Twenty-Nine Palms Enterprises v. Cadmus Construction CA4/1 (2015) · DecisionDepot
Twenty-Nine Palms Enterprises v. Cadmus Construction CA4/1
California Court of Appeal Nov 6, 2015 No. D067422Unpublished
Filed 11/6/15 Twenty-Nine Palms Enterprises v. Cadmus Construction CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
During the course of conducting discovery, Twenty-Nine Palms learned that
Cadmus was not properly licensed under the Contractors' State License Law (CSLL; Bus.
& Prof. Code,1 § 7000 et seq.) when it started work under the contracts. Twenty-Nine
Palms thus claimed Cadmus had to disgorge the money it had been paid under each of the
contracts. Further, Twenty-Nine Palms argued that because Cadmus was not a properly
licensed contractor, each of three contracts was illegal and void. Therefore, arbitration
could not proceed.
The parties disagreed regarding whether the arbitrator could determine if the
subject contracts were illegal. After discussing the issue, Twenty-Nine Palms and
Cadmus agreed to stay the arbitration and submit the legality of the contracts issue to San
Bernardino Superior Court to avoid wasting additional time and resources in arbitration.
To this end, Twenty-Nine Palms filed a complaint in superior court challenging the
validity of the three contracts while alleging that Cadmus had to disgorge its profits under
section 7031, subdivision (b) because it was not a properly licensed contractor when it
began work under the contracts.
1 Statutory references are to the Business and Professions Code unless otherwise specified.
2
In response to the complaint, Cadmus filed a motion to compel arbitration, which
the court denied, finding that the parties had stipulated to allow the court to determine
whether Cadmus was properly licensed and if the contracts were illegal. After some
procedural maneuvering by Cadmus, Twenty-Nine Palms successfully moved for
summary judgment. In granting the motion, the superior court concluded that it was
bound by the holding of Twenty-Nine Palms Enterprises Corp. v. Bardos (2012) 210
Cal.App.4th 1435 (Twenty-Nine Palms Enterprises), and thus, Cadmus could not argue
that section 7031 was not applicable. The court ordered Cadmus to disgorge the money
Twenty-Nine Palms had paid it under the contracts and found that those contracts were
illegal. Accordingly, the court determined that the arbitration could not proceed.
Cadmus appeals the judgment, contending that the court erred in refusing to refer
the dispute back to arbitration, section 7031, subdivision (b) was not applicable under the
circumstances here, and a triable issue of material fact exists as to whether it performed
any work while unlicensed. Twenty-Nine Palms responds that the section 7031 issue was
already determined in Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th 1435 and
Cadmus cannot now argue section 7031 did not apply. In addition, Twenty-Nine Palms
maintains it was undisputed that Cadmus performed and was paid for work prior to being
licensed, and therefore, it had to disgorge the money it was paid. Finally, Twenty-Nine
Palms asserts all three of the contracts were illegal because Cadmus was not properly
licensed when it began work under those contracts.
After receiving briefs in this case, we requested supplemental briefing to address
the issue whether California could regulate the licensing requirements of contractors
3
performing work under a contract with a tribal entity that calls for work to be completed
on tribal land.
After reviewing the supplemental briefs, we determine that California may not
regulate contractors working on tribal land through California law or Public Law 280
(Pub.L. No. 83-280 (Aug. 15, 1953) 67 Stat. 589). Moreover, we conclude that section 4
of Public Law 280 codified at title 28 United States Code section 1360 does not allow
Twenty-Nine Palms to otherwise sue under a California law that does not apply on tribal
land. However, here, the parties to the contracts agreed to be governed by California law.
As such, section 7031, subdivision (b) can apply because the parties consented to its
application in their contracts.
We further determine that the three subject contracts are not illegal because
section 7031 does not apply outside of the contracts themselves. Accordingly, the court
erred in not referring the matter back to arbitration to resolve the remaining disputes. We
therefore reverse the judgment and remand the matter to the superior court with
directions to refer the matter back to arbitration.
FACTUAL AND PROCEDURAL BACKGROUND
Twenty-Nine Palms is a tribal corporation duly chartered under the provisions of
title 25 United States Code section 477 and wholly owned and controlled by the Twenty-
Nine Palms Band of Mission Indians, a federally recognized tribe residing near
Coachella, California. Twenty-Nine Palms owns and operates the Spotlight 29 Casino
(Casino), located at 46-200 Harrison Place, Coachella, California.
4
Cadmus was incorporated on February 8, 2008. Cadmus operated as a general
contractor. Cadmus applied for a California State Contractor's license on March 4, 2008.
It received a contractor's license on April 22, 2008. Paul Bardos is the sole owner,
officer, and director of Cadmus.
On February 5, 2008, Cadmus Construction Corporation submitted a proposal to
Twenty-Nine Palms to take over the recently vacated general contractor job on the
Casino addition project as well as a variety of other pending and yet to be determined
projects. Cadmus thereafter engaged in detailed negotiations with Twenty-Nine Palms
and eventually entered into the following three contracts: (1) a bathroom remodel
contract, entered into on March 10, 2008 (Bathroom Contract); (2) new chiller and
cogeneration plant building shell contract entered into on March 10, 2008 (Chiller
Contract); and the Casino addition project Phase I contract, entered into on April 21,
2008 (Casino Addition Contract) (Bathroom Contract, Chiller Contract, and Casino
Addition Contract collectively referred to as Construction Contracts).
Bardos signed each of the Construction Contracts on behalf of Cadmus as its
president. Article 13.1.1 of the general conditions for all three Construction Contracts
stated that the "Contract shall be governed by the law of the State of California." Each
contract also contained an arbitration provision requiring the parties to arbitrate any
disputes "arising out of or related to" the work to be performed under the Construction
Contracts.
Cadmus performed work under each of the Construction Contracts, and Twenty-
Nine Palms paid Cadmus a total of $1,604,952.32 for its work. Twenty-Nine Palms,
5
however, terminated all three of the Construction Contracts before all work was
completed.
On October 9, 2008, Cadmus filed a demand for arbitration under each of the
Construction Contracts, alleging that Twenty-Nine Palms breached the contracts by
wrongfully terminating the contracts and not paying all money owed. In all, Cadmus
alleged several causes of action, including breach of contract, conspiracy to interfere with
prospective economic advantage, misappropriation of trade secrets, unfair competition,
unfair business practices, accounting, and declaratory relief. Cadmus sought general
damages, treble damages, and punitive damages.
Twenty-Nine Palms answered the arbitration demand on November 10, 2008,
listing 29 affirmative defenses, and seeking relief against Cadmus for, among other
claims, breach of contract, fraud in the inducement, and unfair business practices. At that
time, Twenty-Nine Palms did not challenge Cadmus's right to arbitrate the dispute.
The parties selected an arbitrator and proceeded to engage in discovery over the
next several months. In addition to written discovery, the parties took numerous
depositions. After proceeding toward arbitration for over a year, Twenty-Nine Palms
believed it had discovered that Cadmus was not properly licensed at all times it
performed work under the Construction Contracts. The parties met and conferred
regarding the status of Cadmus's license and eventually submitted a stipulation to stay the
arbitration (Stipulation). The Stipulation stated in relevant part:
"WHEREAS, the parties remain engaged in substantial ongoing discovery;
6
"WHEREAS, [Twenty-Nine Palms] asserts that recent developments in the case have raised issues regarding the contractor's license of Cadmus and whether Cadmus was properly licensed at all times on the three construction projects at issue;
"WHEREAS, Cadmus disputes [Twenty-Nine Palms's] contentions regarding its contractor's license;
"WHEREAS, the parties are in disagreement as to whether the California Supreme Court's decision in Loving & Evans v. Blick, 33 Ca1.2d 603 (1949) mandates that a California court rather than an arbitrator decide the licensing issue;
"WHEREAS, Cadmus has submitted these new allegations regarding its contractor's license to its insurance carrier;
"WHEREAS, the parties have agreed that [Twenty-Nine Palms] shall submit this dispute to a California court;
"WHEREAS, the parties have agreed that the licensing dispute and Cadmus' insurance claim need to be resolved before the arbitration of this matter in order to potentially avoid wasting substantial time and money;"
On December 10, 2009, 14 months after Cadmus demanded arbitration, the
arbitrator signed the Stipulation. Twenty-Nine Palms filed a complaint in San
Bernardino Superior Court 18 days later. The complaint alleged Cadmus "performed
work on the Construction Contracts prior to receiving a contractor's license on April 22,
2008." The complaint acknowledged that the parties were in the process of arbitrating a
dispute under the Construction Contracts, but that Twenty-Nine Palms believed the
arbitrator could not decide the "licensing issue" "and instead [that issue] needed to be
decided by a Superior Court judge."
