Acco Engineered Sys., Inc. v. Contractors' State License Bd.

• Decision Date: 15 November 2018
• Docket Number: B282944
• Court: California Court of Appeals Court of Appeals
• Parties: ACCO ENGINEERED SYSTEMS, INC., Plaintiff and Appellant, v. CONTRACTORS' STATE LICENSE BOARD, Defendant and Respondent.

30 Cal.App.5th 80

241 Cal.Rptr.3d 227

ACCO ENGINEERED SYSTEMS, INC., Plaintiff and Appellant,

v.CONTRACTORS' STATE LICENSE BOARD, Defendant and Respondent.

B282944

Court of Appeal, Second District, Division 5, California.

Filed November 15, 2018

Hunt Ortmann Palffy Nieves Darling & Mah, Dale A. Ortmann, Pasadena, Lisa Lawrence, Diamond Bar, for Plaintiff and Appellant.

Xavier Becerra, Attorney General, Thomas L. Rinaldi, Supervising Deputy Attorney General, Steve J. Pyun, Deputy Attorney General, for Defendant and Respondent.

MOOR, Acting P.J.Plaintiff and appellant ACCO Engineered Systems, Inc. (Acco) appeals from a judgment denying Acco’s petition for a writ of mandamus. Acco’s writ petition sought review of an administrative decision adopted by the Registrar of the defendant and respondent the Contractors’ State License Board (Board), finding Acco in violation of Business and Professions Code section 7110¹ for failing to obtain a building permit before replacing a boiler.

Acco contends it did not violate section 7110 because it did not willfully disregard the permit requirement. The company argues that both the administrative law judge and the trial judge erroneously interpreted the code section to apply to situations where a contractor inadvertently fails to obtain a permit. Acco further argues that even under the administrative judge’s interpretation, the decision is not supported by substantial evidence. We reject Acco’s various arguments and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Acco is a large contracting company that does over $800 million in work a year, ranging from large projects like the renovation of Dodger Stadium or construction on the Wilshire Grand building to smaller mechanical projects worth a few thousand dollars.

In 2014, the Board investigated a complaint that in 2011 and 2012, Acco had replaced a boiler at a commercial building without obtaining the permits required by a Los Angeles city ordinance that adopts the California Mechanical Code’s permitting requirements. After receiving notice of the Board’s investigation, Acco conducted its own investigation as well. The company acknowledged that permits were required and admitted that no permits were obtained at the time the work was conducted. It belatedly applied for and obtained the necessary permits in July 2014. Acco attributed the failure to obtain the needed permits to the inadvertence of a lower level employee.

The Board issued a citation, imposing a civil penalty of $500 on Acco for violation of section 7110, which provides that "Willful or deliberate disregard and violation of the building laws ... constitutes a cause for disciplinary action." Acco appealed, and an administrative hearing took place in September 2015. Board investigator David Dance and Acco’s Chief Executive Officer Peter H. Narbonne testified. Narbonne is the company’s responsible managing officer or license qualifier for six of Acco’s contractor’s licenses. At the hearing, it was undisputed that permits were required for installation of a boiler and a pressure vessel and that Acco completed the work without obtaining a permit. Both parties presented written briefs and oral argument on the key issue of whether Acco’s failure to obtain the required permits was "willful" within the meaning of section 7110.

The administrative law judge made factual findings, which included the following: Acco had a valid contractor’s license, including a license for the classification of "C-4—Boiler Hot Water Heating & Steam Fitting." In the 2011-2012 time frame, Acco performed work for a customer/building owner to replace a boiler in the building. Acco admitted that a permit was required before work commenced, and that it was responsible for obtaining the permit. Acco further admitted that, by mistake, it performed the work without a permit. Finding number 6 stated in full: "The mistake was that of an employee, a manager who had been instructed to check with [Acco’s] in-house expert on building permits on whether a permit was required. All managers employed by [Acco] were so instructed with respect to any project as to which the question of whether a permit was required might arise. In this instance, the manager failed to check with the in-house expert. The boiler project was to exchange like for like, replacing an old boiler with a new one. Permits are not required for many like-for-like exchanges."² Acco became aware of the mistake when the Board began an investigation. The company "promptly sought a permit for and inspection of the work. The permit issued and by early August 2014, a final inspection of the work took place. No corrections were required."

