Court Opinion

ID: 5451611
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:44:24.785868+00
Date Added: 2024-06-11T08:32:25.183470
License: Public Domain

MOSK, J.
I dissent.
In this case a contractor seeks to recover the balance due on a construction contract for work performed in part while lacking a valid license required by the Contractors License Law. (Bus. & Prof. Code, div. 3, ch. 9.) Such an action is barred as a matter of law by Business and Professions Code section 7031.1 The contractor, moreover, cannot bring his claim within that small group of exceptions developed by the courts in cases in which at least one licensee was on the job at all times.
Although making passing reference to “fidelity to precedent,” the majority opinion emphasizes “considerations of equity” which are said to “preclude us from requiring the wholly gratuitous enrichment of defendant at the expense of plaintiff and its creditors. We are not disposed to decree vast forfeitures in the aid of no ascertainable public policy.” But even if such matters were meritorious—which petitioner has denied—they may not be considered in an action barred by the express terms of section 7031.2 As we explained in Lewis & Queen v. N. M. Ball Sons (1957) 48 Cal.2d 141, 150-151 [308 P.2d 713], “One answer to this contention is that, even in the absence of a provision such as section 7031, the courts generally will not enforce an illegal bargain or lend their assistance to a party who seeks compensation for an illegal act. The reason for this refusal is not that the courts are unaware of possible injustice between the parties, and that the defendant may be left in possession of some benefit' *289he should in good conscience turn over to the plaintiff, but that this consideration is outweighed by the importance of deterring illegal conduct. Knowing that they will receive no help from the courts and must trust completely to each other ⅛ good faith, the parties are less likely to enter an illegal arrangement in the first place. [Citations.]
“In some cases, on the other hand, the statute making the conduct illegal, in providing for a fine or administrative discipline excludes by implication the additional penalty involved in holding the illegal contract unenforceable; or effective deterrence is best realized by enforcing the plaintiff’s claim rather than leaving the defendant in possession of the benefit; or the forfeiture resulting from unenforce-ability is disproportionately harsh considering the nature of the illegality. In each such case, how the aims of policy can best be achieved depends on the kind of illegality and the particular facts involved. [Citations.] But we aré not free to weigh these considerations in the present case, 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 the state [citation].” (Italics added.) (Accord, Currie v. Stolowitz (1959) 169 Cal.App.2d 810, 816-817 [338 P.2d 208] ; Cash v. Blackett (1948) 87 Cal.App.2d 233, 237 [196 P.2d 585]; see generally 53 C.J.S., Licenses, p. 715; Note 82 A.L.R.2d 1429, 1440.)
The basic claim of Lee & Co. that its noncompliance is excused by its own “neglect and inadvertence” demonstrates how the policies served by this legislation could quickly be eroded. To begin with, the majority do not consider the important fact that in the text of section 7031 as it read throughout the period here in issue (ante, fn. 1) the Legislature spelled out two specific exceptions to the prohibition against bringing or maintaining this type of action.3 The exception added to the first paragraph in 1961, applicable to unlicensed partnerships or joint ventures in which all the members are individually licensed at all times, codified the holding of Gatti v. Highland Park Builders, Inc. (1946) 27 Cal.2d 687 [166 P.2d 265], The exception comprising the second paragraph, *290enacted in 1957, placed a six-month moratorium on the bar of section 7031 in eases where a license had been automatically suspended under section 7068.2 for failure to notify the registrar within 10 days of the termination of employment of the licensee’s qualifying responsible managing officer or employee, “if such failure was due to inadvertence.” The present ease, obviously, does not fall within either of these exceptions, the enactment of which is significant evidence of legislative intent. In particular, by adopting the second exception to section 7031 the Legislature showed it well knew how to excuse noncompliance on the ground of “inadvertence” if it was so minded. And even that limited excuse is now no longer available to erring contractors, for in its 1965 session the Legislature deleted the entire second paragraph of section 7031. (Stats. 1965, ch. 681.) AVhen the Legislature enacts certain limited exceptions to a comprehensive regulatory statute such as the Contractors License Law, the courts should not lightly create further and different exceptions. (Reynolds v. Reynolds (1960) 54 Cal.2d 669, 681 [7 Cal.Rptr. 737, 355 P.2d 481], and cases cited.)
