Judge: James C. Chalfant, Case: 24NWCP00168, Date: 2025-03-06 Tentative Ruling

Case Number: 24NWCP00168    Hearing Date: March 6, 2025    Dept: 85

Respondent California Contractors State License Board (“Board”) demurs to and moves to strike portions of the First Amended Petition and Complaint (“FAP”) of Petitioner Creditors Adjustment Bureau, Inc. (“CAB”).

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

A. Statement of the Case

1. The Petition

Petitioner CAB filed this action against the Board on April 26, 2024.  The FAP, filed on July 9, 2024, is the operative pleading and alleges claims against the Board for traditional mandamus and declaratory relief.  The FAP alleges in pertinent part as follows.

CAB is a collections services firm in Sherman Oaks, California.  FAP, ¶12.  CAB’s business includes collection actions for various clients, such as State Compensation Insurance Fund (“SCIF”), against contractors who fail to pay commercial debts, including workers compensation insurance premiums.  FAP, ¶12.  CAB is in almost daily contact with the Board as a result.  FAP, ¶12.

The Board is a part of the Department of Consumer Affairs, a local agency of the State of California.  FAP, ¶13.  The mission statement of the Board is to enforce “licensing law ... regulations, and standards governing construction contracting in a fair and uniform manner.”  California Contractors License Law & Reference Book, 2024.  FAP, ¶1.

CAB brings this cause of action because the Board is currently not fulfilling its mission under Business and Professions (“B&P”) Code section 7071.17(j)(l), which states that where a judgment is entered against a licensee, any responsible person who was associated with said license “at the time of the activities on which the judgment is based” shall be automatically prohibited from serving on any other license until the judgement is satisfied.  FAP, ¶¶ 1-3.  CAB requests the court to order the Board to refrain from using the date of entry of judgment in its determination of related license suspension and instead investigate to ensure that any responsible parties to the license are held accountable for their association with the offending license during the time of activities on which the judgment is based.  FAP, ¶¶ 6, 7.   CAB further requests the court to order the Board to properly perform its ministerial duties to act in accordance with the law when making the determination whether to suspend associated licenses as prescribed by B&P Code sections 7071.17(j) and §7090.  FAP, ¶8.  Finally, CAB requests that the court issue mandate to order the Board to comply with mandates prescribed by B&P Code sections 7071.17(f) and 7102 to ensure that bankruptcy protection applies only to the entity or individual which actually files for bankruptcy.  FAP, ¶9.

In 2017, Assembly Bill (“AB”) 1278 was introduced to "clarif[y] and [strengthen] existing law regarding the responsibility of personnel for judgments against the contractor with whom they are associated" under B&P Code section 7071.17. Concurrence in Senate Amendments: Assembly Floor Analysis on Assembly Bill 1278 (2017) (analysis of Vincent Chee).  FAP, ¶6.  The sponsors of this bill were particularly concerned that while the Board awaited judgment finality, other personnel on the license would be able to disassociate from, or "jump off," the affected license prior to final judgment and become an officer (or other official of record) on another license.   FAP, ¶17.   As stated in the final analysis of the Assembly Bill: "[t]his bill seeks to prevent this behavior by clarifying that an individual who served as the qualifying person or personnel of record for a licensee during the event that resulted in a final judgment. [sic] This clarifies that the responsible personnel are included even if no longer associated with the license at the time the final judgment is entered."  FAP, ¶18 (emphasis added).

Currently, the Board is failing the purpose of AB 1278 by not performing its tasked ministerial responsibilities to hold responsible persons accountable.   FAP, ¶19.  The Board uses the date of entry of judgment as the determining date in considering whether the judgment debtor's license should be suspended, as well as whether the license of those in association with the judgment debtor's license should be suspended.  FAP, ¶20.  The mechanical application of the date of entry of judgment is a failure to perform the ministerial duties of the Board under B&P Code section 707 l .17(j)( 1) and AB 1278.  FAP, ¶ 21. 

