S & Q Const. Co. v. Palma Ceia Development Organization

• Decision Date: 01 April 1960
• Docket Number: No. 18314,18314
• Citation: S & Q Const. Co. v. Palma Ceia Development Organization, 3 Cal.Rptr. 690, 179 Cal.App.2d 364 (Cal. App. 1960)
• Court: California Court of Appeals
• Parties: S & Q CONSTRUCTION COMPANY, a California corporation, Plaintiff, Cross-Defendant and Appellant, v. PALMA CEIA DEVELOPMENT ORGANIZATION, A. L. Branden and Branden Construction, Inc., Defendants, Cross-Complainants and Respondents.

Page 690

3 Cal.Rptr. 690

179 Cal.App.2d 364

S & Q CONSTRUCTION COMPANY, a California corporation, Plaintiff, Cross-Defendant and Appellant, v.PALMA CEIA DEVELOPMENT ORGANIZATION, A. L. Branden and Branden Construction, Inc., Defendants, Cross-Complainants and Respondents.

No. 18314.

District Court of Appeal, First District, Division 1, California.

April 1, 1960.

Rehearing Denied April 26, 1960.

Hearing Denied May 25, 1960.

Myrick, Deering & Scott, San Francisco, for appellant.

MacDonald, Brunsell, Brethauer & Walters, Oakland, for respondents.

BRAY, Presiding Justice.

Plaintiff appeals from a judgment in favor of defendants denying damages for an alleged breach of contract.

Questions Presented.

1.Does the fact that Palma Ceia was an unlicensed contractor compel judgment in plaintiff's favor?

2.Does the evidence support the court's findings (a) that defendants did not breach the contract, (b) that plaintiff did?

3.Were the findings unsupported, contradictory, and did they fail to cover the issues?

Record.

The controversy arises out of a contract entered into August 21, 1954, between plaintiff as subcontractor and defendantPalma Ceia as general contractor for the construction in the city of Hayward of a sanitary pumping station, a sanitary sewer main line (referred to as force main) and a gravity sewer line (referred to as gravity line).The work was to be performed in a subdivision being developed by defendants Branden and Branden Construction, Inc.These two were joined as defendants on the theory that they were principals and agents of Palma Ceia in the said contract.The complaint contained three counts, (1) for breach of contract, (2) for foreclosure of mechanic's lien, and (3) for fraud.Defendants answered and cross-complained (later an amendment was allowed to include a counterclaim).To conform to proof plaintiff was permitted to file an amended complaint setting up a fourth count, alleging that the contract was illegal because defendants were not licensed contractors.Plaintiff's motion for nonsuit on the cross-complaint was denied.Defendants' motion for nonsuit was granted as to the mechanic's lien count but denied as to the other three counts.¹Judgment was entered on all counts in favor of defendants and in favor of plaintiff on defendants' cross-complaint and counterclaim.Defendants do not appeal.

1.Effect of Lack of License.

Admittedly Palma Ceia did not have a contractor's license.Plaintiff did.Such license was required.Bus. & Prof.Code §§ 7028,7031,7056and7057.Plaintiff contends that the lack of license made the contract void, and that as plaintiff had such license and did not discover until during the trial that defendantPalma Ceia did not, plaintiff was not in pari delicto and is entitled to recover on a quantum meruit and that defendantPalma Ceia may not assert any defense based on the contract.The court found that Palma Ceia did not have a contractor's license but that 'The failure to have a license in no way prevents said defendant, or any of them, from asserting and proving their answer and defense.'The court correctly expressed the law in California in this statement.It is well settled that the failure to obtain a required contractor's license will bar the contractor from recovery for his work in an action brought by him, but will not bar him from offsetting as a defense sums which would otherwise be due him under the illegal contract.'It is to be noted that the statute merely prohibits a contractor from maintaining or bringing an action upon a contract which he has entered into pertaining to the contracting business.It does not prohibit him when sued from setting up as a defense any sums which may be equitably due him from the plaintiff upon such illegal contract.Such a contract is not malum in se but merely malum prohibitum.'Marshall v. Von Zumwalt, 1953, 120 Cal.App.2d 807, 262 P.2d 363, 364.The contractor's license statute cannot be used as a shield to avoid a just obligation.Norwood v. Judd, 1949, 93 Cal.App.2d 276, 209 P.2d 24.The courts will not impose penalties on a contractor for noncompliance with the licensing requirements other than that provided by the statute.

