*1 Aug. 30173. In Bank. 1974.] No. [L.A. GRIMES, Plaintiff and
RAY Respondent, etc., al., HOSCHLER, as et Registrar,
LEO B.
Defendants Appellants.
Counsel General, Russo, Evelle J. Younger, and Ronald F. Attorney At- Deputy General, for torney Defendants Appellants. W.
Harrison and Joshua for Plaintiff and Hertzberg Respondent. Kaplan Opinion
SULLIVAN, Hoschler, Leo B. J. Defendants of Contractors Registrar the mem- (registrar), Contractors’ State License Board (board),1 1 See Business and Professions Code 7000.5 and 7011. sections Hereafter, indicated, all are unless otherwise section references to the Business and Code. Professions in ad- entered in proceeding a
bers the board appeal writ of mandate of a issuance ordering peremptory ministrative mandamus the contractor’s revoking to set aside their decision defendants commanding license. and to reinstate plaintiff’s Grimes Ray license of plaintiff Code, 7091; (§ accusation Gov. filed an of Contractors Registrar as the sole asserting ground discipline et Grimes seq.) § an adjudi- that obtaining section 7113.52 in latter had violated by him lawful incurred obligations he had avoided cation in bankruptcy true to be the accusation A officer found hearing contractor. be revoked. The registrar adopted license proposed plaintiff’s officer. hearing decision proposed that decision administrative
Grimes review of sought *4 that the (Code Proc., 1094.5.)3 He claimed Civ. provision mandamus. § frus of his license the basis for revocation section 7113.5 establishing in law and there Act under federal trates Bankruptcy the federal Constitution. invalid under the clause of fore is supremacy (1971) Const., v. 402 (U.S. VI, on Perez 2.) cl. art. Campbell Relying 233, entered 1704], the court S.Ct. superior U.S. 607 L.Ed.2d 91 [29 of writ Grimes, of a in of issuance ordering peremptory favor judgment re ordering set decision mandate aside the directing defendants This followed. of Grimes’ license. instatement appeal is not in 7113.5 in section contend that the Defendants pertinent provision debtor to a discharge conflict with that of allowing part (11 35.) debts U.S.C.A. § certain in a bankruptcy proceeding. 637, is 402 U.S. dis v. that Perez
They argue Campbell, supra, v. Tracy Con in that our opinion case and tinguishable present 598, (1965) tractors’ State Board 63 Cal.2d Cal.Rptr. License [47 con 561, 865], P.2d in which we sustained attack,' stitutional controlling.4 still by for a licensee provides part: 2 Section 7113.5 in “The avoidance or settlement as a obligations of licensee incurred
less than their full of the lawful such amount (a) for bankrupcty . . a adjudication contractor in . constitutes cause ... disciplinary action.” to Code of Civil specifically 3 The did not refer petition for writ of mandamus ¿side 1094.5; however, seeking to set it indicated that Grimes was' Procedure section registrar adjudicatory registrar. of as in his function the decision Inasmuch (§ 7091; required by hearing taken Gov. which evidence is law conduct Code, for mandamus seq.), §11500 et it is clear that the standards administrative apply proceeding. Civil Procedure to this expressed in section of the Code of 1094.5 10-11; §2.3, (Cont. Bar) Civil (See pp. Cal. Administrative Ed. Cal. Mandamus (Cont. 1970) §5.8, Ed. Bar pp.,67-68.) Writs a valid represents 7113.5 4 Defendants also contend that section exercise Board, supra, (See Tracy v. State License power this state. Contractors’ police Campbell, U.S. 243- L.Ed.2d 244], the United States struck state statute Court down a Supreme pro- that a did viding discharge not exonerate debtor bankruptcy judgment from the of a state law in to the requirements financial respect responsibility of motorists. The state law involved there authorized the suspension license driver’s and vehicle of a registration judgment nonpayment debt attributable an automobile accident. Under the provisions statute, until challenged judgment remained paid suspension in effect and the judgment debtor continued under its restraint despite the fact that the debt later might be discharged bankruptcy.
