Chu v. Choi

Filed 6/22/07 Chu v. Choi CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Soussan G. Bruguera, Judge. Affirmed.

Frederick W. Lee and Eric M. Sasahara for Defendant and Appellant.

Mark Ravinovich for Plaintiffs and Respondents.

Plaintiff Chan Ung Chu sued defendant Ick Chool Choi for breach of a construction contract and fraud. The trial court granted plaintiffs motion for summary adjudication on the breach of contract claim, ruling that under Business and Professions Code section 7031, subdivision (b) plaintiff was entitled to a refund of his $30,000 down payment because defendant was an unlicensed contractor.[1] Plaintiff thereafter voluntarily dismissed his fraud claim,[2]and judgment was entered in plaintiffs favor in the sum of $30,000 plus costs. Defendant appeals from the judgment, contending that the trial court erred in summarily adjudicating the contract claim in plaintiffs favor. We affirm.

BACKGROUND

A. The Complaint

Plaintiff and co-plaintiff Mu Chin Dietke filed a complaint against defendant in which plaintiff alleged two causes of action, for breach of contract and fraud, and co-plaintiff Dietke alleged one, for sexual assault and battery.

1. Breach of Contract

Plaintiffs breach of contract claim alleged that on March 14, 2005, plaintiff entered a written contract with defendant under which defendant would perform certain construction work on plaintiffs primary residence located at 152 South Serrano Street in Los Angeles. According to the complaint, plaintiff performed each and every covenant of the Contract, except for those covenants the performance of which was prevented by Defendant, and [w]ithin four years from the date of this complaint, plaintiff breached the contract by (a) failing to perform work in accordance with engineering specifications; (b) failing to obtain permits for work performed; (c) abandoning the project in its entirety; and (d) failing to refund the down-payment made by the Plaintiffs. Plaintiff alleged that he suffered damages of no less than $49,600.

Attached to the complaint were a copy of the alleged contract, written in Korean, and a certified English translation of the contract. The contract (as translated) stated in relevant part that the [t]otal cost of construction for the rear house at 152 South Serrano shall be $305,000.00. It then listed several items, as follows:

1. Responsible for the inspection cost

2. Responsible for the cost of obtaining a permit

3. Responsible for the cost of designing

4. Work specifications:

Responsible for the installation of an iron gate and a motor

Responsible for paving the entire front parking lot with concrete

First floor 1 kitchen, 2 rooms with a bathroom in each room

Second floor 7 rooms with a bathroom in each room

Third floor 4 rooms with a bathroom in each room

Total number of rooms to be 14

All bathrooms to have tiled floors

All kitchens to have tiled floors

Installation of an 8-ton air conditioner and heater

3/4 copper pipes to be used for plumbing

70 gallon water heater to be installed

Carpet to be installed on the first floor. Carpet to be selected by the owner.

Hard-wood flooring to be layed [sic] on the entire second floor.

Carpet to be installed on the third floor.

Time of construction to be approximately four months.

The contract provided that the initial payment was to be 20 percent, with 20 percent due at completion of the second floor, and 30 percent due at completion of the third floor. The remaining balance due was 30 percent.

Plaintiff signed contract as the property owner. Defendant signed as the person responsible for the construction.

2. Fraud

In his fraud claim, plaintiff alleged that defendant induced plaintiff to enter the construction contract and make a $30,000 down payment by representing that he was licensed as a contractor by the State of California. In fact, according to the complaint, defendant was not so licensed. After receiving the down payment, defendant abandoned the project, leaving the property semi-demolished. As a result, plaintiff suffered damage of no less than $49,600. Plaintiff also sought punitive damages.

3. Sexual Assault and Battery

In the claim for sexual assault and battery, it was alleged that defendant made sexual advances to co-plaintiff and fondled her. Before the motion for summary judgment at issue in this appeal, this claim was dismissed.

B. Summary Judgment/Adjudication Proceedings

1. Plaintiffs Motion for Summary Adjudication

Plaintiff moved for summary adjudication of his breach of contract claim. In the motion, plaintiff sought return of a $30,000 down payment plaintiff had made to defendant, on the ground that defendant was not licensed as a contractor by the State of California, and that section 7031 entitled plaintiff to a return of his $30,000 down payment.

