Judge: Jon R. Takasugi, Case: 21STCV26707, Date: 2024-01-18 Tentative Ruling

Case Number: 21STCV26707    Hearing Date: January 19, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion for summary judgment is DENIED.

            On 7/20/2021, Plaintiff Icon Identity Solutions, Inc. (Plaintiff) filed suit against Santa Cerritos and Cerritos Promenade, LLC (collectively, Defendant), alleging: (1) breach of contract; (2) common count—quantum meruit; (3) common count—account stated; (4) common count—open book account; and (5) foreclosure of mechanic’s lien.

            Now, Defendant Santa Cerritos, Inc. (Defendant) moves for summary judgment, or in the alternative, summary adjudication of Plaintiff’s Complaint.

Factual Background

Plaintiff alleges that it is owed for construction work it performed as a general contractor pursuant to a written contract with Defendant.

Evidentiary Objections

CCP section 437c, subdivision (q) provides:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

            In light of CCP section 437c, subdivision (q), the Court declines to rule on the submitted objections.

Discussion

            Defendant argues that it is entitled to summary judgment because Plaintiff is not properly licensed by the California Contractors State License Board to perform construction work, and thus, as a matter of law, cannot bring an action to recover compensation for the performance of unlicensed construction work.

            The Contractors State License Law (CSLL), Business & Professions Code (B&P) § 7000 et seq., governs the construction contractors industry in California. The CSLL requires all contractors to be properly licensed with the Contractor’s State License Board (CSLB) at all times that they perform work. (B&P § 7031(a).) Failure to be properly licensed exposes the contractor to a penalty of disgorgement of all compensation paid and preclusion from actions at law to collect payment or the benefits of the contract. (B&P §§ 7026, 7031(a), (b), & 7040 et seq.; White v. Cridlebaugh (2009) 178 Cal.App. 4th 506, 517.) This is true even whether the general contractor is licensed, but the subcontractors are unlicensed. (See Kim v. TWA Constr., Inc. (2022) 78 Cal. App. 5th 808, 831 (“For all of these reasons, we decide that section 7031 bars even a licensed general contractor in California from bringing an action for compensation for an act or contract performed by an unlicensed subcontractor where a license is required.”).)

            Here, Defendant submitted evidence that:

-         On or about September 10, 2020, Santa Cerritos allegedly entered into a written purchase agreement with Icon, an Illinois based general contractor, to provide “the construction and services …including all labor, materials, equipment and services … to properly execute and complete” the design, construction, and complete build out of a Panini Kabob Grill at the Project Location.” (SS ¶ 5.)

-         In approximately April 2021 or May 6, 2021, the contract was terminated by Santa Cerritos. Santa Cerritos terminated the agreement due to Icon’s unilateral 43% increase by $526,789 from the originally agreed upon price for its services from $1,197,706.20 to $1,724,495, among other reasons. (SS ¶¶ 6-7.)

-         Between September 10, 2020 and the termination of the agreement in April or May 2021, Icon hired several subcontractors to perform construction work on PKG Cerritos, who were collectively paid $76,302.23 in total. (SS ¶ 37.)

-         Icon hired subcontractor CMC Mechanical LLC (CMC) to perform pre-construction “HVAC work,” which consisted of “HVAC equipment, duct work, materials.” (SS ¶ 38.)

-         Icon paid CMC $44,600 for its HVAC work for the PKG Cerritos property, which Icon seeks to recover from Santa Cerritos. (SS ¶ 39.)

-         CMC was not properly licensed with the CSLB during the entire time of the PKG Cerritos project, including between January 1, 2020 to August 10, 2022. (SS ¶ 40.)

-         In or around late September or fall of 2019, Icon merged with, was acquired by, or otherwise became Stratus Unlimited, LLC. (SS ¶ 49.)

-         Stratus Unlimited, LLC was not licensed with the CSLB until February 3, 2022. (SS ¶ 42.)

-         Icon’s alleged Responsible Managing Employee (“RME”) is Mr. James Rymarcsuk (SS ¶ 8.)

-         From October 26, 2020 until January 4, 2021, Mr. Rymarcsuk was paid by a company called, Enhanced Site Solutions, LLC (“Enhanced”), an Illinois based limited liability shell company that was never licensed with the CSLB and was merely used to “track costs related to the type of work” Icon was allegedly doing with PKG Cerritos. (SS ¶ 9.)

-         There is no record of fictitious business name filings of Enhanced Site Solutions, LLC doing business as Icon Identity Solutions, Inc, and no record of FBN filings of Icon fictitiously doing business as Enhanced Site Solutions, LLC in California as required by B&P § 17910. (SS ¶ 10.)

-         Between September 10, 2020 and the termination of the agreement in April or May 2021, Icon hired subcontractor True Glass and Glazing, Inc. (“True Glass”) to perform “shop drawings” for the “Store front, glass and glazing” of PKG Cerritos. True Glass was unlicensed while they were working on PKG Cerritos, specifically between January 19- February 11, 2021. (SS ¶¶ 41-44.)

As such, Defendant has submitted evidence that: (1) There is no record of fictitious business name filings of Enhanced Site Solutions, LLC doing business as Icon Identity Solutions, Inc, and no record of FBN filings of Icon fictitiously doing business as Enhanced Site Solutions, LLC in California as required by B&P § 17910; (2) From January 4, 2021 through September 20, 2021, Mr. Rymarcsuk, the alleged Responsible Managing Employee (RME) of Icon was paid a salary by Stratus. There is no record of fictitious business name filings of Stratus doing business as Icon, and no record of FBN filings of Icon Identity Solutions, Inc. fictitiously doing business as Stratus Unlimited, LLC in California in compliance with B&P § 17910; (3) Mr. Rymarcsuk had nothing to do with this project in terms of construction (See SS ¶¶ 14-36); (4) The subcontractors hired by Icon were unlicensed during their work on PKG Cerritos; (5) Icon was required to become licensed with the CLB when it merged with Straus in late September or fall of 2019, yet it did not become licensed until February 3, 2022 (Frank v. Kozlovsky (2d Dist. 1970) 13 Cal. App. 3d 120, 125 [A change in structure or name requires a new contractor’s license.].)

