Mw Erectors v. Niederhauser Ornamental

• Decision Date: 14 July 2005
• Docket Number: No. S123238.,S123238.
• Citation: 36 Cal.4th 412,30 Cal.Rptr.3d 755,115 P.3d 41
• Court: California Supreme Court
• Parties: MW ERECTORS, INC., Plaintiff and Appellant, v. NIEDERHAUSER ORNAMENTAL AND METAL WORKS COMPANY, INC., et al., Defendants and Respondents.

30 Cal.Rptr.3d 755

36 Cal.4th 412

115 P.3d 41

MW ERECTORS, INC., Plaintiff and Appellant, v. NIEDERHAUSER ORNAMENTAL AND METAL WORKS COMPANY, INC., et al., Defendants and Respondents.

No. S123238.

Supreme Court of California.

July 14, 2005.

Pine & Pine, Norman Pine, Beverly Tillett Pine, Sherman Oaks; Gibbs, Giden, Locher & Turner, Richard J. Wittbrodt and Marion T. Hack, Los Angeles, for Plaintiff and Appellant.

Donald K. Struckman for Western Steel Council as Amicus Curiae on behalf of Plaintiff and Appellant.

Law Offices of Abdulaziz & Grossbart, Sam K. Abdulaziz and Bruce D. Rudman, North Hollywood, as Amici Curiae on behalf of Plaintiff and Appellant.

Weinberg, Roger & Rosenfeld and David A. Rosenfeld, Oakland, for District Council of Iron Workers for the State of California and Vicinity as Amicus Curiae on behalf of Plaintiff and Appellant.

Arter & Hadden, Lord, Bissell & Brook, William S. Davis, Los Angeles; Arter & Hadden, Musick Peeler & Garrett and Jack W. Fleming, Costa Mesa, for Defendants and Respondents.

Jones & Mayer, Kimberly Hall Barlow, Fullerton, and Elena Q. Gerli for League of California Cities as Amicus Curiae on behalf of Defendants and Respondents.

BAXTER, J.

To protect the public, the Contractors' State License Law (CSLL; Bus. & Prof.Code, § 7000 et seq.)¹ imposes strict and harsh penalties for a contractor's failure to maintain proper licensure. Among other things, the CSLL states a general rule that, regardless of the merits of the claim, a contractor may not maintain any action, legal or equitable, to recover compensation for "the performance of any act or contract" unless he or she was duly licensed "at all times during the performance of that act or contract." (§ 7031, subd. (a) (section 7031(a)), italics added.)

Earlier case law softened the severity of this scheme by allowing contractors, though technically unlicensed at the time of performance, to show they had substantially complied with licensure requirements. However, the CSLL has since limited the availability of the substantial compliance exception. In particular, the statute specifies that "[t]he judicial doctrine of substantial compliance shall not apply" unless the contractor "had been duly licensed as a contractor in this state prior to the performance of the act or contract" for which licensure was required. (§ 7031, subd. (e), italics added; cf. id., former subd. (d), Stats.1994, ch. 550, § 1, p. 2803 (hereafter, references to section 7031, former subdivision (d) are to this version, unless otherwise noted).)

Here we address several questions about the application of these CSLL provisions. Our most significant conclusions are these: (1) Where applicable, section 7031(a) bars a person from suing to recover compensation for any work he or she did under an agreement for services requiring a contractor's license unless proper licensure was in place at all times during such contractual performance. (2) Section 7031(a) does not allow a contractor who was unlicensed at any time during contractual performance nonetheless to recover compensation for individual acts performed while he or she was duly licensed. (3) The statutory exception for substantial compliance is not available to a contractor who had not been duly licensed at some time before beginning performance under the contract. (4) However, if fully licensed at all times during contractual performance, a contractor is not barred from recovering compensation for the work solely because he or she was unlicensed when the contract was executed.

To resolve this particular case, we further determine that the doctrine of judicial estoppel does not bar defendant, by virtue of allegedly inconsistent positions it took in related litigation, from contesting plaintiff's licensure.

These conclusions require that we affirm in part, and reverse in part, the Court of Appeal's judgment.

FACTS

The pertinent facts, as developed on defendant's motion for summary judgment, are essentially undisputed. Owner Disney Corporation (Disney) constructed a hotel, with Turner Construction Company (Turner) as the general contractor. Turner contracted with defendant Niederhauser Ornamental and Metal Works Company, Inc. (Niederhauser) to perform specialized metal work on the project.

