BEDSWORTH, Acting P. J. —
In their rock-and-roll standard, "End of the Innocence," Bruce Hornsby and Don Henley note that "The lawyers dwell on small details." That's true. We have to. The devil isn't the only resident in the details; sometimes truth and fairness lodge there as well.
In this case, we address a "detail" that was lost or hidden and resulted in what we consider an injustice. Fortunately, as is usually the case, painstaking attention to other small details enables us to correct this injustice. If you dwell on small details with an eye to fairness, the law works well.
Here, a homeowner sued a general contractor for allegedly shoddy and incomplete work in connection with a major home remodeling contract. The homeowner's complaint also contained a cause of action against the general
For his part, the general contractor responded with a cross-complaint against the homeowner for unpaid work. The cross-complaint included a copy of their written contract which showed the contractor's license number. To that, the homeowner simply filed a general denial of all allegations.
When the case came to trial, the homeowner — contrary to the applicable local rule requiring plaintiffs to identify all controverted issues — did not identify licensure as a controverted issue. The contractor's attorney seeing no issue, did not obtain a verified certificate from the Contractors' State License Board (the License Board) showing the contractor was licensed at all times during his performance. But when the contractor was about to rest his case on the cross-complaint, the homeowner's attorney made a motion for nonsuit based on the absence of such a verified certificate as required under Business and Professions Code section 7031, subdivision (d), when the issue of licensure is "controverted."
The trial judge was also surprised the licensure issue was raised. He had not been expecting the issue either. He deferred immediate ruling on the homeowner's nonsuit motion. As the contractor learned to his chagrin, it presently takes at least six days to obtain a verified certificate from the License Board even if one drives overnight to Sacramento to pick it up in person. While the contractor was eventually able to obtain a verified certificate of licensure from the License Board, he could not do so until after the close of the trial, in which he prevailed on his claim for unpaid work from the homeowner. Because no certificate of licensure could be produced, the trial judge reluctantly granted the homeowner's nonsuit motion, by then denominated a motion for judgment notwithstanding the verdict (JNOV), and this appeal ensued.
We reverse the judgment in favor of the homeowner, with instructions to the trial judge to grant judgment in favor of the general contractor as against
This litigation arises out of a 2010 Laguna Hills home remodel undertaken by Art Womack. Womack hired a general contractor named Aztec Sunpower (Aztec).
Womack filed first in January 2011, his complaint alleging breach of contract by Aztec. His first amended complaint, filed in July 2011, alleged Aztec had done an incomplete and sloppy job and thus forced him to incur extra expenses to make things right.
In his first amended complaint, Womack alleged twice that Aztec "at all times" relevant to the suit, "acted in the capacity as a licensed contractor." The first time was in the standard list of parties often given at the beginning of a complaint. The second time was in connection with a fourth cause of action "on contractor's license bonds" against American Contractors License Indemnity Company (American Contractors). In that cause of action Womack alleged that "upon application" by Aztec "to the Registrar of Contractors of the Contractor's State License Board of the State of California for a contractor's license or renewal thereof, and in accordance with the provisions of section 7071.6 of the Business and Professions Code of State of California," Aztec had "filed with the Registrar bonds issued by" American Contractors, "bond number 1000112982 in the sum of $12,500, conditioned upon full compliance" by Aztec "with all the provisions of Division 3, Chapter 9, of the Business and Professions Code of the State of California inuring to the benefit of any person damaged as a result of a violation of the Chapter by the Defendant's licensees." The pleading was unverified.
In April 2012, both Womack and Caballero, represented by the same law firm, filed answers to Aztec's cross-complaint. Each answer generally denied all of Aztec's allegations, which necessarily included the allegation Aztec had been a licensed contractor at all relevant times, a small detail that went unnoticed.
Also in April 2012, Caballero filed his own cross-complaint against Aztec, alleging damages arising out of its breach of contract. In contrast to Womack's earlier complaint, however, Caballero's cross-complaint did not allege Aztec was at all times a licensed contractor. Caballero merely alleged Aztec had "represented" itself to be a contractor.
Three days before a September 30, 2013 trial date, Womack and Caballero's law firm filed a "joint list of stipulated facts and controverted issues," though calling it either "joint" or a "list" would be a stretch. It was not joint — certainly not in the sense of reflecting a document agreed to by adversarial parties. The document was neither signed by Aztec's counsel nor, as far as we can ascertain, ever served on her. Nor was it a list. It merely stated the parties had stipulated a certain surety bond company had issued a bond to Aztec for a certain period and then said "All other issues are controverted," without identifying any of them.