Twenty-Nine Palms alleged in the complaint that San Bernardino Superior Court
had jurisdiction to hear the case under section 7031 generally, but references throughout
7
the complaint make it clear it was seeking relief under section 7031, subdivision (b).2
The complaint included four causes of action. The first three were for violations of
section 7031 because Cadmus was not a properly licensed contractor under section 7026
prior to entering into any of the Construction Contracts or beginning to perform work
under those contracts. The final cause of action was for declaratory relief based on the
following controversies, whether (1) Cadmus was licensed by the California State
Contractors' License Board at all times relevant to the Construction Contracts; (2) the
Construction Contracts were illegal based on Cadmus's lack of license; (3) the entire
arbitration was unenforceable because it was based on illegal contracts; (4) Cadmus was
barred from pursuing all of its claims against Twenty-Nine Palms in arbitration; and (5)
Twenty-Nine Palms was entitled to disgorgement from Cadmus.
Instead of answering the complaint, Cadmus filed a motion to compel arbitration.
In its motion, Cadmus did not address the Stipulation in detail, but argued that each of the
Construction Contracts contained an arbitration clause that required any disputes under
those contracts to be arbitrated, including any claim as to the legality of those contracts.
Twenty-Nine Palms opposed the motion, emphasizing that the parties signed the
Stipulation to allow the superior court to resolve the question about whether Cadmus was
properly licensed. Twenty-Nine Palms further asserted that the court must determine if
the Construction Contracts were illegal because Cadmus was not licensed while
2 Section 7031, subdivision (b) states: "Except as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract." 8
performing under the contracts. Twenty-Nine Palms reasoned that if the Construction
Contracts were illegal then an enforceable arbitration provision would not exist and
Cadmus could not seek relief in arbitration.
During oral argument on the motion to compel arbitration, Cadmus's counsel
argued that arbitration was the proper forum for the dispute to be resolved. Twenty-Nine
Palms's counsel emphasized that the issue raised in the complaint was the illegality of the
Constructions Contracts: "And as far as the scope of this particular action, it is purely to
decide a legal issue dealing with the legality of the underlying contract, which if, indeed,
the contract is illegal the entre arbitration is itself unenforceable."
The superior court agreed with Twenty-Nine Palms noting "the plain meaning of
the stipulation is that the parties agreed to have this Court resolve the licensing dispute
and Cadmus' insurance claim before the arbitration in order to avoid wasting substantial
time and money in the arbitration proceeding." The court therefore denied the petition to
compel arbitration.
Cadmus subsequently answered the complaint. The answer included 16
affirmative defenses, including two based on tribal sovereign immunity.
Twenty-Nine Palms then filed a motion for summary judgment. The motion
focused on the claim that Cadmus violated section 7031, subdivision (b) because it was
not properly licensed when it performed work under the Construction Contracts.
Twenty-Nine Palms also maintained that the Construction Contracts were illegal because
Cadmus was not a properly licensed contractor and asked the court to order Cadmus to
disgorge the money Twenty-Nine Palms had paid it.
9
Rather than file an opposition, Cadmus filed for Chapter 11 bankruptcy, and filed
a new lawsuit in federal court against Twenty-Nine Palms. The federal lawsuit sought a
judicial declaration that the San Bernardino Superior Court lacked jurisdiction to hear the
instant matter because Public Law 280 does not permit California to enforce its
contractors' licensing law with respect to construction contracts for improvements on trial
land.
Cadmus subsequently removed the instant matter to bankruptcy court, initiating an
adversary proceeding against Twenty-Nine Palms, asking the bankruptcy court to decide
the Public Law 280 issue. The bankruptcy court ultimately denied Cadmus's request,
remanding the subject adversary proceeding to the San Bernardino Superior Court. The
federal court then dismissed the federal action Cadmus had filed against Twenty-Nine
Palms.
With the matter remanded to the San Bernardino Superior Court, Twenty-Nine
Palms filed an amended notice of its motion for summary judgment. Cadmus opposed
the motion, contending, among other things, that "[b]ecause of [Twenty-Nine Palms's]
tribal sovereignty, the California Contractors' State License Law does not apply to the
contracts and construction at issue here."
At the time of oral argument on the motion for summary judgment, an appeal was
pending regarding the San Bernardino Superior Court's grant of summary judgment in
favor of Twenty-Nine Palms and against Bardos doing business as Cadmus Construction
Co. (the Cadmus Construction Action). The Cadmus Construction Action involved the
10
same general issue of a nonlicensed contractor performing construction on tribal lands.3
In that case, the superior court granted summary judgment in favor of Twenty-Nine
Palms and ordered disgorgement of all money paid by Twenty-Nine Palms to Cadmus
Construction. One of Cadmus Construction's defenses was that tribal sovereign
immunity prevented the application of the CSLL on tribal lands, and thus, Cadmus
Construction was not legally required to have a contractor's license.
During oral argument on the motion for summary judgment in the instant matter,
the superior court questioned whether given the similarity of the parties and issues in the
Cadmus Construction Action, it would be prudent to stay a decision on the summary
judgment motion until the resolution of the Cadmus Construction appeal. The court
ordered the parties to brief whether a stay should be issued.
Cadmus argued against a stay while Twenty-Nine Palms argued in favor of one.
The superior court agreed with Twenty-Nine Palms and ordered that all further
proceedings in the matter would be stayed pending the Court of Appeal's opinion in the
Cadmus Construction Action. The superior court later denied Cadmus's motion for
reconsideration of the order granting a stay.
In late 2012, the Second Division of the Fourth Appellate District issued its
opinion on the appeal following Twenty-Nine Palms's successful motion for summary
judgment in the Cadmus Construction Action. In Twenty-Nine Palms Enterprises, supra,
210 Cal.App.4th 1435, the Second Division affirmed summary judgment in favor of
3 Cadmus Construction was a sole proprietorship, owned by Bardos. Bardos also is the sole owner of Cadmus. 11
Twenty-Nine Palms. (Id. at p. 1437.) The court explained: "Cadmus [Construction] is
asserting the tribe's sovereign immunity to prevent the tribe from pursing an action
against him in state court. Cadmus [Construction] cannot do this -- the sovereign
immunity defense is reserved for the tribe and tribal entities." (Id. at p. 1446.)
With the sovereign immunity defense issue ostensibly resolved, the superior court
lifted the stay and proceeded with Twenty-Nine Palms's motion for summary judgment.
Based on Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th 1435, the court ruled
that Cadmus could no longer argue section 7031 did not apply to the Construction
Contracts and to work performed on tribal land. The court then determined that there
were no material facts in dispute and Cadmus was not properly licensed under California
law during all time it performed work under the Construction Contracts.
