Holland v. Morse Diesel International

• Decision Date: 13 February 2001
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 1 Dist. 2001) HENRY HOLLAND, Plaintiff and Appellant, v. MORSE DIESEL INTERNATIONAL, INC., et al., Defendants and Respondents. A088941 Filed

104 Cal.Rptr.2d 239 (Cal.App. 1 Dist. 2001)

HENRY HOLLAND, Plaintiff and Appellant, v. MORSE DIESEL INTERNATIONAL, INC., et al., Defendants and Respondents.

A088941

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE

Filed 2/13/01

(Alameda County Super. Ct. No. 803267-2)

Trial Court:Alameda County Superior Court, Trial Judge:Hon. James Richman

Moore and Moore, Howard Moore, Jr. and Marc J. Days for Plaintiff and Appellant.

Thelen Reid & Priest, David Buoncristiani, Kevin O'Brien and Jeffrey S. Bosley for Defendant and Respondent

CERTIFIED FOR PUBLICATION

Parrilli, J.

Business and Professions Code section 7031 bars unlicensed contractors from bringing suit to recover compensation for work requiring a license. In this case, we hold that an unlicensed contractor may pursue an action under 42 United States Code section 1981 for racial discrimination during the performance of his contract, but may not seek damages for the defendant's failure to pay sums due under the contract.

Henry Holland appeals from a judgment of dismissal entered after the trial court sustained a demurrer to Holland's second amended complaint without leave to amend.¹ Holland challenges the court's ruling that his status as an unlicensed contractor foreclosed his civil rights claims. Holland also contends he alleged facts sufficient to exempt him from the license requirement. We disagree with Holland regarding the license requirement. However, we agree that his civil rights claims are viable, though they are subject to the limitation on damages imposed by Business and Professions Code section 7031. Therefore, we reverse.

BACKGROUND

Holland's original complaint included causes of action for breach of contract, enforcement of a stop notice, recovery on a public works payment bond, breach of the covenant of good faith and fair dealing, negligent and intentional misrepresentation, and civil rights damages under state law (Civ. Code, 51.5, 52, & 52.1, and Lab. Code, 1735). It named as defendants a general contractor, Morse Diesel International, Inc. (MDI), two MDI supervisors, the Regents of the University of California, and two surety companies, Seabord and American Home Assurance. Holland, an African American, alleged that he had a contract with MDI to provide clean-up services at a university construction project. During the job, he complained about incidents of racial discrimination against himself and his laborers that created a hostile work environment. After this complaint, MDI informed Holland for the first time that he was required to pay his laborers a prevailing wage rate. It then asked him to perform services beyond those specified in his written contract, which he did. However, when Holland complained again about racial discrimination, MDI retaliated by preventing him from completing the job, refusing to pay him for work already done, and charging him for incomplete performance that was caused by MDI's own refusal to honor the contract. MDI did not breach its contracts with white subcontractors.

MDI and its sureties demurred on the ground that Holland was an unlicensed subcontractor, and therefore Business and Professions Code section 7031 precluded him from recovering any compensation. The trial court rejected Holland's claim that the alleged facts showed he was a supplier of labor and materials rather than a contractor. It sustained the demurrer, giving Holland leave to amend only his civil rights claims. The first amended complaint repeated Holland's original civil rights causes of action and added claims under federal statute (42 U.S.C. 1981), the California Constitution (art. I, 8), and the Government Code ( 12920, 12921, and 12940, subd. (a)). The only named defendants were MDI and its supervisors. The alleged facts were essentially the same, though Holland added a claim that MDI's project superintendent had intentionally ridiculed him in front of contractors and laborers. Holland also included the claim that when MDI asked him to provide further labor, it agreed to compensate him at the prevailing rate.

MDI and the individual defendants demurred again, contending that "[a]ll of Plaintiff's causes of action are thinly veiled attempts to obtain compensation to which he is not entitled as an unlicensed contractor." (Underlining in original.) The court sustained the demurrer with leave to amend the original civil rights claims and analogous claims under federal statute. It struck the other claims because Holland had not sought leave to add them.

