BILL NUMBER: AB 678	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 1, 2001

INTRODUCED BY   Assembly Member Papan

                        FEBRUARY 22, 2001

   An act to amend Section 7031 of the Business and Professions Code,
relating to contractors.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 678, as amended, Papan.  Contractors.
   Existing law prohibits any unlicensed contractor from bringing or
maintaining an action to recover compensation in any court in this
state.
   This bill would authorize a person who utilizes an unlicensed
contractor to bring an action in any court of competent jurisdiction
in this state for recovery of compensation paid to the unlicensed
contractor for performance of any act or contract  unless the
person knew that the contractor was unlicensed prior to making any
payments to the contractor  .
   Vote:  majority.  Appropriation:  no.  Fiscal committee:  no.
State-mandated local program:  no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 7031 of the Business and Professions Code is
amended to read:
   7031.  (a) Except as provided in subdivision  (e), no 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 he or she was 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.
   (b) 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  , unless the person knew
that the contractor was unlicensed prior to the time that any
payments were made to the contractor  .
   (c) A security interest taken to secure any payment for the
performance of any act or contract for which a license is required by
this chapter is unenforceable if the person performing the act or
contract was not a duly licensed contractor at all times during the
performance of the act or contract.
   (d) If licensure or proper licensure is controverted, then proof
of licensure pursuant to this section shall be made by production of
a verified certificate of licensure from the Contractors' State
License Board which establishes that the individual or entity
bringing the action was duly licensed in the proper classification of
contractors at all times during the performance of any act or
contract covered by the action.  Nothing herein shall require any
person or entity controverting licensure or proper licensure to
produce a verified certificate.  When licensure or proper licensure
is controverted, the burden of proof to establish licensure or proper
licensure shall be on the licensee.
   (e) The judicial doctrine of substantial compliance shall not
apply under this section where the person who engaged in the business
or acted in the capacity of a contractor has never been a duly
licensed contractor in this state.  However, the court may determine
that there has been substantial compliance with licensure
requirements under this section if it is shown at an evidentiary
hearing that the person who engaged in the business or acted in the
capacity of a contractor (1) had been duly licensed as a contractor
in this state prior to the performance of the act or contract, (2)
acted reasonably and in good faith to maintain proper licensure, and
(3) did not know or reasonably should not have known that he or she
was not duly licensed. Subdivision (b) of Section 143 does not apply
to contractors subject to this subdivision.
   (f) The exceptions to the prohibition against the application of
the judicial doctrine of substantial compliance found in subdivision
(e) shall apply to all contracts entered into on or after January 1,
1992, and to all actions or arbitrations arising therefrom, except
that the amendments to subdivisions (e) and (f) enacted during the
1994 portion of the 1993-94 Regular Session of the Legislature shall
not apply to either of the following:
   (1) Any legal action or arbitration commenced prior to January 1,
1995, regardless of the date on which the parties entered into the
contract.
   (2) Any legal action or arbitration commenced on or after January
1, 1995, if the legal action or arbitration was commenced prior to
January 1, 1995, and was subsequently dismissed.