Gabrovsky v. Ramlor Construction

Filed 9/29/06 Gabrovsky v. Ramlor Construction CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

I. INTRODUCTION

Appellant, Ianko Gabrovsky, who had been a mechanical subcontractor to respondents, Ramlor Construction Company, Inc. (Ramlor) on two school construction projects, one in Alameda County and the other in San Mateo County, sued them in Alameda County Superior Court for amounts allegedly owed him under the two subcontracts. Respondents^[1] cross-complained against him for sums incurred by them in completing work allegedly required of, but not completed by, appellant under the two subcontracts. After considerable pretrial skirmishing, the matter was tried before the court in a single day. Because it found appellant had not proved that he possessed the contractor’s license required by Business and Professions Code section 7031 (section 7031), at the close of the presentation of his evidence, the court granted respondents’ motion for a nonsuit and then ruled in favor of respondents on their cross-complaint. A judgment to that effect was later entered, which we hereby affirm.

II. FACTUAL AND PROCEDURAL BACKGROUND

Commencing in about July 2000, Ramlor was the general contractor to the New Haven Unified School District of Union City, Alameda County, on a school construction project known as the Alvarado Niles Middle School Science Building Addition (the Alvarado Project). On or about July 24, 2000, Ramlor entered into a subcontract with appellant under which the latter was to provide the necessary labor, material and equipment necessary for the mechanical and sheet metal work required for that project. Appellant allegedly commenced work on the project in February 2001 and “substantially completed” it by July 31, 2001. However, according to both the complaint and a later cross-complaint, during that period and thereafter numerous disputes arose between appellant and Ramlor involving, among other things, allegedly deficient and incomplete work performed by appellant, and the non-payment of sums allegedly owing to appellant by Ramlor under the subcontract.

On March 1, 2001, apparently before any of these disputes surfaced, the parties entered into a second subcontract, this time involving modernization of a Palo Alto school’s heating and air conditioning system (the Gunn Project). Again on that project, Ramlor was the general contractor and appellant a mechanical subcontractor. Although appellant apparently started work on the Gunn Project, he allegedly abandoned it, requiring Ramlor to hire another mechanical subcontractor to complete that work.

On February 6, 2003, appellant sued Ramlor for sums allegedly due him under his subcontract on the Alvarado Project. In that complaint, appellant specifically alleged that he was licensed as a contractor under California law. Respondents first filed a general denial and then, on October 14, 2003, a cross-complaint. The latter pleading covered not only their claims against appellant on the Alvarado Project, but also their claims relating to his alleged abandonment of his work as a subcontractor on the Gunn Project.

Appellant filed a demurrer to respondents’ cross-complaint, which was denied on or about December 1, 2003. The court ordered that appellant’s answer to the cross-complaint be filed by December 22, 2003. On the same day, the same court granted the motion of appellant’s counsel to withdraw from the case. Thereafter, including in this court, appellant has proceeded in pro per.

Appellant apparently failed to comply with the order that he answer respondents’ cross-complaint and they took his default regarding it on February 18, 2004.

With an imminent trial date of March 19, 2004 (later continued), on March 15, 2004, respondents served appellant with several motions in limine, including one (labeled No. 5) asking for a non-suit because appellant “has failed to provide his certificate of license. Accordingly, Business and Professions Code . . . § 7031 bars all of [appellant’s] claims.” Because of the continuance of the trial date, the motion was not filed with the court at that time.

On April 1, 2004, appellant filed a motion to set aside his default. Respondents opposed that motion and the matter was argued before the Honorable Steven Brick on April 7, 2004. After hearing argument, Judge Brick entered an order setting aside appellant’s default, but on two conditions, namely, that appellant pay respondents “reasonable attorneys’ fees incurred in relation to the default” and, secondly, that appellant “is further ordered to produce all documents requested by” Ramlor by the following day, April 8.

On June 16, 2004, respondents re-served appellant with their motion in limine No. 5 relating, as noted above, to the licensure issue. That motion was filed with the court on August 6, 2004. There is no evidence in the record that any opposition to this motion was filed by appellant.

On August 9, 2004, a court trial was held before the Honorable Harry R. Sheppard; appellant appeared in pro per. Both parties made opening statements. In the course of hers, respondents’ counsel specifically noted that her clients disputed that appellant “was licensed throughout the term of the contract” and further noted that it was appellant’s “burden to show that.”

Appellant and one other person then testified in support of his case. During cross-examination of appellant by respondent’s counsel, the issue of his licensure was discussed at considerable length. Respondent’s counsel pointed out to the court that (1) their motion in limine No. 5 had twice been served on appellant prior to trial, the first time on March 15, 2004, and (2) Judge Brick had, in the conclusion of his April 7 order relieving appellant’s default, specifically required that all documents requested by respondents be produced by appellant the following day.

In response to numerous questions from the court and respondents’ counsel on the subject of the current validity of his license, appellant testified that his contractor’s license was “suspended” by the state Contractors’ Licensing Board (Board) after respondents had filed their cross-complaint against appellant in October 2003. More specifically, appellant admitted that the suspension occurred in March or April 2004. This suspension, both appellant’s testimony and the unobjected-to statements of counsel for the respondent surety company indicated, was apparently due to appellant’s inability to post the surety bond required by the Board.