Plaintiffs separate statement of undisputed facts stated that on March 14, 2005, defendant entered a contract with plaintiff the written contract attached to the complaint -- to perform construction work at plaintiffs property at 152 South Serrano. Plaintiff paid defendant $30,000 as a down payment for the construction work. Defendant, however, is not licensed as a contractor by the State of California. Defendant began performing construction work on March 14, 2005, and performed preliminary work between March 15 and March 30. On or about March 30, plaintiff told defendant to stop work. Defendant performed none of the work specifications required by the contract.

2. Defendants Opposition

In opposition to the motion, defendant did not dispute that he signed an agreement with plaintiff, that plaintiff paid him $30,000 as a down payment, and that he began performing construction work on the property on March 14, 2005. However, he disputed the meaning and terms of the contract, and argued that the contract did not demonstrate that he acted in the capacity of a contractor. Rather, according to defendant, plaintiff acted as his own contractor, and defendant worked under plaintiffs supervision. Therefore, according to defendant, there was a triable issue whether defendant was a contractor under the terms of the contract, and plaintiff was not entitled to summary adjudication on the basis of section 7031. Defendant also argued that unbeknownst to him, plaintiff and co-plaintiff were involved in illegal activities, which prevented the formation of a lawful contract because of mistake and illegality of consideration.

According to defendants evidence, plaintiff rented and lived at defendants house for three months, and admired the work defendant had done at the house. After plaintiff moved out, plaintiff and co-plaintiff Dietke wanted defendant to do work on their home. Defendant refused, and told them that he did not have a contractors license. However, defendant agreed to do the work after numerous requests, and signed an agreement written in Korean dated March 14, 2005. The contract was prepared by plaintiff.

Defendant understood the contract to mean that plaintiff was acting as his own general contractor. Plaintiff had cleared this . . . with the city building department, and told defendant that he had extensive experience as a contractor working overseas, and knew all aspects of building construction. Defendant was to work under his supervision on the job. [Plaintiff] was responsible for the inspection cost, permits, design and work specifications. The [sum of] $305,000.00 [stated in the contract] was the total amount that [plaintiff] expected to spend as his own general contractor, and was not the money that Defendant was to receive. Defendant was to receive approximately $50,000 for his labor and services, to be paid in two installments. Defendant received $30,000 on or about March 14, 2005 as a down payment.

According to defendant, his understanding of the Korean words translated from the written contract as person responsible for the construction, is something more like a job foreman as it was agreed that [plaintiff] was to be his own contractor and he would daily tell Defendant what he wanted to get done, and what Defendant was supposed to do.

Defendant started work on March 14, 2005. Plaintiff hired his own architect, and hired other named persons who performed the concrete and carpentry work under plaintiffs supervision. Defendant, too, did several jobs in the construction and labor under [plaintiffs] direct supervision.

On or about March 30, 2005, the day before plaintiff was to pay defendant the second installment of $20,000, plaintiff said that he could not make the payment. He accused defendant (falsely) of making inappropriate sexual contact with co-plaintiff and told defendant to stop work. In April 2005 defendant demanded defendant pay back the down payment and alleged that the house had been damaged.

Defendant later learned that plaintiff and co-plaintiff were involved in a money-laundering scheme, and were building the house for the purpose of prostitution. Co-plaintiff was arrested for these activities. Plaintiffs had forged defendants signature to gift letters to close escrow on the house and [d]efendant was similarly duped into signing what they [plaintiff and co-plaintiff] claim is a construction contract. Defendant never intended to sign the contract as a contractor. [Plaintiff] never agreed to pay [defendant] $305,000.00 as is stated in the written contract. If this was intended, then Defendant was mistaken, as Defendant did not even receive an initial payment of 20% of the $305,000.00, which would have been $61,000.00 if that were intended, and it does not match with the sums of $30,000.00 which Defendant actually received, or the further sum of $20,000.00 that Defendant was to be paid.

Had defendant known of plaintiffs illegal activities, he would not have signed the contract or handled money. Further, plaintiff told defendant that if defendant advanced monies for him for other laborers and materials, he would be reimbursed. According to defendant, [w]ith the monies Defendant paid for expenses that have not been reimbursed to him, and his daily hourly rate for labor spent on this job, Plaintiffs . . . owe him money. Defendant attached receipts to his declaration, which show that he purchased such construction materials as lumber, rebar, anchor bolts, and concrete mix.