The court delineated the issue carefully presented explicated for its principles resolution. The basic court question, high explained, “is the of a State to include as of this power enactment comprehensive part secure for automobile accident victims a section compensation that a providing discharge automobile accident tort shall judgment have no effect on the debtor’s obligation judgment repay creditor, at least insofar such be enforced may repayment (Id., the State.” at withholding driving privileges L.Ed.2d test for determining validity appropriate such state was described a state power as follows: whether “Deciding *5 statute, is in conflict with a federal statute invalid the and hence under is Clause Supremacy essentially ascertaining of first the. two-step process construction of the two statutes and then the constitutional determining (Id., whether are at they in conflict.” at 644 L.Ed.2d p. p. [29 239].) test,
In the this the court examined the of two applying purposes Perez courts, acts. on the construction of the state statute the Arizona Relying the court the is one high concluded that “sole in the emphasis [state] of for the of who providing leverage collection from drivers damages either (Id., admit that are they at fault or are at adjudged negligent.” pp. 646-647 L.Ed.2d at the 241].) The court then examined federal [29 p. act: “This Court on numerous occasions has stated that ‘[o]ne the primary of act’ is ‘a new purposes give debtors oppor- life and a clear tunity effort, field for future pressure unhampered 598, 599; Hope (1964) 414, 63 Cal.2d v. Contractors’ etc. Bd. 228 420 514].) doubt, Cal.Rptr. regulating [39 We have no that this state has an interest However, the financial notwithstanding affairs of its licensed contractors. this state interest, regulation may objectives such operate not of frustrate achievement (See Halpin Superior 885, (1972) under federal v. law. Court 900 6 Cal.3d [101 375, 1295].) Cal.Rptr. 495 P.2d
310 648 at (Id., debt.’ p. of [29
and discouragement preexisting [Citations.]” 241-242].) at L.Ed.2d pp. not stand the state could Court concluded that statute
The Supreme (Id., law. law federal of conflict between state and because the apparent 243-244].) In this conclusion at 652 L.Ed.2d at reaching p. pp. [29 whether a controlling made clear that opinion principle not a federal and merely state statute with and frustrates statute interferes some conceivable state purpose. whether former words, on the of the existence vel non of conflict other depends effect be a consideration its merely by the state statute and cannot determined 52, (1941) v. U.S. from Hines purpose. Quoting [85 Davidowitz 581, 399], 587, declared' Court L.Ed. S.Ct. Supreme “‘[i]n final function is to determine whether challenged our analysis,’ and execution state statute as an obstacle to ‘stands accomplishment ” Campbell, v. (Perez full Congress.’ 242].) at supra, 402 U.S. at L.Ed.2d p. [29 in two different was applied court principle explained Department v. (Kesler state statutes. earlier decisions similar involving 641, 82 S.Ct. Safety (1962) 807] Public U.S. 153 L.Ed.2d v. Mealey (1941) 314 L.Ed. 62 S.Ct. “[In U.S. 33 [86 Reitz dis statute, short, Congress’ giving Kesler frustrated policy the] not concerned debtors a new start. But the Kesler was charged majority statute, did this frustration. In majority opinion upholding only] look to effect of the .... considered legislation [It the state was not cir it because legislation upheld (Perez safety.” cumvent Act but to highway promote Campbell, U.S. at fn. omitted L.Ed.2d 242- supra, pp. concerned, 243].) “The the Court not with *6 similarly opinion Reitz fact that the the New York’s financial law frustrated responsibility oper Act, law, of the the which ation but with the was Bankruptcy purpose.of as (Id., divined at 651 L.Ed.2d highway safety.” promotion p. [29 243].) at p. was
