Holding an Unlicensed Contractor Accountable
Case Summary: The firm won a judgment for $579,657, on behalf of a homeowner, after a court trial in California Superior Court.
Fact: California Law requires that anyone who contracts to perform work valued at $500 or more for labor and materials must have a valid license, in the applicable trade, from the Contractors State Licensing Board. These rules apply to work done by contractors whether commercial or residential.
The Complaint: In our case the Complaint alleged that Defendants lacked the required contractors license to provide landscaping services. The projects were extensive and included landscaping, construction, irrigation, drainage, planting, maintenance, and related services on a residential property. The Defendants included a warranty on their work, which they did not uphold, and falsely promised that their work would deliver water rebates. The Plaintiff filed a suit for breach of contract, fraud, negligent misrepresentation, violation of various Business and Professions Codes and other causes of action, including breach of a small promissory note. The Plaintiff demanded repayment of all sums paid to the unlicensed contractors, along with interest.
Applicable Law: To safeguard the public, the State of California imposes harsh penalties when a contractor fails to maintain the proper license. An unlicensed contractor is required to refund “all compensation paid…for performance of any act or contract.” Similarly, an unlicensed contractor cannot collect any amounts owed by the consumer.
Results of Trial: The San Diego Superior Court issued judgment in favor of the Plaintiff on all counts. It awarded the Plaintiff all amounts paid in addition to both interest and court costs.
Alter Ego Determination: The Judge found the corporate owners and officers were personally liable for the wrongdoing of the company. Bank records showed significant sums of corporate money being deposited into a personal account. Personal expenses were also paid from a corporate account. The corporate formalities were not followed. The Court "pierced the corporate veil," finding the individual and corporate defendants jointly and severally liable on the judgment.
Tips for Hiring Contractors: A license can be verified at “Check A License” at the Contractors State License Board website. An unlicensed contractor is not allowed credit for the value of work done, or even the materials purchased. An unlicensed contractor must refund all amounts paid, dollar-for-dollar, without exception. Under the California Business and Professions Code, it is a misdemeanor to provide services that require a license without possessing the required license. Note also that simply having one kind of license is insufficient to provide services that require another type of license. For example, an arborist (C-61 license/D-49 Tree Service) cannot provide landscape contracting services, which require a C-27 license.
Nathan Wirtschafter, Esq. is a California business trial attorney. His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation. He can be reached at (818) 660-2518 and firstname.lastname@example.org.
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The firm has significant experience in civil litigation.
In a recent trial, the firm won a large judgment against an individual for acting as an unlicensed contractor.
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