The reason for this rule of judicial reticence is well illustrated by the case before us. In its return to the alternative writ of prohibition Lee & Co. explains that “The license was not renewed on June 30, 1963, because Mr. Shepard, the office manager of J. W. Lee & Co. whose responsibility it was to renew the license, had a complete nervous breakdown at this time.” (Italics added:) But from a legal standpoint it was not the responsibility of the office manager to renew the license; rather, the statute places that duty squarely on the individual qualifying as the responsible managing officer or employee, in this case Mr. J. W. Lee. Section 7068.1 declares in relevant part that “The person qualifying on behalf of an individual or firm under subdivision (a), (b), or (c) of Section 7068 shall be responsible for exercising such direct supervision and control of his employer ⅛ or principal ’s construction operations as is necessary to secure full compliance with the provisions of this chapter and the rules and regulations of the board relating to such construction operations. ...” (Italics added.) Included within “the provisions of this chapter” is article 9 (§§ 7140-7145), which lays down the requirement of timely renewal of licenses.
The majority brush aside this point (ante, p. 285, fn. 4) on the assumption that, as used in section 7068.1, the phrase “construction operations” is limited to activities such as moving earth and building houses. This assumption is errone*291ous. The business of a general contractor may be said to have two interrelated aspects: physical labor at the job site, and office paperwork dealing with licenses, contracts, permits, invoices, accounting, etc. Each of these two activities is part of the total “construction operations,” for the latter is the contractor’s sole business. This court recognized as much in Lewis & Queen, where we said (at pp. 149-150 of 48 Cal.2d) that “the statutory provisions setting forth the qualifications for a license, and the causes for disciplinary action against licensees, show that the Legislature was as much concerned to protect the public from dishonesty and incompetence in the administration of the contracting business as in the actual use of bricks, mortar, and earth-moving equipment,” citing inter alia section 7068, predecessor of the present section 7068.1.
The majority’s construction of the statute, moreover, renders it largely meaningless. Section 7068.1 imposes on the responsible managing officer the responsibility of exercising such supervision and control of the construction operations “as is necessary to secure full compliance with the provisions of this chapter” and with the corresponding rules and regulations of the Contractors’ State License Board. The parties have not supplied us with any relevant rules and regulations; but “the provisions of this chapter,” i.e., the Contractors License Law (§§ 7000 et seq.), are for the most part directives governing the paperwork side of the contracting business, such as licensing (§§ 7066-7069), signing and display of licenses (§ 7075), license renewals (§§ 7140-7145), obtaining construction permits (§ 7031.5), reporting changes of personnel (§ 7083), reporting workmen’s compensation coverage (§7125), and many others. What the majority overlook is that not one of “the provisions of this chapter” purports to regulate the manner in which physical labor such as earth-moving and building is to be carried out, for that aspect of the business is covered by local building codes. Thus, unless the phrase “construction operations” is taken to mean something more than just earth-moving and building, the statute ⅛ reference to compliance with “the provisions of this chapter” is futile. It is axiomatic that acts of the Legislature are not to be construed so as to render them either nugatory or meaningless.
Nor is the policy behind this statute difficult to detect. “Passing the buck” is an all-too-frequent human failing, especially in large organizations. Under the majority’s view, *292there is no magic in the choice of the office manager as the person “responsible” for renewing the license; presumably, therefore, the “responsibility” could also be delegated to the office boy, with the classic risks attendant to renewal during the fishing season. It is true that a corporate licensee may delegate to any of its employees, such as its office manager, the administrative task of preparing and filing the necessary applications for renewal of its license ;4 but it cannot thereby shift the primary responsibility for complying with the renewal statutes, which is imposed by law on its qualifying managing officer or employee. By placing this responsibility and other duties on a specific person, the legislation seeks to discourage intentional or negligent noncompliance resulting from the diffusion of responsibility that normally occurs when the licensee is a corporation or other multi-individual grouping. To accept Lee & Co.’s excuse would be, in effect, to nullify this important purpose of the Contractors License Law.
