Viking Pools, Inc. v. Maloney

• Decision Date: 17 April 1989
• Docket Number: No. S004587,S004587
• Citation: 770 P.2d 732,257 Cal.Rptr. 320,48 Cal.3d 602
• Court: California Supreme Court
• Parties: , 770 P.2d 732, 8 UCC Rep.Serv.2d 651 VIKING POOLS, INC., Plaintiff and Appellant, v. Jack MALONEY, as Registrar of Contractors, etc., Defendant and Respondent.

Page 320

257 Cal.Rptr. 320

48 Cal.3d 602, 770 P.2d 732, 8 UCC Rep.Serv.2d 651

VIKING POOLS, INC., Plaintiff and Appellant, v. Jack MALONEY, as Registrar of Contractors, etc., Defendant and Respondent.

No. S004587.

Supreme Court of California In Bank.

April 17, 1989.

Michael L. Pickering and Jerrald K. Pickering, for plaintiff and appellant.

John K. Van de Kamp, Atty. Gen., Steven M. Kahn and Jana L. Tuton, Deputy Attys. Gen., for defendant and respondent.

BROUSSARD, Justice.

In this case we must decide whether a contractor's breach of an express, written warranty is a ground for discipline under the Contractors' State License Law (Bus. & Prof.Code, § 7000 et seq.). ¹ For the reasons set forth below, we conclude that it is.

In 1977, Viking Pools, Inc. (Viking) entered into a written contract with William and Viola Ostrom to supply and install a fiberglass pool for $5,038.02. The Ostroms originally considered purchasing the pool and installing it themselves. They changed their minds, however, when Viking informed them that there would be no warranty unless the Ostroms contracted with Viking to install the pool. The Ostroms entered into such a contract with Viking on August 15, 1977, specifically because they wanted the warranty. Viking completed installation of the pool on August 25, 1977, and immediately thereafter the Ostroms paid Viking in full.

Viking warranted in pertinent part that "Provided VIKING has installed the pool, VIKING warrants to repair or replace defective material or installation thereof for a period of 10 years from the date hereof" except for any defect in the pump or filter.

In 1980, brown spots began appearing on the pool surface. The spots consisted of tiny thorn-like growths protruding from the gel coat, as well as blisters on the gel coat. By 1983, the spots and blisters covered the entire surface of the pool. An expert witness at the administrative hearing in 1983 testified that the spots and blisters were likely caused by contaminants in the materials used to manufacture the pool, and that the phenomenon was known as "black plague" in the pool industry. He said the remedy would be to sand down and resurface the pool, and estimated the cost of doing so at $5,000--about the same amount the Ostroms originally paid to Viking under the contract.

The Ostroms first notified Viking about the spots and blisters in mid-1981. Viking ignored and then refused to correct the problem, thereby breaching the warranty. In mid-1983, the Ostroms complained to the Contractors' State License Board, which filed a disciplinary accusation against Viking. The accusation described the terms of the written contract between the Ostroms and Viking, including the warranty clause. It also described the problem which had developed with the Ostroms' pool and alleged that it was a condition covered by the warranty. The accusation further averred that Viking had subjected its license to discipline under "section 7107 in that it had abandoned its express written warranty on the Ostrom project, without legal excuse, by failing and refusing to correct the defective condition in accordance with the terms and conditions of the warranty." ² A separate allegation was asserted that Viking violated "section 7113 in that it failed in a material respect to complete the Ostrom project for the contract price and the owners will be required to spend substantially in excess of the contract price to correct the defective condition and thereby complete the project in accordance with the contract." ³

Following a hearing, an administrative law judge issued a proposed decision finding "clear and convincing evidence beyond a reasonable certainty" to sustain the charges. The judge's proposed decision ordered that Viking's license be revoked, with revocation stayed and probation imposed for three years upon certain conditions including restitution to the Ostroms. The registrar of contractors subsequently adopted this decision.

Viking petitioned the superior court for administrative mandate, but the court upon an independent review of the record found that Viking's breach of the express, written warranty violated sections 7107 and 7113, and denied relief. Viking then appealed to the Court of Appeal, which reversed on the ground that the language of sections 7107 and 7113 did not embrace the type of misconduct which Viking was found to have committed. We granted review of the matter because construction of the statute presents an issue of statewide significance. For the reasons set forth below, we conclude the interpretation announced by the Court of Appeal was incorrect.