Finally, that the of Kesler and no ruling emphasized Reitz Perez valid. can to the doctrine of longer longer “We no adhere aberrational and law federal Kesler that state frustrate law may operation Reitz as as the state its law had some in long legislature in purpose passing other mind than one of it is at frustration. fact that odds Apart cases, with the taken in such all our Clause approach nearly Supremacy a doctrine all would enable state unwanted nullify nearly legislatures federal committee legislation by legislative publishing simply report or articulating some state interest than frustration policy—other be federal would furthered objective tangentially by proposed —that state law. In view of we would not certainly consequences, apply Kesler doctrine in all Clause cases. it Although Supremacy possible that Kesler and are somehow argue confined to cases either involving Reitz highway safety, discloses no reason States analysis why should have broader federal law in these fields than power nullify Thus, others. we Kesler conclude that and have no can authoritative Reitz effect to the extent are they inconsistent with the that controlling principle any state which legislation frustrates the full effectiveness of federal law is rendered invalid (Id., Clause.” at 651-652 Supremacy pp. [29 L.Ed.2d at 243-244].)5 pp. bench, therefore,
Our task in the case at to determine whether in section “‘an challenged provision 7113.5 obstacle to the represents and execution full and accomplishment purposes ” (Perez v. Congress.’ Campbell, supra, 402 at L.Ed.2d U.S. p. [29 242].) at Act, The p. embodied in the Bankruptcy (402 explained 242]) U.S. at at L.Ed.2d are to p. p. debtors give a “new and a “clear effort” opportunity” field future eliminating debts. preexisting
We turn to consider the and effect the challenged state purpose Tracy Board, provision. Contractors' State License Cal. 598, 600, 2d this court concluded that the is> “not provision aid collection of health, debts but to safety, welfare of the protect public.”6 of the statute has also declared been to be “frankly part 5 In “III” of the opinion, majority explained statute state there was invalid analysis. even under the the express purpose Since Kesler-Reitz “ the state statute protect ‘financially irresponsible creditors from ” (Perez persons’ 239]), at p. at p. [29 L.Ed.2d the court reasoned that such a objective conflicted a primary give Act —“to debtors ‘a effort, new opportunity life and a unhampered clear field for future pressure discouragement (Perez of preexisting debt.’ [Citations.]” L.Ed.2d at At the same time the court “that Kesler and affirmed Reitz are not harmony with sound constitutional those principle,” and concluded distinguishable cases “should not be extended to cover case” which this new *7 has both the effect purpose frustrating objectives of of the Bankruptcy the Act. (Id., at p. L.Ed.2d at 6 Tracy quotes (1948) also from Howard v. State of California stating P.2d purpose 11] of the act License “[t]he [Contractors guard incompetent workmanship, is to the the public consequences Law] imposition of clear, however, merely expressing It deception.” that Howard was general (§ purpose seq.) of Contractors 7000 et because the License Law society.” ills of the economic concern for a “state
economic,” i.e., it reflects 414, 425.) It Bd., supra, 228 Cal.App.2d Contractors’ etc. (Hope is to whose blush, protect a statute seem, first would not motivated even though “health, and welfare of public,” safety, Bank with the reasons, conflict would economic” “frankly we are commanded further since Act. But we must probe ruptcy also its but of section 7113.5 not the declared only to consider effect. threatened a clear: licensee unmistakably the section is
The effect of are dis as a contractor if debts incurred of his license his loss As in a less than their full amount bankruptcy proceeding. for charged reissuance forbids the License Law the Contractors a further consequence, are debts of the discharged paid a revoked license until the amounts Hence, frustrates (§ 7102.) scheme in statutory in full. first, in three it tends to discourage Congress respects: bank-, business debts discharged contractor from his having licensed or in second, either voluntarily if he is adjudicated bankrupt, ruptcy; his the board to revoke or suspend voluntarily, empowers livelihood; third, section license, thus him of his means of depriving effect, licensee to his discharged pay compels disciplined debts if he license or reinstated.8 business desires to have his reissued sum, under the relevant the Contractors License Law here sections of contractors from voluntarily examination licensed only discourage availing themselves beneficent provisions bank but a fresh are sternly start to all licensees who deny adjudicated either rupts voluntarily involuntarily. statute under consideration there another Contractors License Law section making it a capacity misdemeanor act a con- person an unlicensed (§ 7028.)
