Filed 10/27/23 Southwest Painting v. Newcastle Enterprises CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

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or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

SOUTHWEST PAINTING, INC.,

 Plaintiff, Cross-defendant and 

Appellant,

v.

NEWCASTLE ENTERPRISES, LTD.,

 Defendant, Cross-complainant and 

Respondent.

 G061496

 (Super. Ct. No. 30-2019-01099958)

 O P I N I O N

Appeal from a postjudgment order of the Superior Court of Orange County, 

Derek W. Hunt, Judge. Reversed and remanded with directions.

John L. Dodd & Associates, John L. Dodd; Law Offices of John R. Lobherr 

and John R. Lobherr for Plaintiff, Cross-defendant and Appellant.

Law Offices of Gary R. Carlin, Gary R. Carlin and Alexander F. Zaimi for 

Defendant, Cross-complainant and Respondent.
2

Southwest Painting, Inc. (Southwest) entered into at least three contracts 

with Newcastle Enterprises, Ltd. (Newcastle) to perform painting services, fascia repair, 

and siding removal and installment services at an apartment complex owned by 

Newcastle. Southwest later sued Newcastle for breach of contract to recover unpaid 

compensation for painting services it performed pursuant to the parties’ painting contract. 

Newcastle filed a cross-complaint for breach of contract and fraud-related claims against 

Southwest, alleging Southwest performed substandard work and its principal had 

mirepresented Southwest held a license to perform fascia repair and siding installment.

Following a trial, the jury found Newcastle breached the painting contract 

and was liable to Southwest for over $91,000 in unpaid compensation for its painting 

services. The jury also found Southwest had not breached any contract for other work at 

the apartment complex and further found its principal had not negligently or intentionally 

induced Newcastle to enter a contract with Southwest by misrepresenting a material fact. 

The trial court thereafter invited briefing regarding the legal effect of 

Business and Professions Code section 70311 on Southwest’s ability to recover unpaid 

compensation for painting services and Newcastle’s ability to recover amounts already 

paid to Southwest due to the status of Southwest’s licensure. The trial court issued a 

statement of decision concluding section 7031, subdivision (a) (section 7031(a)) barred 

Southwest from recovering unpaid compensation for painting services because it had also 

performed fascia and siding work for Newcastle without the required licensure. For the 

same reason, the trial court concluded, under section 7031, subdivision (b) (section 

7031(b)), Southwest must be ordered to disgorge all compensation it received from 

Newcastle, totaling $252,444. Judgment was entered accordingly.

1

 All further statutory references are to the Business and Professions Code unless 

otherwise specified.
3

Southwest filed a motion to vacate the judgment and enter a new judgment 

under Code of Civil Procedure section 663. The trial court tacitly denied the motion. For 

the reasons we will explain, we reverse and remand with directions. 

FACTS

Newcastle owns Castlewood Park, a 183-unit apartment complex located in 

Buena Park. In 2018, through three separate written contracts, Newcastle retained 

Southwest as a contractor to repaint the entire complex, repair fascia, and remove and 

replace existing siding with manufactured stone veneer siding. 

On August 10, 2018, the parties signed “BID # P2076” by which they 

agreed Southwest would “complete exterior paint[ing] of 183 units.” (Boldface, 

underscore, and some capitalization omitted.) The painting contract provided Southwest 

would be compensated for work performed under that contract for the total amount of 

$181,150. On August 20, 2018, the parties signed an amendment to the painting contract 

to include painting the complex’s laundry rooms.

Also on August 10, 2018, the parties signed “BID # W2081” by which they 

agreed Southwest would perform “wood repairs as listed on summary list” (the fascia 

contract). (Capitalization omitted.) The fascia contract stated it involved “total linear 

footage [equaling] 1444 . . . of 2 x 8 fascia board.” (Capitalization and boldface omitted.) 

At trial, Newcastle’s principal testified, “The original fascia contract was for $17,328.” 

