Opinion
NOT FOR PUBLICATION
Argued and Submitted at San Francisco, California: July 30, 2009
Appeal from the United States Bankruptcy Court for the Eastern District of California. Bk. No. 07-10440-WRL, Adv. No. 07-01097-WRL. Hon. W. Richard Lee, Bankruptcy Judge, Presiding.
Before: DUNN, JURY and MARKELL, Bankruptcy Judges.
MEMORANDUM
Yadivinder Narang, M.D. (" Dr. Narang") and Raushani Narang (collectively, the " Narangs") employed the debtor, Ashish Biswas (" Biswas"), as the general contractor in the construction of their custom home. Midway through construction, the Narangs fired Biswas and employed another contractor to complete the house and correct the various defects throughout the house caused by Biswas's poor workmanship. The Narangs subsequently obtained a state court judgment against Biswas for their damages.
Shortly after Biswas filed for chapter 7 relief, the Narangs initiated an adversary proceeding to except the state court judgment from discharge under § 523(a)(2)(A). Because the Narangs did not provide sufficient evidence to establish fraud under § 523(a)(2)(A), the bankruptcy court determined that the state court judgment was dischargeable. We AFFIRM.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
I. FACTS
On June 2, 2003, Biswas, doing business as Biswas Construction Company, contracted with the Narangs to act as the general contractor in the construction of their home (" Construction Contract"). The Narangs hired Biswas based on the recommendation of friends, who themselves had hired Biswas to build their home, and on his bid, which was significantly lower than the next competing bid.
The original contract amount was $986,080, but during the course of construction, change orders increased the contract amount by $78,905, for a total of $1,064,985.
The Construction Contract provided that Biswas was to supply all work, labor and services and to furnish all the materials necessary to construct the house. It further provided that Biswas was to complete construction within twelve months and in a " workmanship like manner" in compliance with applicable building codes and laws. The Construction Contract acknowledged that state law required contractors to be licensed through the state contractor's licensing board.
Before forming Biswas Construction Company, Biswas's experience was in commercial and residential remodels and residential additions. Before entering into the Construction Contract, Biswas told Dr. Narang that he had built a few houses in Fresno, California and a temple in Bakersfield, California. Dr. Narang was familiar with the temple. Biswas assured Dr. Narang that he would be able to " build a good house" according to the plans and complete construction of the house within twelve months. Dr. Narang did not inquire further into Biswas's experience in residential construction, nor did he question Biswas about the status of his contractor's license.
At the trial, Dr. Narang testified that he viewed a home under construction by Biswas and learned that the homeowners were satisfied with the construction at the time. Dr. Narang further testified that he did not ask Biswas to see any other houses Biswas had built. He also stated that Biswas did not take him to view any other projects.
The house designed for the Narangs was approximately 7, 000 square feet; it consisted of two stories and a basement. The house was the largest residential project Biswas had undertaken and the first with a basement.
Biswas held a valid contractor's license when he entered into the Construction Contract. However, during construction of the Narangs' home, from June 2, 2004 to February 7, 2005, Biswas's contractor's license was suspended because he did not renew his contractor's bond. Biswas was unaware that his contractor's license was suspended until after the suspension had occurred; though he received notice of the suspension by mail, he did not read the notice because it " got caught up in [his moving residences]." Tr. of January 8, 2009 Hr'g, 22:21-25, 23:1-2. A few weeks after Biswas obtained a new contractor's bond, his contractor's license was reinstated. Biswas did not inform the Narangs that his contractor's license had been suspended.
The Narangs obtained a $975,000 home construction loan from Bank of America. Loan funds were disbursed to Biswas based upon the percentage of work completed after an inspection by the bank's representative. Between July 1, 2003 and October 22, 2004, Biswas received draws totaling 80% of the available funds.
Progress of the construction was slow and subject to excessive delays. Biswas did not pay some subcontractors and materials suppliers. On February 7 and February 8, 2005, when the house was only 50% complete and while the house had water damage and mold issues, Biswas requested two additional draws.
On February 18, 2005, the Narangs notified Biswas that he was to cease and desist his work on the house. A week later, concerned with the quality of the work done by Biswas, the Narangs hired an inspection company which concluded that the house was not near completion. The Narangs hired another general contractor to complete construction of the house, who performed substantial remedial and corrective work of various defects throughout the house at a cost of $299,313.27, over and above the amount agreed in the Construction Contract.