The court entered judgment in the instant matter, requiring Cadmus to disgorge
$1,604,952.32 and pay Twenty-Nine Palms over $500,000 in prejudgment interest. The
court also made the following judicial determinations: (1) Cadmus was not a licensed
contractor at all times relevant to its work under the Construction Contracts; (2) Twenty-
Nine Palms is entitled to disgorgement of all monies paid to Cadmus on the Construction
Cadmus from pursuing its claim for compensation against Twenty-Nine Palms in
arbitration; and (4) the Construction Contracts are illegal and therefore Cadmus is
prohibited from continuing with its arbitration against Twenty-Nine Palms.
Cadmus timely appealed. In its opening brief, Cadmus maintains the superior
court erred in not sending the matter back to arbitration when it denied the motion to
12
compel arbitration. It also asserts there exists a disputed issue of material fact as to
whether Cadmus ever performed under the Construction Contracts without a contractor's
license. Finally, Cadmus asserts section 7031 was not applicable to the Construction
Contracts and the work it performed.
In its respondent's brief, Twenty-Nine Palms contends Cadmus waived any right to
appeal the order denying the petition to compel arbitration, and in any event, the
stipulation evidenced the parties' intent that the superior court was to decide the
"licensing issue." Additionally, Twenty-Nine Palms claims Cadmus did not prove that it
was properly licensed at all times it performed under the Construction Contracts.
Twenty-Nine Palms also argues that the holding of Twenty-Nine Palms Enterprises,
supra, 210 Cal.App.4th 1435 defeats Cadmus's position that section 7031 did not apply in
the instant matter.
After reviewing the parties' briefs, this court determined that additional briefing
was needed. As such, we asked the parties to submit letter briefs to address the
following:
"Is Business and Professions Code section 7031 (unlicensed contractor statute) enforceable in a contract between a tribal entity and a nontribal contractor that requires all work done on tribal land? In other words, can California, through Public Law 280 or otherwise, regulate the licensing requirements of contractors performing work under a contract with a tribal entity, which calls for all work to be completed on tribal land? [¶] In answering these questions, please discuss the impact of the following cases on your analysis: Three Affiliated Tribes v. Wold Engineering (1984) 467 U.S. 138; State of Arizona v. Zaman (1997) 946 P.2d 459; California v. Cabazon Band of Mission Indians (1987) 480 U.S. 202. Also, this court is familiar with Twenty-Nine Palms Enterprises Corporation v. Bardos (2012) 210 Cal.App.4th 1435 and urges the parties not to focus on the
13
defense of sovereign immunity to the exclusion of discussing the applicability of the unlicensed contractor statute as a threshold matter."
The parties each filed a supplemental letter brief.
DISCUSSION
I
MOTION TO COMPEL ARBITRATION
Cadmus first challenges the superior court's denial of its motion to compel
arbitration. In considering this argument, it is important that we take into account the
context in which Cadmus brought this motion. The parties had agreed to arbitrate their
disputes under the Construction Contracts. They had been doing so for over a year,
including engaging in extensive discovery, when Twenty-Nine Palms believed it
discovered that Cadmus had not been properly licensed at all times when it performed
work under the Construction Contracts. At that point, the parties disagreed about what
forum was proper to consider the issue of whether Cadmus was properly licensed, and if
the Construction Contracts were illegal. It appears that Twenty-Nine Palms thought the
superior court must make the threshold decision regarding the legality of the contracts
while Cadmus believed the arbitrator should be presented with the issue in the first
instance. Ultimately, the parties entered into the Stipulation and Twenty-Nine Palms
filed an action in superior court to put the issue before the court. As part of its complaint,
Twenty-Nine Palms asked the court to determine whether the Construction Contracts
were illegal and thus unenforceable. Twenty-Nine Palms took the position that if the
14
contracts were illegal, no valid arbitration provision existed and the parties could not
complete the arbitration process they already devoted so much time to.
The court denied Cadmus's motion to compel arbitration on April 12, 2010.
Cadmus filed its notice of appeal on December 31, 2013, well over three years after the
order. Twenty-Nine Palms thus argues that Cadmus waived its right to appeal the order
by failing to timely appeal.
We agree with Twenty-Nine Palms that generally an order denying arbitration is
immediately appealable. (See Burch v. Premier Homes, LLC (2011) 199 Cal.App.4th
730, 733, fn. 2.) However, a denial of a motion to compel arbitration of the arbitrability
of an issue is not an appealable order. (Vivid Video, Inc. v. Playboy Entertainment
Group, Inc. (2007) 147 Cal.App.4th 434, 440-443.) Here, the parties already agreed to
arbitration and had been engaging in that process for well over a year. They agreed to
stay the arbitration to allow the court to determine whether the Construction Contracts
were illegal because Cadmus allegedly did not possess a contractor's license during its
entire performance under the Construction Contracts. In other words, the parties
disagreed about whether an issue was arbitrable not whether the entire dispute was
subject to arbitration.
We are mindful that if the superior court agreed with Twenty-Nine Palms,
ultimately it could determine that the arbitration clauses found in the Construction
Contracts were unenforceable, thus impacting the validity of the stayed arbitration.
However, no such determination had been made at the time Cadmus brought its motion to
compel arbitration. In this sense, Cadmus's motion was premature. Twenty-Nine Palms
15
and Cadmus had just agreed to stay the arbitration and refer the "licensing issue" to the
court because they disagreed regarding whether the arbitrator or the court could
determine the legality of the Construction Contracts. Cadmus filed its motion in response
to Twenty-Nine Palms's complaint and made only a passing reference to the Stipulation
in its moving papers. The court reviewed the Stipulation and concluded "the parties
agreed to have this Court resolve the licensing dispute . . . before the arbitration in order
to avoid wasting substantial time and money in the arbitration proceeding. . . . [¶] The
stipulation executed by the parties clearly states that the parties have agreed to submit the
licensing and illegality dispute . . . to this Court for determination before the arbitration."
Therefore, in denying the motion to compel arbitration, the court did not find that the
dispute could not be arbitrated at all, but instead, that it would decide whether the
Construction Contracts were legal before the parties proceeded with the remainder of the
arbitration. With this context in mind, we determine there was not a final, appealable
order, but instead, the arbitrability of a single issue had been decided. (See Vivid Video,
Inc. v. Playboy Entertainment Group, Inc., supra, 147 Cal.App.4th at pp. 440-443.)
Cadmus did not forfeit its right to challenge the order denying its motion to compel
arbitration. The court did not find that the arbitration could not proceed until it ruled on
Twenty-Nine Palms's motion for summary judgment, over three years later. There is no
dispute that Cadmus timely appealed that judgment. We thus will consider whether the
court erred in not sending this matter back to arbitration within the context of the
judgment following Twenty-Nine Palms's successful motion for summary judgment.
16
II
MOTION FOR SUMMARY JUDGMENT
We review summary judgment de novo. (Saelzler v. Advanced Group 400 (2001)
25 Cal.4th 763, 767.) Here, the court's path to granting summary judgment involved four
critical findings. First, it interpreted the Stipulation as the parties agreeing that the court
was to decide whether the Construction Contracts were illegal based on Cadmus's status
as a licensed contractor. Next, the court determined that the holding of Twenty-Nine
7031 did not apply to the Construction Contracts and/or the work he performed on tribal
land. Then, it found that there were no disputed material facts and Cadmus was not
properly licensed at all times when it performed work under the Construction Contracts.
Finally, the court determined that the Construction Contracts were illegal and void; thus,
the arbitration could not proceed.
A. Stipulation
During the arbitration, the parties entered into the Stipulation to stay the
arbitration and allow Twenty-Nine Palms to seek a resolution to Cadmus's licensing
issue. The extent of what the Stipulation asked the court to do is contested by the parties.
