Pacific Custom Pools v. Turner Const. Co.

• Citation: 94 Cal.Rptr.2d 756,79 Cal.App.4th 1254
• Decision Date: 17 April 2000
• Docket Number: No. B122853.,B122853.
• Parties: PACIFIC CUSTOM POOLS, INC., Cross-Complainant and Appellant, v. TURNER CONSTRUCTION COMPANY, Cross-Defendant and Appellant, Universal City Studios, Inc., Cross-Defendant and Respondent.
• Court: California Court of Appeals

94 Cal.Rptr.2d 756

79 Cal.App.4th 1254

PACIFIC CUSTOM POOLS, INC., Cross-Complainant and Appellant, v. TURNER CONSTRUCTION COMPANY, Cross-Defendant and Appellant, Universal City Studios, Inc., Cross-Defendant and Respondent.

No. B122853.

Court of Appeal, Second District, Division 4.

April 17, 2000.

Anne M. Huarte, Hermosa Beach, Girardi and Keese, Timothy O'Brien and James B. Kropff, Los Angeles, for Cross-complainant and Appellant Pacific Custom Pools, Inc.

Orbach & Huff, LLP, Los Angeles, and Howard B. Brown, Los Angeles, for Cross-defendant and Appellant Turner Construction Company.

Arter & Hadden LLP, Jack W. Fleming and James K. Dierking, Irvine, for Crossdefendant and Respondent Universal City Studios, Inc.

BERLE, J.^*

On this consolidated appeal, Pacific Custom Pools, Inc., challenges the trial court's granting of summary judgment based on the failure of Pacific Custom Pools to substantially comply with the contractor's licensing requirements, and Turner Construction Company questions the court's denial of its attorney's fees. We hold that the trial court properly granted summary judgment but erred in denying attorney's fees.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Universal City Studios, Inc. ("Universal") entered into a general contract with Turner Construction Company ("Turner") for the construction of the Jurassic Park ride (the "project") at the theme park in Universal City, California. In turn, Turner entered into a subcontract ("the Agreement") on the project with Pacific Custom Pools, Inc. ("PCP"), pursuant to which PCP agreed to furnish and install all water treatment work for the project for the contract price of $959,131. PCP further subcontracted its work to Harrington Industrial Plastics, Inc. ("Harrington") and Pacific Engineered Projects ("PEP") for those companies to provide materials and supplies on the project. PCP performed work on the project from April 1995 until June 1996 for which it was paid $897, 719. During the period of October 12, 1995 to March 14, 1996, PCP's contractor's license was under suspension, and although the license had also expired as of January 31, 1996, it was not renewed until May 5, 1996.

Harrington filed an action¹ for breach of contract and foreclosure of mechanics' liens against PCP, Turner, and Universal, alleging that PCP had failed to pay $95,941.85 due under a contract for performance of work on the project. PEP also filed suit² against the same parties for similar relief, claiming that it was owed $55,587.38 under its contract with PCP.

Turner then filed a cross-complaint against PCP for indemnification against the claims of Harrington and PEP, and later PCP filed a cross-complaint against Turner and Universal, seeking damages of $2,000,000 based on claims that misrepresentations had been made as to the scheduling of the order of work.³ By order of the superior court the Harrington and PEP cases were deemed related to each other and assigned to an all purpose judge.

On February 27, 1998, the trial court granted summary judgment to Turner and Universal on PCP's cross-complaint on the grounds that PCP was unlicensed during a period of its contract, and under Business and Professions Code section 7031⁴ an unlicensed contractor may not maintain an action for work performed. Turner's cross-complaint against PCP for indemnity was thereafter voluntarily dismissed without prejudice.

In the judgment that was entered in favor of Turner and Universal, the court identified Turner and Universal as the prevailing parties. Turner then filed a motion for attorney fees under Code of Civil Procedure section 1032.5 and Civil Code section 1717, which was denied by the court.

PCP appeals from the judgment, and Turner appeals from the order denying attorney fees. Both appeals will be addressed in this opinion.

