Attorney General's Opinion
Attorney General, Richard Blumenthal
November 2, 2007
Department of Consumer Protection
1. Should statutory interest be assessed when a contractor enters into an agreement to repay the Home Improvement or New Home Construction Guaranty Funds pursuant to Sections 20-432, subsection (o), and 20-417i, subsection (n), of the Connecticut General Statutes?
2. If interest is not to be assessed in agreements to repay the guaranty funds, what should this Department do in regards to past agreements that assessed interest in accordance with the directives of the auditors?
We conclude that the answer to your first question is in the affirmative. Because of our conclusions regarding your first question, we do not believe it necessary for the Department of Consumer Protection (the “Department”) to revisit past agreements. The grounds for our conclusions are set forth in more detail below.
The Home Improvement Act “is a remedial statute that was enacted for the purpose of providing the public with a form of consumer protection against unscrupulous home improvement contractors….” Kronberg Brothers, Inc. v.
Both Acts provide for the creation and maintenance of “guaranty funds” (the “Funds”) operating under the supervision of the Commissioner of Consumer Protection.
To the extent you, as Commissioner, authorize a payment to a consumer from the Funds, you are subrogated to all of the rights of the consumer, up to the amount paid, plus reasonable interest.
The statutory provisions governing voluntary agreements are the focus of your request. You state that the Department “believes that these statutes can be interpreted as requiring statutory interest only for orders issued by the Commissioner after notice and hearing and that interest [cannot] be imposed against a contractor who enters into a repayment agreement.” The Department’s interpretation is based on the fact that while the statutory language providing for administrative sanctions against contractors states specifically that interest shall be assessed, the provisions authorizing repayment agreements contain no such express language.
We conclude that the Department may require contractors who enter into repayment agreements to pay statutory interest on outstanding balances. Our conclusion is grounded in the plain language of the Acts, supported by the Acts’ remedial purpose, and reinforced by long-accepted principles governing the voluntary settlement of disputes. We address each point in turn.
“The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes.”
The difference in the language discussing administrative orders and repayment plans does not compel a different result. We note that the legislature has used various approaches in the Acts to address the issue of contractor liability to the Funds. For example, section 20-417i(l) states that “the commissioner shall be subrogated to all of the rights of the owner up to the amount paid plus reasonable interest.” (Emphasis added.) Note that the paragraph uses the term “reasonable” interest as opposed to “statutory” interest. Section 20-417i(n), by contrast, provides that a contractor whose certificate has been revoked may not receive a new or renewed certificate until he has repaid the Fund in full, plus interest “at a rate to be in accordance with section 37-3b.” As previously discussed, the statutory language dealing with repayment agreements uses a third formulation when it states that the Commissioner may allow a contractor “to repay the guaranty fund in full in the form of periodic payments over a set period of time.”
Read separately, these four provisions appear to impose different requirements on offending contractors with respect to the payment of interest. Read together, as they must be however, it is clear that the General Assembly intended that a contractor not only reimburse the Funds for the principal amounts paid to his customers, but also that he compensate the Funds for the use of such monies by paying interest. Only in this fashion can the Funds truly be repaid in full.
Our interpretation is also consistent with the Acts’ remedial purpose. The Funds provide some measure of recovery to consumers injured by contractor misconduct. Opinions, Conn. Atty. Gen. 92-017, supra. See Conn. Gen. Stat. §§ 20-417i(j)(payment to eligible consumers an each claim capped at $30,000) and 20-432(k)(maximum payment set at $15,000 per claim). Even with the caps on consumer claims, the General Assembly contemplated that, at times, the Funds might not contain sufficient funds to satisfy all claims. Under those circumstances, the Commissioner may authorize reduced payments to consumers “[i]n order to preserve the integrity” of the Funds. Conn. Gen. Stat. § 20-417i(j), 20-432(k). Once sufficient monies are deposited into the Funds, the Commissioner shall act to satisfy outstanding claims. Conn. Gen. Stat. §§ 20-417i(k) and 20-432(l).