(The parties entered into a subsequent written agreement regarding additional fascia work 

to be completed for the further sum of $2,900.) 
4

Finally, on August 20, 2018, the parties signed “BID # 2088” providing for 

Southwest to perform work described as “wood siding replace[ment] with stone as listed 

on summary list,” for the sum of $955,000 (the siding contract).2 

At all relevant times, Southwest held a valid Class C license sufficient for 

performing commercial painting services. The other work Newcastle retained Southwest 

to perform (e.g., replace fascia, remove and replace siding) generally required a Class B 

license which Southwest “either never had at all, or only later secured surreptitiously 

th[r]ough . . . Hector Villareal [who held such a license] after the work had already 

commenced.” 

Southwest’s owner and manager, Victor Medina, testified he initially and

erroneously believed the siding contract was a do-it-yourself project, given the siding 

manufacturer’s instructions.3 It is unclear when Southwest realized it had agreed to and 

undertaken Class B work, but it is certain it had recognized and addressed the problem by 

October 24, 2018 when it entered into an “Independent Service Agreement” with 

Villareal and his company. It was this agreement (undisclosed at this time to Newcastle) 

that on November 16, 2018, enabled Southwest to obtain a Class B license via Villareal; 

Villareal, however, “disassociated” five months later. 

In 2019, Newcastle removed Southwest from the project citing alleged 

deficient workmanship. 

2

 The siding contract was later amended to provide “ancillary expenses” imposed by the 

City of Buena Park for Southwest to complete work under the contract, such as permit 

fees, would be paid out of the contract price. 

3

 The trial court stated it did not question Medina’s good faith in this matter. 
5

PROCEDURAL HISTORY

I.

SOUTHWEST’S COMPLAINT AND NEWCASTLE’S CROSS-COMPLAINT

Southwest filed a complaint against Newcastle for unpaid compensation, 

asserting claims for breach of contract, account stated, open book account, reasonable 

value, violation of prompt payment statute, enforcement of mechanic’s lien, quiet title,

and declaratory relief. Newcastle filed an answer to the complaint and filed a crosscomplaint for damages and equitable relief against Southwest, asserting claims for breach 

of written contract, promissory estoppel, promissory fraud, negligent misrepresentation, 

intentional misrepresentation, breach of the implied covenant of good faith and fair 

dealing, and removal, release, dismissal, cancellation, striking, and withdrawal of the

mechanic’s lien recorded for Southwest and Medina against Newcastle.

4 Newcastle’s 

cross-complaint was based on allegations of Southwest’s poor workmanship and 

misrepresentations regarding its licensing status. 

II.

THE JURY VERDICTS ON LIABILITY AND DAMAGES

After the first phase of the trial addressing liability issues, the jury returned 

a verdict finding (1) Southwest proved by a preponderance of the evidence Newcastle 

had breached the painting contract; (2) Newcastle did not prove by a preponderance of 

the evidence Southwest breached the painting contract, fascia contract, or siding contract; 

and (3) Newcastle did not prove by a preponderance of the evidence Medina had 

intentionally or negligently induced Newcastle to contract with Southwest by 

4

In addition to Southwest, Newcastle named Villareal and Hector Villareal Construction

as cross-defendants in the cross-complaint but voluntarily dismissed them as parties

during trial. Newcastle also named Medina as a cross-defendant in the cross-complaint,

but the trial court dismissed him during trial after granting his motion for nonsuit.
6

misrepresenting a material fact.5 Following the second phase of the trial addressing 

damages, the jury found Southwest proved by a preponderance of the evidence Newcastle 

was liable to Southwest for unreimbursed work on the painting contract in the amount of 

$91,766.89. 

III.

THE TRIAL COURT’S STATEMENT OF DECISION ON DISGORGEMENT

As explained by the trial court, the jury’s verdicts “left unanswered . . . the 

two parallel questions that both sides put in the hands of the court, namely, (i) In light of 

the facts elicited at trial, what portion, if any, of the jury’s $91,766 damage figure is 

collectible by Southwest given the licensure provisions of [section] 7031 and its 

accompanying jurisprudence? Or (ii) by contrast, may Newcastle claim disgorgement of 

the entirety of its payments heretofore made?” 

After considering arguments and briefs submitted by the parties as well as 

evidence in the third phase of the trial in this matter, the trial court concluded in its

statement of decision dated November 12, 2021: “[F]inding that pursuant to said statute 

and the evidence adduced at trial, Southwest, a Class C licensee which had billed and 

ostensibly performed Class B licensed work under its contract with Newcastle, is obliged 

to disgorge to Newcastle the full $252,444 which it had received under their contract, 

including all sums paid before Southwest engaged a Class B licensee, Villareal 

Construction.” 

