Judge Bruce G. Iwasaki, Case Number: 23STCV11581, Date: 2024-01-03 Tentative Ruling

This is a construction case in which Plaintiff Elizabeth Rowen (Plaintiff) sues Defendants Mr. Build Home Improvement and David Asulin (Defendants), alleging that Defendants’ renovations to Plaintiff’s residence were defectively performed.

Defendants now move for judgment on the pleadings as to the eleventh cause of action in the First Amended Complaint, a claim under Business and Professions Code section 7125.2. Plaintiff opposes the motion.

Defendants’ request for judicial notice of the website page of the Contractor’s State License Board is denied.[1] (Evid. Code § 452, subd. (g), (h).) Defendants’ reply request for judicial notice of Exhibit 3 is granted. (Evid. Code § 452, subd. (g), (h).)

“[A] motion for judgment on the pleadings is the functional equivalent of a general demurrer. . . . Indeed, the only significant difference between the two motions is in their timing.” (People v. $20,000 U.S. Currency (1991) 235 Cal.App.3d 682, 691.)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . ..” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.)

Eleventh Cause of Action for Violation of Business and Professions Code section 7125.2:

Defendants move for judgment on the pleadings of the eleventh cause of action on the grounds that it fails to state a claim.

Business and Professions Code section 7125.2 imposes a penalty on a contractor who fails to obtain and maintain employee workers’ compensation insurance coverage. A violation of this statute results in an automatic suspension by operation of law of the contractor’s license, rendering the unlicensed contractor subject to a Business and Professions Code section 7031 bar for purposes of bringing an action for compensation. (See Smith v. Workers' Comp. Appeals Bd. (2002) 96 Cal.App.4th 117, 127 [noting the Legislature has “harnessed the licensing requirements . . . to serve the statutory goals of the workers' compensation system”].) This comprehensive statutory framework has as its purpose the “protect[ion of] the public” by imposing “strict and harsh penalties for a contractor's failure to maintain proper licensure.” (MW Erectors, Inc. v.Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 418.)

With respect to the eleventh cause of action, the FAC alleges that Defendants underreported its personnel to its worker’s compensation carrier and/or paid employees in cash. (FAC ¶ 132.)

On the motion for judgment on the pleadings, Defendants argue the claim fails because – relying on the request for judicial notice – Defendant Mr. Build had continuous worker’s compensation coverage at all times during the Plaintiff’s project. (RJN No. 2.) Citing Loranger v. Jones (2010) 184 Cal.App.4th 847 (Loranger), Defendants argue the allegation that they underreported its personnel for the purpose of workers compensation does not result in the disgorgement of all sums paid by Plaintiff to Defendant Mr. Build under Business and Professions Code section 7031, subdivision (b).

In Loranger, a contractor was retained by two homeowners to construct a house; the contractor hired an unlicensed subcontractor as an electrician, another unlicensed subcontractor to excavate dirt, and hired his 13-year-old son and another minor to add support to the house’s subfloor. (Id. at pp. 850-851.) The contractor was unaware that the electrician’s license had expired, but he testified that neither his son nor the other minor had work permits. In seeking disgorgement of the funds they had paid to the contractor, the homeowners relied on Wright v. Issak (2007) 149 Cal.App.4^th 1116 (Wright). (Loranger, supra, at pp. 855-856.)

As a result, the Loranger court concluded that the contractor’s testimony that he had workers’ compensation insurance coverage for his employees during the period that he worked on the homeowners’ home satisfied his burden of proof to show that his license was not suspended for a failure to obtain workers’ compensation insurance coverage under section 7125.2. (Loranger, supra, 184 Cal.App.4th at p. 858.)

The court in Castillo v. Toll Bros., Inc. (2011) 197 Cal.App.4th 1172, came to the same conclusion as Loranger. In Castillo, the plaintiffs argued the contractor should be treated as unlicensed because the contractor misreported the nature of the payroll to reduce the workers’ compensation payments. (Id. at p. 1211.) The trial court found the contractor had maintained workers' compensation insurance throughout the project. (Ibid.) The Court of Appeal, relying on Loranger, found: “While we recognize language in Wright v. Issak can be construed as supporting their argument for revocation as a result of misreporting, Wright makes clear that its contractor defendant reported ‘zero or next to zero’ payroll and therefore had no insurance. (Wright v. Issak, supra, 149 Cal.App.4th at p. 1119.) For purposes of Business and Professions Code section 7125.2, the type of misreporting of wage classifications alleged by plaintiffs is not comparable to a complete failure to obtain or maintain insurance. (See Loranger v. Jones (2010) 184 Cal.App.4th 847, 857.)” (Castillo, supra, 197 Cal.App.4th at p. 1211.)