I turn now to the majority’s claimed “fidelity to precedent.” The opinion makes much of two asserted elements of the doctrine of substantial compliance, i.e., that the contractor held a valid license at the time of entering into the contract and that a renewal of that license was secured without further examination when the application therefor was belatedly made. I agree that if, as here, these elements are present, they are relevant and should be mentioned. But a fair reading of the decisions discloses that there is an equally if not more important third element of the doctrine which must be shown, i.e., that there was at all times a properly and currently licensed contractor on the job. The majority concede (ante, p. 283 fn. 2) that language in Loving & Evans v. Blick (1949) 33 Cal.2d 603, 608-609 [204 P.2d 23], and Bierman v. Hagstrom Construction Co. (1959) 176 Cal.App.2d 771, 777 [1 Cal.Rptr. 826, 82 A.L.R.2d 1424], “lends support to this reading” of Gatti v. Highland Park Builders, Inc. (1946) supra, 27 Cal.2d 687, but attack the propriety of such an interpretation. The majority assert that “it is significant, however, that the majority in Gatti did not even state that the partners did in fact possess valid licenses throughout the period of performance.” This is erroneous. The Gatti opinion recites (at p. 688) that the appeal was presented on a settled statement of facts; that in their amended complaint the plaintiff contractors alleged that at all relevant times “they, and each of them, *293were duly licensed building contractors”; and that the answer relied, rather, on the defense that “plaintiffs’ failure to procure a separate partnership license in their two names would prevent their recovery.” The opinion then describes (at p. 689) the subsequently acquired license as “an additional partnership or joint venture license” (italics in original), clearly implying that the plaintiffs continued to hold their individual licenses at that time. (See also id. at p. 690.)
The majority next rely on Citizens State Bank v. Gentry (1937) 20 Cal.App.2d 415 [67 P.2d 364], but fail to mention that the controlling statute at the time of that decision required only that the contractor be duly licensed “at the time the alleged cause of action arose” (see 20 Cal.App.2d at p. 419), rather than, as today, “at all times during the performance of such act or contract” (§ 7031, ante, fn. 1). The majority give neither consideration nor effect to this deliberate change in the wording of the key statute.
The majority fail to discuss the most recent decision of this court on the question of substantial compliance, Weiman v. Superior Court (1959) 51 Cal.2d 710 [336 P.2d 489], Although the majority cite this case once or twice for general propositions, nowhere in the opinion is there a statement of the rather simple facts and holding of Weiman. The court held (at p. 714) that “the admitted facts showed that there had been a substantial compliance with the licensing requirements,” citing both Gatti and Gentry. And what were the “admitted facts” listed by the court? Simply that “John A. Nelson, individually, was at all times a licensed contractor; that he made the construction contract with the Weimans in his individual capacity; that thereafter he incorporated as John A. Nelson, Incorporated, and assigned the contract to the corporation ; that the corporation was thereafter duly licensed during the course of the construction and has since remained duly licensed at all times, but that there was an interval between the time when the assignment was made by John A. Nelson, individually, to John A. Nelson, Incorporated, and the time when the corporation became duly licensed.” (Italics added.) (Id. at p. 713.) The undeniable inference is that the Weiman court found substantial compliance in the fact that there was at all times a duly licensed contractor on the job, either the individual who first obtained the contract or his corporate alter ego to which he assigned the contract.
