Hope v. Contractors' State License Bd.

• Decision Date: 10 July 1964
• Citation: 39 Cal.Rptr. 514,228 Cal.App.2d 414
• Parties: Richard C. HOPE, Petitioner and Appellant, v. CONTRACTORS' STATE LICENSE BOARD of the State of California, and Registrar Leo B. Hoschler, Registrar of Contractors, Respondents. Civ. 10755.
• Court: California Court of Appeals Court of Appeals

Page 514

39 Cal.Rptr. 514

228 Cal.App.2d 414

Richard C. HOPE, Petitioner and Appellant, v. CONTRACTORS' STATE LICENSE BOARD of the State of California, and Registrar Leo B. Hoschler, Registrar of Contractors, Respondents.

Civ. 10755.

District Court of Appeal, Third District, California.

July 10, 1964.

Hearing Denied Sept. 2, 1964.

Frank Sterle, Paradise, for appellant.

Stanley Mosk, Atty. Gen., by Vincent P. Lafferty, Deputy Atty. Gen., Sacramento, for respondents.

PIERCE, Presiding Justice.

The contractor's license of appellant, Richard C. Hope, was revoked after a hearing on an accusation charging him with violation of Business and Professions Code, section 7113.5 (as in effect in 1959). Under this section adjudication and acts of bankruptcy are cause for disciplinary action. Hope petitioned the superior court for a writ of mandate commanding respondent board to reinstate him. The writ was denied.

Appellant urges that the 1959 version of Business and Professions Code, section 7113.5, is unconstitutional because (1) it violates the due process clause of the U.S. Constitution, (2) it is an encroachment upon the exclusive powers of Congress to legislate regarding bankruptcy (U.S.Const. Art. I, sec. 8, cl. 4) and therefore violates the 'supremacy clause' (U.S.Const. Art. VI, cl. 2), (3) it constitutes an unlawful delegation of legislative authority to an administrative tribunal. He also urges that, even should he fail to convince in the postulations proffered above, he is entitled to prevail on the proposition (4) that the board acted arbitrarily, capriciously and in abuse of discretion.

Contentions (1), (3) and (4) can be confidently answered. Business and Professions Code section 7113.5, reasonably interpreted, is a valid exercise of the state's police power. The delegation of decision has sufficient guidelines to withstand the charge that it constitutes an abdication of the legislature's responsibility. In exercising the delegated power, the registrar took and weighed evidence and acted reasonably within the vested discretionary power. We also conclude in answer to contention (2), but with awareness of the closeness of the question presented, that there is 'no clear collision' ¹ between the challenged state law and the federal bankruptcy law.

Hope became a licensed contractor in July 1956. He filed a petition in bankruptcy in a federal district court March 17, 1961, was adjudicated a bankrupt on the same day and was discharged from all debts and claims on January 29, 1962.

In November 1961 an accusation was filed, charging that while Hope was licensed and acting in the capacity of a contractor he violated the provisions of said Business and Professions Code, section 7113.5, in that he was adjudicated a bankrupt. A hearing was had and the registrar adopted the proposed recommendation of the hearing officer that Hope's license be revoked. A rehearing was requested, granted and held, after which the hearing officer again recommended revocation and the registrar again adopted the recommendation.

We consider first the question of validity of the code provision and propriety of respondents' proceedings in this case, without regard to the question of the compatibility of the state law and the federal bankruptcy act.

Business and Professions Code section 7113.5, as enacted in 1959, provided in material part:

'The adjudication of bankruptcy of a licensee or the confirmation of any other proceeding under the federal bankruptcy law, including a composition, arrangement, or reorganization proceeding, the appointment of a receiver of the property of a licensee as provided in Chapter 5 (commencing at Section 564) of Title 7 of Part 2 of the Code of Civil Procedure, or the making of an assignment for the benefit of creditors as provided in Title 3 (commencing at Section 3449) of Part 2 of Division 4 of the Civil Code constitutes a cause for disciplinary action.

'If a license is suspended or revoked upon the grounds set forth in this section, the registrar in his discretion may renew or reissue such license upon the condition that each contract undertaken by the licensee be separately covered by a bond or bonds conditioned upon the performance of, and the payment of labor and material required, by the contract. * * *' (Emphasis supplied.)

(The section has been amended twice, in 1961 immaterially to the discussion here and in 1963 to include provision that '[t]he avoidance or settlement by a licensee for less than their full amount of the lawful obligations of such licensee incurred as a contractor' (by bankruptcy, composition, arrangement, assignment for benefit of creditors, etc.) 'constitutes a cause for disciplinary action.' (Emphasis supplied.) The amendment also deleted the provision for renewal of revoked licenses conditioned upon bonding.

