Aesthetic Property Maintenance, Inc. v. Capitol Indemnity Corp
In Aesthetic Property Maintenance, Inc. v. Capital Indemnity Corp., 183 Ariz. 74, 900 P.2d 1210 (Ariz. 1995), a contractor originally had had a business license in January of 1990, and renewed it in December, 1990. It moved locations and included its new address with the renewal. However, in late 1991, the Registrar of Contractors erroneously sent the renewal notice of the contractor to the old address, and the contractor therefore did not receive the notice and did not renew its license which was suspended by operation of law in January, 1992.
In late June, 1992, the contractor discovered its suspension and immediately sought and received reinstatement. During the lapse, the contractor maintained its general liability insurance, worker's compensation insurance and contractor's licensing bond. Contractor performed and entered into contracts before and during its suspension and sought recourse by the courts to recover payment. The defense of non-licensure was raised.
After conducting a survey of the licensing statutes of other jurisdictions, the court concluded that the underlying theme is that substantial compliance is adequate when it satisfies the general policy or purpose of the statute. Id. at 1214.
The Arizona Supreme Court held an unlicensed contractor could seek compensation under A.R.S. 32-1153 by substantially complying with the licensing requirements. 183 Ariz. at 78, 900 P.2d at 1214.
In so holding, the court recognized substantial compliance satisfied the purpose of the statute, which was not to punish licensees who had failed to strictly comply with the statutory requirements, but "to protect the public from unscrupulous, unqualified, and financially irresponsible contractors." Id. at 77-78, 900 P.2d at 1213-14.
The Court held that substantial compliance was appropriate as to the particular statute at issue. Id.
Some of the factors it found relevant to the issue of substantial compliance was:
(1) whether the suspension of the contractor was by operation of law or for cause;
(2) whether the registrar's failure contributed to noncompliance;
(3) because the statute was designed for the protection of the public, was the public in fact protected during the time the license was suspended;
(4) did the contractor knowingly ignore the registration requirements;
(5) did the contractor, immediately upon learning of the suspension or other statutory noncompliance, apply to reactivate the license or remedy the statutory violation;
(6) did the failure to comply with the statute prejudice the party the statute seeks to protect. Id.
The Supreme Court of Arizona found each of the factors in favor of the contractor and that it had substantially complied with the particular licensing statute. Id.