CAB has requested the Board to properly apply B&P Code section 707l.17(j)(l) through the filing of multiple complaints with the California Department of Consumer Affairs and has received contradictory responses.  FAP, ¶¶ 29-30.  The Board has stated that it considers "the date of entry of judgment or the date of a failure to pay an invoice due or other breach of contract underlying the judgment when applying the suspension to the judgment debtor license and associated licenses." FAP, ¶31 (emphasis added).  However, CAB believes, and has provided the Board with innumerable examples showing, that the Board solely focuses on the judgement date with little to no flexibility in examining the relevant factors.  FAP, ¶33. 

An example of this issue is as follows: A licensee, Thomas Joseph Garces (License #1063278), was associated with Paz-Fairfax Steel (License #1059984) on November 5, 2019 and listed as the responsible managing officer (“RMO”).   Paz-Farifax Steel failed to pay the premiums for two workers compensation policies during Mr. Garces’ ‘tenure, but he disassociated before the date of judgment from Paz-Fairfax Steel and is now a RMO for Jettsyn Iron.  FAP, ¶¶ 35-36.  The Board has refused to clarify why Mr. Garces is not prohibited from serving as a RMO under a subsequent license or to investigate the issue.  FAP, ¶¶ 37-38.  Additional examples are CAB v. Willkom Inc. (License #889329) (FAP, ¶ 41) and CAB v. GKL Construction Inc., DBA Paver Pros (License # 1033240).   FAP, ¶¶ FAP, ¶¶1-43. 

The Board appears to believe it does not have a duty to investigate these associated licenses.  FAP, ¶¶ 48-49.  Mr. Jamnetski, in his November 15th letter writes, "there is no discussion in the legislative history about [Board] staff conducting an extensive analysis or investigation of the facts and circumstances underlying a given judgment to define the offending 'activity' or 'activities' that support the judgment."  FAP, ¶50.  However, B&P Code section 7071.17 requires the Board to appoint a registrar of contractors who may upon his or her own motion and shall upon the verified complaint in writing of any person, investigate the actions of any applicant, contractor, or home improvement salesperson within the state.”  FAP, ¶51 (emphasis added).

The Board also misapplies B&P Code sections 7071.17 (f) and §7102 regarding the effect of individual and/or entity bankruptcy filings, resulting in the failure and refusal to suspend certain licenses and/or associated license.  FAP, ¶56.  The Board refuses and fails to recognize the legally clear distinction between individual and business entities who file for bankruptcy when considering whether certain licenses and/or associated licenses should be suspended.  FAP, ¶58.  The Board wrongly interprets B&P Code sections 7071.17(f) and 7102 to mean that any discharge of the financial obligation under any bankruptcy, whether the individual or the entity, allows reinstatement of a license from suspension or prevents its suspension in the first place, even if the corporate entity is the one who maintains the license with the Board and the individual is a mere officer.  FAP, ¶¶ 60-63.  CAB alleges examples of this failure.  FAP, ¶¶ 65, 66.

The FAP’s first cause of action for traditional mandate alleges that the Board should be prohibiting qualifying individual or other personnel of record who were previously associated with judgment-rendered licenses "at the time of the activities on which the judgment is based" from serving as a qualifying individual on any other license.  Further, under B&P Code section 7090 the Board has a duty to investigate the actions of any applicant, contractor, or home improvement salesperson within the state upon the verified complaint in writing of any person. B&P Code section 7090. The Board is currently failing to carry out its duties under B&P Code sections 7071.17(j)(l) and 7090 and its failure regarding these ministerial duties is an abuse of discretion and a failure to act as required by law.  FAP, ¶¶ 70, 71.  Further, the Board is failing to carry out its duties under B&P Code sections 7071. l7(f) and 7102, and its failure is an abuse of discretion, and a failure to act as required by law.  FAP, ¶74.  Accordingly, a writ of mandate should be issued ordering the Board to comply with B&P Code sections 7071.17(j)(l), 7090, 7071.17(f), and 7102.  FAP, ¶¶ 72-73, 75-76.  CAB has a beneficial interest in the issuance of a writ of mandate, given its reliance on the Board’s proper application of B&P Code provisions to ensure the bankruptcy law is properly applied and contractors fulfill all statutory requirements to maintain a contractor’s license.  FAP, ¶77.