The trial was continued, and on November 5, just before trial was about to begin, counsel for American Contractors (Aztec's bonding agent) and Womack announced in open court (with counsel for Aztec present) that they had a settlement. Counsel for Womack articulated its terms for the record: They agreed that American Contractors had "issued surety bond number 1000112982 in the amount of $12,500 to DA Lovell Corp., which does business as Aztec Sunpower. [¶] The bond was in effect from February 10th — yeah, February 5th, 2010 through March 23rd, 2012. [¶] American Contractors Indemnity Company agrees that if plaintiff Art Womack obtains a net recovery of at least $12,500 for David Angus Lovell Corp. [doing business as Aztec], that American Contractors Indemnity will pay to Art Womack up to $12,500 from the penal sum of the bond. [¶] If the net is less than $12,500, American Contractors Indemnity shall only be obligated to pay the net recovery, not to exceed $12,500. [¶] And the parties agree that the court will retain jurisdiction pursuant to CCP 664.6 to enforce this settlement."
The trial judge was taken aback. He reminded defense counsel he had asked at the "outset" of the case whether there were any "dispositive affirmative defenses," and had heard not a word about the licensure issue. The short colloquy ended with the judge deciding to delay ruling on the matter until sometime after the end of the day.
That day Womack and Caballero's counsel filed written briefing on the subdivision (d) issue. It had obviously not been worked up ad hoc over the lunch hour. The gravamen of the briefing was (1) Aztec's licensure had been "controverted" by virtue of the general denials filed by Womack and Caballero to Aztec's cross-complaint; (2) under section 7031, subdivision (d), proof of licensure may be shown only by a verified certificate of licensure from the License Board; (3) Aztec had failed to produce such a verified certificate (the implication was that by this late date in the trial, Aztec was not going to be able to produce such a verified certificate in time);
The next day, November 7, Aztec rested its case on the liability phase of trial. It is an interesting, but now academic, question whether, under any circumstance, including optimal funding of the License Board in the best of all possible worlds, any contractor will ever be able to procure a verified certificate of licensure overnight. It certainly did not happen here. Rather, immediately after Aztec rested, Womack and Caballero's counsel made an oral motion for nonsuit based on the brief they had filed the previous day.
It appears the trial judge had not yet had time to read that brief. So he denied Womack and Caballero's counsel's request to have him rule on the issue "immediately."
Phase two, the trial on damages, remained so the jury was not dismissed. The next day, November 8, outside the presence of the jury, the judge entertained the motion. By this time there had been oral testimony Aztec was fully licensed, but there was no verified certificate of licensure. Aztec's lawyer contended there had been no need to produce such a certificate, pointing to Womack's first amended complaint, in which Womack "admitted in his pleading that [Aztec] was a licensed contractor." The trial judge understood the point to be that Womack had made a judicial admission Aztec was so licensed. Womack and Caballero's counsel countered by citing the Advantec case. While the trial judge had read the case a couple of weeks prior to the trial, he had not read it for that day, so he again deferred ruling on the motion.
Four days later, on November 12, the jury returned a verdict on the damages issue in favor of Aztec: Womack owed Aztec $13,100, Caballero owed Aztec $4,340. Aztec's counsel told the judge she had ordered a verified certificate from the Licensing Board, but it was not ready yet. The trial judge correctly guessed Womack and Caballero's position would be that it made no difference. As he anticipated, in open court, Womack and Caballero's response to the fact that Aztec was now shown to have been licensed all along was, "Advantec case says that he wins anyway."
That day Aztec's counsel filed opposition to Womack and Caballero's earlier brief, again asserting Womack had made a judicial admission that Aztec was licensed. After a little more discussion, the parties agreed to resume argument two days later, on November 14. When the parties met again on November 14, the trial judge had made up his mind to grant the motion, based on Advantec.
Aztec's counsel once again asserted the argument Womack had made a judicial admission Aztec was "validly licensed." But the trial judge expressed his concern that, "there's no case on point in which that is recognized as an exception to the statute and the Advantec case." He added, "I just don't see any trend here that suggests that on my level, I should do that," though he added he was "rather sympathetic to the argument." The judge granted the motion, now effectively a motion for JNOV.
Aztec was not quite yet ready to throw in the towel. Someone drove to Sacramento on Aztec's behalf to pick up the verified certificate ordered earlier from the Licensing Board, and, on November 22, 2013, Aztec brought
It did not work. The trial judge signed a judgment in favor of both Womack and Caballero. A notice of appeal was timely filed.