5

In the statement of decision, the trial court noted that since the parties filed their 

pleadings, “[a]long the way there . . . had been (i) causes of action and parties voluntarily 

dismissed, (ii) a nonsuit order, (iii) the trial court’s ruling on a quiet title cause of action, 

and (iv) a declaratory relief cause of action rendered moot by the liability verdict.” The 

record does not show how the case was whittled down to the questions presented to the 

jury on the special verdict form; no party challenges the scope of the jury trial in this 

appeal.
7

IV.

SOUTHWEST FILES AN OBJECTION TO THE STATEMENT OF DECISION AND REQUESTS A NEW 

OR MODIFIED STATEMENT OF DECISION; THE TRIAL COURT OVERRULES SOUTHWEST’S 

OBJECTION AND DENIES ITS REQUESTS

Southwest filed an objection to the court’s tentative statement of decision in 

which it argued the order requiring Southwest to disgorge the full $252,444 to Newcastle 

was improper, beyond the court’s jurisdiction, and subject to reversal for the reason 

disgorgement as the basis for an award of damages in any amount was not pleaded by 

Newcastle in its cross-complaint. Southwest argued Newcastle had only pleaded two 

theories for affirmative relief for breach of contract (regarding the siding contract only) 

and fraud (in the form of intentional and/or negligent misrepresentation), and had not 

asserted a claim for disgorgement under section 7031 or otherwise. Southwest pointed 

out no request to amend the cross-complaint was ever requested and none was granted. 

Southwest also filed a request for a new or modified statement of decision 

because: “1.) The conclusions drawn by the Court are not supported by the evidence 

produced at trial; [¶] 2.) The statement is misleading as to the nature of the four 

independent contracts subject of this litigation or, for that matter, that they are 

independent and mutually exclusive at all [sic]; [¶] 3.) The Court’s findings contradict 

admissions by Newcastle Enterprises as to the independence of contracts; [¶] 4.) The 

[C]ourt’s findings treat undisputed facts as being controverted; and [¶] 5.) There appears 

to be a reluctance to treat the multiple contracts as independent of one another in the 

application of [section] 7031. Instead, the Court erroneously treats the four contracts as 

one. [¶] Clarification of these issues is required.” 

Southwest also requested the trial court “render clarification in the form of 

a statement” finding, inter alia, the undisputed evidence established the existence of the 

parties’ separate written contracts and the fact “no funds received by Southwest from 

Newcastle were applied as payment for any work performed under siding contract 
8

W2088.” In conclusion, Southwest stated it “respectfully requests that the Court review 

its tentative statement of decision and make the above corrections/modifications to bring 

the decision in line with the evidence.” 

In a minute order dated November 22, 2021, the trial court stated: “The 

court has received and reviewed this day (i) Southwest’s Objection to Statement of 

Decision and (ii) Southwest’s Request for Statement of Decision. The court has decided 

to decline the invitation to amend the statement of decision. [Citation]; [citations]. The 

court also overrules the objection regarding disgorgement.” 

V.

THE JUDGMENT

Judgment was thereafter entered as follows: 

“1. Plaintiff Southwest Painting, Inc. shall have and is hereby awarded a 

judgment in the sum of $91,766 on its cause of action for breach of contract against 

defendant Newcastle Enterprises Ltd.;

“2. Cross-defendant Southwest Painting, Inc. shall also have and hereby is

awarded a judgment of no liability in its favor on the causes of action against it by

Newcastle Enterprises Ltd. on its causes of action for breach of contract and negligent or

intentional inducement of contract.

“3. The court having found that Southwest Painting, Inc. transgressed the 

license requirements of B&PC §7031, it her[e]by orders Southwest to disgorge the 

entirety of the $252,444[6]which it had received in payments by Newcastle under their 

contract.” 

Notice of entry of judgment was served on the parties on February 9, 2022. 

6

 The trial court did not explain how it calculated the amount of the disgorgement order 

included in the judgment. In briefing, Newcastle argued it had paid Southwest $252,444 

to date for services performed at Castlewood. 
9

VI.