The FAP’s second cause of action for declaratory relief alleges that there is an actual, present controversy between the parties whether the Board complies with B&P Code sections 7071.17(j)(l) and 7090.  FAP, ¶81.  It is necessary and appropriate for the court to render a declaratory judgment that sets forth the parties' legal rights and obligations with respect to whether the Board is substantially compliant with these provisions.  FAP, ¶82.

Further, there is an actual, present controversy between the parties whether the Board complies with B&P Code sections 7071.17(f) and § 7102, along with the relevant bankruptcy law provisions found in 11 U.S.C. §§ 362(a), 541(a).  It is necessary and appropriate for the court to render a declaratory judgment that sets forth the parties' legal rights and obligations with respect to whether the Board is substantially compliant with these provisions and the applicable bankruptcy law.  

The elements for declaratory relief are met because CAB, as well as law-abiding contractors, have a beneficial and concrete interest in declaratory judgment, given its reliance on the Board's proper application of the aforementioned code sections to ensure that contractors are appropriately licensed. Because these code sections have not been properly applied, contractors' licenses have been and currently are active when they should not be. This will continue to injure CAB in the future.  FAP, ¶89.   When the statutory requirements for a contractor's license are not met, the Board must suspend the license.  By not doing so, the Board has caused plaintiff to suffer an injury of sufficient magnitude to warrant declaratory relief, which makes plaintiff actually and concretely interested in the present controversy.  FAP, ¶90.

2. Course of Proceedings

On January 23, 2025, Department 1 granted the Board’s motion to transfer this case from the Norwalk Courthouse in the Southeast District to the Central District and reassigned the case to Department 85.

B. Demurrers

            Demurrers are permitted in administrative mandate proceedings.  CCP §§1108, 1109.  A demurrer tests the legal sufficiency of the pleading alone and will be sustained where the pleading is defective on its face. 

            Where pleadings are defective, a party may raise the defect by way of a demurrer or motion to strike or by motion for judgment on the pleadings.  CCP §430.30(a); Coyne v. Krempels, (1950) The party against whom a complaint or cross-complaint has been filed may object by demurrer or answer to the pleading.  CCP §430.10.  A demurrer is timely filed within the 30-day period after service of the complaint.  CCP §430.40; Skrbina v. Fleming Companies, (1996) 45 Cal.App.4th 1353, 1364. 

            A demurrer may be asserted on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain (“uncertain” includes ambiguous and unintelligible); (g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct; (h) No certificate was filed as required by CCP section 411.35 or (i) by CCP section 411.36.  CCP §430.10.  Accordingly, a demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.  CCP §430.30(a); Blank v. Kirwan, (1985) 39 Cal.3d 311, 318.  The face of the pleading includes attachments and incorporations by reference (Frantz v. Blackwell, (1987) 189 Cal.App.3d 91, 94); it does not include inadmissible hearsay.  Day v. Sharp, (1975) 50 Cal.App.3d 904, 914.   

            The sole issue on demurrer for failure to state a cause of action is whether the facts pleaded, if true, would entitle the plaintiff to relief.  Garcetti v. Superior Court, (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins, (1997) 52 Cal.App.4th 326, 339.  The question of plaintiff’s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court.  Quelimane Co. v. Stewart Title Guaranty Co., (1998) 19 Cal.4th 26, 47.  The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged.  Marshall v. Gibson, Dunn & Crutcher, (1995) 37 Cal.App.4th 1397, 1403.  Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken.  Vance v. Villa Park Mobilehome Estates, (1995) 36 Cal.App.4th 698, 709. 

