Wednesday, September 16, 2015
Court of Appeal Rules:
Contractor Entitled to Have Jury Decide if It Had a Valid License
By a MetNews Staff Writer
The Court of Appeal for this district held, in an opinion certified for publication yesterday, that the trial court improperly ordered a company to refund the $5.5 million it was paid by the City of Pico Rivera for work on a project, holding that it was entitled to have a jury decide whether it held a valid contractor’s license.
Div. Two, in an opinion by Acting Presiding Justice Judith Ashmann-Gerst, said that Los Angeles Superior Court Judge Thomas I. McKnew, Jr. erred in deciding the matter on his own, under the authority of Code of Civil Procedure §597.
That section provides that a judge may decide any “special defense” that is raised.
After Jeff Tracy, Inc., doing business as Land Forms Construction—which had been chosen through competitive bidding to do renovation work at a city park—sued the city for more money, the city cross complained against the contractor, seeking disgorgement of all sums paid, invoking Business and Professions Code §7031(b), which declares that, in general, “a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract.”
The city persuaded McKnew that the contractor “used a sham Responsible Managing Employee” to gain the requisite “Class A” license, while the RME actually provided no supervisorial services.
Code Section Inapplicable
The appeals court reversed, holding that §597 was inapplicable. Ashmann-Gerst explained:
“By statute, a contractor seeking damages must allege and prove it held a valid license before it can prosecute any claim for damages….
“Accordingly, by finding the issue of licensure to be a special defense rather than an element of Land Forms’ breach of contract claim, the trial court abused its discretion in relying on Code of Civil Procedure section 597 to deny Land Forms a jury trial on this issue.
“This conclusion is buttressed by the fact that, here, the determination of whether Land Forms’ held a valid class A license involved questions of fact.”
The jurist said in a footnote:
“It is well established that the right to a jury trial is the same today as it existed at common law in 1850, when the Constitution was adopted. Because a plaintiff had a common law right to jury trial for a breach of contract cause, so too does such a right exist today….The current legislative requirement that a contractor plaintiff must, in addition to proving the traditional elements of a contract claim, also prove that it was duly licensed at all times during the performance of the contract does not change this historical right to a jury trial.”
The appeals court provided guidance for the trial court on remand. If it is found by a jury that Land Forms did not validly hold a “Class A” license, disgorgement of the entire amount paid to it would be required, Ashmann-Gerst said, rejecting its argument that it should be paid for all work which a lesser license it held qualified it to do.
Sec. 7031(b), she noted, allows a party utilizing services of an unlicensed contractor “to recover all compensation paid to the unlicensed contractor for performance of any act or contract.” Ashmann-Gerst said that “the word ‘all; in the statute has been interpreted to mean just that, all compensation without any offsets.”
The case is Jeff Tracy, Inc. v. City of Pico Rivera, B258563.
John L. Dodd, Benjamin Ekenes; and Darryl J. Paul of John L. Dodd & Associates represented the contractor. Wayne W. Call and Todd C. Bouton of Call & Jensen were attorneys for the city.
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