This same inference was explicitly drawn in Bierman v. Hagstrom Construction Co. (1959) supra, 176 Cal.App.2d 771, *294a decision which receives curious treatment indeed at the hands of the majority. In Bier man, a written subcontract was entered into between a licensed painting contractor and a corporation constructing a housing project for the City of Los Angeles. The subcontractor began furnishing labor and materials on December 29, 1954, and received partial payment therefor. Through an unspecified “oversight,” however, the subcontractor failed to renew his license when it regularly expired on June 30, 1955; some five weeks later, on August 3, he discovered the oversight and made the required application. The license was renewed in due course, and the subcontractor continued to furnish labor and materials until ordered to leave the project on October 19, 1955. In an action against the general contractor, the latter moved for summary judgment on the ground that the plaintiff subcontractor had not been licensed at all times during the performance of the contract and hence was barred from maintaining the proceeding by section 7031. The motion was granted.
The appellate court affirmed, holding that “In the present action, appellant’s license was suspended from June 30, 1955, at least to August 3, 1955, and during that period of time, under the provisions of said section 7301 [sic], he was not authorized to act as a contractor. It is undisputed that during that period of time he acted under said contract and that a portion of the compensation he is seeking in the action is for labor and material furnished during that period. Under such circumstances appellant was precluded by the express terms of section 7031 from maintaining the action.” (Id. at pp. 776-777.) The subcontractor urged substantial compliance, citing Gatti, Gentry, and Weiman, but the court (at p. 777) properly distinguished those cases as follows: “In the Gatti case the question was whether individuals, who were partners, could recover for work done by the partnership, which was not licensed. The individuals were licensed at all times during the performance of the work. In the other cases, wherein the question was whether a corporation could recover, it appeared that the individual who formed the corporation, or the corporation itself, had a license at all times during the performance of the work. In other words, in those cases someone had a license at all times during the performance of the work. In the present case there was a period of approximately five weeks when the plaintiff was not licensed.” (Italics added.)
Commenting on Bierman, the majority reiterate (ante, p. 284) their “doubt concerning the accuracy of this reading of the prior decisions,” without telling us how Weiman, for one, *295can reasonably be read otherwise. The majority nevertheless purport to find that in the present case “someone” possessed a valid license throughout the period of performance of the contract. The status of the Bierman decision is thus left in confusion. On its facts it is directly in point; and if it is not to be followed, it should be squarely disapproved.
The next portion of the majority opinion is premised on a subtle change in the wording of the condition assertedly fulfilled here but lacking in Bierman. Since it is conceded that both Lee & Co. and its responsible managing officer, Mr. J. W. Lee, remained unlicensed for more than six months during the performance of this contract, the majority cannot find that there was at all times a duly licensed contractor on the job. Instead, the majority hold that substantial compliance is shown because the “responsibility and competence” of Mr. Lee were “officially confirmed” throughout the performance of the contract. Such “confirmation” is then found in the coincidental existence during this period of a properly licensed corporation, the San Leandro Rock Co., of which Mr. Lee was also the responsible managing officer.
This is a dangerous doctrine indeed. The majority emphasize, and I do not deny, that the qualifications of Mr. Lee which served as the basis for granting San Leandro Rock Co.’s license were also the basis for Lee & Co.’s belatedly renewed license. But if certain financial connections are present, a single individual may qualify as responsible managing officer for any number of corporations (§ 7068.1), no matter how unrelated their purposes or endeavors may be.5 Under the majority’s view, therefore, an interrelated group of construction corporations could violate with impunity the statutory requirements' for renewal of their licenses provided that only one of their number, sharing the common responsible managing officer, maintained its license current. I cannot believe that the Legislature intended to allow such circumvention of the statute.