SOUTHWEST FILES A MOTION TO VACATE THE JUDGMENT AND A 

MOTION FOR A NEW TRIAL ON THE DISGORGEMENT ISSUES

Southwest filed a motion under Code of Civil Procedure section 663 

seeking an order to vacate the judgment. Southwest argued the trial court’s disgorgement 

ruling, by which Southwest was required to return all funds paid to it by Newcastle for 

painting services, was “[f]ounded upon an ‘[i]ncorrect or erroneous legal basis[.]’”

Specifically, Southwest argued the undisputed evidence showed (as Newcastle’s counsel 

had conceded) the parties had entered into at least three separate contracts, not one 

integrated contract. Southwest further argued that because it was a fully licensed painting 

contractor at all relevant times, it was entitled to retain all funds pertaining to the painting 

and fascia contracts. On these grounds Southwest requested that the court vacate the 

judgment and enter a new judgment in its favor in the amount of $91,766.89 as awarded 

by the jury. 

Southwest also filed a motion for a new trial on the same grounds.

Newcastle filed opposition to each motion. After hearing argument on the motions, on 

April 2, 2022, the trial court issued a minute order stating the court took both motions 

under submission to enable “counsel to identify within seven days all trial exhibits other 

than Trial Exhibit 5 constituting Southwest/Newcastle contracts for siding, fascia, and 

stone work.” Southwest filed a posttrial brief and evidence in response to the trial court’s 

minute order.

VII.

THE TRIAL COURT DENIES THE MOTION FOR A NEW TRIAL

On May 31, 2022, the trial court issued a minute order denying the motion 

for a new trial. Our record does not show the trial court ruled on the motion to vacate the 

judgment. 
10

DISCUSSION

I.

THE ORDER DENYING THE MOTION TO VACATE THE JUDGMENT IS APPEALABLE

On June 22, 2022, Southwest filed its notice of appeal stating it was 

appealing the judgment and an order after judgment. Newcastle did not file an appeal in 

this action.

Southwest did not file its notice of appeal within 60 days after the superior 

court clerk served it with notice of entry of the judgment in this case. Therefore, to the 

extent Southwest seeks to directly appeal from the judgment itself, its notice of appeal 

was untimely filed. (Cal. Rules of Court, rule 8.104(a)(1)(A) [notice of appeal must be 

filed on or before 60 days after superior court clerk served on the party filing the notice 

of appeal a document entitled “‘Notice of Entry’”].)

“‘[A]n order denying a motion for new trial is not independently 

appealable.’” (K.J. v. Los Angeles Unified School Dist. (2020) 8 Cal.5th 875, 884.) 

Southwest does not argue otherwise in its appellate briefs.

As to the motion to vacate the judgment, Code of Civil Procedure section 

663a, subdivision (b) provides in relevant part: “[T]he power of the court to rule on a 

motion to set aside and vacate a judgment shall expire 75 days from the mailing of notice 

of entry of judgment by the clerk of the court pursuant to Section 664.5 . . . . If that 

motion is not determined within the 75-day period, or within that period as extended, the 

effect shall be a denial of the motion without further order of the court.”

According to our calculation, the trial court’s jurisdiction to rule on 

Southwest’s motion to vacate the judgment expired on April 25 (75 days from the 

February 9, 2022 date the clerk served Southwest by mail with the notice of entry of 

judgment). The record does not show the trial court ruled on that motion before it lost 

jurisdiction, or otherwise. 
11

The motion to vacate the judgment is therefore deemed denied by the trial 

court, by operation of Code of Civil Procedure section 663a, subdivision (b). With regard 

to motions to vacate the judgment brought under Code of Civil Procedure section 663, 

such as the one here, the Supreme Court has held: “All our prior cases have interpreted 

the statute authorizing appeals from postjudgment orders to include appeals of rulings 

denying section 663 motions. A statutory appeal from a ruling denying a section 663 

motion is indeed distinct from an appeal of a trial court judgment and is permissible 

without regard to whether the issues raised in the appeal from the denial of the section 

663 motion overlap with issues that were or could have been raised in an appeal of the 

judgment. This approach is the most reasonable in light of the text, structure, and context 

of the relevant statutes, because the statute authorizing appeals from postjudgment 

motions provides for appeals from postjudgment orders without reference to the 

substance of the issues analyzed in an order.” (Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 

135.)

