Opinion
See 268 Cal.Rptr. 79.
Previously published at 215 Cal.App.3d 221
Ben Adelman, Pasadena, for plaintiff and appellant.
Quinn, Kully and Morrow and Laurence J. Hutt, Los Angeles, for defendants and respondents.
Under appointment by the Chairperson of the Judicial Council.
This appeal is from the judgment of dismissal entered after sustaining a demurrer without leave to amend to plaintiff's fourth amended complaint in an "unlicensed contractor case." In this opinion "the complaint" will refer to the fourth amended complaint.
The judgment is reversed and remanded. The only record is a clerk's transcript. The complaint alleges three causes of action; the first is for fraud, the second for negligent misrepresentation, and the third for breach of the implied covenant of good faith and fair dealing. Necessarily assuming for purposes of the demurrer and this appeal the facts alleged in the complaint to be true, those facts show plaintiff and appellant, D.R. Gallo Builders, Inc., (Contractor) is a New York corporation and is licensed in New York as a general building contractor.
Defendants and respondents are Travelodge International, Inc., a California corporation, and defendant Knott Hotels Corporation, a Delaware corporation. Santa Monica Travelodge is alleged to be a California corporation and the Monterey California Travelodge is alleged to be operated by the Travelodge Corporation. Because there is an identity of interests, the defendants will be referred to collectively as "Owner."
The gamut of likely or prospective causes of action was run by Contractor in the four complaints which preceded the one at bar. Each complaint was successfully demurred to by Owner. Owner was able to eviscerate the usual causes of action for breach of contract and quantum meruit by the persistent assertion Contractor lacked a valid California general contractor's license for work contracted for in the State of New York but to have been performed in the State of California on three motel sites owned and/or operated by Owner.
As a last gasp, before the final fall of the axe, Contractor had been limited to alleging fraud, misrepresentation and breach of the implied covenant of good faith and fair dealing.
The clerk's record contains copies of earlier complaints as well as the demurrers and opposition thereto. Contractor's fortunes do not necessarily rise or fall on whether the dismissed fourth amended complaint stated one or more causes of action so that, while the earlier pleadings are instructive, they are not integral to this opinion. There are copies in the clerk's transcript of what purport to be construction remodeling contracts attached as exhibits to the complaint. Because earlier demurrers eliminated the breach of contract claims the appended contracts are of no value in determining whether those contracts were breached or not, but they are nonetheless essential to Contractor's position for the reasons hereafter related.
The complaint further alleges on December 11, 1985, at Contractor's place of business in Fishkill, New York, one Ben Mammina, Owner's director of technical services, contacted Contractor about the California jobs; it was further alleged because Owner had been pleased with previous jobs done for Owner by Contractor, Owner "wanted to employ (Contractor) in the State of New York to perform work for (Owner) in [the State of] California...." Contractor asserts Owner knew Contractor did not have a California general contractor's license. Contractor next alleged various inducements and misrepresentations allegedly made by Owner. In paragraph 30 of the complaint Contractor alleged the entry by both parties into the written contracts attached as exhibit "B" to the complaint "on or about December 11, 1985 at Fishkill, New York." The remainder of the complaint alleges "performance" by Contractor and "refusal to pay" by Owner as well as allegations Owner denied, in bad faith, the existence of the construction contracts, copies of which are attached to the complaint as exhibit "B."
A question of some significance to the court which is not raised as an issue in the briefs or elsewhere in the record is what the status of the parties was in New York when the contracts were executed there. Contractor validly held a New York general contractor's license and entered into written construction contracts with Owner in New York to perform certain work in California. Assuming for argument's sake the executed construction contracts were sufficiently definite and certain and not otherwise infirm in any material aspect, as they appear to be, does New York or California law apply to remedy any breach of such agreements? The contracts have no The case of Conderback, Inc. v. Standard Oil Co. (1966) 239 Cal.App.2d 664, at page 675, 48 Cal.Rptr. 901 et seq., is instructive. It is the converse of this case, however. Conderback was not a general contractor, but had for some time before 1962 designed and constructed all of Standard's "trade booth exhibits" at trade shows, conventions, and fairs. Standard contracted with Conderback in San Francisco to construct a pavilion in Seattle for Standard at the Seattle World's Fair. There was a cost overrun of about $150,000 and when Conderback pressed Standard for payment and eventually sued Standard, Conderback was met with the same defense asserted here--that Conderback did a general contractor's job for Standard in the State of Washington without a California general contractor's license, and was thus barred by Business and Professions Code section 7031 from maintaining "any action in any court" in California to attempt collection on the contract. After a concise and scholarly review of the rationale of the contractor's licensing law, the court concluded a construction contract bargained and entered into in California for work to be done outside California did not subject the performance of the contract outside of California to California's contractor's licensing law requirements.
