Summary
The California Supreme Court interprets California Business and Professions Code section 7031, which generally bars an unlicensed contractor from recovering compensation for work requiring a contractor’s license. The court holds that a contractor unlicensed at any time during performance of a contract may not recover compensation for any work under that contract, and that the substantial-compliance exception is unavailable absent prior licensure. The court also holds that judicial estoppel does not prevent the defendant from asserting the contractor’s nonlicensure and affirms in part and reverses in part the Court of Appeal’s judgment.
Topics
Practice areas
Questions Presented
- Whether judicial estoppel barred Niederhauser from contesting MW's licensure based on positions allegedly taken in related litigation.
- Whether California Business and Professions Code section 7031(a) permits a contractor who was unlicensed during part of performance under a contract to recover compensation for separately performed work completed while licensed.
- Whether MW could invoke the substantial-compliance exception despite never having held a California contractor's license before beginning performance under the structural contract.
- Whether a contract for licensed contractor services is automatically void and unenforceable solely because the contractor was unlicensed when the contract was executed, despite being licensed throughout performance.
Holdings
- Niederhauser was not judicially estopped from asserting MW's nonlicensure as a defense. Equitable considerations, alleged bad faith, or possible unjust enrichment cannot override the mandatory statutory bar against recovering compensation for unlicensed contractor work.
- Section 7031(a) bars a contractor from recovering any compensation under a contract for licensed services if the contractor was unlicensed at any time during performance of that contract; the contractor may not segment the contract and recover for portions performed while licensed.
- MW could not invoke the statutory substantial-compliance exception because it had never been duly licensed in California before beginning performance under the structural contract.
- A contractor is not barred from recovering compensation under a private contract solely because the contractor was unlicensed when the contract was executed, if the contractor was licensed at all times during performance.
Key quotations
“Where applicable, section 7031(a) bars a person from suing to recover compensation for any work he or she did under an agreement for services requiring a contractor's license unless proper licensure was in place at all times during such contractual performance.” (30 Cal. Rptr. 3d 755, 756)
“The words "at all times" convey the Legislature's obvious intent to impose a stiff all-or-nothing penalty for unlicensed work by specifying that a contractor is barred from all recovery for such an "act or contract" if unlicensed at any time while performing it.” (30 Cal. Rptr. 3d 755, 764)
“We now confirm that the CSLL does not automatically void all contracts entered by unlicensed contractors.” (30 Cal. Rptr. 3d 755, 775)
Factual background
Disney constructed a hotel with Turner Construction Company as general contractor. Niederhauser subcontracted specialized metal work to MW under structural and ornamental steel contracts. MW began structural work before obtaining a C-51 structural steel contractor's license, obtained that license on December 21, 1999, and never obtained a C-23 ornamental metals license, although it maintained a C-51 license throughout performance of the ornamental contract. MW sought compensation of approximately $955,553 under the structural contract and $366,694 under the ornamental contract.
Procedural history
MW sued Niederhauser and payment-bond defendants for compensation allegedly due under structural and ornamental steel subcontracts. The superior court granted summary judgment for Niederhauser based on MW's alleged nonlicensure and dismissed the action. The Court of Appeal reversed, and the Supreme Court granted review, ultimately reinstating the bar to recovery under the structural contract while affirming the ruling permitting recovery under the ornamental contract if MW was licensed throughout performance.
Remand instructions
The judgment of the Court of Appeal was reversed insofar as it permitted MW to sue for compensation for work under the structural contract. In all other respects, including the ruling concerning the ornamental contract and judicial estoppel, the Court of Appeal's judgment was affirmed.