As noted above, the Court cannot take judicial notice of Defendants’ printout of the government website page.

Judicial notice is a court’s recognition of the existence of a matter of law or fact relevant to an issue as a substitute for formal proof of that matter. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.) “Judicial notice may not be taken of any matter unless authorized or required by law.” (Evid. Code, § 450.) Matters that are subject to judicial notice are listed in Evidence Code sections 451 and 452. A matter ordinarily is subject to judicial notice only if the matter is reasonably beyond dispute. (Post v. Prati (1979) 90 Cal.App.3d 626, 633.)

Defendants contend the website printout is the proper subject for judicial notice under Evidence Code section 452, subdivision (d). This website record is certainly not a court record and, therefore cannot be granted on this ground. The more applicable subdivision would be subdivision (c) [official acts of legislative, executive, or judicial departments], or subdivision (h) [facts and propositions not reasonably subject to dispute and capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy], because they were from a government website. Even assuming the documents are what Defendants purport them to be (Evid. Code, § 1400 [“[a]uthentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law[ ]”] ), that does not answer whether they are adequate to allow judicial notice of the fact for which Defendants offered them, i.e., that Defendants carried workers’ compensation insurance during the relevant period.

Therefore, the Court may take judicial notice of the existence of the website page but not the truth contained therein.[2] The Court can, however, take judicial notice of Exhibit 3, the Contractors State License Board “Certification of Records.” (Pioneer Construction, Inc. v. Global Investment Corp. (2011) 202 Cal.App.4th 161, 166, fn. 5.)

In any case, the ruling on judicial notice is not determinative on this motion for judgment on the pleadings. That is, the FAC does not allege that Defendants did not have workers’ compensation coverage – only that Defendants underreported its personnel.

In opposition to the motion, Plaintiff relies on the holding in Wright, arguing Defendants misrepresented its holding and overstated the holding in Loranger.

Unlike Wright, there is no dispute here and the pleading concedes that Defendants had workers’ compensation insurance. Wright stands alone in its application of an automatic suspension for underreporting. Moreover, the facts in that case were unique; as noted in the case discussion above, the trial record strongly suggested that “the contractor there did not have and never had a policy of workers’ compensation insurance, that he intentionally underreported the wages he was paying (reporting zero or next to zero payroll), and that he did so to be excluded from the requirement of obtaining such insurance.” (Loranger, supra, 184 Cal.App.4^th at p. 857.)

However, in considering both cases, it is unclear on the pleadings alone, whether the facts in Loranger are ultimately closer to the facts before this Court on the FAC or whether the facts are more similar to Wright. Although Loranger rejected the notion that any underreporting triggered an automatic suspension of a contractor's license, Wright clearly held that there were circumstances where underreporting payroll may rise to the level to warrant suspension.

As argued by Plaintiff, both cases were not resolved at the pleading stage and involved consideration of the evidence. (Loranger v. Jones (2010) 184 Cal.App.4th 847, 858 [“We conclude this evidence was sufficient to meet Loranger's burden of proof to show his license was not suspended for failing to obtain workers' compensation insurance coverage pursuant to section 7125.2.”]; Wright v. Issak (2007) 149 Cal.App.4th 1116, 1119 [appeal after court trial]; Castillo v. Toll Bros., Inc. (2011) 197 Cal.App.4th 1172 [on summary judgment].)

Thus, at the pleading stage, the motion for judgment on the pleadings is denied.

The Motion for Judgment on the Pleadings of the eleventh cause of action is denied.

[1] Defendants also request judicial notice of the First Amended Complaint; the Court need not take judicial notice of its own court records in this case.

[2] “ ‘Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.’ [Citation.] While courts take judicial notice of public records, they do not take notice of the truth of matters stated therein. [Citation.] ‘When judicial notice is taken of a document, ... the truthfulness and proper interpretation of the document are disputable.’ [Citation.]” (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375 [italics added]; see also In re Christian P. (2012) 207 Cal.App.4th 1266, 1275, fn. 4 [judicial “notice [of court record] is limited to the existence of the documents and is not the same as taking notice of the truth of any matters or facts stated therein”].)