The Narangs initiated a state court action against Biswas, alleging breach of contract, fraud and negligent misrepresentation. They also demanded that Biswas disgorge $220,128, which Biswas received while his contractor's license was suspended, on the grounds that California Business and Professions Code (" B & P Code") § 7031 bars an unlicensed contractor from demanding or receiving payment for labor and services rendered. On February 1, 2007, they obtained a state court judgment in the total amount of $519,441.27 (" state court judgment"). The damages awarded in the state court judgment consisted of the $299,313.27 in costs the Narangs incurred to complete corrective work on their home (" construction cost award") and the $220,128 in funds Biswas received while his contractor's license was suspended (" disgorgement award").
The state court judgment was entered after an unopposed motion for summary judgment filed by the Narangs.
Three months after Biswas filed for chapter 7 relief on February 20, 2007, the Narangs initiated an adversary proceeding against Biswas to except the state court judgment from discharge under § 523(a)(2)(A). They alleged that Biswas fraudulently represented that he was qualified to construct the Narangs' home competently and that he would maintain a contractor's license during the course of the construction.
The Narangs also asserted that the debt owed by Biswas arose from his willful and " maliciously made" misrepresentations to the Narangs under § 523(a)(6). The bankruptcy court determined that the debt did not arise from a willful and malicious injury within the meaning of § 523(a)(6); it found that the Narangs did not produce any evidence demonstrating that Biswas acted willfully with the intent to cause them injury. The Narangs do not appeal the bankruptcy court's determination as to their § 523(a)(6) claim for relief. Appellants' Opening Brief at 2. In fact, the Narangs assert that they dropped their § 523(a)(6) claim before the trial in the adversary proceeding. Appellants' Opening Brief at 2. We therefore do not address the bankruptcy court's determination as to the § 523(a)(6) claim.
Before the two-day trial, the parties stipulated to many of the material facts. Biswas admitted that he caused some of the construction delays because he did not properly organize the project. He also stipulated that he had neither the experience nor the competence to take on the project, as evident from the manner in which he ran it. He further stipulated that his work was substandard and did not conform with industry standards.
The bankruptcy court noted that Biswas stipulated to this statement in the state court action. Memorandum Decision Regarding Complaint to Determine Dischargeability of Debt (" Memorandum Decision"), 4:8-10. Based on our review of the record, Biswas stipulated to this fact in the adversary proceeding, but not in the state court action. This same statement was made in the Narangs' statement of undisputed facts in support of their motion for summary judgment in the state court action. Biswas did not oppose the motion for summary judgment.
Dr. Narang and Biswas testified at the trial. After the trial, the bankruptcy court took the matter under submission. On February 18, 2009, the bankruptcy court issued its Memorandum Decision and entered a judgment in favor of Biswas. The bankruptcy court held that the Narangs did not establish fraud under § 523(a)(2)(A), as they did not present any evidence demonstrating that at the time he induced the Narangs to enter into the Construction Contract, Biswas subjectively knew he was not competent to build the house and that he intended to deceive the Narangs. The bankruptcy court opined that, in light of his experience in residential and commercial construction, as well as the fact that a professional architect designed the house and that subcontractors performed much of the work, " it [was] more likely than not that Biswas actually believed he could build the house . . . [and] the fact that Biswas overestimated his own ability does not mean that he knowingly lied." Memorandum Decision, 6:5-11. The bankruptcy court concluded that Biswas simply exaggerated his qualifications, which did not rise to the level of fraud.
The bankruptcy court further held that the Narangs did not show that Biswas's lapse of his contractor's license constituted fraud within the meaning of § 523(a)(2)(A). The bankruptcy court found that the Narangs did not provide evidence that they suffered actual injury as a result of the lapse of Biswas's contractor's license.
On appeal, the Narangs claim that the bankruptcy court incorrectly referenced B & P Code § 7160 in its Memorandum Decision analysis. Appellant's Opening Brief at 14 n.3. B & P Code § 7160, entitled " Contract induced by falsity or fraud; suit for penalty, fees and damages, " provides:
The Narangs timely appealed the bankruptcy court's judgment.
II. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § § 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
III. ISSUES
(1) Did the bankruptcy court err in its determinations of knowledge and intent under § 523(a)(2)(A)?
(2) Did the bankruptcy court err in finding that the lapse of Biswas's contractor's license did not support an award of damages for fraud within the meaning of § 523(a)(2)(A)?
IV. STANDARDS OF REVIEW
Whether a claim is nondischargeable presents mixed issues of law and fact, which we review de novo. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002)(citing Murray v. Bammer (In re Bammer), 131 F.3d 788, 792 (9th Cir. 1997)(en banc)). We review the bankruptcy court's conclusions of law and its interpretations of the Bankruptcy Code de novo and its findings of fact for clear error. Id.
" A finding of whether a requisite element of a section 523(a)(2)(A) claim is present is a factual determination reviewed for clear error." Anastas v. Am. Sav. Bank (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996). A finding of fact is clearly erroneous, even though there is evidence to support it, if we have the definite and firm conviction that a mistake has been committed. Banks v. Gill Distribution Ctrs., Inc. (In re Banks), 263 F.3d 862, 869 (9th Cir. 2001). " Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).
V. DISCUSSION
A. Exception to discharge standards
Section 523(a)(2)(A) excepts from discharge debts for money, property or services obtained by the debtor by false pretenses, a false representation or actual fraud. Because excepting a claim from the debtor's discharge limits the debtor's " fresh start" following a bankruptcy, § 523(a)(2)(A) " should not be read more broadly than necessary to effectuate policy, e.g., preventing debtors from avoiding debts incurred by fraud or other culpable conduct." Hayhoe v. Cole (In re Cole), 226 B.R. 647, 654 (9th Cir. BAP 1998). In other words, the exception to discharge provided for in § 523(a)(2)(A) " should be construed strictly against creditors and in favor of debtors." Ghomeshi v. Sabban (In re Sabban), 384 B.R. 1, 5 (9th Cir. BAP 2008).
The creditor seeking to except a debt from the debtor's discharge generally bears the burden of proof. Since the Supreme Court's decision in Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991), the burden of proof standard for exception to discharge actions under § 523 is preponderance of the evidence. Id . at 286-91. The relatively lenient burden of proof standard set against the consistent admonition to construe the standards to except a debt from the debtor's discharge strictly in favor of debtors creates a tension that informs the decision making of bankruptcy courts in considering exception to discharge claims.
To prevail on a § 523(a)(2)(A) claim, a creditor must show, by a preponderance of evidence, that: (1) the debtor made representations; (2) the debtor knew at the time they were false; (3) the debtor made them with the intent to deceive the creditor; (4) the creditor justifiably relied on such representations; and (5) the creditor sustained the alleged damage as a proximate result of the debtor's false representations. In re Britton, 950 F.2d 602, 604 (9th Cir. 1991); see also Turtle Rock Meadows Homeowners Assoc. v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000)(citations omitted).
The bankruptcy court concluded that the Narangs established all but the second and third elements of fraud under § 523(a)(2)(A), finding that the Narangs did not provide sufficient evidence to demonstrate that Biswas knew he falsely represented his competence and experience with the intent to deceive them. Memorandum Decision, 5:26-27, 6:2-4, 7:13-16. On appeal, the Narangs contend that they did not need to show that Biswas had actual knowledge of the falsity of his representations; rather, they only needed to show that he made the representations with reckless disregard for their truth. They further argue that Biswas's intent to deceive may be gleaned from the surrounding circumstances.