II.

THE TRIAL COURT ERRED BY FAILING TO GRANT THE MOTION TO VACATE THE 

JUDGMENT AND ENTER A NEW JUDGMENT

The judgment here incorporated the jury’s verdict in favor of Southwest on 

its claim for breach of the painting contract, finding Newcastle liable to Southwest on 

that claim in the amount of $91,766.89. The judgment also incorporated the jury’s 

verdict with regard to Newcastle’s cross-complaint against Southwest, stating Southwest 

“shall also have and hereby is awarded a judgment of no liability in its favor on the 

causes of action against it by Newcastle Enterprises Ltd. on its causes of action for breach 

of contract or intentional inducement of contract.” Neither party has challenged those 

aspects of the judgment entered in this case.

Southwest’s motion to vacate the judgment, which it brought under Code of 

Civil Procedure section 663, challenged the final portion of the judgment which states: 
12

“The court having found that Southwest Painting, Inc. transgressed the license 

requirements of [section] 7031, it her[e]by orders Southwest to disgorge the entirety of 

the $252,444 which it had received in payments by Newcastle under their contract.” That 

portion of the judgment conflicts with and presumably operates to cancel the former 

portion of the judgment awarding Southwest $91,766.89 for unpaid compensation for 

painting services.

Section 663 of the Code of Civil Procedure provides: “A judgment or 

decree, when based upon a decision by the court, or the special verdict of a jury, may, 

upon motion of the party aggrieved, be set aside and vacated by the same court, and 

another and different judgment entered, for either of the following causes, materially 

affecting the substantial rights of the party and entitling the party to a different judgment: 

[¶] 1. Incorrect or erroneous legal basis for the decision, not consistent with or not 

supported by the facts; and in such case when the judgment is set aside, the statement of 

decision shall be amended and corrected. [¶] 2. A judgment or decree not consistent with 

or not supported by the special verdict.”

For the following reasons, we conclude Southwest’s motion to vacate the 

judgment and enter a new judgment should have been granted because the challenged 

portion of the judgment (along with the statement of decision that preceded it) is 

“[i]ncorrect or [there is an] erroneous legal basis for the decision, not consistent with or 

not supported by the facts” in its application of section 7031. (Code Civ. Proc., § 663.)

A. Section 7031 Generally

Section 7031 is part of the Contractors State License Law (§ 7000 et seq.)

which “imposes strict and harsh penalties for a contractor’s failure to maintain proper 

licensure.” (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc.

(2005) 36 Cal.4th 412, 418 (MW Erectors), italics omitted.) Section 7031 “both bars

recovery in a court of law for any contractor or subcontractor who performed the act or 
13

contract unlicensed (§ 7031(a)) and authorizes a person who utilizes the services of an 

unlicensed contractor or subcontractor to bring a court action to recover the compensation 

paid for that unlicensed work (§ 7031, subd. (b)). These parallel methods of statutory 

deterrence are referred to, respectively, as the ‘“shield’’’ and ‘“sword”’ of the Contractors 

State License Law.” (Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, 828

(Kim).)

Section 7031(a) provides: “[N]o person engaged in the business or acting 

in the capacity of a contractor, may bring or maintain any action, or recover in law or 

equity in any action, in any court of this state for the collection of compensation for the 

performance of any act or contract where a license is required by this chapter without 

alleging that they were a duly licensed contractor at all times during the performance of 

that act or contract regardless of the merits of the cause of action brought by the person, 

except that this prohibition shall not apply to contractors who are each individually 

licensed under this chapter but who fail to comply with Section 7029.” (Italics added.)

Section 7031(b) provides, in part, “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.” (Italics added.)

B. The Judgment Relies on the Erroneous Assumption the Parties Entered into a Single 

Contract

As the judgment cites section 7031 in ordering Southwest “to disgorge the 

entirety of the $252,444 which it had received in payments by Newcastle under their 

contract,” the trial court necessarily concluded the parties had a single contract which 

required the provision of some services for which Southwest was not licensed (e.g., 

siding installation). Contrary to this assumption, Newcastle has consistently agreed it had
14

entered into at least three separate written contracts for the provision by Southwest of

painting, fascia repair and replacement, and siding installation services, respectively.