Niederhauser, in turn, awarded two subcontracts to plaintiff MW Erectors, Inc. (MW). On or about October 11, 1999 Niederhauser and MW executed a contract for MW's performance of "structural" steel work (structural contract). On or about November 12, 1999, the same parties entered a second contract for MW's performance of "ornamental" steel work (ornamental contract).

MW began work under the structural contract on or before December 3, 1999, but did not obtain a C-51 structural steel contractor's license (see Cal Code Regs., tit. 16, § 832.51) until December 21, 1999. Work on the ornamental contract began in early January 2000.

MW subsequently sued Niederhauser and Niederhauser's payment bonds, seeking alleged amounts due of $955,553 for work under the structural contract and $366,694 for work under the ornamental contract.² Niederhauser moved for summary judgment, alleging that MW's claim was barred under section 7031(a), because MW had not been properly licensed at all times during the performance of its contracts. Niederhauser asserted that MW had no C-51 license when it began performance of the structural steel contract, and that MW never obtained a C-23 ornamental metals license, which Niederhauser asserted was required for performance of the ornamental contract. Niederhauser also averred that MW could not demonstrate its substantial compliance with the C-51 license requirement because it had never held a California contractor's license before beginning work under the contracts in December 1999.

In its response to Niederhauser's motion, MW admitted that it needed a C-51 license for its work under both contracts, and that this license was not technically in place when MW began work on the structural contract. MW also admitted it never obtained a C-23 license. However, MW claimed there were triable issues that it was in substantial compliance with the C-51 license requirement at all times during its performance of both contracts, and that no C-23 license was necessary for work under the ornamental contract. In its own subsequent motion, MW asserted that Niederhauser was judicially estopped to contest licensure in any event because, in related litigation, Niederhauser had benefited by its implicit reliance on MW's proper licensing.

The superior court granted summary judgment for Niederhauser and dismissed MW's action.³ MW appealed, urging that (1) it had shown substantial compliance with the C-51 license requirement, (2) it did not need a C-23 license, and (3) Niederhauser was judicially estopped to question licensure. In its respondent's brief, Niederhauser disputed these points, and also argued, for the first time, that both contracts were illegal, void, and unenforceable ab initio because MW was unlicensed when they were executed.

The Court of Appeal for the Fourth Appellate District, Division Three, reversed. The Court of Appeal first concluded that Niederhauser was not judicially estopped to contest MW's licensure. On the merits, however, the court reasoned as follows: The contracts were not void ab initio because of MW's unlicensed status when they were executed. Instead, MW's right to recover depended on its licensure during its performance of the contracts. Under section 7031(a), a contractor must be duly licensed at all times during performance of the "act or contract" for which compensation was sought. Thus, MW could not recover for work it performed under the agreements during the relatively short time before it had secured either a C-51 or C-23 license. Nonetheless, section 7031(a) allowed MW to obtain court-ordered compensation for every individual act it performed under its contracts after all necessary licensure was in place. Thus, MW was entitled to prove amounts due for its work on the structural contract after the C-51 license was issued. MW had a valid C-51 license at all times during performance of the ornamental contract. While MW never sought or obtained a C-23 license, MW raised a triable issue that the C-51 license was sufficient.

Niederhauser sought review, urging that section 7031(a) required due licensure at all times during performance of a contract, and that both contracts were void ab initio because MW was not licensed when they were executed. In its answer to the petition, MW asserted, as additional issues (Cal. Rules of Court, rule 28.1(c)), its claims of substantial compliance and judicial estoppel. We granted review.⁴ We now conclude that the Court of Appeal's judgment must be affirmed in part and reversed in part.

DISCUSSION

1. Judicial estoppel.

MW renews its contention that Niederhauser is judicially estopped to raise MW's nonlicensure as a bar to MW's recovery because, in related litigation, Niederhauser took, and benefited from, the opposite position. MW asserts that in a lawsuit against the project's owner, Disney, and its general contractor, Turner, Niederhauser obtained money by implicitly representing that MW was fully licensed. Under these circumstances, MW insists, Niederhauser may not now assert MW's nonlicensure as a bar to MW's recovery of money due to MW from Niederhauser. For reasons we explain below, we agree with the Court of Appeal that application of the judicial estoppel doctrine is not appropriate here.

The evidence bearing on MW's judicial estoppel argument is sketchy. The record reflects that when MW sued Niederhauser for monies due under the two contracts between these parties, Niederhauser cross-complained against Turner and Disney for sums allegedly due and unpaid by Turner to Niederhauser. Niederhauser also noticed a mechanic's lien against the project for the sums it claimed it was owed by Turner. MW represents, and...