CACI No. 4560. Recovery of Payments to Unlicensed Contractor (Bus. & Prof. Code, § 7031(b))

Judicial Council of California Civil Jury Instructions (2020 edition)

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4560.Recovery of Payments to Unlicensed Contractor (Bus. &
Prof. Code, § 7031(b))
[Name of plaintiff] claims that [name of defendant] did not have a valid
contractor’s license during all times when [name of defendant] was
performing services for [name of plaintiff] under their contract. To
establish this claim, [name of plaintiff] must prove all of the following:
1. That there was a contract between [name of plaintiff] and [name of
defendant] under which [name of defendant] was required to
perform services for [name of plaintiff];
2. That a valid contractor’s license was required to perform these
services; and
3. That [name of plaintiff] paid [name of defendant] for contractor
services that [name of defendant] performed as required by the
contract;
[Name of defendant] must then prove that at all times while performing
these services, [he/she/nonbinary pronoun/it] had a valid contractor’s
license as required by law.
New June 2016
Directions for Use
Give this instruction in a case in which the plaintiff seeks to recover money paid to
an unlicensed contractor for service performed for which a license is required. (Bus.
& Prof. Code, § 7031(b).) It may be modified for use if an allegedly unlicensed
contractor brings a claim for payment for services performed. (See Bus. & Prof.
Code, § 7031(a).)
The burden of proof to establish licensure or proper licensure is on the licensee.
Proof must be made by producing a verified certificate of licensure from the
Contractors’ State License Board. When licensure or proper licensure is
controverted, the burden of proof to establish licensure or proper licensure is on the
contractor. (Bus. & Prof. Code, § 7031(d).)
A corporation qualifies for a contractor’s license through a responsible managing
officer (RMO) or responsible managing employee (RME) who is qualified for the
same license classification as the classification being applied for. (Bus & Prof. Code
§ 7068(b)(3).) The plaintiff may attack a contractor’s license by going behind the
face of the license and proving that a required RMO or RME is a sham. The burden
of proof remains with the contractor to prove a bona fide RMO or RME. (Buzgheia
v. Leasco Sierra Grove (1997) 60 Cal.App.4th 374, 385387 [70 Cal.Rptr.2d 427].)
Whether an RMO or RME is a sham can be a question of fact. (Jeff Tracy, Inc. v.
City of Pico Rivera (2015) 240 Cal.App.4th 510, 518 [192 Cal.Rptr.3d 600].)
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Sources and Authority
• Action to Recover Compensation Paid to Unlicensed Contractor. Business and
Professions Code section 7031(b).
• Proof of Licensure. Business and Professions Code section 7031(d).
• “Contractor” Defined. Business and Professions Code section 7026.
• “The purpose of the licensing law is to protect the public from incompetence
and dishonesty in those who provide building and construction services. The
licensing requirements provide minimal assurance that all persons offering such
services in California have the requisite skill and character, understand
applicable local laws and codes, and know the rudiments of administering a
contracting business.” (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52
Cal.3d 988, 995 [277 Cal.Rptr. 517, 803 P.2d 370], internal citations omitted.)
• “Because of the strength and clarity of this policy, it is well settled that section
7031 applies despite injustice to the unlicensed contractor. ‘Section 7031
represents a legislative determination that the importance of deterring unlicensed
persons from engaging in the contracting business outweighs any harshness
between the parties, and that such deterrence can best be realized by denying
violators the right to maintain any action for compensation in the courts of this
state. [Citation.] . . .’ ” (Hydrotech Systems, Ltd., supra, 52 Cal.3d at p. 995,
original italics.)
• “The current legislative requirement that a contractor plaintiff must, in addition
to proving the traditional elements of a contract claim, also prove that it was
duly licensed at all times during the performance of the contract does not change
this historical right to a jury trial.” (Jeff Tracy, Inc., supra, 240 Cal.App.4th at p.
518, fn. 2.)
• “[T]he courts may not resort to equitable considerations in defiance of section
7031.” (Lewis & Queen v. N. M. Ball Sons (1957) 48 Cal.2d 141, 152 [308 P.2d
713].)
