BILL NUMBER: AB 2027	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Valadao

                        FEBRUARY 23, 2012

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


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2027, as introduced, Valadao. Contractors: law suits.
   Existing law, the Contractors' State License Law, creates the
Contractors' State License Board within the Department of Consumer
Affairs and provides for the licensure and regulation of contractors.
Existing law prohibits a person, acting as a contractor, from
bringing an action to collect compensation for performance of any act
or contract requiring a license without alleging that he or she was
licensed at all times during the performance of the act or contract,
except as specified. Existing law provides that the judicial doctrine
of substantial compliance does not apply where a person who engaged
in the business or acted in the capacity of a contractor has never
been a duly licensed contractor in this state.
   This bill would specify circumstances under which a court may find
that such a person has substantially complied with the licensing
requirements under the law with respect to an act or contract,
including that the person had a valid license prior to forming a
business entity and that license number has been assigned and
transferred to the business entity, the person had a valid license at
the time the act or contract commenced but did not assign and
transfer that contract to the new business entity, the person is the
responsible managing officer of the business entity, the person or
entity maintained a workers' compensation insurance policy pertaining
to the act or contract, and the person had his or her license
reinstated within 30 days following receipt of notice that the
license was suspended.
   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) 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.
   (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 in this subdivision 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)  (1)    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,
notwithstanding subdivision (b) of Section 143, 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)   (A)  had
been duly licensed as a contractor in this state prior to the
performance of the act or contract,  (2)   (B)
 acted reasonably and in good faith to maintain proper
licensure,  (3)   (C)  did not know or
reasonably should not have known that he or she was not duly licensed
when performance of the act or contract commenced, and  (4)
  (D)  acted promptly and in good faith to
reinstate his or her license upon learning it was invalid. 
   (2) Notwithstanding any other provision of this chapter, a court
may determine that a person has substantially complied with the
licensure requirements under this chapter if the person shows, at an
evidentiary hearing, that he or she is duly licensed for the purposes
of this chapter. A court may also make a finding of substantial
compliance if all of the following circumstances exist:  
   (A) The person had a valid license prior to forming a business
entity and that license number has been assigned and transferred to
the business entity.  
   (B) The person had a valid license at the time the contract was
commenced yet failed to assign and transfer that contract to the new
business entity.  
   (C) The person is the responsible managing officer of the new
business entity.  
   (D) The person or business entity maintained a workers'
compensation insurance policy pertaining to the act or contract as to
which the doctrine of substantial compliance is being invoked.

   (E) The person's license was reinstated within 30 days following
the person's receipt of notice that the license was suspended. 
   (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.