In its legal conclusions, the administrative judge found no evidence that Acco’s failure to obtain a permit before replacing the boiler was " ‘deliberate’ within the meaning of ... section 7110 ;"³ however, the administrative law judge found that Acco’s conduct was " ‘willful.’ " Noting Acco’s argument that the failure to obtain the required permit was an inadvertent mistake, and therefore should not be considered "willful" under section 7110, the court concluded that Acco’s "manager who decided to proceed without a permit was doing so by disregarding both the law requiring a permit and an instruction from his employer to consult an in-house expert on building permits. ... Such double disregard cannot be characterized as simply inadvertent, but rather willful misconduct within the meaning of the statute." Noting that civil penalties under the statute serve a dual purpose—to punish past conduct and to deter future misconduct—and acknowledging that Acco had made efforts to ensure compliance with the building laws and took prompt action to correct their mistake by obtaining the required permit, the administrative law judge reduced the penalty amount from $500 to the minimum civil penalty of $200.

Acco then filed a petition for a writ of administrative mandamus pursuant to Code of Civil Procedure section 1094.5 with the trial court. Acco’s petition, like the current appeal, asserted that the administrative decision erroneously interpreted section 7110 to not require a showing of specific intent to disregard and violate the building laws. Acco also argued that the Board had the burden to prove a violation of section 7110, and there was no evidence that Acco had willfully violated the building laws. The trial court denied the petition, reasoning that the term "willful" in section 7110 only requires a showing of general intent, not specific intent to violate the law as Acco was arguing. The trial court further found that the administrative record contained substantial evidence to support the administrative law judge’s finding of a willful violation, because Acco’s project manager made an affirmative decision to proceed without a permit when he disregarded his employer’s instructions to consult Acco’s permitting coordinator.

DISCUSSION

Acco does not dispute that a Los Angeles city ordinance required permits for the boiler replacement, or that it did not obtain the required permits and was therefore in violation of the applicable building laws. Acco’s argument for why section 7110 does not authorize disciplinary action in this particular case centers on the meaning of the term "willful" as used in that section. Acco argues that because the failure to obtain the required permits was an inadvertent mistake by a low-level employee, it was not a willful violation of the permit requirement. Acco argues that willful as used in section 7110 must be interpreted to require a specific intent to violate the law. In response, the Board argues that a general intent to act is sufficient to satisfy section 7110 ’s requirement of a willful violation of the permit requirements.

Considering the statutory scheme as a whole, we reject Acco’s arguments and agree with the Board that the Legislature’s use of the term "willful" in section 7110 only requires a showing of general intent. We also conclude there is substantial evidence to support the administrative judge’s determination that Acco willfully violated the applicable building laws. The fact that an individual employee may not have been aware of a specific local permit requirement does not excuse a corporate licensee from complying with the building laws.

Standard of review

On appeal, we review the administrative record to determine whether factual findings were supported by substantial evidence. ( Handyman Connection of Sacramento, Inc. v. Sands (2004) 123 Cal.App.4th 867, 880–881, 20 Cal.Rptr.3d 727 ( Handyman ) [where the challenged sanction is a fine, and not revocation or suspension of a petitioner’s license, the trial court and the reviewing court determine whether substantial evidence supports factual findings]; MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 217–220, 130 Cal.Rptr.2d 564.) We review questions of law de novo, applying our own independent judgment. ( Owen v. Sands (2009) 176 Cal.App.4th 985, 989, 98 Cal.Rptr.3d 167 ; Handyman, supra, at p. 880, 20 Cal.Rptr.3d 727.) To the extent we are engaging in statutory interpretation, "we must give deference to the Board’s interpretations, but not to the exclusion of other tools of statutory construction. ‘[T]he binding power of an agency’s interpretation of a statute or regulation is contextual: Its power to persuade is both circumstantial and dependent on the presence or absence of factors that support the merit of the interpretation.’ ( Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7 [78 Cal.Rptr.2d 1, 960 P.2d 1031] [ ( Yamaha ) ].)" ( Handyman, supra, at p. 881, 20 Cal.Rptr.3d 727.)

Statutory interpretation of the Contractors’ State License Law

"Our role in construing a statute is to ascertain the intent of the Legislature so as to effectuate the purpose of the law. [Citation.] Because the statutory language is generally the most reliable indicator of that intent, we look...