The money required to underwrite the Funds comes in part from the amounts recovered from contractors; thus the collection of contractor liabilities is integral to the Funds’ viability. Since contractor payments are so important to the Funds, it stands to reason that the Department should treat such liabilities in a consistent manner, regardless of whether the recovery is realized through execution on assets such as bank accounts or equipment, a lump sum payment made pursuant to an administrative order, or periodic installments under a repayment agreement.
Even in the absence of the statutory authorization contained in the Acts, as Commissioner you can insist that a contractor consent to pay interest as one of the negotiated terms in the repayment agreement. You have the discretion to permit or refuse such arrangements, Conn. Gen. Stat. §§ 40-417i(n) and 20-432(o), and thus they are, by their nature, settlement agreements. “When parties agree to settle a case, they are effectively contracting for the right to avoid a trial.” Audubon Parking Assoc. L.P. v. Barclay and Stubbs, Inc., 225 Conn. 804, 812, 626 A.2d 729 (1993).
In this context, by entering into a repayment agreement, a contractor avoids the threat of litigation brought by the Attorney General or administrative proceedings initiated by the Department. He is further able to secure a new or renewed certificate, allowing him to work lawfully at his profession and to satisfy his debt to the Fund over time. The Commissioner for his part obtains greater assurances that the Fund will be made whole, while avoiding the need to devote resources to more formal enforcement measures. Such a result is entirely consistent with the established public policy favoring the negotiated settlement of disputes, regardless of whether those disputes arise in the judicial or administrative arenas. See Schroeder, et al. v. Trianulum Assoc., et al., 259 Conn. 325, 341, 789 A.2d 459 (2002) (worker’s compensation commissioner has inherent authority to approve compromise of compensation claims).4
Based on the foregoing, we conclude that the Department may require contractors to pay statutory interest as part of repayment agreements accepted by you pursuant to Conn. Gen. Stat. §§ 20-417i(m) and 20-432(o). Therefore, the Department need not revisit any prior repayment agreements where the contractor has been assessed interest.
Very truly yours,
1 Section 20-417i(n) of the General Statutes provides
If the commissioner orders the payment of an amount as a result of a claim against a new home construction contractor, the commissioner may, after notice and hearing in accordance with the provisions of chapter 54, revoke the certificate of such contractor and such contractor shall not be eligible to receive a new or renewed certificate until such contractor has repaid such amount in full, plus interest from the time such payment is made from the New Home Construction Guaranty Fund, at a rate to be in accordance with section 37-3b, except that the commissioner may, in the commissioner's sole discretion, permit a new home construction contractor to receive a new or renewed certificate after such contractor has entered into an agreement with the commissioner whereby such contractor agrees to repay the fund in full in the form of periodic payments over a set period of time. Any such agreement shall include a provision providing for the summary suspension of any and all certificates held by the new home construction contractor if payment is not made in accordance with the terms of the agreement.
If the commissioner orders the payment of an amount as a result of a claim against a contractor, the commissioner may, after notice and hearing in accordance with the provisions of chapter 54, revoke the certificate of the contractor and the contractor shall not be eligible to receive a new or renewed certificate until he has repaid such amount in full, plus interest from the time said payment is made from the guaranty fund, at a rate to be in accordance with section 37-3b, except that the commissioner may, in his sole discretion, permit a contractor to receive a new or renewed certificate after that contractor has entered into an agreement with the commissioner whereby the contractor agrees to repay the guaranty fund in full in the form of periodic payments over a set period of time. Any such agreement shall include a provision providing for the summary suspension of any and all certificates held by the contractor if payment is not made in accordance with the terms of the agreement.
3 The primary difference between the Acts is that the Home Improvement Act includes a provision invalidating contracts which do not comply with its terms;
4 Aside from the requirement that a contractor’s certificate be summarily suspended for nonperformance, the Acts do not identify what must be included in a voluntary agreement. We nevertheless conclude that the ability to negotiate specific terms and conditions is inherent in the power to make such agreements. Schroeder, et al.