Discussion of the legislative power to discipline members of an occupation has as its natural prologue, consideration of the problem of the right of control by the Legislature over occupational licensing (and, indeed, the section above quoted is a component of California's Contractors' License Law). (Bus. & Prof.Code, secs. 7000-7158.)

'The right to engage in a legitimate employment or business receives recognition as a portion of the individual freedoms secured by the due process provision of the federal and state constitutions.' (Doyle v. Board of Bar Examiners, 219 Cal.App.2d 504, 509, 33 Cal.Rptr. 349, 353.) But this right does not close the door to all legislative control over the exercise of the right. As early as 1919 the Supreme Court of California upheld the right of the Legislature, as a proper exercise of the police power, not only to license but also '[w]here the occupation is one of which it can be fairly said that those pursuing it should have certain particular qualifications * * * to exact reasonable assurances of those pursuing the occupation that they do possess these qualifications.' (Riley v. Chambers, 181 Cal. 589, 594, 185 P. 855, 857, 8 A.L.R. 418; followed and subsequent cases cited in In re Porterfield, 28 Cal.2d 91, 99-100, 168 P.2d 706, 167 A.L.R. 675.)

Most, if not all, states have adopted occupational licensing statutes. In certain instances where the Legislature's true purpose has appeared to the courts to be a thinly-veiled effort at reestablishment of the guild system under the mere guise of protection of the public, the laws have been struck down as violating economic due process. Constitutionality, however, against both that attack and the charge of violation of equal protection has generally been upheld, the language in Breard v. City of Alexandria, 341 U.S. 622, being typical (at pages 632-633, 71 S.Ct. 920, at page 927, 95 L.Ed. 1233): '[W]e think that even a legitimate occupation may be restricted or prohibited in the public interest. * * * The problem is legislative where there are reasonable bases for legislative action.' (See, also, Monaghan, 'The Constitution and Occupational Licensing in Massachusetts,' 41 B.U.Law Rev. p. 157.) Courts are reluctant to question the expediency and wisdom of economic legislation. (Williamson v. Lee Optical, 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563; Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421, 72 S.Ct. 405, 96 L.Ed. 469; In re Porterfield, supra, 28 Cal.2d 91, 102, 168 P.2d 706; Hart v. City of Beverly Hills, 11 Cal.2d 343, 348, 79 P.2d 1080.) This court had recent occasion to consider occupational regulation by statute in Doyle v. Board of Bar Examiners (Aug.1963), supra, 219 Cal.App.2d 504, 33 Cal.Rptr. 349, on pages 351-358, and the opinion of Justice Friedman therein on pages 507-517 deals exhaustively with the problem. (See, also, 33 Am.Jur.Licenses, sec. 17, p. 336.) Contracting is a vocation regarding which protection of the health, safety and welfare of the People has been held to justify licensing and reasonable regulation. (Howard v. State of California, 85 Cal.App.2d 361, 193 P.2d 11; Franklin v. Nat C. Goldstone Agency, 33 Cal.2d 628, 630, 204 P.2d 37.) In Howard, supra, at page 365 of 85 Cal.App.2d, at page 13 of 193 P.2d, it is stated: 'The purpose of the act is to guard the public against the consequences of incompetent workmanship, imposition and deception.' In Fraenkel v. Bank of America, 40 Cal.2d 845, at 848, 256 P.2d 569, at 571, it is said that the 'law was enacted for the safety and protection of the public against imposition by persons inexperienced in contracting work, and for the prevention of fraudulent acts by contractors resulting in loss to subcontractors, materialmen, employees, and owners of structures. [Citations.]'

Appellant is agreeable to the principles and rules expressed in the Howard and Fraenkel cases, supra. Lack of skill, dishonesty, fraud, etc., are causes for withholding, or revocation of, a contractor's license by Business and Professions Code sections 7107-7123 (other than 7113.5). Appellant concedes their validity. But section 7113.5, covering acts of bankruptcy as ground of disciplinary action, brings something new into the field of regulation of contractors, namely, acts of bankruptcy as a cause for disciplinary action. This, it is contended, goes too far; its effect is to make the registrar of contractors a collection agent for materialmen, subcontractors and other tradesmen with whom the contractor deals and therefore exceeds the proper limits of the police power.

We cannot agree. In his enumeration of the classes affected by a contractor's activities, appellant seems pointedly to omit a very important one-the homeowner. More often than not it is he and not the laborer, mechanic, materialman, or subcontractor who is affected by the financially-irresponsible contractor. Mechanics lien laws protect the latter classes. But the prevalence of instances of homeowners left with incompleted homes, or suffering double payment of construction costs, or even suffering foreclosure, as the result of a contractor's improvidence could well...