At a pretrial conference, the parties’ counsel explained the case involved at 

least three separate contracts as follows:

“The Court: All right. Let me ask this. This came up before. Is there —

since you’re suing for breach of a contract, is there a single documentary contract with a 

single date on it?

“[Southwest’s counsel]: Your honor, four separate single —

“The Court: That is to say there is no single document. We’re litigating 

four separate documents.

“[Southwest’s counsel]: Yes, your Honor.

“The Court: They have different dates.

“[Southwest’s counsel]: They do.

“The Court: But they are not novations?

“[Southwest’s counsel]: They’re separate contracts, your Honor.

“The Court: So each contract is in addition to and not an amendment of an 

earlier contract.

“[Southwest’s counsel]: They are related, your Honor, to the painting and 

they —

“The Court: Do they make reference to each other? The law has some 

mechanism for dealing with what we call novations. You can replace one contract within 

[sic] another. That’s perfectly fine. You can remand [sic] the contract. But if you tend 

not to do either, then the judge has to sort out whether or not you’re abandoning one for 

the other or something else.

“[Southwest’s counsel]: We are not abandoning one for the other. They are 

separate independent contracts.

“The Court: They cover different subject matters?
15

“[Southwest’s counsel]: Different scopes of work, different amounts of 

money and different —

“The Court: All right. We’ll talk about that.

“[Newcastle’s counsel]: And your Honor, if I may add they require 

different types of licenses.

“The Court: So in any event, all four of these contracts are they all signed 

by both sides?

“[Southwest’s counsel]: They are, your Honor.

“The Court: Mr. Romeyn [Newcastle’s counsel]?

“[Newcastle’s counsel]: Yes, your Honor.” 

Later, during Newcastle’s counsel’s opening statement to the jury, counsel 

stated: “There were actually three contracts, separate independent contracts, that were 

formed. The first was for a painting contract to paint these 46 units . . . . There was a 

separate contract to replace this fascia right then and there on the same day. [¶] The 

next -- ten days later on the 20th, there was a contract to do this stacked stone veneer 

work.” 

Copies of the parties’ three written contracts were included in their joint list 

of trial exhibits and were ultimately admitted into evidence during the jury trial as trial 

exhibits 5, 6, and 101. Newcastle’s principal testified at trial the parties had three distinct 

written contracts: the painting contract, the fascia contract, and the siding contract. 

In its post jury trial briefing on the licensure issue, Newcastle 

acknowledged the existence of the parties’separate contracts. And to its credit, even in 

the respondent’s appellate brief, Newcastle acknowledges the parties’ separate contracts 

for painting, fascia repair and replacement, and siding installation (although it also argued 

“all contracts entered into were interrelated and, in reality, constituted a single project

involving the same structures, same employees, same contracting parties, and same time 
16

period. Thus, the work performed cannot be regarded as involving distinct contracts, but 

[in] reality constituted a single contract”.) (Underscoring omitted.) 

We decline to construe the parties’ three separate written contracts for the 

performance of different types of services as a single contract for purposes of section 

7031. “‘In construing a statute, “‘we strive to ascertain and effectuate the Legislature’s 

intent.’ [Citations.] Because statutory language ‘generally provide[s] the most reliable 

indicator’ of that intent [citations], we turn to the words themselves, giving them their 

‘usual and ordinary meanings’ and construing them in context . . . .” [Citation.] “If the 

language contains no ambiguity, we presume the Legislature meant what it said, and the 

plain meaning of the statute governs.” [Citation.]’” (MW Erectors, supra, 36 Cal.4th at 

p. 426.)