The best illustration of this possibility — the spectre that haunted the trial judge here — is Advantec, supra, 153 Cal.App.4th 621. There a developer hired a plumber, then terminated the plumber mid-job. The developer sued for breach of contract. (See id. at p. 625.) The plumber cross-complained for breach of contract, and of course alleged — it had to
The result was reminiscent of Sartre's play No Exit. There was no escape for the hopeless protagonist. The licensure issue could not be described as "new matter" requiring articulation in an affirmative defense (Advantec, supra, 153 Cal.App.4th at pp. 627-630), and, under an abuse of discretion standard, the denial of the continuance could hardly be said to be unreasonable, especially since the nonsuit motion came near the end of a jury trial that had already consumed four days (see id. at p. 631).
But the result in Advantec — and we do not disagree with the result or reasoning of the decision — is not without irony. The legislative history of section 7031, indicates that the potential within subdivision (d) to mislead licensed contractors into thinking no verified certificate was required was part of an effort by the Legislature to prevent licensed contractors from needlessly losing cases because a verified certificate could not be procured in time. That is our case.
The history of subdivision (d) is a history of a pendulum swinging, as the great legal philosopher Roger Miller would say, "like a pendulum do." Section 7031 has been around since 1939, when it was enacted as part of a comprehensive scheme to license contractors. (See Stats. 1939, ch. 37, § 1, pp. 381-395.) In its original incarnation there were no subdivisions. It simply said that no person could "bring or maintain" any action for "any act or contract for which a license is required" without "alleging and proving" he,
A big change came in 1989, in the form of Assembly Bill No. 841 (1989-1990 Reg. Sess.; Assembly Bill 841). The sponsor of Assembly Bill 841 was the License Board itself, and the board's main purpose was to close what the License Board considered the "loophole" of the judicially recognized substantial compliance doctrine, which allowed for the possibility of recovery for some unlicensed work.
But as written in the 1989 version of the statute, subdivision (c) had no "if controverted" clause. Rather, the requirement of a verified certificate was absolute. Contractors had to have a verified certificate of licensure to prove licensure, and they had to prove licensure to recover. The effect was that a verified certificate was required in every case. The theory behind the new need for a verified certification was tied to the overall purpose of Assembly Bill 841, which was to eliminate the judicial doctrine of "substantial compliance." The point of a verified certificate was to provide a bright-line criterion to verify licensure; without such a bright line it was feared courts might find a way to relapse into their old ways of excusing some unlicensed activity.
But it did not take long for the doctrine of unintended consequences to rear its ugly head. By 1992, the need to obtain a verified certificate in every case
The License Board, swamped by having gotten what it wished for in 1989, again sponsored an amendment to section 7031 in 1992. This was Assembly Bill No. 2413 (1991-1992 Reg. Sess.; Assembly Bill 2413), which headed in the other direction. Assembly Bill 2413 was intended to ameliorate the previously absolute requirement for a certificate by adding an "if controverted" clause to what was still at the time an absolute requirement for a certificate under subdivision (c). The License Board readily acknowledged that too many licensed contractors had already lost their cases because they could not obtain a verified certificate in time.
But there were still two major changes to be made before the verified certificate subdivision reached today's version: In 1993, Assembly Bill No. 628 (1993-1994 Reg. Sess.; Assembly Bill 628) clarified that contractors still had the burden of proving licensure and there was no need for persons they were suing for compensation to produce the verified certificate. (See
Neither of the two main California Supreme Court cases explicating section 7031 over the last 25 years, Hydrotech, supra, 52 Cal.3d 988 and MW Erectors, supra, 36 Cal.4th 412, have had occasion to confront the verified certificate provision in what is now subdivision (d). Hydrotech was decided in the wake of the 1989 anti-substantial compliance amendment, and decided that an unlicensed contractor could not even sue for fraud as a way around the plain terms of section 7031, subdivision (a). The Hydrotech court noted the policy against any "compensation for unlicensed contract work" was intended to outweigh "`any harshness between the parties,'" so even a party who falsely promises to pay an unlicensed contractor cannot be liable to that contractor. (Hydrotech, supra, 52 Cal.3d at p. 995, italics omitted.) Along the way — as befits a case decided in the aftermath of the 1989 amendments to section 7031 — Hydrotech made it clear that substantial compliance was outside the pale of section 7031. (See Hydrotech, supra, at pp. 995-996.)
Like Hydrotech, MW Erectors was focused on subdivision (a) of section 7031, which has always been the core of section 7031. Subdivision (a) has always provided that a contractor must be licensed at all times during performance, and MW Erectors is a set of variations on that theme. There, a steel contractor was not licensed at the time the contract was made, or when performance was begun, but did obtain a license about two weeks after performance began and most of its performance occurred while it was licensed. (See MW Erectors, supra, 36 Cal.4th at p. 420.) The intermediate appellate court read subdivision (a) to allow the steel contractor to recover for work done after it had obtained a license, but the Supreme Court concluded the actual language of subdivision (a) requires licensing at all times during performance and the Legislature did not intend to allow any recovery without licensure at all times during performance. (36 Cal.4th at pp. 424-430.)