3. Plaintiffs Reply

In reply to defendants opposition, plaintiff argued that the written contract unambiguously showed that defendant executed the contract in the capacity of a contractor, and that in any event defendants own evidence demonstrated that defendant fell within the statutory definition of a contractor.

4. The Trial Courts Ruling

At the hearing on the motion, the trial court stated that its tentative ruling was to grant summary adjudication because section 7031 entitled plaintiff to a refund. Defendants attorney argued (as was argued in the written opposition) that there was a triable issue as to the meaning of the written contract and whether, under the terms of the contract, defendant acted as a contractor. The court disagreed, and granted summary adjudication. Plaintiff later dismissed his fraud cause of action, and judgment was entered for $30,000 plus costs in plaintiffs favor on the breach of contract cause of action.

C. Defendants Motion for New Trial or to Vacate the Judgment

Defendant moved for a new trial. The substance of the motion was that plaintiffs breach of contract claim, as pled, did not allege defendants lack of licensure as a breach. Further, plaintiff did not allege a cause of action under section 7031, and did not move to amend his breach of contract claim complaint to allege section 7031 as a basis for recovery. According to defendant, if plaintiff had moved to amend, defendant could have opposed the amendment or sought further discovery as a condition for permitting the amendment. Defendant argued that he was prejudiced by plaintiffs delay . . . in exposing [the] legal theory of the contractual case until the time of the summary judgment motion, and was further lulled into not raising the issue until this motion for new trial, because [plaintiff] never sought any amendment. Defendant sought to fit his argument into a host of purported grounds for a new trial: irregularity in the proceedings depriving him of a fair trial (Code Civ. Proc.,  657, subd. 1); accident or surprise, which ordinary prudence could not have guarded against (id., subd. 3); newly discovered evidence which he could not have reasonably discovered (id., subd. 4); insufficient evidence and decision against the law (id., subd. 6); and an error in law to which he objected (id., subd. 7). In the alternative, defendant moved to vacate the judgment due to an incorrect or erroneous legal basis for the courts decision, not supported by the facts. (Code Civ. Proc.,  663, subd. 1.)

Plaintiff opposed the motion. He pointed out that (among other things) defendants claim to have had no notice of plaintiffs theory of recovery under section 7031 lacked merit because section 7031was the entire basis for the summary adjudication motion, and defendant opposed the motion by trying to create a triable issue whether he acted as a contractor under section 7031.

Defendant submitted on the motion without appearing at the hearing, and the court denied the motion by minute order.

DISCUSSION

Reiterating the argument raised in his alternative motion for a new trial or to vacate the judgment, defendant first argues that his unlicensed status was not alleged as a breach of contract, and that plaintiff never sought to amend his complaint to seek relief on the ground that defendant was unlicensed. Therefore, according to defendant, his unlicensed status was not an issue raised by the complaint, and the trial court could not grant summary adjudication on that basis under section 7031. We disagree.

Defendant failed to raise this issue in opposition to the motion for summary adjudication. Rather, he opposed the motion on the grounds that there was a triable issue whether he was a contractor under the contract, and whether the contract was void for illegality or voidable for mistake. He never argued that because his lack of licensure was not alleged as a breach of contract, section 7031 could not provide a ground for relief. Therefore, he has forfeited the issue on appeal. (See Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488 [plaintiffs failure to raise theory of damage in opposition to defendants summary judgment motion forfeited issue on appeal from grant of summary judgment in defendants favor] (Ochoa); see also North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 29 [noting unfairness of permitting party on appeal to advocate new theory of opposition to summary judgment] (North Coast).)

Defendant argues that he timely raised the issue by way of his motion to vacate the judgment under Code of Civil Procedure section 663, which was made in the alternative to his motion for a new trial. He contends that he sought to have the judgment vacated on the ground of an incorrect or erroneous legal basis for the decision. However, the motion to vacate was not properly brought. In substance, defendants motion to vacate sought to set aside the grant of summary judgment, and have the case restored to the trial calendar. But a motion to vacate under section 663 does not lie to vacate a summary judgment and remit an action for trial. (Forman v. Knapp Press (1985) 173 Cal.App.3d 200, 203.) Thus, raising the issue in connection with the motion to vacate did not preserve the issue for appeal.

