ASHMANN-GERST, Acting P. J. —
This appeal follows a bench trial in which the trial court found that a general contractor, appellant Jeff Tracy, Inc., doing business as Land Forms Construction (Land Forms), did not have a valid license while performing work on a project for respondent City of Pico Rivera (the City). The court thus ordered Land Forms to disgorge all compensation paid to it by the City — the amount of $5,487,370.05. Land Forms contends the judgment must be reversed because the trial court improperly denied it a jury trial on the issues of whether it had a valid license and the amount of disgorgement. We agree that Land Forms was entitled to a jury trial on these issues, and therefore reverse the judgment. However, we find that Land Forms is not entitled to any apportionment as a matter of law.
In 2011, the City bid out a public works project for the renovation of a city park known as Rivera Park (the Project). The renovation included landscaping, irrigation, and the construction of baseball fields, bleachers, a backstop, a children's playground, and electrical and concession buildings. The "Notice Inviting Bids" for the Project specified that "Each bidder shall possess at the time this contract is awarded a Class `A' license (General Engineering), pursuant to Public Contract Code Section 3300." Land Forms submitted a bid, stating that it had a class A license and a class C-27 license (general landscaping).
On December 18, 2013, Land Forms filed a first amended complaint (FAC) against the City alleging a single cause of action for breach of contract. Land Forms alleged that the City improperly withheld $518,154.73 in liquidated damages. Land Forms sought general damages "in excess of $1,000,000."
The City filed an answer, including a general denial.
On April 30, 2014, about a month before an estimated 25-day jury trial was scheduled, the City filed a motion for leave to file a cross-complaint seeking disgorgement of all the money it had paid to Land Forms pursuant to Business and Professions Code section 7031, subdivision (b),
The trial court granted the motion five days before trial. Land Forms declined to continue the trial and filed an answer to the cross-complaint.
In its trial brief, the City urged the trial court to proceed by holding a bench trial on the issue of the validity of Land Forms's class A license, since resolution of the issue would be dispositive on both Land Forms's FAC and the City's cross-complaint. Land Forms objected, insisting it had a right to a jury trial. Pursuant to Code of Civil Procedure section 597, the trial court held a bench trial on May 29 and 30, 2014, on the issue of whether Land Forms held a valid class A license during the Project.
The City presented documentary evidence and witness testimony. The City's evidence showed that Land Forms obtained a class A license from the Contractors' State License Board based on the representations in both its
Mr. Nale, however, testified that he was never an employee of Land Forms. He was supposed to have been designated instead as a responsible managing officer (RMO). He received stock worth 20 percent of Land Forms, but this stock had to be returned upon demand. He was paid by check $2,500 per month, which was eventually reduced to $1,000 per month. He could not recall if the checks were on Land Forms's bank account. No taxes were withheld from the money he received, he was not aware of any payroll records regarding his pay, and he never received 1099 or W-2 forms from Land Forms. Land Forms never provided him with an office, computer, e-mail address or business cards. He never saw the Project plans. He visited the Project site three times. He could not name a single subcontractor on the Project. He did not know if the Project had a superintendent. And he could not recall giving any direction or advice to Land Forms as to what needed to be done on the Project.
At the close of evidence, the trial court ruled in favor of the City. In its statement of decision, the court set forth numerous reasons for its conclusions that "James Nale was neither a Responsible Managing Officer, nor a Responsible Managing Employee" of Land Forms during its work on the Project, and that Land Forms had failed to carry its burden of proving that it was duly licensed with a valid class A license. The court also concluded that Land Forms had not demonstrated substantial compliance with the licensing requirements under section 7031, subdivision (e). Accordingly, Land Forms was barred from bringing its breach of contract claim against the City and was required to disgorge all compensation the City paid Land Forms for work on the Project.
After phase one, the trial court noted that an issue remained regarding the amount of disgorgement, which had not been put into evidence. Although Land Forms had not previously contested the amount paid by the City, it refused to stipulate to any amount. It also argued for the first time that the trial court should make an apportionment of (or reduction in) the disgorgement amount for any portion of the work on the Project that Land Forms could have properly performed using only its C-27 landscaping license. Land Forms demanded a jury trial on these issues, which the court refused. The court asked for further briefing and set a briefing schedule.
Before phase two of the evidentiary hearing could proceed, Land Forms filed a petition for writ of mandate to grant it a jury trial on the licensing issues that had already been decided and requested a stay of all proceedings in the trial court. On June 18, 2014, we stayed proceedings in the trial court until further order. On July 15, 2014, we denied Land Forms's petition for a writ of mandate and dissolved the stay. The next day, Land Forms filed a petition for review with the California Supreme Court and requested another stay. The California Supreme Court denied the petition and the stay request. Phase two of the evidentiary hearing/bench trial was reset for August 20, 2014.
On August 20, 2014, the City introduced further documentation establishing the amount of compensation it had paid to Land Forms for its work on the Project, and also introduced contract documents showing that the City required the contractor for the project to have a class A license. This evidence was uncontested.
After hearing the evidence and argument from the parties, the trial court entered a judgment in the City's favor against Land Forms. The judgment stated that Land Forms would take nothing on the FAC, which was dismissed in its entirety and with prejudice, and awarded the City the amount of $5,487,370.05 as disgorgement. Land Forms filed this appeal.
Land Forms contends that the trial court abused its discretion in denying it a jury trial, and instead holding a bench trial, on the issues of whether Land Forms held a valid class A license during its work on the Project and the amount of disgorgement.