            For all demurrers filed after January 1, 2016, the demurring party must meet and confer in person or by telephone with the party who filed the pleading for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.  CCP §430.41(a).  As part of the meet and confer process, the demurring party must identify all of the specific causes of action that it believes are subject to demurrer and provide legal support for the claimed deficiencies.  CCP §430.41(a)(1).  The party who filed the pleading must in turn provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency.  Id.  The demurring party is responsible for filing and serving a declaration that the meet and confer requirement has been met.  CCP §430.41(a)(3).   

            If a demurrer is sustained, the court may grant leave to amend the pleading upon any terms as may be just and shall fix the time within which the amendment or amended pleading shall be filed.  CCP §472a(c).  In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action.  CCP §430.41(e)(1).

C. Governing Law

1. The License

An applicant for a contractor’s license shall show knowledge and experience, and general knowledge of the building, safety, health and lien laws of the state and of the administrative principles of the contracting business as the Board deems necessary for the protection of the health and safety of the public.  Bus. & Prof. Code[1] §7068(a). 

A “qualifying indiividual” or “qualifying person” “means a person who qualifies for a license pursuant to Section 7068.” §7025(c).  

Section 7068, subdivision (b) sets forth how different types of applicants may qualify for a license.  §7068(b).  As is relevant to this case, a corporate applicant shall qualify through the appearance of an RMO who is qualified for the same licensee classification as that applied for.  §7068(b)(3). 

An RMO qualifying on behalf of a firm under section 7068(b) shall be responsible for exercising that direct supervision and control of his or her employer’s or principal’s construction operations to secure compliance with construction law and the board’s regulations.  §7068.1(a).

A RMO may disassociate from a contractor’s license, at which point the licensee has 90 days to replace the responsible manager or be automatically suspended.  §7068.2(a).

2. License Revocation and Civil Judgment

“The registrar may upon his or her own motion and shall upon the verified complaint in writing of any person, investigate the actions of any applicant, contractor, or home improvement salesperson within the state and may deny the licensure or the renewal of licensure of, or cite, temporarily suspend, or permanently revoke any license or registration if the applicant, licensee, or registrant, is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action….§7090 (emphasis added).

The Registrar may suspend or revoke any license if the licensee is guilty of one or more acts or omissions constituting cause for discipline.  §7090.

The performance by any individual, partnership, corporation, firm or association of any act or omission constituting a cause for disciplinary action likewise constitutes a cause for disciplinary action against any licensee who at the time such act or omission occurred was the RMO of such individual, partnership, corporation, firm, or association, whether or not he had knowledge of or participated in the prohibited act or omission.  §7122.5.

Any person who was the RMO on a revoked license shall be prohibited from serving as an officer, director, associate, partner, manager, or RMO of a licensee, whether or not the individual had knowledge of or participated in the prohibited acts or omissions for which the license was revoked.    §7121.5.

“If a judgment is entered against a licensee or any personnel of record of a licensee, then a qualifying person or personnel of record of the licensee at the time of the activities on which the judgment is based shall be automatically prohibited from serving as a qualifying individual or other personnel of record on any license until the judgment is satisfied.”  §7071(j)(1) (emphasis added). 

Section 7071.17 “applies only with respect to an unsatisfied final judgment that is substantially related to the construction activities of a licensee licensed under this chapter, or to the qualifications, functions, or duties of the license.”  §7071.17(e). 

“Except as otherwise provided, this section does not apply to an applicant or licensee when the financial obligation covered by this section has been discharged in a bankruptcy proceeding.”  §7071.17(f) (emphasis added).

“When any loss has been reduced to a monetary obligation or debt…, the satisfaction of4 the monetary obligation or debt as a prerequisite for the issuance, reissuance, or reinstatement of a license shall not be required to the extent the monetary obligation or debt was discharged in a bankruptcy proceeding.”  §7102 (emphasis added).

C. Analysis[2]

The Board demurs to the FAP because (1) the claims intrude on its discretion, (2) CAB lacks standing and (3) the FAP does not allege a narrow and precise question for declaratory relief.  The Board has complied with the meet and confer requirement of CCP section 430.42.  Beasley Decl., ¶2.

