McKinstry Co. v. Smith

Citations: 85 Or. App. 607; 738 P.2d 203Docket: A8312-07931; CA A31930

Court: Court of Appeals of Oregon; June 10, 1987; Oregon; State Appellate Court

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Plaintiff appealed the trial court's dismissal of its breach of construction contract complaint, which was dismissed for lack of sufficient ultimate facts. The key issue involves the applicability of amendments to ORS chapter 701 to the plaintiff's claim, as the complaint was filed after these amendments became effective, though the contract was executed and work performed prior to that date. The complaint, filed on December 30, 1983, alleges that the defendant failed to pay for labor and materials related to a construction contract dated February 19, 1981, for improvements to the 'Thunderhead Lodge' condominium. The plaintiff claimed it was not subject to registration requirements under ORS chapter 701 because the structure was not residential. The defendant argued that ORS 701.065 barred the plaintiff from bringing the action due to lack of registration. The trial court agreed and ruled in favor of the defendant. 

However, the appellate court found that the plaintiff had stated a valid claim for relief. At the time of contract execution, ORS 701.065 prohibited unregistered builders from seeking compensation for work governed by the chapter. The 1983 amendment refined this to restrict actions concerning residential structures unless builders were registered at both the time of bidding and throughout the work. Definitions in ORS 701.005 indicated that 'builder' refers to those engaged in construction activities, and 'structure' specifically denotes residential buildings under certain conditions. The court noted that the only definition of a residential structure included in ORS 701.005(3) outlines various types of residences and multiunit buildings. The amended statute allows courts discretion not to apply these provisions if it would cause substantial injustice to an unregistered builder. Ultimately, the appellate court reversed the trial court's decision, indicating that the plaintiff's claim could proceed.

The statutory framework outlined in ORS 701.005 to ORS 701.235 mandates that individuals classified as builders must register with the Builders Board, as specified in ORS 701.055. Prior to the 1983 amendments, registration was necessary before bidding or contracting for work on structures defined as residential buildings. The 1983 amendments narrowed this requirement to residential structures specifically, acknowledging that failure to register does not invalidate contracts. However, unregistered builders are prohibited from filing liens or pursuing actions in state court, as well as filing claims with the Board under ORS 701.065 if not compensated.

The plaintiff was required to register due to the condominium being classified as a residential structure under the pre-1983 definition. The 1983 legislative changes reflected a decision to limit the registration requirement's applicability to residential structures, excluding larger multiunit buildings from this obligation. Legislative discussions indicated a desire to refine the definition to protect owners contracting for smaller residential projects, while recognizing that unregistered builders could face unfair outcomes under the law. The amendments were deemed remedial, not retroactive, allowing the new definition to apply to post-amendment actions. Consequently, the court concluded that the legislative intent aimed to provide a remedy for builders affected by the changes, emphasizing that denying a remedy under the revised definition would contradict the benevolent goals of the statutory scheme. The court's decision to reverse and remand underscores the importance of these amendments in ensuring fairness for builders while maintaining protections for homeowners.

The court assumes the truth of the facts alleged in the complaint, referencing *Sommerfeldt v. Trammel* and *Parsons v. Henry*. The case was argued on April 19, 1985, following which the defendant filed for bankruptcy, leading the court to stay its decision under ORAP 12.35. The bankruptcy court lifted the stay on July 15, 1986, and the appeal resumed on November 10. Thunderhead Lodge is not classified as a 'structure' under the relevant definition, as it is a multi-unit residential building with more than four units. The definition is deemed applicable even if the builder is unregistered, supported by enforcement provisions that prohibit unregistered builders from claiming breach of contract for residential structures. The defendant contends that legislative history indicates the amendments were not intended to apply retroactively, particularly regarding the amendment to ORS 701.065, which allows courts to refuse enforcement if it would cause substantial injustice. Although the plaintiff attempted to validate prior contracts through House Bill 2145 in 1983, the bill did not pass, leaving the validity of the contract prior to the amendments unclear. Testimony from the Senate Committee indicated that the amendments would only affect future claims and that failing to include a retroactivity clause would limit the plaintiff's recourse. However, these legislative comments pertain specifically to ORS 701.065 and do not influence the court's opinion concerning ORS 701.005(3). The court does not need to address the retroactivity of ORS 701.065 given the case's resolution.