B. The bankruptcy court did not clearly err in its determination of knowledge and intent under § 523(a)(2)(A)
1. Knowledge
Reckless disregard for the truth of a representation satisfies the knowledge element under § 523(a)(2)(A). Houtman v. Mann (In re Houtman), 568 F.2d 651, 656 (9th Cir. 1978), overruled in part on other grounds by Grogan, 498 U.S. at 284 & n.11; see also Rubin v. West (In re Rubin), 875 F.2d 755, 759 (9th Cir. 1989)(" [D]eclarations made with reckless indifference for the truth may be found to be fraudulent.")(quoting Chase Manhattan Bank v. Fordyce (In re Fordyce), 56 B.R. 102, 105 (Bankr. M.D. Fla. 1985)(internal quotation marks omitted)); Gertsch v. Johnson & Johnson Finance Corp. (In re Gertsch), 237 B.R. 160, 167 (9th Cir. BAP 1999)(quoting Houtman, 568 F.2d at 656); Arm v. A. Lindsay Morrison, M.D., Inc. (In re Arm), 175 B.R. 349, 354 (9th Cir. BAP 1994). " A representation may be fraudulent, without knowledge of its falsity, if a person making it is conscious that he [or she] has merely a belief in its existence and recognizes that there is a chance, more or less great, that the fact may not be as it is represented." Gertsch, 237 B.R. at 168 (quoting Restatement (Second) of Torts § 526 cmt. e (1977)(internal quotation marks omitted)). In such circumstances, the person makes the representation " without [believing] in its truth or recklessly, careless of whether it is true or false." Kong, 239 B.R. at 827 (quoting Restatement (Second) of Torts § 526 cmt. e).
" Reckless disregard for the truth of the representation" is used interchangeably with " reckless indifference to [the debtor's] actual circumstances" within the Ninth Circuit. Advanta Nat'l Bank v. Kong (In re Kong), 239 B.R. 815, 826 (9th Cir. 1999).
However, even applying the concept of reckless disregard, based on the record before us, the Narangs do not establish that Biswas represented his qualifications with reckless disregard as to their truth. At the trial, Biswas testified that he intended to comply with the Construction Contract and to build the house according to the Narangs' plans. Tr. of January 8, 2009 Hr'g, 18:19-24. Though the house was the largest he had undertaken to build, Biswas testified that he believed he would be able to perform the Construction Contract, using experienced subcontractors to " make sure [he would] be able to perform [under the Construction Contract]." Tr. of January 8, 2009 Hr'g, 18:25, 19:1, 19:5-7. Biswas's testimony reflects his belief that he had the competence and experience to build the Narangs' house.
The Narangs cite McCain v. Fuselier (In re Fuselier), 211 B.R. 540 (Bankr. W.D. La. 1997), as factually similar to the instant case. Appellant's Opening Brief at 9. In Fuselier, the debtor, who was not a licensed contractor in Louisiana, accepted a project to construct a home for the creditors. Id . at 541. The debtor obtained a written proposal from the construction company for which he worked, substituting his name as the general contractor and using the contractor's license number of the construction company's owner without his permission. Id . The creditors eventually terminated the debtor's services. Id . at 542. The bankruptcy court in Fuselier found that the debtor represented that he was a licensed contractor to induce the creditors to hire him. Id . at 543.
As the bankruptcy court pointed out, Biswas may have exaggerated his ability to build the house, but this does not mean he knowingly or recklessly misrepresented his ability. See, e.g., In re Schwartz & Meyers, 130 B.R. 416, 423 (Bankr. S.D.N.Y. 1991)(holding that, for a representation to be actionable under § 523(a)(2)(A), it must be one of existing fact and not simply an expression of opinion, expectation or a declaration of intention). Biswas had prior experience in residential construction; he had built several homes in Fresno, California. He also used experienced subcontractors to work on the Narangs' house. Given these circumstances, we agree with the bankruptcy court's conclusion that Biswas's " high opinion of his ability was not without some foundation." Memorandum Decision, 6:6. In any event, we are in no position to substitute our perceptions from the evidence for those of the bankruptcy court on what is admittedly a close question. We therefore conclude that the bankruptcy court's finding as to the second element of § 523(a)(2)(A) was not clear error.
The Narangs stress that Biswas stipulated that he lacked the competence and experience to build their house. Such after-the-fact stipulations do not establish that Biswas represented his qualifications without believing them to be true or represented his qualifications without caring whether they were true or false. In short, the stipulations do not go to his state of mind at the time he made the representations.