We interpret a stipulation in accordance with the ordinary rules of contract
interpretation. (Chacon v. Litke (2010) 181 Cal.App.4th 1234, 1252; Sy First Family Ltd.
Partnership v. Cheung (1999) 70 Cal.App.4th 1334, 1341.)
"We interpret a contract so as to give effect to the mutual intention of the
contracting parties at the time the contract was formed. [Citation.] We ascertain that
17
intention solely from the written contract if possible, but also consider the circumstances
under which the contract was made and the matter to which it relates. [Citations.] We
consider the contract as a whole and interpret its language in context so as to give effect
to each provision, rather than interpret contractual language in isolation. [Citation.] We
interpret words in accordance with their ordinary and popular sense, unless the words are
used in a technical sense or a special meaning is given to them by usage. [Citation.] If
contractual language is clear and explicit and does not involve an absurdity, the plain
meaning governs." (Service Employees Internat. Union, Local 99 v. Options—A Child
Care & Human Services Agency (2011) 200 Cal.App.4th 869, 879.)
If contractual language is ambiguous, we may consider a variety of extrinsic aids,
including the purpose of the statute, legislative history, and public policy. (Coalition of
Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.)
Cadmus insists that it signed the Stipulation with the limited intent only to allow
the superior court to determine whether the court or the arbitrator could decide the
legality of the Construction Contracts. Put differently, Cadmus asserts that the sole
purpose of the Stipulation was "to get the trial court's blessing to have the arbitrator
decide the illegality issue." We are troubled by Cadmus's interpretation of the Stipulation
on two points.
First, Cadmus does not explain and we struggle to understand how the Stipulation
would play out under Cadmus's suggested interpretation if the court did not rule that the
arbitrator could decide the legality issue. What if the court found that the arbitrator could
not decide this issue? Cadmus's interpretation of the Stipulation does not account for this
18
possibility whatsoever. It merely assumes that the court would decide that the arbitrator
could address the legality issue. If the court ruled that the arbitrator could not decide
whether the Construction Contracts were legal, what does Cadmus believe the Stipulation
empowered the court to do? Cadmus does not answer this question.
Second, we find no support for Cadmus's interpretation of the Stipulation in the
words of the Stipulation itself. In relevant part, the Stipulation states:
"WHEREAS, [Twenty-Nine Palms] asserts that recent developments in the case have raised issues regarding the contractor's license of Cadmus and whether Cadmus was properly licensed at all times on the three construction projects at issue;
"WHEREAS, Cadmus disputes [Twenty-Nine Palms's] contentions regarding its contractor's license;
"WHEREAS, the parties are in disagreement as to whether the California Supreme Court's decision in Loving & Evans v. Blick, 33 Cal.2d 603 (1949) mandates that a California court rather than an arbitrator decide the licensing issue;
"WHEREAS, Cadmus has submitted these new allegations regarding its contractor's license to its insurance carrier;
"WHEREAS, the parties have agreed that [Twenty-Nine Palms] shall submit this dispute to a California court;
"WHEREAS, the parties have agreed that the licensing dispute and Cadmus' insurance claim need to be resolved before the arbitration of this matter in order to potentially avoid wasting substantial time and money;"
The Stipulation makes clear that Twenty-Nine Palms and Cadmus dispute whether
Cadmus was properly licensed while performing work under the Construction Contracts.
Further, the Stipulation explains the parties "are in disagreement" whether Loving &
Evans v. Blick (1949) 33 Cal.2d 603 (Loving & Evans) requires the superior court rather
19
than the arbitrator to decide the licensing issue. The Stipulation details that the parties
agree that the licensing dispute needs to be resolved before arbitration continued so the
parties would not waste time and money arbitrating the matter if the Construction
Contracts were found to be illegal. Accordingly, the Stipulation sets forth how the issues
would be addressed. The arbitration is stayed. Twenty-Nine Palms would file and serve
a complaint "regarding the licensing issue." And, at a case management conference over
four months later, the parties "shall determine whether to reinstate the arbitration or
continue the stay." At the very least, the court would clarify whether the arbitration
should continue. How it was to reach the point is not clearly explained in the
Stipulation.4
Although the Stipulation does not define licensing dispute, it appears from a plain
reading of the Stipulation that "licensing dispute" refers to the dispute between the parties
regarding whether Cadmus was properly licensed. The parties, however, disagreed
whether Loving & Evans, supra, 33 Cal.3d 603 required the court to resolve this issue.
4 Cadmus also claims the trial court erred in sustaining Twenty-Nine Palms objection to the admission of a declaration of Thomas Slovak, former counsel to Cadmus, that was accompanied by over 70 pages of exhibits, which Cadmus filed with its reply in support of its motion to compel arbitration. Cadmus insists the declaration and exhibits only elaborated on a declaration filed in support of its original moving papers. However, Cadmus's actual motion did not mention the Stipulation in any detail whatsoever. Essentially, Cadmus made the strategic decision not to discuss the Stipulation in its motion, despite the fact that the Stipulation stayed the arbitration and allowed Twenty- Nine Palms to submit some dispute, related to the arbitration, to the superior court. Under these circumstances, we do not find the superior court abused its discretion in sustaining Twenty-Nine Palms's objection. The declaration and exhibits were prejudicial when submitted with the reply as they deprived Twenty-Nine Palms of fully and fairly challenging the newly raised arguments. (See San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316.) 20
Despite the disagreement, it appears the parties stipulated to allow the court to make
some threshold determination. A closer examination of Loving & Evans better informs
us as to the nature of the disagreement and what the Stipulation asked the superior court
to do.
In Loving & Evans, a contractor, who was unlicensed during the entire relevant
period, petitioned for arbitration seeking compensation. The owner answered, and
alleged the lack of a license as an affirmative defense. The arbitrator ignored the license
issue and awarded the unlicensed contractor his fees. The superior court affirmed the
award and judgment was entered. Our high court reversed, stating " 'a contract made
contrary to the terms of a law designed for the protection of the public and prescribing a
penalty for the violation thereof is illegal and void, and no action may be brought to
enforce such contract' [citations]. . . ." (Loving & Evans, supra, 33 Cal.2d at p. 607.) "It
seems clear that the power of the arbitrator to determine the rights of the parties is
dependent upon the existence of a valid contract under which such rights might arise.
[Citations.] In the absence of a valid contract no such rights can arise and no power can
be conferred upon the arbitrator to determine such nonexistent rights." (Id. at p. 610.) If
the issue of the invalidity of the contract is presented to a court on a petition to confirm
and/or to vacate an arbitration award, "and it appears to the court from the uncontradicted
evidence that the contract is illegal, . . . the court should deny confirmation and should
vacate any award granting relief under the illegal contract upon the ground that the
arbitrator exceeded his powers in making such award." (Ibid.)
21
Thus, Loving & Evans, supra, 33 Cal.2d 603, "permitted judicial review of an
arbitrator's ruling where a party claimed the entire contract or transaction was illegal."
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 32.) Based on our review of the record,
it appears that the parties disagreed when the legality determination should be made.
Cadmus apparently believed the matter could first go to arbitration and then the superior
court could independently review the alleged illegality of the Construction Contracts.
Twenty-Nine Palms, however, wanted the issue decided prior to completing the
arbitration to avoid wasting time and resources. We agree with Twenty-Nine Palms that
the parties asked the court to determine the legality of the Construction Contracts prior to
proceeding with the actual arbitration. To this end, the superior court could be required
to determine whether Cadmus was properly licensed to decide the legality issue if
Cadmus's status as an unlicensed contractor would make the Construction Contracts
illegal in their entirety.
