Judge Joel R Wohlfeil, Case 37-2021-00024970-CU-BC-CTL 2023-08-31 Tentative Ruling

Judge: Joel R Wohlfeil, Case: 37-2021-00024970-CU-BC-CTL, Date: 2023-08-31 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - August 28, 2023

08/31/2023 09:00:00 AM C-73 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Joel R. Wohlfeil

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Civil - Unlimited Breach of Contract/Warranty Summary Judgment / Summary Adjudication (Civil) 37-2021-00024970-CU-BC-CTL AMERICAN PRO-COATING LLC VS ACKAD [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 06/16/2023

The Motion (ROA # 103) of Defendant YUHONG E. ACKAD ('Defendant' or 'ACKAD') for summary judgment or, in the alternative, summary adjudication in favor of Defendant and against Plaintiff AMERICAN PRO-COATING, LLC ('Plaintiff'), is GRANTED IN PART ad MOOT IN PART.

The Motion for summary judgment is GRANTED.

The alternative Motion for summary adjudication of affirmative defense numbers 2, 13, 17 and 18 is off calendar as MOOT in light of the ruling granting summary judgment.

Defendant's Request ('ROA # 105) for judicial notice is GRANTED IN PART and DENIED IN PART.

The Court takes judicial notice of Exh's '1, 3, 4, 7, 10 and 11' and the dates only on which Exh's '5 and 9' were filed with the Court; otherwise, the Request is DENIED.

Plaintiff's Request (ROA # 146) for judicial notice is GRANTED IN PART and DENIED IN PART. The Court takes judicial notice of Exh's 'B and E' and nos. '3 and 4' and the date only on which Exh. 'A' was filed with the Court; otherwise, the Request is DENIED.

Plaintiff's evidentiary objections (ROA # 147) are OVERRULED.

Plaintiff's evidentiary objections (ROA # 148) are OVERRULED.

Defendant's evidentiary objections (ROA # 155) are OVERRULED IN PART and SUSTAINED IN PART.

The objections are OVERRULED except as follows: nos. 7, 10, 12, 16 and 23 are SUSTAINED.

'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 they were a duly licensed contractor at all times during the performance of that act or contract ....' Bus. & Prof. Code 7031(a).

'If licensure ... is controverted, then proof of licensure pursuant to this section shall be made by production of a verified certificate of licensure ....' Id. at (d).

'The judicial doctrine of substantial compliance shall not apply under this section where the person who engaged in the business or acted in the capacity of a contractor has never been a duly licensed Calendar No.: Event ID: TENTATIVE RULINGS

2971117 CASE NUMBER: CASE TITLE: AMERICAN PRO-COATING LLC VS ACKAD [IMAGED] 37-2021-00024970-CU-BC-CTL contractor in this state. However ... the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.' Id. at (e).

Section 7031 imposes, as a penalty, denial of access to the Court to recover for the fruits of the contractor's labor or even for materials furnished when the statute is violated. Jackson v. Pancake (1968) 266 Cal. App. 2d 307, 309.

Section 7031 applies despite injustice to the unlicensed contractor. Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal. 3d 988, 995.

It represents a legislative determination that the importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties, and that such deterrence can best be realized by denying violators the right to maintain any action for compensation.

Id.

However artful the pleadings, if the primary claim alleged is a false promise to pay for unlicensed construction work, and the primary relief sought is compensation for the work, section 7031 bars the action. Id. at 1002 (fraud claim is barred).

One fails to meet the technical requirements in section 7031(a) and is ineligible to recover any compensation under the terms of that statute, if, at any time during performance of an agreement for contractor services, he or she was not duly licensed. MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal. 4th 412, 425.

In order to invoke the substantial compliance exception, a contractor who was technically unlicensed at any time during performance is required to establish that he or she had been duly licensed at some time before performance began. Id. at 431.

The obvious purpose was to limit application of the substantial compliance doctrine to those contractors who, at some time before beginning performance, had held valid California contractor's licenses. Id. at 431, 432.

Where the contracting party is an unlicensed corporate entity it is barred from recovery even if its principal holds a valid license. See Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal. App. 4th 71, 76. The opinion states: 'The only subcontractor named in the subcontract is MCI, and the contract was signed by appellant as president of MCI. Appellant contends the evidence before the court, and especially as reinforced by the excluded evidence, would permit a jury to conclude appellant was a party to the contract because his individual contractor's license number was used repeatedly in the documents.

Such a rule would violate at least three aspects of public policy. First, of course, it would render ineffective the contractor's license requirement and encourage fraud if insertion of the license number of one who is not the contractor permitted a suit that otherwise was barred by section 7031. Second, in this case it would be tantamount to permitting an individual to adopt a prohibited fictitious business name and then to sue on a contract, when such suit would be barred for any other unregistered business ....

Finally, '[p]arties who determine to avail themselves of the right to do business by means of the establishment of a corporate entity must assume the burdens thereof as well as the privileges.' (Aladdin Oil Corp. v. Perluss (1964) 230 Cal. App. 2d 603, 614.) An individual who has obtained the benefits of corporate limited liability will not be permitted to repudiate corporate existence just because the corporation has become an inconvenience ....

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2971117 CASE NUMBER: CASE TITLE: AMERICAN PRO-COATING LLC VS ACKAD [IMAGED] 37-2021-00024970-CU-BC-CTL We conclude the court did not impermissibly weigh the evidence in granting summary judgment. The evidence allowed only one conclusion, as a matter of law: the contracting entity was MCI, a separate entity and an unlicensed building contractor.' Id. at 76 (footnote and some internal citations omitted); see also WSS Industrial Construction, Inc. v. Great West Contractors, Inc. (2008) 162 Cal. App. 4th 581 (corporate subcontractor was unlicensed, but its president was a licensed contractor at all times during performance of work; corporation could not recover compensation because it was not licensed and the president's individual license was irrelevant).

In this action, it is undisputed that Plaintiff American Pro-Coating, LLC was never a licensed contractor.

See Defendant's 'Exhibit 1' and Declaration of Joseph Martinez at ¶¶ 13 - 17.

The reasons for this failure are not relevant. Whether this failure was caused by a good faith oversight is not relevant. Section 7031 sets forth a bright line test. Substantial compliance is not available because Plaintiff was never a licensed contractor. Plaintiff's unlicensed status precludes recovery on both causes of action asserted in the Complaint, and summary judgment is granted on this basis.

Given this conclusion, it is not necessary to address Defendant's other arguments (insurance, statute of limitations and statute of frauds).

Plaintiff cites and relies on E.J. Franks Construction, Inc. v. Sahota (2014) 226 Cal. App. 4th 1123.

However, E.J. Franks Construction involved the transfer and reissue of a license from an individual to a newly formed entity during construction. Unlike in this action, work was performed by a licensed contractor at all times such that Contractors' State License Law did not preclude recovery. There was no lapse in the licensure status of the contractor. See Id. at 1128 and 1129 ('We hold section 7031 does not apply here. At no time was the work on the Sahotas's home performed by an unlicensed contractor .... ¶ ...Unlike the authorities cited by the Sahotas, this case did not involve a period wherein the contractor was unlicensed or where a license previously issued lapsed during the construction project.'). The opinion in E.J. Franks Construction is not applicable.

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