Key Points

  • Idaho Code section 54-5217(2) bars a contractor that never registered under the Idaho Contractor Registration Act from suing in Idaho courts to recover for work performed while unregistered.
  • Equitable remedies such as unjust enrichment are available only for work a contractor performs after registering, and only if that work is severable from the unregistered work, as the court held in Genho v. Riverdale Hot Springs (2024) and applied in Farrell v. Whiteman and AED, Inc. v. KDC Investments.
  • The public-policy exception applied in Barry v. Pacific West Construction and Trees v. Kersey does not extend to suits against members of the public, whom the registration law is intended to protect.
  • The court affirmed summary judgment for homeowner Heather Bangeman but denied her appellate attorney fees under Idaho Code section 12-121 because the contractor's appeal raised valid arguments. She was awarded costs under Idaho Appellate Rule 40.

The Idaho Supreme Court ruled Tuesday that a Montana mold-remediation company that never registered as a contractor in Idaho cannot sue a Bonner County homeowner over a $44,451.36 bill, even though the record suggested she collected an insurance payment for the company's work and paid the company nothing.

The five justices unanimously affirmed the dismissal of an unjust enrichment suit brought by Samuel Lee Services LLC, which does business as South Pacific Environmental. Justice Zahn wrote for the court that the Idaho Contractor Registration Act, known as ICRA, "unambiguously precludes SLS' claim, and no equitable exception applies to the general rule that illegal contracts are unenforceable." Chief Justice Brody and Justices Bevan, Moeller and Meyer joined the opinion.

The decision limits the equitable route around the registration law to the one the court described in a 2024 ruling, Genho v. Riverdale Hot Springs. Under that rule, a contractor that registers partway through a project may seek payment in equity only for later work that can be separated from the unregistered work. The court also held that two older decisions relaxing the rule against enforcing illegal contracts, both involving disputes between businesses, do not reach suits against members of the public, whom the registration law is meant to protect.

According to the opinion, Tim Winters, a longtime professional acquaintance of company owner Gary Ashcraft, called Ashcraft shortly before Christmas. Winters said his daughter, Heather Bangeman, needed emergency mold remediation at her home in Bonner County. Ashcraft told Winters the company was not registered in Idaho. Bangeman and the company entered into a contract anyway, and the company met with an insurance field adjuster on Christmas Eve and began remediation several days after Christmas.

When Ashcraft contacted Bangeman's insurer about payment, he learned she had told the insurer not to issue a check to the company. Bangeman concedes she received the insurance payment, the opinion says, but she says she used it to pay another contractor to complete the same remediation and repairs. She contends the company failed to properly remediate the mold damage. She also says she was never told the company was unregistered.

Bangeman moved to dismiss, arguing that only a contractor registered in Idaho may sue in the state's courts to collect for contracting work. The company filed a declaration from Ashcraft, so District Judge Lamont C. Berecz treated the motion as one for summary judgment. The judge granted it, ruling that the statute's plain language barred the suit and that the cases the company cited did not apply.

On appeal, the company did not dispute that ICRA bars unregistered contractors from suing. It argued instead that the court has allowed unjust enrichment claims when noncompliance is nearly harmless and denying recovery would hand the property owner a windfall. Its brief quoted the district court's own observation that the company "appears to have acted in good faith and [went] above and beyond" for Bangeman. The company relied on Genho and four earlier decisions, Farrell v. Whiteman, Barry v. Pacific West Construction, AED, Inc. v. KDC Investments and Trees v. Kersey.

"SLS has misinterpreted our caselaw," Zahn wrote. "This Court has not held that an unregistered contractor may utilize equitable remedies to recover for contracting work performed while unregistered."

Genho involved a contractor that registered midway through a project. The court there allowed equitable claims for the work done after registration. Zahn wrote that this holding "necessarily implies that a contractor may not utilize equitable remedies to recover for work performed before registration." Farrell, which involved an out-of-state architect licensed partway through a condominium project, and AED applied the same rule, the court said.

Barry and Trees arose under Idaho's Public Works Contracting License Act, which has a similar ban on suits by unregistered contractors. In Barry, a 2004 decision, the court sent an unregistered subcontractor's unjust enrichment claim against a general contractor back to the trial court for further consideration. In Trees, a 2002 decision, it allowed an unregistered joint venturer's fraud claim against its partner to proceed, reasoning that the claim concerned wrongdoing that did not involve the general public.

Zahn wrote that those cases did not help the company. "Unlike the subcontractor that sued a general contractor in Barry, here, SLS sued a member of the public to whom it provided mold remediation services. This is the precise party ICRA is intended to protect," the opinion said. The court pointed to the statute's declaration that "the practice of construction in the state of Idaho affects the public health, safety and welfare of its citizens."

"The record on appeal suggests it performed work in good faith and on short notice to help the daughter of a longtime business associate," Zahn wrote, adding that the record also suggested Bangeman received her insurer's payment for that work and refused to pay. "These facts, however, do not permit us to ignore the unambiguous language of ICRA. SLS was an unregistered contractor and Bangeman was a member of the public seeking contractor services."

The court refused Bangeman's request for attorney fees on appeal. Idaho Code section 12-121 allows fees when an appeal was pursued frivolously, unreasonably or without foundation. The court found that the company "made valid arguments for the application of our previously recognized equitable exception" and called those arguments "well-taken in light of the facts contained in the record on appeal."

Davillier Law Group, LLC, of Sandpoint represented Samuel Lee Services, and Daniel Rodriguez argued. Randall C. Probasco, a Coeur d'Alene attorney, argued for Bangeman.

The ruling leaves the dismissal of the company's complaint in place. The court awarded Bangeman her costs on appeal as a matter of right under Idaho Appellate Rule 40.