Our analysis starts from the fundamental premise that the objective of statutory interpretation is to ascertain and effectuate legislative intent. (People v. Woodhead (1987) 43 Cal.3d 1002, 239 Cal.Rptr. 656, 741 P.2d 154; People v. Overstreet (1986) 42 Cal.3d 891, 231 Cal.Rptr. 213, 726 P.2d 1288.) In determining intent, we look first to the words themselves. (Woodhead, supra, 43 Cal.3d at p. 1007, 239 Cal.Rptr. 656, 741 P.2d 154; Overstreet, supra, 42 Cal.3d at p. 895, 231 Cal.Rptr. 213, 726 P.2d 1288.) If the statutory language is clear and unambiguous, there is no need for construction. (Woodhead, supra, 43 Cal.3d at pp. 1007-1008, 239 Cal.Rptr. 656, 741 P.2d 154; Overstreet, supra, 42 Cal.3d at p. 895, 231 Cal.Rptr. 213, 726 P.2d 1288.)

Section 7107 proscribes a contractor from abandoning without legal excuse a "construction project or operation." Similarly, section 7113 prohibits a contractor from materially failing to complete the "construction project or operation" for the price stated in the contract. Viking contends that once it completed physical installation of the pool on August 25, 1977, it could no longer be disciplined under section 7107 for abandonment of, or under section 7113 for material failure to complete, the "construction project or operation." The Attorney General, on behalf of the Contractors' State License Board, argues that the scope of a "construction project or operation" is determined by the contractual agreement between the parties, and that the breach of a contractual warranty is an abandonment of, and material failure to complete, the "construction project or operation."

The touchstone phrase in both sections--"construction project or operation"--is susceptible of only one reasonable interpretation in light of the clear, prophylactic purpose underlying the entire statutory system of which it is a part. (See People v. Shirokow (1980) 26 Cal.3d 301, 306-307, 162 Cal.Rptr. 30, 605 P.2d 859; People ex rel. Younger v. Superior Court (1976) 16 Cal.3d 30, 40, 127 Cal.Rptr. 122, 544 P.2d 1322, and cases there cited.) Contrary to the narrow view urged by Viking, the statutory scheme compels the conclusion that the phrase "construction project or operation" in sections 7107 and 7113 refers to the construction project or operation as determined by the contract agreed to by the parties.

This court has stated that the purpose of the Contractors' State License Law is to protect the public against the perils of contracting with dishonest or incompetent contractors. (Asdourian v. Araj (1985) 38 Cal.3d 276, 289, 211 Cal.Rptr. 703, 696 P.2d 95; see also Rushing v. Powell (1976) 61 Cal.App.3d 597, 130 Cal.Rptr. 110; Conderback, Inc. v. Standard Oil Co. (1966) 239 Cal.App.2d 664, 48 Cal.Rptr. 901; Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 141, 308 P.2d 713.) The Legislature intended that this statute be interpreted broadly in order that contractors could not easily evade the statute's protective purposes. (Johnson v. Mattox (1968) 257 Cal.App.2d 714, 65 Cal.Rptr. 185.)

The Court of Appeal in West Coast etc. Co. v. Contractors', etc., Bd. (1945) 72 Cal.App.2d 287, 301-302, 164 P.2d 811, painstakingly explained the purpose of administrative disciplinary proceedings under the Contractors' State License Law: "The object of establishing the Contractors' State License Board and vesting in the registrar of contractors disciplinary powers is for the protection of the public. The law is intended primarily to keep the contracting business clean and wholesome, to the end that it may merit the respect and confidence of the public in general and in particular those who have recourse to contractors in the construction or improvement of their properties. Therefore, the purpose of a disciplinary proceeding such as the one with which we are here concerned is to determine the fitness of a licensed contractor to continue in that capacity. It is not intended for the punishment of the individual contractor, but for the protection of the contracting business as well as the public by removing, in proper cases, either permanently or temporarily, from the conduct of a contractor's business a licensee whose method of doing business indicates a lack of integrity upon his part or a tendency to impose upon those who deal with him...."

In light of the intent of the legislature and the purpose behind the statutory scheme--to protect consumers and the public from dishonest or incompetent contractors--we must afford the statute a reasonable and practical construction. (Shea v. Board of Medical Examiners (1978) 81 Cal.App.3d 564, 574, 146 Cal.Rptr. 653; Wilson v. County of Santa Clara (1977) 68 Cal.App.3d 78, 137 Cal.Rptr. 78.) ⁴ The phrase "construction project or operation" can only be construed to mean the construction project or operation as defined by the contract between the parties. If we were to narrowly construe the phrase "construction project or operation" to mean only an apparent completion of the physical project alone, then, as Viking did here, a contractor could induce a consumer to enter a contract by making an express warranty, ostensibly complete physical construction, and deem the construction project "complete." Thereafter the contractor could ignore his basic contractual obligations to the consumer, including the warranty, and take...