Holland's second amended complaint named only MDI as a defendant, and included only claims under 42 United States Code section 1981, for race discrimination in contract terms and conditions and for retaliation. Holland added factual allegations that he had complained to MDI about not being regularly compensated, while similarly situated non-African Americans were receiving payment; that after retaliating against him MDI had compensated an unlicensed non-African American for providing clean-up labor; that MDI did not discover Holland's lack of a license until after its retaliatory refusal to compensate him; and that MDI had a policy of contracting with non-Caucasian persons for clean-up labor and discriminating against these laborers by paying them less than the prevailing wage it paid to Caucasian suppliers of labor. The court sustained MDI's demurrer to the second amended complaint, on the ground that Holland's action was barred by Business and Professions Code section 7031.

DISCUSSION

MDI's demurrer admits all material facts properly pleaded by Holland. If those facts support a cause of action under any valid theory, the complaint survives the demurrer. (Mac v. Bank of America (1999) 76 Cal.App.4th 562, 564.) If the second amended complaint contradicts or omits facts pleaded in Holland's first two complaints, we will take judicial notice of the earlier complaints and disregard inconsistent allegations, absent an explanation for the inconsistency. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877; Colapinto v. County of Riverside (1991) 230 Cal.App.3d 147, 151.) We may also take notice of exhibits attached to the complaints. If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 567-568.)

We address Holland's claims on the license requirement first, since if he was not an unlicensed subcontractor Business and Professions Code section 7031 would not apply.²

1. The Complaints Establish Holland's Status as a Contractor

The Business and Professions Code specifically includes "the cleaning of grounds or structures" as among the functions performed by contractors, and provides that "[t]he term contractor includes subcontractor." (Bus. & Prof. Code, 7026.) Holland, however, argues that that he was merely a supplier of labor, not a contractor. He relies on the following distinction drawn in Contractors Labor Pool, Inc. v. Westway Contractors, Inc. (1997) 53 Cal.App.4th 152: "[T]he [licensing] law need apply only to those who actually perform or supervise the performance of construction services; it need not apply to those who only supply materials to be used by others or laborers who will be supervised by others. Thus, a person or company in the business of supplying equipment or hiring out laborers to be supervised by others is not deemed to act in the capacity of a contractor and is not required to have a license. [Citations.]" (Id. at p. 165.) The court held that Contractors Labor Pool, which supplied a variety of temporary construction workers on an hourly basis to a subcontractor on a railway project, did not act as a contractor but merely furnished labor for the project. (Id. at pp. 156-157, 167.)

Holland's second amended complaint is carefully couched in terms of "furnishing labor and material." Nevertheless, certain factual allegations strongly suggest that he was performing construction services rather than simply providing laborers to MDI. The complaint states that when Holland told MDI's project manager he was paying his laborers $8 per hour, the manager informed him for the first time that the prevailing wage of $35 per hour was required. If Holland were merely providing labor at an agreed rate, rather than performing a job for a fixed bid, this scenario would have been impossible. The second amended complaint also alleges that the project superintendent at one point asked Holland "to supply additional labor and re-clean the third level corridor." The superintendent would not have directed Holland to have his laborers perform this task if Holland were only furnishing laborers to be supervised by MDI.

The earlier complaints clearly establish that Holland was a subcontractor. The original complaint alleged that Holland contracted "to perform a certain specified portion of the original contract" between MDI and the university, an unmistakable description of a subcontract. The contract attached as an exhibit to this complaint confirms that Holland agreed to perform clean-up services for a fixed price, not on an hourly basis. In the first amended complaint, Holland alleged that he had "performed his work for Defendant MDI in a completely satisfactory manner." This claim is inconsistent with the contention that he merely provided laborers for MDI's use. The first amended complaint further alleges that MDI breached Holland's contract but "did not breach the contracts of white subcontracts [sic] and paid white subcontractors the prevailing wage." Such an allegation as part of a discrimination complaint is tantamount to an assertion that Holland too was a subcontractor.

Holland alternately contends he might be considered an employee of MDI, within the holdings of Cargill v. Achziger (1958) 165 Cal.App.2d 220, and Jackson v. Pancake (1968) 266 Cal.App.2d 307. However, none of Holland's complaints includes the...