As a result of this evidence, Judge Sheppard granted respondents’ motion for a nonsuit and, on August 24, 2004, entered judgment for respondents in the principal amount of $98,426.22, plus interest in the amount of $22,439.04 through August 9, 2004 (plus per diem interest of $26.97 per day thereafter) and attorney fees and costs to be determined later.

On October 15, 2004, the trial court ordered appellant to pay respondents’ attorney fees in the amount of $46,125.52 and costs in the amount of $6,893.

On the same day, appellant filed a document entitled “[Opposed] Judgment [sic] After Court Trial” which, among other things, recited that appellant “did not receive the paper for court judgment [and] is asking the court for permeation [sic] to appeal above case.”

Appellant filed a formal notice of appeal on February 9, 2005, well after 60 days from the filing and service of the August 24, 2004, judgment. Respondents moved to dismiss the appeal as untimely, a motion we granted by an opinion filed July 18, 2005. Appellant then filed a motion to vacate that dismissal, calling our attention to his October 15, 2004, filing. After receiving and considering an opposition to that motion filed by respondents, on September 12, 2005, we conditionally granted appellant’s motion to vacate our dismissal of his appeal, the condition being his payment to respondent Ramlor of a $1000 penalty. Appellant complied with this condition with the result that, by order dated October 7, 2005, we reinstated appellant’s appeal.

III. DISCUSSION

Because the trial court was, as are we now, interpreting and applying a statute, our standard of review is clearly de novo. (See, e.g., Steinfeld v. Foote-Goldman Proctologic Medical Group, Inc. (1997) 60 Cal.App.4th 13, 17.)

Insofar as pertinent to the issues before us, section 7031 provides as follows: “(a) 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 he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought by the person . . . .

(d) If licensure or proper licensure is controverted, then proof of licensure pursuant to this section shall be made by production of a verified certificate of licensure from the Contractors' State License Board which establishes that the individual or entity bringing the action was duly licensed in the proper classification of contractors at all times during the performance of any act or contract covered by the action. Nothing in this subdivision shall require any person or entity controverting licensure or proper licensure to produce a verified certificate. When licensure or proper licensure is controverted, the burden of proof to establish licensure or proper licensure shall be on the licensee.” (§ 7031, subds. (a) & (d), hereafter section 7031(a) & section 7031(d).)

This statute has consistently been interpreted quite strictly by our Supreme Court. For example, just last year that court unanimously reversed a ruling by one of our sister courts of appeal, which had held that a contractor which did not have a license when it entered into a subcontract to (just as here) perform “specialized metal work” on an Orange County Disney hotel could still recover from the general contractor for work performed after it had, thereafter, secured a contractor’s license from the Board. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 419 (MW Erectors.) Because, the unanimous court ruled, the subcontractor did not have a license at the time it executed the contract, under the terms of section 7031(a), it was not entitled to recover for any work done under the subcontract, even that done after it had secured a license.

Some of the language of the court’s unanimous holding demonstrates the strictness with which it interprets and applies this statute. Thus, at one point it stated: “[T]he Court of Appeal's interpretation contravenes well-entrenched case law. Prior decisions express a consistent understanding that one fails to meet the technical requirements now set forth 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. [Citations.] Our close examination of section 7031(a) confirms that these decisions are correct.” (MW Erectors, supra, 36 Cal.4th at pp. 425-426.) Later, the court continued: “[A]s indicated above, it has been understood for decades that section 7031 precludes court recovery for any work performed under an agreement for construction services unless the contractor was duly licensed (or met the applicable standards for substantial compliance with licensure requirements) with respect to all the work performed thereunder. Even so, we are not aware that significant problems of the kind described by amici curiae have surfaced. The statute’s purpose, to encourage careful adherence to the licensing laws, and to deter persons from offering or providing unlicensed contractor services for pay, has apparently been served.” (Id. at p. 430, fn. omitted.)

In support of this interpretation of the statute, the court cited its earlier decision in Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988 (Hydrotech) in which, among other things, the court held: “The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. [Citation.] The licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business. [Citations.]

Section 7031 advances this purpose by withholding judicial aid from those who seek compensation for unlicensed contract work. The obvious statutory intent is to discourage persons who have failed to comply with the licensing law from offering or providing their unlicensed services for pay.

Because of the strength and clarity of this policy, it is well settled that section 7031 applies despite injustice to the unlicensed contractor. ‘Section 7031 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 in the courts of this state. . . .’ [Citations.]” (Id. at p. 995.)

One commentator has summed up the post-Hydrotech law in this area as follows: “Notwithstanding [a subsequent opinion’s] lip service to the doctrine of substantial compliance, the courts made it patently clear that the importance of deterring unlicensed persons from engaging in the construction contracting business outweighs any harshness of the result, regardless of whether the unlicensed contractor suffered a breach of contract or was even the victim of fraud. Even fraud in the inducement did not get the contractor in Hydrotech around the bar of section 7031. It is therefore clear that the lack of a license operates as a complete defense to any claim by an unlicensed contractor to recover compensation whether based on contract, unjust enrichment, or even fraud.” (Imel, Substantial Compliance with the Contractors’ State License Law: An Equitable Doctrine Producing Inequitable Results (2001) 34 Loyola L.Rev. 1539, 1552-1553.)