tractor. any of the provides part: upon 7 Section 7102 “After revocation of a license article, within grounds set forth be reinstated or reissued in this the license shall not only year proper period of one after the final of revocation and then on decision showing was revoked that all loss caused the act or omission for which license fully has been satisfied . . . .” challenges 8 Respondents mandamus proceeding contend that this in administrative directly concern and does not the revocation of Grimes’ license under section 7113.5 governs However, Grimes’ application 7102. inasmuch section section license, of revocation right consequences represents' to reissuance of his it one of the 7113.5, consider, (402 Therefore, pp. U.S. at as in under section we must 236-238]), a whole statutory scheme as pp. operative L.Ed.2d at 639-642 [29 the Bank purposes of particular conflicts with the it is claimed that statute when ruptcy Act. *8 The state statutes here bear-a to the challenged striking similarity state financial laws under- attack in a There driver’s' responsibility Perez. to be license for- to a debt required failure suspended pay a discharged in here a contractor’s is sub bankruptcy proceeding; license to revoked or for failure to the full of ject being amount pay suspended a business debt in it discharged noteworthy Furthermore is bankruptcy. statute, that under each state license be may reinstated respective not or reissued unless the debt has been in full. The discharged paid conclusion is ineluctable that section in 7113.5 is conflict with the Bank Act and be ruptcy therefore must declared invalid as violative clause. supremacy
Defendants, however, to the statute this case 'distinguish Attempt First, that, Perez, one they unlike the state statute in argue Perez. 7113.5 is to designed section not of debts dis collection promote to to charged defendants-continue look bankruptcy. only Apparently, out, of the statute and its As pointed effect. crucial whether state act frustrates the Congress intent . a give (Perez Campbell, supra, debtors “new life.” v opportunity U.S. at Therefore, at a although p. p. [29 L.Ed.2d debts, state statute is not collection expressly promote it still offend the may if its effect Congress deny debtors benefits Act. Bankruptcy defendants unlike the state law in which
Additionally, argue required license, of a less severe suspension imposes Board, (See Tracy supra, sanctions. v. Contractors’ State License 601; Hope Bd., at Cal.2d v. Contractors’ etc. 228 Cal.App.2d 425.) that under of debts in They urge section discharge does not of a contractor’s license automatically result in loss but cause merely gives action in an administrative pro disciplinary wherein the contractor ceeding be deemed his may worthy retaining license. The record in the instant case belies such a claim., registrar, in his accusation, administrative on the evidence hearing merely considered that Grimes had been a- and had his adjudicated discharged bankrupt debts incurred as a contractor for less than their full’ trial -The amount'. court found that his as adjudication was the sole cause for bankrupt revocation of his event, license. In any defendants’- is beside argument Whether point. action is automatic disciplinary discretionary, where, here, Act are frustrated state statute to revoke the permits license a contractor who registrar has been adjudicated bankrupt.
314 by is controlled decision herein that our contend defendants
Finally,
Board, supra,
State License
Tracy v. Contractors’
our earlier opinion
etc.
Hope v. Contractors’
court,
on
Tracy,
relying
In
this
We Act therefore is invalid under the clause supremacy Bankruptcy the United States Constitution. The affirmed. J., Tobriner, J., Mosk, J., C. concurred.
Wright, BURKE, J. I find that Business and Professions dissent. majority the federal Bank- Code conflicts with the 1 and is invalid under (11 U.S.C. et therefore seq.) ruptcy § Const., VI, com- (U.S. 2). colleagues art. cl. feel My clause supremacy Tracy this result to overrule our unanimous decision reaching pelled Board, State License Contractors’ Cal.2d 598 Cal.Rptr. 865], I I in this because believe section P.2d cannot concur holding charac- correctly 7113.5 sound public policy supported Tracy 600) terized this court in as “not aid collection (p. health, but safety, debts and welfare public.” protect con- Tracy, we the claim that section 7113.5 specifically rejected “ act flicted with the We noted that ‘The Act. Bankruptcy License is to guard public consequences [Contractors Law] Ac- and deception.’ incompetent workmanship, imposition [Citations.] . . . on the statute bears cordingly, only tangentially pur- present (63 it.” Act and not conflict with served does poses Bd., etc. Hope see also v. Contractors’ Cal.2d p.,600; 514]; Hopkins Bd., v. Contractors’ State License Cal.Rptr. *10 917].)1 Cal.Rptr. [49 I do not believe the Campbell, reliance on v. majority’s U.S. 233, 1704], 7113.5, L.Ed.2d is 91 S.Ct. for section justified, Tracy Board, which we in v. upheld supra, Contractors’ State License 63 Cal.2d a different than was decided presents court in high the court was faced with a statute which Perez. for provided driving an accident suspension privileges following full, unless the was in resulting judgment of its dis- paid regardless prior in The court stated that: sole charge “The bankruptcy. emphasis Act is one of leverage [Arizona] for the collection of damages providing . .” (402 . . U.S. L.Ed.2d at This p.
held to with conflict the federal which was to the debtor a give fresh start.