1. Ministerial Duty

A traditional writ of mandate is the method of compelling the performance of a legal, ministerial duty required by statute.  See Rodriguez v. Solis, (1991) 1 Cal.App.4th 495, 501-02.  Generally, mandamus will lie when (1) there is no plain, speedy, and adequate alternative remedy, (2) the respondent has a duty to perform, and (3) the petitioner has a clear and beneficial right to performance.”  Pomona Police Officers’ Assn. v. City of Pomona, (1997) 58 Cal.App.4th 578, 583-84 (internal citations omitted).  Whether a statute imposes a ministerial duty for which mandamus is available, or a mere obligation to perform a discretionary function, is a question of statutory interpretation.  AIDS Healthcare Foundation v. Los Angeles County Dept. of Public Health, (2011) 197 Cal.App.4th 693, 701.

In the absence of a ministerial duty, traditional mandamus relief is unavailable unless the petitioner can demonstrate an abuse of that discretion.  An agency decision is an abuse of discretion only if it is “arbitrary, capricious, entirely lacking in evidentiary support, unlawful, or procedurally unfair.”  Kahn v. Los Angeles City Employees’ Retirement System, (2010) 187 Cal.App.4th 98, 106.  In applying this deferential test, a court “must ensure that an agency has adequately considered all relevant factors, and has demonstrated a rational connection between those factors, the choice made, and the purposes of the enabling statute.”  Western States Petroleum Assn v. Superior Court, (1995) 9 Cal.4th 559, 577.  Mandamus will not lie to compel the exercise of a public agency’s discretion in a particular manner.  American Federation of State, County and Municipal Employees v. Metropolitan Water District of Southern California, (“AFSCME”) (2005) 126 Cal.App.4th 247, 261.  It is available to compel an agency to exercise discretion where it has not done so (Los Angeles County Employees Assn. v. County of Los Angeles, (1973) 33 Cal.App.3d 1, 8), and to correct an abuse of discretion actually exercised.  Manjares v. Newton, (1966) 64 Cal.2d 365, 370-71.  In making this determination, the court may not substitute its judgment for that of the agency, whose decision must be upheld if reasonable minds may disagree as to its wisdom.  Id. at 371.  A writ will lie where the agency’s discretion can be exercised only in one way.  Hurtado v. Superior Court, (1974) 11 Cal.3d 574, 579.

a. Section 7071(j)(1)

Section 7071(j)(1) provides that if a judgment is entered against a licensee, then the RMO at the time of the activities on which the judgment is based shall be automatically prohibited from serving as a qualifying individual or other personnel of record on any license until the judgment is satisfied.

The FAP alleges that the Board failed to uphold this ministerial duty by using the date of entry of judgment as the sole determinative date in considering whether an associated license to the judgment debtor should be suspended.  FAP, ¶¶ 19-21.  CAB contends that the date of judgment is a largely irrelevant fact given the clear statutory language that any responsible person who was associated with said license "at the time of the activities on which the judgment is based" shall be automatically prohibited from serving on any other license until the judgement is satisfied.  Opp. at 8.

The Board’s moving papers argue that the FAP alleges that CAB and the public rely on the Board’s compliance with section 7071.17 to hold debtors responsible for their bad acts which result in outstanding judgments.  FAP, ¶12.  The FAP cites three examples of cases where the Board allegedly failed to hold a debtor responsible by failing to suspend the current license held by the former RMO of a judgment debtor.  The Board argues that these three examples, coupled with judicially noticed documents, demonstrate that the RMO in these three examples disassociated from the licensees sued by CAB before the date the licensees committed any bad acts.  Nor did CAB ever sue the RMO.  Dem. at 7-8.

CAB’s opposition disputes the Board’s position on what the bad act was, contending that in each case the bad act was that the RMO stayed with the licensee for the duration of an insurance policy that went unpaid.  Opp. at 4.

