl took a tempered approach, falling between the Fandel and K Miller courts. It concluded that the HRRA could be a bar on recovery, but that the contractor only needed to have had "substantial compliance"with the act and generally focused its analysis on whether the actions taken by the contractor in Behl generally met with the purpose of the statute. [50] The purpose in question, according to the court, was to improve communication between homeowners and contractors, reduce the amount of disputes, and promote good business practices. [51] An interesting consideration when studying Behl is that the homeowner in that case was a plumber himself and therefore was not an unsuspecting homeowner at all. [52]This therefore raised the question as to whether a lower standard could be applied, or maybe an exception even exist, when the homeowner is a fully informed party. Ultimately, the court concluded that because the homeowner had approached the contractor, had specifically requested the work, and because the two had negotiated every aspect of the work with proper expertise, the court further decided that the homeowner would not be especially prejudiced if the contractor were allowed recover. [53]  As such, the court concluded that the statutory requirements were substantially met and allowed recovery. [54]

Each of the three approaches is based in the idea that the contractor in that case was not the problem the legislature had intended. None of the three contractors at issue appeared to have padded their bills, and none attempted to coerce the homeowner into paying more than was truly owed. As a result, each of the three courts had to come up with a legal mechanism that could allow the contractors to recover what they were owed. Fandel took the most straightforward approach and decided that the HRRA did not bar recovery at all, despite any indication to the contrary. K. Miller went the opposite direction, and found that quantum meruit was the only way to recover. Finally, Behl went with a softer more subjective standard of questioning whether the intent of the statute has been met before allowing recovery. So which is the right answer? Each expands on the law as written for the purpose of allowing a just recovery for contractors, but each does so based on its set of facts and therefore, its own limited perspective.

The approach of Fandel is dangerous. By not barring recovery at all, the door is open for unscrupulous characters to take advantage of homeowners. In such a case, a fine hardly seems like the proper enforcement mechanism. The Fandel reading of the statute is dangerous because it offers little protection to homeowners in theevent that they are taken advantage of. Behl is equally troublesome because it doesn't recognize an illegal act the way Fandel and K. Miller do. As a result, Behlallows contractors that have substantially performed their duties under the HRRA to file for mechanics' liens, which would not be possible under the Fandel or K. Miller approaches. This is largely contrary to the typical wisdom of mechanics' liens, which require full and complete compliance with the law.[55]

The K. Miller view again approaches the problem knowing that the contractor should likely have some resort for recovery so as to disallow homeowners from attempting to get free services from forgetful contractors. However, K Miller choose to retain the protection for homeowners from reading a bar on recovery into the HRRA and instead chose to allow for another well guarded means of recovery: quantum meruit. This may be the wisest approach from an outcome-based perspective because quantum meruit allows any contractor to recover, but only for the worth of the services rendered, rather than what he had intended to charge for them. As such, homeowners do not get free home repair services, but they also cannot be overcharged. As such, they are more protected than under the Fandel or Behl approaches. For the homeowner, this is the best decision. Given the legislature's stated intent in the act to protect the homeowner, this further seems like it might be the best outcome.[56] However, as noted earlier, it is questionable whether this reading of the act is actually supported by the language of the statute.

V.         Recommendation

The obvious recommendation in this case is for someone to figure this out. The K. Miller decision has been vetted for an appeal and so a final decision on the interpretation might be forthcoming. Of course, the need for creating clear statutes is a second obvious take away from this analysis. This is a constant goal of the legal system, but the exact formula continues to elude our legislatures. Perhaps unfortunately, statutes require constant interpretation and often lead to unwanted results.

As a result, another question is raised about the way the courts choose to extend statutory law. In this case, each court had a similar outcome in mind that was arguably not the one prescribed by a close reading of the statutory language. Each of the courts interpreted the law differently and extended it in a different direction in order to secure the fair outcome. Yet, the question remains, which is the better approach? Should courts follow in the footsteps of K. Miller and sidestep the offending statute and rely on already existing common law? Should they take the Behl approach of liberally applying the intent of the statute instead of its text? Or is the straightforward method of Fandel, to simply change the then-accepted interpretation of the text, the best way to about it? In this case, opinions can vary, but the K. Miller approach seemed to cause the least damage and to be the one most in line with legislative intent. This story serves as an additional reminder of the importance of questioning the methods the courts use to force just results on the unintended consequences of statutory law. The need for stable and predictable application of the law further seems to call for a steadier judicial hand in applying these methods, for the efficient functioning of our systems.

VI.       Conclusion

Even a relatively simple law like the HRRA can lead to unintended results. When the courts attempted to stray from statute and apply judicial principles in hopes of attaining an outcome that is more just in the court's eyes, there can be more than one approach. Each of these approaches can come with its own consequences because each changes the law beyond just merely solving the initial problem presented to the court. In this case, trying to protect contractors who made unintentional mistakes in their paperwork from receiving no payment could have more significant effects on the protections that homeowners have against unscrupulous contractors who would take advantage of them. Such extension of the principles of law is a natural result of having a common law system. It is therefore incumbent upon both judges and the lawyers requesting relief before them to consider not only whether it is right to judicially change and extend the law, but also consider the method in which they do so, so as to avoid unnecessary damage.