This interpretation is further supported by the arguments Twenty-Nine's Palms
made to the superior court. For example, during oral argument on Cadmus's motion to
compel arbitration, Twenty-Nine Palms's counsel explained the purpose of the subject
complaint:
"And as far as the scope of this particular action, it is purely to decide a legal issue dealing with the legality of the underlying contract, which if, indeed, the contract is illegal the entire arbitration itself is unenforceable. [¶] Both sides are in complete agreement that the legality of this contract and whether Cadmus, Inc., was properly licensed must be decided by this Court. And sending us back to arbitration to go through hundreds of thousands of dollars of time and money on an arbitration that both sides admit will wind up back here on this exact issue that has to be heard de novo, that will
22
potentially render the entire arbitration null and void, makes absolutely no sense."
The limited scope of Twenty-Nine Palms's complaint was discussed at a
subsequent status conference. When the court set a case management conference after
Twenty-Nine Palms's motion for summary judgment was to be heard, Cadmus's attorney
expressed his concerns about the timing of the upcoming hearings: "I do have a problem
with that. This case has a long history of arbitration before coming to this Court. [¶] It
comes to this Court by way of a stipulation for this Court to decide one distinct issue, the
legality of three subject contracts. [¶] If the Court decides in our favor, it will go back to
arbitration, and it's where we believe the MSJ is more properly heard. If we don't prevail,
then perhaps we go to the MSJ."
After Twenty-Nine Palms's counsel agreed that the dispute had been voluntarily
submitted to arbitration, he echoed opposing counsel's view of the limited nature of the
subject complaint: "Your Honor, this issue has already come up. Defendant brought a
motion to compel the case back to arbitration and we briefed and you heard this issue and
found that pursuant to the stipulation, this case was going forward because the point of
the case and the point of the MSJ is to figure out whether these three contracts are legal
or not. That's precisely what the motion for summary judgment is going to find."
Here, we agree with the superior court that the Stipulation evidences that the
parties wanted the superior court to determine the legality of the Construction Contracts.
Because it was Twenty-Nine Palms's position that if Cadmus was not properly licensed
the entire time it performed work under the Construction Contracts, those contracts were
23
illegal and void, the Stipulation also could require the court to resolve whether Cadmus
was properly licensed.
B. Application of the CSLL
In opposing Twenty-Nine Palms's motion for summary judgment, Cadmus argued
that the CSLL did not apply to the Construction Contracts because of Twenty-Nine
Palms's sovereign immunity. The superior court determined that this argument was
defeated by the holding of Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th 1435.
Here, Cadmus maintains that in Twenty-Nine Palms Enterprises, the issue of whether the
CSLL applied "was not presented clearly and the case turned on an issue that was not
really in dispute in the trial court." Twenty-Nine Palms counters that it is clear that
Cadmus cannot use Twenty-Nine Palms's sovereign immunity as a shield against its
lawsuit. As we indicated in our request for supplemental briefing, we do not believe
Twenty-Nine Palms's sovereign immunity is the ultimate determining factor here.
Instead, an initial question must be answered: Can California regulate the licensing
requirements of contractors performing work under a contract with a tribal entity for
work to be completed on tribal land. We respectfully conclude Twenty-Nine Palms
Enterprises does not adequately answer the question presented here.
In Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th 1435, Twenty-Nine
Palms entered into a contract with Cadmus Construction to construct a temporary access
road and parking lot for the Casino. (Id. at p. 1438.) Cadmus Construction performed
the work on the tribe's land. Twenty-Nine Palms paid Cadmus Construction in full under
the contract around May 2007. However, Cadmus Construction did not receive its
24
contractor's license until October 2007. Twenty-Nine Palms brought suit to have Cadmus
Construction disgorge what it was paid. (Ibid.)
Twenty-Nine Palms brought a motion for summary judgment, arguing the
undisputed evidence reflected that Cadmus Construction was not licensed when it
performed its work at the Casino, and therefore, Cadmus Construction should be required
to disgorge what it was paid under the contract. (Twenty-Nine Palms Enterprises, supra,
210 Cal.App.4th at p. 1438.) Among other arguments, Cadmus Construction maintained
that California's civil regulatory laws do not apply on tribal lands. It reasoned that the
superior court lacked jurisdiction to decide the issue if section 7031 was a civil regulatory
statute as opposed to a criminal statute. (Twenty-Nine Palms Enterprises, supra, at
p. 1441.)
Division Two of this court succinctly rejected Cadmus Construction's argument:
"Cadmus [Construction] asserts the unlicensed contractor statute (§ 7031) is not
enforceable in a contract made with a tribal entity for work done on tribal land. We
disagree because Cadmus [Construction] cannot assert [Twenty-Nine Palms's] sovereign
immunity." (Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th at p. 1445.)
Relying on Three Affiliated Tribes v. Wold Engineering (1984) 467 U.S. 138
(Three Tribes I) and State of Arizona v. Zaman (1997) 190 Ariz. 208 (Zaman), Division
Two concluded "that the sovereign immunity defense is reserved for the tribe and its
entities. Thus, if a tribe or a tribal entity seeks to sue a nontribal entity in state court, then
the nontribal entity cannot assert sovereign immunity as a defense." (Twenty-Nine Palms
25
Enterprises, supra, 210 Cal.App.4th at p. 1446.) The court went on to explain why
Cadmus Construction could not assert sovereign immunity:
"Since the sovereign immunity defense is only available to the tribe and the tribal entities, the defense was not available to Cadmus [Construction]—a nontribal entity. Thus, Cadmus [Construction] cannot rely on the defense theory that section 7031 was not enforceable in a contract made with a tribal entity for work done on tribal land, because that defense relies on principles of sovereign immunity. For example, in [Cadmus Construction's] opening brief, it argues, '[I]t is also well established that building and zoning codes are not operative on Tribal property because of sovereignty interference. . . .' Cadmus further argues, 'The interference with Indian sovereignty of licensing requirements is illustrated in this case: Had Cadmus been forced to obtain a new license prior to commencing work, [then] the Tribe would have had to choose between selecting another contractor or delaying the start of construction. . . .' Cadmus is asserting the tribe's sovereign immunity to prevent the tribe from pursuing an action against him in state court. Cadmus cannot do this—the sovereign immunity defense is reserved for the tribe and tribal entities." (Ibid.)
Division Two also was not impressed with Cadmus Construction's implicit
argument that section 7031 was not applicable on tribal land. The court emphasized:
"It appears Cadmus [Construction] is asserting the following theory: Section 7031 simply was not the law in the jurisdiction where the contract performance took place. The problem with this argument is that it relies on principles of sovereign immunity. Cadmus [Construction] is arguing a particular state law does not apply on tribal lands— Cadmus [Construction] does not have the authority to assert this defense, only the tribe or its entities may assert such a defense. Cadmus [Construction] cannot raise tribal immunity simply because the contract was performed on tribal land— the defense of sovereign immunity is personal to the tribe and its entities. [Citations.] Accordingly, we find Cadmus [Construction's] argument to be unpersuasive." (Twenty-Nine Palms Enterprises, supra, 210 Cal.App.4th at p. 1446.)
26
Division Two's reasoning is clear that it could not consider whether the CSLL
applied on tribal land because only the tribe could raise this defense. Therefore, Division
Two did not analyze whether California can regulate contractors who are engaging in
construction work wholly on tribal land as a starting point. According to the court, it
could not reach this issue because such an argument relied on the defense of tribal
sovereign immunity. We respectfully disagree with this portion of Twenty-Nine Palms
Enterprises, supra, 210 Cal.App.4th 1435, and therefore, asked the parties to submit
supplemental briefs to address this issue. Of particular importance in this case, we
wanted the parties to explain how Twenty-Nine Palms could sue under a California
statute in state court if that statute did not apply on tribal lands.
