Thoryk Architecture v. Trans West Housing

Filed 7/18/06 Thoryk Architecture v. Trans West Housing CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Sheridan Reed, Judge. Reversed and remanded with directions.

Thoryk Architecture, Inc. (collectively with its principal, Paul Thoryk, referred to herein as Thoryk) filed this action against Trans West Housing, Inc. and its principal, R. Barry McComic (collectively, Trans West), for breach of written agreements pursuant to which Thoryk agreed to manage the remodeling of two homes owned by McComic. Trans West appeals a judgment awarding Thoryk damages, contending that Thoryk was barred from recovering against it pursuant to Business and Professions Code section 7031, subdivision (a) because Thoryk was not licensed as a general contractor. (All further statutory references are to the Business and Professions Code.) Thoryk responds that Trans West was the general contractor for the projects, that it was merely acting as Trans West's agent and that it was entitled to do so pursuant to section 7051, which provides an exemption from the general contract licensing requirement for "a licensed architect . . . acting solely in his or her professional capacity[.]" We agree with Trans West's contention that the scope of the work performed by Thoryk pursuant to the contracts required Thoryk to have a general contractor's license and that Thoryk's lack of such a license precludes any recovery for that work.

FACTUAL AND PROCEDURAL BACKGROUND

Trans West is a real estate developer that specializes in the construction of residential subdivisions and planned residential communities in San Diego and Riverside counties; McComic is Trans West's president and sole shareholder. In early 2001, Trans West entered into two written contracts with Thoryk to act as the "project manager" in connection with the remodeling of two of McComic's homes in La Jolla, one on Via Casa Alta and one on Fairway Avenue. (All further dates are in 2001 unless otherwise specified.) The contracts identified Trans West as the owner of the homes because the parties intended that it would be the general contractor for the remodeling projects. Pursuant to the contracts, Thoryk was responsible for reviewing the project designs and construction documents, sending out plans for bid, hiring subcontractors, reviewing their work, approving their payment requests, obtaining lien releases from them prior to payment and providing a final inspection before occupancy. Each of the agreements included a clause allowing Trans West to terminate it on seven days' written notice.

After work started on the two projects, there were several problems at both sites, as well as other circumstances that resulted in changes in the scope of the work. Based in part on project delays and cost overruns, Trans West became concerned with Thoryk's oversight of the jobs and with its discovery that Thoryk's bills to it included mark-ups to the amounts Thoryk paid to the laborers for their work. In late June, Trans West informed Thoryk in writing that it would terminate the contracts unless Thoryk resolved specifically-identified problems within seven days. Thoryk did not respond to the letter and shortly thereafter, McComic verbally requested that Thoryk stop its work on the Fairway project and focus on the Via Casa Alta project. In October, Trans West terminated the Via Casa Alta contract. After Thoryk's termination, Chris McComic, a Trans West project manager and McComic's son, was placed in charge of supervising the work at the projects.

In October 2002, Thoryk filed this action against Trans West for breach of contract, open book account, account stated, common counts, unjust enrichment, declaratory relief and quantum meruit. Trans West cross-complained against Thoryk for breach of contract, misrepresentation of fact and rescission.

At trial, Trans West moved for nonsuit on the ground that Thoryk was not licensed as a general contractor and thus section 7031 precluded recovery. Thoryk opposed the motion, arguing that the evidence had showed it was hired to act as the agent of Trans West, which remained the general contractor for the projects, retained final approval over the subcontractors selected to do the work and in fact paid many of the subcontractors' bills directly. The trial court denied the motion without prejudice, subject to the issue being raised again at the end of trial.

After both parties rested, the trial court took the entire matter under submission, including Trans West's nonsuit motion, which it ultimately denied. In ruling on the motion, the court declined to make any factual findings as to whether Thoryk directly contracted with and paid subcontractors and engaged in the other conduct alleged by Trans West, noting that the evidence on these points was conflicting. It did find, however, that (1) Trans West was the general contractor on the projects; (2) Trans West hired Thoryk "to perform architectural and project management" on the projects; and (3) to the extent that Thoryk engaged in the alleged conduct, Thoryk was merely acting as Trans West's agent. Based on these findings, the court rejected Trans West's contention that, as a matter of law, Thoryk was acting as the general contractor and thus was not entitled to recover.

The court awarded judgment in Thoryk's favor. It concluded that Thoryk was entitled to recover $99,586.00 on its claims for breach of the contracts, but disallowed the claim for surcharges on the laborers' work and rejected the parties' remaining claims. The court awarded Thoryk attorney fees of $24,127.50 and $2,009.00 in costs. Trans West appeals the judgment.

DISCUSSION

1. General Principles

California has strict licensing requirements that are applicable to a "contractor" or "builder," that is, "any person, who undertakes to or offers 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 . . . ." (§§ 7026, 7028, subd. (a).) The licensing requirements are intended to protect the public from incompetence and dishonesty in those who provide building and construction services by discouraging unlicensed individuals from performing work for which a license is required and to provide "minimal assurance" that persons offering such services have the requisite skill, character, understanding of applicable local laws and codes and knowledge of the rudiments of administering a contracting business. (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 995.)

The statutory scheme accomplishes these goals in several ways. First, section 7028 provides that a person who "engage[s] in the business or act[s] in the capacity of a contractor within this state without having a license therefor" is guilty of a misdemeanor unless that person is expressly exempted from the licensing provisions. Second, section 7031 prohibits an unlicensed contractor from bringing or maintaining any action to collect, or from recovering in law or equity, compensation for the performance of any act or contract for which a license is required. (§ 7031, subd. (a).) In addition, section 7031 provides that a person who has utilized the services of an unlicensed contractor may bring an action to recover any compensation paid to that contractor for such work. (§ 7031, subd. (b); see also Hydrotech Systems Ltd. v. Oasis Waterpark, supra, 52 Cal.3d at p. 995 [holding that an unlicensed contractor was barred from pursuing an action seeking compensation for its work even where the party who hired it knew it was unlicensed].)