The plain language of section 7031 precludes recovery of compensation 

and authorizes disgorgement of payments for the performance of an act or a contract by

an unlicensed person acting as a contractor. “[G]enerally, ‘[t]he purpose of the licensing 

law is to protect the public from incompetence and dishonesty in those who provide 

building and construction services. [Citation.] 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. [Citations.] [¶] Section 7031 advances this 

purpose by withholding judicial aid from those who seek compensation for unlicensed 

contract work. The obvious statutory intent is to discourage persons who have failed to 

comply with the licensing law from offering or providing their unlicensed services for 

pay.’ [Citations.]” (Kim, supra, 78 Cal.App.5th at pp. 823–824, quoting Hydrotech 

Systems, Ltd. v. Oasis Waterpark (1991) 53 Cal.3d 988, 995; see MW Erectors, supra, 36 

Cal.4th at p. 426 [it is clear the Legislature intended 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”].)
17

Neither the statutory language nor the Legislative intent behind the 

Contractors State License Law supports expanding the imposition of the admittedly 

“strict and harsh penalties for a contractor’s failure to maintain proper licensure” (MW 

Erectors, Inc., supra, 36 Cal.4th at p. 418) beyond the scope of the performance of an act 

or contract at issue. Neither Newcastle nor the trial court has cited authority supporting 

the application of section 7031 to affect a nonoffending bona fide contract involving a 

licensed contractor, and we have found none.

Consequently, we conclude the trial court erred by construing the parties’

three contracts as a single contract in determining section 7031’s application in this case.

C. Section 7031(a) Did Not Apply to Bar Southwest from Recovering Unpaid 

Compensation on the Painting Contract as Awarded by the Jury

The jury found Newcastle breached the painting contract and was liable to 

Southwest for unpaid compensation on the painting contract in the amount of $91,766.89. 

It is undisputed that at all relevant times, Southwest was properly licensed to perform the 

painting services for Newcastle. 

As discussed ante, section 7031(a) would preclude Southwest from 

“collection of compensation for the performance of any act or contract where a license is 

required by this chapter” if it had not been “a duly licensed contractor at all times during 

the performance of that act or contract.” (Italics added.) As a licensed painting 

contractor, section 7031(a) would not apply to bar Southwest from seeking to collect 

compensation for its painting services on the painting contract. That the parties’ contract 

for painting services was “related” to other contracts in that they too were to be 

performed at Castlewood, does not render such other contracts part of the painting 

contract for the purpose of applying section 7031. Newcastle does not cite any legal 

authority and we have found none that would support the application of section 7031(a) 
18

to compensation sought for Southwest’s painting services under the painting contract

here.

Although the judgment itself does not specifically state the amount awarded 

to Southwest by the jury was unrecoverable under section 7031(a), the statement of 

decision acknowledges the disgorgement order under section 7031(b) 

“[n]aturally . . . would wipe out the jury’s $91,766 verdict.”

D. Even If Newcastle Had Pleaded a Disgorgement Claim Under Section 7031(b), There 

Was No Basis for the Court’s Disgorgement Order as to Compensation Southwest 

Received for Performing on the Painting Contract

In its cross-complaint, Newcastle asserted claims for breach of contract and 

claims based on alleged misrepresentations that Southwest also held a Class B license 

required to perform the stone stacking services provided in the parties’ siding contract. 

Newcastle did not cite section 7031(b) much less plead a claim for disgorgement under 

that code section in its cross-complaint. Nor did it assert section 7031 or disgorgement as 

an affirmative defense in its answer to Southwest’s complaint. 

The first time section 7031 or the issue of disgorgement appears in our

record is in the context of motions in limine filed in anticipation of the jury trial. At no 

time did Newcastle seek to amend its cross-complaint to include a claim seeking that 

form of affirmative relief. (See Eisenberg Village etc. v. Suffolk Construction Co., Inc.

(2020) 53 Cal.App.5th 1201, 1215 [by the time plaintiff first alleged a section 7031(b) 

claim in an amended pleading, it was time-barred by the applicable statute of limitations]; 

San Francisco CDC LLC v. Webcor Construction L.P. (2021) 62 Cal.App.5th 266, 272 

[same].)

Even assuming a disgorgement claim had been properly before the trial 

court, for the same reasons section 7031(a) did not apply to Southwest’s provision of 

painting services under the painting contract, section 7031(b) did not apply because it is 

undisputed at all relevant times Southwest was properly licensed to perform the painting 
19

services provided in the painting contract. There is no dispute the disgorgement order in 

the judgment includes compensation received by Southwest for painting services under 

the painting contract. The disgorgement order’s inclusion of those amounts constitutes 

error. As explained in the statement of decision, the effect of the disgorgement order 

precludes or “wipes out” Southwest’s ability to collect the $91,766 amount awarded it by 

jury. We therefore reverse the trial court’s order tacitly denying the motion to vacate the 

judgment and enter a new judgment.

