Appel v. Morford

[38]

SHINN, J.

Appeal by defendants from a judgment foreclosing a trust deed given to secure payment of a note executed by defendants in favor of Pacific Construction Finance Company, Ltd. Plaintiff sued as assignee of the corporation. The note and trust deed were given in connection with an agreement of the construction company to build a house and garage for defendants and evidenced the major part of the consideration therefor. The building was completed, defendants made certain payments on the note and, after they had defaulted, plaintiff, who had acquired the note from the company in the meantime, brought suit.

One of the special defenses, and the only one urged on the appeal, was that the note was void for the reason that the construction company at the time of entering into the contract and during the construction was in default in renewing its license as a building contractor, as required by section 7138 of the Business and Professions Code (Stats. 1939, p. 395; also p. 2718). Plaintiff’s answer to this contention is two-fold: that, as the court found, the corporation was not, within a proper construction of the pertinent code sections, “unlicensed” at any time and that plaintiff was a holder in due course and held the note free from the asserted defense.

Section 7031 of the Business and Professions Code (Stats. 1939, p. 384) provides as follows: “No person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action in any court of this State for the collection of compensation for the performance of any act or contract for which a license is required by this chapter without alleging and proving that he was a duly licensed contractor at all times during the performance of such act or contract.” Licenses expire on June 30th of each year. Application for renewal, accompanied by the annual renewal fee, must be filed before that date; otherwise the license “shall be

ipso facto

suspended and shall be renewable only on the payment of the penalty fixed by this chapter in addition to the current renewal fee. Unless so renewed the license shall remain suspended during the remainder of the fiscal year.” (Sec. 7138.)

The building contract was executed August 3, 1940, and was substantially completed in the following November. The corporation had been duly licensed, but it neglected to pay