Question
California Business and Professions Code Section 7031: Bars any and all legal actions in California by a party seeking compensation for any construction work or services performed by any person or entity acting in the capacity of a contractor for which a contractor's license is required by the Contractor's State License Law. This section is both a "shield" protecting the consumer from litigation by contractors seeking to get paid and a "sword" allowing a consumer to sue to recover compensation paid to an unlicensed contractor.
General Contractor tried to collect remaining balance from Homeowner for his new house.
Question: California Business and Professions Code Section 7031 should not be new to Mr. Lawyer since he did similar case before. Before retaining Mr. Lawyer was told and warned by the Contractor that the same Homeowner had won the lawsuit for not paying the subcontractor (who did the site work) using this California Business and Professional Code section 7031. However, Mr. Lawyer reassured Contractor that it is no problem to get the remaining balance.
Is it ethical for Mr. Lawyer to accept the case without telling his client the truth about BPC section 7031? And also Mr. Lawyer should have advised and convinced his client to accept the first offer of $70,000+ at the very beginning of the attribution settlement. The Contractor ended up with NOTHING and $80.000 billing.
Answer
It certainly sounds like legal malpractice to handle a case that appears to have no merit; did the homeowner sue for the filing of a frivolous complaint? But if you knew that the sub-contractor had lost why did you sue? How could the attorney run up nearly 270 hours on a case that a demurrer or at most a motion for summary judgment should not have resolved by dismissal? Why would the homeowner offer $70,000+ to settle?
Answer
I can't add anything on the main topic, but I do recall from previous research on unlicensed contractor payment cases that, while the contract itself is unenforceable, the unlicensed contractor is sometimes allowed (by the Court of Appeal, no less) to recover the fair value of the work performed and materials furnished on a "quantum meruit" basis. So, one cannot say that the result of a B&P 7031 enforcement situation is never any payment to the so-called contractor.
Answer
Mr. Whipple is not up on current construction law. You are correct that the current status of B&P section 7031 is that it is an absolute bar on an unlicensed contractor recovering payment for any work, and it provides the owner the right to take back any payments made. It is the culmination of a long battle between the legislature and the courts, in which the legislature would pass stronger and stronger anti-payment to unlicensed contractors laws, and the courts would find ways, including "quantum meruit" as Mr. Whipple mentions, to get around the penal nature of the law. Finally the legislature passes section 7031 and made it VERY clear that there are NO exceptions, and the courts have finally stopped trying to end run the statute.
If you are actually a licensed general contractor, however, why would that statute apply to you? You refer to yourself as "General Contractor." If you are, in fact a licensed general contractor, what do you care about section 7031?