• “In 2001, the Legislature complemented the shield created by subdivision (a) of
section 7031 by adding a sword that allows persons who utilize unlicensed
contractors to recover compensation paid to the contractor for performing
unlicensed work. Section 7031(b) provides that ‘a person who utilizes the
services of an unlicensed contractor may bring an action in any court of
competent jurisdiction in this state to recover all compensation paid to the
unlicensed contractor for performance of any act or contract’ unless the
substantial compliance doctrine applies.” (White v. Cridlebaugh (2009) 178
Cal.App.4th 506, 519 [100 Cal.Rptr.3d 434], internal citation omitted.)
• “It appears section 7031(b) was designed to treat persons who have utilized
unlicensed contractors consistently, regardless of whether they have paid the
contractor for the unlicensed work. In short, those who have not paid are
protected from being sued for payment and those who have paid may recover all
compensation delivered. Thus, unlicensed contractors are not able to avoid the
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full measure of the CSLL’s civil penalties by (1) requiring prepayment before
undertaking the next increment of unlicensed work or (2) retaining progress
payments relating to completed phases of the construction.” (White, supra, 178
Cal.App.4th at p. 520.)
• “In most cases, a contractor can establish valid licensure by simply producing ‘a
verified certificate of licensure from the Contractors’ State License Board which
establishes that the individual or entity bringing the action was duly licensed in
the proper classification of contractors at all times during the performance of any
act or contract covered by the action.’ [Contractor] concedes that if this was the
only evidence at issue, ‘then - perhaps - the issue could be decided by the court
without a jury.’ But as [contractor] points out, the City was challenging
[contractor]’s license by going behind the face of the license to prove that
[license holder] was a sham RME or RMO. (Jeff Tracy, Inc., supra, 240
Cal.App.4th at p. 518.)
• “[T]he determination of whether [contractor] held a valid class A license
involved questions of fact. ‘[W]here there is a conflict in the evidence from
which either conclusion could be reached as to the status of the parties, the
question must be submitted to the jury. [Citations.] This rule is clearly applicable
to cases revolving around the disputed right of a party to bring suit under the
provisions of Business and Professions Code section 7031.’ ” (Jeff Tracy, Inc.,
supra, 240 Cal.App.4th at p. 518.)
• “We conclude the authorization of recovery of ‘all compensation paid to the
unlicensed contractor for performance of any act or contract’ means that
unlicensed contractors are required to return all compensation received without
reductions or offsets for the value of material or services provided.” (White,
supra, 178 Cal.App.4th at pp. 520521, original italics, internal citation
omitted.)
• “[A]n unlicensed contractor is subject to forfeiture even if the other contracting
party was aware of the contractor’s lack of a license, and the other party’s bad
faith or unjust enrichment cannot be asserted by the contractor as a defense to
forfeiture.” (Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239
Cal.App.4th 882, 896 [191 Cal.Rptr.3d 714].)
• “Nothing in section 7031 either limits its application to a particular class of
homeowners or excludes protection of ‘sophisticated’ persons. Reading that
limitation into the statute would be inconsistent with its purpose of ‘ “deterring
unlicensed persons from engaging in the contracting business.” ’ ” (Phoenix
Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp. (2017) 12
Cal.App.5th 842, 849 [219 Cal.Rptr.3d 775].)
• “[Contractor] has not alleged one contract, but rather a series of agreements for
each separate task that it was asked to perform. It may therefore seek
compensation under those alleged agreements that apply to tasks for which no
license was required.” (Phoenix Mechanical Pipeline, Inc., supra, 12 Cal.App.5th
at p. 853.)
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Secondary Sources
1 Witkin, Summary of California Law (11th ed. 2017) Contracts, § 491
12 California Real Estate Law and Practice, Ch. 430, Licensing of Contractors,
§ 430.70 (Matthew Bender)
10 California Forms of Pleading and Practice, Ch. 104, Building Contracts, § 104.83
(Matthew Bender)
5 California Points and Authorities, Ch. 50A, Contracts: Performance, Breach, and
Defenses, § 50A.52 et seq. (Matthew Bender)
29 California Legal Forms, Ch. 88, Licensing of Contractors, § 88.18 (Matthew
Bender)
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