DISCUSSION

A. Summary Judgment Motion

Under Code of Civil Procedure section 437c, subdivision (o)(2), the statute governing summary judgment motions, "[a] defendant ... has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action ... cannot be established, or that there is a complete defense to that cause of action. Once the defendant ... has met that burden, the burden shifts to the plaintiff ... to show that a triable issue of one or more material facts exists as to that cause of action or defense thereto." The appellate court undertakes a de novo review of the trial court's decision to grant summary judgment and is not bound by the reasons or rationales stated by the trial court. (Pensinger v. Bowsmith, Inc. (1998) 60 Cal.App.4th 709, 717, 70 Cal. Rptr.2d 531; Prilliman v. United Air Lines, Inc. (1997) 53 Cal.App.4th at 935, 951, 62 Cal.Rptr.2d 142; Ranchwood Communities Limited Partnership v. Jim Beat Construction Co. (1996) 49 Cal.App.4th 1397, 1408, 57 Cal.Rptr.2d 386.)

In the second amended complaint PCP alleges that at all relevant times it "was licensed by the State of California, under the applicable sections of the Business and Professions Code to do the kind of work" performed under its contract on the project. Turner and Universal filed motions for summary judgment, claiming that they are entitled to judgment as a matter of law because PCP was not a duly licensed contractor all times during its performance on the project and section 7031 bars an unlicensed contractor from maintaining any claim for compensation for work performed. In support of their motions, Turner and Universal presented evidence from the Contractors State License Board ("CSLB") indicating that PCP's license was suspended from October 12, 1995 to March 14, 1996, and that the license was under expiration from January 31, 1996 to May 3, 1996.

Hence, Turner and Universal came forth with evidence to support a complete defense to the action, shifting the burden to plaintiff to show that there was a triable issue of fact with respect to the licensure defense. (Code Civ. Proc., § 437c, subd. (o)(2).) Section 7031, subdivision (c) itself provides that when licensure is controverted, the burden of proof to establish licensure is on the licensee. (See Buzgheia v. Leasco Sierra Grove (1997) 60 Cal.App.4th 374, 383, 389, 70 Cal.Rptr.2d 427.) PCP did not deny that its license was under suspension beginning with October 12 1995.⁵ However, PCP contended that summary judgment should not be granted because there was a material issue of fact as to whether PCP "substantially complied" with the licensing statute which, if proven, would allow PCP to pursue its claim.

B. Doctrine of Substantial Compliance with Licensing Requirements

Section 7031, subdivision (a)⁶ provides that a contractor may not maintain an action for the recovery of compensation for the performance of work requiring a license unless it was "a duly licensed contractor at all times during the performance of that" work. In Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 277 Cal.Rptr. 517, 803 P.2d 370, the Supreme Court set forth the social policy underpinning section 7031:

"The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. (Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 141, 149-150 .) 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. (Ibid.; Conderback, Inc. v. Standard Oil Co. (1966) 239 Cal.App.2d 664, 678-679 .)

"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. [Citation.] ...' (Lewis & Queen, supra, 48 Cal.2d at p. 151 , italics added; see also Brown v. Solano County Business Development, Inc. (1979) 92 Cal.App.3d 192, 198 ; Rushing v. Powell (1976) 61 Cal.App.3d 597, 605 .)" (Id. at p. 995, 277 Cal. Rptr. 517, 803 P.2d 370.)

Through a series of cases beginning in 1966, the courts attempted to alleviate the severity of the application of section 7031 by allowing recovery to a contractor who has substantially complied with the licensing statutory scheme. (Asdourian v. Araj (1985) 38 Cal.3d 276, 283, 211 Cal.Rptr. 703, 696 P.2d 95; Latipac, Inc. v. Superior Court (1966) 64 Cal.2d 278, 281, 49 Cal. Rptr. 676, 411 P.2d 564; Gaines v. Eastern Pacific (1982) 136 Cal.App.3d 679, 682-683, 186 Cal.Rptr. 421; Airfloor Co. of California, Inc. v. Regents of University of California (1978) 84 Cal.App.3d 1004, 1010, 149 Cal.Rptr. 130; Vitek, Inc. v. Alvarado Ice Palace, Inc. (1973) 34 Cal.App.3d 586, 590 110 Cal.Rptr. 86; Lewis v. Arboles Dev. Co. (1970) 8 Cal.App.3d 812, 816-817, 87 Cal.Rptr. 539.)

In reaction to this development in the law, the Legislature amended section 7031 in 1989 to add a subsection (d) which provided that the substantial compliance doctrine shall not apply to that statute. (Stats.1989, ch. 368, § 1; Hydrotech Systems, Ltd. v. Oasis Waterpark, supra, 52 Cal.3d at p. 996, fn. 5, 277 Cal.Rptr. 517, 803 P.2d 370.) In 1991, the Legislature further amended section 7031 to provide an exception to the prohibition of the substantial compliance doctrine where noncompliance with licensure...