Leonard v. Hermreck

California Court of Appeal Feb 20, 1959 No. Civ. 5789Published

Before: Stone

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Holding. The court held that an unlicensed subcontractor is barred by Business and Professions Code section 7031 from suing for compensation under an illegal contract, but may maintain an action for conversion of equipment occurring after the contract relationship terminated. The court further held that the dismissal of the defendants' counterclaims was improper because it could not be determined if they arose from the illegal contract or subsequent events.

Issues

Whether an unlicensed subcontractor is barred from recovering compensation for work performed under a contract requiring a license.
Whether an unlicensed subcontractor is barred from suing for the conversion of equipment occurring after the termination of the contract.
Whether the dismissal of the defendants' counterclaims was proper based on the doctrine of in pari delicto.

Disposition. Affirmed in part, reversed in part, and remanded.

Quotations verified verbatim against the opinion

“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”

“The second cause of action is not founded upon an illegal contract and therefore is not barred by section 7031 of the Business and Professions Code.”

“The fact that there had been a relationship founded upon an illegal contract did not, upon termination of the relationship, give the defendants the right to appropriate property belonging to the other party to the contract.”

STONE, J. pro tem.

The defendants were awarded a contract to construct a section of state highway known as the Colton Freeway Project. Subsequently, they entered into a subcontract dated November 21, 1955, with the plaintiff who agreed to haul approximately 220,000 tons of dirt from the Portland Cement pit to the roadbed of the freeway between certain designated stations. The contract rate to be paid plaintiff was

7Yz

cents per ton. By the terms of the subcontract plaintiff agreed to furnish trucks and drivers while the defendants agreed to furnish loaders. The agreement was modified by a written instrument dated November 30,1955, whereby plaintiff agreed to furnish the loader and defendants agreed to increase the price per ton from 7% cents to 11 cents for all dirt hauled. The plaintiff had no contractor’s license at the time he executed the contracts nor while he was performing work pursuant to the contracts. For reasons which are not

[144]

material to the issues before us the plaintiff ceased work before the contract was completely performed. He commenced an action against the defendants based upon two causes of action. The first was in the nature of a common count for the value of services rendered to defendants, and the second was for damages by reason of defendants ’ alleged wrongful detention and use of plaintiff’s loader. At the conclusion of plaintiff’s case the defendants made a motion for nonsuit upon the ground that plaintiff had no contractor’s license. The motion was granted, a judgment was entered pursuant thereto, and the plaintiff appeals from that judgment.

At the time the court granted the motion for nonsuit plaintiff moved for a dismissal of defendant’s counterclaim. The court, remarking that the parties were

in pari delicto,

granted the motion. The defendants appeal from the judgment dismissing their counterclaims.

Business and Professions Code, section 7028, makes it unlawful for any person to act in the capacity of a contractor within this state without a license therefor. Section 7031 of the same code provides as a civil penalty a bar to maintaining an action if a license is required. Section 7031 provides:

Leonard v. Hermreck

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