Reule Sun Corp. v. Valles

• Decision Date: 06 June 2008
• Docket Number: No. 27,254.,27,254.
• Parties: REULE SUN CORPORATION, Plaintiff-Appellee, v. Joe L. VALLES and Joanne S. Valles, husband and wife, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

191 P.3d 1197

2008 NMCA 115

144 N.M. 736

REULE SUN CORPORATION, Plaintiff-Appellee, v. Joe L. VALLES and Joanne S. Valles, husband and wife, Defendants-Appellants.

No. 27,254.

Court of Appeals of New Mexico.

June 6, 2008.

Certiorari Granted, No. 31,192, August 26, 2008.

Robert D. Gorman, P.A., Robert D. Gorman, Cheryl Thompson, Albuquerque, NM, for Appellee.

Cadigan Law Firm, P.C., Michael J. Cadigan, Albuquerque, NM, for Appellants.

OPINION

CASTILLO, Judge.

{1} In this appeal, we determine whether Reule Sun Corporation (Reule), a duly licensed general contractor, may sue homeowners Joe and Joanne Valles (Valleses) for payment on a construction contract when Reule employed an unlicensed individual, Claudino Perez (Perez), and his crew to perform the work. The trial court allowed the suit and concluded that Reule did not violate the licensing provisions of the Construction Industries Licensing Act (CILA), NMSA 1978, §§ 60-13-1 to -59 (1967, as amended through 2007). We affirm.

I. BACKGROUND

{2} In April 2003, Reule, a duly licensed general contractor, entered into a contract to apply stucco and perform related repair services on Valleses' residence. Valleses agreed to pay approximately $12,200 for Reule's construction-related services. Reule employed Perez, who was not licensed at that time, to perform the work required under the contract. In late spring 2003, Perez and his crew began the work on Valleses' residence.

{3} Valleses were dissatisfied with the quality of the work and demanded that it be redone. Reule agreed to remedy the deficiencies in the work by applying a second color coat of stucco to Valleses' home at no additional charge to Valleses. Perez and his crew also performed this work. Valleses, however, remained dissatisfied, complaining that the stucco had not been applied in a consistent and professional manner, that there were color variations and uneven texture, that leaks and cracks had not been properly repaired, and that Reule failed to clean up properly, all of which resulted in damage to Valleses' property. Valleses therefore refused to pay the balance due under the contract.

{4} In June 2004, Reule filed in district court a complaint against Valleses, which claimed damages for breach of contract and sought to foreclose upon a claim of lien filed against Valleses' property for the amount due under the contract. Valleses answered and asserted counterclaims for breach of contract, breach of warranty, breach of implied warranties, negligence, and malicious abuse of process.

{5} More than two years after the complaint was filed and approximately one month before trial, Valleses discovered — while deposing Reule's owner, Robert Reule — that Perez was not licensed as a contractor when performing the stucco and related repair work on Valleses' home. Based on this information, Valleses raised the affirmative defense that Reule is precluded from recovering payment for work performed by an unlicensed subcontractor. Valleses also moved to stay the trial and to amend the counterclaims. Although the trial court denied Valleses' motion to stay, the court ruled that Valleses could present evidence on the issue of Perez's status and that at the conclusion of trial, the court would reconsider Valleses' motion to amend the counterclaims to conform to the evidence presented.

{6} At trial, in addition to presenting evidence on their claims and counterclaims, the parties argued and presented evidence on the issue of Reule's use of Perez to perform the work under the contract. Valleses argued that because Reule had hired an unlicensed subcontractor to perform the work, Reule is barred from maintaining its action to recover payment on the contract, pursuant to Section 60-13-30(A). Reule countered that its suit is not barred by the statute because Reule was duly licensed to perform the work and because Perez was Reule's employee and was thus not required to be licensed under CILA.

{7} After a two-day bench trial, the court entered its decision in favor of Reule. The trial court found that Reule had substantially performed its obligations under the contract, except for certain finishing and cleanup work, which Valleses had prevented Reule from completing. In concluding that Reule was entitled to maintain its action against Valleses, the trial court found that because Reule was "solely responsible for the performance of the contract" and because Perez "work[ed] under the complete direction and control of Reule," the contract was valid and enforceable, and the protective purposes of CILA were met. The trial court also found that Reule was not acting as an "agent" for any unlicensed contractor in connection with the contract and "did not have a primary motive to misuse the process to accomplish an illegitimate end." The trial court foreclosed the lien on Valleses' property and awarded damages to Reule, including prejudgment interest, attorney fees, and costs. The trial court also dismissed Valleses' counterclaims against Reule. This appeal followed.