There were no judicial admissions in the MW Erectors case for the court to confront. There was a judicial estoppel argument, based on the idea that in
The MW Erectors court noted that neither the cross-complaint filed by the specialty metal contractor against the owner and its general contractor, nor its mechanic's lien, contained any mention of the steel contractor's work. However, in any event, said the high court, the steel contractor could not "invoke judicial estoppel for the simplest of reasons," namely, subdivision (a) expressly precludes any action in law or equity. (MW Erectors, supra, 36 Cal.4th at p. 423.) In that regard, the MW Erectors court quoted Hydrotech for the proposition that the "bar of section 7031(a) applies `[r]egardless of the equities.'" (MW Erectors, supra, 36 Cal.4th at p. 423, quoting Hydrotech, supra, 52 Cal.3d at p. 997.) Thus the MW Erectors court concluded, citing subdivision (a), that acceptance of MW's judicial estoppel argument would mean that MW could "recover compensation for work that required a license, even if MW was not licensed `at all times' during the performance of that work. (§ 7031(a).)" (MW Erectors, supra, 36 Cal.4th at p. 423.)
However, after emphasizing that subdivision (a) would be applied regardless of its harsh consequences and even if it means one party obtains an unjust windfall (MW Erectors, supra, 36 Cal.4th at p. 424), the court ended its judicial estoppel discussion with a passage that took a somewhat wider-angle view of the judicial estoppel issue. We quote the entirety of the passage in the margin,
In our case, counsel for Aztec was effectively trapped in a room with several doors, all locked from the outside, and in her opposition to the JNOV motion she tugged at all of them. And we conclude the trial judge had no choice but to keep them all locked — save one.
Womack makes two arguments against application of the doctrine of judicial admission here: his complaint was unverified and he denied Aztec's licensure allegation in his general denial to Aztec's cross-complaint. Under the circumstances of this case, though, Womack's plain admissions in his original complaint override these two arguments.
Here, as in Reichert, Womack had a tactical reason to include the admission of Aztec's licensure in his original complaint. He wanted to assure recovery against Aztec's contractor's bond under section 7071.5,
We think this case cries out for application of the sham pleading doctrine — all the more so since this case does not seem to involve an honest,
We reverse and remand the judgment in favor of Womack and direct the trial court to enter judgment for Aztec on its cross-complaint against Womack. It is a different story for Caballero. He never admitted that Aztec was licensed, or sued Aztec's license bond insurer. He was not the plaintiff required to facilitate an honest identification of controverted issues. Accordingly we affirm the defense judgment in his favor.
As to appellate costs, we direct the trial court on remand to ascertain that portion of the appellate costs of Aztec attributable to its appeal from the judgment in favor of Womack, and assess all those costs against Womack. As to that portion of appellate costs attributable to Aztec's appeal from the judgment in favor of Caballero, those costs are to be borne by each side, Aztec and Caballero.
Aronson, J., and Fybel, J., concurred.
In this opinion all undesignated references are to the Business and Professions Code, and all undesignated references to any subdivision of a statute are to section 7031.
"`While attorneys who represent contractors are aware they must plead licensure, many are not aware that a certificate from the board is necessary to prove it. [¶] The sponsor thinks that production of the certificate of licensure should only be required if licensure is at issue in the case. That is, if the contractor swears under oath that he or she was licensed, and the defendant's attorney has determined that the contractor was not, only then would the contractor be required to produce a copy of the certificate of licensure.... The board may take up to 6 months to issue the certificate. The sponsor states that cases involving licensure status are rare, and contractors are losing cases [e.g., by nonsuit] where they might otherwise prevail but for this technicality.' (Assem. Com. Consumer Protection, Gov. Efficiency and Economic Dev., Analysis of Assem. Bill No. 2413 (1991-1992 Reg. Sess.) May 6, 1992.)" (Buzgheia, supra, 60 Cal.App.4th at p. 391, italics added.)
"An issue conference is required in all cases at least 10 days prior to the date set for trial, at which time the parties are to meet and confer and execute necessary documents as listed below. Plaintiff or petitioner must arrange the issue conference at a mutually agreeable time and location.
"At the issue conference the parties must: [¶] ... [¶]
"B. Stipulate to all facts amenable to stipulation. [¶] ... [¶]
"E. Prepare a Joint List of Controverted Issues. If all the parties fail to agree that an issue is uncontroverted, then the issue is controverted. [¶] ... [¶]
"The Plaintiff or Petitioner is responsible for providing courtesy copies of the Joint Statement of the Case, the Joint Witness List, and the Joint List of Controverted issues." (Italics added.)
