WHITE, ET AL. V. HARPER CRIDLEBAUGH, ET AL.

WHITE, ET AL. V. HARPER CRIDLEBAUGH, ET AL.
California Appellate Court – Fifth Appellate District
2009 Cal. App. LEXIS 1254 (Appellate Case No. F053843)


On July 29, 2009, the California Appellate Court affirmed the provisions of Business and Professions Code §7031 by stating that unlicensed contractors cannot maintain an action to recover monies owed to them for work performed, and further may be divested of all monies already paid. This statutory remedy may not be reduced via an equitable offset (i.e. for goods and/or services provided), or through claims of indemnity or contribution.

In March 2006, Robert and Carole White (“Whites”) entered into a time and materials contract with JC Master Builders (“JCMB”) for the construction of a single family residence in accordance with previously prepared plans and specifications (“Contract”). As construction proceeded, the Whites became concerned about the accuracy of JCMB’s invoicing and accounting under the contract, as well as their adherence to the plans. After JCMB declined to provide the underlying documentary support for their invoices, the Whites terminated the contract. JCMB placed a mechanics’ lien on the Whites’ property in the amount of $13,561.62.

The Whites subsequently sued JCMB, its agents, and its surety bonding company for various causes of action including breach of contract, negligence, and violation of state contractor licensing laws. In turn, JCMB filed a complaint against the Whites for breach of contract, quantum meruit, and foreclosure of mechanics’ lien.

At Trial, testimony revealed that the sole licensed qualifying individual and responsible managing officer of JCMB moved to Peru in 2004 and turned over all business dealings and daily management of the company to the remaining unlicensed officer, Mr. Harper Cridlebaugh. At the time the Contract was entered into, and at the time the work at issue was performed, neither JCMB nor Mr. Harper Cridlebaugh held valid contractors licenses in the State of California

The jury found that JCMB was not negligent and that the Whites breached the contract. However, upon a motion for directed verdict, the Trial judge found that JCMB had violated California contractor licensing law and California Business and Professions Code §7031. This statutory provision provides that, except in cases of substantial compliance, “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, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required… regardless of the merits of the cause of action…” California Business and Professions Code §7031(a)(e). Furthermore, “a person who utilizes the services of an unlicensed contractor may bring an action… to recover all compensation paid to the unlicensed contractor for performance of any act or contract.” California Business and Professions Code §7031(b).

Accordingly, although JCMB obtained a full defense verdict on all causes of action except for violation of contractor’s licensing law, the aforementioned statutory provisions obligated the Court to dissolve JCMB’s mechanics’ lien and divest it of all monies received under the contract In explaining its ruling, the Trial Court stated that “it’s not a matter of equity, it’s not a matter of balance, it’s a matter of policy behind the licensing laws and the results are harsh.” White v. Harper Cridlebaugh (2009) 2009 Cal. App. LEXIS 1254.

Upon JCMB’s subsequent motion for judgment notwithstanding the verdict (“JNOV”), the Trial Court ruled that the Whites failed to adequately plead statutory relief in the form of reimbursement of all monies paid. Accordingly, the Trial Court vacated its judgment reimbursing the Whites for all monies paid under the contract.

Upon review, the Appellate Court determined that California Business and Professions Code §7031 acts as both a shield and a sword, by (1) precluding non-licensed contractors from recovering monies owed for work performed and (2) allowing courts to divest / disgorge non-licensed contractors from any and all monies actually paid for work performed. Accordingly, the Trial Court’s original ruling was proper under the statutory code, and plaintiffs’ complaint containing a general prayer for relief was sufficient. Furthermore, JCMB was not prejudiced by their inability to produce evidence of equitable offsets (i.e. for materials and/or services provided), indemnity, and contribution, as such claims may not undermine or reduce the statutory relief provided. The Trial Court’s ruling on JCMB’ motion for JNOV was overruled, and the Court’s original ruling as to JCMB was reaffirmed.


Kelly A. Rody
Frank T. Sabaitis