The court need not address this dispute on demurrer because CAB correctly states that the examples are merely support for the FAP’s allegation that the Board considers only the date of judgment in applying section 7017.17(j)(1).  The court must accept this as true and whether the FAP’s examples support the allegation does not bear on the viability of the cause of action.

The Board next argues that CAB seeks to compel it to exercise its discretion a particular way.  Section 7071.17(j)(1) does not state precisely how the Board is to determine “the time of the activities on which the judgment is based”.  The Legislature left this determination to the Board, and there is no way for it to perform this inquiry in a prescribed manner in every case. The FAP’s allegations bolster this conclusion in its three examples.  In each example, CAB sued the licensee for breach of contract and its complaint alleged a specific “due date” for payments under the contract.  By definition, liability attached in those lawsuits on those due dates, as reflected by the fact that CAB sought pre-judgment interest from each of those dates.  Yet now, CAB argues that the “the time of the activities on which the judgment is based” does not mean the breach of contract dates on which it sued and obtained judgment.  In determining “the time of the activities on which the judgment is based,” how can the Board choose between what CAB alleged in its own lawsuits, and what it alleges now unless it exercises its discretion?  Dem. at 13-14. 

In reply, the Board adds that the FAP alleges four different sets of possible dates: the date of entry of judgment; the dates the insurance policy ran; the date of any unpaid invoices; and the date payment was due.  FAP, ¶¶ 38, 40.   CAB does not elucidate which of these the Board must choose (and why), or how it could make such a determination without exercising its discretion in each individual case.  Reply at 3.

The court agrees that section 7071.17(j)(1) requires the Board to exercise its discretion as to what are the activities on which the judgment is based and whether the individual was the RMO at the time of those activities.  The Board cannot be compelled to exercise its discretion on those activities in a particular way.  See AFSCME, supra, 126 Cal.App.4th at 261.  However, the FAP alleges that the Board considers only the date of judgment under section 7071.17(j)(1).  The court accepts this allegation as true, which would be a violation of the Board’s statutory duty to consider the activities on which the judgment is based and is not discretionary.

b. Section 7090

“The registrar…shall upon the verified complaint in writing of any person, investigate the actions of any applicant….” §7090.

The FAP alleges that CAB made formal complaints to the Board which triggered the Board’s mandatory duty to investigate under section 7090, and the Board failed to investigate as required. FAP, ¶¶ 54-55.  CAB refers to a letter from the Board discussing the legislative history of section 7071.17 (Amended Petition, ¶ 50), and implies that the Board’s duty to investigate under section 7090 requires the Board to “apply the facts to the law.”  FAP, ¶¶ 50, 53.  The FAP alleges that the Board is failing to carry out its duties under B&P Code section 7090 and its failure regarding this ministerial duty is an abuse of discretion and a failure to act as required by law.  FAP, ¶ 71. 

The Board does not contend that section 7090 imposes no duty to investigate.  Rather, the Board argues that CAB does not explain how the duty to investigate -- i.e., gathering facts -- compels the Board to apply the facts to the law and make a decision in a manner satisfactory to CAB.  If CAB is unhappy with how the Board investigated or applied the law to the facts, that is not its right to dictate.   The FAP’s allegations related to each of the three example cases show that the Board did gather facts and did decide when the activities which underlie the three alleged judgments occurred.  Dem. at 9, 14.

The Board (registrar) has a statutory duty to investigate an applicant upon a written complaint.  However, the manner and extent of that investigation is entirely committed to the Board’s discretion.  CAB’s mere contention that the Board failed to “apply the facts to the law” is insufficient to allege a complete failure to comply with the statutory duty in section 7090.[3]

c. Sections 7071.17(f) and 7102

“Except as otherwise provided, this section does not apply to an applicant or licensee when the financial obligation covered by this section has been discharged in a bankruptcy proceeding.”  §7071.17(f).