There are numerous statutory exceptions to the licensure requirement (§§ 7040 - 7054.5), including the section 7051 exemption for "a licensed architect . . . acting solely in his or her professional capacity." In the proceedings below, Thoryk relied on this exception, contending that it permits a licensed architect to act as the agent for a general contractor or owner in hiring and paying subcontractors for a construction project. Trans West contends that as a matter of law the architect exception does not apply and thus does not bring Thoryk outside the ambit of section 7031.

2. Standard of Review

The parties dispute the standard of review applicable to this appeal. Trans West contends that the only issues are whether Thoryk's services were "solely within the capacity" of an architect within the meaning of section 7031 and whether Thoryk Architecture, Inc. was entitled to rely on Mr. Thoryk's architect license as the basis for claiming an exemption from the licensing law, which it argues are either pure questions of law or mixed questions of law and fact in which the legal issues predominate. By contrast, Thoryk avers that our review is limited to determining whether the trial court's factual findings, including the finding that it acted at all times as Trans West's agent, are supported by substantial evidence.

The issue of whether someone was functioning as an unlicensed contractor is generally a question of fact. (Vaughn v. DeKreek (1969) 2 Cal.App.3d 671, 677; see also Wallich v. Salkin (1963) 219 Cal.App.2d 157, 163 [same].) Here, however, Trans West does not contest the trial court's findings that it was the intended general contractor for the projects and that Thoryk was acting as its agent. Under these circumstances, we review de novo the legal question of whether section 7031 applied to Thoryk in light of the nature of the work it performed. (Walker v. Nitzberg (1970) 13 Cal.App.3d 359, 369 [where the evidence was undisputed that the plaintiff's assignor was not a licensed contractor, the plaintiff was statutorily barred from recovering compensation under the assigned contract as a matter of law].)

3. Analysis

As noted above, "any person, who undertakes to or offers 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" is required to have a contractor's license. (§§ 7026, 7031.) Here, the contracts between the parties provided that Thoryk was responsible for reviewing the project designs and construction documents, sending out the plans for bid, hiring subcontractors, reviewing their work, approving their payment requests, obtaining lien releases from them prior to payment and providing a final inspection before occupancy. In accordance with the contract terms, Thoryk selected and contracted directly with many of the subcontractors, albeit with Trans West's approval; it also often made direct payments to the subcontractors and laborers for their work.

Trans West contends that these activities are of such a nature as to require a general contractor's license. Thoryk contends otherwise, relying on Wallich v. Salkin, supra, 219 Cal.App.2d 157. In Wallich, the property owner hired a licensed architect to act as his agent in overseeing the construction of an apartment building. Pursuant to the contract between the parties, the architect was responsible for obtaining bids for the work, hiring the subcontractors as approved by the owner and supervising the work, for which he was to receive $25,000. (Id. at p. 159.) The owner later filed an action seeking to cancel the $25,000 secured note he had given to the architect on the ground that the architect was required to be, but was not, licensed as a general contractor. (Id. at p. 160.) The court of appeal rejected this argument, holding that the architect acted within the scope of his professional capacity as a licensed architect in supervising the contracting and construction of the project as the agent of the owner and that thus he was not also required to have a contractor's license under the statutory scheme. (Id. at pp. 161-162.)

In reaching its conclusion, the Wallich court relied on several factors, specifically that the architect had not contracted to build the project for a specified total cost, that the architect only entered into subcontracts with the owner's prior written approval and that the owner directly paid all the subcontractors and laborers. Here, although Thoryk likewise did not contract with Trans West to build the project for a specified price, Thoryk admitted that it entered into certain contracts with subcontractors and laborers without Trans West's prior approval. More importantly, the evidence showed that Thoryk not infrequently made payments to the subcontractors and laborers, seeking reimbursement from Trans West thereafter, and that, in the case of the laborers, it charged Trans West not only for the costs of the labor, but purported to impose surcharges for the work.

These facts distinguish the situation here from that presented in Wallich and show that Thoryk did more than simply act as an architect or as Trans West's agent in supervising the remodeling projects. (See Phillips v. McIntosh (1942) 51 Cal.App.2d 340, 342-343 [unlicensed plumber who charged the owner a surcharge in addition to the costs of her employees' labor and materials was not an agent or employee of the owner and thus was required to have a contractor's license in order to recover]; compare Dorsk v. Spivack (1951) 107 Cal.App.2d 206 [holding that a person who supervised the construction of an apartment building as an employee of the owner was not required to be licensed as an architect or a general contractor, relying in part on the fact that the owner rather than the supervisor paid the subcontractors].) Based on the nature of the work Thoryk provided under its contracts with Trans West, it was required to have a contractor's license, but did not. As a result, Thoryk was not entitled to recover compensation or other damages for its work pursuant to the contracts and the judgment must be reversed. This conclusion renders Trans West's additional argument and its request for judicial notice moot.

DISPOSITION

The judgment is reversed and the matter remanded with directions to the trial court to vacate the judgment and enter a new judgment in favor of Trans West. Trans West is awarded its costs on appeal.

McINTYRE, J.

WE CONCUR:

NARES, Acting P.J.

O'ROURKE, J.

Publication courtesy of California free legal advice.

Analysis and review provided by Carlsbad Real Estate Attorney.