Defendants Laura Waldrop and John Waldrop (“Defendants”) demur to all causes of action in the operative First Amended Complaint. Defendants properly met and conferred prior to bringing the Demurrers. (Code Civ. Proc., § 430.41, subd. (a).)
- PLAINTIFF CANNOT CLAIM HE WAS DEFENDANTS’ EMPLOYEE TO AVOID BUSINESS AND PROFESSIONS CODE SECTION 7031
The main difference between the First Amended Complaint and the original Complaint is that Plaintiff now alleges that he was Defendants’ employee and therefore was not required to hold a valid contractor’s license to recover under the contract.
Plaintiff claims that he is an employee pursuant to Labor Code section 2750.5, which “provides in relevant part that a person performing an activity requiring a contractors’ license “shall hold a valid contractors’ license as a condition of having independent contractor status.” (Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 656 [citing Labor Code, § 2750.5, italics added].)
However, “if section 2750.5 were applied to determinations under sections 7031 and 7053, every unlicensed person performing work on a job would be characterized as an employee and not an independent contractor.” (Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 657.) “This result would repeal by implication section 7031’s ban on recovery by an unlicensed contractor.” (Ibid.) “That ban 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.” (Ibid.)
Importantly, “there is a presumption against repeals by implication; they will occur only where the two acts are so inconsistent that there is no possibility of concurrent operation, or where the later provision gives undebatable evidence of an intent to supersede the earlier; the courts are bound to maintain the integrity of both statutes if they may stand together.” (Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 657.)
Labor Code section 2750.5 is not applicable to determinations of whether one is an employee or unlicensed contractor under Business and Professions Code sections 7031 and 7053.” (Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 657.)
- FIRST CAUSE OF ACTION: BREACH OF CONTRACT
Aside from Plaintiff’s allegations that he was Defendants’ employee, the First Amended Complaint does not contain new facts from the original Complaint that would change the court’s analysis for the first cause of action for breach of contract. The court finds that Business and Professions Code section 7031 bars Plaintiff’s first cause of action for breach of contract.
Business and Professions Code section 7031(a) expressly provides the following:
“[N]o 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 by this chapter without alleging that they were a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.” (Bus. & Prof. Code, § 7031, subd. (a).)
“The plain meaning of the subdivision (a) provision in section 7031, as construed by our Supreme Court, is ‘that, except as expressly otherwise provided, a contractor may not sue to collect compensation for performance of ‘any act or contract’ requiring a license without alleging that he or she was duly licensed ‘at all times during the performance of that act or contract.’” (Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, 826.)
“The Supreme Court has construed section 7031(a) as imposing a complete bar to any recovery of compensation for unlicensed work ‘by specifying that a contractor is barred from all recovery for such an ‘act or contract’ if unlicensed at any time while performing it.’” (Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, 827 [citing MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 426].)
Section 7031 “reflects ‘a legislative determination’ as to ‘the importance of deterring unlicensed persons from engaging in the contracting business … by denying violators the right to maintain any action for compensation in the courts of the state.’” (Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, 827.)
Here, Plaintiff alleges that Defendant Laura Waldrop entered into a contract with Plaintiff pursuant to which Plaintiff would use his money to complete construction of an Auxiliary Living Quarter on Defendant Laura Waldrop’s property. (First Amended Complaint (“FAC), ¶ 9.) In exchange for his construction and building services, “Wiser shall be permitted to reside at the Property rent free for a period of five (5) years from the date that the construction of the ALQ is completed and the occupancy permit is issued by the City of Anaheim” (Ibid.)
Plaintiff alleges that around June 2021, Defendant Laura Waldrop and Plaintiff had a falling out. (FAC, ¶ 15.) But at the time of the falling out, “the auxiliary living quarter on the subject property was substantially completed only requiring a final inspection/issuance of an occupancy permit.” (FAC, ¶ 15.)
Now, Plaintiff “contends that he is entitled to reside at the subject property for a period of five (5) years pursuant to specific performance of the contract or the reasonable value thereof as damages.” (FAC, ¶ 16.) Plaintiff also contends that “the is entitled to ten percent (10%) of the net equity. The approximate currently market value of the property is $900,000. The Mortgage against the subject property is approximately $500,000. As such, the equity is approximately $400,000.” (FAC, ¶ 17.)
Importantly, the operative First Amended Complaint does not state that Plaintiff was a licensed contractor, the contract attached to the operative Complaint implies that Plaintiff was not a licensed contractor, and the opposition to the Demurrer expressly states that Plaintiff was not a licensed contractor.
However, the allegations in the operative First Amended Complaint clearly establish that Plaintiff was acting as a contractor as defined in Business and Professions Code sections 7026, 7026.1, and 7151.2.
For these reasons, section 7031 applies and bars Plaintiff’s recovery against Defendants.
Plaintiff argues that the Agreement should be considered a loan for $40,000 rather than a construction Agreement. However, the Agreement expressly states that the purpose of the Agreement was “for completion of a 700 Square Foot Auxiliary Living Quarter (ALQ) consisting of 2 bedrooms, 1 bathroom, and a sitting room to be construction at the real property located at 407 S. Hilda Circle, Anaheim, California (the Property).”