2. Intent to deceive
Fraudulent intent may be demonstrated " 'by circumstantial evidence, or by inferences drawn from a course of conduct.'" McCrary v. Barrack (In re Barrack), 217 B.R. 598, 607 (9th Cir. BAP 1998)(quoting Devers v. Bank of Sheridan (In re Devers), 759 F.2d 751, 753-54 (9th Cir. 1985)). Intent to deceive can be inferred from surrounding circumstances. Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015, 1018 (9th Cir. 1997)(citing In re Kurdoghlian, 30 B.R. 500, 502 (9th Cir. BAP 1983)); see also Gertsch, 237 B.R. at 167-68; Barrack, 217 B.R. at 607; In re Hultquist, 101 B.R. 180, 183-84 (9th Cir. BAP 1989)(citations omitted).
The Narangs contend that the surrounding circumstances indicate that Biswas intended to deceive them into contracting with him. Though he never previously had constructed such a large home, and never previously had constructed a home with a basement, Biswas did not disclose this information to the Narangs. He instead assured the Narangs that he would be able to " build [them] a good house" according to the plans and within a year. More than a year after commencing construction, the Narangs assert, Biswas had only completed 50% of the house, with much of the construction defective and below industry standards. Based on these circumstances, the Narangs argue, Biswas misrepresented his qualifications in order to induce them into hiring him as their general contractor.
Reviewing the record, we do not have a definite and firm impression that the bankruptcy court clearly erred in finding that Biswas did not intend to deceive the Narangs. Even though he never had built such a large house, with a basement, Biswas had prior experience in commercial and residential construction to bolster his assertion that he had the ability to build the Narangs' home. He also used experienced subcontractors to ensure that he built the home according to the plans. Biswas testified that he fully intended to comply with the Construction Contract. The fact that he fell short of his promise to build the Narangs a " good house" does not demonstrate that he intended to deceive them. Cf. Rubin, 875 F.2d at 759 (" [A] promise made with a positive intent not to perform or without a present intent to perform satisfies § 523(a)(2)(A)."). Rather, it shows that Biswas simply bit off more than he could chew, as he later admitted in his stipulations. We therefore conclude that the bankruptcy court did not clearly err in finding that Biswas did not intend to deceive the Narangs.
C. The bankruptcy court did not clearly err in finding that the lapse in Biswas's contractor's license did not constitute fraud within the meaning of § 523(a)(2)(A)
At the trial, the Narangs sought to have the disgorgement award deemed nondischargeable. Relying on Ghomeshi v. Sabban (In re Sabban), 384 B.R. 1 (9th Cir. BAP 2008), the bankruptcy court declined to do so, finding that the Narangs produced no evidence demonstrating that they suffered actual injury from the lapse in Biswas's contractor's license. Memorandum Decision, 8:18-20, 9:24-25.
The Narangs did not distinguish between the construction cost award and the disgorgement award in their adversary proceeding complaint; rather, they sought a determination that the entire state court judgment was nondischargeable on the grounds that both the construction cost award and the disgorgement award arose from Biswas's fraudulent representations. We nonetheless analyze the disgorgement award separately because the state court judgment was based, in part, on the Narangs' claim under B & P Code § 7031.
As noted earlier, the Narangs' disgorgement award was based on B & P Code § 7031. B & P Code § 7031 prohibits unlicensed contractors from initiating or maintaining actions to recover compensation and allows persons who have utilized the services of an unlicensed contractor to recover all compensation paid to the contractor. Sabban, 384 B.R. at 3. B & P Code § 7031 does not limit disgorgement to persons who have been defrauded by an unlicensed contractor. Id . It " operates even where the person for whom the work was performed knew the contractor was unlicensed." Id . at 4 (quoting Hydrotech Sys., Ltd. v. Oasis Waterpark, 52 Cal.3d 988, 277 Cal.Rptr. 517, 803 P.2d 370, 376 (1991)(internal quotation marks omitted)).
B & P Code § 7031(a) provides:
In Sabban, we confronted the issue of whether an amount awarded under B & P Code § 7031(b) constituted a nondischargeable debt within the meaning of § 523(a)(2)(A). In Sabban, the debtor, an unlicensed contractor, performed remodeling work for the creditor. 384 B.R. at 3. To induce the creditor into engaging his services, the debtor represented that he was a licensed contractor. Id . The creditor later obtained a state court judgment against the debtor under B & P Code § 7031(b) for disgorgement of the $123,000 compensation the debtor received for the remodeling work (" award"). Id . at 3-4. After the debtor filed for chapter 7 relief, the creditor filed a complaint for a determination that the award was nondischargeable under § 523(a)(2)(A). Id . at 4. The bankruptcy court determined that the award was dischargeable because it was not proximately caused by the creditor's reliance on the debtor's misrepresentation regarding his unlicensed status. Id .