III.

WE REMAND WITH DIRECTIONS FOR THE TRIAL COURT TO VACATE THE JUDGMENT AND 

ENTER A NEW JUDGMENT AND ISSUE AN AMENDED AND CORRECTED STATEMENT OF 

DECISION IN ACCORDANCE WITH OUR OPINION

On remand, we direct the trial court to vacate the judgment and enter a new 

judgment that credits Southwest $91,766.89 for unreimbursed work on the painting 

contract as awarded by the jury. The new judgment shall also include a new 

disgorgement order, if any, that at a minimum is reduced from the original amount of 

$252,444 by the amount Newcastle paid to Southwest for painting services pursuant to 

the painting contract. 

On remand, the trial court shall also determine whether to omit or further 

reduce the amount of the disgorgement order by amounts included in the original 

judgment after considering whether: (1) Newcastle properly pleaded a disgorgement

claim under section 7031(b) or whether such a claim is otherwise properly before the 

court; (2) Southwest performed services under the fascia contract that were incidental and 

supplemental to the performance of the painting contract, within the meaning of section 
20

7059, subdivision (a),

7

so as to render such amounts ineligible for disgorgement;

8

and 

(3) Southwest should be required to disgorge any funds it received as reimbursement for

expenses, pass-through charges, and/or unused but unreturned materials within the 

meaning of section 7045.

9

The trial court shall thereafter prepare an amended and corrected statement 

of decision and enter a new judgment in accordance with our opinion.

DISPOSITION

The order denying the motion to vacate the judgment and enter a new 

judgment is reversed. On remand, we direct the court to vacate its judgment and enter a 

new judgment and an amended and corrected statement of decision, that, at a minimum, 

award Southwest $91,766.89 for unpaid compensation for painting services in accordance

7

 Section 7059, subdivision (a) provides: “The board may adopt reasonably necessary 

rules and regulations to effect the classification of contractors in a manner consistent with 

established usage and procedure as found in the construction business, and may limit the 

field and scope of the operations of a licensed contractor to those in which he or she is 

classified and qualified to engage, as defined by Sections 7055, 7056, 7057, and 7058. A 

licensee may make application for classification and be classified in more than one 

classification if the licensee meets the qualifications prescribed by the board for such 

additional classification or classifications. The application shall be in a form as 

prescribed by the registrar and shall be accompanied by the application fee fixed by this 

chapter. No license fee shall be charged for an additional classification or classifications. 

[¶] Nothing contained in this section shall prohibit a specialty contractor from taking and 

executing a contract involving the use of two or more crafts or trades, if the performance 

of the work in the crafts or trades, other than in which he or she is licensed, is incidental 

and supplemental to the performance of the work in the craft for which the specialty 

contractor is licensed.” (Italics added.)

8

 Citing section 7059, Southwest argues in its opening brief it “is entitled to the funds 

paid it for the fascia boards since their repair was necessary to painting them” as 

confirmed by Newcastle’s expert witness’s trial testimony.

9 Section 7045 provides in relevant part: “This chapter does not apply to the sale or 

installation of any finished products, materials, or articles of merchandise that do not 

become a fixed part of the structure.”
21

with the jury’s verdict, and decrease the disgorgement order in the original judgment by 

the amount of compensation Southwest received for performing painting services 

pursuant to the painting contract. 

We further direct the court on remand to consider whether the disgorgement

award should be altogether omitted from the new judgment after considering whether 

Newcastle ever pleaded a disgorgement claim under section 7031(b) or whether such a 

claim was otherwise properly before the trial court. 

Finally, we direct the court to consider whether in the new judgment, the 

disgorgement award, if any, should be further reduced by—to the extent they were 

included in the original award in the judgment— (1) the amount of compensation 

Southwest received for fascia work, if any, that was incidental and supplemental to the 

performance of painting services within the meaning of section 7059, and/or (2) the 

amount, if any, Southwest was reimbursed for expenses, pass-through charges, and/or 

unused but unreturned materials within the meaning of section 7045.

Appellant to recover costs on appeal.

MOTOIKE, J.

WE CONCUR:

GOETHALS, ACTING P. J.

DELANEY, J.