“When any loss has been reduced to a monetary obligation or debt, however, the satisfaction of the monetary obligation or debt as a prerequisite for the issuance, reissuance, or reinstatement of a license shall not be required to the extent the monetary obligation or debt was discharged in a bankruptcy proceeding.”  §7102.

The FAP alleges that the Board wrongly interprets B&P Code sections 7071.17(f) and 7102 to mean that any discharge of the financial obligation under any bankruptcy, whether the individual or the entity, allows reinstatement of a license from suspension or prevents its suspension in the first place, even if the corporate entity is the one who maintains the license with the Board and the individual is a mere officer.  FAP, ¶¶ 60-63.  The FAP alleges that the Board wrongly applies bankruptcy discharges to entities or individuals who did not file bankruptcy and thereafter reinstating their contractor's license.  FAP, ¶64.  The FAP alleges examples of this failure.  FAP, ¶¶ 65, 66.  The FAP further alleges that the Board misapplies the automatic stay as to the entity when it is only the individual who has filed bankruptcy and therefore only the individual obtains bankruptcy protections by operation of law, or vice versa.  FAP, ¶75.

The Board argues that the FAP alleges two instances where the Board improperly applied bankruptcy protections and where, “upon review of the relevant bankruptcy records, only the individual filed bankruptcy, not the entity.”  FAP, ¶¶ 65-66.  The Board seeks to rebut these allegations with judicially noticeable documents.  For both of the FAP’s example bankruptcy cases, the respective bankruptcy court’s discharge order states that a discharge is granted to the identified individuals (Sean S. Adams, and Corey Fuller, respectively), and lists the alleged corporate entities (EZ Remodeling, Inc., and Paradigm Construction & Associates, Inc., respectively) as dbas of the individuals.  RJN Exs. 3-4.  Additionally, the determination of whose debts were discharged would necessarily require the Board to exercise its discretion.  Dem. at 10, 14.

Again, whether the FAP’s examples are valid does not prove the untruth of the rest of the cause of action.  Moreover, the FAP is clearly correct that there is no discretion in evaluating a bankruptcy court discharge order or bankruptcy stay; it is a ministerial duty.  See FAP ¶75.

2. Standing

Standing is a threshold issue necessary to maintain a cause of action, and the burden to allege and establish standing lies with the plaintiff.  Mendoza v. JPMorgan Chase Bank, N.A., (“Mendoza”) (2016) 6 Cal.App.5th 802, 810.  As a general rule, a party must be “beneficially interested” to seek a writ of mandate.  Friends of Oceano Dunes, Inc. v. San Luis Obispo County Air Pollution Control Dist., (2015) 235 Cal.App.4th 957, 962 (citing CCP §1086).  Likewise, to seek declaratory relief, a party must be an “interested person.”  CCP §1060.  An “interested person” means the same thing as a “beneficially interested” person in mandamus cases.  Asimow, et al., Administrative Law (2018), Ch. 14, §14:6. “Beneficially interested” has been generally interpreted to mean that one may obtain the writ only if the person has some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large.  SJJC Aviation Services, LLC v. City of San Jose, (“SJJC”) (2017) 12 Cal.App.5th 1043, 1053.  The beneficial interest must be direct and substantial.  Ibid.  A petition has no beneficial interest if she will gain no direct benefit from the writ’s issuance and suffer no direct detriment if it is denied.  Ibid.

The Board argues that the FAP fails to allege that CAB has any beneficial interest above the general public’s interest.  The FAP does not allege that it sued any of the former RMOs and the reason why not is obvious: CAB’s assignor (SCIF) did not contract with those individuals.  While the FAP makes conclusory allegations that the failure to suspend “exposes CAB, its clients, and the public to further damages” (FAP ¶ 32), and that the failure to apply bankruptcy law “detrimentally affects CAB” (FAP, ¶ 68), it does not allege how.  Nor does the FAP allege how these vague harms differ from those suffered by the general public.  See FAP, ¶¶ 46, 69.  Because the FAP fails to allege the invasion of a legally protected, concrete, and particularized interest held by CAB, it lacks standing to seek mandamus relief.  Dem. at 15.  The same is true for declaratory relief.  Dem.  at 17.

