Case Number: EC061049    Hearing Date: July 18, 2014    Dept: NCB

19. EC061049
DANIEL C. CONNOLLY et al v. SCOTT ANTHONY WILLIAMS, et al
Demurrer
Case Management Conference

The First Amended Cross-Complaint alleges that Cross-Defendants failed to pay the Cross-Complainants for services. This was a breach of an oral agreement under which the Cross-Defendants agreed to employ the Cross-Complainants to provide services beyond the scope of their tree-trimming license.

The causes of action in the First Amended Cross-Complaint are for:
1) Breach of Contract
2) Bad Faith
3) Intentional Misrepresentation
4) Negligent Misrepresentation
5) Negligence

This hearing concerns the demurrer of the Cross-Defendants to the entire Cross-Complaint on the ground that the Cross-Complainants admit that they were unlicensed for the work they were doing. The Cross-Defendants argue that the Cross-Complainants are not entitled to seek damages in each claim in their First Amended Cross-Complaint because the Cross-Complainants were not duly licensed at the time they performed the work for which they are seeking payment.
Under Business and Professions Code section 7031, no 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 for the collection of compensation for the performance of any act or contract without alleging that he was a duly licensed contractor at all times during the performance of that act or contract. A general demurrer will be sustained to a pleading by a contractor on a construction contract which does not allege that the contractor was licensed. Marogna v. Mitchell (1951) 104 Cal. App. 2d 799, 805.
Further, section 7031 requires the contractor to have a license at all times during the time of performance of the work or contract. MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal. 4th 412, 428. Accordingly, the general rule is to deny recovery of all compensation for work requiring a contractor’s license if a valid license was not in place when performance began, or if licensure lapsed at any time during the work. Id.
The bar of section 7031 applies regardless of the equities. Id. at 423. Further, it has long been settled that the Courts may not resort to equitable considerations contrary to section 7031 because 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 this state. Id.

A review of the First Amended Cross-Complaint reveals that the Cross-Complainants alleged in paragraph 4 that they were duly licensed as a D49 Tree Service Contractor. However, the Cross-Complainants then alleged in paragraph 5 that the Cross-Defendants entered into an oral agreement to employ the Cross-Complainants for various other projects “outside the purview of cross-complainant’s license.” Since the Cross-Complainants’ allegation indicates that they were doing work for which they did not have a license, they are barred from recovering any payment for the work.
The Cross-Complainants attempted to plead around this defect by alleging in paragraph 5 that they were acting as employees of the Cross-Defendants when they did this work. Under Business and Professions Code section 7053, the requirements of the license do not apply to any person who engages in the activities herein regulated as an employee when:

1) the person receives wages as his or her sole compensation;
2) the person does not customarily engage in an independently established business; and
3) the person does not have the right to control or discretion as to the manner of performance so as to determine the final results of the work performed.

Case law holds that the contractor’s licensing provisions do not apply to any person who engaged in activities as an employee with wages as his or her sole compensation. Pickens v. American Mortg. Exchange (1969) 269 Cal. App. 2d 299, 305. The question of whether a person seeking to recover for his or her labor is functioning as an employee or an independent contractor has been characterized as essentially a question of fact. Id.
A review of the pleadings reveal that the Cross-Complainants have not alleged that their sole compensation was wages. The Cross-Complainants allege in paragraph 5 that they were hired to perform tree trimming services pursuant to their license and that “at about the same time” they entered into an oral agreement to perform various other projects outside the purview of the license. This indicates that the Cross-Complainants were earning two forms of compensation: 1) compensation for tree trimming services pursuant to their license and 2) compensation for other unlicensed services.
Further, the Cross-Complainants do not allege that they do not customarily engage in an independently established business because their allegations indicate that they operate a tree trimming business. The Cross-Complainants allege in paragraph 8 that they were terminated from “their employment and their tree trimming service”. This indicates that the Cross-Complainants were working in two capacities: 1) as employees and 2) as tree trimmers. In addition to the allegation, the Cross-Complainants identify themselves as having a dba “SAW Tree Service”. The use of a dba indicates that the Cross-Complainants were operating an independently established business in which they provided tree services.
Accordingly, a review of the First Amended Cross-Complaint reveals that the Cross-Complainants do not fall under the Business and Professions Code section 7053 because they do not allege facts demonstrating that they received wages as their sole compensation or that they did not customarily engage in an independently established business. Since the Cross-Complainants do not fall under the exception of section 7053 for employees, they are barred from seeking compensation for their unlicensed work.

As noted above, a general demurrer will be sustained to a pleading by a contractor on a construction contract which does not allege that the contractor was licensed. Marogna v. Mitchell (1951) 104 Cal. App. 2d 799, 805. Accordingly, the Cross-Complainants are not entitled to recover any amounts from the Cross-Defendants because the allegations in the Cross-Complaint indicate that they are seeking compensation for were unlicensed contractor services and that they do not fall within the exception of Business and Professions Code section 7053.

Therefore, the Court sustains the demurrers to each cause of action in the First Amended Cross-Complaint.

In order to obtain leave to amend, California law imposes the burden on the Cross-Complainants to demonstrate the manner in which they can amend their pleadings. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Cross-Complainants did not request leave to amend. Further, the Cross-Complainants do not offer any manner by which they can amend the admissions in their pleadings that they were doing work beyond the scope of their license.
Accordingly, the Court does not grant leave to amend.