Defendant’s evidence supports a reasonable inference Plaintiff itself was not properly licensed with the CSLB at all times that they allegedly performed work on PKG Cerritos, nor were the subcontractors hired by Icon.  Accordingly, the burden shifts to Plaintiff to disclose a triable issue of material fact.

            In opposition, Plaintiff submitted evidence to argue that: (1) Icon was properly licensed; (2) True Glass was properly licensed at the time it performed work on behalf of the project; (3) CMC did no work and supplied no material to the project; and (4) Icon was rebranded as Straus and as one and the same identity Icon could not have paid Straus.

            In support of the first contention, Plaintiff submitted evidence to show that Mr. Rymarcsuk was a bona fide employee of Icon. In particular, it submitted evidence that: (1) his application for employment was made to Icon (Rymarcsuk Decl. ¶ 3); (2) the application for employment clearly states that Mr. Rymarcsuk was applying for a full-time position is Chief Construction Estimator (Rymarcsuk Decl. ¶¶ 4-5.); (3) an offer of employment was made by Icon to Mr. Rymarcsuk, which he accepted. On June 10, 2019, Mr. Rymarcsuk was offered the position of Senior/Chief Estimator for Icon, working under the direction and control of Roy Schumacher, Senior Vice President of construction for Icon. (Rymarcsuk Decl. ¶¶ 4-5); and (4) The offer of employment references an annual salary, as well as participation in the Icon health and benefit package. Furthermore, the offer of employment also contained a “Non-Solicitation, NonCompetition and Confidential Agreement,” which states in pertinent part: “This Non-Solicitation and Confidential Agreement (“This Agreement”) is made and entered into as of June 11, 2019, by and between Icon Identity Solutions, Inc. (“Icon”), and together with its subsidiaries and affiliates (“The Company”) and James Rymarcsuk (“Employee”) …” (Rymarcsuk Decl., Exh. B.)

            Plaintiff also submitted evidence to show that Mr. Rymarcusk was not a sham “RME” but was actively engaged in the project. In response to Defendant’s evidence that Mr. Rymarcusk did not visit the project cite, generate or review reports or notes about the Project, or communicate with anyone who had been present at the cite, Plaintiff submitted evidence that the project never started. As such, there was no construction work performed, no meeting calendars to be kept, notes or reports to review, or communications about the construction site to be had. (See e.g. Exhibit 18 to Motion, McHugh Depo. Pg. 24:7-23, McHugh Decl. ¶ 2.)

            Moreover, Plaintiff argued that even assuming there was an actual construction project to supervise, Mr. Rymarcusk's conduct would have been sufficient to qualify as a RME. In support, Plaintiff cited cases like Jeff Tracy, Inc. v City of Pico Rivera (2015) 240 Cal.App.4th 510, which involved issues as to whether or not a business had a proper contractor’s license with an RME qualifier. There, the Court wrote:

…The qualifier must exercise direct supervision over the work for which the license is issued to the extent necessary to secure full compliance with the provisions of the law (Section 7068.1)”(Wright v. Issak, 149 Cal.App.4th 1116, 1123, 58 Cal.Rptr.3d 1 (2007); see Section 7068.1, subd.(a) [qualifier “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 this chapter and the rules and regulation of the board”])

…

 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. (citations) All of these are factual questions that should have been submitted to a jury for determination.

            (Id. at 606-607.)

            Here, Plaintiff submitted evidence that Mr. Rymarcsuk had supervisory duties as to company construction activities, including on a Santa Mix Project, and that Business and Professions Code section 7068.1 does not require work on a specific project.

            The Court agrees that, at the very least, Plaintiff’s evidence supports a reasonable inference that he was employed by Icon, and was a qualified RME. As such, a triable issue of material fact exists as to this issue.

            As to the second contention (i.e., True Glass), Plaintiff concedes that for the period between 1/19/2021 and 2/11/2021, True Glass’s license was suspended. However, Plaintiff submitted evidence that the license was reinstated on 2/11/2021, and the shop drawings that True Glass prepared according to the invoice dated 5/11/21 would have been completed when True Glazing was licensed (Exhibits 17 and 21 to Motion.) Given that Defendant’s evidence does not foreclose the possibility that the work was completed either prior to the suspension or after the license was reinstated, the Court agrees there is a triable issue of fact as to this issue.

            As to the third contention (i.e., CMC), Plaintiff submitted evidence that CMC did not do any construction work on the Project nor did it supply any materials. Joseph McHugh testified “CMC Mechanical never supplied us with the materials.” (See Exh. 18 to Motion, Deposition of J. McHugh Page 60:24-25 and Page 24:7-23.) Given that no license is required if no work is performed or materials delivered, the Court finds there is a triable issue of fact as to this issue.

            Finally, as to the fourth contention, (i.e., the separation between Icon and Straus), Plaintiff submitted evidence that Icon was rebranded as Straus, as thus always existed through the date of termination.

Taken together, this submitted evidence discloses a triable issue of material fact as to all causes of action.

            Based on the foregoing, Defendant’s motion for summary judgment is denied.

It is so ordered.

Dated:  January    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

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