Although not mentioned by defendant in his argument on appeal, we note that a grant of summary judgment may properly be challenged by a motion for new trial. Defendant made such a motion here. But when (as in the instant case) the relevant basis of the new trial motion is that the court committed an error of law occurring at trial (Code Civ. Proc.,  657, subd. 7), the party seeking a new trial must have objected to the error during the trial. (See 8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court,  45, pp. 550-551; Wegner, et. al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2006),  18:194, p. 18-43.) As we have discussed, defendant did not argue in opposition to summary adjudication that his unlicensed status was not pled as a breach of contract, and that section 7031 could provide no legal basis for adjudication of the breach of contract claim. Thus, the issue was not preserved for the new trial motion, and likewise was not preserved for appeal.

Finally, we observe that defendants failure to raise the issue in opposition to the motion for summary adjudication prejudiced plaintiff. Plaintiff was deprived of the opportunity to respond to this argument by seeking to amend the complaint to allege section 7031 as a ground for relief in the breach of contract claim, or in a separate cause of action. Hence, it would be unfair to plaintiff to permit defendant to challenge the judgment on a ground he did not raise in opposition to summary judgment. (See North Coast, supra, 17 Cal.App.4th at p. 29.) Further, defendants claim of prejudice is unpersuasive. The breach of contract claim alleged that defendant failed to refund plaintiffs down payment. Defendants unlicensed status was pled in plaintiffs fraud cause of action. Thus, defendant was on notice long before the summary adjudication motion of his need, if any, to conduct discovery on the issue whether his lack of licensure might entitle plaintiff to a refund of his down payment. Further, the summary adjudication motion itself gave notice that plaintiff was seeking relief under section 7031, so defendant cannot credibly claim to have been surprised as to the basis of the courts ruling.

Next, defendant argues that there is a triable issue of material fact whether the language of the contract made him a contractor. However, without regard to issues of contract interpretation, the undisputed evidence demonstrates that defendant was a contractor as that term is statutorily defined, and that plaintiff was entitled to a return of his $30,000 down payment under section 7031.

Section 7031, subdivision (b), provides in relevant part that 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. Section 7026 defines the word contractor to include any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, . . . or does himself or herself . . . , construct, alter, repair, add to, subtract from, improve [or] demolish any building, . . . or other structure, . . . or improvement, or to do any part thereof.[3] Similarly, section 7026.1, subdivision (b) provides in pertinent part that the term contractor includes [a]ny person . . . who . . . undertakes, offers to undertake, [or] purports to have the capacity to undertake . . . to construct any . . . home improvement project, or part thereof.

At the very least, the undisputed evidence showed that defendant was a person who by contract undertook construction work to alter or improve plaintiffs residence. In opposition to summary adjudication, defendant did not dispute that he entered the written contract attached to plaintiffs complaint relating to construction work to be performed at plaintiffs property. He did not dispute that he signed the contract as the person responsible for the construction, although he understood the Korean wording of the contract to be more accurately translated as something more like job foreman. Defendant did not dispute that he was paid $30,000 as a down payment for his work, or that he purchased materials used in the construction at the house, or that he performed construction work there under the contract. This evidence established as a matter of law that by contract defendant undertook to, and did, engage in construction work to alter or improve plaintiffs residence, and that he was therefore a contractor within the meaning of sections 7026 and 7026.1.

In determining whether there is a triable issue of material fact concerning defendants status as a contractor, it is immaterial that defendant may have considered himself to be more like a job foreman than literally the person responsible for the construction under the contract, or that plaintiff told defendant what he wanted to get done, and what Defendant was supposed to do. The salient, undisputed fact is that by contract defendant undertook to, and did, perform construction work to alter or improve plaintiffs residence. He was, thus, a contractor within the meaning of sections 7026 and 7026.1. (See Contractors Labor Pool, Inc. v. Westway Contractors, Inc. (1997) 53 Cal.App.4th 152, 165-166 [noting that persons who contract to perform construction services are plainly within the scope and purposes of the Contractors State License Law, and distinguishing such persons from those who simply furnished laborers to another, and did not actually perform or supervise any construction services or contract, bid or promise to do so].) Because defendant acted as a contractor, plaintiff was entitled under section 7031 to a return of the $30,000 down payment he made for defendants services.