The danger, moreover, is well illustrated by the facts of the case before us. We have not been informed what the precise business of San Leandro Rock Co. is, but its classified listing is under rock and gravel sales rather than construction services. Unlike the corporations in Gentry and Weiman, it did not succeed to the rights and duties of the contracting party, *296did not assume the task of finishing the construction project, and, for all that appears, never turned a stone at the job site. It follows that the mere coincidence of Mr. Lee’s common connection with Lee & Co. and San Leandro Rock Co. cannot reasonably be magnified into an identity of interests between the latter such as was held controlling in Gentry and Weiman. In legal effect San Leandro Rock Co. remains a total stranger to this case, and there is no justification shown for allowing its license to be retroactively “borrowed” by Lee & Co. for the sole purpose of evading the prohibition of section 7031.
The majority strictly construe the Gentry opinion as disclosing no legal connection between the entity found to be licensed and the contract upon which suit was brought. Such an interpretation is unwarranted. From the recital in Gentry that the individual contractor requested his license to be re-, newed in the name of his construction corporation and thereafter ‘ ‘ carried on and completed the work under the auspices of” that corporation, the only reasonable inference is that the contract was assigned to the new entity. More significantly, the majority omit any discussion of the Weiman case in this connection. In Weiman, the opinion expressly states (at p. 713 of 51 Cal.2d) that after the individual contractor incorporated his business, he “assigned the contract to the corporation. ’ ’
In any event, the question of liability on the contract is merely incidental here. The general purpose of the Contractors License Law, as the majority recognize, is to protect public health and safety by prohibiting incompetent or inexperienced persons from acting as building contractors. (Gatti v. Highland Parle Builders, Inc. (1946) supra, 27 Cal.2d 687, 690.) Although the time of contracting is one of the “key moments” in this scheme for the reasons given by the majority, it is not the only one. The statutory requirement (§ 7031) that the contractor be licensed “at all times during the performance” of the contract demonstrates the Legislature’s determination that it is equally important for the health and safety of the public that a competent and experienced contractor be on the job at all times while the work is in progress. Every one of the substantial compliance cases cited by the majority, when fairly read, contains this factual element; the present case does not.
Although one may well be sympathetic to the equitable arguments of the contractor, such arguments should be addressed to the Legislature rather than the court; the Contractors Li*297cense Law, as shown at the outset, is a comprehensive regulatory statute the wisdom of which is not subject to our review. Moreover, the trend of legislative amendments to this statute seems to be towards still stricter controls over the contracting business.6 In these circumstances it is singularly inappropriate to carve out a new exception at this time, on the basis of a belated discovery of a licensed corporation sharing the same responsible managing officer as Lee & Co. but having no known connection with either the work done or the contract sought to be enforced.
I would grant the writ of prohibition as prayed.
Traynor, C. J., and McComb, J., concurred.
Petitioner’s application for a rehearing was denied April 5, 1966. Traynor, C. J., McComb, J., and Mosk, J., were of the opinion that the petition should be granted.

 Throughout the period in issue section 7031 provided: “No person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action in any court of this State for the collection of compensation for the performance of any act or contract for which a license is required by this chapter without alleging and proving that he was a duly licensed contractor at all times during the performance of such act or contract, except that such prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.
“Until the expiration of six months from the date of a suspension of a license pursuant to Section 7068, the provisions of this section do not apply to any person whose license was suspended pursuant to Section 7068 for failure to notify the registrar within the 10-day period, if such failure was due to inadvertence.” (Italics added.)

 This and all other code references in the remainder of this opinion are to the Business and Professions Code.

 It is noteworthy that the majority opinion (ante, p. 279, fn. 1) omits these exceptions from its quotation of section 7031.

 The qualifying managing officer or employee, however, must personally sign each such application. (§ 7067.6.)

 For example, Mr. Lee appears to have been the responsible managing officer of at least three corporations at the time the affidavit of the registrar of contractors was prepared.

 As noted above, in its 1965 session the Legislature deleted the “inadvertence” exception contained in the former second paragraph of section 7031. Other changes made in 1965 include the enactment of new section 7028.3 (allowing injunctive relief against unlicensed contractors) and new section 7033 (requiring a signed statement that a contractor’s license “is in full force and effect,” for issuance of a city business license).