One specific requirement of section 7031(d) is that, if the plaintiff’s licensure is controverted by the defendant in a contractor’s collection action, “the burden of proof to establish licensure or proper licensure shall be on the licensee.” (§ 7031(d).) The appellate courts have strictly interpreted and applied this rule. (See, e.g., Buzgheia v. Leasco Sierra Grove (1997) 60 Cal.App.4th 374, 383-385; Pacific Custom Pools, Inc. v. Turner Construction Co. (2000) 79 Cal.App.4th 1254, 1261.) And exactly this was clearly controverted here. In his initial unverified complaint, appellant pled that he “was duly licensed to do business as [a warm-air heating, ventilation and air conditioning specialty contractor] in the State of California.” Respondents filed a general denial of the allegations of this complaint. Such a pleading operates to deny “all the allegations of the complaint,” including of course this one. (Walsh v. West Valley Mission Community College Dist. (1998) 66 Cal.App.4th 1532, 1545; see also 5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 986, pp. 444-445.)

More importantly, by their motion in limine No. 5, served on appellant twice (on March 15 and June 16, 2004), respondents very specifically put that issue into contention. The motion was more than just a motion in limine, but specifically asked for a non-suit of appellant because he has “failed to provide his certificate of license. Accordingly, [section 7031] bars all of Gabrovsky’s claims.” This statement was followed by three pages of briefing concerning the impact of section 7031, including citations to several cases, including Hydrotech. As noted earlier, this motion for non-suit was filed with the court on August 6, 2004, and was never opposed by appellant.

At trial, appellant could not and did not produce his contractor’s license, despite a specific admonition from the trial court that he should get such a document over the luncheon recess and have it with him at the afternoon session. Appellant did not do so. He explained that his license had been suspended in March or April of 2004 because, apparently, the filing of the respondent’s cross-complaint triggered a suspension of his surety bond by the bonding company which, in turn, resulted in the suspension of his contractor’s license, which he was currently in the process of trying to get reinstated. However, he represented to the court, during his work on both the Alvarado and Gunn projects, he was licensed.

As the trial court recognized, section 7031(a) provides that “no person. . . acting in the capacity of a contractor, may bring or maintain any action” to collect on a construction contract without establishing his or her licensure. (§ 7031(a), emphasis added.) Further, and as already noted, when such licensure is, as it was here, controverted, the burden of proof of such falls on the alleged licensee, here appellant.

We recognize that this result, like many noted in the authorities cited above, may fall into the “harsh” category. As best as we can understand appellant’s final, and vain, protests to the trial court on this issue, he was apparently licensed at the time (2000 and 2001) he entered into both the Alvarado and Gunn contracts and performed as much work as he did on them. But this license was suspended in March or April of 2004 as, probably, the combined result of (1) his failure to answer respondents’ cross-complaint in the fall of 2003, (2) the consequent entry of a default against him by respondents, (3) the consequent cancellation of the surety bond issued to him by his-then surety company, and (4) the fact that such a bond is essential to the continued viability of a contractor’s license. (See Acret, Cal. Construction Law Manual (6th ed. 2005) § 4:7, p. 270.) And, in all likelihood, another key factor in all of this was the withdrawal of appellant’s counsel at a critical point in time (December 2003) and appellant’s rather dubious decision to proceed in pro per thereafter.

But the fact remains that, whatever the reasons and wherever the responsibility lies, appellant has “maintained” this action without sustaining the burden specifically given to him to show he was during the relevant times, or even is now, a licensed contractor.^[2] Under all the authority just cited, we have no alternative but to affirm the judgment of non-suit against him.

IV. DISPOSITION

The judgment is affirmed.

_________________________

Haerle, Acting P.J.

We concur:

_________________________

Lambden, J.

_________________________

Richman, J.

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^[1] In addition to Ramlor, respondents are Ramiro Anthony Gutierrez and Great American Insurance Company.

^[2] By a motion filed on July 6, 2006, appellant has asked this court to take judicial notice, pursuant to Evidence Code sections 452 and 459, of certain records of the Contractors State License Board. These records appear to suggest that appellant was licensed by that Board during the period of time the work on the two subject projects was being performed by it, i.e., 2001 and 2002, but not during much of the time this action has been pending, i.e., 2004 and thereafter. We deny the motion. As our Supreme Court has pointed out: “Reviewing courts generally do not take judicial notice of evidence not presented to the trial court. Rather, normally ‘when reviewing the correctness of a trial court’s judgment, an appellate court will consider only matters which were part of the record at the time the judgment was entered.’ [Citation.]” Only “exceptional circumstances . . . justify deviating from that rule. . . .” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.; see also Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 910, fn. 4.) No such “exceptional circumstances” exist here, because appellant’s motion does not purport to explain why this evidence was not produced below, as specifically requested by the trial court during the trial and as put into issue by respondents’ motion in limine No. 5.