BILL ANALYSIS
AB 678
Page 1
ASSEMBLY THIRD READING
AB 678 (Papan)
As Amended May 1, 2001
Majority vote
JUDICIARY 8 -0 BUSINESS & PROFESSIONS
10-0
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|Ayes:|Steinberg, Bates, |Ayes:|Correa, Bogh, Cedillo, |
| |Corbett, Dutra, Harman, | |Chavez, Corbett, Kelley, |
| |Longville, Shelley, Wayne | |Leach, Cardoza, Nation, |
| | | |Wesson |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Seeks to authorize persons who use the services of an
unlicensed contractor to bring an action 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 making any payments to the
contractor.
EXISTING LAW :
1)Prohibits unlicensed contractors from bringing an action to
collect compensation for the performance of any act or
contract, regardless of the merits of the cause of action
brought by the unlicensed individual.
2)Requires anyone who contracts to do construction work to be
licensed by the Contractors' State License Board if the total
price of the job is $500 or more and provides that contracting
without a license shall be a misdemeanor.
FISCAL EFFECT : None
COMMENTS : This bill, sponsored by Judge Quentin Kopp, would
specifically allow an individual who had used the services of an
unlicensed contractor to bring an action to recover all
compensation already 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. In commenting on the need for this bill, the
author states:
AB 678
Page 2
Our state's policy since 1939 reflects in Section 7031 of
the Business and Professions Code the intent of the
Legislature that the public be protected from unqualified
contractors. Since 1939, a contractor must be licensed by
the state in order to recover the value of services
rendered with or without a written contract. Licensing
requirements provide minimal assurance that all persons
furnishing construction services in our state possess the
requisite skill and character, understand pertinent local
laws and codes, and know the rudiments of administering a
contracting business. The Legislature had determined that
the importance of deterring unlicensed persons from
engaging in the building or contracting business outweighs
any harshness to an unlicensed party who provides services
and then cannot collect compensation.
According to the sponsor, this bill is intended to address the
recent case of Cooper v. Westbrook Torrey Hills, LP (2000) 81
Cal. App. 4th 1294, in which the court, in an unpublished
portion of the opinion, referred to the Business and Professions
Code, Section 7031(a) prohibiting an unlicensed contractor from
recovering fees, but not requiring any refund of compensation
already paid to the contractor. Cooper relied on Culbertson v.
Cizek (1964) 225 Cal. App. 2d 451, 473, in which the court
permitted the unlicensed contractor to offset "as a defense
against sums due the plaintiffs any amounts that would otherwise
be due Cizek under his contract." This bill is intended to
clearly state that those using the services of unlicensed
contractors are entitled to bring an action for recovery of
compensation paid.
The sponsor further explains the purpose of this bill, stating:
Section 7031(a) of [the Business and Professions] code
requires any contractor suing for money due on a
construction contract to allege that he or she was a duly
licensed contractor at all times during performance of the
work or contract. In AB No. 678, the question has been
raised as to whether a person for whom work was performed
by an unlicensed contractor would be entitled to recover
compensation paid the unlicensed contractor if the person
receiving the services knew the contractor was unlicensed .
By a parity of reasoning from the state of the law
respecting Section 7031(a), knowledge of the status of an
AB 678
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unlicensed contractor is irrelevant to the recovery of
compensation from the unlicensed contractor. California
courts have unmistakably ruled that in any action by an
unlicensed contractor to recover for the value of a
contractor's services rendered or contractual provision,
the unlicensed contractor cannot recover money even if the
person for whom the work was performed knew the contractor
was unlicensed. Hydrotech Systems, Ltd. v. Oasis Waterpark
(1991) 52 Cal. 3d 988, 997-998; Vallejo Development Co. v.
Beck Development Co., Inc. (1994) 24 Cal. App. 4th 929,
941; see also Pickens v. American Mortgage Exchange (1969)
269 Cal. App. 2d 299, 302 and Cash v. Blackett (1948) 87
Cal. App. 2d 233. ?
AB No. 678 constitutes an additional and consistent
legislative determination that such deterrence can best be
realized by compelling violators to return all compensation
received from providing their unlicensed services. That
rationale is reflected in the judicial decisions involving
rejected attempts by unlicensed contractors to obtain
payment based on knowledge of their unlicensed status by
persons sued for non-payment of services rendered. That
policy is furthered in AB No. 678 by specifically
recognizing the capacity of an owner to recover money
already paid an unlicensed contractor, even if the person
knew the contractor was unlicensed. (Emphasis in
original.)
Analysis Prepared by : Saskia Kim / JUD. / (916) 319-2334
FN: 0000626