Defendant argues that he produced evidence that plaintiffs were involved in a money laundering scheme and were building the house for the purpose of prostitution. He also produced evidence that plaintiffs had forged his signature to gift letters to close escrow on the house. According to defendant, he was unaware of these activities, and was similarly duped into signing the construction contract. Therefore, defendant contends that he raised triable issues whether the existence of the contract was vitiated by the defenses of unclean hands, mistake, and illegality.

For several reasons, defendants evidence raised no triable issue as to whether plaintiff was entitled to a refund of his $30,000 down payment under section 7031. As to the defense of unclean hands, defendant did not argue in opposition to summary adjudication that plaintiffs conduct gave rise to the defense of unclean hands. Therefore, defendant has forfeited that issue. (See Ochoa, supra, 61 Cal.App.4th at p. 1488.) Contrary to defendants position on appeal, plaintiff had no burden to produce evidence to negate the existence of this defense or any other -- when moving for summary adjudication. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2006)  10:235, p. 10-89; Code Civ. Proc.,  437c, subd. (p).) Even if the issue were preserved, the equitable doctrine of unclean hands is no defense to an unlicensed contractors liability under section 7031. [I]t has long been settled that the courts may not resort to equitable considerations in defiance of section 7031. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 423 [holding judicial estoppel inapplicable to permit unlicensed contractor to recover for work performed] (MW Erectors).)

As for the defense of illegality, defendants evidence raised no triable issue concerning the validity of the construction contract. Defendants evidence had nothing to do with any purported illegality of consideration (cash is legal consideration, regardless of its source) or illegality of contractual objective (constructing improvements to a house is not illegal). At best, defendants evidence showed that the construction contract might indirectly aid illegal conduct that is, perhaps the money paid to defendant came from a money-laundering scheme, and perhaps after construction the house would be used for prostitution. But [a]n independent, lawful contract will not ordinarily be denied enforcement for being remotely connected with or indirectly aiding in the accomplishment of an illegal object. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts,  423, p. 464.) Defendant presented no evidence or argument in the trial court, and he presents no argument on appeal, to show how the remote relationship of the construction contract to the purported illegalities rendered the contract unenforceable. We see none. On appeal, as in the trial court, defendant relies instead on plaintiffs failure to negate Defendants claim to this defense. But plaintiff had no such burden in moving for summary adjudication, and it is for defendant to point to a triable issue of material fact based on this affirmative defense. Defendant fails to do so.

Finally, defendant argues that the defense of mistake applies to render the contract unenforceable, because he was unaware of plaintiffs illegal activities, would not have entered into the contract if he had known of them, and in any event never intended to sign the contract as a contractor. Defendant fails to present adequate argument and citation of authority to explain how his evidence fits within the doctrine of mistake so as to form a defense to a breach of contract action, or more importantly a defense to statutory liability under section 7031. He has thus forfeited the issue on appeal. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.) Further, section 7031 applies regardless of the equities between the parties, and even when the person for whom the work was performed has taken calculated advantage of the contractors lack of licensure. (MW Erectors, supra, 36 Cal.4th at p. 424.)

DISPOSITION

The judgment is affirmed.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WILLHITE, J.

We concur:

EPSTEIN, P. J. SUZUKAWA, J.

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line attorney.

[1] All undesignated section references are to the Business and Professions Code.

Section 7031, subdivision (b) provides: Except as provided in subdivision (e) [which does not apply in the instant case], 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.

[2] The complaint also alleged a cause of action on behalf of co-plaintiff Mu Chin Dietke for sexual assault and battery. The co-plaintiffs claim was dismissed before the motion for summary judgment.

[3] Section 7026 provides in full: Contractor, for the purposes of this chapter, is synonymous with builder and, within the meaning of this chapter, a contractor is any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, parking facility, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith, or the cleaning of grounds or structures in connection therewith, or the preparation and removal of roadway construction zones, lane closures, flagging, or traffic diversions, or the installation, repair, maintenance, or calibration of monitoring equipment for underground storage tanks, and whether or not the performance of work herein described involves the addition to, or fabrication into, any structure, project, development or improvement herein described of any material or article of merchandise. Contractor includes subcontractor and specialty contractor. Roadway includes, but is not limited to, public or city streets, highways, or any public conveyance.