CAB responds that, as a collections firm dealing primarily with unpaid workers compensation premiums on behalf of SCIF, CAB is in nearly daily contact with the Board and is intimately affected by the Board's decision to either suspend or not suspend certain licenses. The Board’s repeated and continued failure to perform its ministerial duties has detrimentally affected CAB's ability to conduct business.  The only way the judgment debt of many corporate or LLC licensees will be paid is through suspension of the associated license.  Otherwise, the corporate license will just close shop and reopen with a new license, and CAB will be unable to collect anything from the new entity.  The FAP alleges that CAB has a beneficial interest beyond the general public’s interest because the Board's current interpretation could result in financial ruin to SCIF and harm the California employers and employees SCIF was constitutionally created to protect, while enriching those who commit insurance fraud.  See Ins. Code §11770 et seq.  Opp. at 11.

The petitioner’s beneficial interest or right must be over and above that held in common with the public, and must be direct and substantial.  SJJC Aviation Services, LLC v. City of San Jose, supra, 12 Cal.App.5th at 1053.  A petitioner has no beneficial interest if it will gain no direct benefit from the writ’s issuance and suffer no direct detriment if it is denied.  Ibid.

The Board is correct that CAB’s interest in using the Board’s actions as leverage in debt collection efforts by itself does not confer standing.  Dem. at 4.  The Board does not exist for this purpose. However, section 7071(j)(1) provides that, if a judgment is entered against a licensee, then a qualifying person or personnel of record of the licensee at the time of the activities on which the judgment is based shall be automatically prohibited from serving as a qualifying individual or other personnel of record on any license until the judgment is satisfied.”  §7071(j)(1).  This provision is intended to benefit judgment creditors of the licensee, including SCIF and its assignee CAB.  CAB has standing to raise the Board’s duties under section 7071(j)(1) and, by extension, sections 7090, 7071.17(f), and 7102.

3. Narrowly Tailored Declaratory Relief

“[D]eclaratory relief requires a court to have narrow, precise questions to guide its examination, without which it is unable to decree, and not suggest, what the parties may or may not do.”  Monterey Coastkeeper v. Cal. Regional Water Quality Control Board, (2022) 76 Cal.App.5th 1, 14.  A court may refuse declaratory relief “where its declaration or determination is not necessary or proper at the time under all the circumstances.”  Meyer v. Sprint Spectrum L.P., (2009) 45 Cal.4th 634, 647.

CAB’s second cause of action for declaratory relief alleges that there is an actual, present controversy between the parties whether the Board complies with B&P Code sections 7071.17(j)(l) and 7090.  FAP, ¶81.  It is necessary and appropriate for the court to render a declaratory judgment that sets forth the parties' legal rights and obligations with respect to whether the Board is substantially compliant with these provisions.  FAP, ¶82.

Further, there is an actual, present controversy between the parties whether the Board complies with B&P Code sections 7071.17(f) and § 7102, along with the relevant bankruptcy law provisions found in 11 U.S.C. §§ 362(a), 541(a).  FAP, ¶84.  It is necessary and appropriate for the court to render a declaratory judgment that sets forth the parties' legal rights and obligations with respect to whether the Board is substantially compliant with these provisions and the applicable bankruptcy law.  FAP, ¶85.

The Board is correct that the FAP does not allege any narrow, precise relief as to what the Board may do.  The FAP does not allege how the Board is supposed to determine what qualifies as “activities on which the judgment is based”.  The FAP does not allege the extent to which the Board must investigate under section 7090, or how it should assess bankruptcy discharge orders and automatic stays.  Dem. at 17; Reply at 6.

The demurrer is sustained on this ground.[4]

D. Conclusion

The demurrer is overruled on for the mandamus claim and sustained as to declaratory relief.  CAB has 20 days’ leave to amend for declaratory relief.  The motion to strike is granted for FAP paragraphs 10-11 only.