2.Sufficiency of the Evidence.

This is a typical conflict of evidence case in which the trial court resolved the conflict in favor of the defendants.Plaintiff in its exceedingly lengthy briefs comments on the credibility of witnesses and details evidence which possibly could have supported a judgment in its favor.The rule is so well settled that this court is bound by the findings of the trial court on conflicts where there is substantial evidence to support those findings, that it does not require the citation of authorities.In considering plaintiff's contentions concerning the findings we will refer principally to the evidence which supports them.

(a)Defendants did not breach the contract.

The contract made time of the essence and provided that progress payments were to be made 'progressively on the 8th day of each month for all work completed during the preceding month ending on the 30th or 31st day thereof,' less 10 per cent retention.The sums retained were to be paid 35 days after completion of all work, provided that said work was accepted by the city of Hayward.The contract provided that plaintiff was to be paid for all of the work specified in the contract, 'the following lump sums set forth opposite the following respective items:

"Schedule A--  Pump Station .... $41,010.00
                "Schedule B--  Force sanitary
                               sewer main
                               line ............  24,810.00
                "Schedule C--  Gravity sewer
                               line ............  26,309.00
                                                 ------------
                                       Total ... $92,129.00."
                

September 14, 1954, during the progress of the work, plaintiff was given a change order affecting the force line.This work amounted to $10,050.Progress payments were made for the work completed during September and October.

Plaintiff notified defendants on November 24 that it claimed to have completed all work under the contract and requested completion payment and that notice of completion be filed.The contract does not provide for a completion payment, but only for the progress payments and the 10 per cent retention, which is not payable until 35 days after completion.Thereafter and on December 2plaintiff submitted a bill requesting payment of $18,183, which was the balance of the contract price and the price of the work under the change orders then unpaid.The parties concede that under the terms of the contract the price of the change orders work would be added to the contract price and considered in figuring the progress payments.It is plaintiff's contention that on December 8he was entitled to a progress payment of 90 per cent of this $18,183 and that the failure to pay it constituted a breach by Palma Ceia of the contract.The court found that on December 8 there was nothing due from defendants to plaintiff.Certainly plaintiff was not entitled to the amount requested at that time as even under plaintiff's contention that the contract was completed on November 24, the 35 days after completion had not yet run.Had plaintiff then requested a progress payment, and had it been refused, defendants, except for the matters hereafter discussed, might be considered to have breached the agreement for not paying the progress payment.But plaintiff was not asking for that; it was asking for the entire balance, a sum to which it was not entitled.

As a result of plaintiff's notice of November 24 claiming it had completed the work, Branden asked the city to accept the work which acceptance, as will hereafter appear, was required.The city conducted a 'light and ball' test specified in the contract and found six large breaks in the gravity line and that considerable water had infiltrated.The city then issued an order to stop work on the line.A meeting was held at the office of the city engineer on December 2 at which the parties and the city engineer and inspector were present, and the parties were informed that the city refused to accept the line because of the condition of the line.Plaintiff was informed that because of the failure of the city to accept the line, defendants would not make the payment demanded by plaintiff.The city required that the line be repaired.Plaintiff agreed to do so.There is a conflict in the evidence as to whether plaintiff was to do this at his own expense or as an extra at Palma Ceia's expense, or whether the expense was to be shared by the parties.In January a test made by the Sealite people, who were to apply their process to the line, disclosed a much larger number of breaks in the line and that it was from one-half to one-third full of water.After repairing only part of the breaks during the middle of January, plaintiff on January 20 again billed defendants for the total amount unpaid under the contract, plus extra work.No money being forthcoming, plaintiff on January 26 stopped working and refused to continue with the job, contending that Palma Ceia had breached the contract by failing to pay the amounts demanded by plaintiff.Branden, Palma Ceia's president, testified that at the meeting of December 2he told plaintiff that Palma Ceia would not pay the money demanded until the line was repaired so that it could be used.He figured that because of its condition the whole line might have to be dug up.The trial court found in effect that because of the defective work Palma Ceia was justified in not paying plaintiff any more money, not even the 90 per cent progress payment which would otherwise have been due December 8.Had Palma Ceia made such payment, there would have been retained by it only $10,217.90 on the contract price, which was not enough to ensure of the repairing of the line as demanded by the city.As said in Golden Gate Lumber Co. v. Sahrbacher105 Cal....