Not surprisingly, the parties reached different conclusions. Relying primarily on
California v. Cabazon Band of Mission Indians (1987) 480 U.S. 202 (Cabazon), Cadmus
maintains that Public Law 280 does not grant a California superior court the "power to
hear this case." Cadmus argues that the CSLL is regulatory in nature and the holding of
Cabazon prohibits California from enforcing a regulatory statute (like § 7031) to
construction work performed on tribal lands. (See Cabazon, supra, 480 U.S. at p. 209
["[I]f the state law generally permits the conduct at issue, subject to regulation, it must be
classified as civil/regulatory and [Public Law] 280 does not authorize its enforcement on
an Indian reservation."].)
In addition, Cadmus insists a California superior court lacks "inherent jurisdiction"
to hear the instant matter. In support of its position, Cadmus argues Three Tribes I,
supra, 467 U.S. 138 and the follow up case Three Affiliated Tribes v. Wold Engineering
27
(1986) 476 U.S. 877 (Three Tribes II), when read together, support its position that the
superior court here lacked jurisdiction. In Three Tribes I, the Supreme Court held that
federal law did not preclude North Dakota from exercising civil adjudicative jurisdiction
over the claims of an Indian tribe suing a nonmember. (Three Tribes I, supra, at p. 150.)
However, in Three Tribes II, supra, 476 U.S. 877, the Supreme Court concluded that
North Dakota's attempt to condition access to its courts on the tribe's waiver of its
sovereign immunity and its agreement to the application of state law to all suits to which
it was a party was preempted by Public Law 280. (Three Tribes II, supra, at p. 887.) The
court noted that although Public Law 280 was designed to extend the jurisdiction of the
states over tribal lands and there is a strong federal interest in ensuring that all citizens
have access to the courts, the North Dakota conditions constituted "a potentially severe
intrusion on the Indian's ability to govern themselves according to their own laws in order
to regain their access to the state courts." (Three Tribes II, supra, at p. 889.) Cadmus
reads these two cases as not permitting California to force Twenty-Nine Palms to use the
CSLL in the instant lawsuit. This argument misses the mark. Twenty-Nine Palms does
not contend that California is forcing it to sue under the CSLL. Instead, Twenty-Nine
Palms elected to bring suit under a portion of the CSLL (§ 7031) and argued that the
Construction Contracts were illegal and void in their entirety because Cadmus was not
properly licensed by the State of California. As such, contrary to the facts of Three
Tribes I and Three Tribes II, here the superior court did not compel Twenty-Nine Palms
to give up any of its sovereignty to bring suit or only allow it to bring suit under a
specific state law.
28
The majority of Cadmus's supplemental brief is spent contending the superior
court lacked jurisdiction to hear the instant matter. In other words, Cadmus insists that
Twenty-Nine Palms could not sue it in a California superior court. Cadmus has not
offered any authority to support its position. Indeed, one of the cases on which Cadmus
relies undercuts its position. In Three Tribes I, the United States Supreme Court
concluded the situation of an Indian suing a non-Indian in state court is "very different"
from a non-Indian suing an Indian in state court for events occurring on tribal land. The
United States Supreme Court explained, "As a general matter, tribal self-government is
not impeded when a State allows an Indian to enter its courts on equal terms with other
persons to seek relief against a non-Indian concerning a claim arising in Indian country."
(Three Tribes I, supra, 467 U.S. at pp. 148-149.)
Further, although we explicitly asked the parties to address Zaman, supra, 190
Ariz. 208, Cadmus omitted any discussion of that case. In Zaman, a mother, who was a
member of the Navajo tribe, brought an action in Arizona state court against her child's
father, who was not a member of an Indian tribe. (Id. at p. 209.) The mother sought to
have the father adjudged the child's father and ordered to pay child support. (Ibid.) The
father argued the trial court lacked jurisdiction. The trial court found in favor of the
mother, but the intermediate appellate court reversed. The intermediate court held, the
trial court "lacked subject matter jurisdiction because 'state action [would] infring[e] on
the right of reservation Indians to make their own laws and be ruled by them.' " (Ibid.)
The Arizona Supreme Court vacated the intermediate appellate court's decision.
(Zaman, supra, 190 Ariz. at p. 213.) The court reasoned, "[The father], a non-Indian,
29
seeks to use a protection afforded Indians to defeat the claim of an Indian who chooses
the state forum. This attempt to clothe oneself in the immunity afforded another has
already been rejected by the Supreme Court." (Id. at p. 210.) Thus, the holding of
Zaman contradicts Cadmus's position that the superior court did not have jurisdiction to
hear the instant matter.
Simply put, Three Tribes I, supra, 467 U.S. 138 and Zaman, supra, 190 Ariz. 208
do not stand for the proposition that Twenty-Nine Palms could not bring suit in a
California superior court for a dispute that arose out of three construction contracts
requiring work to be done on tribal lands. To the contrary, these two cases support
Twenty-Nine Palms's position that the superior court had jurisdiction to hear the instant
matter. We agree. We find nothing in any of the cases cited by Cadmus in its
supplemental brief that would prohibit Twenty-Nine Palms from filing its complaint in
superior court.
That said, the question remains whether the CSLL applies to a contractor entering
into a contract with an Indian tribe to perform work on tribal lands. The holding of
Cabazon, supra, 480 U.S. 202, implies that it does not.
The issue in Cabazon was whether the State of California could apply its gaming
regulations to tribal bingo and card games. (Cabazon, supra, 480 U.S. at p. 205.) The
state regulations did not prohibit such games, but restricted them to charitable
organizations and imposed limitations on the amount of prizes that could be awarded and
restricted the use of profits to charitable purposes. (Ibid.) Recognizing that "Indian
tribes retain 'attributes of sovereignty over both their members and their territory,' " the
30
court first held that Congress had not allowed the state to assume jurisdiction over
gaming activities under Public Law 280 because the state's regulations relating to these
forms of gaming were civil and regulatory in nature and not criminal and prohibitory.
(Cabazon, supra, at pp. 207-208.) Because California allowed a substantial amount of
gambling activity and even promoted gambling through its state lottery, the court
concluded, "California regulates rather than prohibits gambling in general and bingo in
particular." (Id. at p. 211.) As such, the holding in Cabazon implies that California law,
under Public Law 280, could apply to activities on tribal land to the extent the law was
"prohibitory," but did not generally apply to the extent that it was "regulatory."
(Cabazon, supra, at pp. 207-210.)
Here, Cadmus argues that the CSLL is regulatory in nature. Twenty-Nine Palms
maintains the civil or criminal distinction is not relevant in this matter, and therefore,
does not address it. However, the California Supreme Court already answered this
question: "The CSLL is a regulatory statute." (MW Erectors, Inc. v. Niederhauser
Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 436 (MW Erectors).)
Nevertheless, Twenty-Nine Palms contends Cabazon, supra, 480 U.S. 202 is not
instructive here because California is not seeking to enforce any of its laws against
Twenty-Nine Palms. Instead, it is Twenty-Nine Palms bringing suit under California law
in a California superior court against a non-Indian. Nonetheless, this scenario begs the
question: If the CSLL does not apply on tribal lands in general, can a tribe seek to
enforce a portion of the CSLL in state court? Twenty-Nine Palms answers this question
in the affirmative for two separate reasons.
31
First, Twenty-Nine Palms maintains that it can bring suit in state court under the
CSLL pursuant to section 4 of Public Law 280. Section 4 states:
"Each of the States listed in the following table have jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in the areas of Indian country listed opposite the name of the State to the same extent that such State has jurisdiction over other civil causes of action, and those civil causes of action, and those civil laws of such State that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within the State." (28 U.S.C. § 1360, subd. (a).)
