Opinion ID: 2576241
Heading Depth: 1
Heading Rank: 5

Heading: Substantial compliance with C-51 license requirement.

Text: Because the Court of Appeal concluded that section 7031(a) allowed MW to recover compensation for the great majority of its act[s] under the structural contract, insofar as a valid C-51 license was in place when MW performed those act[s], the court did not address MW's theory that it could recover in any event because it was, at all times during its work on the project, in substantial compliance with the C-51 licensing requirement. We now conclude that MW cannot establish substantial compliance. MW entered the structural contract in 1999 and performed its work under that contract in 1999 and 2000. At those times, section 7031, former subdivision (d) provided that the doctrine of substantial compliance could apply only when, among other things, the contractor, despite a later lapse in licensure, had been duly licensed as a contractor in this state prior to the performance of the act or contract  for which compensation is sought. (Stats.1994, ch. 550, § 1, p. 2803, italics added.) [11] Thus, in order to invoke former subdivision (d)'s substantial compliance exception, a contractor who was technically unlicensed at any time during performance was required to establish that he or she had been duly licensed at some time before performance began. The obvious purpose of the subdivision was to limit application of the substantial compliance doctrine to those contractors who, at some time before beginning performance, had held valid California contractor's licenses. MW concedes it had never held a valid California contractor's license until, after commencing performance of the structural steel contract, it received its C-51 license. Hence, MW is ineligible, under section 7031, former subdivision (d), to invoke the doctrine of substantial compliance. MW suggests it does qualify to demonstrate its substantial compliance during the entire period of performance because it was duly licensed before it completed performance. But again, such an assertion contravenes the plain statutory language. By specifying that the substantial compliance doctrine applies only to those who had been duly licensed in this state  prior to the performance of the act or contract (§ 7031, former subd. (d), italics added), the statute clearly contemplates that, in order to qualify for this exception, the contractor must have been duly licensed in California at some time before the performance began. The trial court rejected MW's substantial compliance theory on just this ground. MW argues that, to do so, the trial court improperly rewrote section 7031, former subdivision (d) to add the words the commencement of between prior to and the performance. Not so. The existing statutory language specifies that due licensure must have existed at some time prior to performance. That language cannot be squared with the notion that the contractor could first become licensed at some time during performance. The words that MW suggests the trial court added would be superfluous. MW focuses on the first sentence in former subdivision (d) of section 7031, which provided that [t]he judicial doctrine of substantial compliance shall not apply ... where the person who [acted as a contractor] has never been a duly licensed contractor in this state. (Italics added.) MW insists this means that if a contractor was duly licensed in California at some point, he or she was eligible to establish substantial compliance with licensure requirements during performance of the work for which compensation is sought. Any other construction, MW insists, would render meaningless the word never. The argument lacks merit. MW's theory omits the proviso that, as one prong of substantial compliance, the contractor must show he or she had been duly licensed at some time  prior to the performance of the act or contract. (§ 7031, former subd. (d), italics added.) The structure of section 7031, former subdivision (d) also belies MW's interpretation. After stating that one could not qualify for substantial compliance if he or she had never been licensed here, the subdivision continued:  However, the court may [find] substantial compliance ... if it is shown ... that the [contractor] (1) had been duly licensed ... prior to the performance of the act or contract.... ( Ibid., italics added.) Thus, the subdivision conveyed that a contractor who had never been licensed in this state was one who had [not] been duly licensed ... prior to ... performance. ( Ibid. ) Though MW argues otherwise, the legislative history of section 7031, former subdivision (d) confirms this construction. As added in 1989, former subdivision (d) flatly stated that [t]he judicial doctrine of substantial compliance shall not apply to this section. (Stats.1989, ch. 368, § 1, p. 1509.) In 1991, this absolute bar was softened by addition of language stating that a court could find substantial compliance under certain circumstances. These included that the person seeking compensation was a duly licensed contractor during any portion of the 90 days immediately preceding the performance of the act or contract for which compensation is sought. (Stats. 1991, ch. 632, § 1, p. 2937, italics added.) In 1994, the Legislature rewrote the subdivision to the form it retained in 1999 and 2000. The requirement that the contractor must have had a license validly in effect at some time within 90 days before performance was dropped in favor of language requiring simply that the contractor must have been duly licensed  prior to [such] performance. (Stats.1994, ch. 550, § 1, p. 2803, italics added.) Though the 1994 amendment thus expanded the time during which the necessary previous licensure could have been in place, it retained the concept that this period must have preceded the performance for which compensation was sought. [12] Finally, the Legislature has recently indicated it intends the substantial compliance doctrine, now set forth in subdivision (e) of section 7031, to apply in exactly this way. [13] In 2003, the Legislature amended subdivision (e) to provide that one may establish substantial compliance, despite being unlicensed at some time during performance, if he or she (1) had been duly licensed ... prior to ... performance ..., (2) acted reasonably and in good faith to maintain proper licensure, (3) did not know or reasonably should not have known that he or she was not duly licensed when performance of the act or contract commenced, and (4) acted promptly and in good faith to reinstate his or her license upon learning it was invalid.  (Stats. 2003, ch. 289, § 1, italics added.) Thus, as currently worded, the statute explicitly contemplates a situation in which (1) the contractor had been licensed prior to performance, (2) the previously valid license had expired, or was suspended, at the time performance of the act or contract commenced  and (3) the contractor, upon learning of the lapse, acted diligently to reinstate the license (§ 7031, subd. (e), italics added). In an uncodified section of the 2003 amendments, the Legislature [found] and declare[d] that the changes made by this act do not constitute a change in, but are declaratory of, existing law. (Stats.2003, ch. 289, § 2.) `[A] subsequent expression of the Legislature as to the intent of [a] prior statute, although not binding on the court, may properly be used in determining the effect of [the] prior act.' [Citation.] ( Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244, 62 Cal.Rptr.2d 243, 933 P.2d 507.) Here, for reasons we have explained, the 2003 amendment seems entirely consistent with the prior statutory expression of the substantial compliance doctrine. No reason appears to reject the Legislature's assurance that the amendment merely clarified, and did not change, existing law. Hence, we conclude, it governs this case. ( Id., at p. 252, 62 Cal.Rptr.2d 243, 933 P.2d 507.) Because MW was not duly licensed at all times during performance of the structural contract (§ 7031(a)), and cannot alternatively establish its substantial compliance with the licensure requirements in that it had never held a valid California contractor's license prior to beginning performance (§ 7031, former subd. (d); see now id., subd. (e)), MW cannot sue to recover any compensation for work performed under that contract. Insofar as related to this portion of MW's complaint, the summary judgment entered by the trial court was proper.