In light of Cohen v. De La Cruz, 523 U.S. 213, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998), which emphasized that a debtor's liability for a debt must flow from his or her fraud, we agreed with the bankruptcy court in Sabban that an award under B & P Code § 7031(b) did not necessarily constitute a nondischargeable debt under § 523(a)(2)(A). Id . at 6-7. Because B & P Code § 7031(b) was " neutral as to fraudulent intent and was enacted to deter unlicensed contractors from offering their services for pay[, ]" the award did not arise from the debtor's fraudulent representations as required under § 523(a)(2)(A). Id . at 7. We pointed out that, even if the creditor had known about the debtor's unlicensed status, the creditor still could have obtained an award under B & P Code § 7031(b). Id . The award, we concluded, was unrelated to the debtor's fraud and could have been granted in the absence of justifiable reliance. Id . Indeed, the state court awarded statutory damages under B & P Code § 7031(b), even though it held that the creditor had suffered no compensatory damages. Id . at 6-7.
On appeal, the Narangs attempt to distinguish Sabban from the instant case. Appellant's Opening Brief at 16. The Narangs contend that, unlike the creditor in Sabban, they suffered actual injury as a result of Biswas's false representation to maintain a valid contractor's license. When the Narangs entered into the Construction Contract with Biswas, Biswas represented that he was a licensed contractor. The Narangs relied on this representation in allowing Biswas to take draws on their construction loan. Appellant's Opening Brief at 14. While his license was suspended, Biswas received two draws, which brought the total amount of draws to 80% of the construction loan, even though he had completed only approximately 50% of the work on the house. Appellant's Opening Brief at 16. As a result, the Narangs claim, they overpaid Biswas. Appellant's Opening Brief at 16.
We agree with the bankruptcy court that the Narangs did not establish that they sustained damage as a result of Biswas's representation regarding the status of his contractor's license. Nothing in the record indicates that the Narangs conditioned construction loan draws on the continued validity of Biswas's contractor's license. The Narangs made the alleged overpayment to Biswas based on the work performed on the house, not on whether Biswas maintained his contractor's license. As noted above, draws on the construction loan were allowed based on the percentage of work completed, after inspections by the bank's representatives. Based on our review of the record, we do not have a definite and firm conviction that the bankruptcy court clearly erred in finding that the lapse in Biswas's contractor's license did not support an exception to discharge under § 523(a)(2)(A) for the disgorgement award.
Interestingly, Dr. Narang testified that, had he known Biswas's contractor's license was suspended, he simply would have had Biswas stop work until his contractor's license was reinstated. Tr. of January 8, 2009 Hr'g, 16:17-24.
VI. CONCLUSION
Based on the record before us, we conclude that the bankruptcy court did not clearly err in its findings supporting its ultimate holding that the Narangs' state court judgment against the debtor was not excepted from discharge under § 523(a)(2)(A). We AFFIRM.
The bankruptcy court did not make a finding as to whether Dr. Narang managed to observe Biswas's work to ascertain his ability. The bankruptcy court instead found that the Narangs could have asked for prior examples of Biswas's work to verify his qualifications but did not do so, instead relying on their friends' recommendations.
Any person who is induced to contract for a work of improvement, including but not limited to a home improvement, in reliance on false or fraudulent representations or false statements knowingly made, may sue and recover from such contractor or solicitor a penalty of five hundred dollars ($500), plus reasonable attorney's fees, in addition to any damages sustained by him by reason of such statements or representations made by the contractor or solicitor.
The bankruptcy court questioned whether B & P Code § 7160 even applied to the facts in the case before it. Memorandum Decision, 8: 18-20. In any event, the bankruptcy court's decision rests on § 523(a)(2)(A), so B & P Code § 7160 is not dispositive as to the handling of the case.
Unlike the creditors in Fuselier, the Narangs have not demonstrated that Biswas knew that he misrepresented his qualifications at the time he made the representations.
Except as provided in subdivision (e), no person engaged in the business of 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 & P Code § 7031(b) provides:
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.