Court Opinion

ID: 9846004
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:32:34.895379+00
Date Added: 2024-06-11T09:16:30.996987
License: Public Domain

CARTER, J.
I dissent.
In my opinion, the strict construction placed upon Business and Professions Code sections, particularly section 7031, by the majority is unwarranted. Section 7031 is but a statutory declaration of the common law rule that a contract which violates a statute designated for the protection of the public is void and unenforceable. (Levinson v. Boas, 150 Cal. 185 [88 P. 825, 11 Ann.Cas. 661, 12 L.R.A.N.S. 575] ; Berka v. Woodward, 125 Cal. 119 [57 P. 777, 73 Am.St.Rep. 31, 45 L.R.A. 420] ; 12 Am.Jur., Contracts, § 158, p. 652.) This rule, however, is not applied where to do so does not serve the intended purpose of the statute. (Wilson v. Stearns, 123 Cal.App.2d 472, 478 [267 P.2d 59], citing Harris v. Runnels, 12 How. (U.S.) 79 [13 L.Ed. 901]; 12 Am.Jur., Contracts, § 162, p. 657.) At one time in this state, statutes, such as section 7031, which expressly deny the enforcement of contracts which violate a particular law, were strictly construed to prevent recovery. (See e.g., Wise v. Radis, 74 Cal.App. 765 [242 P. 90], involving a statute which prevented the enforcement of certain contracts by unlicensed real estate *156brokers.) More recently, however, section 7031, although literally applicable, has not been applied where enforcement of the contract was considered not to be adverse to the public interest sought to be protected by the pertinent Business and Professions Code sections. (Gatti v. Highland Park Builders, Inc., 27 Cal.2d 687 [166 P.2d 265] ; Citizens State Bank v. Gentry, 20 Cal.App.2d 415 [67 P.2d 364]; Norwood v. Judd, 93 Cal.App.2d 276 [209 P.2d 24] ; Galich v. Brkich, 103 Cal.App.2d 187 [229 P.2d 89]; Wold v. Luigi Consentino & Sons, 109 Cal.App.2d 854 [241 P.2d 1032]; Matchett v. Gould, 131 Cal.App.2d 821 [281 P.2d 524].) The effect of these cases is that the common law exceptions to the rule are recognized as being preferable to a strict, literal construction of the statutory language. Accordingly, the conclusion of the majority—that because plaintiff is within the statutory definition (subcontractor) and seeks recovery of his share of the proceeds arising from the work, it necessarily follows that recovery must be denied—is based upon an incomplete analysis of the question presented. Rather, an examination should be made to determine whether the intended statutory purpose requires the denial of enforcement of this particular contract. Such an examination, it is submitted, demonstrates that the statute was not so intended.
The facts of this case are quite similar to those in Norwood v. Judd, supra. There, plaintiff and defendant had formed a partnership to conduct a contracting business. Defendant was a duly licensed contractor but neither plaintiff nor the partnership was. Plaintiff brought an action to recover his share of the business proceeds from his partner. Literally, Business and Professions Code, section 7031, would have barred plaintiff’s action as it provides, in part, that: “No person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action . . . 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.” However, recovery was allowed and the court declared (93 Cal.App.2d at 286) that “It must be remembered that these licensing statutes are passed primarily for the protection and safety of the public. They are not passed for the benefit of a greedy partner who seeks to keep for himself all of the fruits of the partnership enterprise to the exclusion of another partner entitled to share therein. Where the illegal transaction has been terminated, public policy is not pro*157tected or served by denying one partner relief against the other.” It was further noted (p. 288) that Wise v. Radis, supra, (applying the strict rule of construction) had been overruled in legal effect. Defendant’s petition for a hearing in the Norwood case was denied by this court.
A similar problem was presented in Galich v. Brkich, supra, 103 Cal.App.2d 187. Plaintiff, apparently an unlicensed contractor, entered into a joint venture or partnership agreement with defendant. No license was obtained for the enterprise as required by Business and Professions Code, section 7029. In allowing recovery by plaintiff of the money due him for the contracting work performed by the venture, the court declared (p. 191) that “The contract in question was not per se contrary to any statute; public welfare and safety were not threatened, and public policy would not be protected or served by denying one partner relief against the other.” Applying the reasoning of the Norwood case, supra, the court observed that “. . . the rule that courts will not lend their aid to the enforcement of an illegal agreement should not be ‘blindly’ extended to ‘every ease where illegality appears somewhere in the transaction.’ ” Defendant’s petition for a hearing in this court was denied.
In Wold v. Luigi Consentino & Sons, supra, 109 Cal.App.2d 854, the same problem was again presented. The application of the statute was rejected, the court declaring (p. 857) that its main purpose was protection of owners.
Recovery was allowed in these cases because the actions were not against those whom the statute was intended to protect, that is, an owner or other member of the general public who is without knowledge of or experience in contracting affairs, and hence, is wholly dependent upon the competence of the contractor. Accordingly, the statute was not applied to allow an associate of an unlicensed individual to retain the proceeds rightfully owing to the latter. It seems clear that this principle is applicable here, despite the absence of a partnership or joint venture relationship, for in practical effect, the circumstances are identical. Two parties agreed to perform work for a third party and one of the two has withheld the other’s share of the proceeds. Upon facts identical to those in the present case, the Second District Court of Appeal in Matchett v. Gould, supra, 131 Cal.App.2d 821, applied the principle of the partnership cases and allowed recovery. In that case, neither plaintiff, a subcontractor, nor defendant, a general contractor, was licensed. Upon com*158pletion of a contracting job for a third party, plaintiff sought the amount owing to him for the work performed. Analogizing to Norwood v. Judd, supra, the court allowed recovery and declared that the precise relationship between the parties, that is, whether partners or contractor and subcontractor, was not determinative and that the statute was not intended to prevent recovery where the unlicensed contractor has completed the job, where there is no serious moral turpitude involved and where a denial of recovery would permit unjust enrichment of one not intended to be protected, namely, the general contractor. Citing Gatti v. Highland Park Builders, Inc., supra, 27 Cal.2d 687, the court observed (131 Cal.App.2d at 829) that the statute was not intended as an “unwarranted shield for the avoidance of a just obligation.”
Here, the majority, to sustain their decision that plaintiff is precluded from enforcing his contract, concludes that the reasoning of Matchett v. Gould, supra, is erroneous, although a petition for hearing in that case was denied by this court. The majority opinion further declares that “To allow him [plaintiff] to recover would in fact destroy the protection of those who dealt with him, and they are in the class the Legislature intended to protect whether they are owners or general contractors.” What protection is to be afforded a general contractor ? He is not in the position of a member of the public who desires contracting work performed and because of the disparity of knowledge and experience is extended statutory protection. Rather, his position is equal to that of the subcontractor and he is, therefore, able to judge the nature and quality of. the subcontractor’s performance for himself. If the statute was intended to “protect” a general contractor as a member of the public, as undeniably he is, then it should be applied to “protect,” from one another, members of a partnership which has illegally undertaken contracting work. It has been seen, however, that the statute is not construed in such a fashion. In the interests of just and- consistent application, it should not be so construed here. Por this reason, I would reverse the judgment and remand the case for a determination of the cause on its merits.
Schauer, J., concurred.
Appellants’ petition for a rehearing was denied April 17, 1957. Carter, J., and Schauer, J., were of the opinion that the petition should be granted. Gibson, C. J., did not participate therein.