A trial court abuses its discretion when it "`exceeds the bounds of reason'" after considering all the circumstances before it. (Denham v. Superior Court (1970) 2 Cal.3d 557, 566 [86 Cal.Rptr. 65, 468 P.2d 193].) A trial court therefore abuses its discretion when it transgress the confines of the applicable principles of law. (Horsford v. Board of Trustees of California State
The trial court denied Land Forms's request for a jury trial on the issue of whether it held a valid class A license, and instead conducted a bench trial on the issue, pursuant to Code of Civil Procedure section 597. This statute provides in part: "When the answer ... sets up any other defense not involving the merits of the plaintiff's cause of action but constituting a bar or ground of abatement to the prosecution thereof, the court may, either upon its own motion or upon the motion of any party, proceed to the trial of the special defense or defenses before the trial of any other issue in the case, and if the decision of the court, or the verdict of the jury, upon any special defense so tried ... is in favor of the defendant pleading the same, judgment for the defendant shall thereupon be entered and no trial of other issues in the action shall be had unless that judgment shall be reversed on appeal or otherwise set aside or vacated ...." (Code Civ. Proc., § 597.)
By statute, a contractor seeking damages must allege and prove it held a valid license before it can prosecute any claim for damages. Section 7031, subdivision (a) states: "Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought by the person ...." (Italics added.) Section 7031, subdivision (d) places the burden of proof on the contractor: "When licensure or proper licensure is controverted, the burden of proof to establish licensure or proper licensure shall be on the licensee." (§ 7031, subd. (d); see Advantec Group, Inc. v. Edwin's Plumbing Co., Inc. (2007) 153 Cal.App.4th 621, 626-630 [63 Cal.Rptr.3d 195]
A variety of activities can constitute direct supervision and control, including "`one or any combination of the following activities: supervising construction, managing construction activities by making technical and administrative decisions, checking jobs for proper workmanship, or direct supervision on construction job sites.'" (Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1299 [28 Cal.Rptr.3d 92], quoting Cal. Code Regs., tit. 16, § 823, subd. (b).) All of these are factual questions that should have been submitted to a jury for determination.
Accordingly, the trial court should have granted Land Forms's request to have a jury determine whether Land Forms held a valid license.
Land Forms argues that the amount of disgorgement should also have been tried to a jury rather than the trial court.
The City counters that the issue of disgorgement was a matter of law to be decided by the trial court. Specifically, the City asserts that the amount of disgorgement (i.e., the compensation it paid to Land Forms for its work on the Project) was undisputed because Land Forms had agreed to the amount in its verified interrogatory responses, and thus there was no need to waste a jury's time on the issue. Rightly or wrongly, Land Forms did not stipulate to the amount paid to it by the City. Because the amount of disgorgement was an element to be proved by the City on its cross-complaint, Land Forms was entitled to require the City to meet its burden of proof on the amount of
This conclusion comports with public policy. As stated in Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 942 [29 Cal.Rptr.2d 669]: "The Legislature has determined that ultimate responsibility for construction work must rest with a licensed contractor — in this case, a licensed general engineering contractor — who has demonstrated the requisite competence in the construction business. This policy ensures that all subcontractors and materialmen on a project will be answerable to and directed by someone whose knowledge and experience meet uniform requirements. In addition, this policy protects consumers of the contractor's services by making all persons who are responsible for construction projects subject to the regulatory powers of the CSLB [Contractors' State License Board]."
As noted, section 7031, subdivision (b) allows a person who utilizes the services of an unlicensed contractor to bring an action "to recover all compensation paid to the unlicensed contractor for performance of any act or contract." (§ 7031, subd. (b).) This section was added to the Contractors' State License Law (§ 7000 et seq.) in 2001 to provide a "sword" to consumers against unlicensed contractors. (White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 519 [100 Cal.Rptr.3d 434].) Since that time, the word "all" in the statute has been interpreted to mean just that, all compensation without any offsets. (See White v. Cridlebaugh, supra, 178 Cal.App.4th at pp. 520-521 ["We conclude the authorization of recovery of `all compensation paid to the unlicensed contractor for performance of any act or contract' (§ 7031[, subd.] (b), italics added) means that unlicensed contractors are required to return all compensation received without reductions or offsets .... [¶] Our interpretation... is consistent with the usual meaning of the word `all,' which signifies the whole number and does not admit of an exception or exclusion not specified. [Citation.] In short, `all compensation paid' does not mean all compensation less reductions for offsets."]; Alatriste v. Cesar's Exterior Designs, Inc. (2010) 183 Cal.App.4th 656, 672-673 [108 Cal.Rptr.3d 277] [same].)
"[T]he legislative committee reports show that, in enacting section 7031[, subd.] (b), the Legislature was specifically aware that permitting reimbursement may result in harsh and unfair results to an individual contractor and could result in unjust enrichment ..., but nonetheless decided that the rule was essential to effectuate the important public policy of deterring licensing violations and ensuring that all contractors are licensed." (Alatriste v. Cesar's Exterior Designs, Inc., supra, 183 Cal.App.4th at p. 673.) This is especially true where, as here, a public works contract is at issue.
Thus, in the event it is determined upon retrial that Land Forms must reimburse the City, Land Forms is not entitled to any apportionment or offsets.
The judgment is reversed. The parties are to bear their own costs on appeal.
Chavez, J., and Hoffstadt, J., concurred.