Twenty-Nine Palms contends that the statute's reference to "civil laws . . . of
general application to private persons or private property" confirms that California laws
(including the CSLL) apply to private legal disputes, like the one here, between a tribe
and a non-Indian arising on tribal land. However, except for quoting section 4 of Public
Law 280 directly, Twenty-Nine Palms offers no authority to support its position. This is
especially troublesome when it is clear that California cannot regulate contractors
operating on tribal lands. (See Cabazon, supra, 480 U.S at pp. 207-210.) In other words,
we are concerned whether section 4 could somehow make a California law regulating
licensing of contractors that California could not enforce on tribal land applicable when a
tribal entity brings suit in California court against a non-Indian.
Our independent research indicates that case law interpreting section 4 of Public
Law 280 is sparse. Yet, the United States Supreme Court did address this issue in regard
to an Indian resident of an Indian reservation who brought a declaratory judgment that the
State of Minnesota and Itasca County could not impose a property tax on his mobile
home located on land held in trust for members of his tribe. (See Bryan v. Itasca Cty.,
32
Minnesota (1976) 426 U.S. 373, 375 (Bryan).) In determining that section 4 of Public
Law 280 did not provide Congressional consent to allow the county or state to levy a
property tax upon the petitioner's mobile home, the Supreme Court reviewed the
legislative history of Public Law 280. In doing so, the court noted: "The primary concern
of Congress in enacting [Public Law] 280 that emerges from its sparse legislative history
was the problem of lawlessness on certain Indian reservations, and the absence of
adequate tribal institutions for law enforcement." (Bryan, supra, at p. 379.) The court
also stated there was a "virtual absence of expression of congressional policy or intent
respecting [section] 4's grant of civil jurisdiction to the States." (Byran, supra, at p. 381.)
In addition, the court observed "the total absence of mention or discussion regarding a
congressional intent to confer upon the States an authority to tax Indians or Indian
property on reservations." (Ibid.)
The Supreme Court concluded that section 4, subsection (a) was "primarily
intended to redress the lack of adequate Indian forums for resolving private legal disputes
between reservation Indians, and between Indians and other private citizens, by
permitting the courts of the States to decide such disputes[.]" (Bryan, supra, 426 U.S. at
p. 383.) The court, however, clarified the type of disputes to which it was referring:
" 'A fair reading of these two clauses suggests that Congress never intended "civil laws" to mean the entire array of state noncriminal laws, but rather that Congress intended "civil laws" to mean those laws which have to do with private rights and status. Therefore, "civil laws . . . of general application to private persons or private property" would include the laws of contract, tort, marriage, divorce, insanity, descent, etc., but would not include laws declaring or implementing the states' sovereign powers, such as the power to tax, grant franchises, etc. These are not within the fair meaning of
33
"private" laws.' " (Id. at p. 384, fn. 10, quoting Israel & Smithson, Indian Taxation, Tribal Sovereignty and Economic Development (1973) 49 N.D.L.Rev. 267, 296, n. 8.)
We read Bryan, supra, 426 U.S. 373 as supporting the principle that section 4,
subdivision (a) of Public Law 280 does not confer general regulatory control over tribal
lands. (See Bryan, supra, at p. 384.) Twenty-Nine Palms has provided no contrary
authority. Therefore, we conclude that Public Law 280 does not allow California to
regulate contractor licensing on tribal land and section 4, subdivision (a) does not
somehow allow a tribal entity to sue under the CSLL. (See Bryan, supra, at p. 384;
People ex rel. Dept. of Transportation v. Naegele Outdoor Advertising Co. (1985) 38
Cal.3d 509, 521 (Naegele) [holding Public Law 280 did not authorize the state to restrict
outdoor advertising insofar as it applied to tribal land].)5
In addition to contending that section 4 allows it to bring suit for a violation of
section 7031, Twenty-Palms asserts the parties here explicitly agreed to be governed by
California law. Thus, Twenty-Nine Palms argues the parties consented to a choice of law
provision that provided that California law would apply to each of the Construction
Contracts. Cadmus does not address this point.
5 We acknowledge that both Bryan, supra, 426 U.S. 373 and Naegele, supra, 38 Cal.3d 509 concern a state trying to enforce its regulatory law on a tribe operating on tribal land. Here, a tribal entity is suing under a California statute that otherwise does not apply on tribal lands. Although this is a different scenario than what is presented in Bryan and Naegele, we find no basis under Public Law 280 that would allow the tribe to sue in California court under a law that does not apply on tribal lands. Of course, a tribe can create its own contractor licensing laws or adopt laws that mirror the CSLL. In those circumstances, the tribe could sue in superior court to enforce its laws. However, in the instant matter, Twenty-Nine Palms admits that no tribal contractor licensing laws exist. 34
We agree with Twenty-Nine Palms. Each of the Construction Contracts contains a
choice of law provision that provides that the contract is governed by California law. We
find no impediment in general to a tribal entity entering into a contract with a non-Indian
that requires work to be done entirely on tribal lands and agreeing that the contract is
governed by California law. (See Smith v. Hopland Band of Pomo Indians (2002) 95
Cal.App.4th 1, 10-11.) It is through this choice of law contractual provision that section
7031 applies to the Construction Contracts.
C. Judgment
Although we determine that the CSLL, including section 7031, applies to the
Construction Contracts, we do not automatically affirm the judgment below. Instead, we
must evaluate the judgment in consideration of what the Stipulation asked the superior
court to do: decide the licensing dispute within the context of determining if the
Construction Contracts were legal under Loving & Evans, supra, 33 Cal.2d 603. This
issue is critical to our ultimate analysis because the parties had contracted to go to
arbitration, had been participating in the arbitration process (including taking discovery)
for over a year, and stayed the arbitration because the parties disagreed whether the
arbitrator instead of the court could address the legality of the Construction Contracts.
In granting summary judgment, the superior court, following Twenty-Nine Palms
Enterprises, supra, 210 Cal.App.4th 1435, ruled that Cadmus could not take the position
that section 7031 did not apply. The court therefore found that section 7031 did apply
and Cadmus was not a licensed contractor at all times when it performed work under the
Construction Contracts. Accordingly, the court ordered judgment in favor of Twenty-
35
Nine Palms on all causes of action and, under the first three causes of action, ordered
Cadmus to disgorge what it was paid under Construction Contracts. In regard to the
fourth cause of action for declaratory relief, the court reached the following judicial
determinations: (1) Cadmus was not a licensed contractor at all times relevant to its work
under the Construction Contracts; (2) Twenty-Nine Palms is entitled to disgorgement of
all monies paid to Cadmus on the Construction Contracts under section 7031, subdivision
(b); (3) Cadmus is barred from pursing its claim for compensation against Twenty-Nine
Palms in the arbitration under section 7031, subdivision (a); and (4) the Construction
Contracts are illegal and therefore Cadmus is barred from continuing with the arbitration.
Although the court did not explain why it found the Construction Contracts illegal,
it appears it did so based on Twenty-Nine Palms's argument that the contracts would be
illegal under Loving & Evans, supra, 33 Cal.2d 603. The court in that case found that
"the contract upon which the award was based was illegal and void because of
respondents' failure to comply with the licensing requirements." (Id. at p. 614.) There,
the subject contractor did not hold a contractor's license "either at the time of the making
of the contract or at any time while the work was in progress." (Ibid.) Yet, to find the
Construction Contracts illegal under Loving & Evans, the court had to first conclude that
section 7031 applied to the contracts.
Here, the superior court followed Twenty-Nine Palms Enterprises, supra, 210
Cal.App.4th 1435. Indeed, it had no choice but to do so. (Auto Equity Sales, Inc. v.
Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 455.). In Twenty-Nine
Palms Enterprises, Division Two determined that Cadmus Construction was prohibited
36
from arguing that section 7031 did not apply because it must invoke the tribe's sovereign
immunity to do so. (See Twenty-Nine Palms Enterprises, supra, at pp. 1446-1447.) As
we discuss in detail above, we respectfully disagree with Division Two and conclude that
California could not regulate contractor licensing on tribal land. Moreover, we find
nothing in section 4 of Public Law 280 that would allow Twenty-Nine Palms to assert a
claim arising out of a dispute on tribal land under a California regulation that does not
otherwise apply. As such, Twenty-Nine Palms could not use section 7031, as a law of
general application, to argue that the Construction Contracts were illegal.
Nevertheless, even in the absence of the CSLL applying on tribal land, we agree
with Twenty-Nine Palms that the parties here assented to applying California law to the
Construction Contracts. Yet, the source of the CSLL in this instance is the contracts
themselves. Therefore, if the court found them illegal then California law would no
longer govern. Put differently, if the Construction Contracts are the source of the CSLL,
including section 7031, subdivision (b), applying to the instant dispute, the CSLL would
no longer apply if its source was found to be illegal and void.
Further, we are skeptical that the Construction Contracts are illegal regardless of
how the CSLL applies. We are not persuaded that the holding of Loving & Evans, supra,
33 Cal.2d 603 mandates a court to find a contract entered into by an unlicensed contractor
illegal and void. Indeed, our high court explicitly stated this is not the rule: "[T]he CSLL
does not automatically void all contracts entered by unlicensed contractors."
(MW Erectors, supra, 36 Cal.4th at p. 440.) Thus, merely because Cadmus may not have
been licensed at the time it entered into the Construction Contracts did not make those
37
contracts illegal without any further analysis. Moreover, because the contracts would not
necessarily be illegal simply because Cadmus was not licensed at the time it entered into
them, we see no impediment to proceeding with the arbitration and allowing Twenty-
Nine Palms to raise a defense under section 7031 at the arbitration. (See Templo
Calvario Spanish Assembly of God v. Gardner Construction Corp. (2011) 198
Cal.App.4th 509, 519-521 (Templo).)
In light of MW Erectors, supra, 36 Cal.4th 412, within the context of a question
regarding the legality of a contract entered into by an unlicensed contractor, Loving &
Evans, supra, 33 Cal.2d 603, at best, stands for the proposition that a contract entered
into by an unlicensed contractor that never became licensed at any time during its
performance under the contract could be illegal and void. Here, Twenty-Nine Palms does
not argue that Cadmus was never licensed when it performed work under the
Construction Contracts, but instead, Twenty-Nine Palms contends Cadmus started
working prior to being properly licensed. This fact distinguishes the instant action from
the facts of Loving & Evans where the court noted the subject contractor did not hold a
contractor's license "either at the time of the making of the contract or at any time while
the work was in progress." (Id. at p. 614.)
Accordingly, independent of considering whether section 7031 applied here, under
the record before us, we do not read Loving & Evans as supporting the superior court's
finding that the Construction Contracts were illegal.
Having determined that the superior court erred in its judicial determination that
the Construction Contracts were illegal and that Cadmus was barred from pursuing its
38
claims in arbitration, we next evaluate what impact, if any, this error has on the remainder
of the judgment. To do so, we again return to the Stipulation and consider the unique
procedural nature of this case.
The parties were engaged in arbitration to resolve their disputes under the
Construction Contracts. No one challenged that arbitration was the appropriate dispute
resolution forum. However, when Twenty-Nine Palms discovered that Cadmus may not
have been licensed during all times it performed work under the Construction Contracts,
it believed that the subject contracts were then illegal and there would be no enforceable
arbitration provision. The parties agreed that the superior court would ultimately have
final say regarding the legality of the Construction Contracts, but they disagreed when
this should occur. Cadmus argued that the arbitration should go forward and after the
arbitrator rendered his decision, the superior court could then address whether the
contracts were illegal. Twenty-Nine Palms countered that it would be a waste of money
and time if the parties completed arbitration only to have a superior court declare the
Construction Contracts illegal and then vacate any arbitration award. To resolve this
impasse, the parties signed the Stipulation and submitted the illegality issue to the
superior court, which, presumably, would have to resolve whether Cadmus was properly
licensed to ultimately answer the illegality question.
We conclude that the court erred in finding the Construction Contracts illegal
under the CSLL. Because the contracts were legal, the arbitration provisions remained
enforceable, and the arbitration could proceed. At that point, the superior court should
have referred the matter back to the arbitrator to resolve the dispute. It did not need to
39
determine whether Cadmus was properly licensed at all times because the Construction
Contracts were legal. Therefore, the arbitrator could have made a determination if
Cadmus was properly licensed under California law as required by the Construction
Contracts.6 (See Templo, supra, 198 Cal.App.4th at pp. 519-521.)
Because we determine that this matter should be referred to the arbitrator, we do
not reach Cadmus's additional contention that a triable issue of material fact exists as to
whether it was properly licensed at the relevant times under the Construction Contracts.
6 At oral argument, in response to questioning by this court, Twenty-Nine Palms insisted that it did not matter whether the Construction Contracts were illegal. Because the superior court found that Cadmus was not properly licensed, Twenty-Nine Palms now claims that such a finding mandates we affirm the judgment regardless of whether the Construction Contracts were legal. It is well established that we need not consider claims raised for the first time at oral argument. (See Animal Protection & Rescue League v. City of San Diego (2015) 237 Cal.App.4th 99, 107, fn. 5.) Moreover, this position is contrary to Twenty-Nine Palms's many representations to the superior court that the purpose of its complaint was for the court to determine the legality of the Construction Contracts. Indeed, it made the same argument here, asserting the contracts were illegal, and thus, void under Loving & Evans, supra, 33 Cal.2d 603. And we also are not impressed by Twenty-Nine Palms's new argument raised at oral argument that the superior court, not the arbitrator, must determine whether a contractor is properly licensed under the CSLL. Twenty-Nine Palms has not offered this argument previously and did not provide any authority to support this position. Our independent research uncovered a case in which the Court of Appeal determined that a court may conduct a de novo view of an arbitration award if that award violated an explicit legislative expression of public policy. (See Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, 38 ["We conclude that section 7031 constitutes an 'explicit legislative expression of public policy,' that if not enforced by the arbitrator, constitutes grounds for judicial review."].) However, Ahdout does not stand for the proposition that an arbitrator cannot decide the licensing issue during arbitration. It merely offers another scenario in which a court could review an arbitration award independently.
40
DISPOSITION
The judgment is reversed and remanded back to the superior court. The superior
court is ordered to enter an order denying Twenty-Nine Palms's motion for summary
judgment, finding the Construction Contracts legal, and referring the matter back to
arbitration. The parties are to bear their own costs on appeal.
HUFFMAN, Acting P. J.
WE CONCUR:
NARES, J.
McDONALD, J.
41
AI Brief
AI-generated · verify before citing
Holding. The court held that California law does not apply to construction on tribal land by default, but because the parties' contracts contained a choice-of-law provision selecting California law, the disgorgement provisions of Business and Professions Code section 7031, subdivision (b) are enforceable. Consequently, the court reversed the summary judgment and remanded with directions to refer the remaining disputes to arbitration, as the contracts themselves are not illegal.
Issues
Whether California may regulate contractor licensing requirements for work performed on tribal land.
Whether Business and Professions Code section 7031, subdivision (b) is enforceable when parties to a contract involving tribal land have agreed to be governed by California law.
Whether the superior court erred in failing to refer the dispute back to arbitration after determining the licensing issue.
Disposition. reversed and remanded
Quotations verified verbatim against the opinion
“California may not regulate contractors working on tribal land through California law or Public Law 280”
“However, here, the parties to the contracts agreed to be governed by California law. As such, section 7031, subdivision (b) can apply because the parties consented to its application in their contracts.”
“We further determine that the three subject contracts are not illegal because section 7031 does not apply outside of the contracts themselves.”