78 Cal.App.5th 808
Cal. Ct. App.2022Background:
- Kim and Truong hired TWA (general contractor, owned by Wong) under a written September 28, 2015 construction agreement for a ~ $1.6M project; the scope included "site work" and a fixed-price that factored in tree removal.
- TWA subcontracted eucalyptus tree removal to Marvin Hoffman (located via Craigslist). Hoffman performed tree work on September 28, 2015; work stopped when the neighbor objected. Hoffman did not participate in litigation and no licensing proof for him was offered at trial.
- Neighbor Todd sued Kim and Truong (later adding TWA) for tree damage; Kim and Truong cross-complained against TWA for indemnity, comparative negligence, breach of contract, etc.; TWA cross-complained for breach of contract and damages.
- Pretrial, Kim and Truong moved under Cal. Bus. & Prof. Code §7031 to bar TWA from collecting for work performed by an unlicensed subcontractor; the trial court granted a ruling allowing the jury to decide whether Kim paid for unlicensed tree work and to disgorge such payments.
- The jury found TWA 100% at fault for Todd’s damages, awarded Todd damages (doubled under timber statute), and answered that Kim paid TWA $10,000 for the tree trimming performed by TWA’s subcontractor; the trial court entered judgment ordering TWA to disgorge $10,000 and awarded Kim attorney and expert fees under the contract.
- TWA and Wong appealed, arguing (1) the trial court misapplied §7031, (2) the written contract did not include tree work so indemnity/fee provisions don’t apply, and (3) insufficient evidence supported the $10,000 finding. The Court of Appeal affirmed.
Issues:
| Issue | TWA/Wong's Argument | Kim/Truong's Argument | Held |
|---|---|---|---|
| Whether Bus. & Prof. Code §7031 bars a licensed general contractor from recovering compensation from an owner for work performed by an unlicensed subcontractor | §7031 should not bar recovery because TWA itself was licensed and sought compensation as a licensed contractor | §7031 bars any recovery that effectively seeks compensation for unlicensed subcontract work and allows owners to recover payments to unlicensed contractors | Held: §7031 bars a licensed general contractor from recovering compensation for work performed by an unlicensed subcontractor; trial court’s pretrial ruling was correct |
| Whether the written construction agreement includes tree removal (so contractual indemnity and attorney-fee provisions apply) | Tree work was a separate side/oral agreement and not part of the September 28 written contract | Tree removal was included as part of site work and was factored into the contract price; the written agreement is the entire agreement | Held: Contract reasonably susceptible to and, on the evidence, includes tree work; indemnity/fee provisions apply |
| Whether substantial evidence supports the jury finding that Kim paid $10,000 for the tree trimming | No; checks and Wong’s testimony allocate $10,000 to erosion control and other payments do not show $10,000 was for tree work | Testimony and contemporaneous e-mail by Truong allocate $10,000 to tree work; Kim’s testimony supports that erosion control/bridge work was incomplete | Held: Substantial evidence supports the jury’s $10,000 finding |
| Whether the postjudgment attorney-fee award should stand | Fee award should be reversed if contractual liability is reversed | Fees are authorized by the contract and proper if judgment stands | Held: Fee award affirmed because judgment and contract-based entitlement were affirmed |
Key Cases Cited
- MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc., 36 Cal.4th 412 (Cal. 2005) (interpreting §7031 as barring recovery for unlicensed contract work)
- Hydrotech Systems, Ltd. v. Oasis Waterpark, 52 Cal.3d 988 (Cal. 1991) (explaining licensing law purpose and that §7031 withholds judicial aid to discourage unlicensed contracting)
- Lewis & Queen v. N. M. Ball Sons, 48 Cal.2d 141 (Cal. 1957) (legislature prioritized deterrence of unlicensed contracting over equitable relief)
- Holm v. Bramwell, 20 Cal.App.2d 332 (Cal. Ct. App. 1937) (unlicensed subcontractor’s contract is void and bar to recovery)
- Dyna-Med, Inc. v. Fair Employment & Housing Com., 43 Cal.3d 1379 (Cal. 1987) (statutory construction principles—harmonize related provisions and consider consequences)
- Asdourian v. Araj, 38 Cal.3d 276 (Cal. 1985) (§7031 enforces the Contractors’ License Law and supports barring recovery for unlicensed work)