The Conderback court stated (Conderback, supra, 239 Cal.App.2d at p. 679, 48 Cal.Rptr. 901): "By way of illustration, the legislative purpose would not be furthered in the instant case if we were to hold that a contractor duly licensed by the State of Washington [or, read here "New York"] would be required to have a California contractor's license before he could meet, negotiate and contract with Standard at the latter's offices in San Francisco for the construction of Standard's exhibit at the World's Fair in Seattle. We venture to say that many corporations of national and international size and scope of operations with executive and administrative offices located in this state negotiate and contract here for the construction of buildings and projects in other states and in foreign countries. It could not have been reasonably intended by the Legislature that all persons thus dealing with such corporations would be required to qualify for and obtain a California contractor's license. Nor could it have been reasonably intended that since they were subject to the Contractors' License Law, there was [therefore] imposed upon the Contractors' State License Board ... the insuperable burden of investigating and passing upon the building practices of such persons all over the world. Basically, Conderback is in no different position."
The wrinkle here is that Owner sought out Contractor in the State of New York because Owner was pleased with the results of other work Contractor had done for Owner and the parties contracted lawfully and with appropriate licensure in New York for Contractor to do California jobs. It must be remembered--this case is converse to the Conderback case.
At this point, two aspects of the law of New York become important. It is clear in California law that in an unlicensed contractor case there can be no resort to equity or equitable principles to ameliorate a general contractor's lack of a valid license. (Brown v. Solano County Business Development, Inc. (1979) 92 Cal.App.3d 192, 198, 154 Cal.Rptr. 700; Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 141, 151, 308 P.2d 713.) Resort to equity in New York, however, does not seem to be so barred. "Such [final] payment [to an unlicensed contractor] for a fixed and nonreturnable value actually received by [Owner] is appropriate. However, the recovery may not in any way exceed the contract price, lest a premium result from failure to comply with the licensing law. [p ] In the absence of factors indicating unconscionable intent or actual danger to public safety, a quantum meruit award does not offend the intent of the New York City [Contractor's] licensing provisions." (Lindner Appraisal Corp. v. H. Mabel Frewil Corp. (1973), 72 Misc.2d 1041, 340 N.Y.S.2d 242, 246.)
Secondly--should New York law be applied to this case? Owner sought out Contractor in New York and executed the contracts for construction work in California in Before such conclusions can be adopted though, if suit had been brought in a New York court, Contractor would have had the burden of establishing in personam jurisdiction over Owner. (Rios v. Altamont Farms, Inc. (Supp.1983) 117 Misc.2d 728, 459 N.Y.S.2d 386 at p. 388, citing Jetco Electronic Industries, Inc. v. Gardiner (5th Cir.1973) 473 F.2d 1228.) The Rios' case was one where an attempt was made to establish a Commonwealth of Puerto Rico default judgment against the defendant, a New York State domiciliary. The "minimum contacts" necessary to validate Puerto Rico's "long arm statute" was the circularization by Altamont Farms of posted offers for Puerto Rican agricultural workers to be employed in State of New York. That was held sufficient contact under "International Shoe" (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95) to satisfy the "traditional notions of fair play and substantial justice" doctrine initiated into American law by that case. The court in Rios, 459 N.Y.S.2d at page 389, cites and quotes from Kulko v. Superior Court of California (1978) 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 as follows: " '[W]hile very little purposeful activity within the state is necessary to satisfy the minimum contacts requirement, we have, nevertheless, unequivocally required some activity by the defendant before permitting the exercise of in personam jurisdiction ... the jurisdictional touchstone being the presence of sufficient in-state business activity to indicate a purposeful enjoyment of the benefits and protections of the states' law.' "
Owner's seeking out contractor in New York and entering into construction contracts in New York sufficiently satisfies the "traditional notions of fair play and substantial justice" test for the assertion of in personam jurisdiction by New York courts over Owner, assuming there were no travelodges operating then in New York State, a fact which is emphatically not assumed.