Defendant’s benefit of the bargain was the construction that Plaintiff performed on her property. The Agreement expressly states that Plaintiff will perform constructions and building services on Defendants’ property in exchange for being “permitted to reside at the Property rent free for a period of Five (5) years.” Whether Plaintiff or Defendant funded the construction is of no consequence. Plaintiff agreed to construct an Auxiliary Living Quarter on Defendants’ property in exchange for living at the property for five years rent free.
This is a contract for Plaintiff’s contractor services and section 7031 applies, barring Plaintiff’s recovery against Defendants.
Plaintiff also argues that the owner-building exception in section 7044 applies because Plaintiff was acting as an “agent” of the homeowner. This is insufficient. Section 7044 only applies to the homeowners and the contract expressly states in paragraph 2 that “Waldrop is currently the legal owner of the Property and Wiser is currently residing at the Property and paying Waldrop rent of $600 per month.” Thus, Plaintiff is not the owner and section 7044 does not apply. Plaintiff does not cite to any legal authority stating otherwise.
As such, the Demurrer to the first cause of action for breach of contract is SUSTAINED WITHOUT LEAVE TO AMEND.
III. SECOND CAUSE OF ACTION: UNJUST ENRICHMENT
Next, Defendants demur to Plaintiff’s second cause of action for unjust enrichment. Plaintiff alleges that Defendants were unjustly enriched by the work that Plaintiff performed to improve the Property. (Complaint, ¶¶ 22-28.)
“There is no cause of action in California for unjust enrichment.” (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1138; Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) Rather, “[u]njust enrichment is synonymous with restitution.” (Ibid.)
However, on a demurrer, the test is whether the complaint states any valid claim entitling plaintiff to relief, even if plaintiff’s cause of action is improperly titled, or an improper remedy is stated. (Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 38 [“If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.”].) Thus, although Plaintiff cannot bring an unjust enrichment cause of action, the cause of action will be sufficient on demurrer if the complaint establishes a cause of action for restitution.
“There are several potential bases for a cause of action seeking restitution.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) “For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (Ibid.) “Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct.” (Ibid.) “In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory.” (Ibid.) “In such cases, where appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to the parties’ intent, in order to avoid unjust enrichment.” (Ibid.)
“Under the law of restitution, an individual is required to make restitution if he or she is unjustly enriched at the expense of another.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) “A person is enriched if the person receives a benefit at another’s expense.” (Ibid.) “However, the fact that one person benefits another is not, by itself, sufficient to require restitution.” (Ibid.) “The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.” (Ibid.) “As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract.” (Ibid. [citing California Medical Assn. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172].)
“An unjust enrichment theory is inapplicable” where the plaintiff “alleges the parties entered into express contracts.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) However, “[a] claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement.” (Russell City Energy Co., LLC v. City of Hayward (2017) 14 Cal.App.5th 54, 70.)
Importantly, “section 7031 bars all actions that effectively seek compensation for illegal unlicensed contract work, regardless of the equities.” (Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, 830.) “Because of the strength and clarity of this policy, it is well settled that section 7031 applies despite injustice to the unlicensed contractor.” (Id., 830–831.) “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.” (Id., 831.)
Thus, section 7031 bars Plaintiff’s claim for restitution. Defendants’ Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to Plaintiff’s second cause of action for unjust enrichment.
- THIRD THROUGH EIGHTH CAUSES OF ACTION: VIOLATIONS OF THE LABOR CODE
Plaintiff’s allegations in support of his third through eight causes of action for various violations of the Labor Code all rely on his allegations that Labor Code section 2750.5 qualifies him as Defendants’ employee.
For example, Plaintiff alleges, “since Wiser was a worker without a contractor’s license, or was working for someone without a contractor’s license, and as such is presumed to be an employee.” (FAC, ¶ 11.) As discussed above, however, this argument was addressed and rejected by the court in Fillmore v. Irvine (1983) 146 Cal.App.3d 649.
Accordingly, the Demurrer to the third cause of action for failure to pay all wages earned in violation of Labor Code section 200 et seq. against all Defendants, fourth cause of action for failure to provide meal periods or compensation in lieu thereof in violation of California Labor Code sections 226.7 and 512 and IWC Wage Orders, fifth cause of action for failure to provide rest periods or compensation in lieu thereof in violation of California Labor Code section 226.7 and IWC wage orders, sixth cause of action for statutory waiting time penalties in violation of Labor Code sections 201 and 203 and IWC wage orders, seventh cause of action for failure to provide accurate wage statements in violation of Labor Code sections 221, 223, 226, and 226.3 and IWC Orders; and eight cause of action for failure to keep accurate payroll records in violation of Labor Code section 1174 and 1174.5 and IWC Wage Orders are SUSTAINED WITHOUT LEAVE TO AMEND.
Defendants to prepare a judgment.
The Case Management Conference is off-calendar.
Defendants to give notice.