II. DISCUSSION

{8} Valleses makes four arguments on appeal: (1) that Perez was a subcontractor and was thus required to be licensed under CILA, (2) that the trial court improperly denied the motion to stay trial and amend counterclaims, (3) that certain photographic evidence was wrongly excluded, and (4) that the trial court erred by limiting the time available to Valleses for presenting evidence at trial. We address each argument in turn.

A. CILA

{9} The overarching issue in this appeal is whether CILA bars Reule from recovering on its contract with Valleses because Reule, a licensed contractor, hired Perez, who did not have a license, to perform the work. Section 60-13-30(A) makes the following prohibition:

No contractor shall act as agent or bring or maintain any action in any court of the state for the collection of compensation for the performance of any act for which a license is required by [CILA] without alleging and proving that such contractor was a duly licensed contractor at the time the alleged cause of action arose.

Under CILA, all contractors and subcontractors must be licensed. Section 60-13-12(A) ("No person shall act as a contractor without a license issued by the division classified to cover the type of work to be undertaken."); Section 60-13-3(B) (including "subcontractor" in the definition of the term "contractor" under CILA). As a result, unlicensed contractors and subcontractors may not recover on contracts that are governed by CILA. See Gamboa v. Urena, 2004-NMCA-053, ¶ 12, 135 N.M. 515, 90 P.3d 534 (observing that CILA prohibits an unlicensed contractor from filing an action for compensation). There is no dispute that Perez did not have a contractor's license when he performed the work on Valleses' home. Instead, the dispute revolves around the legal relationship between Reule and Perez.

{10} Valleses make three arguments to support their contention that Reule cannot recover on the contract. First, Valleses argue that Reule violated CILA by using an unlicensed subcontractor and is therefore barred from any recovery on the contract. Second, Valleses contend that Reule and Perez circumvented the licensing requirement by sharing Reule's license and that Reule should therefore not be permitted to recover on the contract. Third, Valleses argue that the policy behind CILA demands that Reule be prevented from recovering on work performed by an unlicensed subcontractor. Reule contends that it was entitled to recover on the contract because Perez was an employee and therefore needed no license. We agree with Reule.

1. Subcontractor/Employee Relationship

{11} Section 60-13-3(D) provides eighteen exemptions from CILA's licensing requirement. Additionally, our Supreme Court has determined that an employee is not a contractor and is therefore not required to obtain a contractor's license. Mascareñas v. Jaramillo, 111 N.M. 410, 412, 806 P.2d 59, 61 (1991); Latta v. Harvey, 67 N.M. 72, 75-76, 352 P.2d 649, 650-51 (1960). Indeed, Valleses admit that if Perez were an employee, he would not have been required to obtain a contractor's license. Their contention is, however, that Perez was a subcontractor, who was required to be licensed, and that the trial court improperly allowed Reule to recover for work performed by an unlicensed subcontractor. Because we agree with the trial court that Perez was an employee, not a subcontractor, we need not reach the question of whether a duly licensed contractor may recover for work performed by an unlicensed subcontractor.

{12} Whether Reule and Perez maintained an employer-employee relationship is a mixed question of law and fact. See Benavidez v. Sierra Blanca Motors, 1998-NMCA-070, ¶ 7, 125 N.M. 235, 959 P.2d 569. Under these circumstances, we "conduct a de novo review of the trial court's application of the law to th[e] facts," and we review the trial court's findings of fact for substantial evidence. Allen v. Timberlake Ranch Landowners Ass'n, 2005-NMCA-115, ¶ 13, 138 N.M. 318, 119 P.3d 743. In viewing the facts that were determined by the trial court, "[t]he question is not whether substantial evidence exists to support the opposite result, but rather whether such evidence supports the result reached." Las Cruces Prof'l Fire Fighters v. City of Las Cruces, 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177.

{13} In construction cases, our courts have stated that "[t]he principal test to determine whether one is ... an employee is whether the employer has any control over the manner in which the details of the work are to be accomplished." Campbell v. Smith, 68 N.M. 373, 377, 362 P.2d 523, 525-26 (1961). Further, "it is the right to control, not the exercise of it, that furnishes the test." Id. at 377, 362 P.2d at 526 (internal quotation marks and citation omitted). This Court and our Supreme Court have considered the Restatement (Second) of Agency § 220 (1958) approach to be instructive when...