Still, the choice of law question is unanswered insofar as any damages may be recovered for Owner's refusal to perform its contracts by payment to Contractor for the work done.
The traditional rules in California's conflicts of law doctrine are that the law of the forum where the contract is to be performed apply. (12 Cal.Jur.3d, Conflict of Law, § 70, p. 559.) As to Contractor this would ostensibly require application of California law to the work done in California by the Contractor; but as to Owner, if payments on the contracts were made or due to Contractor in New York, then New York would be the place of performance for Owner.
However, the law of California is manifestly clear on one salient point--Civil Code section 1643 states: "A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties."
It is the law in California that the law of the forum which validates the contract will be applied as opposed to the law of the forum which would invalidate the contract, if so applied. (12 Cal.Jur.3d, Conflict of Law, § 75, pp. 567-568; citing, Robbins v. Pacific Eastern Corp. (1937) 8 Cal.2d 241, 65 P.2d 42.) Robbins presents an interesting situation where it was held in a very lengthy opinion concerning violation of securities laws: "To have title to the Trading Corporation stock pass in California would be to so interpret the [subject] contract as to render it violative of the Corporate Securities Act; to hold that title passed in New York is to so interpret the contract as to render it valid. Under such circumstances, even if the contract were silent on the point, we would be compelled, under the rules discussed above, to uphold It can be equally said here that to interpret the contracts in this case under California law would clearly defeat them, as opposed to interpreting them under New York law which might very well validate them. This is stated while bearing in mind Business and Professions Code section 7031 does not mandate the conclusion a construction contract between an unlicensed contractor and an Owner is per se invalid; it merely deprives an unlicensed contractor of the ability "to bring or maintain any action in any court of this state" to collect on the contract.
For purposes of this opinion it is not necessary to know whether New York has a rule in parity with the rule in the Conderback case, supra, 239 Cal.App.2d 664, 48 Cal.Rptr. 901. However, if the California rule is essentially that a construction contract entered into in California by an unlicensed contractor for work to be done outside California does not bar access to relief in the California courts for nonpayment by the application of Business and Professions Code section 7031's "no right to sue" doctrine, there is no reason to suspect the appellate courts of New York are any less enlightened than California's appellate courts, and that under New York law, a licensed (as opposed to unlicensed) New York contractor who contracts in New York to do work outside the State of New York may very well have a contractual or equitable right of payment for that work under New York law.
Because the record is essentially devoid of evidence and only the presumably true allegations of the fourth amended complaint frame the issues for consideration here, no reliance on this opinion as "law of the case" should be carved in stone. However, because this is not a case of a contractor either licensed in California or elsewhere entering into a contract in California to do a job of work in California, no immutable reliance should be placed on Business and Professions Code section 7031 as a vehicle to bar contractual recovery. Brown v. Solano County Business Development, Inc., supra, 92 Cal.App.3d at page 196, 154 Cal.Rptr. 700 states: "The purpose of the Contractors' License Law is to protect the public by prohibiting dishonest, incompetent, inexperienced or financially irresponsible persons from acting as building contractors [citations]."
If true, as the complaint alleges, that Owner sought out Contractor in New York because of satisfaction with previous jobs Contractor had done, presumably under the aegis of Contractor's valid New York license, then reliance on Business and Professions Code section 7031 becomes a sword and not a shield and frustrates rather than fulfills the raison d'etre of the California contractor's licensing scheme. None of the abhorrent reasons for precluding recovery by an unlicensed contractor cited in the Brown case, supra, would seem to apply here.
This is not a case where an unscrupulous unlicensed person posing as a contractor attempts to bilk money from the unsuspecting widow--this is a case, instead, of a large and sophisticated business corporation seeking out its own New York licensed Contractor to come completely across country to work in California, and then refusing to pay the Contractor because California law adamantly precludes resort to the courts of California to maintain an action to collect on the contract if the Contractor did not have a valid California general contractor's license.
But for the possible, if not probable, right of Contractor to avail of New York law by means indicated herein, the judgment would otherwise have to be routinely affirmed. Because, for the reasons stated, New York law may very well be applicable here, the judgment is reversed. Leave to amend consistent with the views expressed in this opinion should be granted by the trial court for a reasonable time subsequent to the finality of remittitur from this court.
Reversed. Each party to bear own costs.
ASHBY, Acting P.J., and BOREN, J., concur.