On the other hand section 7113.5 is a merely codification of a proper state to policy from protect and public incompetence deception state authorizing officers revoke or a contractor’s suspend bankrupt license. The of such does imposition any debt- discipline promote collection (See ante.) in conflict with the laws. fn. policy bankruptcy We Tracy Board, noted in Contractors’ State License 598, 601, Cal.2d the sanctions “‘are imposed by much less drastic than those of the Utah Financial Responsibility Act. Here acts of do not license revocation. bankruptcy require peremptory merely for the They give cause of some action. taking disciplinary and, so, thereof, Whether such action will be taken if the extent left to be gauged by all factors to the relevant comprehensive appraisal ultimate issue: Can this at the time be deemed person competent present ” to continue to weal?’ pursue affecting vocation substantially public Hope Bd., (Quoting v. Contractors’ etc. supra, 228 Cal.App.2d 414, 425.) that section tends majority suggest 7113.5 invalid because “it a licensed discourage contractor from his business debts dis- having out, appellants point legitimate 1 As the state protecting has a interest subcon tractors, materialmen, employees property resulting owners from loss from the irresponsibility building
financial incompetence Accordingly, contractors. bankruptcy triggers fact of properly investigation an leading possible license revo cation, (§ any pay 7120) does suppliers, failure to materialmen or subcontractors job circumstances, complete (§7113). or failure to a construction Under such revo future, to prevent past cation occurs similar loss in the to provide and not creditors any leverage against additional or recourse the contractor. (Ante, 312.) Evidently;,the majority-as- charged,¿n>.bankruptcy,...” mea- the extreme a debtor from law which sume that discourages taking any view of the To the would be invalid! likely sure contrary, bankruptcy his own damage reputa- to creditors the public, hardship Of this regard. should be inhibited in tion, debtor quite properly may the state course, elect to file bankruptcy, the debtor does once effect laws underlying not interfere with the policy 7113.5, author- Yet, section of business debts. discharge- permanent contractor, thé board take action *11 izing bankrupt .to disciplinary the contractor’s or collection of discharge has no effect whatever the upon debts. to
Thus, bankrupt that revoke statutory authority I would conclude conflict With does not license for public contractor’s protection a debtor from federal Act to relieve pay- ment of his obligations. past revocation, however, is of license
Wholly apart propriety must his whether a contractor such as Grimes previously pay question his license. debts to reinstatement of contractor’s as a condition discharged the condi- sets forth of the Business and Professions Code Section 7102 reissuance of license previously tions for reinstatement or obtaining board, that such reinstatement revoked including provision revo- year following for a of one reissuance shall occur period by the act cation, that loss caused “and on all only showing then proper fully has been revoked or omission which the license was for satisfied have all the decision of revocation and that conditions imposed that (Italics Grimes contends added.) forcefully been with.” complied (and section would conflict with the laws rationale decision) as were it Grimes repay requiring interpreted (See as a his license. his debts condition to reinstatement of discharged Note, 348.) also L.J. Hastings yet
Yet the 7102 is not before validity section interpretation case, us in this for revocation of his license only Grimes attacks initial Hope etc. (See and not the board’s failure to reinstate it. v. Contractors’ Bd., 414, If, 426.) to the board’s contrary repre- court,2 to this such sentations the board condition impose attempts 2 Appellants apply provisions have any disclaimed intention section Appellants wherein a cases revoked under section 7113.5. further been license.has Registrar Contractors], “The public, state protecting-the [of concerned likely practice or not the licensee his whether has rehabilitated himself and then the validity section so will be applied, for our consideration. ripe
I would reverse judgment.
McComb, J., J., Clark, concurred. Appellants’ denied 1974. petition rehearing September McComb, J., Burke, J., Clark, J., were of the opinion should be petition granted. *12 profession chosen competently responsibly so represent as not threat laborers, materialmen, homeowners whom he come into contact will a contractor.”